Court awards lessor BOC Aviation damages over Russian-operated freighters

Photo: Freedomz/ Shutterstock

Lessor BOC Aviation has been granted damages of more than $400m against Russian freight operators AirBridgeCargo and Volga-Dnepr, over defaults relating to three leased Boeing 747-8Fs.

The situation emerged after the Russian invasion of Ukraine in February last year, after which international sanctions were imposed on Russian carriers and lessors sought to retrieve their aircraft.

AirBridgeCargo was using three 747-8Fs – serial numbers 60117, 60118 and 60119 – which BOC Aviation acquired in 2017. The third aircraft had originally been leased to affiliated operator CargoLogicAir when BOC took ownership, and it was transferred to AirBridgeCargo in 2020.

As a result of the Ukrainian conflict the European Union prohibited insurance and reinsurance of aircraft used by Russian carriers. Having been notified of reinsurance cancellation for the 747-8Fs, BOC informed AirBridgeCargo that it would not be able to continue operating the jets in Russia because the reinsurance situation no longer met the lease agreement terms.

All three aircraft were outside of Russia – in Shanghai, Hong Kong and Zhengzhou – on 5 March last year, when BOC issued a grounding notice to the carrier.

But a US Southern District of New York court document detailing the case states that AirBridgeCargo flew two of the aircraft, 60117 and 60119, from China to Russia the next day.

BOC formally issued default notices to the carrier for all three aircraft, and demanded their return, but it has only been able to retrieve 60118 from Hong Kong, which was ferried to Arizona on 25 March 2022. Only two of its four General Electric GEnx engines were BOC Aviation’s – two others belonging to the lessor remain in Russia.

The court held a one-day bench trial on 3 April this year, for which AirBridgeCargo and Volga-Dnepr Logistics, as defendants, offered no witnesses.

Much of the claim for damages in the case has focused on whether there had been an ‘event of default’ and an ‘event of loss’.

The court has ruled that the existence of an ‘event of default’ is “undisputed” under the lease agreements for each aircraft, and that there were also ‘events of loss’.

It agrees with BOC that the situation was “foreseeable” by the defendants, rejecting the defence’s ‘impossibility’ argument, and also rules that the defendants did not prove the lessor had failed to mitigate its damages.

As a result it has awarded damages totalling $406 million, including nearly $176 million for aircraft 60117, almost $180 million for aircraft 60119, plus more than $50 million for the retrieved aircraft 60118.
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