Aircraft Lessor Sues Insurers For Not Covering Russian Plane Losses

When Russia decided that holding on to other people's property was a good way of fighting sanctions levied against it as a result of its invasion of Ukraine, predictions abounded that this would lead to an insurance nightmare. And indeed, aircraft lessors have lost billions of dollars and are none too happy about insurers not parting with the cash.

Carlyle Aviation Partners, one of the world’s largest aircraft leasing operators, is now seeking $700 million from more than 30 insurers and reinsurers for their failure to pay out claims related to jets stuck in Russia.

According to The Financial Times, the motion was filed in a Florida court late on Monday, October 31. The case covers policies related to 23 aircraft following the fallout from the war in Ukraine. It includes a claim that states that the insurers have “violated their good faith duties” when not evaluating the claims, first presented in March 2022, in a "timely or serious manner."

The case was brought by Carlyle Aviation’s UK and US branches, described in the claim as “the Carlyle plaintiffs,” and states that there have been nine separate breaches of contract. The legal action reads,

“In blatant breach of their contractual obligations, and months after the Carlyle plaintiffs first notified defendants of their covered losses, defendants have failed to provide coverage for these losses."

Photo: Maarten Visser via Wikimedia Commons

Sixteen jets yet to be recovered

The Carlyle case reportedly concerns 16 Boeing and seven Airbus aircraft leased to 12 different airlines. Five of them, all Boeing 737-800s, are operated by Siberia's UTair, the country's sixth-largest airline by passengers carried in 2021. According to ch-aviation, the lessor also had, among others, three aircraft with Nordwind Airlines, one Boeing 777 with Rossiya Airlines, two 737-800s with S7, and one 737-700 with low-cost carrier Smartavia.

All of them remain in Russia, apart from one Boeing 737-800 operated by charter carrier Azur Air, which is being held in Egypt. However, the Egyptian authorities are also allegedly uncooperative. Meanwhile, they have indicated that they will release the jet if Carlyle pays outstanding parking and storage fees.

Photo: Anna Zvereva via Wikimedia Commons

Carlyle Aviation Partners told the FT that it was bringing the lawsuit as it has "exhausted all avenues to recover the aircraft" and has not been compensated by insurers despite following all procedures required.

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$10 billion lost

When sanctions hit following Russia's invasion of Ukraine, foreign lessors had 515 planes in the country, with a combined market value of over $10 billion. Following the ad hoc law allowing operators to re-register the aircraft in Russia, at odds with the Chicago convention, sparking protests from ICAO.

With billions of dollars on the line for lessors whose assets have essentially been pirated, this is surely not the last case we will see where leasing companies and insurers go head-to-head over parting with funds to cover the enormous losses. The outcome from this case could set billions in precedent from this crisis, and any more in the future.