(Bloomberg) -- Russia offered to pay compensation to owners of jets commandeered by the country, in a bid to smooth relations with leasing firms that stand to lose billions of dollars on rented aircraft they can’t get back.
Authorities in Moscow are seeking ways to legally get round sanctions that require international companies to recall their planes, Transport Minister Vitaly Savelyev said Tuesday. Options include payments or the outright purchase of the jets, he said.
Lessors have so far been unwilling to negotiate on the matter, according to Savelyev. That’s most likely because any financial accord with Russian airlines would appear to present a clear breach of the sanctions.
“We are not losing hope but we are not giving them back, because that would mean to leave oneself without aviation,” Savelyev said.
Leasing firms doing business in Russia have demanded the return of hundreds of Airbus SE (OTC:EADSY) and Boeing (NYSE:BA) Co. jetliners under economic sanctions imposed by European Union and U.S. authorities in response to the invasion of Ukraine. Under EU rules, the owners have until March 28 to cancel contracts, but have no way to repossess the planes after Russia moved to keep them within its borders.
Russia, meanwhile, faces the prospect of an aviation market cut off from many international markets, leaving the country without access to foreign aircraft, spare parts or services provided by foreign firms.
Lessors caught in the middle stand to lose as much as $10 billion as the value of their fleet in Russia declines. The offer to purchase the planes would ease the impact and give Russian airlines a potential pathway for re-establishing business ties after the crisis passes. But moving forward would put foreign lessors at risk of being penalized by authorities in the U.S., EU or other jurisdictions.
Lost Planes
Russia has moved almost 800 aircraft to the local register, according to Savlelyev. Bermuda and Ireland, where many of them have been registered, have suspended the airworthiness certificates of planes tied to Russia. The minister said 78 planes have been “lost” after being seized overseas.
International flights that remain possible even after widespread airspace closures are being operated by Russian-owned aircraft, including almost 150 Sukhoi Superjet 100s and 44 Boeing and Airbus models, he said.
The minister warned that sourcing parts for the remaining planes will become an issue and said authorities are examining how Iran managed to maintain flights under years of restrictions. He said Russia had 1,367 aircraft in total.
Aviation consultancy Ishka said the transfer of the leased fleet to the Russia registry could be seen as a step toward the state-seizure of foreign-owned planes.
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