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Russia sanctions pierce luxury jet world’s ultra-private bubble

FILE PHOTO: The interior of a business jet is seen at the National Business Aviation Association (NBAA) exhibit in Las Vegas
FILE PHOTO: The interior of a business jet is seen at the National Business Aviation Association (NBAA) exhibition in Las Vegas, Nevada, the United States, October 21, 2019. REUTERS/David Becker

March 17, 2022

By Allison Lampert

(Reuters) – The gleaming latest-model European jet for sale was a rarity in the hot used business jet market.

It was only after aviation lawyer Amanda Applegate’s client did some additional research that they discovered that although the plane was not registered in Russia, it was in fact Russian-owned.

It was a deal-breaker for that buyer, said Applegate, a partner at U.S.-based Soar Aviation Law, as the West imposes sweeping sanctions in the wake of Russia’s invasion of neighboring Ukraine.

The private jet world is on high alert to avoid doing business with Russia, while a Twitter account run by a Florida teenager, @RUOligarchJets, has drawn public attention to the fugitive luxury fleets of the ultra-rich.

“When I look at the compliance, it’s like a taco wrapped in a burrito wrapped in a chalupa,” said an executive at a business jet manufacturer, speaking on condition of anonymity.

According to the European data research and consulting company WINGX, only about 100 business jets are entered in the Russia register. But around 400 company planes flew out of the country frequently over the past year, raising questions about the true extent of Russian control over the fleet.

“We believe a good portion of the 400 is owned by Russia-based individuals or companies,” said WINGX CEO Richard Koe.

Concerned aircraft manufacturers are handing out questionnaires and conducting additional checks to ensure parts shipped to repair centers outside Russia are not inadvertently supporting jets hit by sanctions, the manufacturing manager said.

This is anything but easy in the ultra-private world of corporate aviation.

Most Russian-owned business jets are registered outside the country, and ownership is camouflaged behind layers of shell companies and trusts.

According to Jefferies analysts, about 5% of European business jets are registered in Russia. But those actually owned by Russians could be as much as three times that, analysts say.

VERIFICATION OF EXPORTS

One of the world’s largest maintenance companies, Germany’s Lufthansa Technik, has set up a task force and created an export authorization process to avoid violating sanctions banning technical support and parts from being shipped to Russia.

“This means more complexity for our global supply chain processes,” said a spokesman.

Aircraft manufacturers need to be sure that a part delivered to a maintenance center will not later end up on an aircraft owned by a sanctioned person or organization.

This is not a problem when ordering parts for a specific aircraft identified by its serial number. But in some cases, the order could come from a maintenance center without naming a specific jet.

“My expectation is that the (manufacturers) and other suppliers will start asking more questions so they can screen end users for parts exports to certain countries,” said aviation attorney Jonathan Epstein, a partner at Holland & Knight, based in the US .

Canada’s Bombardier and General Dynamics Corp’s Gulfstream are among the top suppliers of Russian-owned jets, according to analysts and brokers.

Bombardier, which has severed ties with Russia, said it is strengthening the company’s operations.

It has suspended some customers’ accounts, although they are not directly affected by sanctions, and will not provide parts or technical support to anyone anywhere if they use the plane in Russia, the Canadian planemaker said in a customer bulletin obtained by Reuters.

Gulfstream did not respond to a request for comment.

It’s also a headache for buyers. Like Applegate’s customer, many avoid all Russian-owned planes, not just those owned by sanctioned owners.

William Quinn, president of US consultancy Aviation Management Systems, said he expected more European business jet deals to come under scrutiny.

He recently represented a lender in a deal for a one-year-old Pilatus jet registered in Guernsey. That deal, too, fell through when the customer discovered it was Russian-owned, Quinn said.

A broker has advised clients to “run, not walk” doing business with Russians, fearing more names would end up on blacklists or that deals would worry lenders. The Kremlin has warned of anti-Russian sentiment in the West.

“There are real concerns that the ‘list’ is not yet refined and will continue to grow,” the broker said on condition of anonymity. “Much greater risk of getting stuck than just going in a different direction.”

(Reporting by Allison Lampert in Montreal; Additional reporting by Jamie Freed in Sydney; Editing by Tim Hepher and Jan Harvey)

https://www.oann.com/russia-sanctions-pierce-luxury-jet-worlds-ultra-private-bubble/?utm_source=rss&utm_medium=rss&utm_campaign=russia-sanctions-pierce-luxury-jet-worlds-ultra-private-bubble Russia sanctions pierce luxury jet world’s ultra-private bubble

DUSTIN JONES

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