Why would airline lessors lose over 500 planes and $12 billion in Russia?

Airline Lessors may face a combined loss of $12 billion to $15 billion. More than 500 airplanes leased to Russian airlines by Western businesses are in jeopardy of never leaving the country. There are no signs of the war deescalating, the West is ratcheting up the pressure on Russia with punitive sanctions, and President Vladimir Putin has approved a plan to nationalize all Western companies that suspended operations in Russia after the sanctions were announced.

If the plane goes missing, the lessor businesses might face a combined loss of $12 billion to $15 billion.

How did these planes end up in Russia?

Throughout half of the planes operated by airlines around the world are leased from airplane leasing companies rather than being owned by the airlines. Airlines and aircraft operators prefer leasing planes to avoid the large upfront costs of purchasing them and to quickly enhance capacity, possibly temporarily, on specific routes or sectors.

Throughout half of the planes operated by airlines around the world are leased from airplane leasing companies rather than being owned by the airlines. Airlines and aircraft operators prefer leasing planes to avoid the large upfront costs of purchasing them and to quickly enhance capacity, possibly temporarily, on specific routes or sectors.

According to a report in The New York Times citing consulting firm IBA, there were 523 aircraft leased to Russian carriers by non-Russian lessor companies as of Thursday (March 10). All of these planes are effectively stranded in Russia.

What is the issue with flying these planes out?

Russia’s skies are virtually sealed off from the rest of the world as a result of the war and Western sanctions. The lessors will be unable to fly the aircraft out of the country, and since Russian carriers have ceased international flights, the aircraft will not be repossessed outside of Russia.

Lessors based in Europe have until March 28 to terminate their contracts with Russian lessees and reclaim their planes under EU sanctions. That is just not enough time, given the current state of the war, which includes intense Russian military action against civilian targets and no real discussions.

According to Reuters, David Walton, Chief Operating Officer of Singapore-based aircraft lessor BOC Aviation Ltd, told analysts, “The EU and UK sanction effectively set a deadline of 28 March for termination of aircraft leases, which is frankly an unrealistic timetable for a fleet of approximately 500 aircraft leased into Russia by operating lessors.”

According to Nick Popovich of the aviation repossessions firm Sage-Popovich, those multinational lessors who contacted him were largely concerned that the planes would be lost. “We will not accept an assignment for which we are unsure of our ability to complete.” “I’m still researching what we can and can’t do legally,” he told the New York Times.

According to The New York Times, 101 of the aircraft on lease to Russian carriers are with S7 Airlines, the country’s largest private airline, and 89 with Aeroflot, the country’s national flag carrier. The remainder are on different airlines.

Which businesses are being harmed as a result of this situation?

AerCap, based in Dublin, is the world’s largest lessor, with over 1,000 aircraft leased to customers in over 80 countries. According to the NYT story, 142 of AerCap’s planes are now leased in Russia, citing IBA. According to the article, AerCap’s aircraft in Russia accounted for around 5% of the company’s fleet in a recent financial declaration. SMBC, a lessor located in Ireland, has multiple aircraft in Russia. According to sources, Russian carriers were using 18 of BOC Aviation’s jets as of February.

Will the Airline lessors’ finances be ruined if these planes are lost?

Most analysts believe that no lessor companies will go bankrupt. Given the complicated ways in which aircraft are often funded, there will be large losses for a variety of individuals and institutions. Grabbing these planes may provide some short-term benefits for Russia, but keeping them flying will become increasingly difficult over time as Boeing and Airbus refuse to supply spare parts. 

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