If you’ve been watching Flight Radar 24, as I have for the last three weeks, you’ll notice that most of the Russian airliners are registered to Bermuda or Ireland. This is a common tax avoidance maneuver that is not limited to the Russian fleet. The following gets into policy wonkiness, but here is what happens if the recent news about Russia nationalizing its fleet were to happen.
For leased aircraft operated in Russia, most of those aircraft have been registered in Bermuda or Ireland. Bermuda and Russia (as with most countries) have a delegation agreement that moves the safety oversight responsibility from the state of registration (Bermuda) to the state of the operator (Russia). Delegating the safety oversight is a right that is granted by the Chicago Convention on International Aviation and effectuated via an ICAO Art. 83 bis.
Nevertheless, the state of registration (Bermuda) always retains the certification of airworthiness responsibilities and must be satisfied that Russia is in compliance with the Art. 83 bis to renew the subject aircraft’s airworthiness certificate.
Some recent news suggests that Russia intends to or has terminated these delegations. That is its sovereign right. Russia is only obliged to be responsible for safety oversight of aircraft registered elsewhere to the extent that it wishes to do so, i.e. Russia no longer wants to certify and maintain the airworthiness of its Bermuda-registered aircraft.
The more troubling is the news that Russia intends to take over the ownership of the aircraft. This it cannot do. It cannot transfer registration of the aircraft (and consequently responsibility for oversight of certification of airworthiness) from the state of registration to itself without the state of registration’s agreement because the removal or non-removal of an aircraft from its register is the sovereign right of the state of registration.
This means that Bermuda cannot satisfy itself as to the airworthiness of the aircraft involved, and likely will be unable to renew the certificates of airworthiness. If that happens, then the aircraft cannot be flown internationally – states allowing them into their airspace would be in likely breach of their own Chicago Convention obligations to other state parties.
It is unclear yet how all this will play out. Russia is already in breach of its Cape Town Convention obligations but if it breaches its Chicago Convention obligations too. We could see a world where Russia is unable to operate flights outside of its airspace.
As of last week, there were 523 aircraft leased to Russian carriers by companies outside the country. All told, the planes are worth as much as $12 billion. The big question on the table is what will the insurance companies do if Russia nationalizes the fleets. Is it a constructive loss or will claims be excluded because of wartime policy exclusions?