Aircraft leasing group SMBC Capital takes $1.6bn hit from Russia

SMBC Capital Aviation, one of the world’s biggest aircraft lessors, took a $1.6b write-off to cover the loss of its planes stuck in Russia, but struck an optimistic note about the rebound the industry is enjoying. The Irish-based lessor said on Friday that it had taken a $1.6b impairment to cover the loss of 34 of its planes still in Russia following the invasion of Ukraine. Despite terminating the leases for the planes in line with international sanctions, Russian carriers were continuing to fly the aircraft. SMBC said it was “unlikely” that it would be able to recover the aircraft “within a reasonable timeframe, or at all”. The company added that it had the “benefit of significant insurance coverage” and expected that “substantial recoveries will be secured”. The war triggered a global rush among overseas leasing groups to recover more than 500 aircraft, worth an estimated $10b, from Russia. The country’s carriers, however, have continued to fly many of the planes, both domestically and internationally. Lessors have only managed to retrieve a handful of them in recent months despite efforts to repossess them at airports outside of Russia. Peter Barrett, SMBC CE, said the company had since renewed its insurance cover and that premiums had gone up “by multiples” in the wake of the war. The write-off left SMBC with a net loss of $1.1b in the 12 months to the end of March. It overshadowed a strong underlying performance for the year, with profit before tax and exceptional items of $336m — just shy of the $364.5m it reported in 2019, the year before the pandemic. Barrett said that despite “ongoing challenges, the business is benefiting from a market recovery that continues to gather pace and a positive rebound in airline and investor demand for our portfolio of high quality assets”.<br/>