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Tuesday, February 27, 2024

Ilyushin Finance Is Taking Airbus To Court In Moscow Over A220 Deposits

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  • Russian leasing firm Ilyushin Finance is suing Airbus over undelivered A220 aircraft, seeking over $26 million in compensation.
  • The Russia-Ukraine conflict led to Western companies canceling contracts with Russian firms.
  • Similar cases have arisen, with other Russian lessors and airlines filing claims against Airbus over down payments for undelivered aircraft.

Russian leasing firm Ilyushin Finance is suing Airbus over down payments it made for over a dozen A220s that were not delivered. The lessor at one point agreed to a deal for 42 A220s worth over $3.4 billion, but the Russia-Ukraine conflict led to Western companies ripping up their contracts with Russian firms.

Russian lessor takes Airbus to court

As first reported by Russian news outlet Interfax, Ilyushin Finance Corp (IFC) has filed a claim in the Moscow Arbitration Court over undelivered Airbus A220 aircraft related to a deal struck back in 2013. The company is seeking more than 2.3 billion rubles (around $26 million), which it says it paid to Airbus Canada – the joint venture between Airbus and Bombardier – as an advance for 14 undelivered A220s.

bombardier cs300

After Russian companies were hit with sanctions following its invasion of Ukraine in early 2022, Airbus was no longer able to honor its contract with the Russian lessor. Like other airlines and lessors have done, IFC is seeking to get its money back.

A complicated situation

Over a decade ago, Ilyushin Finance – a subsidiary of state-owned defense company Rostec – signed an agreement with Bombardier for 32 CS300 aircraft and a further ten on option. The Russian lessor would, in fact, become one of the earliest customers of the type, later to become the A220-300 when Airbus took over the program. IFC later reduced its order to 20 A220-300s and appears to have taken delivery of just six of these aircraft.

Since being cut off from the Western supply and maintenance chain, Russian airlines have imported over $1 billion in parts for Airbus and Boeing aircraft to keep their fleets operational. The Russian Foreign Ministry has also lodged a formal complaint to ICAO over the sanctions, claiming they seriously threaten aviation safety.

Similar cases

Last year, Aviacapital Services – also a leasing subsidiary of Rostec – launched its claim against Airbus to the Moscow Arbitration Court regarding down payments for 17 Airbus A350 aircraft.

An Airbus A350-900 engine with its cowlings off.

Photo: Airbus

As of this summer, the Russian lessor continues to pursue its case, seeking another $5 million in restitution from the European planemaker. Airbus reached a large settlement of around $200 million with Russian flag carrier Aeroflot over four undelivered A350s.

Additionally, some deals have been reached between Western leasing firms and Russian customers regarding compensation. Last month, lessor SMBC Aviation Capital agreed to a $710 million settlement with Russian state-owned insurer NSK over 16 aircraft and additional engines delivered to Aeroflot that have not been returned. This followed a US court order for Russian cargo airline AirBridgeCargo to pay lessor BOC Aviation over $406 million after defaulting on its leasing contracts.

What are your thoughts on this legal complication? Let us know in the comments.

Source: Interfax

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