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Sept. 12 (Bloomberg) -- For years, Nice Cote d’Azur airport received a steady stream of wealthy Russians touching down in corporate jets on their way to holiday homes on the French Riviera. As the Ukraine crisis deepens, that’s begun to change.

European Union sanctions curbing travel for leading Russian business people and politicians have started to bite, causing private-aircraft flights from Moscow to Nice to drop 5 percent in the seven months through July, the first fall since 2009.

“A lot of Russians bought property in the south of France, they love to come here,” said Umberto Vallino, head of business aviation development for Nice, Cannes and St. Tropez airports. “This is the first year we’ve noticed a reduction in traffic.”

More than 140 individuals and 50-60 companies are already subject to sanctions imposed by the EU and other authorities, according to law firm Debevoise & Plimpton LLP, which has a specialist aviation practice and offices in Moscow. With Europe due to extend curbs to sectors including defense and energy today and the U.S. scouring aircraft fleets for links to Russian owners, the decline in private-jet flights seems set to deepen.

Nice, the nearest major airport to high-end Mediterranean sunspots such as Cannes and Monaco, is the leading year-round European destination for the Russian elite, followed by Geneva, said Magnus Henriksson, head of business development at Avinode, which matches private jet owners with rental customers.

Working Holidays

Russians landing at Nice’s business aviation terminal often own property in France and fly over with their spouse and children for working holidays, helping Moscow to become the airport’s biggest summer source of private-jet traffic.

“Contracts can be signed in a nice hotel or on a yacht, it’s not necessary to be in the office,” Vallino said.

The decline in Moscow-Nice flights reached 9 percent in June, he said, while research from business aviation consultant WingX Advance shows the number of services from the Russian capital’s Sheremetyevo airport to the French city fell by 32 in the year through August, with 13 fewer flights from nearby Domodedovo and 25 fewer from St. Petersburg’s Pulkovo hub.

Operations from Moscow Vnukovo to Geneva and Zurich in Switzerland have also declined, with the routes showing drops of 49 and 30 flights respectively versus a year earlier, while services to London Luton have dropped by 36, according to WingX. Some other routes have shown gains, including Vnukovo to Vienna, Paris Le Bourget and Farnborough, southwest of London.

Gulfstream Grounded

Gennady Timchenko, co-founder of oil trader Gunvor Group Ltd., has grounded a Gulfstream model made by business-jet arm of General Dynamics Corp. as a result of U.S. and Canadian sanctions, the ITAR-TASS news agency reported last month, citing an interview. Stuart Leasor, a U.K.-based spokesman for Timchenko, said the billionaire had no comment.

The impact of sanctions appears to be extending beyond those companies and individuals singled out, with other Russian business leaders actively avoiding travel to deal with issues such as Russia’s retaliatory ban on imports of meat, cheese, fruit, vegetables and dairy items from the EU and U.S., according to Debevoise & Plimpton.

With the EU extending sanctions, and loopholes in existing visa bans and asset freezes being closed, private jet providers and their supply chain could face a tougher future, said George Galanopoulus, managing director of London Executive Aviation, a U.K.-based charter-plane operator.

Short Hops

“In our industry more or less everyone would get affected by deeper sanctions,” he said. “Handling agents, airports -- everything down to the shuttle company that picks up these guys from the airport and takes them into the city.”

Russians have been especially important in bolstering the top-end segment of private aviation by flying short hops in Gulfstream IV and V jets which had previously been confined mainly to intercontinental flights, said Adam Twidell, chief executive officer of PrivateFly, a British on-line jet broker.

U.S. agents are meanwhile searching for assets including private aircraft that wealthy Russians may have hidden behind shell companies, John Tobon, who heads the Department of Homeland Security’s financial investigations unit, said in May.

Many Russian owners domicile planes in Switzerland or Austria and have companies in those countries to manage them, according to Avinode’s Henriksson. Russia itself has only 53 registered business jets, versus 244 in Austria, according to the Corporate Jet Investor website. The U.S. is by far the biggest base for the aircraft, with more than 12,500 listed.

With summer visits to the French Riviera on the decline, Alpine ski trips similarly popular with Russian private jet customers are also facing a slump, Geneva Airport CEO Robert Deillon said in an interview.

“I don’t know if we will see many Russians in Courchevel this winter,” he said.

--With assistance from Alex Sazonov in Moscow.

To contact the reporters on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net; Andy Hoffman in Geneva at ahoffman31@bloomberg.net To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Simon Thiel at sthiel1@bloomberg.net

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