Air Lease says Russia’s leased jet law could help claim insurance

March 16 (Reuters) – A new Russian law on leased planes has shown that Moscow can “confiscate” planes and such a move could help it claim insurance, Air Lease Corp (AL.N) said at a time. where rental companies risk canceling stranded jets in the sanctioned country.

“It (the law) helps the insurance issue because it demonstrates the intent to confiscate what I think is a critical aspect of our war risk insurance,” the chairman of the agency said on Wednesday. Air Lease, Steven Udvar-Házy.

The new law allows Russian airlines to place planes leased from foreign companies on the country’s aircraft registry and has raised fears of mass airliner failure. Read more

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Global leasing companies have been scrambling to repossess more than 400 planes worth nearly $10 billion from Russian airlines, which have mostly failed to respond to requests to return the planes. Read more

That raised the possibility of a long-running tussle between lessors and insurers, who could face multi-billion dollar payouts.

The law prompted AerCap Holdings NV (AER.N), the world’s largest aircraft leasing company, to notify insurers of a potential $1 billion loss, according to a report in The Insurer.(https ://bit.ly/3MWfAJK)

AerCap declined to comment. The publication of the fourth quarter results is scheduled for March 30.

Russia said the law aims “to ensure the uninterrupted operation of activities in the field of civil aviation”. Read more

Air Lease Chief Financial Officer Gregory Willis also raised the possibility that the governments of the United States and the European Union (EU) will step in to support the leasing industry if insurance payments become an issue.

“I can very easily see the government stepping in at some point like they did,” Willis said during a presentation at the JP Morgan Industrials conference.

Cowen analyst Helane Becker said she did not believe the US or EU would step in to provide support.

“The major Western donors exposed to Russia should be able to manage the situation without government support,” Becker said.

Shares of Air Lease closed up 3.7% after allaying fears over its exposure to Russia, as all of its planes are owned by private carriers in Russia that prefer to continue doing business with Western companies.

The company also has “very strong security deposits” on leased planes, Udvar-Házy said.

Air Lease, which had less than 5% of its fleet by net book value leased to customers in Ukraine and Russia, said it was making “good progress” in reducing its exposure to Russia.

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Reporting by Abhijith Ganapavaram in Bengaluru; Additional reporting by Aishwarya Nair in Bengaluru and Tim Hepher in Paris; Editing by Krishna Chandra Eluri and Arun Koyyur

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