CMB Financial Leasing provides $323 million leasing facility to State Transport Leasing Company for acquisition of seven Airbus A320-214 aircraft

In 2016, CMB Financial Leasing Co. (CMBFL) entered into a $323 million leasing facility agreement with PJSC State Transport Leasing Company (STLC) (GTLK) -- a Russian state-owned leasing company -- for the acquisition of seven new Airbus A320-214 aircraft. Once received, these planes were leased out to Russian airliner Aeroflot. As a consequence of the February 24, 2022 invasion of Ukraine, Western government issued a number of sanctions on the Russian aviation and airline industry. As a result, a number of leasing companies cancelled their lease agreements with Russian airliners. Despite the cancellations, Russia acted to seize the leased aircraft to maintain a fleet of air-worthy aircraft and prevent foreign currency outflows (since leasing contracts are denominated in United States dollars) in violation of the Cape Town Convention, an international treaty that stipulates the return of leased aircraft to their owners when contracts are cancelled. On March 14, 2022, after the beginning of the 2022 Russian invasion of Ukraine, Russia passed a law to allow foreign-registered aircraft owned by non-Russian lessors to be placed on the Russian registry, making it likely that leasing companies would be unable to recover their assets. Seven Airbus A320-214 aircraft owned by CMBFL — presumably the seven leased under the 2016 agreement to GTLK — were re-registered in Russia, making it likely that CMBFL would fail to recover its aircraft.

Additional details

1. AidData treats this lease as a loan. A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. Under a capital lease (a financial arrangement where the lessee/borrower uses an asset and pays regular installments plus interest to the lender/lessor), rental payments are usually classified as interest and obligation payments, similarly to a mortgage (with the interest calculated each rental period on the outstanding obligation balance). 2. CMBFL was established in April 2008 as a wholly-owned subsidiary of China Merchants Bank.

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