Gregory Polek has spent his entire career in aviation journalism with AIN, starting as a proofreader and assistant to then-managing editor Mary Mahoney in 1995 after serving an internship with&nbsp;New Jersey Monthly&nbsp;magazine and completing his B.A. degree in English/Writing at New Jersey’s William Paterson College. By 1997 Polek accepted a position as an associate editor, covering the regional airline beat for&nbsp;Aviation International News&nbsp;in place of retiring industry veteran Don Anderson. The assignment took Polek across North America and Europe to profile regional airlines varying in size and mission from the likes of floatplane operators Kenmore Air and Chalk’s Ocean Airways to regional jet operators such as SkyWest and American Eagle. Today, in his dual role as Air Transport Editor and International Airshow Editor, Polek writes, edits, and manages AIN’s commercial aviation content while overseeing each of the company’s daily international air show publications in Paris, Farnborough, Singapore, and Dubai. Most recently Polek has assumed oversight of daily coverage of the Helicopter Association International’s annual Heli-Expo convention.

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Gregory Polek

Irish lessor AerCap has terminated all its leases with Russian customers and repossessed 22 out of 135 of its aircraft in the country, amounting to about 5 percent of its fleet value, company CEO Aengus Kelly said during a March 30 earnings call. Also recovering three out of 14 engines it leased to Russian customers, the net value of the assets removed from the country amounts to about $400 million. AerCap estimates that the value of its assets leased in the country at $3.1 billion.

 


The terminations met the European Union’s March 28 deadline under sanctions it imposed on Russia in response to its invasion of Ukraine. According to trade group Aircraft Leasing Ireland, all Irish aircraft lessors have terminated their contracts with Russian operators.

 


Kelly and AerCap CFO Peter Juhas stressed that insurance coverage could help offset losses the lessor would incur from its inability to recover the rest of its Russian-based airplanes, many of which airlines have placed back into service under Russian registration. AerCap recently submitted a $3.5 billion worth of insurance claims for airplanes and engines it cannot repossess.

 


“As you would expect we have taken aggressive steps to recover these assets,” said Kelly. “Let me add that our lessees are required to provide insurance coverage with respect to leased aircraft and we’re insured under those policies in the event of a total loss of an aircraft. We also purchase insurance which provides us with coverage when our aircraft and engines are not subject to a lease, or if they are subject to a lease, a lessees policy fails to indemnify us.”

 


Now assessing the condition of the aircraft it has recovered, AerCap holds some $260 million of letters of credit related to Russian assets presented to banks, mostly representing security deposits that the lessor can draw upon in the event of a default, explained Juhas. The company has so far received some $175 million of that total from the banks, he reported. Considering the money recovered from the letters of credit and assets removed from Russia, AerCap’s remaining exposure totals $2.5 billion, he added.

 


AerCap’s situation is not unique among international leasing companies, which owned some 515 of the 777 aircraft leased in Russia before the conflict. Notwithstanding the March 28 EU deadline to repossess aircraft, Russia’s declaration that the sanctions amounted to an act of war—prompting the Kremlin to effectively take possession of the aircraft—and the fact that EU, U.S., and Canadian sanctions have effectively prevented Russian-controlled aircraft from flying in European and North American airspace severely complicated the task from the start.

 


An executive with a leading leasing group speaking with AIN on the condition of anonymity in early March said that companies face serious legal and logistical challenges in recovering their assets. Some have looked for ways to get aircraft flown to countries such as Kazakhstan, where they could repossess the assets in a process that could involve hastily switching the jets to new registries. The executive added that about 12 months ago, his company started reducing its exposure to the Russian market in anticipation of political instability. However, he conceded that no one in the industry had anticipated the extent to which the Putin administration would violate international legal conventions.

 


Given the sensitivity and fluidity of the situation, most leasing groups have shown reluctance to comment on the record. Apart from AerCap and fellow Irish lessor Avolon, which told Reuters that 10 of the 14 airplanes it leased to Russian airlines remain in the country, other publicly listed companies, also including Air Lease Corp., so far have shown particular sensitivity about speaking out.

 


One lessor with particular exposure to Russia, Dubai Aerospace Enterprise (DAE), said on March 3 that Russian airlines operated some 7 percent of its leased fleet by net book value. Its current fleet size totals&nbsp;425 aircraft serving 114 airlines, with a total aircraft portfolio value of $16 billion and an average age of 6.6 years. “DAE intends to fully comply with all applicable sanctions including those which currently prohibit the leasing of aircraft to an entity in Russia or for use in Russia,” it told AIN.

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