President Vladimir Putin signed a law on Monday as part of the government’s anti-sanctions measures that will allow Russian airlines to register aircraft chartered by foreign companies in Russia, where local airworthiness certificates will be issued, according to a Kremlin statement.
The bill will allow Russian airlines to keep their leased planes overseas and to operate planes on domestic routes, making it more difficult for foreign companies to reclaim their jets without Russian government approval.
US and European sanctions imposed on Russia require leasing companies to take back all planes they have chartered to Russian airlines by the end of the month.
Russia also has 83 regional jets made by Western manufacturers such as Bombardier, Embraer and ATR. Only 144 aircraft of the active fleets of Russian airlines were built in Russia.
Cirium’s data shows that 85% of those foreign-made aircraft are owned by leasing companies and estimate their combined value at $ 12.4 billion.
It was not clear how the leasing companies could get hold of these planes while they remained on Russian soil. Additional sanctions banning Russian planes from flying to most other countries have limited its airline industry essentially to domestic flights.
The leasing companies did not respond to a request for comment on Russia’s shares and it is unclear whether they will want those planes back. The aircraft will not have access to spare parts and will not have valid airworthiness certificates that would be accepted by Western airlines.
“These jets will no longer be supported with parts and maintenance,” said Richard Aboulafia, managing director of AeroDynamic Advisory. “It is a real problem if they lose their airworthiness certificates, which can happen if proper records are not kept, or especially if they are cannibalized in parts.”
Losing access to 85% of its foreign-built aircraft would be a major blow to the country’s economy.
Russia is the largest nation in the world by landmass, more than double the continental United States. It needs a viable airline industry to keep its economy running, said Charles Lichfield, deputy director of the GeoEconomics Center at the Atlantic Council, an international think tank.
“It is an important part of the Russian economy,” he said. “They want some basic domestic industries to stay in place. The Russians don’t fly as much as the Americans. They don’t fly to Siberia for the holidays.”
Its aviation industry is a crucial link for business, not only for international flights, but also for domestic service for its energy sector, due to the need for transportation engineers, other workers and equipment to and from its distant oil fields.
“Aviation is an incredible driver of economic growth, both nationally and internationally,” said Robert Mann, airline consultant and analyst. “Without it, you bring it back to an almost agrarian economy, trying to operate with a railway network”.
Russia doesn’t need all the planes it is impounding, as the blow to its economy of sanctions will greatly reduce the need to travel by air, said Betsy Snyder, a credit analyst covering aircraft leasing companies at Standard & Poor’s. .
“The Russian economy is doing very well,” he said. “Nobody is going in and out of Russia, Russian citizens are losing their money, so they don’t have the money to travel in the future. It could be that. [airlines] it will be a much smaller deal. “
This raises the possibility that many of the hijacked planes will be cannibalized in parts.
“If you don’t have parts manufacturing authority, you shouldn’t make it alone,” Mann said. “You don’t know what standards were used. Did you get the right internal feature? When you put it into a turbine section of an engine, will it perform as designed?”
Mann said that when a part reaches the end of its intended usefulness, known as “green time,” an airline must choose between flying parts that should have been replaced for safety reasons or stealing parts from other aircraft.
“You can go through this process as long as you have planes that have green time,” he said. “As you run out of planes, your network shrinks and you can fly fewer hours each day, as long as you don’t have an airline.”
So even keeping the planes will not necessarily keep the Russian airline industry running. “Within a year Russia will cease to have any viable aviation industry,” Aboulafia said, adding that its airline industry may soon find itself somewhere between the heavily sanctioned industries in Iran and North Korea.
Can a country as big as Russia live without a modern and sustainable airline industry? “This is a thesis that has never been tested,” Aboulafia said. “But it’s going to be.”