FSVT reports only one aircraft leased in Russia in 1999 and desperate need for leasing structure and funding

Published: 11/22/1999

Viktor Samokhin, Head of the Science and Technology Centre at the FSVT, has reported that only one new Russian-made plane has been leased in Russia in 1999. Speaking at a meeting of the representatives of air administrations of Russia and CIS, Samokhin confirmed that the aircraft was a Tu-204, leased for five years from the Ulyanovsk plant, Aviastar, by a state owned airline called Kavminvodyavia in Stavropol, which currently has six such aircraft on order. Cost is the key-inhibiting factor. Prices of new Russian aircraft have quadrupled in ruble terms, due to the high cost of foreign components, since the financial crisis of August 1998. In some aircraft, such as the Il-96, the foreign content is reported to be as much as 60% of the value of the aircraft. The finance that is available is often prohibitively expensive; with interest rates reported in the region of 40% on contracts of 5-8 years, which presumably explains the low take-up on the leasing option available within Russia. The leasing law, which is now being considered by the federal government, potentially if implemented could help Russian airlines to update their fleets (www.concise.org. 26th October 1999). Recent leasing to Aeroflot and Volga Dnepr of Il-96-300s and An-124s appear to have been done at less aggressive rates, but Sberbank, the state saving bank, which has provided the funding still demands, according to reports, leases of only 5 years at a reported rate of 13% in hard currency, leaving this option really only available to those airlines with access to substantial foreign income. According to the much vaunted leasing legislation, Rb 4 billion ($150m) will be allocated annually by the government for leasing. Airlines that lease Russian aircraft will get tax breaks on profit, property and the onerous road taxes. Banks that provide funding for leasing will be also granted tax concessions. Russia has a total of 7530 aircraft, including 1750 for long and medium range routes, 758 cargo, 2616 for serving local routes and 2384 helicopters. The sheer size and cheapness of the existing fleet works against the acquisition of new Russian aircraft. However, according to Samokhin, failure to upgrade fleets, even if the demand for air traffic can easily be met over the next ten years, means that Russian aircraft will be pushed out of the international air market because they will not meet ICAO standards on noise, toxicity and navigational accuracy. The role of the FSVT in establishing a state-supported leasing system will be critical in addressing this problem.

Article ID: 1111