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.

According to Air Insight Group and Ernest Arvai, the problem is.

• 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 sanctions against Russia remain in place, what will happen to the aircraft that have been successfully repossessed? Iran is a possibility.

[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.

Some airlines may be allowed to park some of their planes in hopes that the current situation won't last, and that the leasing companies will restart their lease once those are allowed. As sanctions are extended, the loss grows for the companies.

I have written many times about my concern with Russia's attack on Ukraine, as well as my thoughts on what we can do in the U.S. to help. Since Putin's intentions were accidentally leaked by state media, I have zero sympathy for the Russian position that provoked these attacks. The atrocities are terrible.

The aftermath of a Russian attack on a residential district in Borodyanka, Kyiv region. Notice the children’s play set. pic.twitter.com/cFz85dDJ9m

— Christopher Miller (@ChristopherJM) March 1, 2022

Russians bombed a military base in Zhytomyr this evening, city’s mayor say.

These are the effects of a stray missile that apparently hit a residential area in the city pic.twitter.com/6EIadsqZCM

— Matthew Luxmoore (@mjluxmoore) March 1, 2022

There are two sides to each transaction, and if sanctions are imposed on Russian action, it will hurt their counterparty as well. AerCap has 154 aircraft that are leased to Russian airlines. They are all at risk. The burden of sanctions against Russian isn't just being felt by Russia, but also by the West. Some companies could fail because they did business with Russia.

The value of each plane would be depressed if the market was flooded with over 200 aircraft, 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. It's a paper loss, but only when an airline looks to unload planes to raise cash. It will help other airlines that are trying to bolster their fleets on the cheap.