Reinsurance News

Planes still stranded in Russia as lessors end rental contracts

29th March 2022 - Author: Matt Sheehan

Hundreds of Western-manufactured planes remain stranded on the ground in Russia, despite Irish lessors having now terminated their Russian airline leases in line with the European Union’s (EU) sanctions deadline.

Irish lessors, which account for more than 60% of the world’s fleet of leased aircraft due to the country’s favourable tax regime, all ended their leasing agreements by Brussels’ Monday deadline, reports suggest.

The deadline formed part of the package of economic sanctions imposed by the EU following Russia’s invasion of Ukraine.

Aviation has been a major concern for the re/insurance industry since the outbreak of the conflict, with analysts warning of the potential for historic losses if Russia goes ahead with its move to nationalise Western-made planes grounded within its borders.

And with more than 400 planes reportedly still stranded even now leases have been terminated, the potential for a huge loss to lessors, and to re/insurers, now seems ever more likely.

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Some commentators have suggested that the remaining planes represent a possible loss of $10 billion if they cannot be repossessed.

However, it should be noted that not all the leased planes currently inaccessible to lessors are in Russia.

Reports from Interfax news agency, quoting Transport Minister Vitaly Savelyev, suggest that more than 70  planes leased to Russian carriers have been seized while abroad and will not fly back to Russia.

Additionally, of the planes actually within Russia, it’s believed that some remain grounded due to their airworthiness certificates having been revoked, rather than due to intentions to imminently nationalise them.

But, even if these planes are returned after sanctions are lifted, they may become worthless if detailed records of their movements are unavailable, and if Russia-made parts have been used for service and repair, which are now prohibited by international standards.

Of the Irish lessors at risk, it’s believed that AerCap is most exposed, with 152 planes leased to Russian air carriers worth $2.5 billion dollars, according to reporting from Insider.

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