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Bermuda Delists Russian Aircraft in Setback for Foreign Owners

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Bermuda’s Civil Aviation Authority removed all aircraft tied to Russia from its airworthiness registry, according to a local report, exposing hundreds of jetliners owned by foreign leasing firms to devaluation.

International sanctions have had a “significant impact on the ability to sustain safety oversight” on Russian-operated aircraft, and the authority “is unable to confidently approve these aircraft as being airworthy,” Bernews reported, citing an unidentified spokesperson.

The move is likely to accelerate decisions by Irish leasing firms that have rented Boeing Co. and Airbus SE jetliners to Aeroflot PJSC and other Russian airlines to cancel the contracts. They have until March 28 to do so under European Union sanctions tied to Russia’s invasion of Ukraine. Russia has already started moving planes to its local registry from Bermuda.

About 740 Russian aircraft are registered on the island, whose aviation authority performs an essential role in assuring planes in Russia are insured and maintained to confirm their airworthiness. Without it, the jets can’t be marketed later to airlines elsewhere in the world, and lose their value.

Foreign owners have leased out jetliners to Russian operators worth an estimated $10.3 billion, according to aviation consultant Ishka.

Staying in Russia

Russian officials have been preparing to keep at least some of the planes in the country rather than allow them to be returned to owners. An official last week said more than 100 aircraft had already been re-registered there.

Foreign lessors had 523 aircraft rented to Russian operators as of March 10, according to consultant IBA. Dublin-based AerCap Holdings NV, the world’s biggest leasing firm, had 142 of the total, followed by SMBC Aviation Capital with 35. Also based in Dublin, it is part of the Japanese consortium of Sumitomo Corp. and Sumitomo Mitsui Financial Group.

S7 Airlines is the biggest customer of foreign leasing firms with 101 aircraft, followed by state-owned Aeroflot with 89, according to IBA. While many of the planes are older, with an average age of 12.8 years, S7 — Russia’s biggest domestic carrier — has 31 of Airbus’s newer A320neos on lease, while Aeroflot has six, the consulting firm said.

Asset-backed securities tied to jets in Russia leased by Carlyle Aviation Management, Castlelake Aviation Holdings and others have been put on watch for downgrade by Kroll Bond Ratings. Leasing firms are expected to file insurance claims, leading to litigation over payouts.

The provisional suspension of Russian airworthiness certificates took effect on Sunday local time, Bernews said. It affects all aircraft operating under an agreement between Bermuda and the Russian Federation.

Premier David Burt previously said the island, which sits about 650 miles off the coast of North Carolina and is a self-governed overseas territory of Britain, will largely follow U.K. sanctions on Russia.