Source Companies of the Russian Federation are trying to return hundreds of millions of dollars for undelivered aircraft. As Kommersant found out, Rostec is trying to recover about $200 million in advance from Airbus, which it paid for the delivery of 17 A350 aircraft, which was not carried out due to sanctions. Potentially similar claims could be filed by other Russian carriers and lessors, including Aeroflot, which ordered 22 A350s from Airbus but managed to receive only seven. However, lawyers estimate the chances of returning the money as zero.
According to Kommersant's information, the size of the advance that Rostec's lessor, Aviacapital Service (AKS), intends to claim from the European aircraft manufacturer Airbus is about $200 million. , as well as sources close to Aeroflot. The parties do not disclose the amount of claims. The lawsuit was filed with the Moscow Arbitration Court on December 13, and it became known on December 16.
This is a contract for the supply of 17 long-haul wide-body A350s. AKC entered into an agreement directly with Airbus in 2015 and planned to then lease them to Aeroflot. None of the aircraft was received by the customer.
In addition, since 2007, Aeroflot had a firm contract with Airbus for the supply of 22 A350 aircraft, seven of which he managed to receive. The first one was received from STLC in March 2020, the last one was received in February 2022. In total, Aeroflot was going to receive 39 A350s, which were supposed to gradually replace the Boeing 777 carrier in the fleet.
The contract for 22 aircraft was concluded under a sale-and-leaseback scheme: the manufacturer provides significant discounts to the airline as an end customer, and the carrier enters into an operating lease agreement for these aircraft with lessors. While Aeroflot has not reported attempts to recover the transferred advances from Airbus, the company does not comment on the possibility of filing a lawsuit.
The last two contracts with lessors for six Airbus 350-900s worth $210 million each were signed by Aeroflot in July and December 2021, the contractor was not disclosed. At the same time, Aeroflot told Kommersant that under the updated pre-pandemic agreements, by the end of 2021, the airline should receive nine more A320neo models and two Boeing 777-300ERs (see Kommersant dated May 5, 2021). The group explained that they initiated the postponement of deliveries to 2022–2023 against the backdrop of pandemic restrictions, and, as Kommersant’s sources in the market explained, the carrier could not refuse or reduce supply plans due to large fines provided for by the manufacturer.
Aeroflot and the lessor of Rostec are not the only ones who cannot return the paid advances.
In April, it was reported that Azimuth was unable to return payments for six Airbus A220-300s ordered from the lessor Air Lease Corporation (USA). The company declined to comment on this. One A330 managed to order iFly: according to Kommersant's interlocutor in the company, the prepayment amounted to “a little less than $ 1 million.” On the eve of the announcement of sanctions, Smartavia managed to abandon plans to supply A3210Neo, but, according to a Kommersant source in the industry, it was not possible to return the pledge. The company did not respond to Kommersant.
Also, according to Kommersant, the negotiation process between Ural Airlines and Boeing, which began even before the pandemic, on compensation for the disruption of deliveries of 14 Boeing 737 Max and the return of advances is now frozen for them.
Now Kommersant's interlocutors in the leasing market assess the chances of returning paid advances as close to zero, since EU sanctions prohibit any financial relationships with companies from the Russian Federation. Moreover, the total amount, according to their estimates, may exceed several hundred million dollars, since the amount of advances starts from 5–10% of the contract amount at the signing stage and approaches 40–50% a year before delivery.
Igor Smirnov, senior director for corporate ratings at Expert RA, believes that the only promising solution is to try to register the claim of Russian legal entities in foreign courts.
Guillaume Faury, CEO of Airbus, October 28:
“We are concerned about the conditions of maintenance (in Russia.— “Kommersant”), because in fact the planes fly a lot. Because of the sanctions, we cannot truly monitor and support our customers in the way that we do in normal times.”
Both the EU and the UK have recently clarified that the right to judicial protection is inviolable, and even substation persons cannot be denied access to justice, says Mr Kulkov: “Despite this, there is a strong opinion among lawyers that the road to Western courts is for Russian persons, especially sanctioned ones, is closed.” Alexander Zablotskis, chairman of the A1 Bar Association, agrees that “it is now difficult and unpromising to sue debtors in Western courts.”
Maxim Kulkov, managing partner of Kulkov, Kolotilov & Partners, believes that a claim based on the new provision of the Arbitration Procedure Code of the Russian Federation (Article 248.1), which allows Russian sanctioned persons to apply to a Russian court, even if the supply contract provides for a foreign court or arbitration. The logic of the claim is not clear to him, since “the decision made in the Russian Federation will not be executed anywhere except in Belarus.” The only explanation could be the presence of the defendant's property in Russia. But, according to Igor Smirnov, Airbus had no assets in Russia that could be frozen as collateral.