Analysis: A multi-million case in the High Court has highlighted the risks and complexities posed by wars and conflicts on aviation leasing
The recent verdict in a case concerning jets stranded in Russia following its 2022 invasion of Ukraine has set a precedent that will have lasting implications for Ireland's aviation leasing sector. With Dublin being the hub of the global aircraft leasing industry, the outcome of this case will shape legal, financial, and strategic decisions for years to come.
How did we get here?
Ireland has been a global hub for aircraft leasing and aviation finance since the 1970s, a legacy that began with Tony Ryan's pioneering work at Guinness Peat Aviation (GPA). His innovative leasing model paved the way for industry giants like AerCap and Avolon, both now headquartered in Dublin. This business model allows airlines to expand their fleets without massive upfront costs, positioning Ireland as a leader, managing over 60% of the world’s leased aircraft.
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From RTÉ Archives, Andrew Kelly speaks to GPA and Ryanair's Tony Ryan in 1990
Following Russia's invasion of Ukraine in 2022, Western sanctions forced leasing companies to terminate contracts with Russian airlines. This led to an unprecedented crisis, with over 400 Western-owned aircraft, valued at approximately $10 billion, effectively stranded in Russia.
In response, Russia enacted legislation on March 14, 2022, allowing its airlines to re-register foreign-owned aircraft domestically, complicating recovery efforts. Some of these jets were even sold within Russia, deepening the legal and financial complexities of the situation. Lessors, facing billions in losses, turned to their insurers to recover their financial exposure under war-risk and all-risk policies.
So why was the legal action taken in Dublin?
With many leading aircraft lessors headquartered in Dublin, it was logical for legal proceedings to take place in the High Court. Avolon, the world's second-biggest aircraft leasing company behind AerCap, was at the centre of this legal battle, along with other lessors such as SMBC Aviation, BOC Aviation and AerCap, all facing similar financial losses.
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From RTÉ Radio 1's News at One in Feb 2022, Omega Aviation's Ulick McEvaddy on why getting Irish leased aircraft out of Russia is "mission impossible"
At the heart of the dispute was whether insurers, including Lloyd's, Chubb, AIG and Fidelis, were obligated to compensate lessors for the aircraft that had been effectively seized by Russia. The insurers pushed back, arguing that the policies in place did not fully cover such extraordinary circumstances.
What was the outcome of the action?
In February, Avolon reached a confidential settlement with its insurers, reportedly worth $300 million. While the full details remain undisclosed, this agreement provides insight into how such disputes might be resolved going forward. Despite the settlement, uncertainty remains. Other lessors are still pursuing billions in claims against insurers, and it remains unclear whether further settlements or extended litigation will follow.
Avolon’s recent financial results offer some insight into how the company is moving forward. While the report does not go into detail about the settlement, it indicates that the company has begun to stabilise after its significant 2022 impairment losses of $304 million. The outcome of this legal battle will shape the industry’s approach to future geopolitical risks.
From CNBC International, Avolon CEO Andy Cronin says the company are seeing robust demand for aircraft, especially in Asia
What does this mean for the aircraft leasing industry?
One immediate consequence is that insurers are likely to tighten policy terms and raise premiums for war-risk coverage, making aircraft leasing in politically unstable regions significantly more expensive. In response, leasing companies may also implement stricter contractual safeguards to protect against geopolitical disruptions, such as requiring larger security deposits or alternative guarantees. As leasing companies adjust to increased costs and risks, airlines could see higher leasing rates, which may ultimately lead to more expensive ticket prices for passengers.
Meanwhile, Russia has been pushed to accelerate efforts to develop its own aircraft manufacturing industry to compensate for the loss of Western aircraft. However, ongoing sanctions and the lack of Western expertise are expected to make this transition slow and costly.
'A broader shift in how the aviation industry manages risk'
The Dublin court ruling is about more than compensation for lost aircraft and it signals a broader shift in how the aviation industry manages risk. For decades, aircraft leasing operated under the assumption that planes could always be repossessed in the event of a dispute. The Russian crisis has challenged that confidence, suggesting that future leasing contracts may need to redefine force majeure clauses and place greater emphasis on geopolitical risk assessments.
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From RTÉ Archives, Bryan Dobson reports for RTÉ News in 1989 on the growth of Guinness Peat Aviation to become the world's largest aircraft leasing company
Moreover, this case has underscored Ireland’s central role in the legal and financial framework of global aviation leasing. The verdict will serve as a reference point for future disputes, reinforcing Dublin’s reputation as a key jurisdiction for aircraft leasing litigation.
The industry has learned a critical lesson: political risks can no longer be ignored. Aircraft leasing companies must now rethink their exposure, diversify their leasing portfolios, and demand stronger insurance protections. While the recent Avolon settlement provides some clarity, the broader legal battles are far from resolved. Other lessors are still locked in disputes, and insurers are preparing for potential additional payouts.
As the industry adapts to this new reality, one thing is clear: the days of business as usual in aircraft leasing are over. The sector must now evolve to withstand a world where geopolitical shocks can have multi-billion-dollar consequences.
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The views expressed here are those of the author and do not represent or reflect the views of RTÉ
