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Will lessors repossess Volga-Dnepr freighters stranded in Russia?

Layoffs, ownership change mark cargo airline’s struggle to overcome crippling sanctions

Volga-Dnepr subsidiary AirBridgeCargo had six 747-400 freighters, pictured, in its fleet. (Photo: Shutterstock/Vytautas Kielaitis)

A new ruling by Bermuda’s Civil Aviation Authority may increase slim odds that all-cargo airline Volga-Dnepr Group can return to leasing companies Boeing aircraft grounded by Western sanctions on Russia for the invasion of Ukraine. 

The carrier is desperately trying to survive, after losing most of its international business, and not burn bridges with partners needed for any postwar comeback. 

Repatriation is far from certain because the Russian government has blocked foreign-owned aircraft from leaving its airspace and helped airlines reregister aircraft to its own registry, against international law. And it’s not clear how much lessors want aircraft that have degraded without normal maintenance. 

Russian officials say they have transferred hundreds of foreign-built passenger aircraft to the domestic register.

Moscow-based Volga-Dnepr in March shuttered its two subsidiaries — AirBridgeCargo and Atran Airlines — that rely on Boeing (NYSE: BA) aircraft because of sanctions on its leased aircraft, airspace bans and the revocation of airworthiness certificates by aviation registries in Bermuda and Ireland.

ABC, which was based in the U.K., operated 17 Boeing 747 freighters, including 13 late-model 747-8s plus a Boeing 777. BOC Aviation, a leasing company in Ireland affiliated with the Bank of China, earlier this year  reclaimed a 747-8 from AirBridgeCargo. 

Subsidiary Atran Airlines provided regional service to Europe and Asia with four Boeing 737-400 and two 737-800 narrowbody aircraft. 

The elimination of more than 20 freighters from the market, especially large ones used on long-haul routes, has further pinched air cargo capacity for businesses at a time when the supply of airlift for goods is still below 2019 levels due to reduced passenger networks coming out of COVID. 

The Bermuda Civil Aviation Authority on Monday issued a notice saying it will relax on a case-by-case basis its suspension of safety certificates for Russian-controlled aircraft flying under its registry to allow the repatriation of assets to lessors. In March, the agency determined that airspace bans and restrictions on technology transfers prevented it from sustaining safety oversight and validating the airworthiness of aircraft, effectively putting them out of service.

Authorities in Bermuda now “may provide individual approvals to persons and permits to aircraft, but only where this technical assistance facilitates recovery of those aircraft from the Russian Federation, to a place outside of the Russian Federation, on behalf of non-Russian owners,” the notice said.

The Bermuda registry shows 16 aircraft registered to ABC, including one Boeing 777 freighter, and eight 737s registered with Atran Airways. The aviation authority has more than 25 airworthiness inspectors around the world and an inspection office in Shanghai. It would make money by charging lessors for issuing new airworthiness certificates, special flight permits and other documents required for approval. 

Under U.S. export controls, Russian airlines must also obtain a license to conduct any flights with U.S.-origin aircraft. 

Russian media outlet RBC has reported that Volga-Dnepr asked the Ministry of Transport for permission to return foreign-owned aircraft to leasing companies. Volga-Dnepr declined to confirm whether it made such a request. An aviation industry source familiar with the situation, who asked not to be identified because of the sensitive political situation in Russia, said the company is negotiating an aircraft giveback with lessors. 

Most of the Boeing aircraft are stranded at Moscow’s Sheremetyevo Airport, but the source, who works closely with airlines in Russia, said at least two are “imprisoned” in Canada and Germany.

Volga-Dnepr’s desire to return property to its owners is likely rooted in creating goodwill for future business, said aerospace analyst Richard Aboulafia, managing director at AeroDynamic Advisory.

“Airlines, like most businesses, are less interested in fighting wars and more interested in their future survival. Russia will already have big issues obtaining finance for anything, particularly aircraft, so any hope these airlines have will depend on some kind of ‘well, at least they tried’ perception by financiers,” he said.

Aircraft losing value

But Russia’s policy of essentially seizing foreign aircraft, along with the inability to properly maintain planes and uncertainty over maintenance records, mean there is little chance lessors will repossess any assets, said Joel Hussey, CEO of Tailwind Capital, an aviation investment services firm based in Redmond, Washington.

“Those planes will never come back, or reenter service. The longer they’re there and they have to put non-OEM parts on the airplanes, the further out of conformance they’ll get. That would really cloud efforts to battle the insurance companies for total loss coverage,” he said in an interview. “So I think a lot of the lessors would rather fight the battle and just try to collect from insurance companies than go through the process of trying to recertify a plane that’s been effectively out of their control for what could be years.”

Even if some aircraft were released to leasing companies there wouldn’t be a market for them, according to aircraft finance experts.

“It’s unlikely those airplanes will ever get into typical operation with what I’ll call ‘normal carriers’ that aren’t affiliated with Russia” because they wouldn’t be comfortable with their condition, Hussey explained. 

It’s conceivable, he acknowledged, that a few highly desirable aircraft with plenty of useful life might find a new home. Cargo airlines are hungry for more freighters after three years of trying to keep up with demand, making ABC’s 13 late-model 747-8s an interesting prospect. 

“You just have to do the math and figure out how long it’s been there and what it’s going to cost to go through the plane and get somebody to sign off on the registration,” Hussey said. 

AerCap, the world’s largest aircraft leasing company, in May sued Volga-Dnepr for $427 million for not returning eight Boeing aircraft, Law360 reported.

Volga-Dnepr allegedly told AerCap (NYSE: AER) that it was attempting to return the planes but that it needed approval from Russian customs authorities.

AerCap filed a claim for $3.5 billion for its fleet stranded in Russia and took an impairment charge.

Reuters reported two weeks ago that Russian airlines are harvesting parts from commercial jets to keep others airborne because they can no longer procure spares or maintenance from Europe and the U.S. 

Owner cuts pilots, then ties to company

Volga-Dnepr confirmed founder Alexey Isaikin last week announced his withdrawal as president and as a shareholder, and transferred control to existing management after the U.K. in June added him to a sanctions list for individuals allegedly supporting Russia’s aggression in Ukraine. The British government objected to Volga-Dnepr signing contracts with the city of Moscow to establish an air bridge to Asia and the Middle East for the resupply of critical goods using its five Ilyushin-76 freighters, according to RBC.

The apparent purpose for cutting ties is to spare the 32-year-old company from the threat of having bank accounts blocked and being forced to stop contacts with customers, financial institutions and attorneys in Europe. It also keeps alive the possibility of restoring the international fleet to service through a transfer of assets and personnel to Etihad Airways, as reported by The Loadstar, or through some other joint venture in countries within Russia’s orbit, according to Kommersant. 

The state-controlled newspaper said Isaikin is also giving up ownership in several companies, including airlines CargoLogic Germany and CargoLogicAir (U.K.). Isaikin has dual citizenship in Cyprus so relinquishing ties to Russian companies could allow him to participate in other business, The Loadstar suggested.

Volga-Dnepr earlier this month terminated more than 200 pilots for AirBridgeCargo and Atran, RBC reported. Some crews have been spared in case the Ministry of Transport agrees to the return of aircraft to foreign lessors. 

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.


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Eric Kulisch

Eric is the Supply Chain and Air Cargo Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals from the American Society of Business Publication Editors for government coverage and news analysis, and was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at [email protected]