The Ukrainian Conflict: Impact on the Aviation Finance and Leasing Industry

The conflict between Russia and Ukraine has resulted in additional burdens on the aviation industry, compounding the impact of the COVID pandemic. Airline manufacturers and operators are suffering extra costs due to the steep rise in commodities prices, especially those linked to energy costs, and the decline in the supply of crucial manufacturing materials like titanium, as a result of supply chain issues and sanctions. The sanctions, led by the United States and the European Union, impacted Russia multilaterally. They included prohibiting the transfer of maintenance materials and technologies; forbidding aircraft leases to Russian operators; airspace closure; and suspension of airworthiness certificates. Russia responded to the sanctions by suspending bilateral agreements and unilaterally re-registering leased aircraft in Russia. Russia’s responses have impeded aircraft lessors seeking to repossess their assets and forced an inevitable write-down of asset values, leading lessors and financiers to file insurance claims. This has dampened the global aviation finance and ABS markets.