Aircraft lessor Dubai Aerospace Enterprises (DAE) has written off $576.5 million of planes leased to Russian air carriers. The leasing company previously leased 22 aircraft to Russian-based airlines. Following the Russian invasion of Ukraine, the company followed the example of other aviation companies and cut ties with its associates in Russia. The write-off was announced when the company released financial reports for the first nine months of 2022 on November 3rd.

Financial report

In the report released covering the company’s finances between January 1st and September 30th, the lessor suffered a total loss of $335 million. Despite the massive financial loss, the company did manage to generate $203.6 million in profit before the exceptional items were accounted for. It also saw a 20% increase in available cash flow, helping it to sustain its existing operations.

DAE aircraft in flight

Photo: DAE

The CEO of DAE, Firoz Tarapore, shared that the increase in interest rates and aircraft scarcity has created a difficult operating environment. Despite these challenges, demand continues to grow. Tarapore stated,

“The global shortage of aircraft availability and a rising interest rate environment is resulting in higher lease rental rates and robust residual values for the existing fleet. We continue to see demand for aircraft from airlines globally as travel demand remains resilient.”

Tarapore went on to share that the company is seeing positive results from its engineering department, which is making significant advancements toward reducing aircraft fuel consumption. This reduced fuel consumption will help decrease both carbon emissions and operating costs. Tarapore said,

“We also continued to enhance our ESG standing globally with a voluntary disclosure to CDP, one of the world’s leading environmental disclosure platforms, thus furthering our commitment to transparency and disclosure of the environmental impacts of our business.

“DAE Engineering achieved yet another quarter of record revenues as it continues to execute its multi-year strategic roadmap. With all hangar space fully committed for the final quarter of the year, we expect DAE Engineering to record its strongest year ever in 2022.”

Trapped aircraft

Three of the 22 aircraft DAE leased to Russian carriers were returned to the lessor before sanctions were put in place. DAE has stated that it is unsure if the remaining aircraft will ever be returned. It has accepted that these aircraft are a financial loss and has enacted the insurance policies for these aircraft that it put in place before they were leased which protect the lessor should the lessor be unable to recover the assets.

DAE Boeing 787 in flight

Photo: DAE

A spokesperson for DAE shared the following concerning the 19 unattainable assets,

“The group has insurance cover in respect of the 19 aircraft under a number of insurance policies and has filed insurance claims and a litigation claim to recover amounts due under the policies,”

These airplanes make up only a handful of the leased aircraft trapped in Russia. Roughly 435 aircraft from foreign lessors leased to Russian-based air transit companies were in the country when the sanctions began. This has caused a significant financial burden on the aviation industry, particularly harming the parties with capital tied up in unaccessible airplanes.

What do you think of DAE writing off these aircraft? Let us know in the comments below.

Source: The National News


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