Since the outbreak of the Russia-Ukraine war, over 70 aircraft leased to Russian airlines could not be reclaimed, causing several Chinese companies to suffer losses of billions of yuan. Currently, these companies have had to pursue recourse for their losses through insurance claims and legal actions, as well as significantly devaluing assets to cope with the situation.
One of these companies, Guangzhou state-owned enterprise “Shanhe Intelligence,” revealed in their latest announcement that their wholly-owned subsidiary AVMAX could not reclaim 3 aircraft leased to Russian clients since February 2022. After multiple failed negotiations and recovery attempts, AVMAX ultimately reached a compensation agreement with the insurance underwriter, receiving a settlement of $29 million, netting $22.9651 million after deducting related expenses, equivalent to about 164 million yuan.
Another enterprise, “Rifa Precision Machinery,” is facing a similar ordeal. Among the six B757-200 cargo aircraft leased to Russian clients by its subsidiary Airwork, only one has been recovered, leaving the other five stranded in Russia. The company provisioned for a devaluation loss of 741 million yuan in October 2022 for these 5 aircraft and is currently seeking claims through legal means against the insurance company QBE.
Shenzhen-based “Guoyin Jinzu” terminated lease contracts for 15 aircraft with Russian airlines, managing to reclaim 6 but still having 9 aircraft stranded in Russia, resulting in confirmed devaluation losses of 2.414 billion yuan.
Two aircraft from China Aircraft Leasing are also stuck in Russia, resulting in a full provision of 438 million Hong Kong dollars in losses in 2022.
The asset losses for industry-leading companies are even more severe. Avolon, the world’s second-largest aircraft leasing company under Bohai Leasing, has 10 aircraft located within Russian borders, leading to a devaluation loss provision of $298 million, approximately 2.142 billion yuan.
China Bank’s subsidiary, China Bank Aviation, has 17 aircraft stranded in Russia, resulting in a full asset devaluation provision of $804 million, around 5.78 billion yuan.
Industry insiders disclosed to mainland media that the impact of aircraft being stranded in Russia is quite extensive. Over half of the fleet of Russian cargo and passenger airlines consists of leased aircraft, with more than half of them leased from overseas lessors.
According to statistics from the Civil Aviation Institute of China, Chinese lessors involved in leasing aircraft to Russia include institutions such as China Bank Leasing, Guoyin Leasing, Gongyin Leasing, Avolon under Bohai Leasing, Henan Aviation Capital and Avia AM, a joint venture leasing company based in Lithuania.
It was verified by Epoch Times reporters that the aforementioned Chinese companies providing leasing services to Russian airlines are either state-owned or state-controlled enterprises.
Due to the inability to confirm the airworthiness status of the stranded aircraft, most leasing companies have fully devalued these planes, reducing their book value to zero directly.
Furthermore, in the face of substantial losses, insurance claims have become the primary recourse. Following the successful insurance payout, Shanhe Intelligence received a 126 million yuan post-tax compensation, which is equivalent to 172.92% of its previous year’s net profit.
Guoyin Jinzu was also among the first to receive insurance compensation for their grounded aircraft in Russia in 2023, accumulating reimbursement of 1.562 billion yuan for 5 aircraft.
China Bank Aviation Leasing received $208 million cash from Russian insurer NSK in 2023 for the 8 stranded aircraft, and in March 2024 successfully recovered two Boeing 747-8F freighters.
However, not all companies have been able to obtain compensation smoothly. Some companies have turned to legal remedies, such as Rifa Precision Machinery, currently suing the insurance company QBE in the High Court at Auckland, New Zealand. Bohai Leasing has also initiated legal proceedings regarding insurance claims related to the stranded aircraft in Russia.
Nevertheless, industry analysts point out that the issue of aircraft stranded in Russia will continue to plague relevant companies for a considerable period, becoming a significant risk factor for the industry’s development.