Russian planes face risk as leasing firms mull default

Bloomberg

Leasing firms are facing the challenge of recalling jetliners worth billions of dollars from Russian airlines, as sanctions imposed over the Ukraine invasion threaten carriers’ ability to operate rented planes.
EU sanctions ban the supply of “all goods and technology” linked to aircraft. Planes can’t be insured, either. That means leasing firms will be required to terminate all contracts with Russian airlines over the next 30 days, said a senior leasing executive with aircraft in the country.
More than half of the active commercial aircraft based in Russia are leased, mostly
from companies based abroad, according to analysis from
IBA Group, which advises airlines, planemakers, banks and lessors. That tally includes scores of aircraft at flag-carrier Aeroflot.
AerCap Holdings is most exposed to the crisis, with 152 aircraft across Russia and Ukraine that have a portfolio market value approaching $2.5 billion, according to IBA figures.
Even before the EU decision, Russian carriers were facing a test in coming days in seeking to pay for the jets they hire. With Russian financial institutions also sanctioned, and the US, EU, UK and Japan taking steps to exclude some banks from the SWIFT messaging system used for transactions, airlines could struggle to submit dues for March, IBA President Phil Seymour said.
“There’s a real risk of default as soon as the coming week,” Seymour said in a phone interview. “Leasing firms are aware that the tap will be tightened even further as sanctions are rolled out and there are decisions to be made.”
Repossessions may already be taking place. A European lessor is recalling three Boeing Co 737 aircraft from Aeroflot’s low-cost Pobeda unit, Interfax reported, citing an unidentified source at the Russian flag-carrier. Russian media outlet RBC reported separately that an Irish leasing firm seized a Pobeda 737 at Istanbul’s Havalimani airport, citing an unidentified airline source.
Representatives from the Russian carriers didn’t immediately respond to requests for comment from Bloomberg outside of business hours.
Data from IBA shows that 713 leased Russian aircraft are registered in Bermuda and a further 34 in Ireland. Of the 158 registered in Russia itself, a further 11 are owned by foreign banks or lessors, with the rest owned by Russian institutions.