Aercap expects insurers to contest claims of €3.1bn for aircraft stranded in Russia

Lessor earns €895m profit for ‘milestone’ 2021

Aircraft leasing giant Aercap expects insurers to contest the company's $3.5 billion (€3.1bn) claims for planes stranded in Russia.

The Dublin-based business, which buys aircraft from manufacturers and leases them to airlines around the world, said on Wednesday that it earned $1 billion (€895m) profit last year.

Aengus Kelly, Aercap chief executive, confirmed that the company filed claims totalling $3.5 billion with insurers for more than 100 aircraft that it was unable to recover from Russia following the invasion of Ukraine.

Responding to questions from investors' analysts, Peter Juhas, chief financial officer, added that Aercap believed insurers would contest these claims.

However, Mr Kelly stressed that Aercap’s insurance claims were valid. “We intend to aggressively pursue all our claims on all our policies,” he said.

Aercap terminated leases on 135 aircraft and 14 engines with Russian airlines as the EU and US imposed sanctions following the invasion. The Irish company has repossessed 22 planes and continues to pursue airlines for the remaining aircraft.

Mr Juhas remarked that the country’s carriers were flying many of Aercap’s planes illegally as a consequence.

Aercap faces a potential net loss of $2.5 billion on the aircraft that remain in Russia. The company calculates that those planes amount to 5 per cent by value of its entire fleet.

It was also earning $33 million a month in rent on the planes it had leased to the country. Aercap will begin accounting for the financial impact of this as it reports results through this year.

However, Mr Kelly argued that the cost to the company was far less important than the tragedy unfolding in Ukraine. “We are all hoping for a peaceful resolution as soon as possible,” he said.

Sanctions

Aercap is complying with EU and US sanctions imposed on Russia following its invasion of Ukraine.

“These sanctions include prohibitions regarding the supply of aircraft and aircraft components to Russian persons or for use in Russia, subject to certain wind-down periods,” the company noted in a statement.

Aercap owned or managed 3,701 planes, helicopters and engines around the world by the end of last year.

The company continues to see strong recovery in air travel as country’s reopen following Covid-19 lockdowns.

Mr Kelly highlighted southeast Asia and, North and South America as regions where growth is returning rapidly.

He noted that Aercap is also experiencing increased demand in Europe for wide-body aircraft, largely used for long-haul flying.

“What we have seen is the demand for travel has not gone away and it comes back faster than airlines realise in every region,” he said.

Aercap's €25 billion takeover of rival GE Capital Aviation Services (GECAS) made 2021 a "milestone year" for the company, said Mr Kelly.

The deal was the biggest in aviation leasing history, he told investors. Mr Kelly also pointed out that integrating the two companies had gone smoothly.

Notwithstanding the consequences of Russia’s invasion of Ukraine for the company, he said it believed the “continued recovery in air travel in many parts of the world puts Aercap on a positive trajectory heading into 2022”.

Income

Aercap published results on Wednesday showing that net income for 2021 was $1 billion (€895m), turning around a $298.6 million loss the previous year. Excluding the costs of the GECAS transaction, net income reached $1.294 billion.

Debt rose $21 billion to $47.3 billion last year, while equity climbed almost $8 billion to $17.8 billion.

Revenue grew 16 per cent to $5.2 billion in 2021 from $4.5 billion the previous year.

Aercap’s net assets were $16.6 billion at the end of last year from $8.9 billion on December 31st, 2020.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas

READ MORE