Southwest Airlines (LUV.US) has taken the first step in its fleet monetization plan by signing aircraft sale and leaseback agreements.
1min read Southwest Airlines (LUV.US) will earn $92mn from the sale and leaseback of 35 Boeing (BA.US) 737-800 aircraft, marking the first step in a broader plan to monetize part of its massive fleet and large aircraft order book, the airline said on Tuesday.
The airline received a total of $871mn in proceeds from the December 2022 deal with Babcock & Brown Aircraft Management. The $92mn proceeds will be recorded in the fourth quarter of 2024. Another aircraft sale and leaseback is expected to be completed in January.
Southwest is currently trying to extract additional value from its more than 800 Boeing 737 aircraft and nearly 700 aircraft on order as part of a broader overhaul to improve investor returns that lagged peers in recent years. Other initiatives include abandoning the traditional model and offering premium seats with more legroom.
The fleet transactions aim to capitalize on surging demand and prices for aircraft as Boeing and Airbus (EADSY.US) face production challenges that are limiting new jet deliveries. The sale and leaseback agreements allow the airline to sell some of its 737-800 medium-range aircraft to lessors and then lease them back for a fixed period of 26 to 37 months. The transaction will add $2.6mn in annual rent payments.
The airline said it may also directly sell some of its fleet and some of the new 737 Max aircraft it received from Boeing. The company does not currently need those aircraft and would lose existing credit points if it did not accept the order. Southwest's Boeing order extends through 2031.
