SMBC Aviation Capital Receives $710 Million Insurance Settlement for Jets Leased to Aeroflot

Ireland-based aircraft lessor SMBC Aviation Capital has announced that it has received a substantial cash insurance settlement of $710 million for its jets previously leased to Russia’s state-owned airline, Aeroflot. The settlement amount reflects SMBC Aviation Capital’s claims on Aeroflot’s insurance related to 16 aircraft and their engines. Additionally, an insurance settlement has been reached for one aircraft and its associated engines managed by SMBC Aviation.

The aircraft lessor, which operates under Japan’s Sumitomo Mitsui Financial Group, has been facing challenges due to the refusal of Russia to release the leased jets after lessors canceled lease agreements to comply with Western sanctions following the invasion of Ukraine last year. Russia was once a significant market for aircraft lessors, who purchased planes from manufacturers like Boeing and Airbus and leased them to airlines in the country.

Last month, Aercap, the world’s largest aircraft lessor, also settled an insurance claim over Russia’s refusal to return 17 jets leased to Aeroflot. SMBC Aviation Capital has expressed its commitment to continue mitigating losses on aircraft previously leased to other Russian airlines, including S7 Airlines, Ural Airlines, Nordwind Airlines, and Nordstar Airlines. The lessor terminated these lease agreements in March 2022.

Sumitomo Mitsui Financial Group, the owner of SMBC Aviation through its leasing and banking units, expects to record $311 million in equity gains from affiliated companies in its third-quarter consolidated earnings for the current fiscal period, ending in March 2024. Similarly, Sumitomo Corp, a minority stakeholder in SMBC Aviation, anticipates a 30 billion yen ($200 million) after-tax profit from the insurance payment in the third quarter.

The insurance settlement provides a positive outcome for SMBC Aviation Capital, allowing the company to recover a significant portion of its losses. As the lessor continues its efforts to navigate the challenges posed by the Russian market, it remains committed to finding solutions and maintaining its position in the aviation industry.