Russian airline Aeroflot plans to scrap five Boeing 737-800BCF cargo aircraft for parts to outfit commercial passenger jets amid ongoing sanctions, according to a report by Russian news agency Kommersant.
Kommersant reported Friday that Aeroflot is primarily interested in the engines, landing gear racks, avionics, and other components of the Boeing jets, which are roughly valued at around $80 to $90 million altogether.
The aircraft were acquired from Irish lessor AerCap through one of several “insurance settlements” now being used by Russian airlines to indirectly purchase leased Western-origin aircraft.
Crippling Sanctions
A Wilson Center analysis stated that as of the start of February 2022, over 80% of the fleet of the twenty largest Russian airlines – accounting for 97% of all passenger traffic – consisted of foreign-origin aircraft.
U.S. and European-imposed sanctions on Russia following the invasion put sweeping export controls on items related to the aviation industry and their required licenses, according to an analysis by Pillsbury’s Global Trade and Sanctions Blog.
Russian news agency Izvestia reported in November that 36 small and medium-sized airlines providing 26% of passenger traffic within Russia may go bankrupt in 2025 due to debts from leasing foreign aircraft.
The Russian government will let carriers write off their debts in 2025, but these amounts will still be subject to a 25% income tax. Izvestia reported that Russia’s Association of Air Transport Operators is working with airlines on amendments to this tax code to protect carriers from potential bankruptcies.
No Give-Backs
Sanctions by Western nations banned exporting all aircraft and parts to Russia and saw international lessors like AerCap terminate their leasing agreements with Russian airlines. But Russian carriers were able to hold on to over 500 leased airplanes when the state banned exporting foreign-owned jets outside of the country.
These airlines survived on government subsidies until the state switched its strategy and began buying the leased aircraft outright through a legal loophole in 2023.
“Although the sanctions prohibited such transactions, resourceful Russian lawyers found a loophole and turned the buyout into an insurance settlement,” the Wilson Center analysis stated. “By the end of 2023, Russia had bought 150 airplanes out of more than 500 required to be returned. Aeroflot accounted for more than half of the purchased planes. Negotiations on further ‘insurance settlement’ of the situation around the leased aircraft are reportedly ongoing.”
