The Editor’s Corner #10 – Ukraine Crisis: Lessors Will Not Win The Russia Battle

Masakatsu Ukon, CC BY-SA 2.0 , via Wikimedia Commons

LONDON – Within the Sri Lankan court ruling today, it is clear lessors will not win the battle in Russia. Welcome to the latest edition of The Editor’s Corner.

Apologies for not releasing an Editor’s Corner last week. In lieu of this, two will be released this week as part of a catch-up.

The Editor’s Corner is an op-ed series from AviationSource Editor-in-Chief James Field, who is going to give his thoughts (Maybe controversial) on all things going on in the aviation industry.

In case you have missed the last nine, feel free to browse through them before you continue to read this piece:

  1. The Editor’s Corner #1: The Industry Isn’t Ready for Summer 2022 Demand
  2. The Editor’s Corner #2: JetBlue’s Offer for Spirit Airlines Will Change The American Airline Dynamic
  3. The Editor’s Corner #3: Boris Johnson’s Damage To The Aviation Sector is Another Reason for Resignation
  4. The Editor’s Corner #4: PLAY Will Transform The Market with a Post-Pandemic Edge
  5. The Editor’s Corner #5: Detriment of the Boeing 737 MAX & 787 Is Causing a 777X-Based Aftershock
  6. The Editor’s Corner #6: Qantas’ Plans For The Future Will Turn Around Negative Times
  7. The Editor’s Corner #7: The P2F Market Is Hotting Up…
  8. The Editor’s Corner #8: O’Leary Is Gunning For Another Cheap Boeing Order
  9. The Editor’s Corner #9: Ukraine Crisis: Turkish Airlines’ A350 Snap-Up from Aeroflot May Have Something To Do With A Red Carpet…

James will be starting things off with his next topic being: Ukraine Crisis: Lessors Will Not Win The Russia Battle

Ukraine Crisis: Lessors Will Not Win The Russia Battle

With the Sri Lankan courts effectively handing the Aeroflot Airbus A330 back to Russia, and not to the rightful owner, this is another example of how lessors are losing out.

Political influence seems to be an apparent factor in this decision-making, and Aeroflot and Russia both know this.

This is going to have further repercussions down the line, especially when it comes to continued attempts at repossession.

Russia Fiddling With Sri Lankan Politics…

The Sri Lankan courts have lifted the ban on the detained Aeroflot Airbus A330 days after the aircraft was grounded in Colombo.

Officials have said that the aircraft is able to leave the country, rather than waiting until June 16 for the court case with Selective Aviation, a body of GECAS, one of the lessors.

It is also understood that this is a result of political pressure from Russia, with the Sri Lankan Ambassador in Moscow being summoned to the Kremlin for an explanation, according to local media.

So, with that in mind, especially as we know how the Russian political system works when it comes to any form of opposition, that conversation with the Sri Lankan ambassador probably went in one direction, and one direction only.

Good News for Aeroflot…

With the Sri Lankan authorities lifting the grounding measure on the aircraft, this could be seen as a win for Aeroflot and the Russian Government.

This is down to the fact that the expectation was GECAS would have got that aircraft back, as VQ-BMY wasn’t one of the 8 Airbus aircraft that the Russian carrier purchased back.

It also means that such a policy of nationalization of those aircraft will continue and that sanctions imposed won’t be affected on this jet.

Looking ahead, it will be interesting to see whether this has set a precedent for future aircraft and whether the same issues could happen again, irrespective of nationalization or theft.

But for now, Aeroflot walks away with a tiny victory and will have that aircraft back in their skies soon.

International Expansion on the Foundation of No Difficulties…

It does appear that whilst Aeroflot had a minor difficulty in this incident, it has now been resolved pretty quickly, offering the view that Aeroflot’s international expansion will be formed on the foundation of no difficulties.

Sri Lanka, for example, is a popular tourist destination for many in Russia and the rest of the world as well.

And this is what Aeroflot will do as it continues to pivot around the sanctions and airspace closures it finds itself in as a result of the Ukraine Crisis.

It also offers the view that if they do this, then sanctions are just forcing them to diversify, which is what any airline would want to do when it comes to entering new markets.

What will be the interesting factor behind this will be the airline’s financials, whenever they would be revealed, to see how they have potentially managed to minimize such losses caused by the sanctions.

Lessors Will Continue to Struggle…

What does remain clear, however, is that this may set the precedent for future incidents where leasing companies try and steal back the aircraft that the Russians have taken with them.

If the Sri Lankan courts have struck this ban down, then this is something that Aeroflot can use in future court cases, especially with the nationalization effort in full swing.

And this all forms with Aeroflot’s desire to fly internationally, but only in specific markets, where they know they have considerable influence.

Both countries in recent years have bolstered political and cultural cooperation, especially through visa-free movement between Russia & Sri Lanka as well. So this is something else that you have to take into consideration.

Overall: It’s A Difficult One…

It remains clear that through the relations between Russia & Sri Lanka, this grounding wasn’t going to last very long.

This conversation in Moscow with the Sri Lankan ambassador probably involved a reminder of the relations between the two sides.

As long as the two sides remain friends, Aeroflot and other Russian carriers have good market opportunities to use to keep revenue flowing in.

This is why it would have been difficult for GECAS particularly, as it probably felt like participating in a battle that you know you are not going to win.

Hopefully, GECAS and its subsidiaries have better attempts at getting the aircraft back, but for now, it’s a loss that they have to deal with in the short term.

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