AerCap’s $46m lawsuit highlights Russian plane lessor’s woes

Details of a $46 million claim made by an Irish subsidiary of Dublin-based aircraft leasing giant AerCap against UniCredit in London shed light on behind-the-scenes maneuvers initiated by aircraft lessors to limit their exposure to potential losses in Russia.

Eastern plane lessors – many of which are based in Ireland – have had to terminate lease contracts with Russian carriers due to sanctions imposed on Russia after its invasion of Ukraine in February.

But Russia has seized leased planes that have remained within its borders, with little chance of the lessors regaining control.

AerCap’s Celestial Aviation Services has filed its $45.8 million (€42.2 million) claim against UniCredit, the Italian bank that guaranteed aircraft lease payments on behalf of Russia’s biggest lender, Sberbank .

Celestial’s claim against UniCredit relates to letters of guarantee related to leases for two Boeing 747-400ERF cargo aircraft and three Airbus A319-100 aircraft. The two 747s are leased to AirBridge Cargo Airlines, while the three Airbuses are leased to Aurora Airlines.

Aurora is a subsidiary of Aeroflot, controlled by the Russian state, and operates mainly from the far east of Russia.

AirBridge Cargo Airlines is part of the Volga-Dnepr Group headquartered in Moscow and is the largest air cargo carrier in Russia. However, its activity disintegrated following the imposition of sanctions.

Between 2017 and 2020, Russia’s largest lender, Sberbank, issued a total of seven stand-by letters of credit relating to the aircraft leased by Celestial, in favor of the Irish company. UniCredit guaranteed the letters of credit.

Lessors can call on these letters of credit in the event of default by a lessee.

The letters of credit required Celestial to state that it was drawing on the covenant due to default by the tenants.

On March 2 this year, just days after the Russian invasion began, Celestial wrote to UniCredit asking it to pay under four of the letters of credit provided by Sberbank. The amount requested is $44.5 million.

Two days later, Celestial made another claim regarding three of the letters of credit for a total of $1.3 million.

“Wrongfully and in breach of its obligations under the Letters of Credit, the defendant has refused to pay these sums or any part thereof,” Celestial said in its complaint to the High Court in London.

UniCredit wrote to Celestial on March 7, saying it was unable to make the payments because sanctions prohibited it from doing so. Celestial disputed this claim.

“Letters of credit operate independently of the underlying transactions (namely, leases) and create stand-alone payment obligations,” he said.

“Plaintiff is entitled and seeks the sum of $45.8 million,” Celestial notes in its claim. “Alternatively, plaintiff suffered losses and damages in the same amount and seeks damages in the same amount.”

Last month, AerCap said it had $260 million in letters of credit tied to its Russian assets. By the end of March, approximately $175 million had been received by AerCap under these instruments.

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