Russian airlines will receive funds from the National Wealth Fund (NWF) to buy foreign-made aircraft currently on lease, state-run media outlet TASS reported.
Igor Chalik, Deputy Minister of Transport, addressed the situation, stating that there are no issues with the fund allocation mechanism, only “organizational questions”.
The NWF had earmarked 300 billion rubles (about $4 billion) to facilitate the acquisition of approximately 80-90 foreign aircraft by Russian airlines in March 2023. The aim was to continue air transport operations in the country despite geopolitical challenges.
Aeroflot, Russia’s largest airline has already bought out 10 Boeing 777-300ER aircraft from financial leasing and is currently negotiating terms for another 47.
An amendment to European Union (EU) sanctions, published on April 8, 2023, enables its lessors to accept payments from Russian companies that have received aircraft on financial lease under agreements concluded before the beginning of Russia’s invasion to Ukraine on February 24, 2022. The ownership of the aircraft can be transferred after the lease payments have been made.
Western nations also demanded their lessors reclaim leased aircraft from Russia. However, Russian authorities issued a countermanding directive, transferring the aircraft to a domestic registry and continuing to operate in the country.
While the NWF fund had to be distributed equitably among several airlines, the lack of clear allocation criteria and the delay in distributing the funds has caused an increasing level of uncertainty, casting a shadow over the initiative.
Despite reaching or nearly finalizing terms for insurance settlements with Western aircraft owners, other Russian airlines, such as S7, Ural Airlines, RusLine, and iFly, are still waiting for their share of the funding.
“It is difficult to say when they will receive them,” Chalik was quoted as saying by TASS on July 24, 2023. “However, our task is to complete this program in any case by the end of September.”
As the September 2023 deadline approaches, it is estimated that Russia is losing around $700 million a day for its war in Ukraine and around $150 million a day due to sanctions. As of June 1, 2023, Russia’s NWF stood at the equivalent of $153.1 billion.
Currently, more than 500 leased foreign-made aircraft remain in Russia and are valued at approximately $20 billion.