Top aircraft lessor files $3.5bn claim on Russian losses, still ahead of airline policies

The world's largest aircraft lessor has filed a $3.5 billion insurance claim on aircraft stranded in Russia, above its own net exposure, and will scour airline and other related-party policies for grounds for further claims.

“We intend to vigorously pursue all of our claims under these policies with respect to our assets leased to Russian airlines,” the CEO of leasing firm AerCap, Aengus Kelly, told his company's fourth quarter earnings call.

AerCap filed its own $3.5 billion claim last week based only on its own insurance coverage. “Last week we submitted an insurance claim for approximately $3.5 billion with respect to our aircraft and engines remaining in Russia,” CFO Peter Juhas said.

Lessees are contractually required to hold coverage to protect AerCap and those policies will also be scoured for claims options, officials said.

The $3.5 billion headline figure is well above the neighborhood $2.5 billion in carrying value of assets remaining in Russia after several successful repossessions and adjusted for several letters of credit that have already been collected.

AerCap doesn't imagine that insurers will rush forward to write checks.

While CEO Kelly insists “the full amount of our $3.5 billion claim is valid,” CFO Juhas said he wouldn't write the sum directly into his near-term cash flow projections.

“In this case we expect them to be contested just given the large sums involved across the industry,” Juhas told analysts. “I just think it is reasonable to assume that they will be contested in this case.”

The notable discrepancy between asset values and claim size reverses attempts by insurance industry leaders to talk down the scope of likely losses.

An early calculus had been closely tied to reports of a $13 billion price tag on over 500 aircraft arguably lost to Russian expropriation after sanctions were announced. Lloyd's CEO John Neal took the biggest bite out of those early estimates with a claim that insured values are likely only 15 to 20% of total asset values.

Cancellation timing vis-a-vis formal triggers was said to be another potential limiting factor. Talk of policy aggregate limits also had worked to trim some headline figures.

AerCap was the single largest lessor of aircraft to Russian airlines, a ranking by the International Bureau of Aviation (IBA) has indicated. Amongst non-Russian names, Japan's SMBC Aviation Capital also figured high on the league rankings.