Bermuda revokes the airworthiness status of Russian jets

Bermuda revokes the airworthiness status of Russian jets

Sanctions

3 min.

22.03.2022

Movement comes as Luxembourg investigates two business jets linked to Roman Abramovich banned from flying

The Bermuda Civil Aviation Authority has suspended the airworthiness certificates of all planes connected to Russia on its register, exposing hundreds of jetliners owned by foreign leasing companies to devaluation.

“International sanctions on the aviation sector have a significant impact on the ability to maintain security oversight on Russian-operated aircraft,” the authority said on its website. The agency said it was “not able to reliably rate these aircraft as airworthy.”

The move is likely to speed up decisions by leasing companies that lease Boeing co. and Airbus SE Jetliner leased to Aeroflot PJSC and other Russian airlines to cancel the contracts. Irish tenants have until March 28 to do so under sanctions from the European Union linked to the Russian invasion of Ukraine. Russia has already started moving planes to its local Bermuda registry.

About 740 Russian planes are registered on the island, according to Bernews, which previously reported the action. The Bermuda Aviation Authority plays a key role in ensuring that aircraft in Russia are insured and maintained to confirm their airworthiness. Without it, the Jets could not later be marketed to airlines elsewhere in the world, and lose their value.

The move comes as the Luxembourg Civil Aviation Authority is investigating whether two business jets connected by a company linked to Russia’s oligarch Roman Abramovich’s business network had to fly under new EU sanctions.

The two Luxembourg registered aircraft – a Gulfstream G650 with the tail number LX-RAY and a Bombardier Business Jet identified as LX-LUX – are owned by the Jersey-based company Clear Skies Flights Limited and operated by Global Jet Luxembourg, based in the village of Hesperange.

Foreign owners have leased jetliner to Russian operators worth an estimated $ 10.3 billion, according to aviation consultant Ishka.

Stay in Russia

Russian officials keep at least some of the planes in the country instead of returning them to the owners. An official said last week that more than 100 planes had been re-registered.

Foreign tenants had leased 523 aircraft to Russian operators as of March 10, according to consultant IBA. Dublin-based AerCap Holdings NV, the world’s largest leasing company, had 142 of the total, followed by SMBC Aviation Capital with 35. Also in Dublin-based SMBC Aviation is part of the Japanese consortium of Sumitomo Corp. and Sumitomo Mitsui Financial Group.

AerCap said at the end of February it would respect EU sanctions. Its contracts in Russia have an estimated value of $ 2.5 billion, according to IBA. SMBC Aviation said it has already completed all of its leasing with Russian airlines.

SMBC Aviation “continues to monitor developments in Ukraine closely and is committed to all relevant authorities,” the company said in an email to Bloomberg. “The business will fully comply with all relevant sanctions.”

S7 Airlines is the largest customer of foreign leasing companies with 101 aircraft, followed by the state-owned Aeroflot with 89, according to IBA. While many of the aircraft are older, with an average age of 12.8 years, the S7 – Russia’s largest home carrier – has 31 of the new Airbus A320neos on lease, while Aeroflot has six, the consulting firm said.

Investor burden

Asset-backed securities associated with Jets in Russia leased by Carlyle Aviation Management, Castlelake Aviation Holdings and others were placed under surveillance by the Kroll Bond Ratings. Leasing companies are expected to file insurance claims, leading to disputes over payouts.

“Claims will already be considered by tenants against various aviation insurance policies that are insured and reinsured in the London market,” said James Healy-Pratt, an aviation lawyer. However, the manner of the confiscation may not fit properly with Russian actions, so disputes are likely to arise.

The provisional suspension of Russian airworthiness certificates will take effect on Sunday, according to authorities. It affects all aircraft operating under an agreement between Bermuda and the Russian Federation.

Prime Minister David Burt has previously said that the island, which lies about 650 miles (1,050 km) off the coast of North Carolina and is a self-governing overseas territory of the United Kingdom, largely follows UK sanctions on Russia, Bernews said.

(Additional reporting by Yannick Lambert, Reuben Malekar)

© 2022 Bloomberg LP

Luxembourg Time has a new mobile app, download here! Get the Luxembourg Times delivered to your inbox twice a day. Sign up for your free newsletter here.