How Ukraine crisis is hitting business aviation
Russia customers are extremely important to European business aviation. Both as aircraft owners and charter customers.
EU airspace closed to Russians
The EU and the UK have closed all airspace to Russian owner or operated aircraft.
“We are shutting down the EU airspace for Russians. We are proposing a prohibition on all Russian-owned, Russian registered or Russian-controlled aircraft. These aircraft will no more be able to land in, take off or overfly the territory of the EU. This will apply to any plane owned, chartered or otherwise controlled by a Russian legal or natural person,” said Ursula von der Leyen, president of the European Commission. “So let me be very clear. Our airspace will be closed to every Russian plane – and that includes the private jets of oligarchs.”
This is a massive headache for operators. How do you view a jet owned by a Russian individual who has duel citizenship? What about a shared ownership or fractional aircraft with a Russian individual? How do you define a non-Russian registered aircraft owned by a BVI company?
Sanctions big threat to industry
The Russian invasion of Ukraine has led to a flurry of sanctions being issued by the US, EU UK, and other countries. These will be negative for some, but perhaps positive for business jet buyers.
The US has targeted Russia’s 10 largest banks. It is also blocking payments to major banks, which could make paying Russian companies – like fuel providers or airports – impossible.
But the biggest risk to Russian business aviation is business jet owners – corporates and individuals – getting sanctioned. This threat alone is stopping banks from offering finance to Russian customers and manufacturers from selling aircraft.
Adverse impact on transactions
New business jet purchase and financing deals for Russian clients will be put on hold — some already are. Those existing deals may face issues such as illegality, force majeure, payment defaults, etc. due to sanctions or export restrictions.
Any international transactions with business jets in which a sanctions-restricted bank or one of its subsidiaries is involved will now be adversely affected — as a buyer, seller or financier.
It is worth noting some sanctioned banks, such as VTB Bank and Sberbank, have leasing subsidiaries that also deal with aircraft and that will be affected.