By Jamie Freed

(Reuters) – As Monday approaches, the deadline to return more than 400 leased Russian aircraft worth nearly $10 billion to Russian airlines is fast approaching. Foreign lessors are losing faith in their chances of getting their planes back.

According to IBA consultancy, most of these planes still fly Russian domestic routes. However, Bermuda and Ireland, where the majority are registered, have suspended their airworthiness certificates, which typically means that they need to be grounded.

Moscow’s invasion and subsequent tit-for tat bans on airspace meant that aviation was a first business casualty. Lessors now face huge insurance costs and writedowns as they try to terminate plane leases that were not subject to European Union sanctions.

Volodymyr Biolotkach, associate professor of aviation management at the Singapore Institute of Technology said that “I fear we will witness the greatest kind of theft of aircrafts in the history of commercial civilian aviation.”

International rules prohibit dual registration. However, Russia, according to Wednesday’s Russian government, has moved over half the aircraft from foreign owners to its registry.

Interfax news agency reported on Tuesday that Russian airlines had leased 78 aircrafts. The planes were seized in foreign countries and they would not return to Russia.

Avolon, the major aircraft leasing company in Russia, has ended all Russian airline leases. A source close to the situation said that four of 14 aircraft leased with Russian airlines had been repossessed.

Moscow didn’t specify whether the planes in question were among the 78.

Analysts say that although the planes were insured, there will be years of litigation between insurers and lessors to determine if any payouts should be made.

Even if planes were repossessed they would not be worth their recoverable value because aircraft must maintain accurate records in order to prove that the components are genuine and traceable. This is another aspect of the sanctions imposed by the West on Russia.

The planes’ total worth is enormous, but the effect on leasing companies may be manageable, even though writedowns will need to occur. Russian aircraft are less than 10% of all leasing company portfolios.

Brad Dailey of Alton Aviation Consultancy, who worked previously at AerCap Holdings in Ireland, stated that the “it’s going not to cripple them businesses.”

He stated that “what it does in my opinion is it changes Russia’s future market potential.”

COVERAGE

Several private airlines indicated that they are willing to return planes to lessors. However, it remains to be seen if the Russian government would approve such transactions.

Russia’s UTair Airlines stated on March 14, that all nine of its leased Boeing 737 NGs (NYSE:) would be withdrawn from service. The move was made in response to the owner requirements.

These planes were not made available for flight since the announcement, but they remain in Russia according to FlightRadar24 data.

Sometimes, lessees may have security deposits that can be forfeited and which could cover some losses but only a small fraction of the plane’s actual value.

Alton’s Dailey explained that the security deposit required for narrowbody aircraft worth $20m could amount to $450,000. That is roughly three months rent.

KBRA Ratings Agency said that the security deposit ranges from 1 to 4 months depending on credit assessments of airlines leasing planes.

Aeroflot was considered the Russian national carrier before the invasion. Industry sources say that this assessment is no longer valid after Moscow registered its planes here.

One person who was exposed to Aeroflot from a Chinese Lesor said that no security deposit had been made to the airline, and suggested that insurance payouts were the only way to recover losses.

According to the source, the lessor will begin to file insurance claims once the deadline of March 28 has expired. The person was not authorized to discuss the matter publicly.

Sources at another Chinese lessor exposed to Aeroflot stated that it had instead taken a security deposits and held U.S. Dollar letters of credit from Russian bank branches. But the source claimed they were now worthless due to Russian currency control imposed as a result of financial sanctions.

Dailey stated that lessors at lower-tier airlines are more likely have higher security deposits.