In a much needed relief, Russia’s state-controlled Aeroflot Group has negotiated a payments-restructure plan on operational and financial lease contracts for 67 aircraft – representing 19 per cent of the group’s entire fleet – with one of its lessors, the government-owned VTB Leasing.
The settlement is the Russian airline industry’s first such arrangement, although it remains unclear whether similar deals may be extended to Aeroflot by other lease providers and, equally importantly, to other carriers. It is abundantly clear though that, without such restructurings or grace periods, the COVID-19-stricken industry is facing a financial collapse.
In the Aeroflot deal, VTB Leasing has agreed to provide a lease payment holiday for the four carriers within the Aeroflot group, which consists of flag carrier Aeroflot, low-cost Pobeda Airlines, medium-segment operator Rossiya Airlines and Russian far eastern regional carrier Aurora Airlines. The lessor has agreed to forego lease payments for 67 aircraft operated by the group’s carriers from April through to the end of September, it is reported. The subsequent pending debt would be fully paid off in July 2021, in the middle of next year’s high season, when it is hoped that international air travel will have completely recovered and the airline consortium will have generated enough cash revenues to cover the debts.
Industry experts estimate the total value of the lease payments concession to be approximately US$200 million. According to VTB Leasing, Aeroflot Group is leasing 50 Boeing 737-800s, four Boeing 747s, two Boeing 777s, nine Airbus A319s, as well as an А320 and an А330.
“We are the first in the market to have agreed to such a massive restructuring in the interests of our client, but considering the on-going situation I cannot exclude that other lease companies will follow our lead,” comments Dmitry Ivanter, VTB Leasing’s general director.
Aeroflot is currently in negotiations with its other lease providers. The state-owned airline group, which is listed as one of the country’s enterprises of strategic importance, is likely to reach agreements with state-owned lessors such as Sberbank Leasing and State Transport Leasing Corporation (GTLK), as well as Lithuania’s AviaAM Leasing.
Yesterday, financial analyst and ratings agency Fitch Ratings affirmed Aeroflot Group’s long-term issuer default rating at ‘BB’ as part of its review of the airline’s credit ratings, with the outlook changed from ‘stable’ to ‘negative’.
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