[ad_1]

Through last Monday, Russia ranked 11th in terms of private jet departures in 2022. According to WingX, Russia had 3,860 private jet flights, slightly ahead of the Bahamas at 3,791 and behind Italy in the 10th spot at 4,497. The U.S., the world’s largest business aviation market, had 349,283 private flights during the same period. Mexico was second at 10,179, followed by France with 10,179 and Canada at 9,646.

While Russia’s business aviation segment may pale compared to the U.S., it’s big in another sense. Forty-three percent of flights were aboard large cabin, ultra-long-range and VIP airliner business jets. These aircraft often cost over $50 million.

Richard Koe, managing director of WingX, says, “The much longer-term view of flight activity out of Russia, since 2005, illustrates that recent flight activity has recently come close to previous peaks in 2018 and 2013, and until now, appeared to be on an upward trajectory in the last 18 months, especially in Large Jet activity. Russian registered jets had a robust 2021, up by 80% compared to 2019.”

Koe continues, “In the European region, in 2021, 11% of all country connections involved Russia or Ukraine, as an arrival or destination, and that translated into 7% of all flights. The exposure is much higher for some countries than others, with respectively 22% and 16% of flights from Estonia and Cyprus heading to Russia, but only 1% of outbound U.K. flights, 6% from Turkey.

So far, the U.K., Poland, Czech Republic and a half dozen other countries have banned flights by Russian-registered aircraft, including private jets. Other countries are expected to follow suit. Russia is retaliating, meaning routes for jets registered in those nations flying between Europe and China or North Asia can no longer use its airspace.

Rising jet fuel prices, already on their way up, could mean fuel surcharges in fixed rate membership and jet card programs. Fractional share programs update fuel surcharges monthly. Some membership programs have contractual triggers. However, it’s possible providers could implement the extra fees under force majeure clauses, which are standard.

Koe says there is variable exposure across OEM fleets, with 25% of European flights connecting with Russia and Ukraine during 2021 aboard Boeing Business Jets and 12% by jets manufactured by Gulfstream Aerospace.

Alisdair Whyte, Editor of Corporate Jet Investor, wrote Friday in his weekly newsletter, “[T]he biggest risk to Russian business aviation is business jet owners – corporates and individuals – getting sanctioned. This threat alone is stopping banks from offering finance to Russian customers and manufacturers from selling aircraft.”

He adds, “Banks that have financed aircraft for oligarchs are watching updates closely. Although it can be possible to keep receiving interest payments on existing deals, many sanctioned individuals simply stop paying. We could soon see repossessions of these aircraft.”

Whyte notes that it’s hard to know how many private jets are owned by Russian nationals. Many are registered in other countries.

Forbes reports Russian billionaires have lost more than $126 billion in wealth since February 16.

For an industry with a severe shortage of aircraft to buy, Russia may now provide much needed inventory. Alireza Ittihadieh, President & CEO at Freestream Aircraft, is quoted by Whyte as saying, “Russia could become the next source of aircraft after China.”

Steve Varsano, CEO of The Jet Business estimates 10% of all new super midsize and larger private jets on order are for Russian customers.

“Manufacturers can easily move customers around and buyers are desperate for large pre-owned aircraft,” Whyte writes.

Varsano says there are between 300 and 500 aircraft in the current worldwide fleet that are likely connected to Russian owners. What’s not clear is how many of those aircraft will be impacted by sanctions.

The result could mean more inventory for U.S. operators who are still facing a supply shortage. Argus TraqPak predicts 2022 will break last year’s record for flight hours.

While Varsano expects Russian owned jets to begin coming to market within weeks, he isn’t sure that will immediately benefit large fleet operators like NetJets, Flexjet and Vista Global. He notes they typically want standard configurations, so aircraft that are already kitted out to an owner’s specifications may not fit their needs.

He says they will be exerting pressure on OEMs to gain more aircraft delivery slots. “You have customers who buy dozens of aircraft a year and individuals who buy one jet every five to seven years,” he notes.

Despite what he calls “a fluid market, changing daily,” Varsano is launching a $300 million fund to buy aircraft that come onto the market.

It’s also possible supply chain issues may impact OEM delivery schedules. Russia is a major producer materials such as aluminum, nickel and titanium.

By the same token, it’s not assured that demand will remain robust. Varsano notes, “Sentiment is driving demand. It doesn’t take much to change market sentiment.”

[ad_2]

Source link

By Admin

Leave a Reply

%d bloggers like this: