Lufthansa refinanced eight aircraft in the second half of 2020. The transaction has generated €500 million ($613 million) for the German flag carrier, which is continuing to deal with the global aviation crisis’s impact, which has hit passenger numbers and profitability.
2020 threw a lot of unexpected challenges at airlines around the world. Many airlines have been dealing with unprecedented circumstances, from having to ground entire fleets, trim routes, and employees to seeking government bailouts. In a bid to raise funds, many airlines have turned to selling aircraft for leaseback, or in the case of Lufthansa, refinancing them.
Eight aircraft used as security
Earlier today, German flag carrier Lufthansa revealed that it had used eight aircraft as security in financial transactions. The aircraft have been refinanced, generating €500 million in funds for the airline. According to a press release, the aircraft refinanced were five A350s and three Airbus A320 family aircraft.
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The funds were raised through sale and leaseback financing, secured loans, and secured promissory notes. The funds came from Banks, private equity funds, and corporate investors from Europe and Asia. The airline goes on to state that it has received attractive terms for the transactions.
Commenting on the refinancing, Wilken Bormann, Executive Vice President Corporate Finance of the Lufthansa Group, said,
“We have taken another successful step in refinancing existing liabilities which are maturing in 2021. The transactions once again demonstrate the confidence the market has in our company and our restructuring measures. We have a wide range of financing instruments at our disposal and aircraft financing will continue to play a key role in our financing strategy as it offers financially attractive conditions.”
What other actions has Lufthansa taken since the start of the crisis?
The refinancing of eight planes is just the tip of the iceberg when it comes to Lufthansa’s actions to deal with the crisis. In April, the airline announced that it would be retiring a significant number of its long-haul aircraft.
This included six A380s, seven A340-600s, three A340-300s, and five Boeing 747-400s. The remainder of the airline’s A340-600 and A380 fleets are currently in storage, alongside other partial fleets. Thought the airline doesn’t now expect that the Airbus A380 will return.
The airline also received a considerable €9 billion ($11 billion) bailout from the German government. The airline’s shareholders approved the bailout at an extraordinary general meeting on June 25th, 2020.
At one point during the crisis, Lufthansa revealed that up to 26,000 jobs, equating to 22,000 roles, were at risk as the airline looked to cut costs. However, some jobs have been saved thanks to concessions made by groups such as pilots and cabin crew.
What do you make of Lufthansa refinancing eight aircraft? Let us know your thoughts in the comments.
