What happened to those 400 planes from Western companies that were in Russian territory when the war in Ukraine began and Moscow has refused to return them?

A little more than two years have passed since the invasion of Ukraine began. It is a territorial conflict that seems to have a distant end and that, from time to time, leaves us statements from world leaders that warn about the escalation of violence and even the consequences of a nuclear war. Apart from the consequences for the population, there are sectors such as technology, transportation and even public administration that have had problems and Russia is covered with sanctions from the United States and the rest of Europe.

And now there is another major ruckus: Russia has kept 400 commercial airplanes that were parked in the country when the war started, and the owners want them back.

The plane crisis in Russia. Just four months after the invasion began, the Russian aviation sector began to suffer the consequences. Since trade was cut off, they could not get spare parts for their planes from the countries that previously traded with them. The solution they found was to hack those pieces.

Russian airline Aeroflot was running out of spare parts, so it began cannibalizing necessary parts from other planes. In fact, it was estimated that Russian airlines had official spare parts for three months, but then they would have to start looking for parts in any way, and that way was by taking them from other planes. It is a maintenance problem for many parts, some as key as tires.

On horseback”… And what planes would they hack? Well, those that other foreign companies had left behind at the airports when the war started. Although don’t think that the companies got lost and left the planes there by mistake, without trying to recover them. When the blockades began and companies such as Boeing or Airbus announced that they would paralyze any support for Russian airlines, the Kremlin carried out a curious counterattack.

Faced with the prospect of Russia running out of commercial aircraft, Putin signed a law allowing Russian airlines to register more than 400 planes in their name. This huge fleet is valued at 10 billion dollars. Many of the Russian airlines’ aircraft are leased by other companies, with the Irish AerCap being one of the most present, with 152 aircraft valued at around $2.4 billion.

Owners demand liability from insurers. As you can imagine, the owners of those planes who lease them to Russian airlines have not sat idly by these two years and have begun to demand responsibility. As we read in The Wall Street Journal, these planes that remained in Russia are covered by both Russian and Western insurers, some of them being quite large (Chubb, Swiss Re or American International Group).

These companies can reinsure assets and there are special clauses that cover various risks, such as possible war. Therefore, lawyers for tenant companies are asking insurers to take charge of the problem, ensuring that, “Failure to do so could lead to larger scale problems, including a domino effect of insolvencies and missed payments.“Another law firm that is suing insurers states that, “If insurers don’t step up, it could undermine the future of insurance because buyers will doubt whether coverage can be trusted“.

And the insurers throw the ball out. It seems that insurers don’t care much about this and are arguing that they should not make payments for various reasons, one of them being quite curious. And they claim that they withdrew insurance coverage for Russia after the war began, but before the Kremlin put into effect the Law that allowed vehicles to be retained.

In fact, insurer Chubb states that tenants “voluntarily abandoned their assets“and they should not expect insurance to cover it. They add that “had opportunities before and after February 24, 2022 to withdraw their assets from Russia“. It is something that the tenant companies do not agree with and there are lawyers who are calling these arguments from the insurers “ridiculous“.

Give him back what? In any case, while the companies that rent their planes to Russian airlines argue with insurers, some of these ships are flying on national or international routes in those countries where they can land after the sanctions. And those that are not flying are being dismantled for spare parts. And this is not an optimal reality, since some of these spare parts may not meet flight requirements, putting the passengers themselves at risk.

In fact, Ukraine claims to have had access to data confirming that the numbers of ship malfunctions are much higher than those reported in previous years. We will see how the conflict spreads, but it is clear that they will be able to extract a limited number of pieces from that retained fleet. That is why Russia agreed with countries like Iran to maintain some aircraft.

Image | Photo by John CARTER on Unsplash

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