The world's largest aircraft-leasing company, AerCap, has filed US$3.5 billion in insurance claims after more than 100 of its planes became stranded in Russia following the widespread imposition of sanctions against that country. Before the sanctions, AerCap had 135 planes placed with Russian airlines. But so far, the lessor has only recovered 22 of them.

AerCap CEO confirms the insurance claims

On an investor call last week, AerCap Chief Executive Gus Kelly confirmed the filing of the insurance claims. Aercap is just one of many lessors with planes stuck in Russia. All up, more than 400 leased planes remained stranded in the pariah country. Aggravating the problem for lessors like Aercap is a new Russian law that allows Russian airlines to re-register the planes and keep flying them.

AerCap is the largest owner of commercial aircraft globally and the most active aircraft trader, with around 1,750 planes on its books. Lessors say the new Russian laws contravene international aviation agreements and equate to theft - and that's setting off a chain of insurance claims.

AerCap CEO Gus Kelly
AerCap CEO Gus Kelly (pictured) says Russian airlines are now flying his planes illegally. Photo: AerCap

No guarantee AerCap can recover its planes stranded in Russia

"Many of these aircraft are now being flown illegally by our former airline customers," said Mr Kelly during the investor's call. The CEO said approximately 5% of AerCap's fleet by net book value was on lease to Russian airlines and that the lessor was continuing to try to repossess its planes, but there is no guarantee that will happen.

"AerCap intends to fully comply with all applicable sanctions, and we have terminated the leasing of all our aircraft and engines with Russian airlines," AerCap said in a statement. "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.

"We expect to recognize an impairment on our assets in Russia that have not been returned to us as early as the first quarter of 2022, although we have not determined the amount of any impairment."

Airbus A320neo S7 Airlines
In contrast to Aeroflot, S7 Airlines is a big AerCap customer. Photo: Airbus

Aeroflot a small AerCap customer

State-owned Aeroflot is Russia's biggest airline. Airline database planespotters.net reports 180 aircraft in Aeroflot's fleet, correct as of April 3. A substantial portion of those planes is marked as leased. Historically, Aeroflot has done business with a wide range of lessors but getting a handle on who has recovered what planes and when is a tricky business.

Most of AerCap's planes stuck in Russia are not with Aeroflot. Lessors with the most significant exposure to Aeroflot include GTLK State Transport Leasing, SB Leasing, and SMBC Aviation Capital. Given that GTLK is a Russian-based lessor, they probably won't need to take back any planes.

Aircraft leasing database ch-aviation.com reports Aeroflot holds four Aercap planes worth nearly US$92 million, including three A330-300s and one A320-200. A big AerCap Russian customer is S7 Airlines, with a reported 44 AerCap aircraft worth nearly $743 million. Yekaterinburg-headquartered Ural Airlines has 20 AerCap narrowbody Airbus aircraft valued at nearly $350 million. Low-cost airline smartavia also has 11 planes from AerCap - a mix of narrowbody Airbus and Boeing jets.

Lessors and their insurance companies are reportedly in talks over potential payouts. But like most insurance settlements, AerCap's CEO doesn't expect any payouts to come easily or quickly.

Source: The Wall Street Journal