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Avolon says bruised jet backers in no rush to return to Russia


Band Tim Hepher

PARIS, March 29 (Reuters)Russian airlines could be shut out of the aircraft leasing market well beyond the Ukraine conflict, one of the industry’s biggest players warned on Tuesday, blaming what executives described as a default involving hundreds of Western planes.

Global leasing companies had until Monday to sever ties with Russian carriers under Western sanctions imposed during Moscow’s invasion of Ukraine, but executives say only a fraction of the more than 400 planes directly involved have been returned.

Domhnal Slattery, managing director of Dublin-based Avolon, the world’s second-largest leasing company, told Reuters his own risk was limited, with net exposure below $200 million on 10 planes still stuck in Russia after recovering four planes.

But the mainly Irish-based rental industry, which accounts for around half of the world’s airline fleet, will not be in a rush to restore relations with Russian airlines even if sanctions against Moscow are lifted, he said. predicted.

“From Avolon’s point of view, it’s not important; from an industry point of view, it’s a problem, unquestionably,added Slattery.

“In terms of the future appetite in a post-war scenario for new business in Russia, I think everyone in our industry will think long and hard about the risks of this jurisdiction and the appetite to return there” , he said in an interview. .

Earlier this month, Moscow introduced a law allowing airlines to re-register leased planes locally, which is widely seen as encouraging airlines to keep their planes and avoid a collapse of the Russian airline industry, which is heavily dependent on the rental.

Until now, planes leased from Russia have been registered in Bermuda or Ireland as part of an agreement intended to guarantee leasing companies already worried about the will of Russian courts to enforce the rights of foreign lessors.

Avolon, controlled by Bohai Leasing, a majority subsidiary of China’s HNA Group, has gross exposure of just under $400 million to Russia, Slattery said.

After deducting the value of four jets that were salvaged, as well as guarantees and letters of credit that were drawn, Avolon’s net exposure is less than $200 million.

“Given our scale that puts it in the realm of a headache rather than a migraine,” Slattery said.

“We believe our planes are all properly insured (…), all leases are terminated and we will continue to try to recover them,” he added.

Russia’s airline industry, the 11th largest in the world, had 980 planes in its fleet on the eve of the invasion of Ukraine, 777 of which were leased rather than owned by the carriers.

Of these, 515 were leased to foreign companies and around 400 of them – worth up to $10 billion – were most immediately at risk from the crisis, according to aeronautical data firm Cirium. .

(Reporting by Tim Hepher; Editing by Kirsten Donovan and Alexander Smith)

((tim.hepher@thomsonreuters.com; +33 1 49 49 54 52; Reuters Messaging: tim.hepher.thomsonreuters@reuters.net))

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