Southwest makes sale, leaseback plane deal

[UAL_TECH]

Southwest makes sale, leaseback plane deal

Under the first part of the deal, which closed Tuesday, the airline sold five of the aircraft and agreed to lease them back and continue to operate them and maintain them. Southwest will make monthly payments totaling roughly $7.8 million for the five aircraft for the first six months of the leases. The payments will be reset every six months.

Southwest expects to close the second part of the transaction in the first quarter of next year. It provides for the sale and 16-year leaseback of five more Boeing 737-700 aircraft on similar terms, including proceeds, as the first part of the deal.

Good Luck Everyone!

B) xUT

 

[swflyer]

This is not the first time we've done this.

We've always owned a majority of our fleet, but have done the sale/leaseback thing all the way back to the -200's.

Thanks for your concern.

Southwest makes sale, leaseback plane deal



Good Luck Everyone!

B) xUT

 

[UAL_TECH]

This is not the first time we've done this.

We've always owned a majority of our fleet, but have done the sale/leaseback thing all the way back to the -200's.

Thanks for your concern.

Sorry, I did not know that. I did not post out of malice but it seems strange that the airlines are selling their aircraft then leasing them back. Hopefully, there must be some huge tax benefit to do that besides the short term gains of immediate cash.

U.S. Airlines Grab Cash In Crunch Over Credit

Good Luck

B) xUT

 

[SharoninSAT]

Sorry, I did not know that. I did not post out of malice but it seems strange that the airlines are selling their aircraft then leasing them back. Hopefully, there must be some huge tax benefit to do that besides the short term gains of immediate cash.

U.S. Airlines Grab Cash In Crunch Over Credit

Good Luck

B) xUT

Thanks UT

 

[swflyer]

Sorry, I did not know that. Good Luck

B) xUT

Actually it's a REALLY good question, UT. Someone smarter than me needs to answer about specifics.

I think (uh, oh!!) that it can be about liquidity, cash is king. But I can see how it also increases our flexibility, both financing our own aircraft purchases and, should it become necessary, returning older planes to lessors. I know they were -700s, this time.

There's a video on YouTube, I just saw, of one of our old -200s flying for Air Slovakia. They replaced "Southwest" with "Air Slovakia", in script, and are flying our former colors.

At least I know they were well cared for, whilst we had them.

 

[UAL_TECH]

Actually it's a REALLY good question, UT. Someone smarter than me needs to answer about specifics.

I think (uh, oh!!) that it can be about liquidity, cash is king. But I can see how it also increases our flexibility, both financing our own aircraft purchases and, should it become necessary, returning older planes to lessors. I know they were -700s, this time.

There's a video on YouTube, I just saw, of one of our old -200s flying for Air Slovakia. They replaced "Southwest" with "Air Slovakia", in script, and are flying our former colors.

At least I know they were well cared for, whilst we had them.

Maybe FWAAA can explain it to us.

Take Care,
B) xUT

 

[citrus jock]

Sorry, I did not know that. I did not post out of malice but it seems strange that the airlines are selling their aircraft then leasing them back. Hopefully, there must be some huge tax benefit to do that besides the short term gains of immediate cash.

U.S. Airlines Grab Cash In Crunch Over Credit

Good Luck

B) xUT

Our VP of Flt. Ops. explained it in a recurrent class a few years ago. IIRC, he said there are about a half dozen pre-delivery deposit payments (1 to 2 million per payment on average) made per aircraft, beginning about a year (?) prior to delivery. You could be talking about alot of money depending on the number of deliveries in a year. If these prepayments caused unrestricted cash to fall below a certain level, it would automatically trigger a preagreed upon exponential increase in interest rates of other loans. That could mean tens of millions or hundreds of millions of dollars (until unrestricted cash rose). Of course, this was explained to us while simultaneously explaining the dire need for pilots to take paycuts, while management kept their bonuses. <_<

 

[BoeingBoy]

Sale/leasebacks are primarily used to either raise cash (when doing it with planes that have been in the fleet a while) or to keep from using so much cash (for new deliveries). Two other alternatives are mortgaging airplanes (basically like you buy a house) by borrowing money and using the planes as collateral, or strictly leasing from one of the leasing companies like IFLC. Most big airlines do more of these transactions, or at least for more of their fleet than Southwest. For example, US owns outright no airplanes - they're all either leased or mortgaged. Owning a significant portion of the fleet gives Southwest more flexibility than most - they can sell/leaseback or mortgage planes if necessary to raise cash or they can park owned airplanes with very little cost if necessary. Using US as an example of the other extreme, they have no unencumbered airplanes that can be used to raise money and have to continue to pay lease or mortgage payments if they park airplanes. US' only out is returning planes to the lessor as the leases expire.

Jim