Another lessor has to accept the financial implications of the situation in Russia. Aircastle has taken a $252 million impairment on thirteen aircraft that are unlikely to be repossessed from airlines. Of these, twelve are in Russia and one in Ukraine. Last week, Air Lease Corporation (ALC) took an $802 million write-off on its Russian fleet. Aircastle also writes off on Russian and Ukrainian fleet.
Aircastle, which has a fleet of 260 managed and owned aircraft, had twelve aircraft on lease with six aircraft in Russia on February 24, the day Russia invaded Ukraine. All contracts have been terminated and two aircraft have been repossessed from one of the airlines, while another one was outside Russia for maintenance. This leaves nine aircraft in Russia. “It is unclear whether we will be able to recover the remaining aircraft or what the condition will be at the time of repossession or whether we will be able to recover the related technical records and documentation”, Aircastle says in its financial statements. One aircraft, a Boeing 737-800 (not the one in the picture), is leased to Ukraine International Airlines and is outside the country for maintenance.
The thirteen aircraft in Russia and Ukraine comprised six percent of Aircastle’s net book value or seven percent of the lease rentals. The lessor had $49.5 million in credit letters to its Russian customers, of which $25.4 million has been received from various financial institutions. Aircastle continues to get the remaining payments and will pursue all legal claims.
Given the uncertainty, Aircastle recorded the $251.9 million non-cash impairment charge on the Russian and Ukrainian fleet, which has been booked in its fourth quarter of FY21 which ended on February 28, 2022. At the same time, Aircastle has also filed claims “against relevant insurance and reinsurance policies seeking an indemnity of approximately $350 million.” If the claims are successful is most uncertain, the lessor admits: “Our claims are subject to the terms of the applicable policies, and given the unprecedented scenario and the magnitude of potential claims, insurers and reinsurers may raise various defenses. Accordingly, at this stage, we can give no assurance as to when or what amounts we may ultimately collect.”
Impairment results in a $216 million loss
The impairment pushed the fourth quarter (December-February) result into a $215.8 million net loss compared to $-95.8 million in the same period of FY20. Fourth-quarter revenues increased to $169.4 million from $137.9 million. For the full year, Aircastle reported a $278.2 million loss versus $-333.2 million in the previous year, with revenues at $595.2 million from $611.4 million. Liquidity stood at $2.1 billion.
Lease collection rates were 95 percent on average for the full year and 103 percent in Q4. As the effects of the Covid-crisis softened, so did the number of requests from lessees for payment deferrals and lease restructurings. At the end of February, deferrals stood at $55.5 million from nine customers, with 93 percent of this part of broader restructurings.
Aircastle took delivery of eighteen new aircraft, including fourteen Airbus A320neo-family aircraft, Boeing MAX, and Embraer E195-E2s. It sold fifteen aircraft and other flight equipment with an average age of sixteen years.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.
