Finnish flag carrier Finnair has sold one of its 15 A350s to raise money. The airline has undertaken a sale and leaseback of the aircraft and will continue operating it on a leased basis. This, it says, has improved its cash position by some €100 million ($118m).
Finnair has sold an A350 to raise cash
Finnair has sold one of its Airbus A350s. But the aircraft won’t be leaving the fleet, thankfully, as it is sold as part of a sale and leaseback deal.
The A350 sold was originally delivered to Finnair in February 2020. It is the newest A350 in the fleet and is registered as OH-LWP. It has been in regular service for Finnair since it entered operations, flying to Bangkok, Shanghai, Tokyo and Delhi amongst other destinations.
Most recently, the aircraft has been on a rotation between New York, Helsinki and Seoul. It was the 15th A350-900 to be delivered to the airline out of an order of 19. Right now, Finnair has 11 of its A350s in service, as it works to restore its network following an extensive grounding. Four remain parked.
Viidestoista A350-lentokoneemme, rekisteröintitunnukseltaan OH-LWP, on juuri nyt matkalla @Airbus'in tehtaalta @HelsinkiAirport'ille. ✈️ Tervetuloa kotiin! #a350 #feelfinnair pic.twitter.com/GdoTwbK0tM
— Finnair (@FinnairSuomi) February 10, 2020
According to the airline’s statement on the sale and leaseback, it was conducted with Nomura Babcock & Brown Co., Ltd. (“NBB”), and BBAM Aircraft Management LP as an arranger and lease servicer. The initial operating period is 12 years, with the option to extend.
While the positive cash effect won’t make a huge difference to the results of Finnair’s third quarter, the airline has revealed that the deal will improve its liquidity by more than €100 million ($118m).
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What’s a sale and leaseback all about?
The sale and leaseback market has been growing in popularity as airlines attempt to bolster their liquidity amid the unprecedented downturn in travel demand. With very little cash incoming, the airlines are being forced to liquidate their most valuable assets, which tends to be their owned aircraft.
In the past few months, we’ve seen easyJet selling six A320neos to a leasing firm, while low-cost Wizz Air has sold and leased back six A321neos to BOC Aviation. United also did a deal with BOC Aviation, selling a total of 22 aircraft for leaseback, while Delta Air Lines sold and leased back six of its A321neos. One of the biggest sale and leaseback deals seen to date, however, has to be Etihad Airways who sold 38 A330s and Boeing 777s, raising $1bn in the process.
Sale and leaseback has become the new normal in aviation, as airlines strive to secure the cash they need to keep operating. Of course, the downside to this is that the company, as a whole, decreases in value, because it has fewer owned assets. There is also the long term disadvantage of not owning aircraft, such as the commitment to pay expensive leases.
With just one A350 sold on a leaseback deal, Finnair is clearly not in the worst financial position. Last month, it raised $575 million through a rights issue, which will have helped bolster its reserves. But with a €600 million ($710m) loan to pay back and difficulties in restoring its network, there’s still a mountain to climb before it’s out of the woods.