The Kremlin announced today it would provide 100bn roubles (£919.3m) to help the Russian domestic aviation market as the sanctions imposed by the West continue to bite.
President Putin said in a televised address that domestic flights should become cheaper for Russian and that the share of Russian-made aircraft should increase.
Aviation was one of the first industries to be hit with sanctions following Moscow’s decision to invade Ukraine.
According to analytics company Acuity Knowledge Partners, the airspace ban imposed by several countries such as the US, UK and EU battered Russia’s airlines.
Aeroflot Group, S7 Airlines, Ural Airlines and UTair Group in fact held around 70 per cent of the country’s air market share and generated substantial revenue from Western routes.
In addition, ticket-booking giant Sabre cut ties with Moscow, preventing carriers from selling tickets even for domestic flights.
Russian planes could also see their airworthiness certificate removed as manufacturers banned the sale of parts.
To prevent the industry from going bust, earlier this month Putin signed a law allowing Russian carriers to take ownership of foreign-leased planes in the country, City A.M. reported.
“As for leasing payments, let me remind you that a significant part of them were supposed to be paid to companies from so-called unfriendly countries, and they violated their contractual obligations,” Putin said.
The move could create a £10bn “nightmare scenario” for lessors and insurers and lead to Russia being ousted by the global leasing market.
“In terms of future appetite in a post-war scenario for further business in Russia, I think all players in our sector will think long and hard about the risks of that jurisdiction and the appetite for going back in,” said Domhnal Slattery, chief executive of the world second-largest lessor Avolon.