Ural Airlines and iFly cannot agree on terms for Western airliners

As Kommersant found out, Ural Airlines and iFly were unable to re-register the aircraft of foreign lessors into Russian ownership until the end of September, while OFAC licenses allowing this were in effect. The lessor of Ural Airlines was able to agree with the US Treasury on extending until October 31 permission to transfer funds as part of the insurance settlement. iFly is in the process of extending its deadlines. So far, only Aeroflot has managed to successfully complete transactions. According to Kommersant’s sources in the industry, the problem for other carriers is the lack of an agreement with the future owner of the aircraft, NLK Finance, a company controlled by the Federal Air Transport Agency. Kommersant’s interlocutors close to the Ministry of Transport expect that the issue will be resolved in the next few days.

As Kommersant learned, Ural Airlines and the charter company iFly were unable to close insurance settlement deals with the foreign owners of their aircraft on time. In July, OFAC, part of the US Treasury, issued licenses to lessors allowing them to make payments in foreign banks, but their validity expired at the end of September (see Kommersant of September 27).

According to Kommersant, the lessor of Ural Airlines managed to extend the transaction license for 19 Airbus aircraft until October 31. iFly’s lessor, Air Lease Corporation (USA), is in the process of extending the terms of the permitted transfer for three A330s: there are six Airbuses on the operator’s certificate; now the charter carrier cannot relieve them of double registration and fly abroad. Both companies do not comment on the situation.

As a result of the transactions, the new owner of the aircraft should become the leasing company NLK-Finance, which is part of the Federal Air Transport Agency through the NSK and the Federal State Unitary Enterprise AGA (a). The money comes from the National Welfare Fund as a soft loan for 15 years, and airlines sign new leasing contracts with NLC or NSC.

Money for planes of private airlines has not yet been received by NLK-Finance, unlike Aeroflot planes. According to a Kommersant source in the government, the reason for the delay is that the Ministry of Transport, NLK-Finance and airlines cannot agree on the terms of leasing contracts. When asked why Aeroflot’s contract cannot be used as a standard contract, Kommersant’s interlocutor found it difficult to answer, pointing out that these issues are the responsibility of the Ministry of Transport. A source close to the Ministry of Transport confirmed to Kommersant that the hitch occurred due to the approval of contracts with NLK-Finance. “The parties have been working closely for the last ten days, and there is hope that the process will be completed in the coming days,” he added. According to him, the difference from the Aeroflot contracts is that the Ministry of Finance has put forward additional requirements for private carriers.

The Ministry of Finance and the Ministry of Economy declined to comment. The press service of the Ministry of Transport reported that “the terms of agreements between these airlines and the leasing company are currently being agreed upon.”

On October 2, the Aeroflot group announced the completion of an insurance settlement for another 17 aircraft previously owned by the Irish SMBC Aviation Capital. The lessor reported that the amount of insurance compensation amounted to $710 million (RUB 69.1 billion at the Central Bank exchange rate). Ownership of the aircraft was transferred to the NSC. The Ministry of Economy previously told Kommersant that 98 billion rubles were allocated from the National Welfare Fund. “NLK-Finance” These funds were spent on 10 long-haul Boeing (35 billion rubles) and 18 other aircraft and 5 AerCap engines (Ireland).

According to a Kommersant source in the government, just over 167 billion rubles were allocated from the National Welfare Fund for all Aeroflot transactions.

Thus, from the initially envisaged budget of 300 billion rubles. 133 billion rubles remain. It is expected that the transactions of Ural Airlines, iFly and S7 will account for about 100 billion rubles. S7 has submitted an application to the Ministry of Transport and continues negotiations with the owners of the aircraft. Ural Airlines previously confirmed to Kommersant that the cost of 19 Airbuses is about 30 billion rubles.

In August, the Ministry of Transport obliged carriers to invest all of their net profits for 2022 in the settlement of Western aircraft. Aeroflot was unprofitable, but Pobeda, part of the group, earned about 15 billion rubles – according to Kommersant’s interlocutor in the government, this amount will be used in future settlements. Ural Airlines will invest all of its net profit for 2022 – 13.4 billion rubles. Last year, iFlu was unprofitable, and S7 received the largest profit – more than 34 billion rubles. According to calculations by analysts of the “My Investments” channel, the total cost of the S7 fleet could be about 190 billion rubles. S7 does not comment on these figures and the extent to which the company expects to carry out an insurance settlement.

According to Kommersant, no new applications for state co-financing have been received. Kommersant’s sources at several airlines noted that in isolated cases they have already been able to buy planes or pay insurance compensation, but for the most part the negotiations have not yet been successful.

Aigul Abdullina