Russian airlines are not helping Irish lessors get their planes back

Russia’s state-owned airlines are not cooperating with Irish aircraft leasing companies over demands to release planes worth billions of euros to comply with EU sanctions over the war in Ukraine.

The industry braces for not being able to recover the aircraft from Russia and the potential fallout resulting from certain bank failures paying letters of credit on aircraft contracts, resulting insurance claims and litigation potential arising from these claims.

It is understood that state-owned airline Aeroflot and the carriers it owns are not responding to requests to return the plane once the leases have been terminated, which will allow Irish and European leasing companies to comply with sanctions .

Contracts

All EU-based leasing companies have until March 28 to terminate existing contracts with Russian airlines under the sanctions and have begun seeking to recover the aircraft.

“Russian state-owned airlines, Aeroflot or airlines belonging to Aeroflot, do not cooperate in any way and other Russian airlines pretend to cooperate but do not,” an industry source said.

“There are no planes leaving Russia at this stage and there will be no planes leaving Russia. There’s no way a plane will come out.

Following the sanctions, the Kremlin signaled that it would retaliate against EU measures, which ban the export of aviation products and services.

There are growing fears in the Irish aircraft leasing industry that the Russian government will seize ownership of aircraft leased overseas to shield Aeroflot from sanctions.

It raises the prospect of billions of dollars in potential losses for Irish leasing companies and subsequent insurance claims and litigation if insurers dispute the claims.

One source said the crisis had left the industry in ‘no man’s land’ while another aviation industry executive called the situation a ‘mission disaster’.

Nearly 700 aircraft are leased to Russian airlines, including more than 200 to Irish companies, putting the Dublin-based aircraft leasing industry at the heart of this crisis.

Dublin-based AerCap, the world’s largest aircraft leasing company, is the most exposed to the crisis, with 152 planes in Russia and Ukraine valued at 2.1 billion euros, which is less than 5 % of the value of its fleet.

A spokeswoman for the company declined to say whether Russian airlines were cooperating with the planes’ return.

rooms

SMBC Aviation Capital is the second most exposed with 34 aircraft valued at 1.2 billion euros.

A spokesperson for SMBC Aviation Capital said it was “carefully monitoring developments in Ukraine and was in contact with all relevant authorities”.

“The company will fully comply with all relevant sanctions and we are currently in the process of terminating all leases with Russian airlines,” he said.

Dublin-based Avolon, the world’s second-largest aircraft leasing company, owns 14 planes leased from Russian airlines, worth 320 million euros.

He repossessed one of the leased planes at an airport in the Turkish capital Istanbul 10 days ago.

Aircraft Leasing Ireland, the industry group affiliated with Ibec, said it was working with the government, EU and other authorities to ensure compliance with the sanctions.

Russian airlines are facing further difficulties with an interruption in the supply of EU parts needed for the regular maintenance of planes and their constant use.

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