Lessors are set to terminate hundreds of aircraft leases with Russian airlines following Western sanctions over the invasion of Ukraine that require the contracts be cancelled.
AerCap Holdings, the world's biggest leasing company, said on Monday it would cease leasing activity with Russian airlines, while BOC Aviation said most of its leases in Russia would now have to be terminated by March 28.
Russia warned the West it would retaliate against sanctions targeting its aviation industry.
Russian companies have 980 passenger jets in service, of which 777 are leased, according to analytics firm Cirium. Of these, two-thirds, or 515 jets, with an estimated market value of about $10 billion, are rented from foreign firms in the mainly Ireland-based industry.
AerCap, which has the largest exposure to Russia and Ukraine with 152 planes, according to consultancy IBA, said by net book value 5% of its fleet was leased in Russia as of December 31.
Its Russian clients include Aeroflot, S7 Airlines, Rossiya, Azur Air and Ural Airlines, its website shows, involving aircraft worth an estimated $2.5 billion, according to aviation services firm ACC Aviation.
ACC Aviation Vice President Viktor Berta said repossessing aircraft could prove challenging, including if Russian aviation authorities and airlines were not cooperative with lessors.
Given the airspace bans, it could also take time for personnel to travel to Russia to repossess the aircraft, he said.
Avolon, the world's second biggest leasing company, has fewer than 20 airplanes in Russia and one or two in Ukraine out of a total fleet of more than 550 aircraft, CEO Domhnal Slattery told Reuters this month.
He said at the time that Avolon was concerned that sanctions on international payment transfers through SWIFT could be disrupted, making it hard for airlines to pay their bills.
Avolon declined to comment when asked about the sanctions.
Group of Seven (G7) leaders said on Sunday that Western allies had decided to cut off "certain Russian banks" from the SWIFT a secure messaging system to ensure rapid cross-border payments which has become the principal mechanism to finance international trade.
Lessor BOC said it had 18 planes representing 4.5% of its owned fleet based in Russia, placed with Aeroflot subsidiary Pobeda as well as Ural Airlines, S7 Airlines and AirBridgeCargo Airlines. It also has an aircraft in its managed fleet on lease to Rossiya Airlines.
"Our policy is to fully comply with all laws applicable to our business," the lessor said in a statement. "The practical consequences of the new EU sanctions are complex and at the present time we are unable to provide further information."
Dubai Aerospace Enterprise (DAE) has at least three Russian airline customers, including Aeroflot, according to its website. The Dubai-owned lessor did not respond to a request for comment.
Novus Aviation Capital Co-Chief Executive Mounir Kuzbari told Reuters the firm had no aircraft in Russia but that mass cancellation of leases in Russia could hit global lease rates and aircraft values.
Other non-Russian lessors with planes in the countries include SMBC Aviation Capital, Air Lease Corp and Aviation Capital Group, IBA said.
SMBC said it would adhere to any relevant sanctions.
Russia to retaliate against sanctions on aviation industry, Kremlin says
Moscow will retaliate against Western sanctions targeting Russia's aviation industry over the invasion of Ukraine, Kremlin spokesperson Dmitry Peskov said on Monday.
"The guiding principle will be reciprocity, and our own interests will be at the forefront of that," he told reporters on a conference call.
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