Singapore Airlines Generates $1.5 Billion From Aircraft Leaseback Sales

Singapore Airlines has raised approximately US$1.5 billion for the sale and leaseback of 11 of its widebody aircraft. The airline has been struggling with liquidity during the pandemic and will use the money to help it navigate the ongoing low demand.

Singapore Airlines Generates $1.5 Billion From Aircraft Leaseback Sales
Singapore Airlines has raised liquidity by the sale and leaseback of 11 aircraft. Photo: Singapore Airlines

The airline confirmed in a statement today that it had completed the sale and leaseback of seven Airbus A350-900s and four Boeing 787-10s. Reportedly four parties were involved in the process, and the airline raised S$2 billion (US$1.5 billion).

A sale and leaseback transaction is when an airline sells its planes but then takes the aircraft back on a lease. It is an effective way to raise money without cutting the number of aircraft available for use.

The breakdown of the transactions is: Aergo Capital Limited has taken one of each type of aircraft, as has Munzinich and Co Limited. EastMarchant/Crianza Aviation bought one Airbus and two Boeings. Altavair snapped up the remaining four Airbus aircraft.

Like many airlines, Singapore Airlines has been struggling with liquidity in recent months as the pandemic continues to impact revenue. The sale and leaseback of the 11 aircraft is part of an ongoing attempt to raise cash and cash-equivalent assets.

Singapore Airlines Generates $1.5 Billion From Aircraft Leaseback Sales
The transactions aw seven Airbus A350 and four Boeing 787 acquired by four lessors. Photo: Singapore Airlines

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Increasing liquidity

As part of the announcement regarding the sale and leaseback, Singapore Airlines also provided an update on its liquidity situation. The airline confirmed it had raised approximately S$15.4 billion (US$11.5 billion) in fresh liquidity since April 1st, 2020. This includes the recent transaction as well as S$8.8 billion (US$6.6 billion) raised in a rights issue back in June 2020.

The airline raised a further S$2.2 billion (US$1.6 billion) by issuing convertible bonds and notes and another  S$2.1 billion (US$1.5 billion) from secured financing. Singapore Airlines also has the option to raise a further S$6.2 billion (US$4.6 billion) in mandatory convertible bonds at the Annual General Meeting in July. Goh Choon Phong, chief executive of Singapore Airlines, commented,

“The additional liquidity from these SLB transactions reinforces our ability to navigate the impact of the COVID-19 pandemic from a position of strength. We will continue to respond nimbly to the evolving marketing conditions, and be ready to capture all possible growth opportunities as we recover from this crisis.”

Delta Getty
Delta, easyJet, and Cathay Pacific are amongst many airlines that have used sale and leaseback to boost liquidity. Photo: Getty Images

Sale and leaseback during the pandemic

Entering into sale and leaseback arrangements has been a fairly common response from airlines over the course of the pandemic. The agreement with a leasing company allows the airline to access cash previously tied up in the asset. Importantly, it means the airline can still use the aircraft, and they haven’t reduced the number of seats available.

Early on in the pandemic, Delta Air Lines entered into two sale and leaseback transactions with BBAM Aircraft Leasing & Management and Altavair AirFinance for the combined total of US$1 billion. easyJet did the same in August 2020 with an agreement with Bocomm Leasing, and Cathay Pacific sold and leased six 777-300ER for a total of US$704million.

In fact, the pandemic has seen a significant increase in the number of sale and leaseback transactions. Singapore Airlines is only the latest in a long list of airlines to take advantage of these agreements.

What do you think of airlines opting for sale and leaseback as a way to get cash quickly? Let us know what you think in the comments.