Two decades ago, as a resurgent Russia sought to reclaim its place on the global stage, flagship airline Aeroflot PJSC and various startup carriers accelerated their shift from Soviet-era Ilyushins and Tupolevs to modern jetliners. That proved a bounty for Airbus SE and Boeing Co., of course, but it also enriched a less exalted corner of the aviation business: aircraft leasing firms. Dozens of lessors jumped in, and today about half of the 1,000 planes in the Russian fleet are owned by companies outside the country. Vladimir Putin’s war in Ukraine has thrown that market into turmoil, setting up a high-stakes tussle between leasing companies and their insurers, who say they’re not obligated to pay many claims because sanctions required them to drop coverage in Russia.
Days after the invasion, the European Union, seeking to pressure Moscow to withdraw its troops, ordered lessors to take back their planes. About 30 jets were seized in places such as Hong Kong, Istanbul, and Mexico City. But the Kremlin quickly imposed its own ban on most international flights for Russian airlines, leaving almost 400 foreign-owned aircraft stranded. When the places where the planes were registered—mostly Bermuda and Ireland—withdrew their safety certifications, Russia encouraged its carriers to also register them at home, a move that’s banned by international aviation treaties. “I don’t think anyone in the insurance market contemplated Russia re-registering Western aircraft,” says Garrett Hanrahan, global head of aviation at insurance broker Marsh. “The equipment, the hulls, and the engines in Russia are likely to stay there.”