LONDON – Leasing giant AerCap has filed a $3.5bn insurance claim to cover the cost of aircraft that are either stuck or stolen in Russia.
In a filing today, the company expects 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.
Efforts Still Being Made to Repossess…
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”.
Shares in AerCap have dropped 10% at the news surrounding such repossessions and the insurance claim it is having to make, which represents around $3bn in overall fleet value.
Will they get these aircraft back?
It is a question that has been asked over the past couple of weeks, especially with the Russian government nationalizing such leased aircraft.
Some Russian carriers like Pobeda have been compliant with the West and have returned some aircraft, but it is a very small figure compared to the over 500-600 aircraft that are on lease in Russia.
This is also why AerCap said what they said above. It is probably unlikely they will get these aircraft back, hence why the insurance claim has been filed.
It will be interesting to see how this situation develops over the next few weeks and months.
Will insurers payout for this?
Another important question that needs to be asked. Typically insurance companies use conflicts such as Ukraine as “an act of God”, which exempts them from having to payout.
Paying out a $3.5bn claim would damage the insurance companies’ financial standing, especially in times of turmoil already.
It will probably be likely that these claims will be fought in court, as the insurers will probably do all they can to get themselves out of it.
However, they could pay out the claim in support of the West, but again this is purely speculative at this point.
What remains clear is that lessors such as AerCap are currently in a sticky situation, which comes at no fault of their own.
As the conflict in Ukraine continues, so will sanctions, and so will the damage to the purse strings of these companies.
The Russian government will continue to prop up the aviation sector in this regard, as a mass return of aircraft would sink a lot of the country’s economy overnight.
It will be interesting to see whether AerCap can repossess some more of its assets from Russian carriers, but the numbers will more than likely remain low in this respect.