Another lessor has confirmed an impairment on aircraft that it has been unable to repossess from customers in Russia. Dubai Aerospace Enterprise (DAE) reported a $537.9 million net write-off on nineteen aircraft. DAE takes write-off on Russian fleet too.
Originally, DAE had placed 22 aircraft in Russia with Aeroflot, iFly, and Nordwind, but in its financial statements that were released on May 6, it mentions nineteen. “In response to the sanctions imposed against Russia, the Government of the Russian Federation has issued a number of decrees which provide, amongst other things, that Russian airlines are required to obtain governmental approval for the redelivery of aircraft to foreign lessors. In these circumstances, the Group has no control over the nineteen aircraft that are currently in Russia. The Group has no way to determine whether these aircraft will be returned at any point in the future.”
The total write-off is $576.5 million and includes aircraft, maintenance reserves, security deposits, and other assets and liabilities. Including a tax benefit, and the impairment of $537.9 million. This is 4.6 percent of DAE’s total assets before the write-off. DAE says that it has filed insurance claims of $1.0 billion so far “under certain policies”, but adds that “we expect to file additional claims to recover amounts due to us.” CEO Firoz Tarapore said in the earnings call that he expected to file these claims “in the coming weeks.”
We have now confirmed lessor impairments on Russia from Air Lease Corporation ($802.4 million), Avolon ($304 million), and Aircastle ($252 million). AerCap will report on its write-off on May 17 but said in March it will make an impairment.
DAE reports a 46.4 million profit before the impairment
After the on-off impairment, DAE booked a first-quarter loss of $-491.3 million compared to a $24.4 million profit in the same period last year. Without the impairment, DAE would have reported a $46.6 million profit. The operating loss including the write-off was $-467.4 million versus $113.8 million last year. Revenues were down to $298 million from $307.5 million, which includes the effects of lease restructurings offset by higher income from maintenance.
DAE is still feeling the effects of the Covid-crisis and until April executed relief packages including lease deferrals and other amendments for 43 customers. This resulted in accrued revenues of $129.6 million and a corresponding loss of $27.8 million this Q1 compared to $136.5 million and $-22.4 million at the end of December. Tarapore expects further improvements as the financial situation of its customers recovers. DAE ended the quarter with $2.6 billion versus $2.9 billion in December. It concluded a four-year $1.0 billion revolving credit facility in April. Net debt stood at $7.5 billion.
The Dubai-based lessor ended the first quarter with a fleet of 295 owned and 81 managed aircraft. It has unfilled orders for eight aircraft, of which seven Boeing MAX and one managed Airbus A320ceo coming in. DAE took delivery of three aircraft in Q1 and sold four. For the rest of 2022 and 2023, DAE will rely on sale and leasebacks and secondary aircraft to meet its growth targets, so don’t expect the lessor to place any direct new aircraft orders.
