Finnair has sold another A350 to a leasing firm and will be renting back the airplane for a term of at least 12 years. It’s the latest move in the airline’s many-pronged mission to raise capital, as it awaits the outcome of a $488 million loan from the Finnish government.
Another A350 sold for Finnair
Amid the chaos of 2020, Finnair has again sold and leased back one A350-900 in a bid to raise cash. In a statement today, Finnair said that the aircraft will be sold to BBAM Aviation Services Limited, with Incline B Aviation Limited Partnership as a lessor guarantor, and leased back for a period of 12 years.
The airline took delivery of the plane in April 2019, one of 19 ordered by Finnair. So far, a total of 16 A350s have been delivered to the airline, but with the slump in international travel still ongoing, the need for cash is more pressing than the need to own planes. The deal, it says, will see it raising immediate capital of more than €100 million ($122 million).
Finnair advised Simple Flying that the aircraft in question is OH-LWO (Airbus A350 – MSN 300).
It’s the latest in a series of capital raising activities that the airline has been involved with. The airline previously sold an A350 in August, which was then leased back, also from BBAM, for a 12 year period.
As well as these more conventional means of raising capital, Finnair has been undertaking some more out of the box thinking in its search for liquidity. Earlier this month, it launched flights to see Santa that operate from home and has also begun selling its signature juice in Finnish supermarkets. It has also used one of its newest A350s as collateral for a €100 million loan.
The airline is still hopeful of a substantial loan from the State of Finland in the coming weeks. The loan, which is subject to EU approval, would be for €400 million ($488 million), enough to see the airline through the bitter winter ahead.
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Are sale and leasebacks a problem?
In themselves, sale and leasebacks are not a problem. Lessors provide a cushion to airlines that are in need of rapid capital, and during uncertain times like these, they are a real lifeline to carriers in need.
However, longer-term, there is a downside. Selling and leasing back an aircraft is a bit like selling your house and then living in it as a tenant. While the mortgage payments are gone, and you’ve got back your equity, you still have to pay every month to stay in that house. At the end of the lease term, you have nothing at all.
With aircraft, that could be a blessing or a curse. Finnair is getting its money back for planes it's already paid for, keeping it afloat in the short term. Longer-term, who knows what those planes will be worth after 12 years of use. Were they A380s, for example, probably not much at all – if they could even find a buyer. But for the modern A350, there is likely much life beyond 12 years.
Nevertheless, it’s a trend we’ve seen play out over 2020 with many an airline. What the impact of coming out of this crisis saddled with debt and ongoing lease payments will be, remains to be seen.