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Belavia Looks to New Leasing Options Following EU Sanctions
In the wake of the standoff at the Poland-Belarus border, the national airline of Belarus is looking for an alternative arrangement for future leasing deals that parts ways with leased aircraft that are tied to the European Union.
The airline itself was called out this fall after being accused of bringing migrants from Iraq and Yemen to Belarus and having them walk to the border in response to the European Union showing doubt regarding the legitimacy of Belarusian President Alexander Lukashenko’s rule. The nation has been on rough terms since the arrest of oppositional journalist Roman Protasevich this summer, which ultimately led to the European body banning Belavia from flying throughout the block.
But after the latest attempt to flood the European Union with migrants, the tensions have risen to a new level. The organization has stepped up sanctions and empowered allies on the border with Belarus as they face the consequences of their unruly neighbor.
Margaritis Schinas, the Vice President for Promoting our European Way of Life, commented on the ruling, saying, “In the past weeks, we have managed to bring the EU’s collective weight to bear in face of the hybrid attack directed at our Union. Collectively, the EU made clear that attempts to undermine our Union will only solidify our solidarity with one another. Today we are giving living manifestation to that solidarity: in the form of a set of temporary and exceptional measures that will equip Latvia, Lithuania and Poland with the means needed to respond to these extraordinary circumstances in a controlled and swift manner and to operate in conditions of legal certainty.”
Big Consequences for Belavia
The fallout of the impact is the national airline rethinking both its fleet and leasing strategy. Belavia noted that it would slash its fleet by nearly 50%, downsizing from 29 aircraft — split from 14 Boeing 737s and 15 Embraer E-Jets — to just 15 aircraft.
The airline has previously relied on leasing aircraft from Irish-based lessors like Air Lease Corporation but has found working with a Western Europe-based leasing company has become increasingly unbearable as the European Union and U.S. have put pressure on the nation. According to the Centre for Aviation’s database, Belavia has a mix of Embraer and Boeing aircraft tied to leasing companies like AerCap, SMBC Capital, Air Lease Corporation and Nordic Aviation Capital.
The aviation leasing world has sought refuge in Ireland for decades, finding the nation’s legal system conducive for doing business all over the world. The country also has a reputation as a tax haven for U.S. companies. Companies like AerCap, BOC Aviation and Air Lease Corporation have held offices in Ireland for the goal of negotiating lease deals in a nation that follows the Cape Town Convention, which allows for a smoother repossession of an asset in the face of a leased aircraft falling into the hands of a financially failing airline.
Belarus, which also follows the Cape Town Convention’s rulings, will not see the brunt of the changing fleet according to the airline for the time being, and the government will continue to support the airline. Belavia said that it will begin pursuing lease deals with companies that do not have ties to the European Union. The airline said that its existing fleet will continue to provide enough aircraft to run its current schedule and will have its fleet replenished by the summer of 2022.
The airline was not ready to talk about any fleet changes, but a reduced flight schedule as the airline has still not been allowed reentry to Europe. Belavia says it can still operate its current route map with no issues and does not plan to lose any vital aircraft in the short term. The airline says that the reduction on the European alliance will reduce stress at the airline and will prevent assets from being suck in distant nations.
Members noted that talks with leasing companies have become increasingly difficult the last six months and even seen the European Union put pressure on these companies to track Belavia aircraft to prevent the border crisis back in November. Getting out of contracts will be difficult for Belavia, with deliveries of aircraft like the Boeing 737-8 MAX happening as recently as the previous summer season prior to sanctions beginning.
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