Aviation

Russian airlines asked to return leased planes as US blocks carriers from airspace

Following the invasion of Ukraine, aircraft leasing firms are set to terminate hundreds of leases with Russian airlines as the Biden administration considers banning Russia from US airspace.

Most commercial aircrafts flown by Russian companies are leased, and more than half are from countries abroad.

The majority of these are based in Ireland, a member of the EU, which has officially banned the leasing or sale of aircrafts to Russian companies.

AerCap, the world’s largest aircraft leasing company, which is based in Dublin, saw its New York-listed shares fall 12.7 per cent after announcing it would stop leasing to Russian carriers. US-based Air Lease fell almost 8 per cent.

According to Reuters, AerCap said that by net book value, 5 per cent of its fleet was leased in Russia as of 31 December and has the largest exposure to Russia and Ukraine with 152 planes leased.

According to The New York Times, the Irish aircraft leasing company said recovering planes would be difficult if it had to cancel contracts due to government sanctions.

“We may encounter obstacles and are likely to incur significant costs and expenses conducting repossessions,” the company said in a securities filing.

Actually repossessing these jets will be quite difficult. The repatriation of leased planes normally takes place years in advance and Russian airlines may not co-operate or may be ordered by Vladimir Putin’s government to create obstacles.

“The logistics are immense. We are talking hundreds of planes that need to be flown out,” said Phil Seymour, an aviation specialist with the consulting firm IBA.

“Where in the world can they go? Will they play ball? Will there be any edict from above, telling not to cooperate?”

Pobeda, a low-cost Russian unit of the state airline Aeroflot, has faced requests from some leasing companies to return their fleet, according to Interfax.

The Russian airline can not immediately replace the leased planes with other aircraft and has no plans to suspend its operations.

The leasing companies asking for their planes back comes as the US considers joining the EU in banning Russia from its airspace.

“There are a lot of flights that US airlines fly over Russia to go to Asia and other parts of the world and we factor in a range of factors,” White House spokesperson Jen Psaki told reporters.

The issue has become an intense government discussion recently and US Senator Dick Durbin, the second-highest-ranking Democrat in the US Senate, supported the ban.

“Other countries have done it in Europe and turning the lights out at the airport on those guys isn’t a bad idea,” he told reporters.

According to Reuters, a European official, who asked not to be named, said the EU had full confidence the US would follow suit.

Banning Russian carriers from US airspace could provoke a response from Moscow, impacting carriers like United Airlines, which uses Russian airspace for flights from Delhi.

On Monday, Russia banned airlines from 36 countries, including all 27 members of the EU after EU ministers refused entry to Russian planes, including the private jets of oligarchs.



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