May 24, 2022

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Russia moves to seize hundreds of planes of foreign owners

Russia moves to seize hundreds of planes of foreign owners

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 from foreign companies in Russia, where they will issue domestic certificates of airworthiness, according to a statement from the Kremlin.

The bill would allow Russian airlines to keep their foreign charter planes and operate planes on domestic routes, while making it difficult for foreign companies to take back their planes without Russian government approval.

US and European sanctions against Russia require leasing companies to repossess all aircraft they have leased to Russian airlines by the end of the month.

Western aircraft makers like Airbus (EADSF) And the Boeing (Bachelor’s) You already have Russian airlines cut off access to spare parts They need to maintain their planes and fly them safely. Russian Airlines operates 305 Airbus aircraft and 332 Boeing aircraft, according to data provided by aviation analytics firm Cirium.

Russia also has 83 regional aircraft made by Western companies such as Bombardier, Embraer and ATR. Only 144 aircraft were built in the active fleets of Russian Airlines in Russia.

Cirium data shows that 85% of those foreign-made aircraft are owned by leasing companies, and their total value is estimated at $12.4 billion.

It was not clear how the leasing companies acquired the planes while they were on Russian soil. Additional sanctions that prevent Russian planes from flying to most other countries have essentially restricted their airline industry to domestic flights.

The leasing companies did not respond to a request for comment on Russia’s actions, and it is not clear if they even want those planes back. The aircraft would not have access to spare parts and would not have valid airworthiness certificates that would be accepted by Western airlines.

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“These aircraft will no longer be backed by spare parts and maintenance,” said Richard Aboulafia, managing director of consultancy AeroDynamic. “It’s a real problem if they lose their airworthiness certificates, which can happen if proper records are not kept, or especially if they are taken apart for parts.”

Losing access to 85% of its aircraft manufactured abroad would be a severe blow to the country’s economy.

Russia is the largest country in the world by area, more than twice the size of the continental United States. Charles Litchfield, deputy director of the Center for GeoEconomics at the Atlantic Council, an international think tank, said it needed a viable airline industry to keep its economy running.

“It is an important part of the Russian economy,” he said. “They want some basic local industries to stay in place. Russians don’t fly the way Americans do. They don’t fly to Siberia for vacation.”

Its aviation industry is an important link for companies, not only for international flights but also for domestic service of the energy sector, due to the need for transportation engineersAnd the Workers and other equipment to and from remote oil fields.

“Aviation is an incredible enabler of economic growth both domestically and internationally,” said Robert Mann, an aviation consultant and analyst. “Without it, you could put it back into a semi-agricultural economy, trying to run with a rail network.”

Russia doesn’t need all the planes it seizes, said Betsy Snyder, a credit analyst who covers plane leasing companies at Standard & Poor’s, because the hit to its economy from sanctions would dramatically reduce the need for air travel.

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“The Russian economy is collapsing,” she said. “No one is going to go in and out of Russia, Russian citizens lose their money, so they don’t have money to travel in the future. It could be that [airlines] It would be a much smaller business.”

This raises the possibility that many of the captured aircraft will be dismantled.

“If you don’t have the authority to manufacture parts, you shouldn’t make them yourself,” Mann said. “You don’t know what standards were used. Did I get the internals right? When you put them in the turbine section of the engine, will they work as if they were designed?”

When a part reaches the end of its designed usefulness, known as “green time,” the airline must choose between flying parts that had to be replaced for safety reasons or stealing parts from other aircraft, Mann said.

“You can go through this process as long as you have planes with green time,” he said. “As planes run out, your network gets smaller and you can fly fewer hours each day, until you don’t have an airline.”

So, keeping aircraft will not necessarily make the Russian aviation industry work. “Within a year, Russia will stop having any kind of viable aviation industry,” Abulafia said, adding that its aviation industry may soon find itself somewhere between the sanctioned industries of Iran and North Korea.

Can a country as large as Russia survive without a modern and viable aviation industry? “This is a thesis that has never been tested,” said Abul Afia. “But it’s about to be.”

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