19 C
Dubai
Monday, December 23, 2024

TUI Sold 5 Boeing 737 MAXs To BOC Aviation For $226 Million

Must read

Anglo-German multinational travel and tourism company TUI has today announced that it had agreed to the sale and leaseback of five brand new Boeing 737 MAX-8 aircraft. The Hannover-based travel company will provide BOC Aviation with the planes for $226 million, which will boost its finances during the severe COVID-19 global pandemic.

Boeing 737 MAX TUI London Gatwick
TUI is selling its order for &737 MAXs and then leasing them back. Photo: Boeing

Since first surfacing in Italy on January 31 following an outbreak in Wuhan, China, the coronavirus has virtually wiped out European air travel. With a new resurgence of the virus rearing its ugly head, airlines like TUI are worried about their future. With mostly summer holiday destinations, a part of its business plan, the decline in passengers, and government restrictions have TUI preparing for the worst.

TUI wants to cut costs by 30%

To prepare for the new reality, TUI says it needs to shed 8,000 jobs and cut its costs by 30% if it hopes to survive the air travel downturn. Regarding the sale of the new MAXs to Singapore-based BOC Aviation, TUI said that it applied to aircraft that were due to be delivered in 2021 and was part of its “asset right” approach to ownership.

TUI said that the agreement was on standard commercial terms, and would create a lifetime lease obligation of around 223 million euros ($260million)starting the end of the 2021 financial year.

BOC Aviation is doing deals left and right

BOC Aviation, a leading Asian leasing company, has done deals worth an estimated $5.5 billion during what is arguably the sector’s worst-ever crisis. These deals include a purchase-and-leaseback agreement with Southwest Airlines for ten Boeing 737 MAX 8 Aircraft and United Airlines for six Boeing 787-9 and 16 Boeing 737 MAX 9s. Regarding the 737 MAX purchase and leaseback for an aircraft that has been grounded since March 2019 following two deadly crashes, BOC Aviation says they remain confident about the plane.

MAX with other aircraft in the background
BOC Aviation is buying ten &£& MAX aircraft from Southwest and then leasing them back. Photo: Southwest

As far as TUI is concerned, its UK unit took a considerable hit following the United Kingdom government’s decision to impose a 14-day quarantine on all people returning from Spain. This new requirement came just 15 days after the government told people it was safe to holiday in Spain and now sees TUI having to deal with thousands of cancelations.

BOC Aviation canceled its order with Boeing

Interestingly, on June 30, the Hong Kong Stock Exchange-listed company said it had canceled Boeing orders for 30 737 MAX jets.

“We discussed with Boeing what is the best way to deploy our capital in a time like this because everyone realizes this is not a short term downturn, it is a long one,” BOC Aviation Chief Executive Robert Martin told Reuters.

“It became clear to us that the best way for us to support the MAX and other Boeing products is by us doing purchase-and-leasebacks during this period, and these replaced several direct (Boeing) orders we had,” Martin said.

“This is not in any way, a loss of confidence in the MAX. We are absolutely confident; otherwise, we would never have done purchase-and-leasebacks.”

united-737-max
Buying and leasing back MAXs from airlines has to be cheaper than buying direct from Boeing. Photo: United Airlines

Martin perhaps forgot to add that almost; certainly, BOC Aviation was able to purchase the leaseback 737 MAXs on much more favorable terms than to buy them new from Boeing. It is uplifting to see BOC Aviation’s confidence in the long-term, and unlike some companies that are cutting costs, they see bargains to be had.

What do you think of BOC Aviation’s strategy? Please let us know your thoughts in the comments.

 

[ad_2]

Source link

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest article