Washington, D.C. (September 19, 2023) – Lewis Brisbois has commented extensively on the conflicts between aircraft lessors and insurance companies related to aircraft detained in Russia due to the Russia-Ukraine conflict. The sixth part of this series looks at Russian state-owned airline Aeroflot's plans to buy the detained airplanes.
On August 14, 2023, Aeroflot announced plans to purchase an additional 61 airplanes from foreign lessors by the end of the year. Aeroflot has already purchased an estimated 10 airplanes from an undisclosed Irish leasing company and approximately seven airplanes from unidentified foreign lessors. Publicly available documents do not disclose from which leasing companies Aeroflot has or will purchase the aircraft., The proceeds may arguably offset the damages the leasing companies are seeking to recover in pending lawsuits consolidated before the UK High Court, which Lewis Brisbois detailed in the previous installment of this series, "A Look At Aircraft Insurers' UK Mega Trial Over Planes Stuck In Russia."
Since the beginning of the conflict the U.S. Commerce Department's Bureau of Industry and Security (BIS) prohibited export and report to Russia of any aircraft under a Russian national's control, including the "License Exception" allowing reexport of a U.S.-manufactured, foreign-flagged vessel on a temporary sojourn in and out of Russia. 87 Fed. Reg. 13,048, 13,053 (Mar. 8, 2022). Because Lewis Brisbois does not have access to the leasing agreements of the aircraft detained in Russia, the Firm expresses no opinion as to whether these aircraft fall within a Russian national's control as defined by the above-stated March 8, 2022 BIS regulation promulgated under the authority of the Export Control Reform Act of 2018 (ERCA), 50 U.S.C. §§ 4811, et seq.
The aircraft subject to Aeroflot's plans are among the approximately 400 foreign airplanes stranded in Russia after the conflict with Ukraine began. After the U.S.-led sanctions discussed above, Russia seized foreign airplanes just as lessors terminated their leases due to sanctions. The Russian government has allocated funds for the sole purpose of purchasing these seized airplanes from foreign lessors. However, the rules and regulations about the distribution of said funds among airplane carriers have not been finalized.
Last, Western sanctions have significantly impacted Russian airlines' ability to maintain and service their aircraft. For example, Aeroflot reportedly stripped some of its planes for parts due to its inability to purchase replacement components because of Western sanctions. Sanctions will continue to prevent Russian airlines from purchasing western-built aircraft or aircraft components. Aeroflot must acquire more foreign-leased planes in order to maintain its fleet.
Lewis Brisbois' attorneys have a deep understanding of the coverage issues and insurance laws being impacted by the conflict and are advising clients on managing their legal and business risk as events develop. For more information, contact the author or editors of this alert. Visit our Ukraine Conflict Response Practice page for additional alerts in this area.
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