Upswing of SLBs ( Sale and Lease Back) - Scandinavia’s flagship airline-SAS & Leasing company CDB Aviation did one such transaction.

The SLB Announcement :

CDB Aviation, a wholly owned Irish subsidiary of China Development Bank, announced of a new sale and leaseback (SLB) transaction for four Airbus aircrafts with Scandinavia’s flag bearer, SAS.

Scope of the agreement is three A320neo and one A350-900 aircraft, which are leased to SAS on a long-term basis, SAS has already taken delivery of the A350 on March 26, 2021.

The remaining three A320neos are planned to be delivered during mid of 2022.

What is a SLB ( Sale and Lease Back) ?

SLB transaction is an effective way for airlines to gain liquidity (Read as Cash) by unlocking capital that is otherwise locked up on physical possession of  an aircraft or related assets like engines.

How do they do the SLB ( Sale and Lease Back) ?

• First step includes airline selling the asset(s) to a leasing company. Asset can be a whole aircraft or engines, sometimes, it may include spares, tooling or other related assets.
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• In the Second step, the airline/operator gets the sale price of the asset(s) and enters into a lease agreement to lease the asset(s) back from the lessor.
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• During the SLB transaction, airlines & Lessor consider the evaluated selling price or market value of the assets against any debt obligations to determine the actual cash value, as payables.

What does CDB say about this transaction ?

CDB Aviation Chief Marketing Officer Peter Goodman says, “We are pleased to expand our long-standing relationship with SAS, with the addition of these new technology Airbus aircraft to the carrier’s growing one-type fleet.” 

What does SAS say on the SLB ?

Magnus Örnberg, Chief Financial Officer of SAS, said,  “SAS has previously worked together with CDB Aviation on SLB transactions, and we are glad that we have secured the financing of new aircraft deliveries together with Patrick Hannigan and his team. The transaction enables the financing of our transition towards a unified fleet, with significantly lower emissions in a cost and cash efficient way.”

Some previous SLBs (Sale and Lease Back) :

Though, there are many SLBs, reported or un-reported , happening in Aviation industry, some of the major transactions include :

• In April 2020, Delta did a sale and leaseback transaction worth US$ 1 billion, where the airline entered two separate SLB agreements.(US$750 with BBAM Aircraft Leasing & Management  and  US$250 million with  Altavair AirFinance, to maintain liquidity).
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• In August 2020, easyJet did a sale and leaseback transaction worth US$266 million with Bocomm Leasing . easyJet's SLB transactions are based on its fleet of A320 family aircraft.
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• Cathay Pacific also did a similar SLB transaction with BOC Aviation to raise approx. US$704 million that involved six Boeing 777-300ER aircraft.
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What do you think of these SLB upswings ? Write it down in feedback section .