Russian government challenges ‘grace periods’ for aircraft imports

aircraft imports One of the support measures is providing subsidies to help Russian aircraft manufacturers during the initial stages of setting up serial production and bringing new aircraft models to the market (Irkut)

Russian president Vladimir Putin has instructed his government to evaluate the expediency of extending the effective grace period for the import of western-built passenger jet aircraft – and deliver its deliberations by April 2019. The president has also proposed the possibility of a trade-in, part exchange scheme for purchases of Russian-built aircraft.

The temporary grace period, during which certain classes of commercial aircraft are exempted from import duties, is in effect until December 31, 2019. It provides tax relief on imported passenger jet aircraft, including the most popular Airbus A320 and Boeing 737 families, which are currently temporarily imported to the territory of the Eurasian Economic Union (EAEU), a political and economic union of states located in central and northern Eurasia including Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. The ruling specifically excludes those 50-100 seat aircraft that compete directly with the Russian-made Superjet 100.

The mechanisms for state financing of trade-in deals, whereby purchasers of Russian-made aircraft would be able to submit their used aircraft as partial payment, should be in place by June 1, 2019.

The president has also ordered the government to come up with a list of additional support measures for the Russian aerospace industry. One of these is the allocation of state funds in 2019, 2020 and 2021 to top up the registered capital of Russian state-owned leasing companies that have Russian aircraft in their portfolios.

Another plausible measure is a variety of options for providing subsidies to help Russian aircraft manufacturers during the initial stages of setting up serial production and bringing new aircraft models to the market. The manufacturers may also be given help in the restructuring of their outstanding debts with Russian financial institutions, situations that have resulted from credits for aircraft design and production.

The government is hopeful that once the import duty grace period is over and the trade-in options scheme is in place, Russian airlines will then be more inclined to purchase locally-produced aircraft. However, the grace period has already been extended once – until the end of 2019 – in advance of the expected entry into service of the MC-21 advanced narrow-body scheduled for 2020. As for the trade-in scheme, this idea is not new. It was an option investigated last year by the nation’s ministries of transport, finance and trade.

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