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| 1 minute read

Aviation:  Lessors scramble to recover leased aircraft held hostage in Russia

Reed Smith is seeing a rising number of aviation and insurance enquiries from aircraft lessors exposed to the fall out of Russia’s invasion of Ukraine.

As has been well publicised in the national press, there are hundreds of commercial aircraft owned by Western, Asian and other entities which are on commercial leases to Russian airlines.  Estimates have suggested that the cost to the lessors (or perhaps their insurers) could be as high as US$10 billion.

As matters stand, these aircraft, which were operating both globally and regionally, now appear to be stuck on Russian soil presenting significant challenges for lessors who wish to recover them.  

The effective seizing of these aircraft by the regime appears to all but take “snatch and grab” tactics off the table, since self-help remedies under commercial leases or the assistance of courts (in Russia or elsewhere) are of little use given the regime’s intervention and the physical location of the aircraft (although one Russian lawyer cast doubt whether the regime's latest decree captured leased aircraft on the ground).

Lessors’ invidious position is further compounded by reinsurers’ notifications of a change to geographical limits under contingent liability insurance policies, often on as little as 7 days’ notice.  This means lessors have very little time to notify brokers/reinsurers of claims under these policies, such claims which may or may not have actually accrued by the time the deadline comes around.

The situation is incredibly fluid and rapidly evolving. Reed Smith is advising lessors both in relation to the recovery of aircraft and the submissions of claims under relevant insurance policies.

Jet leasing firms face $10bn hit. Moscow refuses to return 450 aircraft to West