Dublin-based lessor SMBC suffers a $1.6 billion loss from 34 jets stranded in Russia

Dublin-based aircraft rental company SMBC Aviation Capital has written off $1.6bn (€1.6bn) of stranded jets in Russia after the Russian government seized assets following the invasion of Ukraine.

In yesterday’s release of annual results, SMBC announced that 34 planes were stranded in Russia. The $1.6 billion impairment caused the lessor to post a loss of $1.1 billion for the year ended March.

However, it said a resurgence in flight activity helped SMBC deliver a strong underlying performance for the period, with profit before taxes and exceptional items rising to $336 million from $15.2 million. Rental income and other operating income increased to $1.5 billion for the year compared to $1.2 billion in fiscal 2020.

SMBC has a fleet of more than 730 owned, managed and on-order aircraft.

The company recently entered into an agreement to purchase rival Dublin-based leasing company Goshawk, which will solidify SMBC’s position as one of the world’s largest aircraft leasing companies. That acquisition — valued at $6.5 billion enterprise value — is expected to close in the last quarter.

SMBC CEO Peter Barrett confirmed that following Russia’s invasion of Ukraine, 34 of its own aircraft remain in Russia “although SMBC Aviation Capital has terminated leasing of these aircraft in line with international sanctions”.

He said Russian airlines continue to fly the jets within Russia and to countries from which redemption was not possible.

“It is unlikely that SMBC Aviation Capital will be able to recover the 34 owned aircraft within a reasonable timeframe or at all,” said Mr. Barrett.

“As a result, we recorded a $1.6 billion write-down related to the aircraft, which represents a full write-down of the book value,” he added.

“We have the benefit of significant insurance coverage and expect to secure significant recoveries.”

SMBC is owned by a consortium of Japan’s Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Finance and Leasing and Sumitomo Corporation.

Mr Barrett added that the underlying business performance over the last financial year shows SMBC Aviation Capital’s “strong upward trend” despite the impact of the war in Ukraine and the Covid pandemic.

“While we see ongoing challenges, the company is benefiting from a market recovery that continues to gain momentum and a positive recovery in demand from airlines and investors for our portfolio of quality assets,” he said.

Mr. Barrett said the acquisition of Goshawk will “bolster SMBC’s leading market position and give us further momentum and competitive advantage.”

“Our shareholders are providing significant support and the recapitalization they are making ensures we retain our A ratings from both S&P and Fitch,” he said.

“The expanded SMBC Aviation Capital will lend itself very well to the shape of the recovery taking place.”

https://www.independent.ie/business/world/dublin-based-lessor-smbc-suffers-16bn-loss-on-34-jets-stranded-in-russia-41825942.html Dublin-based lessor SMBC suffers a $1.6 billion loss from 34 jets stranded in Russia

Fry Electronics Team

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