Ural Airlines and iFly have still not been able to pay Western lessors for the aircraft
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As Kommersant learned, Ural Airlines and iFly have still not been able to pay Western lessors for the aircraft. OFAC licenses for making payments are valid until the end of September; funds from the National Welfare Fund for transactions should have arrived a week ago, but as of the evening of September 26, this did not happen. According to preliminary data, we are talking about less than 50 billion rubles. for an insurance settlement on 22 aircraft. According to Kommersant’s sources, the airlines are afraid of expired licenses, although the government’s financial unit has “prepared everything for the transfer of funds.”
As Kommersant found out, Ural Airlines and iFly have still not been able to re-register the aircraft of foreign lessors as Russian property. In the summer, the companies were the first private carriers to agree with the Ministry of Transport to receive funds from the National Welfare Fund for an insurance settlement – previously only Aeroflot succeeded in this (see Kommersant on August 31). The money was supposed to be received by the leasing company NLK-Finance (controlled by the Federal Air Transport Agency) “by the twentieth of September” for subsequent transfer to foreign lessors. OFAC licenses that aircraft owners have issued to receive payments are valid until the end of September. There are three weekdays left to close trades, but as of the end of the day on September 26, there was no movement of funds.
As a government source told Kommersant, carriers fear the deal will be disrupted. At the same time, according to him, the Ministry of Economy and the Ministry of Finance “carried out the entire range of necessary work and approvals, there is no delay on their part.” A Kommersant source in the Ministry of Transport suggested that funding was delayed “due to bureaucratic procedures.” The ministry did not officially respond to Kommersant’s request. The Ministry of Finance limited itself to clarifying that decisions on transactions “are communicated upon the fact of their implementation.” Ural Airlines confirmed to Kommersant the estimate of the cost of 19 of its Airbuses at 28–33 billion rubles, but refrained from making other comments. A representative of iFly, whose three A-330s are valued at 9–10 billion rubles, refused to discuss the situation.
A number of Kommersant’s interlocutors in the aviation industry attribute the delay to the Ministry of Transport’s intention to “hold back funds from the National Welfare Fund” in the interests of Aeroflot. Aeroflot plans to complete insurance settlements for 61 aircraft by the end of the year (18 have already been re-registered with NLK-Finance). Until payment is made for the remaining at least 43 aircraft of the largest carrier, the rest “will wait for financing,” believes Kommersant’s interlocutor at one of the airlines.
As the Ministry of Economy clarified to Kommersant, 98 billion rubles have already been spent on Aeroflot aircraft from the National Welfare Fund, which were issued by NLK-Finance. The first ten aircraft were purchased by Aeroflot at the beginning of 2023 for 35 billion rubles, and in the summer another 63 billion rubles were allocated from the National Welfare Fund.
A Kommersant source in the government doubts the validity of the version about “reserving funds for Aeroflot.” According to him, of the remaining reserves in the National Welfare Fund for aircraft, 202 billion rubles. about 100 billion rubles. just allocated for the transactions of Ural Airlines, iFly and S7 – the latter, according to his information, accounts for about half of the amount, but it is “still at the stage of agreement with all parties.” Kommersant’s interlocutor clarifies that no other applications for government funding have been received yet: “The remaining approximately 100 billion rubles. will be distributed in 2024, if there are those interested.” S7 did not comment on the progress of the negotiations on the aircraft.
From the state’s point of view, priority financing of the Aeroflot fleet would look like a rational decision, although “unfair from the point of view of other private carriers,” notes Avia.ru editor-in-chief Roman Gusarov.
The state, the expert explains, may be quite motivated to buy out the group’s young fleet, which in the future may be transferred to other companies as Aeroflot’s fleet is replenished with Russian ships. As for the lack of applications from other carriers for state funding, failures in negotiations or unpreparedness of documents can easily be attributed to “the machinations of officials,” Mr. Gusarov emphasizes.
The complexity of the approvals process should not be underestimated, argues Elena Sakhnova, an analyst at the My Investments channel. As part of insurance settlements, many schemes are sorted out to fall under sanctioned exclusions, she explains: “It’s long and complicated, just like determining the value of the aircraft itself.” The analyst also shares carriers’ concerns about expired OFAC licenses, the renewal of which “looks like an extremely difficult and multilateral process.” It is better, Ms. Sakhnova is sure, not to take risks with going beyond the permitted time frame.
Today it is impossible to assess the prospects of airlines outside the top 5 in 2024, and it is impossible to reach an agreement with foreign owners of aircraft, notes Fedor Borisov, an expert at the Institute of Transport Economics and Transport Policy at the National Research University Higher School of Economics. Larger carriers, he said, find it easier to negotiate with foreigners, while the position of a “small airline with three aircraft” may have little weight.
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