The Ministry of Transport requested another 295 billion rubles. from the National Welfare Fund for the re-registration of foreign aircraft

As Kommersant found out, the Ministry of Transport proposed that the government allocate another 295 billion rubles. from the National Welfare Fund for the re-registration of foreign aircraft into Russian ownership. The funds, according to Kommersant sources, are being requested mainly for Aeroflot based on the potential acquisition of about 90 aircraft. The authorities have already allocated almost 300 billion rubles. from the National Welfare Fund in 2023, which made it possible to buy 162 aircraft from Aeroflot, S7, Ural Airlines and Aurora – this is more than a third of the fleet owned by foreign lessors. According to experts, extending government funding makes sense: it will help minimize legal risks when flying abroad, as well as reduce the foreign currency debt burden of carriers.

As Kommersant learned, the Ministry of Transport proposed that the government provide another 295 billion rubles. from the National Welfare Fund in 2024 for the purchase of foreign aircraft into Russian ownership. The initiative, according to Kommersant’s sources, was discussed at a meeting with the President of the Russian Federation on February 7, where they also discussed postponing the delivery of new domestic aircraft (see Kommersant on March 1). According to a Kommersant source close to the government, the appeal is under consideration and a decision on it has not yet been made. According to another Kommersant source in the aviation industry, the requested amount was calculated primarily based on the needs of Aeroflot. According to him, an estimate of the value of transactions for private airline aircraft was not requested. The Ministry of Transport, the Federal Air Transport Agency, the Ministry of Finance and the Ministry of Economy did not answer Kommersant. The airlines interviewed by Kommersant did not comment on the situation.

In 2023, almost 297 billion rubles were allocated from the National Welfare Fund. for an insurance settlement for 162 aircraft, the new owner of which was NLK-Finance, a subsidiary of the Federal Air Transport Agency (see “Kommersant” dated December 25, 2023). As a result, foreign lessors ceased their claims against the Russian side both under insurance policies and leasing agreements. Funds from the National Welfare Fund were allocated to NLC at 1.5% for 15 years. Aeroflot received aircraft from NLC under an operating lease, and private airlines received a financial lease (after the expiration of the contract, the aircraft will become their property).

Aeroflot Group has re-registered 93 aircraft using funds from the National Welfare Fund since December 2022. Aeroflot also in the spring of 2022, using its own funds, purchased eight more Airbus A330s, which were under financial lease. In addition, in 2023, the group’s fleet was replenished with one Boeing 737-800 from the suspended Royal Flight (the source of funding was not named), as well as two aircraft belonging to State Transport Leasing Company.

In total, Aeroflot Group has a fleet of 349 aircraft, including 78 SSJ-100 of Rossiya Airlines. Of the 271 foreign aircraft on the Bermuda registry, according to Aeroflot’s presentation, 185 aircraft have been withdrawn. According to Kommersant, these are 102 aircraft of foreign owners and 83 aircraft of Russian lessors re-registered in 2022–2023. Thus, the group could potentially “debermudize” and re-register another 86 foreign aircraft to the Russian lessor.

From the previous tranche of the National Welfare Fund in the amount of 297 billion rubles. According to Kommersant’s sources, at least 250 billion rubles were allocated for Aeroflot’s transactions on aircraft and aircraft engines. The carrier announced that it had also allocated almost 15 billion rubles for these transactions. net profit of Pobeda (see “Kommersant” dated August 31, 2023). In addition to Aeroflot, in 2023, S7 Airlines (45 aircraft) and Ural Airlines (19) were able to co-finance transactions from the National Welfare Fund. The amount of S7 transactions, taking into account own funds (34 billion rubles from net profit for 2022) amounted to 45–50 billion rubles, about 11–16 billion rubles were received from the National Welfare Fund. Ural Airlines sent 13.5 billion of its funds, and 17–20 billion rubles were received from the National Welfare Fund. Aurora re-registered five Airbus A319s using funds from the National Welfare Fund, “paying” almost 2 billion rubles for them. net profit (three more A319 Aurora belong to State Transport Leasing Company). Charter iFly requested funds but did not receive them.

In total, taking into account aircraft purchased from financial leasing, as well as individual transactions using their own funds, Russian airlines re-registered more than 170 aircraft out of approximately 400 owned by foreign lessors. This number should be increased, says Fyodor Borisov, head of the State Research Institute of Civil Aviation analytical center: “In an ideal situation, it makes sense to legalize the entire remaining fleet.” So far, the carrying capacity of Russian airlines is sufficient to meet demand on foreign routes, but it is obvious that over time the fleet will shrink, the expert says. In addition, the buyback reduces legal risks and will “prevent future claims or arrests of aircraft if the situation worsens.” If a decision is made to continue government financing of transactions, it would be advisable to include a fleet of private carriers in order to maintain their international flight network.

If budgetary possibilities allow, co-financing of transactions is a very powerful tool for supporting the air transport industry, notes Oleg Panteleev, executive director of Aviaport. According to Aeroflot, the already completed insurance settlement transactions allowed the group to reduce the share of foreign currency leasing obligations from more than 90% to 60% (see Kommersant on March 6). At the same time, independent, without state support, settlement of issues with foreign lessors, according to Oleg Panteleev, is “difficult and unlikely” for airlines.

Aigul Abdullina