Multiple aircraft lessors and insurers are going head-to-head over the loss of hundreds of jets that airlines in Russia still won’t return.
Russia’s invasion of Ukraine has now been going on for nine months. Obviously, the effects on Ukraine and its people are enormous. But elsewhere, some industries have undergone considerable changes as a result of the war. Aviation is one of these industries, and it had to adjust in multiple ways. One of these involves leased aircraft in Russia.
If you are late to the party, over four hundred aircraft, belonging to international lessors, are still in Russia today. From the start, we knew that lessors and insurers would eventually have to deal with this issue.
Russia permitted (or instructed) its airlines to keep these aircraft and transfer them to the Russian aircraft registry. This is against ICAO regulations – and to leasing companies, it amounts to theft. Not all Russian operators want to keep all of these jets – especially since finding parts for them is already proving challenging. But this is not the point.
For international lessors, the fact remains that these aircraft (and the revenue lessors expected from them) are gone. Of course, lessors had policies with insurers involving the loss of aircraft because of theft and war, among other reasons. But it’s not that simple, say the insurers.
The argument of the insurers is that some or many of these aircraft are intact and could still get back in the hands of lessors who own them. But as we have seen, this is highly questionable. For one thing, Russian authorities have allowed Russian airlines to maintain and service these planes in… new ways.
Lessors, Insurers, And Some Lawsuits
These ways could involve service centers that could be lacking certain approvals from Boeing or Airbus, for instance. Replacement parts are a factor as well. And if the provenance of parts and/or the quality of maintenance are in doubt, some lessors might not want back these jets, whatever the insurers say.
According to recent reports, there are now at least eight lessors and dozens of insurers battling each other in the court systems of Britain, Ireland, and the United States. These lawsuits add up to $6.5 billion. The aircraft that are stuck in Russia are valued even higher, at $10 billion. In addition to aircraft, some of these claims also involve aircraft engines.
Russian airlines will eventually need domestically-produced aircraft, to replace western jets. How effective (or quick) this replacement plan will be, is very questionable, as we’ve seen. As for their current aircraft, it looks like lessors and insurers will take months or years to resolve their disputes. Fortunately, these companies appear to have robust finances, despite the loss of these jets.