Largest aircraft owner lost 113 planes to Russia due to sanctions

AerCap Holdings, the aircraft leasing giant that is the world’s largest owner of jets, lost 113 planes when Russia seized them in response to sanctions triggered by the war in Ukraine.

The seizures of the planes and 11 jet engines by Russian authorities caused AerCap to take a $2.7 billion pre-tax charge during the quarter, causing the company to report a net loss of $2 billion rather than the $500 million profit it would have made without the hit. But company executives said the quarter was actually a good one and they see better times ahead as global demand for flying continues to recover from the Covid pandemic.

“But for the impact of Russia, this is a strong underlying quarter for the company,” said CEO Aengus Kelly in comments to analysts. “Across all our business lines … we are seeing improving demand, increased utilization of our assets and the improving financial health of our customers.”

Investors agreed and shares of Dublin-based AerCap (AER) gained 6% in afternoon trading following the report.

The company was able to recover 22 jets and 3 engines before they were seized by Russian authorities. It has filed insurance claims to seek to recover the lost aircraft, although some of those claims are with Russian insurance companies. Those policies are backed by Western re-insurance companies, but AerCap stated that “the timing and amount of any recoveries under these policies are uncertain.”

The company owns a total of 1,624 aircraft, far more than owned or operated any single airline. The jets lost to Russia represented less than 5% of the net value of Aercap’s fleet, which grew larger during the pandemic by purchasing rival leasing firm GECAS from General Electric (GE).

Aercap should easily ride out the financial loss of the jets, said Richard Aboulafia, managing director with AeroDynamic Advisory. Even if the war were to end and the sanctions were to be lifted, the planes have lost their operating certificates in the eyes of Western aviation regulators.

“Once the documentation goes, there’s very little point in even trying to get them back,” he said.

When Russia invaded Ukraine on February 24, Russia’s air carriers were operating 861 commercial planes, according to data from aviation analytics firm Cirium. Just over half of those planes, with an estimated market value of $9.2 billion, were owned by non-Russian leasing companies.

Sanctions by multiple countries required international aircraft leasing companies that owned the jets to repossess them by the end of March. An estimated 79 jets were repossessed, but Russia announced it was nationalizing hundreds more. (CNN)