36 aircraft to BBAM in Southwest sale-leaseback deal
January 7, 2025
Southwest Airlines has entered into a sale-leaseback transaction with Babcock & Brown Aircraft Management (BBAM) for 36 737-800 aircraft, part of the low-cost carrier’s multi-year fleet monetization strategy announced in September 2024.
With the sale-leaseback of the initial 35 units completed in late December 2024, Southwest received gross proceeds of $871 million, expecting to record realised gains to the tune of $92 million for Q4 2024. A deal for the final aircraft is expected to be completed this month.
The aircraft will be owned and leased to Southwest by Incline Aviation III, part of BBAM’s flagship aviation investment fund series. Lease terms will range from 26 to 37 months, with aircraft ownership costs to increase by around $2.6 million per aircraft.
The sale-leaseback deal forms part of Southwest’s ‘Even Better’ plan, unveiled at its September 2024 investor’s day, where it revealed: “we are actively pursuing opportunities to monetise the value of all our all-Boeing 737 fleet”. Citing “opportune market conditions to sell excess aircraft,” southwest revealed it was “selectively considering sale-leasebacks while maintaining leverage targets”.
Combining disciplined cost initiative, prudent capital deployment and strategic fleet management, the ‘Southwest Even Better Plan’ expects to deliver over $500 million in cost savings by 2027. Alongside “strategic fleet management initiatives designed to extract value from assets in low growth environment to drive financials,” this will be complemented by a raft of other “restructuring and optimisation measures”.
Proceeds from the sale “are expected to be used in support of the company’s capital allocation strategy, which includes funding future fleet modernisation and providing Shareholder returns,” concluded Southwest in its SEC filing.
