Putin Signs Law Allowing Russian Air Carriers to Seize Western Jets Worth $10B
The Russian government wants to allow for the repurposing of more than 500 jets for domestic travel.
With the Russian invasion of Ukraine now about to enter its third week, cascading impacts across global commerce are cropping up by the day. This trend continued Monday, as state-owned media agency TASS reports that Russian President Vladimir Putin has signed an order allowing for the seizure of over 500 commercial jets that Russian airlines have leased from Western companies. It is an unprecedented move for the global aviation industry.
The law comes after a period where the future of the jets was unclear. With many countries banning flights from Russia, including the entirety of the European Union and the United States, many Western aircraft leasing firms sought to repossess the jets, with the EU providing a March 28 deadline to any European firms to recover their property. Russia's airlines reportedly operate 728 Western-made aircraft in total, and it's believed that 515 aren't owned by these air carriers—instead, they are leased from other companies. The foreign airplanes are primarily made by either Boeing (332 total planes) or Airbus (304 total planes), and both companies have announced they will not be supplying parts or technical support to Russian carriers until further notice. Now, the Russian government has allowed domestic airliners to keep the planes—valued at a cumulative $10 billion dollars—and break lease agreements.
This leads to further logistical problems for Russia's domestic airliners. All planes have to be certified as airworthy by their country of origin, and most of Russia's leased fleet has lost that certification. The planes primarily come from Bermudan and Irish companies, whose governments have already revoked the planes' ability to fly under international law. As a result, the seized planes will not be allowed in international airspace until those certifications are reinstated. The Kremlin is seeking to change Russian airworthiness certification laws to allow for domestic agencies to certify foreign aircraft as safe and worthy for travel, which would allow them to be flown domestically. Without a supply of fresh parts for maintenance and repairs, though, it's unclear how long carriers can keep the planes in the air.
Even more critically for the country, registering an airplane in two countries at once is not allowed by rules defined by the United Nation's 1944 Convention on International Civil Aviation, which set international standards for airspace. If Russian airlines decide to take advantage of Putin's new law and seize the jets, re-registering them in Russia, they risk destroying relationships with manufacturers and lessors and may be disallowed from international airspace going forward. If they let the planes sit indefinitely, it could spell financial catastrophe as significant portions of their fleets stay grounded. Aeroflot, Russia's largest air carrier and a state-owned company, has already flown most of its foreign-owned planes back to Russia ostensibly to prevent repossession, but it has not re-registered any of the planes yet.
It is hard to determine how, exactly, this affects global travel and aviation companies. The Russian breach with decades-old international law hasn't been done before and threatens the very model of the aircraft leasing business, which depends on allowing international owners to repossess unpaid airliners. With that standard upended, even if the invasion is withdrawn and sanctions recede, it could be quite a long time before the dust settles and the fate of the trapped airliners is clear.
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