Key Points:

  • The world’s foremost aircraft lessor, AerCap, has settled with NSK insurance for $645 million regarding 17 aircraft and five spare engines previously leased to Aeroflot, with the assets to now be owned by the Russian state-controlled firm.

  • The agreement, endorsed by the U.S. Treasury and Commerce departments, doesn't contravene EU sanctions and marks a significant development in disputes involving around 400 Western aircraft stranded post the Ukraine invasion.

  • While this settlement significantly reduces AerCap’s insurance claim to approximately $2.75 billion, it initiates discussions about potential settlements between Aeroflot and other lessors, potentially influencing the financial ramifications of the geopolitical tensions on the aviation sector.

AerCap-Aeroflot Deal Paves the Way for Settlement with Other Lessors

DUBLIN — In a pivotal development amid disputes over approximately 400 Western aircraft stranded since the Ukraine invasion, AerCap has finalized an insurance settlement with NSK over Russia’s retention of 17 jets leased to Aeroflot. In a disclosure to the stock market, Ireland’s AerCap detailed that NSK, the insurance firm, had fully settled the insurance claims with a payment of $645 million, pertaining to 17 aircraft and five spare engines leased to Aeroflot and its affiliate Rossiya, both under the aegis of the Russian state. Following the settlement, NSK will assume ownership of these assets.

AerCap shares observed a 5% ascent in premarket trading following the announcement. Aeroflot clarified in a release that post-settlement, 18 aircraft along with five engines had transitioned into NSK’s ownership, although this statement contained a discrepancy in the count of aircraft as mentioned by AerCap. The aircraft lessor noted the discontinuation of its claims against the Russian entities, both regarding the insurance provisions devised by Russian insurers and the lease agreements, affirming it had obtained the necessary approvals from the U.S. Treasury and Commerce departments to proceed with the settlement, which aligned with other existing sanctions regimes.

Historically, Russia represented a significant market for aircraft lessors, acquiring jets from eminent manufacturers like Boeing and Airbus to lease them to Russian carriers. However, the Ukraine invasion instigated a series of Western sanctions compelling the lessors to annul countless leases, while Moscow barred the aircraft from departing the country. As of now, the legal scenario affirms that EU sanctions don’t restrain such insurance settlements with Russian corporations, albeit contingent upon the specific details of the agreement.

In light of the recent settlement, which mirrors a compromise in the economic discord between Moscow and the Western nations, insurers engaged in legal battles stand to witness a reduced liability, which revolves around the determination of the party responsible for compensating the up to $10 billion loss. Despite this resolution, AerCap is involved in a $3.5 billion lawsuit filed in London against AIG and Lloyd’s concerning 141 aircraft and 29 engines leased to Russian airlines. Furthermore, several minor lessors, including SMBC Aviation Capital holding 34 jets, find their assets stranded in Russia. The Aeroflot agreement has led to a decrease in AerCap’s claim from its all-risk insurers to roughly $2.75 billion.

AerCap divulged that negotiations are underway concerning claims involving the insurance policies of several other Russian airlines, albeit without confirming whether the settlements would facilitate Russian airlines in acquiring more formal ownership of the aircraft at potential hefty discounts.