United Airlines has entered into a sale and leaseback agreement with BOC Aviation for 22 of its aircraft. This means that BOC Aviation will purchase the planes from United and then lease those same planes back to the airline, as announced on April 19th.
The agreement between BOC Aviation and United
Reuters reports that BOC Aviation reported the sale of the 22 aircraft to the Hong Kong Stock Exchange on Sunday. The deal includes six Boeing 787-9 aircraft and 16 Boeing 737 MAX 9. Though the details are limited, the aircraft lessor indicated that the leases with United are long-term, meaning that the airline will continue to fly these aircraft.
This sale is a way for United to conserve some cash. Despite an agreement with the United States Treasury for $5 billion, the carrier still needs ways to raise more capital. This sale and leaseback means that United can earn some much-needed cash while also retaining aircraft for when they are ready to return to the sky.
Most likely, all of the 22 aircraft in this agreement are on the ground. The 16 MAX 9s, for sure, are grounded, while United’s expansive international route network has been significantly cut back in recent days.
Sale and leaseback agreements
These agreements are nothing new in the aviation world. Etihad also did the same for 38 aircraft in early February with a different company. In essence, these agreements do not change much about the aircraft and operation itself.
United can still customize the interior of these aircraft. This would be incredibly important for the 787-9s, which are set to undergo retrofits to include Premium Plus and Polaris.
In terms of its impact, United will receive some much-needed cash in the short-term with leasing installments in the long-term. Aircraft leasing is a complex web of agreements. However, leasing provides a way for airlines to acquire and operate new aircraft without requiring airlines to pay the full cost of the aircraft upfront, which can be in the hundreds of millions.
This company is a Singapore-based lessor wholly owned by the Bank of China with agreements around the world. The lessor works with airlines, including American, Interjet, Qatar Airways, and others.
As airlines around the world are facing negative pressure on their finances, BOC Aviation has made agreements with some carriers. This includes Cathay Pacific from whom the lessor purchased six Boeing 777-300ER aircraft.
At the end of March, BOC Aviation owned and managed a total of 363 aircraft with another 204 aircraft on order. This includes aircraft from the A320ceo and A320neo family, the A330ceo and A330neo family, Airbus A350s, Boeing 777-300s, Boeing 737 Next Generations, and Boeing 737 MAX aircraft.
For passengers, this sale and leaseback agreement will not affect too much. The aircraft will continue to fly United’s colors once the global MAX grounding is lifted and once international routes start to open up in full. In the meantime, this will provide much-needed cash for the airline.
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