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Dublin-based lessor SMBC suffers $1.6bn loss on 34 jets stranded in Russia

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SMBC chief executive Peter Barrett. Photograph: Simon Dawson/Bloomberg

SMBC chief executive Peter Barrett. Photograph: Simon Dawson/Bloomberg

Peter Barrett, chief executive officer of SMBC Aviation Capital

Peter Barrett, chief executive officer of SMBC Aviation Capital

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SMBC chief executive Peter Barrett. Photograph: Simon Dawson/Bloomberg

Dublin-based aircraft lessor SMBC Aviation Capital has written off $1.6bn (€1.6bn) worth of jets trapped in Russia after the government there seized assets following its invasion of Ukraine.

Releasing full-year results yesterday, SMBC said it has 34 aircraft stranded in Russia. The $1.6bn impairment pushed the lessor to a $1.1bn loss for the year ended in March.

However, it said a resurgence in airline activity had helped SMBC deliver a strong underlying performance for the period, with profit before tax and exceptional items soaring to $336m from $15.2m. Its lease revenue and other operating income rose to $1.5bn for the year, compared to $1.2bn in the 2020 financial year.

SMBC has a fleet of more than 730 owned, managed and on-order aircraft.

It recently finalised a deal to buy rival Dublin-based leasing company Goshawk in a move that will cement SMBC’s position as one of the world’s biggest aircraft leasing companies. That takeover – with an enterprise value of $6.5bn – is expected to complete in the final quarter.

SMBC CEO Peter Barrett confirmed that following Russia’s invasion of Ukraine, 34 of its owned aircraft remain in Russia “despite SMBC Aviation Capital terminating the leasing of these aircraft in line with international sanctions”.

He said Russian carriers continue to fly the jets within Russia and to countries from which repossession has not been possible.

“It is unlikely that SMBC Aviation Capital will be able to recover the 34 owned aircraft within a reasonable timeframe, or at all,” said Mr Barrett.

“As a result, we have recognised a $1.6bn write-off in respect of the aircraft, representing a full impairment of the carrying value,” he added.

“We have the benefit of significant insurance coverage and have every expectation that substantial recoveries will be secured.”

SMBC is owned by a consortium of Japan’s Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Finance and Leasing, and Sumitomo Corporation.

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Mr Barrett added that the underlying performance of the business in the last financial year demonstrates the “strong upward trajectory” of SMBC Aviation Capital despite the impact of the war in Ukraine and the Covid pandemic.

“While we are seeing ongoing challenges, the business is benefiting from a market recovery that continues to gather pace and a positive rebound in airline and investor demand for our portfolio of high quality assets,” he said.

Mr Barrett said that the acquisition of Goshawk will reinforce SMBC’s “leading market position and give us further momentum and competitive advantage”.

“Our shareholders are providing considerable support and the recapitalisation they are undertaking ensures we maintain our A-ratings with both S&P and Fitch,” he said.

“The expanded SMBC Aviation Capital will be very well suited to the shape of the recovery that is taking place.”


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