Significant Financial Assistance worth Billions for Grounded Aircraft in Russia
A significant legal dispute is underway in London this week, as plane owners take on their insurers in court. These plane owners are demanding compensation after their insurance companies refused to pay out following the grounding of numerous aircraft in Russia following the Ukraine incident. The potential financial stakes here are enormous, with estimates suggesting that billions of dollars could be on the line.
Names included in the lawsuit are well-known insurance companies such as AIG, Chubb, and Lloyd's of London. These entities have all refused to cover the costs of Boeing and Airbus planes that were grounded in Russia following the aforementioned incident.
Among the plaintiffs is AirCap, the world's leading aviation leasing company, which is seeking around $3 billion from its insurers. Analysts are suggesting that the aviation insurance industry could be facing its biggest loss ever if AirCap and other plaintiffs are successful in their claims. This loss could potentially surpass that seen in the wake of the 9/11 attacks.
In total, over 500 planes, valued at approximately $10 billion, have been stranded in Russia since the invasion in February 2022. While some leasing companies were able to retrieve their planes, the majority remain in Russian hands and are being operated by Russian airlines.
Insurers' legal teams are expected to argue that it's premature to declare a total loss, as the planes have not been destroyed and could still potentially be recovered. They may also highlight that the conflict between Russia and Ukraine is far from resolved.
At issue is not only whether aircraft lessors are covered by insurance but also which policy applies: war or all-risk insurance. The latter insures against all damages not explicitly excluded in the fine print. The judge will need to decide the legal basis for the loss and clarify whether the planes were seized by the Russian government or stolen by airlines.
AirCap has scored some victories already, having reached settlement agreements worth $1.3 billion with various Russian airlines and their insurers in 2023. However, insurers had initially rejected all compensation claims, citing the ongoing war as a reason.
Plaintiff AirCap, along with other aircraft lessors, is utilizing war or all-risk insurance to seek compensation from insurers like AIG, Chubb, and Lloyd's of London, citing the grounding of their Boeing and Airbus planes in Russia. Despite insurers' argument that it's premature to declare a total loss, these aircraft, valued at around $10 billion, continue to be stranded and operated by Russian airlines.
