Leasing firms face $10bn hit due to Russia's refusal to return aircraft

Western aircraft finance companies face a $10 billion hit after Russia said it would act to stop the hundreds of leased planes operated by its airlines from being returned.

About 450 aircraft owned by western organizations are operated on leases by Russian carriers. European sanctions adopted last week mean all these contracts must come to an end by March 28.

Lessors have been trying to recover the aircraft but with little success. Russian aircraft are banned from British, European Union, and American airspace and Russian airlines have ceased operating on nearly all international routes.

Yesterday, the Russian parliament said it would introduce new laws that would make the handing back of any aircraft illegal unless approved by a state commission.

Since the sanctions went into effect, analysts expected lessors to face problems getting their aircraft out of Russia due to airspace restrictions creating logistical challenges and pushback from Russian authorities. According to aviation consultancy IBA, Dublin-based leasing company AerCap has the largest fleet in Russia at 152 planes worth nearly $2.5 billion.

At the end of February, the company announced a halt to work in Russia. Other leasing companies from which Russian airlines lease aircraft are SMBC, Avolon Aerospace, and Carlyle Aviation.

According to experts, the retention of leased aircraft in the Russian Federation may lead to lengthy litigation, including between lessors and insurance companies, an increase in insurance payments in this area, and a reassessment of the level of risks in this area market.