Russia Allocates $4B To Buy Western Jets From Some Lessors

The Russian government is trying to help local airlines to buy Western-made commercial aircraft leased from foreign companies and has allocated about RUB300 billion (around $4 billion) to facilitate this process, according to transport minister Vitaly Savelyev.

Lessors based in the European Union, the UK and the U.S. are directly affected by Western sanctions against Russia following the invasion of Ukraine. Lessors had to terminate all leasing agreements and stop all business dealings with their Russian customers. Russia blocked its airlines from returning leased aircraft and instead had them re-registered on the local aircraft registry.

Savelyev said that Aeroflot has already used some of the government money to acquire 10 Boeing 777-300ER widebodies. The airline bought these airliners from an unnamed Irish lessor in December 2022 using a relaxation in the fifth package of the European Union sanctions that allowed selling commercial aircraft to Russia if they had been in a financial lease arrangement with the local carriers before. Earlier that year, Aeroflot gained ownership over eight leased Airbus A330 widebodies. The 777-300ERs are believed to have been previously owned by the Irish subsidiary of Russia’s VEB Leasing.

According to Savelyev, almost half of the Russian commercial fleet—595 out of 1,297 aircraft—is still owned by foreign lessors. According to Savelyev, foreign lessors managed to regain 75 aircraft which were outside of Russia when the sanctions had been imposed. 

As a result, most of the Western aircraft operating in Russia today have double registrations, which prevents them from flying on most international services. Gaining ownership would allow the Russian carriers to legally de-list the aircraft from foreign registries. Aeroflot’s CEO Sergey Alexandrovsky confessed at the end of December 2022 that Aeroflot had managed to withdraw 89 aircraft out of its 180-strong fleet from foreign registries.

A Russian airline source said that the volume of the allocated funds was calculated on the basis of estimates carriers provided the government in autumn 2022. This money was expected to be borrowed from the National Wealth fund. Interfax agency cited Russia’s presidential aide Igor Levitin saying on March 16 that the transport ministry was entitled to distribute the funds among the carriers.

However, Kommersant daily cited leasing sources in September 2022 saying that only about 50 Russian-operated aircraft had been in a financial lease. 

According to Savelyev, the average age of the Russian-operated, Western-made fleet now stands at 15 years. The minister hopes Russian airlines can successfully maintain the fleet for another decade due to grey logistics and parallel import of spare parts.