As exclusively reported in CargoForwarder Global’s latest issue last Wednesday, Russian passenger and cargo carrier UTair is in severe financial trouble. Immediately after the article had been published, a number of forwarding agents and handling firms contacted us complaining about unpaid bills amounting to hundreds of thousands of euros. To have the debts get paid, some creditors have approached their regulators, asking them to intervene.
The question is: Will UTair planes landing at European airports be chained as ransom for collecting money by state authorities for funds the Russian airline owes to local clients? Very unlikely, despite the fact that many of their invoices for time-definite delivery of spare parts and aircraft components have not been paid since months.
According to an official who doesn’t want to read his name here, chaining any Russian aircraft on the grounds of debts will cause political consequences leading presumably to an unwanted domino effect. “Creditors should better consult a lawyer to pursue their claims instead of asking the regulator to act as a collection office,” he recommended.
What is behind all of this?
UTair’s long-standing financial woes got rapidly worse with the Russians annexing the Crimea and their ongoing military support of Ukraine’s separatists. Sanctions and counter-sanctions, the closure of Ukrainian air space for all Russian carriers, the sharp fall of the ruble against the euro and dollar, plus a near collapse of the Russian travel market led to enormous operational losses.
Prior to the Crimea occupation, every single invoice sent to UTair by forwarding or handling agents was paid without much delay, clients confirmed. But when western countries started imposing sanctions against the Kremlin, UTair’s money transfers were suddenly reduced to a trickle. “Since last May they haven’t paid any of our bills and owe us meanwhile more than €420,000 euros,” states a German forwarding agent in a letter they sent to the LBA, Germany‘s national regulator. The note continues: “It would be interesting to know what our government intends doing. Does Berlin consider paying any compensation to us for the money we lost or do medium-sized enterprises like ours have to shoulder these financial losses themselves caused by political tensions and sanctions we have not caused?”
No discounts, no pay
Actually, the addressee of this complaint and those voiced by other agents is not directly UTair, but their European subagents Avia Consulting and Rusavia. Both enterprises act as a third party service provider for UTair by supplying UTair together with some other Russian carriers with western aircraft parts and components. “They continuously have sent our bills back to us, claiming that the amounts charged for delivering aircraft components are far too excessive. Unless we reduce our receivables substantially they refuse to pay,” stated a Frankfurt-based forwarder.
As a reaction to unpaid invoices he has meanwhile terminated supplying spare parts and components to UTair and cut all business relations with Avia Consulting and Rusavia.
Quality has its price
Asked about current price structures in the aero parts biz with Russian carriers a specialist from Hamburg said that there has been a fierce competition lately between forwarding agents. Consequently the rates went south step by step. But when presented the 20 and more percent Avia Consulting and Rusavia asked potential suppliers to grant as discount for being rewarded with UTair’s spare part biz the agent reacted with outrage. “As a matter of fact, managing spare part supplies for airlines requires a wealth of expertise and constant availability of personnel because this job knows no time limits since it is run around the clock 365 days a year.” “Quality has its price,” he added, “that’s why we sharply reduced our commitment for UTair.”
He is apparently not the only one.