Russia and aircraft leasing

Bloomberg gives us the facts.

In a long feature article Bloomberg, the New York based financial services and publishing company says that aircraft owners are coming to grips with the loss of hundreds of Airbus and Boeing jets that Russian carriers have effectively shielded from seizure behind a new incarnation of the Iron Curtain.

With the window just about closed, foreign leasing firms have succeeded in repossessing only about two dozen of the more than 500 aircraft rented to Russian carriers, according to Dean Gerber, General Counsel for Valkyrie BTO Aviation.

Technically, lessors have until 28 March to retrieve the planes under European Union sanctions. But state-owned Aeroflot PJSC and other Russian airlines have already gathered the vast bulk of them back inside the country, out of reach of their owners.

“The number one fear right now is that these aeroplanes are gone forever”, said Steve Giordano, Managing Director of Dover, Delaware-based Nomadic Aviation Group, one of a handful of firms specializing in aircraft repossessions.

The shock from the rapid turn of events rippled through the roughly 2,000 attendees gathered at the annual ISTAT Americas convention in San Diego, where Valkyrie BTO’s Gerber spoke last Monday. There, elation over the fading omicron wave of coronavirus – the bane of aviation for the past two years – gave way to talk of spiking oil prices and doomsday scenarios for the stranded jets.

“The more we talk with insurers and other people at this conference, the clearer it’s becoming that these aircraft aren’t coming back”, said George Dimitroff, Head of Valuations for consultant Ascend by Cirium.

Aircastle Ltd, a Stamford, Connecticut-based lessor, used the confusion over the insurance status of one of its jets to take possession as it made a stopover in Mexico City.

“These are really small victories”, Christopher Beers, Aircastle’s Chief Legal Officer, said in San Diego. “The doors are closing”.  

In another case reported by The Air Current, an Airbus A321neo on its way to Cairo had its airworthiness certificate revoked by authorities in Bermuda mid-flight after it lost its insurance.  Its owner, lessor SMBC Aviation Capital, attempted to repossess the plane after it landed but it was able to return to Moscow, the outlet said.

Dublin-based AerCap Holdings NV has the most planes leased to Russia at 152, with a market value approaching $2.5bn, according to aviation consultancy IBA. Carlyle Aviation is among others with exposure, IBA said.

Aercap shares have lost about a quarter of their value since the European Union banned companies from supplying Russia with aircraft, parts or services in response to the invasion of Ukraine. Kroll Bond Ratings said it may downgrade nine aviation asset-backed securitizations exposed to planes in Russia and Ukraine.

The crisis has highlighted tiny Bermuda’s Civil Aviation Authority with almost 800 aircraft on its register, some 777 of those Russian, according to the agency’s 2020 annual report.

Also see Aerotime News in this week's BTN.

www.bnnbloomberg.ca/owners-outfoxed-as-russia-absconds-with-10-billion-of-jets-1.1734432

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