AerCap Holdings NV announced that it had filed $3.5 billion in insurance claims for more than 100 jetliners that it had rented to Russian airlines and that are now stuck in the country as a result of Western sanctions.
The world’s largest aircraft-leasing company by value said it had rented 135 aircraft to Russian carriers and had recovered 22 of them so far. Sanctions imposed by Europe and the United States forced lessors to cancel contracts and barred Western companies from providing maintenance and spare parts for those planes left behind.
The effects of Russia’s invasion of Ukraine have shook the aviation industry, forcing airlines to suspend and reroute flights. More than 400 rented Western jets remain in Russia, sparking what industry experts predicted would be a protracted battle between aircraft owners and insurers over an estimated $10 billion in claims.
According to some lessors, the Russian government is pressuring some Russian airlines to continue flying aircraft. The Russian government passed a law earlier this month that allows airlines to re-register planes in Russia, in violation of international aviation treaties. Lessors claimed that this amounted to seizure of their assets, triggering insurance claims for the aircraft.
AerCap Chief Executive Gus Kelly stated on a conference call with investors on Wednesday that the Dublin-based company had filed insurance claims on its planes in Russia, which accounted for about 5% of its portfolio of around 1,750 aircraft.
The company estimated its current Russia exposure to be around $2.5 billion and stated that it could take unspecified charges against lost planes as soon as the current quarter, ahead of any potential insurance payouts.
AerCap’s US-listed shares were down around 6% in midday trading, having recovered roughly half of their 30% drop since the Russian invasion last month.
Following its $31 billion acquisition of General Electric Co.’s jet-leasing business last year, AerCap is the world’s largest aircraft lessor. GE still owns 45 percent of AerCap.
AerCap said it is still attempting to repossess its planes in Russia but is unsure if it will be successful or what condition they will be in with sanctions prohibiting spare parts and maintenance support.
Mr. Kelly stated, “Many of these aircraft are now being flown illegally by our former airline customers.”
Leasing companies and insurers have stated that they are discussing potential payouts on the fleet, many of which are still in use by carriers such as Aeroflot Russian Airlines PJSC. Mr. Kelly predicted that insurers would contest the claims.
Aviation insurers such as the United Kingdom’s Beazley PLC declined to comment.
Other aircraft leasing companies have stated that recovering planes presents significant legal and logistical challenges. Sanctions imposed by the European Union required them to cancel existing leases with Russian carriers by March 28.
Mr. Kelly of AerCap said he didn’t expect a “black swan” event in Russia to have an impact on leasing planes to other countries.
The Covid-19 pandemic resulted in massive airline losses, forcing more people to rent rather than buy planes. At an investor event earlier this month, Steven Udvar-Házy, executive chairman of Air Lease Corp., another major lessor with a presence in Russia, stated that he expects a record 60 percent of aircraft deliveries this year to go to leasing companies.
Mr. Kelly stated that AerCap has more than 400 jets on order, and that airline preferences for renting, as well as problems at Airbus SE and Boeing Co. in delivering new jets, have given AerCap leverage with customers, especially with signs of airline demand returning in hard-hit regions such as Southeast Asia.
“Where we have supply hiccups, it’s not always a bad thing for us,” he explained.