Russia’s invasion of Ukraine in February 2022 and the subsequent, ongoing sanctions on the country—designed to weaken President Vladimir Putin’s war economy and his cabal of influential oligarchs—has almost completely sealed off Russian aviation, both business and commercial.

This previously steady market has been devastated, with original equipment manufacturers (OEMs) stopping the sale and supply of aircraft and components. The sanctions have made it impossible to trade, service, and support an aircraft with links to a Russian entity anywhere in the world.

Notams, meanwhile, ban Russian-registered aircraft and those types known to be owned or operated by Russian nationals—whatever their connection to Moscow—from entering European airspace or of landing in many countries.

Less than a decade ago, Russia was regarded as one of the great emerging markets for business aviation, along with the likes of China, Brazil, and India—known as the BRIC countries.

The ostracization of Moscow has certainly had an effect on the ability of oligarchs to travel the world for business and pleasure, although many popular destinations in North Africa and the United Arab Emirates still remain open to them. Sanctions, however, and the effective shuttering of a swathe of European airspace is having repercussions on the industry as a whole—to what extent is still open to debate.

Traditionally the Russian market accounts for around 2 percent of new aircraft sales each year, largely in the super-midsize, large-cabin, long-range, and VIP airliner categories, according to Robert Baltus, chief operations officer for the European Business Aviation Association (EBAA). “Obviously these orders cannot be honored in the current climate, but thanks to the bullish market right there is no shortage of buyers to take their place.”

Strong Market

Baltus’s view is echoed by aviation analyst Rolland Vincent. “There are ample customers more than willing to gobble up any available delivery positions, often at higher prices due to the restricted supply of aircraft in today’s marketplace,” he said.

Vincent described the current marketplace as “exceptionally tight” with order backlogs of more than two years, unprecedented pricing strength, and limited availability of quality preowned aircraft. “While inventories of for-sale aircraft have been trending upwards, the market remains a seller’s paradise—for now,” said Vincent. 

According to market research company Amstat, around 150 business aircraft are registered in Russia, down slightly from 167 a year ago. The majority of Russian-owned and -operated models are registered outside of the country and are estimated to number around 400 units—2 percent of the global fleet and 5 percent of the inventory of super-midsize to ultra-long-range jets—although it is opaque as to how many are still operating today. 

It is also unclear how many business jets with links to Russia have been seized and grounded to date, with some observers putting the tally at a couple of dozen in Europe alone. This includes a pair of private jets owned by sanctioned Russian billionaire Eugene Shvidler: a Bombardier Global 6500 (registration LX-FLY) impounded at London-area Farnborough Airport on March 9, 2022, along with a Cessna Citation Latitude impounded at Biggin Hill. Their seizure followed the introduction by the UK government of a law making it a criminal offense to handle an aircraft that has any connection to Russia through registration or ownership, management, and charter.

The restrictions, largely mirrored throughout Europe, Canada, and the U.S., include a rule that aircraft seized must be grounded with immediate effect and not be touched.

This ruling has been greeted with frustration by the industry, Baltus noted, with many seeing it as a blunt tool. “Leaving an aircraft in the spot where it was seized, had a lot of unintended consequences from a health and safety, fire, operational, logistical and even environmental perspective,” Baltus noted. “Furthermore, if that sanctioned aircraft is parked in front of your hangar door and you’re not allowed to move it, you can’t run your business. So, who are rules hurting in that case?”

Sanction Sanity

The EBAA has been in “constant dialogue” with the European Commission (EC), Baltus noted, to ensure that its members are fully complying with the sanctions, “which can be difficult to navigate.”

The Brussels-based association along with other concerned industry groups secured clarifications from the Commission and the UK government to allow seized aircraft not owned by Russian nationals on the sanctioned list to be stored in a protection plan, to allow the engines to be turned intermittently to prevent corrosion.

Baltus stressed however that this is only a “basic” concession and depends on the interpretation of the 27 EU member states and the U.S. sanctions. There is no figure to date on the number of impounded aircraft that are stored in a protection plan and what condition they are in, but the Commission has made it “very clear,” Baltus conceded, that anything that helps retain the residual value of the sanctioned aircraft “is not acceptable.”

For aviation lawyer Aoife O’Sullivan, this position is regrettable.

“There’s a lot of beautiful equipment, multi-million-dollar assets in many cases, that cannot be serviced or even sold on, and that is such a pity,” she said.

O’Sullivan, partner of London-based The Air Law Firm, suggested the far-reaching nature of the sanctions and notams is heavy-handed.

“So, you're not a sanctioned individual, you’re not living in Russia, you don't support Putin or the regime, yet you're left with a pretty asset sitting on the ramp that you can do nothing with. It’s unfair,” she said.

O’Sullivan is calling on Europe’s lawmakers to collaborate with the industry to find a practical solution. “If you don't want Russian owners to own aircraft, please just work with us to get them sold to people who want them and can use them. Nobody is gaining by leaving the assets on the ground,” she said.

If there are any positive repercussions for the industry from the sanctions, O’Sullivan argues it is the increase in transparency and an acquiescence to the increased level of scrutiny. The mantra “know your customer” (KYC) is now common parlance, said O’Sullivan. “Due diligence was often resisted and greeted with accusations of ‘you are asking too many questions.’  Now there is a general acceptance that clients must share their information because companies won’t take any risks in the current climate of there being even a hint of a connection to Russia."

Know Your Customer

Her claim is supported by TAG Aviation, one of Europe’s largest business aviation charter and management companies, where KYC is embedded in the company culture.  

“Russian nationals or anyone with links to Russia cannot be the principal passenger on a charter or have anything to do with the payment of the flight,” said TAG Aviation chief commercial officer Karl Mills.

While the rules may seem clear-cut, it can often be tricky to follow the money trail. “If there is a hint of doubt as to the identity of the principal passenger, we won’t accept the booking. The stakes are far too high,” said Mills. 

The industry saw the ramifications of cases that could be traced back to Russian use. One such example followed by AIN was Emperor Aviation. The Maltese operator was sanctioned by the U.S. Office of Foreign Assets Control last November— along with eight related business jets—for conducting travel on behalf of the family of sanctioned oligarch Suleiman Kerimov.

TAG Aviation’s zero-risk approach to the sanctions led to it terminating a handful of aircraft management contracts with customers with links to Russia. While a blow to these owners, the Geneva, Switzerland-headquartered firm had no difficulty replacing the lost business, thanks to a surge in post-Covid-pandemic travel, which, according to Mills, has cushioned any financial impact from the shuttered Russian market.

“Leisure flights boomed as travelers—many first-time entrants to business aviation—opted for private jets rather than commercial airlines, which they viewed as unreliable and less Covid-safe,” said Mills.

TAG Aviation’s business continues to thrive. This success is driven partly by the many first-timers making a permanent switch to private aviation, he noted, but also by the long-awaited return of the corporate travel market late last year and TAG Aviation’s recent expansion into the cargo, medical evacuation, and MRO niches. “We learned in the early days of the pandemic that your business is built around moving passengers and if they can’t fly, you have to diversify and spread the risk,” said Mills.

This includes expanding its geographical reach. With the Russian market now sealed off for the foreseeable future, TAG Aviation is eying ventures in Asia, Australia, and the Middle East, he added.

TAG Aviation’s diversification strategy is shared by VistaJet, the Malta-headquartered high-end charter provider and one of Europe's largest operators with a multi-model Bombardier fleet.

The company’s shift over the last decade from a largely Europe-centered to a global business aviation company has helped to minimize the collapse in the Russian market on its balance sheet, according to VistaJet chief commercial officer Ian Moore.

“The Russian market represented less than 5 percent of our customer base when the sanctions hit,” he noted. “A decade ago, that would have been a far larger percentage, because Russia, largely driven by luxury consumer-driven customers, had a deep footprint inside the European industry,” Moore conceded.

The closure of the Russian market was evident for the first time at the start of the year, Moore suggested, with the loss of the traditional Orthodox Christmas holiday traffic. “You didn’t have that second or third week of flying in January that you usually have, and coupled with a softening of the charter market during the same period, the impact was noticeable,” he noted.

Conservative Approach

Like TAG, VistaJet has taken a “very conservative” approach to the sanctions. “If there is any grey area with a customer or a booking, we go to the highest level as the risks are enormous both financially and reputationally,” said Moore.

The last thing the private aviation industry needs, he admitted, is the optics of doing things that other people could not do.

While some of VistaJet’s Russian customers have been able to adapt to the sanctioned environment by using up their committed charter hours outside the restricted regions, others have not. “Obviously some customers cannot fly so we have worked with them to suspend their commitment going forward in return for a small fee,” said Moore. “There's a big cost to us because we carry all the fixed costs,” he added. 

Moore describes the timing of the sanctions as “fortunate” for the European private aviation market. “There was enough business in the marketplace for several more months so Russia coming out of the market didn't have a significant impact on anyone who was truly European as opposed to those who were Eastern European with a focus on the Russian client base,” he said.

Czech business aviation services provider ABS Jets said the Russian market represented 20 percent of its business before the war began. Jan Kralik, chief executive of the Prague-headquartered firm, said the impact of the sanctions was felt by its handling, operations, and MRO divisions, where the Russian and Ukrainian markets “always played a significant role before the war.”

Thanks to Europe’s buoyant business aviation sector, ABS has successfully plugged the gap, snapping up contracts in new markets and adding five managed jets to its fleet of high-end jets. “As always, every crisis brings opportunities,” said Kralik.

Of course, the sanctions are not one-sided. Russia in retaliation introduced harsh restrictions on NATO and EU members, closing its vast airspace to all aircraft registered in these countries.

Typically, Russia accounts for a small percentage of global traffic, said EBAA’s Baltus. He cites IATA data from 2021 to illustrate his point.  For the 12 months ended December 31, the country accounted for 1.3 percent of global movements while international air traffic to and from Russia accounted for 5.7 percent of total European traffic. “The closure of this airspace has therefore had relatively small impact on business aircraft operations overall,” Baltus noted.

The shuttering of Russian airspace is, however, causing a headache for some western operators, notably on flights linking Europe and North America to Asia.  “These routings all create further issues in terms of added time, increased fuel costs, and limited divert options,” said Matthew Borie, chief intelligence officer and co-founder of aviation risk assessment company Osprey Flight Solutions. Aircraft now, for example, have to fly south of Russia through the Central Asian states or the Middle East to access Asia. “This has created increased fuel costs, crew rest complexities [on commercial flights], and additional aircraft maintenance,” Borie noted.

Despite the rising costs and the increased flight duration, VistaJet’s Moore said the appetite for long-distance journeys has not waned in private aviation. “The proposition remains strong,” he conceded. “Most of our customers fly these lengthy routes for business and are purchasing around 15 percent more hours to cover the extra mileage. What’s more, our top-of-the-range Global 7500s perform those flight lengths [up to 14 hours nonstop] uniquely where other aircraft couldn't,” Moore said. VistaJet has 17 of the 7,700-nm-range twins in its fleet.

While the conflict shows no sign of ending in the short term, aviation consultant Brian Foley puts things in perspective for European business aviation. “The industry has proven time and time again that it can adapt to and survive nearly any setback. This determination and flexibility will propel it through the next set of challenges whatever they may be.”