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‘Grand Theft Aero’: Russia’s $10bn plane grab signals losses for lessors

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‘Grand Theft Aero’: Russia’s bn plane grab signals losses for lessors

Three days after the invasion of Ukraine, a Boeing 737 — operated by Russia’s Pobeda however owned by Dublin-based Avolon — was impounded after touchdown in Istanbul.

The airplane’s seizure got here as European sanctions on Russia’s aviation sector prompted a world scramble amongst abroad leasing teams to recuperate greater than 500 plane, price an estimated $10bn, that had been caught within the nation.

Nevertheless it was among the many final to be repossessed, after the Kremlin moved to dam such efforts final week by signing a brand new legislation permitting overseas jets to be re-registered in Russia.

“The Russian authorities is enjoying a sport of what I name ‘Grand Theft Aero’,” mentioned Paul Jebely, international head of asset finance at legislation agency Withers.

Russia’s actions might power the world’s largest leasing corporations to jot down off billions of {dollars} price of belongings, elevating the prospect of prolonged battles with insurers over who ought to foot the invoice.

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Score companies have warned that the misplaced earnings from the leases has elevated dangers to bondholders in offers backed by the plane.

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Moscow has flouted decades-old worldwide treaties that offered safety to lessors working in additional dangerous jurisdictions and helped underpin a increase in worldwide journey.

“That is the worst-case situation, the place a rustic unilaterally takes management of an plane’s register,” mentioned Phil Seymour, president of aviation consultancy IBA. “It has by no means actually been contemplated. There might be repercussions by way of plane lease agreements.”

Some business executives have insisted that it was too early to jot down off the possibilities of these planes flying internationally once more. Others, nonetheless, imagine the possibilities are slim.

“From a planning perspective, we must always assume that these aeroplanes are gone for all intents and functions,” one govt mentioned.

Dublin: the world’s plane leasing capital

The disaster has despatched shockwaves by way of the aviation finance business of Eire, which is residence to 14 of the world’s prime 15 lessors, together with market chief AerCap.

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Irish lessors handle greater than €100bn in belongings, 22 per cent of world plane and greater than 40 per cent of these which can be leased, in keeping with IDA Eire, the nation’s funding promotion company.

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The main place dates again to Ryanair co-founder Tony Ryan, who propelled Eire right into a leasing powerhouse together with his firm Guinness Peat Aviation (GPA), which he began within the Seventies with an funding of simply £5,000.

A failed inventory market itemizing led to the corporate’s downfall and the acquisition of its belongings by GE Capital, but it surely left business consultants behind who had been able to compete within the area of interest leasing market.

GPA’s heritage just isn’t the one motive Eire grew to become a world hub for the business. Enticing tax and capital allowance charges have been a giant draw. The nation’s 12.5 per cent company tax price has been one of many lowest in Europe, though Eire has signed as much as the OECD reform to carry it to fifteen per cent.

The sector’s affect in Eire’s financial system has elevated through the years, as different industries akin to skilled providers have grown to assist it. However regardless of the scale of the business, corporations concerned in plane leasing paid simply €105.5mn in Irish tax in 2020, although further tax liabilities had been deferred.

Irish-owned plane leased to Russian airways are price greater than $4bn, in keeping with estimates by aviation consultancy from Cirium.

AerCap is probably the most uncovered, with 152 planes valued at €2.1bn earlier than the outbreak of the battle, in keeping with IBA knowledge. Japanese-controlled SMBC Aviation Capital had 34 valued at $1.3bn, whereas Avolon had 14 valued at €320mn when the warfare broke out. All three teams declined to remark.

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Whereas the disaster could show to be a major monetary hit to the businesses’ stability sheets, it isn’t an existential menace. The lessors’ exposures are within the single digits by way of the proportion of the whole internet guide worth of their fleets. On the finish of final yr, about 5 per cent of AerCap’s fleet by internet guide worth was on lease to Russian airways.

“It’s a giant headache, possibly a migraine, however not a deadly one,” mentioned Ross Harvey, leasing analyst at Irish stockbrokers Davy.

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One senior Irish official dominated out any bailout for the sector.

Essentially the most fast query for the lessors might be to make sure they’ve terminated all of their contracts in Russia by March 28, the deadline imposed below EU sanctions.

Within the very quick time period, most may have no less than some safety within the type of safety deposits, sometimes three months price of lease leases. IBA’s Seymour estimated {that a} provider would sometimes have paid about $1mn a month in lease rental for a five-year-old Boeing 777.

Wrangles with insurance coverage corporations have already begun. Some lessors are reviewing whether or not their plane hull insurance coverage protection will assist them recuperate potential losses, in keeping with one business guide.

One professional in aviation finance primarily based in Dublin mentioned he was conscious of some lessors already receiving cancellations of warfare threat insurance policies associated to the protection of plane. What’s accepted because the set off for a declare might be key.

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Steven Udvar-Hazy, chair of US firm Air Lease, mentioned the brand new Russian legislation confirmed that Moscow supposed to “confiscate” planes, including that this may assist lessors in claims with insurers.

“I feel it helps the insurance coverage query as a result of it demonstrates the intent to confiscate which is, I feel, a crucial side of our warfare threat insurance coverage,” he advised a JPMorgan convention on Wednesday.

Withers’ Jebely, who can also be chair of a world arbitration courtroom for aviation set to launch in Might, mentioned Russia had painted itself as a “goal for plane lessors and others to make use of funding treaty rights” to pursue “investor-state” arbitration claims in worldwide tribunals.

One senior leasing business govt tried to strike a extra sanguine tone, noting that: “[T]he warfare might be over at some stage. Russia has about 700 plane and the majority are western-manufactured. The fact is a deal should be executed . . . Folks should be sensible.”

Longer-term, there are considerations that the issue may come up elsewhere.

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“We spent many years attempting to open up the Russian market to western finance and expertise,” mentioned one business veteran.

“If this might occur in Russia, then might it occur in China? Russia is a market that the aviation business can afford to lose by way of a leasing and financing perspective. China just isn’t.”

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Pilots Battling L.A Fires Face Heat, Turbulence, and High-Pressure Risks

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Pilots Battling L.A Fires Face Heat, Turbulence, and High-Pressure Risks

Piloting a firefighting aircraft is sweaty, tiring work, Mr. Mattiacci said. The conditions that increase fire risk — hot days, high wind, often mountainous areas — also make for turbulent flying conditions. The aircraft fly at low speeds, increasing the turbulence, he added.

“You get pulled up out of your seat and your head bangs against the roof,” he said. In the hot conditions, pilots must keep just hydrated enough not to have to use the bathroom, on flights that can last up to five hours, he said.

There’s also a risk of flying into the thick, blinding smoke that wildfires send up, he said. The aircraft flying low to the ground — sometimes as low as the height of treetops — meaning there’s a significant risk of flying into power lines, radio towers and buildings.

“When we lose all visual reference, it gets a bit scary,” he said.

The stronger the winds, the harder it is to get close to the fire, as winds push the smoke around and obstruct visibility.

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The large air tankers in Australia drop retardant from an altitude of about 100 to 150 feet, he said, while smaller ones can fly even lower. The largest tankers — which can carry up to 9,400 gallons of fire retardant at a time, and have been used to fight the Southern California fires — drop from about 250 feet, according to the National Interagency Fire Center.

Mr. Mattiacci said that he often feels pressure as he looks down from the cockpit at homes and structures under threat, knowing his job is to help save them. And if the fire retardant doesn’t land where it’s needed, he added, during a fast-moving fire, “there might not be another chance.”

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German economy shrinks for second consecutive year

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German economy shrinks for second consecutive year

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Germany’s economy shrank for a second straight year in 2024, underlining the severity of the downturn facing Europe’s manufacturing powerhouse.

The Federal Statistics Office said on Wednesday that Europe’s largest economy contracted by 0.2 per cent last year, after shrinking by 0.3 per cent in 2023. Economists had expected a decline of 0.2 per cent.

“Germany is experiencing the longest stagnation of its postwar history by far,” said Timo Wollmershäuser, economist at Ifo, a Munich-based economic think-tank, adding that the country was also underperforming significantly in an international comparison.

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Confirmation that Germany is suffering one of the most protracted economic crises in decades comes six weeks ahead of a crucial snap election.

Campaigning has been dominated by the spectre of deindustrialisation, crumbling infrastructure and whether or not the country should abandon a debt brake that constrains public spending.

Friedrich Merz, head of the centre-right Christian Democratic Union who is likely to be Germany’s next chancellor, is campaigning on a reform agenda, promising to cut red tape and taxes and dial back welfare benefits for people who are not working.

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While private sector output contracted, government consumption rose sharply by 2.6 per cent compared with 2023.

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Ruth Brand, president of the Federal Statistics Office, blamed “cyclical and structural pressures” for the poor performance, pointing to “increasing competition for the German export industry, high energy costs, an interest rate level that remains high and an uncertain economic outlook.”

In the three months to December, output fell by 0.1 per cent compared with the third quarter.

Robin Winkler, chief economist for Germany at Deutsche Bank, said the contraction in the fourth quarter came as a “surprise” and was “concerning”.

“If this is confirmed, the economy would have lost further momentum by the end of the year,” he said, suggesting this was probably driven by “political uncertainty in Berlin and Washington”.

The Bundesbank said last month that stagnation was set to continue this year, predicting growth of just 0.1 per cent and warning that a trade war with the US would trigger another year of economic contraction.

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US president-elect Donald Trump has pledged to impose blanket tariffs of up to 20 per cent on all US imports.

Germany is struggling with a crisis in its automotive industry fuelled by Chinese competition and an expensive transition to electric cars, alongside high energy costs and tepid consumer demand.

Output in manufacturing contracted by 3 per cent, the statistics office said on Wednesday, while corporate investment fell by 2.8 per cent.

Germany has in effect seen no meaningful economic growth since the start of the pandemic, with industrial production hovering more than 10 per cent below its peak while unemployment has started to rise again after it fell to record lows.

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Trump’s attorney general pick to face scrutiny on first day of Senate hearing

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Trump’s attorney general pick to face scrutiny on first day of Senate hearing

Pam Bondi, Donald Trump’s nominee for attorney general, is expected to face scrutiny on Wednesday during the first day of her confirmation hearing about her ability to resist the White House from exerting political pressure on the justice department.

The hearing, before the Senate judiciary committee, comes at a crunch time for the department, which has faced unrelenting criticism from Trump after its prosecutors charged him in two federal criminal cases and is about to see Trump’s personal lawyers in those cases take over key leadership positions.

Bondi, the first female Florida attorney general and onetime lobbyist for Qatar, was not on the legal team defending Trump in those federal criminal cases. But she has been a longtime presence in his orbit, including when she worked to defend Trump at his first impeachment trial.

She also supported Trump’s fabricated claims of election fraud in 2020, which helped her become Trump’s nominee for attorney general almost immediately after Matt Gaetz, the initial pick, withdrew as he found himself dogged by a series of sexual misconduct allegations.

That loyalty to Trump has raised hackles at the justice department, which prides itself on its independence from White House pressure and recalls with a deep fear how Trump in his first term ousted top officials when they stopped acquiescing to his demands.

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Trump replaced his first attorney general, Jeff Sessions, after he recused himself from the investigation into the Trump campaign’s contacts with Russia and, later, soured on his last attorney general, Bill Barr, after he refused to endorse Trump’s false 2020 election claims.

Bondi is also expected to be questioned about her prosecutorial record as the Florida attorney general and possible conflicts of interest arising from her most recent work for the major corporate lobbying firm Ballard Partners.

During her tenure as Florida attorney general, in 2013, Bondi’s office received nearly two dozen complaints about Trump University and her aides have said she once considered joining a multi-state lawsuit brought on behalf of students who claimed they had been cheated.

As she was weighing the lawsuit, Bondi’s political action committee received a $25,000 contribution from a non-profit funded by Trump. While Trump and Bondi both deny a quid pro quo, Bondi never joined the lawsuit and Trump had to pay a $2,500 fine for violating tax laws to make the donation.

As the chair of Ballard’s corporate regulatory compliance practice, Bondi lobbied for major companies that have battled the justice department she will be tasked with leading, including in various antitrust and fraud lawsuits.

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Bondi was a county prosecutor in Florida before successfully running for Florida attorney general in 2010 in part due to regular appearances on Fox News.

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