BERLIN — Western sanctions aimed at punishing Russian President Vladimir V. Putin for invading Ukraine may also have dealt a major blow to European companies that charter commercial aircraft to Russian airlines.
Most of the commercial planes flown by Russian companies, more than half, are leased from companies abroad. Most of these companies are based in Ireland, a member of the European Union, which has banned the sale or lease of aircraft to companies in Russia as part of a package of sanctions.
The fate of hundreds of aircraft worth an estimated $12 billion is at stake, according to Ishka, a consulting firm specializing in the aviation industry. The report said those in Ireland were particularly exposed, with between $4 billion and $5 billion worth of aircraft in Russia.
The Irish government confirmed on Monday that the sanctions are giving companies that lease the planes until 28 March to terminate existing contracts.
But getting the planes back won’t be easy. The repatriation of chartered aircraft is normally scheduled years in advance. Airlines in Russia may not cooperate or may be ordered by Putin’s government to lift the barriers. Another challenge is that Europe and Russia close their airspaces to each other’s planes.
“Logistics is tremendous. “We’re talking about hundreds of planes that need to be flown,” said Phil Seymour, an aviation expert at IBA, a consulting firm. He listed the questions that companies that own the aircraft are currently facing. “Where in the world can they go? Will they play ball? Will there be an order from above telling you not to cooperate?” said.
AerCap, the world’s largest commercial aircraft leasing company, said on Monday it will fully comply with sanctions that require Russian airlines to cease leasing aircraft.
According to IBA, Dublin-based AerCap will be the most sanctioned company, with 152 aircraft valued at approximately $2.5 billion in Russia and Ukraine. Nine Irish-based leasing companies also have planes in Russia.
In its appeal to investors, AerCap said its contracts with Russian airlines, which include Aeroflot and Rossiya, accounted for roughly 5 percent of its fleet by value at the end of December, according to its website.
The company acknowledged at the end of the year that doing business in places like Russia is inherently risky. AerCap said at the time that it would be difficult to recover the planes if it had to cancel contracts due to government sanctions.
Russia’s Attack on Ukraine and the Global Economy
It’s a rising concern. Russia’s attack on Ukraine could cause dizzying increases in energy prices and may scare food and investors. The economic damage from supply cuts and economic sanctions will be severe in some countries and industries, while in others it will go unnoticed.
“We may face hurdles and, most likely, incur significant costs and expenses to repurchase,” the company said in its securities filing.
For a company as large as AerCap – the company has $75 billion in assets by the end of 2021 – the losses could be bearable, aviation experts said. But sanctions could devastate companies with much smaller fleets and greater exposure to Russia.
Aircraft charter companies have encountered problems from time to time, even when working with cooperative customers. For example, the engines originally installed on the aircraft may no longer exist because airlines have replaced other engines for maintenance or other reasons.
“It can be very costly for lessors,” said Mr. Seymour. He said that normally before an airplane is returned, it needs to be put back into shape, have a clean interior, and have paperwork documenting its maintenance history and any issues.
Ishka’s adviser, Paul O’Driscoll, said that if the rental companies do not get their plane back, they will assume all the risk associated with the plane. When contracts are canceled, Russian airlines no longer have to pay for or maintain aircraft.
“The local airline is exempt from liability,” Mr. O’Driscoll said. “You’re really stuck. You have to leave the metal there.”
Niraj Chokshi Contributing reports from New York and Liz Mayor from Paris.