Dublin-based SMBC is latest aircraft lessor to sue over lost planes in Russia

Another Dublin aircraft leasing company has joined a growing list of businesses pursuing legal actions against insurers over aircraft stuck in Russia in the wake of the invasion of Ukraine.

SMBC Aviation Capital, the Irish company with the second-largest exposure to the fallout from the war, has issued legal proceedings against insurance giant Lloyd’s in the High Court.

The company booked an impairment charge of $1.6 billion (€1.5 billion) earlier this year over its inability to recover 34 aircraft leased to Russian airlines following the outbreak of the war.

In its 2022 annual report, SMBC, owned by Japan’s Sumitomo Mitsui Financial Group and Sumitomo Corporation, said the lost aircraft was “one of the most difficult moments for aviation”.

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Hundreds of jets leased to Russian airlines were held and re-registered in Russia in what was interpreted as retaliatory action after western countries sanctioned Russia over its war on Ukraine.

High Court records show that SMBC and two associated companies Global Aviation Equipment Leasing Ireland and Wilmington Trust SP Services (Dublin) have issued legal proceedings as plaintiffs against Lloyds Insurance Company.

[ Avolon sues insurers over aircraft losses in Russia ]

A spokesman for SMBC confirmed that it had commenced litigation in the Irish courts “against the insurers of aircraft lost in Russia.”

“Appropriate insurance is in place and we expect to be paid in accordance with our insurance policies,” he said.

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A spokesman for Lloyds told The Irish Times that the company was “not at liberty to share information on any specific claim, policy or policyholder”.

Irish aircraft lessors were among the first businesses to sustain losses after Russia’s invasion of Ukraine in February. They are pursuing multibillion-euro losses against insurers after the Russian government blocked foreign-owned aircraft from leaving the country.

SMBC joins three Dublin-based firms — AerCap, the world’s largest aircraft leasing company, Irish-owned Avolon and BOC Aviation (Ireland), a subsidiary of the largest aircraft leasing company in Asia — in taking legal actions against their insurers over the loss of aircraft.

Avolon and BOC Aviation are taking their legal actions in Ireland, while AerCap has issued legal proceedings through the courts in London.

AerCap’s legal action is the largest, relating to a $3.5 billion claim for more than 100 seized jets.

Overall, at least eight legal actions have been taken in Ireland, the UK and the US involving 35 or more insurers with claims exceeding $6 billion.

[ AerCap boosts earnings outlook after strong demand ]

It is estimated that aircraft lessors lost more than 400 leased plans worth almost $10 billion.

SMBC is on the verge of becoming the world’s second-largest player in aircraft leasing with the takeover of rival Goshawk in a deal valued at $6.7 billion (€6.5 billion)

The company buys aircraft using its own cash and debt and leases them to airlines around the world. It mostly favours the latest models of Boeing and Airbus short-haul aircraft.

At the end of September, SMBC had 700 aircraft that the company had owned, managed for other investors or ordered for airline customers.