Lessor AerCap books $2.7 billion charge on stranded Russian jets

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AerCap logo is seen displayed in front of the model of an airplane and a Russian flag in this illustration taken, May 4, 2022. REUTERS/Dado Ruvic/Illustration

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  • Irish lessor had largest Russia exposure
  • AerCap submitted $3.5 bln insurance claim in March
  • Plans to vigorously pursue all claims

May 17 (Reuters) - The world's top aircraft lessor AerCap (AER.N) said on Tuesday it booked a pretax charge of $2.7 billion in the first quarter as it recognised a loss on its more than 100 jets that remain stranded in Russia.

AerCap is the latest leasing company to take an immediate hit on its Russian exposure, something the firms had previously been expected to defer until they had more clarity over the amount that could be reclaimed from insurers. read more

But with lessors and insurers gearing up for an historic battle over record potential claims worth an estimated $10 billion, industry executives said some lessors had been advised by lawyers to take writedowns as soon as possible to buttress claims that could drag through the courts for years. read more

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Dublin-based AerCap had the largest exposure of any lessor, accounting for 5% of its fleet by value. It submitted a $3.5 billion insurance claim in March and said on Tuesday it had not recognized any receivables relating to the claims. read more

"We have filed insurance claims related to these assets and will vigorously pursue all available remedies to recover our losses," AerCap Chief Executive Officer Aengus Kelly said in a statement, describing the Russian hit as an undoubted setback, but a manageable one.

Over 400 leased planes worth almost $10 billion remained in Russia after a March 28 deadline to cancel the contracts in line with Western sanctions over the war in Ukraine.

AerCap's charge comprised of an impairment loss and complete write off of flight equipment that remains in Russia. It removed 22 aircraft and three engines that were based outside of Russia when the sanctions were announced, but has 113 aircraft and 11 engines still stuck in the country.

The charge was partially offset by $210 million in payments from letters of credit related to the Russian-based assets. AerCap said it had initiated legal proceedings against one financial institution which rejected its payment demands.

AerCap said that excluding the charge, its first quarter net income was $540 million and Kelly said he expected to see demand for travel continue to grow as a broad-based recovery progresses.

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Reporting by Nathan Gomes in Bengaluru, Padraic Halpin in Dublin and Tim Hepher in Paris Editing by Maju Samuel and Mark Potter

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