Summary
- Russian National Wealth Fund allocates funds for aviation firms NLK-Finance and Avia Capital Services to finance aircraft purchases.
- NLK-Finance buys aircraft from Western lessors, settling claims with them over re-registered aircraft.
- Sanctions following Russia’s invasion of Ukraine have left the local aviation industry without Western support, including from lessors and manufacturers.
Ministry of Finance of the Russian Federation (Министерство финансов Российской Федерации, MinFin) announced its newest funds placement round on behalf of the Russian National Wealth Fund (Фонд национального благосостояния России, ФНБ, FNB). Two aviation firms, NLK-Finance and Avia Capital Services, received money in the shape of the FNB placing the money in the businesses’ bonds.
Buying aircraft from Western lessors
NLK-Finance received RUB107.7 billion ($1.2 billion), while the FNB also allocated RUB34.4 billion ($385.6 million) to Avia Capital Services. MinFin said that the latter received funds to finance the infrastructure project ‘Preferential Leasing Project for Domestic Aircraft’.
Meanwhile, NLK-Finance, a subsidiary of the state-owned insurance company NSK, has been buying out aircraft from Western-based lessors. For instance, in December 2023, GA Telesis announced that the firm received a money insurance settlement for 2 Airbus single-aisle aircraft that were leased to Rossiya, a member of the Aeroflot group. Consequently of the settlement, GA Telesis dropped its claims against NSK, Aeroflot, and Rossiya, with the settlements and the transfer of the funds being approved by america (US) Department of the Treasury (USDT).
At the tip of December 2023, Russia’s Kommersant reported that Aeroflot, S7 Airlines, and Ural Airlines had settled claims for 147 Airbus and Boeing aircraft with various Western-based aircraft leasing corporations, including AerCap. Nonetheless, in a separate report in December 2023, Kommersant disclosed that out of the RUB300 billion ($3.3 billion) within the FNB, only RUB3.5 billion ($39.2 million) was left to repurchase aircraft from aircraft lessors. The Fund’s reserves were allocated to NLK-Finance, which is managed by the Federal Air Transport Agency (Федеральное агентство воздушного транспорта, FATA), following Russia’s invasion of Ukraine in February 2022.
Photo: JetKat | Shutterstock
Since then, Western governments have sanctioned the country and its aerospace sector, cutting off the Russian fleet from support from manufacturers, including Airbus, ATR, Bombardier, Boeing, De Havilland Canada, and Embraer. In response, Russian airlines re-registered their aircraft onto the Russian registry, prompting aircraft lessors to sue the country’s carriers.
Avia Capital Services described itself as an experienced aircraft manager and lessor. The corporate is owned by Rostec, the state-owned defense conglomerate established in 2007. In keeping with ch-aviation data, the lessor owns no Western-made aircraft but has a backlog for 423 Russian-built jets, including the MC-245, Sukhoi Superjet 100, and Tupolev Tu-214.
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The Tu-214’s mission is to exchange A320 and 737 aircraft across the fleets of Russian airlines.
Replacing aircraft locally
During Vladimir Putin’s first public press conference for the reason that war in Ukraine broke out, the Russian president said that the country must not depend on Western-made aircraft and as a substitute develop its own manufacturing industry. Putin added that Russia plans to supply over 1,000 domestically made aircraft by 2030, with the Ministry of Industry and Trade of the Russian Federation (Министерство промышленности и торговли Российской Федерации, MITRF), planning that greater than 80% of the local airlines’ fleet would consist of Russian-built aircraft.
Photo: dentorson | Shutterstock
Nonetheless, Evgeny Elin, the Chairman of the Board of Directors of Russia’s S7 Group, which owns S7 Airlines, warned that the local industry must master reverse-engineering of Western-made components to maintain the local airline industry afloat. Elin warned that locally-made parts have a much shorter service life between overhauls than their Western counterparts, which could lead on to potential disruption to passengers.
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S7 Group’s chairman believes that Russia must master reverse engineering with a view to keep the established order of the country’s airline industry.