Air Transportation: Ukraine Sanctions Destroying Russian Airlines

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July 8, 2022: Russian commercial airlines have about 800 aircraft and nearly all the large ones are Western airliners from Boeing and Airbus. To facilitate sales Boeing and Airbus will lease their airliners rather than sell them outright. Most airlines prefer the more efficient leasing route, making it easier to downsize when poor economic conditions warrant it. Currently 71 percent of Russian airliners are leased and these aircraft are subject t0 repossession if lease payments are not made on time. The increased sanctions imposed on Russia after February 2022 made it difficult, then impossible for Russia to make the lease payments, which must be in dollars.

Soon after February Russia began to default on all foreign loan payments that had to be made in dollars. Rather than return their leased Western airliners, Russia went outlaw and used them only for domestic flights. As long as these aircraft remained inside Russia, they could not be seized. That also meant these aircraft could not obtain major upgrades or mandatory modifications to maintain flight safety. Another problem is that all Western parts and support service for leased or owned foreign airliners must be paid for in dollars. There are solutions available to Russia, but these involve improvisations that may take too long to keep all the commercial aircraft flying.

Russian airlines are grinding to a halt because they can no longer obtain legal spare parts. China manufactures some of these spares under license but many other unauthorized (counterfeit) components continue to be made and quietly sold. The Chinese counterfeits have improved their quality levels because one of these components causing an accident in a Western built airliner used by a Russian airline causes major problems for the airlines involved. The Chinese counterfeits also show up with U.S. airlines and even American military aircraft. This is where Chinese counterfeit parts are usually discovered because the American military is much more diligent about authenticating the source of components. Russian counterfeits are not as reliable nor are those from outlaw manufacturers in several other countries. China is taking risks violating sanctions to keep Russian military and commercial aircraft flying. The risk is seen as acceptable because China is now building locally designed airliners and is better at it than Russia. In the future China will be an alternative to Boeing and Airbus for airliners. China has always had a marketing edge because they will sell to anyone who can pay. No political or ideological background check required.

Russia still has an aircraft manufacturing industry that produces components, including engines and avionics for military aircraft and tries to build competitive (with more cost-effective and safer) Western airliners. That is still a work in progress for Russia but China is having more success. Neither Russia or China has been able to build the larger jet engines used by most Western airliners. China is closer, but not there yet. China could justify increasing its efforts to build competitive large turbofan engines. China can provide some, but not all of the spare parts these engines require. If Russia remains an outlaw state over more than a few years the damage done by the sanctions to the entire Russian economy will be catastrophic and unsustainable because more of the population would demand a new government and peace in Ukraine. Russia currently believes it can outlast the West in this Ukraine endurance test. That is seen as unlikely because the longer Russia keeps the war going the more war crimes accusations it accumulates and the rest of the world is not willing to waive punishment for the Russian politicians and military commanders responsible. Russia citizens experiencing lower and lower living standards are not in a forgiving mood either. That way the seemingly formidable Soviet government fell in 1991.

Russia and China have already organized a method for conducting trade in Russian rubles and Chinese yuan. A few other nations are willing to join this network, but none of them can help with the Russian airliner spare parts problem. China sees the situation as a useful and low risk challenge while for Russia it's more a matter of life and death for airline passengers facing lower flight safety levels and Russian officials responsible for the war crimes in Ukraine. Substitute spares can keep the airliners flying for a year or so but then the need for more difficult to counterfeit components will make this massive improvisation more difficult and unsafe.

China is involved but Russia is committed to making this work and willing to risk lives to make it happen.

 


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