Russian law creates new hurdle for foreign plane lessors

Russian airlines have almost 780 leased jets, with 515 leased from abroad. The new law, part of Russia's measures to combat Western sanctions, says it aims "to ensure the uninterrupted functioning of activities in the field of civil aviation." The move comes after aviation authorities in Bermuda and Ireland, where virtually all foreign-leased jets operating in Russia are registered, said they were suspending certificates of airworthiness for those planes. No plane can fly without a certificate of airworthiness issued by the civil aviation authority in the country where it is registered.

A law allowing Russian airlines to register inside Russia planes leased from abroad came into force on Monday, creating a new obstacle for leasing firms and lenders seeking to repossess more than 500 jets before sanctions kick in.

The bill, signed by Russian President Vladimir Putin, has rattled the global aviation industry as Western sanctions imposed after Russia's invasion of Ukraine give leasing firms until March 28 to repossess aircraft worth $10 billion. Russian airlines have almost 780 leased jets, with 515 leased from abroad.

The new law, part of Russia's measures to combat Western sanctions, says it aims "to ensure the uninterrupted functioning of activities in the field of civil aviation." The move comes after aviation authorities in Bermuda and Ireland, where virtually all foreign-leased jets operating in Russia are registered, said they were suspending certificates of airworthiness for those planes.

No plane can fly without a certificate of airworthiness issued by the civil aviation authority in the country where it is registered. Re-registering foreign-owned planes in Russia would aim to get around this, said one source. But it could put airlines at odds with leased aircraft owners and international rules barring dual registration of planes, which can be registered in one country at a time.

Leasing companies are widely seen as unlikely to agree to free their jets from their current foreign registries, chosen due to concerns over the reliability of Russian regulations. "It is illegal to register an aircraft without proof of deregistration from the previous registry as well as the agreement of the owner. This would be a default under leasing contracts," said aviation adviser Bertrand Grabowski.

The Russian Federal Aviation Agency said there were 776 planes registered abroad as of Feb. 24, giving the number on the day Russia invaded Ukraine. Russia calls its actions in Ukraine a "special operation". Leasing companies are terminating leases and asking for planes to be returned. But they have had little success and experts say legal wrangling between Russian airlines and leasing companies could last years.

The United States and European countries on one side and Russia on the other have each blocked their airspace to each others' airlines in tit-for-tat measures. Russia's state aviation authority recommended last week that airlines with foreign-leased aircraft suspend flights abroad, making it harder for lessors to make repossessions. Some 425 jets are most at risk, the consultancy Ascend by Cirium says.

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