Irish jet lessor AerCap is making $3.5 billion insurance claims for Russian planes

AerCap had leased 135 of its own aircraft and 14 of its own engines to Russian airlines by the time Russia invaded Ukraine, and has repossessed 22 jets and three engines worth about $400 million.

The EU imposed a series of sanctions on Russia, including a ban on selling planes, parts or related financing to Russian airlines.

Mr Kelly said AerCap leased seven aircraft in Ukraine and took back five of them.

The aircraft lessor has the most exposure to Russia of any lessor, but said its assets in Russia account for just 5 percent of its fleet by net book value.

Peter Juhas, AerCap’s chief financial officer, told investors today that the 135 aircraft and 14 engines the company leased in Russia generated about $33 million in revenue each month.

“We intend to be fully compliant with all applicable sanctions,” he said. “We have issued notices regarding all of our aircraft and engines leased to Russian airlines and we have taken aggressive steps to recover our assets.”

He said AerCap is currently assessing the condition of the planes and engines it has been able to retake from Russian airlines.

“We have approximately $260 million in letters of credit related to our Russian assets that are not on our balance sheet,” he added. “Most of these are security deposits that are not paid for in cash, but deposited with a bank as a letter of credit that can be used in the event of a default. We have submitted payment requests to all banks offering these letters of credit.”

Mr. Juhas said AerCap has received approximately $175 million from these banks to date and “will pursue payment of the remaining amounts to enforce our rights under the remaining letters of credit.”

He said AerCap remains in Russia in assets of about $2.5 billion based on the jets and engines already repossessed and the $175 million in proceeds from the letters of credit.

“Of course, we continue to make efforts to recapture more aircraft and engines from Russia, but it is uncertain whether we will be successful in these efforts,” he said. “Many of these planes are now being flown illegally by our former airline customers.”

AerCap expects to recognize an impairment of its assets remaining in Russia.

Mr. Juhas noted that its airline customers are required to purchase insurance coverage under AerCap’s leases, while the lessor also purchases its own insurance for contingency coverage and coverage in the event that its aircraft are not leased.

“We will vigorously pursue our rights under all of these policies,” he said. “Last week we filed an insurance claim for approximately $3.5 billion related to our aircraft and engines remaining in Russia,” he said.

“We also intend to pursue all other opportunities to restore the value of our assets,” he added.