Lessor Air Lease Corporation (ALC) says it is making good progress on getting its aircraft back from Russian airlines. “We are making good headways and minimizing our exposure on a weekly basis”, Chairman of the Board Steven Udvar-Hazy said on March 16 during the JP Morgan 2022 Industrials Conference. ALC making good progress on repossessing Russian aircraft.
Udvar-Hazy and CEO John Plueger repeated what they said last month during their 2021 results investor’s call that ALC is not exposed to state-owned airlines, but only has private airlines as its lessees. “The advantage of dealing with privately-owned airlines is that they very much see beyond the end of this current crisis. We believe that there is life after this crisis and they know they need our aircraft and those of other Western suppliers, so they are doing an excellent job in trying to manage this balance”, said Plueger, who stressed that ALC is fully complying with the US and EU sanctions.
“There is nothing within the sanctions that prevent you from talking to your customers”, added Udvar-Hazy. “You can be sure that records are being properly kept and the aircraft are being maintained.” ALC says that communications with Russia’s commerce department have been very transparent and that they have been “very receptive and smart.”
ALC didn’t want to disclose the value of the leased fleet in Russia, saying it will specify the numbers during its Q1 earnings presentation later. But according to Airfinance Journal, it is around $757 million for 25 aircraft. ALC’s website mentions S7 Siberia Airlines, Nordwind, iFly Airlines, and Ural Airlines as its customers in Russia.
AirInsight has identified five A320ceo’s, two A321ceo’s, six A321neo’s, and seven Boeing MAX 8s (of which two have been delivered) on lease to S7. iFly has one Airbus A330-200 and three A330-300s from ALC, Nordwind three A321ceo’s, two A321neo’s, two A330-200s, and five Boeing 737-800s.
The aircraft have been all registered in either Bermuda or in Ireland. With Bermuda to de-register all Russian-operated leased aircraft and Russia saying they will re-register them in their own books, this makes the position for the lessor quite complicated.
It could lead to insurance claims for those aircraft that can’t be repossessed. “We have insurance coverage. We have very strong security deposits packages and financial coverage as well”, said Plueger, although a legal battle is likely to be a long one. ALC isn’t ready to make any impairments yet. There might also be a role here for government assistance in both the US and EU, said Udvar-Hazy, who referred to 9/11 as a precedent for them to help out airlines and lessors.
ALC is close to placing ‘Russian’ MAX with a European customer
Udvar-Hazy said that ALC has a small number of the Boeing MAX on the backlog for Russian airlines (predominantly S7), which will now be redeployed “because of the probability of Russia certifying the 737 MAX is none in nil, so we feel we are totally free now to redeploy those aircraft. We will be meeting with a European carrier tomorrow (March 17) to take all of those.” ALC also has a few A321neo’s, “which are the hottest airplanes in the market”. “We have already made plans to redeploy those to other airlines.” He didn’t mention the position of the five A220s it agreed to lease to Azimuth Airline from 2023.
Aircraft that Airbus and Boeing have on direct order from Russian customers offer a further opportunity to ALC to take up. “We have a long-established history of jumping on those opportunities as they present themselves. And because of the single-aisle shortage with Boeing and Airbus, I think would find relief in being able to even work with us concurrently on campaigns. I see the greater opportunity for us going forward”, said John Plueger.
While the situation in Russia is significant and painful for Russian airlines and Western lessors, Udvar-Hazy pointed out that the impact of the pandemic on the airline industry has been far worse: “That was an 8.0 earthquake. This is like a 2.5 aftershock.”
