Russian airlines are effectively cut off from most of the world. But that’s the least of the industry’s problems. Russia’s domestic aviation industry may soon become a mere shell of itself due to restrictions on its activities. Sanctions imposed by the United States and the European Union mean that the world’s two largest aircraft manufacturers, Boeing (BA) and Airbus (EADSF), can no longer supply parts or provide maintenance to Russian airlines. The same applies to jet engine manufacturers.
This means that Russian airlines may run out of needed parts within a few weeks or fly aircraft without changing equipment as often as is recommended for safe operation.
“The priority of the Russian government does not include consumer safety and security,” said Charles Lichfield, deputy director of the Center for Geoeconomics at the Atlantic Council, an international think tank.
Russia’s largest carrier, Aeroflot, was cut off from Saber, which provided a computing framework that allowed the airline to easily book tickets. And airline leasing companies, which own about 80% of the nearly 900 commercial aircraft in Russia’s fleet, have been ordered to withdraw those aircraft by the end of this month. These leased aircraft have a reported value of $13.3 billion, according to aviation analytics firm Cirium, though the actual market value at this point is likely only a fraction of that amount.
“Any viable air travel industry will disappear in Russia in a year,” said Richard Abulafia, managing director of AeroDynamic Advisory. He said the country’s aviation industry could soon find itself somewhere between the heavily sanctioned industries in Iran and North Korea.
Airlines are critical to the Russian economy
This creates a serious problem for the economic activity of Russia as a whole.
Russia is the largest country in the world by land area, more than twice the size of the continental United States. It needs a viable aviation industry to keep its economy going, Lichfield said.
“Russians don’t fly as much as Americans. They don’t fly to Siberia for holidays,” he said. But the air travel industry is a critical link for business not only for international flights but also for domestic flights for its energy sector due to the need for transport engineers., other workers and equipment to and from their far-flung oilfields.
“This is an important part of the Russian economy. They need this backbone. [airline] the industry will stay put,” Lichfield said.
According to Circium, domestic flights by Russian airlines represent only a fraction of the US aviation industry’s domestic operations, about 7% of the number of flights last year. But, unlike US industry, it has fully recovered from the pandemic and has actually flown 8% more domestic flights in 2021 than in 2019, while U.S. domestic flights are still 22% behind the 2019 total.
With the blows to the Russian economy caused by the countless escalation of sanctions, it is inevitable that its economy will not need all those flights in 2022, or likely in the coming years. But the loss of major parts and the possibility of the aircraft being confiscated means that Russia’s ability to recover in the future will be seriously undermined.
Aircraft can be hijacked
Some of the companies leasing planes to Russian carriers are Chinese, and China has yet to impose any sanctions of its own. But it is possible that even Chinese leasing companies will find it necessary to try to get hold of the Boeing and Airbus aircraft they have leased to Russian airlines, Abulafia said. This is because these Chinese companies do not want to risk buying aircraft from Airbus or Boeing in the future.
“These are Western planes. I’m not sure how Chinese firms will react to the sanctions,” he said. “More importantly, these aircraft will no longer be provided with parts and maintenance. It’s a real problem if they lose their airworthiness certificates, which can happen if proper records aren’t kept or especially if they’re stripped for parts.”
China has already said it will not supply parts for these aircraft to Russia, according to the Russian TASS news agency, citing Valery Kudinov, head of the aircraft airworthiness department at the country’s Federal Air Transport Agency.
Russia will fight attempts to seize planes
On Thursday, Russia announced plans to pass a new law that would block these planes from leaving the country. But it will create a situation where its airlines will have trouble leasing planes in the future, even after sanctions end.
“Russian airlines want to do business with leasing companies. When all is said and done, they suspect they will need jets in the future,” said Betsy Snyder, a Standard & Poor’s credit analyst who monitors leasing companies. “But those in power in Russia are telling them not to do it.”
The global aviation industry is much easier to live without Russia, which accounts for only about 1% of total commercial aircraft purchases, than Russia without aircraft or parts from the US and the EU. Russia’s attempts to build its own commercial aircraft have resulted in jets of dubious safety that have not found buyers on the international market.
Can a large country like Russia live without a modern, viable aviation industry?
“This thesis has never been tested,” Abulafia said. “But it must be.”