Russia has handed out more than $12 billion in state subsidies and loans to keep its aviation sector afloat since Western sanctions over Moscow’s invasion of Ukraine cut off supplies of critical parts and maintenance services. The country faces the daunting task of developing its industry with domestically sourced parts while buying aircraft from foreign lessors to avoid seizing more of its fleet.
The Kremlin has targeted producing more than 300 new aircraft in 2023, including the new Sukhoi Superjet 100 business jet, the Irkut MC-21 regional jet, and the LMS-901 utility aircraft. Most production, however, is expected to comprise helicopters as the government tries to catch up with sanction-related delays to the main airliner programs.
It has injected capital into two state-owned leasing companies to buy back some of the 728 Western-built aircraft that airlines had leased from them and to build more of its planes. It also plans to provide its airlines spare parts and technical support for their jets. That should help them fly for years, but it will not be enough to stem the losses caused by their suspension of international flights.
Aircraft lessors, which own a large portion of the aircraft still in Russia, will face multi-billion dollar claims for their losses. A trial date has been set in February between the lessors, which include Aercap, Carlyle, and Avenue Capital Group, and insurers over who should foot the bill for the lost revenue. The lessors seek to recover the planes they have lent to Russian carriers, but that will be challenging as the planes will need new airworthiness certificates for commercial flights.
The government has already spent some of the money it has set aside to buy back aircraft from foreign lessors. It earmarked about $3 billion to purchase ten long-haul Boeing 777s for Aeroflot last year after the EU eased restrictions on dealing with Russian aircraft leasing firms in the wake of the Ukraine crisis. However, the lessors may not want the aircraft back because they will need to invest in refurbishing them to meet Western requirements and will not have access to replacement parts.
The lessors are mainly based in the EU, with Avolon, based in Ireland, being one of the largest. The firm and its rivals hope that the Trump administration and the European Union will consider a waiver to allow them to deal with Russian aviation firms to keep their aircraft in service. The only solution is for the lessors to find a buyer for their aircraft outside Russia. That could mean China, which has an insatiable appetite for new planes and is keen to bolster its civil aviation industry, although Beijing will not want to be seen as supporting the Kremlin. That could lead to a tense relationship between the world’s two biggest emerging economies. Meanwhile, Airbus and Boeing will remain reluctant to sell to a competitor hostile to the West.