Aegean Airlines hopes to free $25 million of cash by selling and leasing back seven Airbus A320s due for delivery in 2015 and 2016, says executive vice-chairman Eftichios Vassilakis.
The Greek carrier intends to sell five A320s converted from options into firm orders earlier this month plus another two subsequently ordered from the European manufacturer, in order to boost cash flow.
Vassilakis believes Aegean can achieve a "cash neutral" position on the transaction if it can sell and lease back five of the aircraft over the next 12 months, which will allow it to recoup $60 million paid to Airbus. It will be cash-positive to the tune of $25 million if it can sell and lease back all seven.
"We are definitely going to try to place most [of those aircraft], if not all, for sale and leaseback with a commitment to eight to 10 years," says Vassilakis. "We need to get rid of this revenue liability to get back to a positive result in the next 12 months."
He says the seven aircraft are to be delivered in "short order" between June 2015 and March 2016.
Vassilakis says the decision marks a shift away from Aegean's strategy of growing its fleet with used leased aircraft, to buying brand-new aircraft because lessors are now demanding longer contracts.
"We have noticed two things happening. Lease rates are getting higher, [which] is not necessarily a bad thing. On the other hand, as demand has gone up, lessors are demanding longer lease terms: six- or seven-year terms, when the demand is for two- or three-year terms," says Vassilakis.
Vassilakis says a one- to two-year leasing contract on used aircraft has given Aegean the "flexibility" needed for future growth.
Source: Cirium Dashboard