Dublin aircraft lessor terminates leases with Russian airlines

The Irish-based aircraft leasing company with the second-largest exposure to the fallout from the war in Ukraine has confirmed it has terminated leases with Russian airlines.

Dublin-headquartered SMBC Aviation Capital is one of a number of Irish companies seeking the recovery of airplanes after aircraft lessors were forced to terminate leases with Russian airlines to comply with European Union sanctions imposed to punish Russia for its invasion of Ukraine.

The company, owned by Japan's Sumitomo Mitsui Financial Group and Sumitomo Corporation, said that it was severing leases to comply with the EU sanctions. The company owns 34 aircraft worth about $1.3 billion (€1.1 billion) that are leased to Russian airlines.

Lessors have until March 28th to terminate the lease agreements, triggering a frantic scramble to recover and repossess aircraft from state-owned airline Aeroflot and other Russian airlines.

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“SMBC Aviation Capital continues to carefully monitor developments in Ukraine and is engaged with all relevant authorities,” said a spokesman for the company.

“The business will fully adhere to all relevant sanctions and we have issued termination notices in respect of all leases with Russian airlines.”

The company buys aircraft from manufacturers Airbus and Boeing and leases the airplanes to airlines around the world. It has more than 750 aircraft on its books.

Dublin-based firms

Irish companies are among those worst affected by the Ukraine crisis, with Dublin-based firms owning aircraft worth between €3.5 billion and €4.5 billion leased to Russian firms.

Dublin-based AerCap, the world’s largest aircraft lessor, is the most exposed to the crisis with 152 aircraft valued at €2.1 billion rented to Russian and Ukrainian airlines.

Russian airlines lease almost 780 jets, including just over 500 from foreign leasing companies, about two-thirds of which are owned by Dublin-based aircraft lessors.

Efforts to recover the aircraft are complicated by the Russian government’s plans to proceed with legislation that could block their return and seize ownership of foreign aircraft.

On Thursday, Russia’s transport ministry published a draft law that would force the country’s airlines to make lease payments for the remainder of this year in roubles, the Russian currency that has collapsed in value as a result of western measures taken against the Kremlin.

Under the draft law, a special government commission will, if the foreign leasing company terminates the lease agreement, decide whether the aircraft can be returned or rule that the aircraft must stay in Russia.