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Aircraft lessor writes off Russian jets, as hopes of recovery fade

26th April 2022 - Author: Matt Sheehan

Lessor company Air Lease Corporation has revealed that it expects to record a write-off of its interests in its owned and managed fleet that remain in Russia, totalling approximately $802.4 million.

The company believes it is “unlikely” to regain possession of aircraft that have not been returned by Russia since Western lessors were ordered to end their contracts with operators in the country.

For Air Lease Corporation, 21 aircraft in its owned fleet remain stranded in Russia, in addition to six aircraft in the company’s managed fleet.

As of March 31st, approximately 3.4% of the lessors fleet by book value was on lease to customers in Russia.

Analysis by IBA’s InsightIQ shows the number of foreign-managed aircraft operated by Russian carriers decreased from 513 to 484 aircraft between the start of the conflict and the EU lease termination deadline of March 28th.

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But over 400 of these aircraft are currently located in Russia, making it increasingly more difficult that lessors will be able to recover many more leased aircraft.

According to InsightIQ figures, 32 aircraft managed by non-Russian lessors have left Russian operators since the invasion, of which 29 have been returned to their respective lessors.

The remaining 3 aircraft were initially on sub-lease to Russian carriers, and have now been returned to their original non-Russian lessees.

“There are likely several aircraft currently in the process of being returned to their lessors, and as such we expect exposure to reduce further progressing into May 2022,” analysts said.

Of the major lessors caught in the crisis, Aercap is believed to have had the most success in recovering aircraft and reducing its exposure in Russia, with eight aircraft having been recovered so far.

Air Lease Corporation is believe to have recovered just three of its aircraft, as has fellow lessor Aircastle.

Despite the termination of lease agreements, nearly 300 aircraft were identified as active during the third week of April 2022, mostly operating on domestic routes inside Russia, which represents around 60% of foreign-owned Russian-operated aircraft.

This follows a move by Russian authorities that allowed for the nationalisation of Western-leased aircraft in the wake of the sanctions imposed on it for invading Ukraine.

Some lessors have already begun filing insurance claims, with AerCap having submitted a claim worth $3.5 billion for its stranded fleet.

This claim alone, if successful, would dwarf the industry loss figures of $2 billion and $1.5 billion put forward by some analysts, and could make S&P’s worst-case scenario estimate of $20 billion seem more likely.

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