Russia splashes $12 billion to keep the aviation sector in the air. According to a Reuters study, Russia has given its aviation sector more than twelve billion dollars in state subsidies and loans to keep it operating after Western sanctions imposed in response to Moscow’s invasion of Ukraine cut off supplies of necessary parts and maintenance services.

Russia, dependent on aircraft manufactured in other countries, is challenged to build its aviation sector on its own using components acquired from within the country while purchasing aircraft from lessors located in other countries to prevent more of its fleet from being confiscated.

Since March 2022, Western aircraft manufacturers Airbus (AIR.PA) and Boeing (BA.N) have discontinued their provision of services and spare parts, as well as their provision of regular maintenance assistance for Russian airlines, including Aeroflot (AFLT.MM), which is the country’s flag carrier.

According to calculations made by Reuters, based on information obtained from the Ministry of Finance and the Accounts Chamber, which is responsible for overseeing the execution of the budget, Russia has spent 1.09 trillion roubles, which is equivalent to $12.07 billion, to support the civil aviation industry. This involves the manufacturing of aircraft as well as providing financial assistance to airlines.

This investment is almost twice as much as the 547 billion roubles paid out in 2020–21 when the COVID-19 epidemic caused a significant decline in air travel. This spending exemplifies the magnitude of the Kremlin’s drive to grab control of an essential business.

According to statements made by President Vladimir Putin the previous week, “Our fleet of aircraft is very overloaded… with planes made in other countries.” By 2030, we’ll have produced more than a thousand airplanes. The work is required.”

Ch-aviation, a Swiss aviation information service, reports that Russian airlines now operate 991 aircraft, of which 405 were manufactured in Russia.

However, only 133 of these aircraft are Superjets, which the state-owned United Aircraft Corporation (UNAC.MM) produces. Several other aircraft manufactured in Russia, such as the Tupolev, Yakovlev, and Ilyushin, are only occasionally utilized for commercial endeavors.

The Ministry of Industry and Trade declared that they would continue to support the manufacture of airplanes, a significant industry, in response to Reuters’ findings.

“The main emphasis is on supporting sales, expanding production capacity, and creating a post-sales service system,” according to the government.

Both to carry people and products throughout Russia’s large area and to bolster Moscow’s narrative that sanctions have had only a minor impact, the need for a dependable aviation sector is particularly vital for Russia.

Given that voters are scheduled to march to the polls in three months, the failure of an airline may put Putin, who is standing for president once more, under pressure in terms of his character and electoral credentials.

There is no question about Russia’s technological capability because it has been a significant aviation power ever since the Soviet era.

Some Western aviation specialists believe that the investments will, at most, maintain the fleet in operation. Still, they are skeptical that its aircraft will return to Western markets shortly, even if the war in Ukraine is resolved. In order to rebuild a fleet with a clean and traceable safety record and certified parts, a significant amount of money and bureaucracy is involved. This is the reason for it.

FUNDS FOR RAINY DAYS

According to the statistics, Russia has used its reserve money to compensate airlines for losses caused by a high increase in the cost of jet fuel. In 2022, the country spent 110 billion roubles to compensate airlines for these losses.

Moscow has received about 400 billion roubles for aviation expenditures so far in 2023, which indicates that the National Wealth Fund (NWF) has played a more significant role in providing financing this year.

It is estimated that the level of spending in 2022–23 will be similar to slightly less than one percent of the gross domestic product (GDP) for 2023. During the year 2022–23, Russia allocated an extra 2.3 trillion roubles to develop transportation systems unrelated to aviation.

As a result of airlines discovering new means to import replacement parts through a grey import program that the government had implemented, domestic passenger traffic in the country started to recover around the end of 2022.

Russian airlines have been able to keep their fleet of Western planes in the air because they have imported replacement parts from other nations without the manufacturers’ agreement, primarily Airbus and Boeing.

Although the number of passengers is increasing, it is still lower than before COVID. Meanwhile, concerns regarding airplane safety have been raised due to the loss of foreign components and maintenance skills.

Last year, sources inside the aviation industry informed Reuters that several carriers had disassembled airplanes to salvage components.

To minimize the possibility of its aircraft being confiscated while they were in transit outside of Russia, Moscow has hastily localized the registration of its fleet and has used cash from the NWF to purchase aircraft from foreign lessors.

Vitaly Savelyev, the Minister of Transport, stated that in 2023 300 billion roubles might be utilized to purchase aircraft from foreign lessors.

According to the statistics, 190 billion roubles have been spent up to this point, with the state-owned insurance firm NSK holding planes on behalf of airlines. Reuters was able to get a copy of a government document that outlined strategic expenditure intentions for aviation. The document said that Russia would be required to spend a minimum of 711 billion roubles to “achieve technological independence from foreign suppliers.” Responses to requests for comment were not received from Aeroflot, the Ministry of Transport, or the Ministry of Finance.