CJI London: Russian business aviation poised for growth
Business aviation in Russia could be poised for significant growth, creating key opportunities for Western partners, Derek Bloom, partner with Atlantic Aviation Legal Services LLC, told delegates at Corporate Jet Investor’s London 2021 conference.
Bloom highlighted the opportunity to provide more loan and lease financing to increase the number of aircraft in Russia available for charter use. “There is an opportunity for large Western operators to place aircraft in Russia on to AOC’s there, and to form joint ventures with Russians who control Russian AOCs,” he said.
Two factors were likely to boost the import of aircraft into Russia. One factor was the 0% VAT rate for aircraft imported into the country Russia, which was introduced from January 1st 202o. The second factor was the complete exemption from customs duties for most models of aircraft. But Bloom acknowledged it could be difficult to identify accurate statistics.
Research by Atlantic Aviation Legal Services identified that there has been a big increase in the number of aircraft imports to be registered in Russia last year. “It appears that 17 business aircraft were imported and registered in Russia in 2020,” said Bloom. “Plus, a total of 100 to 105 business aircraft are registered in Russia at present.”
‘Bought and sold 500 business aircraft’
It is estimated that high net worth Russians and Russian corporations beneficially own another approximately 200 business aircraft that are registered outside of Russia, he added. “This is the apparent current result of them having bought and sold approximately 500 business aircraft in recent years.” Most of the aircraft imported to Russia last year appear to have already been Russian-owned and to have been imported to Russia from tax haven jurisdictions. Several new aircraft in 2020 were imported by Russian corporations.
Asked about the apparent export of Russian business aviation, Bloom said: “This arose out of historic dependence on European infrastructure and the absence of business aircraft infrastructure across Russia. The import of many aircraft to Russia is causing investments to be made in the ability to conduct their maintenance within Russia.”
Despite the opportunity to relocate aircraft now to Russia, many High-Net Worth Individuals will likely choose not to, he predicted. Those decision would continue to create business for Western banks and operators.
‘Renew and update their fleets’
But demand from operators and corporations was set to grow. “Commercial operators and large corporations will continue to import aircraft to Russia and to renew and update their fleets. That will justify a greater presence by aircraft brokers and financiers in Russia, or, at least, a willingness to finance aircraft based there,” said Bloom.
Looking further ahead, Bloom predicted gradual improvement in the Russian business aviation market, which could be dented by political risk factors and the possible expansion of sanctions. “There’s an opportunity for first movers among Western companies to establish a presence in Russia and compete successfully with domestic Russian operators because better aircraft and services can be offered,” concluded Bloom.
Christian Certa, Credit Suisse Vice President of Aviation and Yacht Finance, said Covid-19 had highlighted the benefits of owning or chartering a private jet in terms of flexibility and safety. “There is now more awareness of these two topics and clients, who can afford it, are now more inclined to buy a jet or chartering it, even if the total annual cost is higher,” said Certa. “I believe this consciousness will stay even after the pandemic has been defeated.”
Also taking part in the forum, was Anna Serezhkina, executive director of the Russia United Business Aviation Association. Covid-19 had prompted a big increase in the number of passengers sharing private jets in Russia, said Serezhkina.
Meanwhile, Corporate Jet Investor London 2020 is taking place between February 2nd to February 4th. More information about the online conference is available here.
Derek Bloom sees business opportunities