Wednesday, March 16, 2022

Aviation War Begins as Russia Seizes Over 500 Aircraft in Retaliation for Sanctions

Effect on Market Compared with 9/11
Shipping News Feature

RUSSIA – According to the UK based analytics group Russells, new legislation passed by the Russian authorities entitles them to seize $13 billion worth of aircraft from western holdings.

With all the state airline Aeroflot services effectively stopped from operating the country’s aero industry is in a parlous state and the authorities say the imposition of such sanctions justify the seizure of assets to compensate.

Russells studies the ways in which political, economic and environmental stability or supply chain, credit and cyber security risks all combine to disrupt trade and cause operational and financial loss, principally for use by insurance groups. Many of its clients will doubtless be affected by this latest move

The seizure is expected to include a minimum of 543 Boeing & Airbus aircraft prompting Suki Basi, Russell Group MD to comment:

“The nightmare scenario that has kept many of our clients awake at night has now finally happened and it will leave a significant mark on the aviation war market on a par with 9/11. We are stepping up our efforts here at Russell to help our clients through this difficult moment, as it is absolutely crucial for good accurate data that can help an aviation underwriter understand and know their exposures better.”

Many companies have substantial interests tied up in Russian plane stocks. The Stat Times quotes Dublin based aircraft leasing and aviation finance group AerCap as one entity suffering. On February 24 the company lodged a Form 6-K with the US stock market regulator, the Securities And Exchange Commission (SEC) stating 5% of its fleet by net book value was leased to Russian airlines.

AerCap holds 74 freighter aircraft and 2,319 passenger aircraft in its fleet and had a net income in Q3 2021 of $434 with reported revenue of $1.4 billion. In communication with the SEC AerCap said : .

”Risks related to our relationship with our lessees. If our lessees fail to cooperate in returning our aircraft following lease terminations, we may encounter obstacles and are likely to incur significant costs and expenses conducting repossessions."

It is difficult to see any possibiity that the aircraft can be recovered whilst the current hostile state exists. In the meantime the loss of capacity on several routes has seen airfreight rates creeping higher as a result.