DAE posts first-half loss after writing off Russian aircraft leases

Jet lessor incurred loss of $397.8m in six months to June 30, compared with profit of $49m in previous 12 months

Dubai Aerospace Enterprise outlined the impact of the Russia conflict on the plane leasing business. Photo: DAE Capital

Jet lessor Dubai Aerospace Enterprise recorded a first-half loss after a $576.5 million write-off related to “loss of control” over planes it had previously leased to airlines based in Russia.

DAE incurred a loss of $397.8m in the first six months of 2022, compared with a profit of $49m in the previous 12-month period, it said in a statement on Thursday.

However, before net exceptional items, the Dubai-based plane lessor said it had earned a profit of $140.1m during the six-month period, ending June 30.

DAE had leased 22 aircraft to Russia-based airlines but ended the contracts in compliance with western sanctions following Ukraine war. The company said that it had “no control” over 19 jets currently in Russia.

“The group has no way to determine whether these aircraft will be returned at any point in the future,” DAE said.

The company is now focused on filing insurance claims to recover the amounts due after the write-off. It fully expects to recover these funds but it will “take time to get resolved”, Firoz Tarapore, chief executive of DAE, said in an earnings call on Thursday.

DAE's total revenue of $582.8m for the six months of 2022 was down by 5 per cent to $613.4m for the same period last year.

This is due to lower net lease revenue, primarily because of lease terminations of aircraft in Russia, cash accounting on customers who entered administration and lease restructurings due to the Covid-19 pandemic, the company said.

DAE Capital, which continues to be active in the secondary trading market, has committed about $750m in the first half of the year to acquire assets for both its owned and managed portfolios, the company said.

In terms of asset sales, DAE said it had secured a mandate to acquire up to $1.75bn of additional aircraft assets.

During the first half of the year, the lessor acquired 34 aircraft and sold 27 jets, it said.

It also signed 85 lease agreements, extensions and amendments during the period.

The total number of aircraft in DAE's fleet as of June 30 had reached 390, comprising 297 owned jets, 85 managed and eight committed aircraft.

Cash flows from operating activities for the January to June period increased by 36.1 per cent to $678.5m.

“Air travel demand continues to be strong and all leading indicators continue to point to a strong summer season for our airline customers,” Mr Tarapore said in a statement.

Supply side constraints, particularly among airports, as well as inflationary concerns, have not dented demand, but are likely to be a key constraint as airlines work towards returning to 2019 levels, he said.