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Repo wars: Russian airline's 737 grounded in Alaska over unpaid lease

Dermot Cole
A Yakutia Airlines 737, similar to the one pictured above, remains grounded at Ted Stevens Anchorage International Airport in a fight over $2.6 million in unpaid bills. The repo effort took shape in secret out of fears that the airline would cancel the last flight of the season to Alaska from the Russian Far East. Yakutia Airlines photo

As Yakutia Airlines prepared to make its last flight of the season from Russia to Alaska late last month, the world’s largest aircraft-leasing company quietly launched a court fight to repo the Boeing 737 at Ted Stevens International Airport.

The jet has been grounded outside the North Terminal for the past couple of weeks since representatives of the leasing company greeted the Yakutia Air captain at the gate with legal papers. The company says Yakutia owes $2.6 million in back lease payments on two leased 737s, worth a total of $54 million, and this was the last flight the airline had on its schedule to the U.S. The company provided seasonal service between Russia and Anchorage in 2012 and 2013, with roundtrip tickets starting at a little more than $1,000.

On Sept. 23, the International Lease Finance Corp. (ILFC), a wholly-owned subsidiary of AIG, asked in federal court that the Anchorage records be sealed for 72 hours, arguing that if Yakutia learned about the repo plan in advance, the airline would scrap the final flight or use a different plane. David Beker, a vice president of the aircraft leasing company, said in his experience a company "in a difficult financial situation will evade demands to ground the aircraft by changing routes or canceling flights.”

District Court Judge Sharon Gleason agreed to keep the documents secret from Sept. 24-27, but declined to issue a temporary restraining order preventing Yakutia from flying out of Anchorage Sept. 26.

She said that the company had failed to show it could not use the normal collection procedures to collect the debt. That appears to be the route the leasing company has pursued, though airport officials could provide few details, and an Anchorage attorney for the leasing company declined comment. Airport managers said they received word that court papers were served on the airplane crew and that the jet owners are paying a daily parking fee.

Eight passengers routed through Seattle

Some eight passengers booked on the return flight to Russia made connections through Seattle when the jet was parked.

Gleason said it appeared that the leasing company had the right, under its leases, to tell Yakutia to bring the jet to Anchorage or cease operating it in Anchorage.

“To the extent Yakutia fails to comply, plaintiffs may seek to enforce their contractual rights in this court and other forums,” Gleason said.

The finance corporation, which has nearly 1,000 planes on lease around the world, claims Yakutia has not been making payments on two 737s it leased a year ago. Yakutia is a regional airline based in Yakutsk, about 2,500 miles west of Anchorage. The news agency ITAR-TASS quoted a Yakutia statement blaming the debt on “the seasonal decline in air traffic,” but the company said it hoped to get the plane flying again.

“Experts noted that the arrests of airliners are few,” ITAR-TASS said.

Payment problems on 'numerous occasions'

The lease company says it has not been paid on “numerous occasions,” starting shortly after signing the seven-year leases a year ago. Yakutia was behind in its payments last October and refused to comply with a grounding order, the company charged. The lease company said it considered a seizure action this past spring, but Yakutia paid its bills in May, only to fall behind again.

“The history indicates that Yakutia is unable to meet its basic financial obligations under the leases,” Beker wrote in a court filing.

For each plane, the company was also required to file a “technical evaluation report” about the condition of the aircraft one year after signing the lease. Yakutia has never done so, ILFC said in court.

Mark Dudley, a regional director for InterPacific Aviation and Marketing in Seattle, said Yakutia carried about twice as many passengers between Russia and Alaska this year as last year, so it was a good season. He said his company is not involved with the issue between the airline and the leasing company, but he hopes that service will continue next year and be profitable.

“We are disappointed that tourism is slow to develop between the regions, both east- and westbound, but we understand that this will take time; now that reliable air-transportation is in place, other issues hindering tourism need to be addressed,” he wrote in an email.

Those include the cost of visas and dealing with bureaucracy as well as overcoming the lack of infrastructure and the shortage of guides.

Contact Dermot Cole at dermot(at)alaskadispatch.com. Follow him on Twitter @dermotmcole