By Jamie Freed

(Reuters) – BOC Aviation Ltd, an aircraft lessor, believes that a deadline of just more than two weeks for lessors to terminate contracts with Russian airlines due to sanctions on its invasion in Ukraine is unrealistic. A senior executive stated this Thursday.

According to transcripts of earnings calls, Chief Operating Officer David Walton stated that the EU and UK sanctions had set a 28 March deadline for terminating aircraft leases. This is a ridiculous timeframe for approximately 500 Russian aircraft being leased by operating lessors.

He said that BOC Aviation would adhere to the sanctions, and was in discussions with its customers about logistics for recovering their planes.

Russia released a draft law Thursday which could prohibit its airlines from returning leased aircraft. This raises the stakes for a fight with Western finance, worth more than $10 billion.

BOC Aviation stated that its 18 aircraft leased from Russian airlines had an estimated book value of $935M and may also have been affected by cancellations of insurance policies following Russia’s invasion.

According to its financial reports, the lessor reported that certain insurance elements related to Russian aircraft leased or located in Russia are being progressively cancelled by international aviation markets. We are closely monitoring this complex, rapidly changing situation.

BOC Aviation has 4.8% (by book value) of its assets leased to Russian airlines. This is the first time that a public statement was made by a leasing firm to confirm the upheavals in the aviation market.

According to experts, the flood of claims that could result in writedowns or other damages may trigger an extended dispute between insurers as well as lessors regarding liability.

Robert Martin, chief executive of BOC Aviation, stated that Russian rental payments are fully up-to-date as of February. Russia’s domestic market for aviation was among the best performers worldwide during the pandemic.