Russian President Vladimir Putin has today passed a bill that will allow foreign aircraft leased by Russian airlines to be registered in Russia. This would enable Russian airlines to continue operating despite Western sanctions imposed in response to the ongoing conflict in Ukraine.
Western sanctions have given leasing companies until March 28th to terminate all Russian leasing contracts. If the leased aircraft were registered in Russia, this would not apply.
In addition, several aviation authorities, including those of Ireland and Bermuda (where many leased aircraft are registered), have declared that they will be suspending the airworthiness certificates of foreign-leased aircraft operating in Russia. Aircraft are unable to fly without an airworthiness certificate, so re-registering the aircraft in Russia would enable them to continue operating.
What challenges does the bill face?
While the bill may have been approved by Russia, foreign leasing companies are not expected to be in favor of the move. As a result of both the Russian Rouble dropping in value and Russia having been removed from the international SWIFT banking system, lease payments have been further complicated. Foreign leasing companies may therefore look to recover their assets instead of continuing the leasing process.
The bill also comes up against the barrier of dual registration, as an aircraft cannot be registered in more than one country at any one time. According to aviation advisor Bertand Gabrowski,
“it is illegal to register an aircraft without proof of deregistration from the previous registry as well as the agreement of the owner.”
The United Nations International Civil Aviation Organization (ICAO) has stated that dual registration would not be consistent with Article 18 of the 1944 Convention on International Civil Aviation (known as the Chicago Convention) – “an aircraft cannot be validly registered in more than one state.”
Aircraft leasing in Russia
Aircraft leasing is common in the aviation industry, and it is estimated that there are over 13,000 commercial aircraft currently being leased worldwide. According to analytics firm Cirium, out of a total of 980 commercial aircraft in Russia alone, 515 are currently leased from foreign leasing companies.
Airlines may decide to lease aircraft for a variety of reasons, including the initial cost of leasing versus purchasing an aircraft and the increased flexibility that leasing brings, allowing them to increase or decrease their operation according to demand.
The new bill in the context of Russian aviation
Only time will tell the impact of this bill, but for the moment at least, the situation remains complex and challenging for all involved.
Russian airlines have already suspended many international services, in order to avoid aircraft being confiscated while on the ground outside of Russia, and only a limited number of foreign airlines are still flying to Russia. This in turn has led to travelers being stranded and unable to return home.
For aircraft leasing companies, lengthy battles to recover their assets may be on the horizon.
How do you think this new bill will impact Russian aviation? Let us know your thoughts by commenting below.