(Bloomberg) — Russian airlines face the risk of jetliner groundings as sanctions imposed over the Ukraine invasion threaten their ability to fund rented planes and leasing firms look at enforcing default measures.
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More than half of the active commercial aircraft based in Russia are leased, mostly from companies based abroad, according to analysis from IBA Group, which advises airlines, planemakers, banks and lessors. That tally includes scores of aircraft at flag-carrier Aeroflot.
Tests are likely to come over the next few days as carriers go to make payments for the jets they hire. With Russian financial institutions sanctioned and the U.S., European Union, U.K. and Japan taking steps to exclude some banks from the SWIFT messaging system used for transactions, airlines may struggle to submit dues for March, IBA President Phil Seymour said Sunday.
“There’s a real risk of default as soon as the coming week,” Seymour said in a phone interview. “Leasing firms are aware that the tap will be tightened even further as sanctions are rolled out and there are decisions to be made.”
Under EU sanctions announced Sunday, leasing firms will be required to terminate all contracts with Russian airlines over the next 30 days, said a senior leasing executive with aircraft in the country. This requirement is independent of the SWIFT bans, the person said, based on their understanding of the measures.
Read more: European Union Bans Russian Flights in Bid to Rein In Putin
Repossessions may already be taking place. A European lessor is recalling three Boeing Co. 737 aircraft from Aeroflot’s low-cost Pobeda unit, Interfax reported, citing an unidentified source at the Russian flag-carrier.
Russian media outlet RBC reported separately that an Irish leasing firm seized a Pobeda 737 at Istanbul Havalimani airport, citing an unidentified Russian airline source.
Representatives from the Russian carriers didn’t immediately respond to requests for comment from Bloomberg outside of business hours.
AerCap Holdings NV is most exposed to the crisis, with 152 aircraft across Russia and Ukraine that have a portfolio market value approaching $2.5 billion, according to IBA figures.
Among foreign lessors, SMBC Aviation Capital, the Dublin-based leasing arm of Japan’s Sumitomo Mitsui Financial Group, ranks next by value, with Singapore-based BOC Aviation and Air Lease Corp. of Los Angeles holding smaller positions.
Russian state leasing firm GTLK ranks second overall with a blend of commercial jets and helicopters including the Russian-built Sukhoi Superjet 100 regional airliner, which would likely be unaffected, Seymour said.
AerCap has 96 planes on lease to Aeroflot and 17 to low-cost subsidiary Pobeda, according to aviation consulting firm Avitas, corresponding to about 5% of the Dublin-based firm’s total fleet.
Airspace Restrictions
While Russian airlines have been hit by airspace closures that largely prevent them from operating westbound, about 65% of the market comprises domestic flights mostly unaffected by the measures. That means demand for those aircraft will remain strong, IBA says, especially after a strong travel rebound from Covid-19.
Even if Russian airlines manage to hand over fees, lessors will be examining grounds for seizing jets should they view themselves as compromised by the developing situation or deem aircraft to be at risk now or in the future.
Plane-rental contracts generally contain a “material adverse change” clause and leasing firms could argue that airspace closures and sanctions imposed on Russian carriers amount to just such a breach. That would allow them to declare default and seize back their aircraft, Seymour said.
Possible Seizures
Payments are also almost always made in dollars, so steps to keep Russia from transacting in the currency would also comprise leases, he said.
Efforts to take back aircraft could be made easier by the fact that a large number of Russian jets are registered in Bermuda, something that lessors can insist on when there are concerns about their ability to recover them.
Airlines could ask lessors to collect aircraft from Moscow rather than delivering them to Dubai, say, making recovering tougher in the current circumstances. Even so, Seymour said Russian airlines would likely cooperate to safeguard access to planes in future years.
(Updates with leasing recal plans, reports on Pobeda planes from fifth paragraph)
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
