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Will Russian Sanctions Bankrupt Airbus + Leasing Companies?

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Will Russian sanctions bankrupt Airbus and European leasing companies?

Take a look at the viral claim, and find out what the facts really are!

 

Claim : Russian Sanctions Will Bankrupt Airbus + Leasing Companies!

This message is going viral on social media, including WhatsApp and Facebook, claiming that the Russian sanctions will end up killing Airbus and European leasing companies.

It also suggests that the sanctions are being used by the United States to “screw the Europeans again”.

It’s a long post, so feel free to skip to the next section for the facts!

Interesting side effect of european sanctions on russia (as per Phil Seymour – President of the association of European Leasing Companies.

All over the word airlines don’t own their own planes, they lease them.

The European Union has imposed sanctions on Russia and obliged European leasing companies to take back all leased aircraft from Russia by March 28th. That’s a total of 520 aircraft.

Phil Seymour, President of the Association of European Leasing Companies:
1. Return of 520 aircraft! How is this to be done? The Russians said if you refuse to lease them to us, get them back yourself! How can we get 520 crews to Russia when the airspace in Russia, Belarus and Ukraine is closed? We can’t fly in!
2. Once the handover has taken place in Russian airports, the planes will no longer be Russian. But a non-Russian plane is not allowed to fly in Russian airspace – the Russian airspace is blocked! We won’t be able to fly out!
3. However, the leasing companies are the initiators of the termination of these leases. In the original calculation of the cost of fines in such a case, we will all be bankrupted at once. It’s easier and cheaper to go bankrupt than to take back the planes.
4. February is over and Russia has to pay the lease payments for the month. Russia is willing to pay but cannot pay because it is excluded from SWIFT. We ourselves have to pay fines because of the terminations, but in view of the lack of incoming payments from Russia we have no money for such payments!
5. Even if we take back these planes, what are we going to do with them? We don’t need them, nobody wants them and it’s impossible to sell them!
6. The Boeings of American leasing companies are not affected. If Europe takes the planes away from the Russians, the US will supply Russia with its Boeing planes and become the world’s No. 1 airline, bankrupting both the European leasing company and Airbus.”

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Truth : Russian Sanctions Will NOT Bankrupt Airbus + Leasing Companies!

This is yet another example of pro-Russian fake news that was created to mislead people about the Russian sanctions, and drive a wedge between the United States and Europe.

Here are the reasons why…

Fact #1 : There Is No Association of European Leasing Companies

There is no such thing as an Association of European Leasing Companies.

There is the International Society of Transport Aircraft Trading (ISTAT), but it is an international organisation for commercial aviation professionals, and not restricted to leasing companies.

Fact #2 : Phil Seymour Is President Of IBA Group

Phil Seymour (LinkedIn) is the President of the IBA Group, not the President of the non-existent Association of European Leasing Companies.

In case you are wondering, Phil Seymour (left) is not the President of the ISTAT organisation either. That’s Dean Gerber (right).

Fact #3 : IBA Group Is An Aviation Consultancy Firm

The IBA Group is an aviation consultancy firm based in the United Kingdom. It is not an association of leasing companies.

Fact #4 : Airlines Do Not Always Lease Aircraft

Until recent years, airlines generally own most of the aircraft they use.

Aircraft leasing only started in earnest in the 1990s. Even then, it took until 2020 for 50% of commercial aircraft worldwide to be leased, which topped at 51% in 2021.

The claim that airlines do not own their planes, but lease all of them is false.

Fact #5 : Russia Has 515 To 758 Foreign Leased Aircraft

According to Cirium, Russia has 980 commercial aircraft, of which 777 are leased :

  • 515 aircraft leased from foreign companies, and
  • 252 aircraft leased from Russian companies

IBA claims that Russia has 905 leased commercial aircraft, of which :

  • 713 are registered in Bermuda
  • 34 are registered in Ireland
  • 158 are registered in Russia (11 are owned by foreign banks / lessors)

Depending on your definition – owned or registered – Russia has either 515, 747 or 758 foreign leased aircraft.

The figure of 520 foreign leased aircraft attributed to Phil Seymour appears to be made-up.

Fact #5 : Not Only European Leasing Companies Are Affected

Ireland-based AerCap Holdings NV is the most leasing company most affected by the sanctions on Russia with :

  • 96 aircraft leased to Aeroflot, and
  • 17 aircraft leased to Pobeda

However, European companies are not the only ones affected. After AerCap, these companies are most affected (ranked from top to bottom) :

  • SMBC Aviation (Ireland-based leasing arm of Sumitomo Mitsui Financial Group of Japan)
  • BOC Aviation Ltd. (based in Singapore)
  • Air Lease Corp. (based in Los Angeles, United States)

Fact #6 : Handover / Repossession Need Not Take Place In Russia

The claim that the Russians are insisting that leasing companies recover their planes in Russia is nonsense. There was no such demand.

While Russian airlines may make it difficult for leasing companies by insisting they recover the planes from Moscow, they will likely fly their leased aircraft to other countries like Dubai, for instance.

As Phil Seymour himself pointed out that, “Russian airlines would likely cooperate to safeguard access to planes in future years.”

Only 33 countries banned Russian commercial aircraft from their airspace (as of 2 March 2022) :

  • All 27 European Union countries
  • Albania
  • Canada
  • Norway
  • Switzerland
  • United Kingdom
  • United States of America

Russian airlines can still fly into many other countries to handover their leased aircraft, as this map shows.

Countries that banned Russian aircraft (blue), as of 2 March 2022

Fact #7 : Russia Banned Airlines, Not Leasing Companies

On 28 February 2022, Russian Federal Air Transport Agency (Rosaviation) banned airlines from 36 countries in response to the banning of Russian airlines from their airspace.

The ban only applied to airlines from those 36 countries, with my own emphasis underlined and bold :

In accordance with the norms of international law, as a response to the ban of European states on flights of civil aircraft operated by Russian air carriers and/or registered in Russia, a restriction on flights of air carriers of 36 states has been introduced.

Therefore, leasing companies will have no issue repossessing their aircraft in Moscow and flying them back.

Fact #8 : Leasing Companies Need Not Pay Termination Fines

The claim that leasing companies will have to pay Russian airlines hefty termination fines for cancelling their lease is false.

Phil Seymour himself said that leasing companies are protected by the Material Adverse Change clause.

Plane-rental contracts generally contain a “material adverse change” clause and leasing firms could argue that airspace closures and sanctions imposed on Russian carriers amount to just such a breach. That would allow them to declare default and seize back their aircraft.

In fact, he also pointed out that leasing companies have grounds to repossess their aircraft, regardless of sanctions or ability to pay – as long as they believe that the lease is “compromised by the developing situation” or deem that the “aircraft to be at risk now or in the future”.

Fact #9 : Boeing Aircraft Are Affected Too

The claim that Boeing aircraft are not affected by the sanctions is an outright lie.

The EU sanctions apply to “any plane owned, chartered or otherwise controlled by a Russian legal or natural person“, not just those manufactured by European companies like Airbus.

In fact, the first four aircraft known to be repossessed from Russian airlines are all Boeing 737 planes :

  • Interfax reported that three Boeing 737 aircraft are being recalled from Pobeda (Aeroflot’s low-cost airline).
  • Russian media outlet RBC reported that a Boeing 737 operated by Pobeda was seized from the Havalimani airport in Istanbul, Turkey.

Pobeda Boeing 737 flying in happier times

Fact #10 : Both Boeing + Airbus Suspended Operations In Russia

It is ludicrous to claim that the US will sell Boeing aircraft to Russia, when the United States also imposed sanctions on Russia!

In fact, both Boeing and Airbus announced on 1 March 2022 that they are suspending support for their aircraft in Russia. This includes supply of spare parts, as well as maintenance and technical support.

Fact #11 : Russia Is Not A Very Big Market For Aircraft

It is also ludicrous to claim that Airbus will be bankrupt by the sanctions on Russia.

For one thing – all Airbus aircraft leased to Russian airlines are owned (and paid for) by the leasing companies. So Airbus won’t suffer any financial loss, even if the leasing companies do not get their planes back.

Russia is also not a very big market for commercial aircraft. The complete loss of the Russian market will be painful, no doubt, but it won’t be enough to bankrupt Airbus.

Worldwide fleet of commercial airliners 2019, with 2040 projections

Now that you know the truth, please help us fight fake news by sharing this fact check article with your family and friends!

 

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Dr. Adrian Wong has been writing about tech and science since 1997, even publishing a book with Prentice Hall called Breaking Through The BIOS Barrier (ISBN 978-0131455368) while in medical school.

He continues to devote countless hours every day writing about tech, medicine and science, in his pursuit of facts in a post-truth world.

 

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