Irish lessor AerCap submits $3.5B insurance claim for jets trapped in Russia

Irish aircraft leasing company AerCap has submitted an insurance claim for $3.5 billion as more than 100 of its aircraft remain trapped in Russia following the invasion of Ukraine. 

In an official statement dated March 30, 2022, AerCap’s chief financial officer (CFO) Peter Juhas confirmed that the company has submitted an insurance claim for approximately $3.5 billion. AerCap has leased a total of 135 planes and 14 engines to Russia, but only 22 aircraft and three engines have been returned.  

“We’ve issued termination notices in respect of all of our aircraft and engines leased to Russian Airlines, and we’ve taken aggressive steps to recover our assets. The net carrying value of the assets that we’ve removed to date is approximately $400 million, and we are currently assessing the condition of these aircraft,” Juhas said. 

“We have approximately $260 million of letters of credit related to our Russian assets that are not on our balance sheet,” he added. 

As international sanctions were imposed on Russia in the wake of its invasion of Ukraine, AerCap became one of the worst affected companies, forced to suspend multiple leasing contracts with the country.  

Prior to the sanctions, lease agreements with Russia accounted for around 5% of AerCap’s fleet value. According to the company’s CEO Aengus Kelly, the potential losses are unprecedented. 

“Let me add that our lessees are required to provide insurance coverage with respect to leased aircraft, and we are insured under those policies in the event of a total loss of an aircraft. We also purchased insurance, which provides us with coverage when our aircraft or engines are not subject to a lease or where they are subject to a lease, but a lessee’s policy fails to indemnify us,” Kelly explained.  

“We intend to vigorously pursue all of our claims under these policies with respect to our assets leased to Russian Airlines as well as all other legal remedies that may be available to us,” he continued.  

“We plan to pursue all other avenues for the recovery of value of our assets, including other legal claims available to us,” said Juhas, before adding that it is uncertain whether these efforts will be successful. 

He continued: “Many of these aircraft are now being flown illegally by our former airline customers. We expect to recognize an impairment on the aircraft and engines that remain in Russia, which may occur as early as the first quarter of 2022.” 

“We’ll also need to review for impairment the assets that we’ve removed from Russia,” Juhas added. 

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