Could Leasing Companies be Forced to Write-off 500+ aircraft

[nomorecatering]

I was wondering what the leasing companies would do with all the airframes that have their lease terminated due to the sanction on Russia.

But it appears that Russia is not going to give them back. Their airworthiness certificates will be revoked.

Interesting times ahead.

https://www.youtube.com/watch?v=Lz4gCE4ccRM

[zambonidriver]

Without manufacturer support they will find it very difficult to operate (even within the confine of the Russian federation & satellite countries). Wonder if there is any “kill switch” embedded…

[andrasz]

Without manufacturer support they be very difficult to operate...
Not impossible, Iran has managed to keep a fleet of western aircraft in the air since 1979 and counting... The remnants of the old Soviet aircraft industry are still capable of manufacturing many replacement parts if needed, subject only to local CAA authorisation, which in this case will be forthcoming. As long as these aircraft remain within the realm, they can be operated with impunity. Of course there will be safety implications, as there was in Iran, but if you look at all those Russian dashcam videos, you'll realise that this concept is treated a bit differently than in our part of the world.

[SpringHeeledJack]

Without manufacturer support they be very difficult to operate (even within the confine of the Russian federation & satellite countries). Wonder if there is any “kill switch” embedded…

In general terms, how often do the manufacturers release software updates for the flight systems ? Even if the possibility of 'kill switches' is a reality, surely the onward march of AD's etc would make the aircraft non-compliant. The Russians can nationalise the leased aircraft but soon enough there will be operational issues that can't be resolved easily, and then of course there will be liens galore.

[Equivocal]

It may be possible to keep aircraft flying within an individual state's territory by maintaining them according to local standards. However, being able to demonstrate that they meet international standards at any time in the future is likely to be all but impossible thus rendering those aircraft to be useable only in the territory of the state that 'went local' for the rest of their operational days.
.

[krismiler]

With a lack of international flights there wouldn't be enough demand for all of them but hopefully the situation will be resolved before this becomes a long term problem.

[ATC Watcher]

Don't underestimate the ingenuity of airlines under an embargo . As said earlier Iran managed successfully since over 40 years to buy and get a fleet of Airbus, Boeing , ATRs and Fokker flying ,, mainly due to the use of third counties sympathetic to Iran providing the aircraft , the spares, the software updates etc.. . Russia is a bit more isolated at the moment but if for instance China supports them , they can continue to fly for a long time, and when this war is over and sanctions lifted , they can , just like before use their Soviet and recent Russian made aircraft to fly internationally.
The other plausible scenario is of course a regime change in Russia, the past is forgotten , and the West happily sells them new western aircraft ., just like in 1990 ...

[Less Hair]

Not sure how many new leases will be offered.

[oceancrosser]

Out of date NAV databases will be one of the first issues. Cycle 2203 is effective on March 24th. I doubt that will be sent to russian operators as normal.

[Denti]

Don't underestimate the ingenuity of airlines under an embargo . As said earlier Iran managed successfully since over 40 years to buy and get a fleet of Airbus, Boeing , ATRs and Fokker flying ,, mainly due to the use of third counties sympathetic to Iran providing the aircraft , the spares, the software updates etc.. . Russia is a bit more isolated at the moment but if for instance China supports them , they can continue to fly for a long time, and when this war is over and sanctions lifted , they can , just like before use their Soviet and recent Russian made aircraft to fly internationally.
The other plausible scenario is of course a regime change in Russia, the past is forgotten , and the West happily sells them new western aircraft ., just like in 1990 ...

There just will be the very insignificant and teeny tiny problem of the airlines in fact having defaulted on their lease contracts. One thing that is very much different between Iran and Russia, is the fact that russian airlines have leased around three quarters of their fleets, mainly from international leasing companies. Which is not the case in Iran. Of course, that can be solved, given enough hard cash (rubles won't do) and the possibility to transfer that, once the sanctions are lifted that is.

[NutLoose]

They could also go after airline assets not in country.

[Denti]

Well, seems as if lessors are indeed a bit in a panic mode at the moment, while the big law firms are already busy calculating the income from a possible decade of lawsuits between lessors, insurers and airlines. Will be very interesting to see how this turns out, as russian airlines basically rip up the normal world of aircraft leasing.

https://www.reuters.com/markets/europe/lessors-face-legal-quagmire-russian-plane-repos-stall-2022-03-09/

[ATC Watcher]

An hypothetical question : if Aeroflot decided to do all its maintenance with HAECO in Hong Kong , with the blessing of the Chinese ( or just turning a blind eye ) could the leasing companies repossess the aircraft in China ?

[Denti]

Some will be able to. After all, some of the bigger leasing companies are china based.

[Plane Speaker]

An hypothetical question : if Aeroflot decided to do all its maintenance with HAECO in Hong Kong , with the blessing of the Chinese ( or just turning a blind eye ) could the leasing companies repossess the aircraft in China ?
Once or if the aircraft is away from Russian airspace a repossession can be effected but will require the support of the local airport and a Part 145 as the aircraft will need to fly out on a different registration (ELT and Mode S need recoding and the new rego needs to be applied).The aircraft lease will require to be terminated, the aircraft de-registered (not sure if the Russians will comply) and re-registered in a new country, a ferry company will be required to reposition the aircraft to a place of storage. The the fun starts as it unlikely that the Lessor will have scanned copies of all the records up to the point of repo so a massive engineering and airworthiness review task then starts.

[ATC Watcher]

Interesting , thanks Denti and Plane Speaker., so basically if China (or the local airport) does not support the repossession, nothing is likely to happen .And if , as you say, the biggest lessors are China based , it means that China in fact hold the future of Russian civil aviation in their hands. I am not sure Putin had thought of that before he started this "special military operation" ..

[compressor stall]

The value of an aircraft without the records would be akin to aluminium cans.

[Denti]

Interesting , thanks Denti and Plane Speaker., so basically if China (or the local airport) does not support the repossession, nothing is likely to happen .And if , as you say, the biggest lessors are China based , it means that China in fact hold the future of Russian civil aviation in their hands. I am not sure Putin had thought of that before he started this "special military operation" ..
No, it is not the biggest lessors, just some of the bigger firms are now chinese. The biggest lessors are Irish though, thanks in large to the very accommodating laws there making it essentially a tax haven for that industry.

Now, Russia ups it's game, by drafting a law that basically says that leasing rates have to be paid in rubles, and if a lease is terminated a government commission then has to decide if the plane may be returned (in accordance with the Cape Town Convention) or not, which of course would be a violation of that convention.

https://www.reuters.com/article/ukraine-crisis-russia-airlines-leasing-idCNL5N2VD26B

[Denti]

Interesting. Apparently China refuses to provide spare parts for leased aircraft in Russia, which makes it that much harder to maintain them in flying shape. Guess they have to scrap a good portion of the fleet for parts, something they are very much used to anyway for their homegrown aircraft.

https://www.reuters.com/business/aerospace-defense/russia-says-china-refuses-supply-aircraft-parts-after-sanctions-2022-03-10/

[Flugplatz]

Going to be interesting times for the UK since many (perhaps most?) of Russia's modern airline fleet are ultimately under the legal auspices of UK Parliamentarians via the ICAO 83 bis arrangements for Bermuda and UK overseas territory aviation legislation. I thought they may have taken some action in Parliament during the Skripal poisonings but they didn't; not even against selected oligarch's aircraft. Mind you they may have had to compensate Bermuda in some form - too late now as it has got away from them

[DaveReidUK]

Interesting. Apparently China refuses to provide spare parts for leased aircraft in Russia, which makes it that much harder to maintain them in flying shape. Guess they have to scrap a good portion of the fleet for parts

You believe that Russia will start to break up lessors' aircraft ?

The lawyers will have a field day.

[Denti]

You believe that Russia will start to break up lessors' aircraft ?

The lawyers will have a field day.

Of course they will, see the link above. But they will have anyway, as russian airlines are not returning aircraft and documentation to the leasing companies as required by the Cape Town Convention. So they are already in breach of their contracts and that will just get worse. And yes, big law firms are already calculating their bonuses for the minimum of a decade of litigation following this mess.

[Peter47]

Could someone clarify what has to happen if you have an aircraft without its maintenance records, which has happened several times before. Ultimately would it need a 'D' check (or even a 'D' check +) to make it airworthy?
I've actually seen an advert from an organisation that has repossessed an aircraft asking for the log book. I don't know if they were successful.

[andrasz]

Could someone clarify what has to happen if you have an aircraft without its maintenance records.

The most likely outcome would be aluminium cans. Without records all life limited parts need to be assumed to have zero hours/cycles left, and the cost of re-conditioning and re-certifying all such components are probably akin to buying a new aircraft.

[ATC Watcher]

The most likely outcome would be aluminium cans. Without records all life limited parts need to be assumed to have zero hours/cycles left, and the cost of re-conditioning and re-certifying all such components are probably akin to buying a new aircraft.
I can conform this , in a smaller scale, a few years back the office near a hangar burned in a small airfield and all the Log books and maintenance records of a few gliders and aircraft went up in flames. . . After months of litigation with the local CAA , the aircraft could not be re-registered and were ultimately scrapped.

[Winemaker]

Here's a really good video from Mentour Now about leased aircraft, Russia, and repossession and consequences. It's worth a watch.
https://youtu.be/Lz4gCE4ccRM

[hunbet]

Delta Tech Ops did a lot of heavy maintenance for Russian airlines, including engine overhaul.
That came to a screeching halt.
It's going to be hard for them to replace that expert maintenance !

Delta doesn't fly any 787's but they overhaul the engines for airlines that do .

https://deltatechops.com/delta-techops-mro-reaches-new-milestone-with-first-rolls-royce-trent-1000-ten-engine-service/

[Denti]

Apparently Bermuda has withdrawn the airworthiness certificates from over 700 jets operated by russian entities.

https://twitter.com/alexinair/status/1502933647783043080?s=21

[lederhosen]

Reports that they have been deregistered too. I presume they will shortly be sporting Russian registrations with airworthiness certificates and insurance arranged in record time. The legal ramifications are going to be interesting.

[Dannyboy39]

Reports that they have been deregistered too. I presume they will shortly be sporting Russian registrations with airworthiness certificates and insurance arranged in record time. The legal ramifications are going to be interesting.
You can’t deregister an aircraft without prior consent from the owner. You can however revoke a CofA at anytime.

And reasons being that the aircraft are registered in Bermuda for tax reasons are not true - can you imagine working with the Russian authority to remove an aircraft in the current circumstances. But of course the “journalist” who broke this story would know that…

[lederhosen]

The next few days will show how the Russian authorities respond. I would be surprised if they just stop flying. As I said earlier the legal arguments are yet to be heard. By the way can you explain your comment about tax and registration in Bermuda. I did not quite follow what you were saying.

[HKG253250]

The ownership in Bermuda and other offshore registrations is absolutely for tax reasons, though there may well be other ‘corporate’ considerations as well.

[Big Pistons Forever]

Can China sell Russia their new narrow-bodied jet or is there enough Western technology that sales could be blocked ?

[Dannyboy39]

The ownership in Bermuda and other offshore registrations is absolutely for tax reasons, though there may well be other ‘corporate’ considerations as well.
But that’s the point - they are not owned in Bermuda, but in Ireland.

[brak]

Can China sell Russia their new narrow-bodied jet or is there enough Western technology that sales could be blocked ?

I doubt russian operators have the money to afford any new ac r/n or anytime soon.

[lederhosen]

Dannyboy39 my point was primarily about registration. The original reasons for non registration in Russia included punitive taxes on imported foreign aircraft and leasing companies' concerns about remarketing aircraft that had been operated under Russian rules as well ironically as the very issue which is now top of the list recovering their assets (see Capetown agreement).

[ATC Watcher]

The ownership in Bermuda and other offshore registrations is absolutely for tax reasons, though there may well be other ‘corporate’ considerations as well.
It is not as Lederhosen explained, , in fact I was told certain leasing companied mandated registration in Bermuda as a precondition to a leasing contract mainly to avoid Russia bureaucratic control. Well it did not help much in the end. .

[Denti]

In the end it is about both issues. Registration of a western build aircraft in russia required an import tax of 25% of the value of that aircraft. Which is quite a big incentive not to do it. On the other hand, lessors wanted non-russian registrations as well, so it was a win-win at that point. Now, since russia basically does not allow the return of leased aircraft there will be apparently not a registration tax anymore when and if those aircraft will be put on the russian registry. In an autocratic state laws are basically meaningless anyway, just whatever the Fuhrer wants is important, nothing else.

[lederhosen]

I am always happy to learn something new. But it would be helpful to understand which bit I got wrong ATC Watcher. Denti who is usually pretty reliable has confirmed that there were taxation implications on the import of foreign aircraft. A short google search will back this up up if anybody remains unconvinced.

My second point was that leasing companies preferred foreign registrations for various reasons. One reason (which I may not have explained particularly well) is that the Russian authorities reputation for oversight of maintenance etc. was not the greatest. One of the big risks in leasing is the state of the aircraft when you get it back. I have had some personal experience of airframes that came back from Africa and South America which were in a shocking state. Fixing them was a big hit to the bottom line. The lessors also hoped that having them registered abroad would help if they needed to get them back. Again as Denti has pointed out that has not worked so well. One aircraft was reportedly flown back from Egypt against the wishes of the lessor and allegedly without insurance.

Someone has started a new thread which confirms my original point that I expected the Russians would in any case continue flying these aircraft. My personal view is that the Russians consider themselves to be in a war situation (in this case economic) and therefore anything goes.

[ATC Watcher]

lederhosen : But it would be helpful to understand which bit I got wrong ATC Watcher.
Ooops , syntax error , typed too fast. . The comma is missing after "it is not" . I was directly replying to the HKG affirmation that it was absolutely for tax reasons , quoting you as reference... The correct sentence should have read , It is not ( absolutely for that reasons), comma, as lederhosen explained, etc..
You got nothing wrong ,, sorry for the misunderstanding, will better watch my syntax next time!

[WillFlyForCheese]

Putin signs law allowing foreign aircraft to be re-registered as RussianFrom - https://insuranceday.maritimeintelligence.informa.com/ID1140124/New-Russian-aviation-law-sparks-confiscation-fears (https://insuranceday.maritimeintelligence.informa.com/ID1140124/New-Russian-aviation-law-sparks-confiscation-fearsA)

A new law allowing Russian airlines to register inside Russia planes leased from abroad has come into force, raising further fears in the aviation insurance market of massive losses.

As Insurance Day reported last week, there have been fears the Russian government might effectively confiscate up to $13bn-worth of foreign-made planes being leased by Western companies to Russian clients. According to analysts, there are 589 Western-built aircraft that are owned by European companies in Russian airports.

The new law was signed by Russia’s president, Vladimir Putin, and is part of the country’s measures to combat Western sanctions. The law says it aims to ensure the uninterrupted functioning of activities in the field of civil aviation.

According to Reuters the move comes after aviation authorities in Bermuda and Ireland, where virtually all foreign-leased jets operating in Russia are registered, said they were suspending certificates of airworthiness for those planes.

No plane can fly without a certificate of airworthiness issued by the civil aviation authority in the country where it is registered. Re-registering foreign-owned planes in Russia would aim to get around this, Reuters said.

[Atlantic Explorer]

Putin signs law allowing foreign aircraft to be re-registered as RussianFrom - https://insuranceday.maritimeintelligence.informa.com/ID1140124/New-Russian-aviation-law-sparks-confiscation-fears (https://insuranceday.maritimeintelligence.informa.com/ID1140124/New-Russian-aviation-law-sparks-confiscation-fearsA)

A new law allowing Russian airlines to register inside Russia planes leased from abroad has come into force, raising further fears in the aviation insurance market of massive losses.

As Insurance Day reported last week, there have been fears the Russian government might effectively confiscate up to $13bn-worth of foreign-made planes being leased by Western companies to Russian clients. According to analysts, there are 589 Western-built aircraft that are owned by European companies in Russian airports.

The new law was signed by Russia’s president, Vladimir Putin, and is part of the country’s measures to combat Western sanctions. The law says it aims to ensure the uninterrupted functioning of activities in the field of civil aviation.

According to Reuters the move comes after aviation authorities in Bermuda and Ireland, where virtually all foreign-leased jets operating in Russia are registered, said they were suspending certificates of airworthiness for those planes.

No plane can fly without a certificate of airworthiness issued by the civil aviation authority in the country where it is registered. Re-registering foreign-owned planes in Russia would aim to get around this, Reuters said.

Well that’s the end of International flights for Russian airlines. This will take decades to sort out if ever.

[Nil by mouth]

Well that’s the end of International flights for Russian airlines. This will take decades to sort out if ever.

Now Aeroflop or Aeroflip?

[zambonidriver]

Still interested to see who will taking the hit at the end... Leasors? Insurances?
My money is on the taxpayer but I'm the cynical kind.

[WillFlyForCheese]

Still interested to see who will taking the hit at the end... Leasors? Insurances?
My money is on the taxpayer but I'm the cynical kind.

Yes - all involved will scramble for coverage. Act of War exclusion anyone?

Some are already litigating whether those types of exclusions apply to "Cyber War." The world is, unfortunately, getting more interesting in this regard.

https://www.fitchratings.com/research/insurance/russian-cyberattacks-may-test-insurer-war-exclusion-policy-language-01-03-2022

[Journey Man]

Well that’s the end of International flights for Russian airlines. This will take decades to sort out if ever.

I can envisage Russian airlines flying to vassal states, who are unable to refuse, thus widening the scale of the problem.

[ATC Watcher]

I can envisage Russian airlines flying to vassal states, who are unable to refuse, thus widening the scale of the problem.
Indeed, but the attitude of China will determine if this is viable If they support Russia, this could drag on for years , but it they refuse, this will not work long term . Even Russia most fervent supporters, the like of Serbia, Cuba and Venezuela will be out of reach.

[compressor stall]

China will ban them. They will want to sell the failed Russian state their aircraft in a rescue package. Airframes too cheap to refuse with lots of economic strings attached.

[pulse1]

Am I right in thinking that the biggest share of leased aircraft has come from China?

[Sallyann1234]

China will ban them. They will want to sell the failed Russian state their aircraft in a rescue package. Airframes too cheap to refuse with lots of economic strings attached.

Can China supply aircraft with 0% US or EU content?

[Denti]

Am I right in thinking that the biggest share of leased aircraft has come from China?

As far as we know that is not the case. The biggest leasing companies are irish, although China is certainly trying to catch up.

[vikingivesterled]

Am I right in thinking that the biggest share of leased aircraft has come from China?

Over 200 of the aircrafts are owned by Dublin based leasing companies including 128 by AerCap alone, according to RTE News at One.

[Bidule]

China will ban them.

It does not seem to be the case: https://www.cnbc.com/2022/03/15/ukraine-crisis-china-wants-to-avoid-us-sanctions-over-russias-war.html

.

[compressor stall]

It does not seem to be the case: https://www.cnbc.com/2022/03/15/ukraine-crisis-china-wants-to-avoid-us-sanctions-over-russias-war.html

.
My opinion expressed above, but I note China also banning supply of spares to Boeing and Airbus.

China play the long game. Look at belt and road. Find third world countries, offer them something they can't afford themselves, then presto, debt bondage for generations.

A post Putin less autocratic regime will be desperate for airframes.... Those remaining will be practically un airworthy, China would love a market.

[Nil by mouth]

A new development maybe?
https://euroweeklynews.com/2022/12/09/russia-evades-sanctions-with-the-return-of-over-300-aircraft/

[DaveReidUK]

A new development maybe?
https://euroweeklynews.com/2022/12/09/russia-evades-sanctions-with-the-return-of-over-300-aircraft/

A very poorly written article.

The majority of the planes are said to be leased from foreign companies and had been registered in Bermuda given concerns over the transparency and completeness of the procedures for maintaining airworthiness in Russia.

So instead they were registered in Bermuda and Ireland, well known places for registering planes and ships.

Sanctions required these countries to suspend registrations and airworthy certificates making it impossible to fly. But that appear to have been easily overcome by simply changing the place of registration.

My understanding is that all of those aircraft are still technically on the Bermuda/Irish registers. They are/will be severely restricted as to where they can fly outside Russia as very few countries will recognise as legitimate the RA- registrations that they now wear in contravention of ICAO's ruling that an aircraft may not be simultaneously registered in multiple countries.

A further 150 super jets have returned to Russia and are now able to fly abroad, albeit to a limited range of counties.[sic]

Hmmm.

[Liffy 1M]

I spotted this article today. Not a runner as long as the current sanctions remain in place, it seems certain. https://www.irishtimes.com/business/2022/12/22/russia-explores-buying-stranded-jets-from-western-leasing-firms/

[ATC Watcher]

Interesting, but why would anybody agree to this?, this is not only a flagrant contravention of sanctions but also would allow Russian airlines to buy these aircraft at a fraction of their actual worth., kind of a rewardi for the war.. Crazy.

[DaveReidUK]

The chances of EU approval are zero.

[tdracer]

The chances of EU approval are zero.
Exactly - this was mainly Russian consumption so that - when the EU rejects it - Vlad can blame it on the evil west instead of where the blame actually belongs.