GTLK will not increase leasing rates for aircraft GTLK Europe

As Kommersant learned, GTLK abandoned plans announced in the summer to increase leasing rates by 30% for 37 aircraft owned by its subsidiary GTLK Europe. Most of these airliners are operated by Aeroflot and Rossiya, as well as S7, Aurora and Yamal. The latter decided to return three Airbuses to the owner, and, according to Kommersant’s information, they are claimed by S7, which re-signed contracts with STLC for six Boeings on comparable terms with the previous ones. Aeroflot continues the approval process, but, as Kommersant’s sources note, it will also not allow a revision of the terms. A compromise, according to Kommersant, was achieved thanks to the intervention of the Ministry of Transport. Some Kommersant sources call this decision non-market, but others believe that the state-owned company “will not be lost.”

As Kommersant learned, the State Transport Leasing Company (STLC; controlled by the Ministry of Transport) extended contracts with S7 Airlines for the leasing of six Boeings on the same terms as provided for in agreements with the Irish structure GTLK Europe. In the summer, the lessor planned to review contracts with Aeroflot and members of the Rossiya group (23 aircraft in total), S7 (6), Yamal (5) and Aurora (3). In total, we were talking about 37 aircraft located in the Russian Federation, the leasing rate could increase to 30% (see “Kommersant” dated July 11).

On November 16, State Transport Leasing Company General Director Evgeniy Dietrich told reporters on the sidelines of the Transport of Russia 2023 forum that contracts with S7 had been renegotiated, and Yamal notified the company of the return of three Airbus A321s.

Negotiations on the remaining aircraft are ongoing, he said. According to Kommersant, Yamal aircraft may move to the S7 fleet. But Mr. Dietrich did not disclose the fate of these three A321s and the terms of the extensions with S7; State Transport Leasing Company and the airline refrained from commenting.

Foreign structures of STLC owned 74 aircraft, of which 37 ended up abroad, and the rest in Russia. At the end of September, the Federal Air Transport Agency recommended that carriers not fly abroad on planes of foreign structures of the State Transport Leasing Company undergoing bankruptcy proceedings, due to the risks of their arrest at the request of creditors. Airlines suspended flights, but now all restrictions have been lifted, including for those carriers who have not yet renewed their contracts.

According to Kommersant’s interlocutor at the market, 23 STLC aircraft are in the fleet of Aeroflot and Rossiya. According to him, the group continues the process of agreeing on contracts and “is unlikely to allow their re-signing on terms different from the previous ones.” According to Kommersant’s interlocutor in one of the large leasing companies, “this is hardly a positive event for STLC.” He believes that STLC’s refusal to revise rates was forced after the Ministry of Transport intervened in the negotiation process. “Aeroflot has connected an administrative resource,” suggests an interlocutor in the leasing market. A Kommersant source close to the Ministry of Transport noted that “the process is certainly in the attention of the ministry,” since “the cost of transportation, of which leasing accounts for up to a third,” is a socially significant issue. He refrained from giving other details. The Ministry of Transport and Aeroflot did not answer Kommersant.

The lessor had a “detailed argument” for the need to revise contracts originally concluded in foreign currency, recalls Kommersant’s source. The State Transport Leasing Company explained that the new conditions were determined “taking into account the forecast of the volatility of the national currency.” The increase in rates was justified, among other things, by the need to service the debt to Russian holders of Eurobonds issued by foreign subsidiaries of State Transport Leasing Company for $1.6 billion. The lessor clarified that the bonds were placed “just to finance the acquisition of these aircraft.” At the same time, STLC in 2022 received a record loss under IFRS in the amount of 54 billion rubles. Pushing STLC “to non-market decisions” at a moment of crisis for it could negatively affect it in the future, says Kommersant’s interlocutor at another leasing company.

STLC is a state-owned company, recalls FrequentFlyers.ru chief editor Ilya Shatilin, and its desire to raise rates after Western lessors left the Russian Federation was also “not very market behavior.” Obviously, STLC incurred costs associated with the re-registration of ownership of these aircraft, he agrees, but the cost of owning them has not changed. In any case, the state-owned company is not at risk of bankruptcy, he believes, admitting that if losses increase, the government can recapitalize STLC or allow it to increase its debt.

Aigul Abdullina