Southwest Airlines has entered a sale-leaseback transaction involving 36 of its Boeing 737-800s with US lessor Babcock & Brown Aircraft Management.
Detailed in a 7 January US regulatory filing, the sale of 35 of the aircraft closed in late December, generating $871 million in gross proceeds for Southwest.
The Dallas-based carrier says it will record $92 million in realised gains in the fourth quarter as a result of the transaction.
A sale-leaseback deal for the final 737 is expected to be completed this month.
Lease terms for the narrowbody jets will range from 26 to 37 months, during which period Southwest “will pay aircraft rents”.
”Transaction proceeds generated from the fleet strategy initiative, as well as excess cash from the balance sheet, are expected to be used in support of the company’s capital allocation strategy, which includes funding future fleet modernisation and providing shareholder returns,” Southwest says.
The major US carrier disclosed during its investor day in September that it would explore selling its older 737-800s and newer 737 Max jets – in addition to sale-leaseback deals – amid a tight market for used aircraft.
The plan to leverage its existing fleet and 737 orderbook comes as part of a sweeping strategic overhaul aimed at capturing its lost form as a reliably profitable company.
“We have a unique opportunity to capture value and earnings on excess aircraft we do not need with our moderate growth plan,” chief executive Bob Jordan said at the time. ”With that in mind, we are pursuing direct sales of [737]-800 aircraft. We are also looking at sale-leaseback where we can be opportunistic.”
Southwest will report its fourth quarter and full-year financial results on 30 January.
