Western sanctions promised to deprive Russia of foreign aircraft. It has already become dangerous to fly abroad – at any moment our liner could be arrested. However, the aviation authorities found a sanctions loophole. Moscow deprives the "great aviation power of Bermuda" of power over our planes – and re-registers them in Russia. Why were our planes registered in Bermuda before? And how will re-registration help preserve our aviation fleet?
Western sanctions promised to deprive Russia of foreign aircraft and, in fact, kill domestic air transportation. Europe has banned Russia from buying European aircraft and demanded the return of those that are in the fleet of Russian carriers. Most of the foreign boards are leased from foreign companies (they are the owners). The EU has demanded leasing companies to terminate contracts by March 28. At least up to this point, they could fly without any problems.
However, another problem arose: the planes of our airlines began to be delayed abroad. Due to the risk of arrest of airliners, the Federal Air Transport Agency recommended suspending flights abroad from March 6. The problem turned out to be not only that the planes of our carriers do not belong to them, but the leasing companies are the owner. This is, in fact, a normal practice for the whole world: not all airlines can afford to buy expensive planes immediately into ownership.
The problem turned out to be the registration of aircraft operated by Russian airlines abroad. Most often they were registered in Ireland and Bermuda. And planes registered in Europe were immediately hit. And literally since March 14, aircraft registered in Bermuda have also been at risk. The Bermuda Civil Aviation Authority has cancelled the validity of the airworthiness certificates of our airliners due to international sanctions against the Russian aviation sector. Our airlines have not stopped flying, but now they fly at their own risk.
According to the Ministry of Transport on March 11, Russian airlines operate 1,367 aircraft. More than half – 700-800 aircraft - are registered in Bermuda.
However, Russia has found a way out of such a difficult situation. President Vladimir Putin has signed a law on the possibility of registering rights to foreign aircraft leased from Russian carriers. In this case, Russia itself can issue flight certificates.
"This has nothing to do with the expropriation or nationalization of aircraft. This is just a re-registration. It can be compared with a car that is removed from the register in the traffic police in Moscow and is registered with the traffic police in St. Petersburg, but the owner does not change",
- explains the head of the industry portal Avia.ru Roman Gusarov.
In fact, it was possible to register aircraft in Russia before that. "In our country, about 5% of the fleet was registered in the Russian registry, and the planes flew with a Russian certificate of airworthiness. But 95% of the planes were in a foreign registry. The new law, in fact, introduces amendments and clarifications to the current law in order to make the process of re-registration of aircraft easier and faster. In particular, the registration period of the aircraft in Russia has been reduced from 30 to 10 days," the source explains.
In his opinion, this is an excellent way out of the situation that has developed due to sanctions for both Russian airlines and foreign leasing companies, which, to put it mildly, were not happy with the sanctions imposed. Informally, it was reported that they asked very much not to introduce such restrictions and warned about the risk of their own bankruptcy.
Russian airlines get the legal right not to return the planes, continue to operate them and fly both inside the country and abroad without the risk that the plane will be detained and arrested, the interlocutor explains. If the plane is registered in Russia, it will not be possible to detain it at a foreign airport at the request of Ireland or Bermuda. Theoretically, this can be done if the leasing company requires it through the court on the basis of, for example, non-payment of lease payments. This option is possible in principle, but unlikely. After all, Russian carriers do not refuse to pay. Another thing is that they got the right to make payments in rubles, because it will be difficult with the currency against the background of freezing our reserves and cutting off dollars and euros. "The vast majority of lessors will make all these changes, because they have little choice. They either get rubles, or nothing at all," says Gusarov.
For leasing companies - owners of these aircraft - these changes give a chance for survival. They will continue to receive leasing payments from Russian carriers, they will not have to pay a fine for breaking lease agreements – and bankruptcy will be avoided.
According to Gusarov, a large number of applications have already been submitted for re-registration. And there are already the first registered aircraft, applications for which were submitted earlier. In particular, Utair said that it has already registered 50 aircraft in the Russian registry, including long-haul wide-body Boeing 767. Several aircraft registered in Bermuda have been decommissioned. The company explained that they started the process of re-registration of aircraft last year, and the existing fleet of aircraft is sufficient for uninterrupted passenger service. It also confirms that lessors agree to new changes.
Why were planes operated by Russian carriers registered most often in Bermuda or Ireland, and not in Russia? After all, legally such a possibility existed before.
This was due to the requirements of the Western leasing companies themselves. "Initially, Soviet standards did not correspond to Western ones, therefore, so-called aviation offshores, such as Ireland and Bermuda, were chosen for the registration of aircraft and for the supervision of their operation in our country. However, a lot of water has flowed since then. Our legislation has changed, technical centers and norms that meet international standards have appeared. The Ministry of Transport has long called for the aircraft to be re-registered in the Russian registry. However, the lessors said no," explains Gusarov.
According to him, the most popular excuse for this was that foreigners do not trust our courts and the legal system, and in Ireland and Bermuda there is Anglo-Saxon law that protects their property that is more understandable to them.
"It turned out to be a paradoxical situation when in Russia the great aviation power Bermuda was engaged in the operation of aircraft in quotation marks. This suited the foreign owners. They threatened that if the plane was registered in Russia, the risks would increase, and with them the leasing rates and the cost of insurance would rise.
Our carriers, of course, immediately backed up. But now all these arguments are zero," the interlocutor explains.
Leasing companies will either have to agree to the changes, or lose lease payments and get all their planes back. So far, they cannot physically return the planes to themselves. Because the airspace is closed. But even if this issue is resolved and Russia returns them all 700-800 aircraft that are currently on lease, foreign firms simply do not know what to do with them next. Such an influx of supported aircraft will collapse the secondary market for the sale of airliners overnight. Even at the best of times, it would be difficult to attach so many planes, we would have to provide big discounts, incur losses.
Now the world aviation is going through difficult times because of covid. The demand for air transportation has declined sharply and has not yet recovered, many planes are already forced to stand on the ground. In such a situation, it will be necessary to give the liners returned from Russia for a song, if only they would not rust. Next, it will hit the production of new Boeing and Airbus aircraft. Because why order new liners if it is much cheaper to buy used ones.
As a result, Russia managed to solve the issue with foreign airliners in such a simple way. We also have our own technical centers. But there is still the issue of spare parts, which the West has forbidden to supply to Russia. For the first few months, the spare parts available in the warehouses of Russian airlines are likely to be enough, judging by the statements of carriers and expert assessments. In particular, Ural Airlines noted that they can safely fly for two to three months without disassembling aircraft for spare parts.
During this time, it is necessary to find ways to solve the problem. One of the options is to use some aircraft as donors for others, that is, to disassemble the aircraft for spare parts. Another option is to get the necessary parts through third countries on the secondary market.
Olga Samofalova
