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By John Helmer in Moscow

Business aviation, that elite division of the Mile High Club that is more luxurious and more private than first-class, has been a poor investment since the crash of 2008. A great many jets have been on the market, including the Boeing 737 Business Jet (BBJ) that is owned by Suleiman Kerimov. According to information provided by aircraft brokers, this one is currently for sale for $46.95 million.

A source, which cannot be corroborated, claims the aircraft was purchased by Kerimov for less than half that price. Also uncorroborated is the report that the aircraft purchase was financed by Credit Suisse, and may be subject to a continuing Credit Suisse lien.

Kerimov’s air force may not be as numerous as Gennady Timchenko’s, but he probably outguns Oleg Deripaska’s air force, Mikhail Prokhorov’s, and Roman Abramovich’s too, taking into account that brokers’ purchase and sale data, along with photography posted online by plane spotters, may not be current or comprehensive. Still, Superboy appears to have his Boeing BBJ, a Gulfstream V, a Gulfstream 550, a Lear 60XR, and a small helicopter; his associate Alexander Mosionzhik flies in one of these.

Timchenko operates at least six aircraft through a Finland company, Airfix Aviation – a Citation-X, 4 Falcons, and a Global Express XRS.

Deripaska’s air force comprises, at the very least, a Hawker 800 XP, a Gulfstream V, a Gulfstream 550, and a Sikorsky helicopter, model S76B. The last came in handy when the impressionable BBC correspondent, Tim Whehell, reported last July in mid-flight on the interior fittings, the view out the window, etc.

Prokhorov is reported to have a Gulfstream 550 and a Falcon 990. Abramovich is reported to have just one jet, an Airbus A340-300, which he bought after trading in a Boeing 767-33A/ER. He also has three small helicopters.

Owning airforces like these is costly, especially if you add debt service when they are mortgaged to international banks. But then, as public debate in the US and UK reveals, private jets avoid having to pay all sorts of taxes and fees imposed on regular airline flights, their passengers, and operating companies. There is also a case to be made, at least outside Russia, that the regular economy-class flier is paying a subsidy through his airfare to the oligarch, tycoon and magnate airforces.

If Superboy were to land his BBJ at Biggin Hill, the private jet haven for London, he would have to pay £1,930.50 for landing, ₤331 for handling, and £396.50 for parking per day. That last item is a steal, compared to City of London car-parking charges. In the last war, Biggin Hill was a Royal Air Force base for Spitfires; the squadron based there set a record for shooting down 1,000 German attackers. Recent court papers suggest the airfield remains in state ownership, through the local municipality, but has been granted to a commercial operator on a 125-year lease.

When business is booming, airfields like Biggin Hill boom too. But there are drawbacks for Russians landing and parking there. British government sources remember, for example, the day two well-known oligarchs landed, but were detained for several hours while secret service agents went through the aircraft, on-board computers, and briefcases, before they were released.

That’s just one form of insecurity in using the Green Channel at Biggin Hill. Another is that if aircraft are pledged as security for debts, they are vulnerable to court bailiffs carrying asset seizure orders. Naturally, oligarchs don’t personally own such objects of value, but if insolvency and debt claims are a nagging problem, it’s often prudent to find a home-base that is less vulnerable. The Russian oligarch airforces are often registered in out of the way places like Aruba, a Dutch island in the Caribbean. But what could be safer at home than home?

It is therefore no surprise that Kerimov’s holding Nafta Moskva is reported to be in the running for development rights to the Kubinka military airfield (see picture above) outside Moscow. According to the documents posted on the website of the Ministry of Defense, an order of June 9, no. 636, has set July 21 as the date for bidders to buy 46 hectares of the airfield, plus buildings, hangars, lean-to’s, and other things covering 12,260 square metres. The sale, according to the ministry, is an auction. The starting price for the lot is Rb212,077,860 ($6.8 million).

An auction appears to be an auction, but over more than a year, Moscow press reports have suggested there is only one bidder in line – that is Superboy, through a company called Kubinka Airport, which in turn is owned by Nafta Moskva Cyprus Ltd.

The Defence Ministry was asked to clarify whether other bidders, Russian or foreign, are eligible, and how the valuation to fix the starting price was arrived at. Land nearby is valued at about $2,000 per square metre for residential development, so the built zone of Kubinka that is for sale might be worth $25 million– and that isn’t counting the 20 hectares of grassy sward that have been allocated on the private side of the runways and apron. By comparison, the redevelopment of the Khodinka airfield in the northern district of Moscow for an apartment and mixed-use project known as Grand Park — acquired and built by Inteko, belonging to the Mayor of Moscow’s wife, Yelena Baturina (indirect owner of a Gulfstream 550) – was selling apartments at the peak of the boom for an average of $5,000 per square metre. The land value at purchase from the Defence Ministry isn’t known. But part of the deal required building several blocks of apartments for the military.

The Ministry has responded that it does not reply to telephone enquiries, and limits its responses to written questions filed by facsimile and signed by the editor in chief. Kommersant, the well-known Moscow newspaper owned by Alisher Usmanov, could not get a reply to its queries. (Usmanov’s aircraft is not known, though his junior partner in the Metalloinvest holding, Andrei Skoch, has an Airbus A319.)

Like Biggin Hill, Kubinka has been a fighter base, as well as a base for airforce acrobatic teams and a warplane museum. But the military functions have been reduced, the airfield roughly cut in half, and part privatized for Moscow’s first dedicated private jet park. Kommersant has reported that privatization was made possible by an order from Prime Minister Vladimir Putin, dated June 22, 2009. A Ministry of Defence official then told Kommersant: “the airport is managed by the Air Force of Russia and the emergence of the private investor is possible.” He was followed, the newspaper says, by a Nafta Moskva official intimating that there was a negotiation under way with the Defence Ministry on private development of the airfield. This negotiation was first made by public by Nafta Moskva in April 2009. It seems to have gone on for longer than the promoters expected.

Nafta Moskva rarely responds to media questions, and this time is no exception. Kerimov is not known to speak in public at all, not even from the tribune of the Federation Council, where he is a senator representing Dagestan.

There has been speculation that Kerimov’s involvement in building housing for military personnel may be connected to the airfield deal. Since Kubinka has no Russian peers for comparison, projections of the investment required for it vary from the $130 million which Novaport, owned by Roman Trotsenko recently spent on a second runway and other upgrading at Tolmachevo airport, Novosibirsk; to the state sale of Sochi airport to Oleg Deripaska for $177 million. Since no project plans are likely to be made public before the auction result is known, these estimates are shots in the dark. Who will finance Kerimov – his acquisitions are usually leveraged with Russian state banks – is also unknown at this point.

It’s not too late to apply to bid in the auction. According to the Defence Ministry particulars, the deadline for applications is July 15. A deposit for eligibility is required – Rb21,207,786 ($684,122) – and the applicants should go to Pirogovskaya Bridge Road, no. 23, between 10 and 4 on weekdays (except for lunch break between 1 and 2).

The Defence Ministry also advises that “if the submitted documents contain blots, erasures, corrections, etc., the latter must be certified by an official stamp and seal of the legal person who committed them, or the instruments should be replaced with copies, notarized in the prescribed manner.”
 

OLIGARCH AIRFORCES TODAY

Rank

Name

Company

Wealth in $bn

Aircraft make

Aircraft price $mn

1

Abramovich

The owner of Millhouse Capital, chairman of the Duma of Chukotka

17.00

Boeing 767-300

100

2

Suleiman Kerimov

The owner of Nafta Moskva, a member of the Federation Council

14.50

Boeing 737-7BJ / W BBJ

50-52

Gulfstream GV

35

3

David Yakobashvili

Co-owner of Wimm-Bill-Dann

0.53

Gulfstream G550

55

Bombardier Challenger 604

26-28

4

Mikhail Prokhorov

President of Onexim

17.85

Gulfstream GV-SP

45

Falcon 900 EX

28-30

5

Shalva Chigirinsky

Former co-owner of Sibir Energy

0.17

Gulfstream G550

55

6

Rustam Tariko

Chairman of the Board of Directors and owner
Russian Standard Bank "

1.60

Boeing 737-7BJ / W BBJ

50-52

7

Andrew Scotch

Co-owner of Metalloinvest,
State Duma

2.45

Airbus A319-115CJ

> 50

8

Mikhail Fridman

The main owner and Chairman of the Supervisory Board of Alfa-Group "

14.30

Bombardier Global Express

48

9

Deripaska

CEO and owner of Basic Element

13.80

Gulfstream GV-SP

45

10

Sergei Pugachev

The owner of United Industrial Corporation, a member of the Federation Council

2.40

Falcon 2000 Ex Easy

25

Gulfstream IIB

10

11

Gregory Anikeev

State Duma deputy from the "United Russia"

na

Falcon 2000 Ex Easy

33

12

Alekperov

President and co-owner of Lukoil

10.65

Falcon 900EX

28-30

Yak-142 (remake Yak-42)

2-2,5

13

Mordashov

CEO and main owner
Severstal

10.00

Bombardier Challenger 604

26-28

14

Potanin

President of the Interros

9.95

Gulfstream

25-33

15

Vladimir Bogdanov

CEO of Surgutneftegaz

0.12

Gulfstream IV-SP

25-31

16

Vladimir Yevtushenkov

Chairman of the Board and principal owner of Sistema

6.50

Embraer-135BJ Legacy

23-25

17

Igor Makarov

The main shareholder of Itera

19.70

Embraer-135BJ Legacy

23-25

18

Viktor Vekselberg

Chairman of the Supervisory Committee
and principal owner of the Renova

8.35

Bombardier BD-700 Global Express

22-24

19

Cyril Minovalov

President and owner of the Bank "Avangard"

0.56

Cessna 750 Citation X

21

20

Igor Vozyakov VI

Collector and philanthropist (former top manager of Transneft)

na

Learjet 60

19-20

Source: Finans Magazine, June 21, 2010

 
 
THE ABRAMOVICH FLYER

Russia’s greater Abramovich, Vsevolod Mikhailovich, became the chief test pilot in Germany of the aviation company established there by Wilbur and Orville Wright. Abramovich designed his own plane, the Abramovich Flyer (shown here in 1912) That same year, he set a world altitude record of 2,100 m and an endurance record for carrying four passengers for 46 minutes 57 seconds. He was killed in a crash while instructing a novice.

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