The Impossible Task Of Repossessing 236 Planes Now Illegally Leased By Russian Airlines

Not only has Europe banned Russian planes from its airspace, European sanctions mean that Russian airlines face repossession of more than half of their planes. That’s because they’re leased and those leases become illegal, and void.

The problem is, according to Air Insight Group and Ernest Arvai,

  • 236 planes need to be repossessed. In one month.

  • If the airlines are willing to return the planes, where do they go? They can’t fly to Europe. They can go to the Mideast, for instance Dubai, where lessors can collect and store them.

  • But Russian airlines may not return the planes. If you can get crew into Russia to repossess the planes “there simply aren’t enough repossession crews in the world to be able to retrieve all of these aircraft in the” time remaining.

  • Some may be used to fly routes where air space isn’t closed, but that’s risky if the airline is still trying to use aircraft whose leases have been cancelled. The planes could be repossessed on arrival.

  • Insurance on these aircraft is mostly cancelled as a result of sanctions. If these planes are sitting in Russia many (with European insurers or re-insurers) also uninsured. At the very least the question of insurance coverage is something that’s going to be litigated.

  • The Russian government may restrict the planes to Russian airspace, forbidding the repossessions. Or they could even be ordered into the Russian air force – again, uninsured. (And even if insurance remains on the plane, the policy probably excludes use of the aircraft in war.)

If the war doesn’t resolve quickly, and sanctions against Russia remain in place, what could happen to the aircraft that have been successfully repossessed? On possibility is… Iran.

[D]iplomatic breakthroughs with Iran are likely over the next couple of months, so stay tuned – the Russian aircraft may end up in Teheran, which can also help with deficits in oil production and ease pricing. In politics, the good guys and bad guys sometimes change positions, and the enemy of my enemy can become a friend.

On the other hand some airlines may be allowed to park some planes with the leasing companies willing to ‘wait it out’ in hopes that the current situation doesn’t last, expecting to restart leases once those are permitted. Leasing companies then take a loss that grows as sanctions extend.

I’ve written several times extremely concerned with Russia’s attack on Ukraine, including my own thoughts on things that we can do here in the U.S. to help. I am appalled and have zero sympathy for the Russian position that provoked these attacks, and even less since Putin’s intentions were accidentally leaked by state media (before being deleted). The atrocities are horrible.

Without taking anything away from this, there are two sides to each transaction, and imposing sanctions or bans on Russian action entails harm to their counterparty as well. One company, AerCap, has 154 aircraft it owns leased to Russian airlines. They’re all currently at risk. The burden of sanctions against Russian isn’t just being felt by Russia, and it won’t be felt evenly in the West either. We could see some companies fail, because they did business with Russia when it was considered proper to do so.

Meanwhile flooding the market with over 200 serviceable aircraft would depress the value of each plane, an issue not just for leasing companies but also for the assets on the books of commercial airlines around the world that suddenly find the value of their fleets depreciating. That’s a paper loss, to be sure, except when an airline looks to unload planes to raise cash. Of course it will help other airlines that are seeking to bolster their fleets on the cheap, too.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Typical behavior of incompetent Europeans. Doing nothing for decades while Putin repeatedly let it be know he thinks the demise of the USSR was the greatest tragedy and wants to reconstruct it. Subsequently, those incompetent Europeans double down on their delusion and make themselves even more dependent on Russia for gas imports (NS2)!
    And now, when Russia finally has invaded their neighbor, those inept politicians wake up and slap sanctions on Russia? Seriously, how more woke and deranged can you get!
    Of course, those same politicians never ever think about the (medium and long term) consequences of their actions. It is all to “look good” in the camera and jokey for the next election.
    With respect to repossessing planes, perhaps they should have FIRST seized the planes at European airports, THEN close their airspace? Not the other way around!

  2. The planes will be scrubbed. Transponders switched out and identifying parts removed. No way these planes are ever recovered

  3. Oh they might not be recovered, but they won’t be flying long. Russian airlines will need parts and start to take parts from planes and grounding more and more until eventually nothing will be flying, not even the “Superjets” which require western parts.

  4. Me yesterday: Well, at least Gary’s comment section can’t get any worse.
    Me today: Sees an old man call all europeans “woke” for not appeasing putin.

    Welp, wrong again.

  5. It is worth noting that UK soccer team Chelsea is now up for sale by its Russian oligarch owner. Sanctions and severance of financial connections between Russia and the free west will accelerate and they will increasingly target the wealth of oligarchs, most of whom have been very close to Putin to secure their own possession. Biden said in his SOTU that the US is going to go after assets of the oligarchs in the US. I suspect there will be alot of Russian citizen linked assets that will have for sale signs soon. A number of British officials are saying Chelsea’s owner is just trying to liquidate his assets (which are far more than just Chelsea) before they are seized.
    Any notion that it is only average every day Russians that are getting hit is inaccurate. Russia says it is a democracy and there are Russian people protesting at the risk of prison about the invasion. A complete disconnect of Russia from the west needs to happen and remain in force until Ukraine has full and complete control of all of their land including what Russia took less than a decade ago and until Russia pays reparations and for the cost of rebuilding Ukraine.

  6. Amtrak is the greatest. Who needs air lines? I’ve got AF One…says Brandon. Where’s the men’s room?

  7. The planes are only illegal according to illegal laws in certain European countries. Those planes are not illegal in Russia and the actions of European governments banning these leases is illegal in Russia. We’ve come to a dangerous point where assets of civilians who have nothing to do with the government are seized. Imagine if an FDA worker in the U.S. has his assets seized by some foreign power because he works for the U.S. government. It’s ridiculous.

    For all the complaints about Putin, dictator Trudeau seized bank accounts of citizens who made a donation to a protest for freedom. Where are the calls to try Trudeau for a crime against humanity? Where are the sanctions? Where are the no fly zone demands?

    Russia should seize the planes as part of sanctions on certain EU countries.

  8. Lets hire the Hertz corporation to take up this repo task with a nice government contract, after all they do a fine enough job with their stolen car claims!

  9. @Jackson Waterson, once Putin pulls out of Ukraine and pays war reperations, all the sanctions end. That’s the way out for Russia. Until then, the sanctions will hit hard. Oh, and it’s not you to deem things illegal, that’s up the courts in each country.

  10. The wording of the sanctions mentions planes owned or under the control of Russian entities. So if a plane is flying back to a lessor, that should suit the definition of not being under Russian control as the lessor is flying them back into their custody.

  11. Ed,

    A lot of what you mention is due to the US wanting to have Russia (and also China and India) increasingly integrated into the global market under the assumption that increasingly free trade and economic interdependency would be good for the US and peaceful relations among nations. Of course what is taken to be good for US business/capital for a long while isn’t necessarily a long-term inoculation from the threat posed by weak powers becoming strong powers (due to increased global integration) when the state or society of those powers are or become authoritarian in nature and have the power to boot to make things increasingly miserable for people in other countries and/or domestic minorities.

  12. Perhaps Boeing can arrange for some of those leased 787 to fill American’s orders.

  13. Luke. Hertz has the experience with dealing with this. They can put Putin and his men in jail for not returning those planes …..and then say that is was just an error ..Herts is going to send over Buford T Justice of Texas to get those metals back.

  14. Of course Jackson Waterpipestoned will support Putin. Found the russki 2 rouble trolll

  15. @Ed Bravo! it’s about time to read some non-colored truth.

    As for the many lessors affected, well , it was time to learn the cost of doing business with commie tyrants (I wish the same outcome to everyone that support tyrants in any kind of way, specially financially, like the ones that support the regime of my destroyed homecountry Venezuela).

    They will learn the same lesson as RSX holders, and that will also give a hint for many of the ADR/ADS holders of economies of the NOT-Free world. As for me, I always put my money where my mouth is, always short communism. Still hasn’t covered my juicy RSX short (the BABA one I did cover, like for 50% profit!).

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