Lessor SMBC Aviation Capital has taken an $1.6 billion impairment on 34 of its aircraft that are still in Russia, it reported on July 8. This makes SMBC’s loss on Russia one of the largest of all lessors. SMBC takes $1.6 billion impairment on Russian fleet.
SMBC announced the impairment in its FY21 results, which closed on March 31. Five weeks after Russia invaded Ukraine in February and various countries imposed sanctions on Russia, the lessor had terminated contracts for all aircraft. Yet, it has been unsuccessful in repossing the 34 aircraft.
In a media statement, CEO Peter Barret says: “It is unlikely that SMBC Aviation Capital will be able to recover the 34 owned aircraft within a reasonable timeframe, or at all. As a result, we have recognised a $1.6bn write-off in respect of the aircraft, representing a full impairment of the carrying value. We have the benefit of significant insurance coverage and have every expectation that substantial recoveries will be secured.” By comparison: AerCap reported a $2.4 billion net charge in May.
The one-off impairment resulted in a $1.1 billion net loss for FY21. SMBC is happy with a strong underlying performance, which produced a profit before tax and exceptional items of $336 million compared to $15.2 million in FY20 and almost on par with $364.5 million reported in FY19. Lease revenues were $1.5 billion versus $1.2 billion in the previous year.
The lessor has seen strong demand for the Airbus A320neo family and Boeing MAX, resulting in the placement of 41 aircraft during the year.
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.
In 2022, he has gone full-time freelance. Richard has been contributing to AirInsight since December 2018. He is also writing for Airliner World and Aviation News. From January 2023, he will add a part-time role with Dutch website and magazine Luchtvaartnieuws. Twitter: @rschuur_aero.