The Russian government has enacted a law to deal with the issue of the over 500 government-owned and private aircraft stranded within the country as the country’s ongoing war with Ukraine rages.
Analysts believe that the new legislation is Kremlin’s open rebuttal to sanctions imposed on it by several countries, especially the EU nations, following its invasion of Ukraine.
The Russian government felt that the new law would ‘ensure the stable functioning of the national transport system’.
It stated on its website: “The amendments are being made, in particular, in order to ensure the uninterrupted functioning of civil aviation and are aimed at keeping foreign aircraft with Russian carriers.
“The Federal Law gives the Government of the Russian Federation the authority to establish retaliatory restrictions against aircraft of foreign states that restrict Russian aircraft entry into their airports.
“In addition, the Law empowers the Government of the Russian Federation to add, among other things, exceptions to the execution of financial lease agreements, foreign aircraft lease agreements, the state registration procedure for civil aircraft, aircraft ownership rights and deals with them”, Kremlin added.
Latest reports showed that 515 jets worth over $10bn were stranded within the country and that if the new law is implemented, the government may use the jets to fly domestic routes within the country.
Analysts at Russell Group, a data and analytics company, had last Thursday reported that 589 Western-built aircraft with a market value of approximately $13 billion were currently grounded at Russian airports.
News reports indicated that hundreds of leased planes in Russia that were owned by European companies got stuck in Russia.
Commenting on the implications of the grounding of the jets for the aviation industry, Russell Group Managing Director, Suki Basi, said: “There is a large concern in the aviation war market at the moment; clients are all trying to understand the number and value of planes on the ground in Russia, as there are concerns that these aircraft could be confiscated by the Russian government.
“What our analysis can reveal is that there is a sizable number of planes on the ground in Russia with a large market value which reinforces the need for good accurate data that can help an aviation underwriter understand and know his exposures better”, Basi added
In its remarks, AM Best says Russia’s invasion of Ukraine will likely have significant fallout in the capital markets, with impacts for the entire industry expected in the short-to-medium term.
This is even as rating agencies have already turned negative on insurance and reinsurance companies operating in Russia, while firms operating in Western nations such as the UK and the US are likely to face “significant” but “manageable” impacts due to the sanctions.
