Canadian Aviation Company Caught In Russia’s Confiscation Of Hundreds Of Foreign-owned Jets
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Canadian aviation company caught in Russia’s confiscation of hundreds of foreign-owned jets

From The Globe and Mail 🔗 link to source story Eric Atkins, Transportation Reporter, The Globe and Mail • March 19, 2022 Dash 8 Number 443 rolled out of the hangar at Bombardier Aerospace’s plant in Toronto and took its…

From The Globe and Mail 🔗 link to source story

Eric Atkins, Transportation Reporter, The Globe and Mail • March 19, 2022

Dash 8 Number 443 rolled out of the hangar at Bombardier Aerospace’s plant in Toronto and took its maiden flight from the Downsview Airport in the spring of 1997.

The turboprop regional airliner spent years flying passengers in China, Western Canada and eastern Siberia. Now, the plane and its Canadian owner have been swept up in the fallout from Russia’s invasion of Ukraine.

Dash 8 443 and hundreds of other aircraft have been reregistered in Russia, which industry observers say is a move by Russian President Vladimir Putin to seize billions of dollars in aircraft.

The Dash 8′s owner, Avmax Aircraft Leasing Inc. of Calgary, figures the plane is gone for good.

“We are treating it as a loss and we’ve informed our insurance company to that effect,” said Bruce Nysetvold, senior legal counsel at Avmax, which leases about 100 aircraft to operators in Europe, Africa, South America, the United States, Canada and elsewhere. Aurora Airline, a subsidiary of Russian government-owned Aeroflot, leases two Dash 8s from Avmax.

Russia’s seizure of about 500 passenger aircraft worth as much as US$12-billion followed sanctions applied by Western countries to punish Mr. Putin for his Feb. 24 invasion of Ukraine.

Bermuda and Ireland, the tax-friendly countries in which 80 per cent of the world’s passenger aircraft are registered, have cancelled the certificates because the sanctions make it impossible to conduct safety inspections, said Alana Caldwell, a spokeswoman for the Bermuda Civil Aviation Authority.

The same sanctions forced Avmax and other plane owners to cancel the Russian leases and demand their planes be returned.

However, Russia has passed a law allowing the leased aircraft to be registered in Russia, sparking fears of a mass expropriation.

“It’s totally illegal, but they’re doing it because they’ve apparently chosen not to honour any treaties,” said Helane Becker, a financial analyst at Cowen and Co. She said the companies that insure the aircraft have informed the lessors that the policies are invalid because of war risk, setting the stage for several years of legal battles.

“They’ve all filed claims, and then it’ll probably go to litigation and be stuck in litigation for years,” Ms. Becker said from New York.

Russia’s move echoes that of Iraqi Airways after being hit by sanctions over Iraq’s 1990 invasion of Kuwait. Court battles over those planes lasted as long as nine years, she said.

Ms. Becker said a couple of aircraft have been repossessed from Russian operators, but the maintenance records were withheld, significantly reducing the value of the planes.

Russia’s Yakutia Airlines last flew Avmax’s Dash 8 on Dec. 9, and then parked it at the airport in Yakutsk, according to Flightradar 24, a website that tracks aircraft. The plane’s call sign has been changed to RA-67268, a Russian registration.

E-mailed questions to Yakutia Airlines were not returned. Markus Ruediger, a spokesman for International Air Transport Association, which represents most of the world’s airlines, declined to comment. Global Affairs Canada did not provide answers to e-mailed questions.

Avmax’s Mr. Nysetvold said the company had been in communication with government-owned Yakutia Airlines, but that stopped after Avmax demanded the plane be returned. Mr. Nysetvold said the Calgary company arranged for a permit that would allow the plane to be flown to Kazakhstan, safely out of Russian hands.

“And then nothing happened. Right up until the deadline they were talking about working with us to try to return it. but that pretty much went radio silent at that point.”

Mr. Nysetvold declined to say how much the plane is worth and the value of Yakutia’s lease payments. Similar planes sell for more than US$3-million, according aviation websites.

“We’ve been doing our very best to recover the aircraft and we continue to be try to be in contact with the lessees or the beneficiaries of the leases,” Mr. Nysetvold said. “We’re trying to mitigate our losses. But … Mr. Putin has made it almost impossible to remove aircraft from Russia.

“He’s made it very difficult to carry on business with companies based in countries that imposed sanctions on Russia. And he has forbidden Russian companies from paying in anything except rubles, which have been vastly devalued.”

Dublin’s AerCap Holdings leases about 150 aircraft to Russian operators, and is believed to be the most exposed to any Russian expropriation.

Western countries have closed their airspace to Russian planes, and Russia responded in kind. Canada and other countries have frozen the assets of some Russian oligarchs, and many companies have closed their Russian operations. The asset freezes and other government sanctions are meant to punish Mr. Putin and his associates, and to starve the Kremlin of revenue that it uses to purchase the weaponry targeting Ukrainian civilians.

The companies that make and service the planes, including giants Airbus, Boeing Co and Embraer SA, have all stopped supplying parts and technical service to Russia. This means keeping the planes flying will be difficult, said Ian Petchenik, a spokesman for Flightradar24.

“Giant computers” is how Mr. Petchenik describes the modern aircraft, including the Airbus A350s, seized by Russia. “Without the ability to maintain the aircraft, it’s not clear how long they can keep using it,” Mr. Petchenik said from Chicago.

Russia’s move to seize so many aircraft signals it has no intention of trying to improve its reputation in the world of trade, whenever it ceases its attacks on Ukraine, said Barry Prentice, a professor at University of Manitoba.

“You do that kind of thing and people remember,” Prof. Prentice said.

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