United Airlines has agreed to sell 22 of its airliners to BOC Aviation for immediate leaseback with the airline. This process is actually more common than you might think.
The Aircraft Involved
The sale to BOC Aviation includes six Boeing 787-9 aircraft and 16 Boeing 797 MAX 9 aircraft. As you know, the Boeing 737MAX fleet is currently grounded by the FAA and aviation authorities around the world. The 787-9 are most likely grounded while United’s international market sorts itself out. BOC Aviation is the aviation leasing arm of the Bank of China which has a fleet of 567 aircraft.
Why Airlines Do This
The sale/leaseback arrangement has a major advantage – the airline gets immediate cash. The leasing company does not physically take possession of the aircraft, they will actually stay placed with the airline. This gives the airline flexibility to lower their monthly aircraft payments. The day the leases expire, they can return them to the leasing company instead of trying to find buyers on the used aircraft market. The practice of aircraft sales and leaseback is not new, it has been used for decades.
Etihad recently made the same kind of arrangements 38 aircraft last February.
This Will Help United Conserve Cash
The sale/leaseback transaction will help the carrier with their most immediate need, to conserve cash. United Airlines will receive $5 billion in airline aid. The stimulus money from the CARES Act from the U. S. Treasury Department will not be enough to meet the needs of U. S. based airlines. Airlines are having to look at operating in a “cash conservation” mode to help them weather the storm.
No Difference To United Passengers
The aircraft will remain painted in the current United Airlines liveries. The 787 aircraft will still have the Premium Plus and Polaris seating so it is vital that United maintain the procession of these aircraft. For United passengers, this is essentially a paper transaction and they should see no difference with these aircraft.
These are truly trying times for the airline industry. Airlines operate in a cash-intensive environment so conserving cash is necessary while the industry sorts itself out. The aircraft sale and leaseback transaction is not new but it may be more common to help airlines with their cash management. For United, this makes a lot of sense particularly with most of these aircraft are currently parked. United Airlines has a “branded interior” – Polaris in their 787 aircraft and the leaseback will allow United to keep their Polaris class interiors.