Hundreds of planes jettisoned in Russia

Hopes of recovering hundreds of aircraft of several Western airlines from Russia have been dashed. The planes were leased in Russia, with the Russian carriers intent on keeping foreign-registered aircraft within the country. President Vladimir Putin openly discussed nationalising the assets of foreign businesses.
Until Thursday, according to consulting firm IBA, 523 aircraft were on lease by Western companies. Of them, 101 were leased to S7 Airlines and 89 to Aeroflot. However, both airlines have stopped flying globally amid sanctions, eliminating any chance of repossessing the planes on foreign soil.
"The general consensus is we won't be able to recover them,” said finance professor Vitaly Guzhva at Embry-Riddle Aeronautical University.
Guzhva and others who attended a recent industry conference in San Diego said the predicament for the leasing companies was the talk of the event, held by the International Society of Transport Aircraft Trading. Experts there generally aligned around the view that the companies were facing the possibility of huge losses, they said. All told, the planes are worth as much as $12 billion, according to Ishka, an aviation consulting firm.
AerCap, the world’s largest leasing company for commercial aircraft, has 142 leased planes in Russia, more than any other company, according to IBA. AerCap declined to comment, but said in a recent financial disclosure that its aircraft in Russia account for about 5 percent of its fleet. SMBC Aviation Capital, which did not respond to a request for comment, is the second-most exposed business, with 35 leased planes in Russia.
Under European sanctions, lessors such as AerCap and SMBC, which are based in Ireland, have until March 28 to terminate contracts with the Russian airlines and get their planes back.
On Thursday, David Walton, chief operating officer of BOC Aviation, a leasing company based in Singapore, said the March 28 deadline was “frankly an unrealistic timetable” to get hundreds of planes out of the country. As of late February, Russian airlines were using 18 BOC-owned aircraft, or about 4.8 percent of the company’s fleet.
Nick Popovich, whose Indiana firm, Sage-Popovich, performs aircraft repossessions, said he had been contacted by some major global lessors interested in recovering their planes from Russia. He declined to name the companies, but said they mostly acknowledged that it was a lost cause. Popovich said he was still investigating what could be done, but didn’t immediately see a viable way to recover the planes.
“We won’t accept an assignment that we’re not sure we can do,” he said. “I’m still doing research on what we can and can’t do legally.”
While a few planes may have been recovered abroad before international flights were halted, they are of little use to their owners without the meticulous maintenance records that accompany every aircraft and are often stored by airlines themselves, experts said. And the longer a plane is stuck in Russia, the greater the concern that work on the jet’s body, engines and flight systems may not be logged, causing its value to plummet.
“Unless you have those records, the aircraft is virtually worthless,” said Quentin Brasie, founder and CEO of ACI Aviation Consulting. “They’re literally more important than the asset itself.”
The financial consequences of the planes’ being held in Russia could be far-reaching, too. Such aircraft are financed in a variety of ways, including funding from banks, leasing companies themselves, and investors in securitized debt.
Insurers and reinsurers may be on the hook, too, experts said. Aviation war insurers, in particular, are concerned and facing their biggest potential losses since the Sept. 11 terrorist attacks, according to Russell Group, a data and analytics company. Aircraft insurance premiums have been on the rise for years as the industry struggled to counter recent annual losses.
As prices went up during the pandemic, insurers cut coverage, according to Suki Basi, founder of Russell Group. At the least, the situation in Russia will probably have a similar effect.
-B