Approximately US$1.5 billion has been generated by Singapore Airlines through the sale and leaseback of 11 of its widebody aircraft. The pandemic had caused a low cash flow for the airline and this money will help Singapore Airlines to navigate the ongoing low demand.
The airline confirmed that it had completed the sale and leaseback of seven Airbus A350-900s and four Boeing 787-10s. It is reported that four parties were involved in the process, and the airline raised S$2 billion (US$1.5 billion) in the transaction.
A sale and leaseback transaction is when an airline sells its planes and then takes the aircraft back on a lease. It is an efficient method used to raise money without cutting the number of aircraft available for use.
Aergo Capital Limited has bought 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 of Singapore Airlines Airbus aircraft.
Due to the impact of COVID-19, Singapore Airlines has been hit hard and is struggling with liquidity. The sale and leaseback of its 11 aircraft is part of an ongoing effort to increase cash and cash-equivalent assets.
Singapore Airlines confirmed that since April 1st, 2020, it had generated around S$15.4 billion (US$11.5 billion) in fresh liquidity. 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.
Through the issuance of convertible bonds and notes, the airline raised a further S$2.2 billion (US$1.6 billion) and another S$2.1 billion (US$1.5 billion) from secured financing. The airline 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.”
Not too long after the onset of the pandemic, Delta Air Lines entered into two sale and leaseback transactions with BBAM Aircraft Leasing & Management and Altavair AirFinance and had raised a total of US$1 billion. In August 2020, easyJet too entered a similar agreement with Bocomm Leasing, and Cathay Pacific sold and leased six 777-300ER for a total of US$704million.
The pandemic has witnessed 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.