The world’s largest aircraft lessor AerCap is entitled to recover a claim of over $1bn from insurers, after it “lost” aircraft in Russia following the country’s 2022 invasion of Ukraine. The ruling, made in London at the UK High Court also includes several additional lessors who were also were unable to retrieve aircraft from Russia, some three years after the invasion.
AerCap’s claim was heard during a 12-week trial at the UK High Court, involving 13 legal teams, 24 witnesses and 14 experts.
Six actions were brought before the court, these included claims made by AerCap, Dubai Aerospace Enterprise (DAE), Merx Aviation, KDAC Aviation Finance, Falcon and Genesis. These claims were made against a number of insurers, including AIG, Lloyd's, Chubb and Swiss Re.
The case centred around nearly 150 aircraft and multiple engines, which the claimants stated had been lost in Russia. AerCap contended that it lost 116 aircraft – the largest claim made during the trial. These aircraft and engines had insurance claims worth $4.5bn attached.
In his judgment, Judge Christopher Butcher ruled that the claimants "war risk insurance policies" were triggered, meaning that as losses of the aircraft and engines were directly caused by government actions following the Russia's invasion of Ukraine, the insurers are obligated to compensate the aircraft lessors for their losses under the terms of the policies.
The trial focused-on insurance policies taken out by the aircraft lessors, referred to as 'Lessor Policies' (LPs), which are distinct from the 'Operator Policies' (OPs) taken out by the lessees. The LPs include 'Contingent Cover' and 'Possessed Cover,' and the scope of these coverages was heavily contested.
Within court documents, it concluded that the contested aircraft were lost in Russia on March 10, 2022. The primary reason for the loss of the aircraft was government implementation of resolution No. 311 (GR 311). Issued on March 9, 2022, coming into force the following day, this rule imposed an export ban on aircraft and aircraft engines, until the end of 2022. This ban was later extended to December 31, 2025.
The judgment clarifies that the loss was specifically due to these government actions.
AerCap’s initial case for $3.4bn was reduced to around $2bn, according to court filings, with the lessor’s cover under war risks limited to $1.2bn. Until February last year, AerCap’s 116 jets and 15 engines remained in Russia, used by 15 airlines including Aeroflot.
In December 2021, Aeroflot’s fleet consisted of 183 aircraft, this included 15 aircraft owned by the airline, 81 by owned by domestic lessors, 29 owned by EU/UK/US lessors, and 58 owned by other foreign lessors.
In 2022, AerCap recognised a pre-tax net charge of $2.7bn to earnings, which included a total loss write-off with respect to the assets which remained in Russia and Ukraine and impairment losses with respect to the assets which the lessor had recovered from Russia and Ukraine at that time. Following recoveries of $1.3bn in 2023 and $195 million in 2024, this indemnity award will bring AerCap's total pre-tax recoveries relating to the Ukraine conflict to approximately $2.5bn.
AerCap's law firm, Herbert Smith Freehills Kramer, said the judgment secured $1.035bn for the lessor.
"We are proud to have secured this outcome for AerCap,” said Alexander Oddy, partner at Herbert Smith Freehills Kramer. “Today's judgment underscores the importance of insurance in today's uncertain world, as well as the need for insurers to accept their responsibilities. It is a testament to the hard work and dedication of our team across a number of years."
These claims were managed and tried together, with the trial starting on October 2, 2024. The Genesis action was later included to be tried concurrently with the other LP claims. During the trial, KDAC settled with its insurers, and its action was dismissed.