Avolon loses $173m after losing aircraft leased to Russian companies

Irish lessor Avolon lost €173 million in the first three months of the year after it could not get back aircraft leased to Russian airlines.

Dublin-based Avolon confirmed on Tuesday that the 10 aircraft that it could not recover from Russian carriers after that country invaded Ukraine in February cost it a net $261 million.

Avolon lost $182 million (€173.3 million) in the first quarter of this year as a consequence, $99 million more than the $83 million loss it reported for the same three months in 2021.

Excluding its Russian losses, Avolon’s net profit for the opening three months of 2022 was $80 million, the company noted.

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Chief executive Dómhnall Slattery said that while Avolon was making every effort to recover the planes, it accounted for their loss to put “the financial impact of Russian sanctions firmly behind us”.

Mr Slattery told a live interview last week that his company would make insurance claims for the planes, saying that the company believed its cover was valid.

He noted that Avolon regarded the aircraft as having been stolen because the Russian carriers that have kept the planes are not paying rent for them.

The Irish lessor had provided 14 jets to Russian airlines, but recovered four of them shortly after the country invaded Ukraine, sparking a war with its neighbour.

Avolon and other lessors are among many businesses impacted by sanctions against Russia following the invasion, losing rent payments and some of the aircraft they own.

Peaceful end

The Irish company recognised a total loss of $304 million against the 10 aircraft involved after reducing their value to zero on its books.

It offset this against $43 million from other balances associated with the leases, resulting in a $261 million loss.

Mr Slattery stressed that Avolon hoped for a swift and peaceful end to the conflict.

He noted that Avolon’s first-quarter performance was its strongest since the pandemic struck two years ago, despite Covid’s ongoing impact on global travel and the Russian sanctions.

"The rapid reopening of borders in Asia and increased flying globally", which boosted cash collection from airline customers, drove Avolon's improved performance, Mr Slattery said.

Avolon owned or managed 592 aircraft at the end of March, while it had 142 airline customers in 61 countries.

It earned $658 million in lease revenues, which in turn generated $320 million in net cash.

Avolon had a total of $5.4 billion available to it at the end of the quarter, including $477 million in cash and $4.9 billion of unused credit.

The lessor paid shareholders $12.5 million dividends for 2021. It also released $104.7 million of previously withheld dividends to one of its backers, Chinese company Bohai.