AerCap Submits $3.5 Billion in Insurance Claims Over Trapped Russia Jets
Aircraft leasing industry may seek estimated $10 billion in payouts over planes still being flown ‘illegally’ after sanctions
AerCap Holdings NV said it had filed $3.5 billion in insurance claims over more than 100 jetliners the company had rented to Russian airlines and that are now stuck in the country following the imposition of Western sanctions.
The world’s largest aircraft-leasing company by value said it had rented 135 aircraft to Russian carriers, and has so far been able to recover 22 of them. European and U.S. sanctions required lessors to cancel contracts, and banned Western companies from providing maintenance and spare parts for those planes left behind.
The aviation industry has been rattled by the effects of Russia’s invasion of Ukraine, which has forced airlines to suspend and reroute flights. More than 400 rented Western jets remain in Russia, triggering what industry experts said was likely to be a yearslong battle between aircraft owners and insurers over an estimated $10 billion in claims.
Some lessors have said some Russian airlines are being pushed by the country’s government to continue flying aircraft. The Russian government earlier this month passed a law allowing airlines to re-register planes there, contravening international aviation agreements. Lessors said this was tantamount to seizure of their assets, triggering insurance claims from them for the aircraft.
AerCap Chief Executive Gus Kelly said Wednesday on an investor call that the Dublin-headquartered company had filed insurance claims on its planes in Russia, which represented about 5% of its portfolio of around 1,750 aircraft.
The company estimated its current Russia exposure is around $2.5 billion and said it could take unspecified charges against lost planes as early as the current quarter, ahead of any potential insurance payouts.
AerCap’s U.S.-listed shares closed 8.4% lower Wednesday, having in recent weeks recovered around half of their 30% drop since the Russian invasion last month.
AerCap is the world’s largest aircraft lessor following its $31 billion takeover of the jet-leasing business of General Electric Co. last year. GE retains a 45% stake in AerCap.
AerCap said it continued to try to repossess its planes in Russia but isn’t sure if it can, or what condition they will be in with sanctions blocking spare parts and maintenance support.
“Many of these aircraft are now being flown illegally by our former airline customers,” said Mr. Kelly.
Leasing companies and insurers said they are discussing potential payouts on the fleet, many of which are still being flown by carriers such as Aeroflot Russian Airlines PJSC. Mr. Kelly said he expected insurers to contest the claims.
Insurers active in the aviation market, such as U.K.-based Beazley PLC, declined to comment.
Other aircraft-leasing companies have said they face huge legal and logistical challenges in recovering planes. European Union sanctions required them to cancel existing leases with Russian carriers by March 28.
AerCap’s Mr. Kelly said he didn’t expect what he called a “black swan” event in Russia to impact leasing planes to other countries.
The Covid-19 pandemic drove huge losses among airlines and pushed more to rent rather than buy planes. Steven Udvar-Házy, executive chairman of Air Lease Corp., another big lessor with exposure to Russia, said at an investor event earlier this month he expects a record 60% of aircraft deliveries this year to be to leasing companies.
AerCap has more than 400 jets on order, and Mr. Kelly said airline preferences for renting, along with problems at Airbus SE and Boeing Co. in delivering new jets, have given AerCap leverage with customers, particularly with signs of airline demand returning in hard-hit regions such as Southeast Asia.
“Where we have the supply hiccups, it’s not always a bad thing for us,” he said.