Ukraine Crisis: Leased Aircraft Write-Offs Continue to Place Strain on Lessors

Photo: Karam Sodhi/AviationSource

LONDON – Following the news from BOC Aviation’s financials last week, it is clear that the write-off of leased aircraft continues to place strain on lessors.

From Air Lease Corporation (ALC) having to write off over $800m to AerCap filing a $3.5bn insurance claim for aircraft stuck in Russia, the pressure on lessors continues in this respect.

BOC Aviation themselves posted a net loss after tax of $313 million for the first half of 2022, with this being caused by the write-off of 17 aircraft that remain in Russia, valued at $804 million.

Robert Martin, the CEO & Managing Director of BOC Aviation, commented on the financials, which were strong in cash flow:

“In the first half, BOC Aviation generated core NPAT of US$206 million, which demonstrates the resilience of our underlying business”.

“Our balance sheet strength and high levels of liquidity position us well to continue producing long-term sustainable earnings for our shareholders.”

With a portfolio of 608 aircraft owned, managed, or on order, BOC Aviation is still in a strong position, but it could have performed better had it not been for the Russian government nationalizing aircraft.

Which Lessor Has Been Affected The Most?


So far, it is AerCap that has been the most affected by the Ukraine Crisis and Russian nationalization, as seen below:

In a filing released in March, the company expected impairments of around 135 owned aircraft and 14 owned engines on lease to Russia airlines, which represented around $3.1bn in total assets.

The company has repossessed and removed around 22 aircraft from Russia as well as three engines, which has a net value of around $400 million.

Add the two figures together, and you can understand why AerCap is filing a large insurance claim.

With that in mind, AerCap still needs to repossess 113 aircraft and 11 engines from Russia.

In the filing, AerCap said the following on the repo situation:

“We continue to make efforts to repossess additional aircraft and engines from our former Russian airline customers, but it is unclear if we will be able to do so, or what the condition of these assets will be at the time of repossession”.

If anything, the likes of Air Lease Corporation and BOC Aviation have gotten away from this situation with the least amount of financial damage.

But with AerCap’s liquidity still in a strong position, it will be a heavy dent, but they will survive.

Overall…


As mentioned in previous articles at AviationSource, it is clear that the lessors will not win the battle and have thus accepted this, which has been seen through the use of write-offs and insurance claims.

With the Ukraine Crisis still ongoing, it will be interesting to see how long the war lasts and, when it ends, whether the lessors would be able to claim those aircraft back in the future. It’s likely this won’t be the case, however.

But for now, it does seem that lessors have accepted defeat and will do what they can to recover from any losses made from aircraft stuck in Russia.

About the author

James Field

James is a passionate AvGeek based in Manchester, U.K who has been actively spotting for years. James is the Editor-in-Chief for the company.

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