The government creates a new leasing company for Aeroflot

A new leasing company to return funds from the National Wealth Fund (NWF) will be created for Aeroflot, Sergey Aleksandrovsky, CEO of the airline, told reporters on June 15 at the St. Petersburg International Economic Forum (SPIEF-2023). The balance of the leasing structure will receive aircraft that Aeroflot will be able to buy from foreign lessors.

“The process (purchase of foreign aircraft from operating lease. – Vedomosti) turned out to be a little more complicated than we expected,” Aleksandrovsky explained. – We are quite actively moving on the insurance settlement with lessors, about 47 aircraft are in operation. The process is in a fairly active phase. As a result, these aircraft will become the property of a specially formed leasing company, to which we will make lease payments.”

He explained that the leasing mechanism would ensure the return of funds from the National Welfare Fund, and the company would become captive for Aeroflot. Aleksandrovsky admitted that other airlines would follow the path of creating their own captive leasing companies, but did not rule out interaction with them within the framework of the new Aeroflot company. “If they want to come to us, we will be happy to satisfy everyone,” said the top manager.

According to him, today 102 Aeroflot aircraft are only in the Russian register, without double registration. 18 aircraft were purchased, which were previously under financial leasing.

After the start of the NWO in Ukraine, the EU countries, the United States, Great Britain and their allies imposed sanctions against Russian civil aviation. Western companies are prohibited from supplying Russian carriers with new aircraft, components for them and participating in their maintenance. Russian airlines are also banned from flying over the territory of the European Union, the United States and other countries that have joined the sanctions.

Foreign aviation authorities detained aircraft that were at that time in foreign airports. Transport Minister Vitaly Saveliev said that as of March 22, 2022, 78 aircraft had been arrested at foreign airports. Russian carriers massively re-registered the aircraft remaining at their disposal in the Russian registry, but many of them were never removed from foreign registries.

In the future, the resumption of international flights took place by mutual agreement between the Russian and foreign aviation authorities. But many states refuse to allow dual-registration ships into their airspace. In the absence of the funds from the airlines to buy the planes, the Russian authorities created a scheme using funds from the National Welfare Fund.

“The money should come from the NWF to the accounts of Russian carriers, then to the accounts of a counterparty in a neutral country, then to the depository center of the country of registration of a foreign leasing company, and only then to the lessor, the owner of the aircraft,” says a Vedomosti source in one of the Russian airlines.

A Vedomosti source in another airline notes that at the moment there is some ambiguity in this scheme: the airline buys the planes, but with the money of the National Welfare Fund, and they are returnable. “The airline cannot return these funds at a time. On the surface, there is the creation of a leasing company under the FNB,” he says. According to the interlocutor of Vedomosti, Aeroflot is the main interest due to the largest number of dual-registration aircraft, so the creation of a new company for its interests looks logical.

A Vedomosti source in one of the Russian leasing companies claims that Aeroflot’s new captive lessor has already been created, but does not specify its name.

The Ministry of Industry and Trade forwarded questions to the Ministry of Transport, the Ministry of Finance – to Aeroflot.

Vedomosti also sent inquiries to S7, Ural Airlines, UTair, leasing companies GTLK, Sberleasing, VTB Leasing, VEB Leasing, PSB Leasing, Aviacapital Service (owned by Rostec, owns a minority stake in Aeroflot) and in the Ministry of Transport. The press service of Aeroflot declined to provide additional comments.

Oleg Panteleev, Executive Director of Aviaport, says that the creation of a separate company to solve a highly specialized applied task is a rational approach and common practice. “Such a leasing company should have a limited range of functions and competencies, it should not become a profit center,” he believes. According to the expert, it would be wise for large airlines to create their own captive company, for small players to negotiate with leasing companies already operating on the market.