In a strategic move to raise operating capital, US low-fare carrier Southwest Airlines has finalised a sale-leaseback agreement with Babcock & Brown Aircraft Management (BBAM) for 36 Boeing 737-800 aircraft.
The transaction, announced today (January 7), sees the ownership of the aircraft pass to Incline Aviation III, BBAM’s third flagship aviation investment fund, with Southwest immediately leasing them back.
Tammy Romo, Executive Vice President and CFO of Southwest Airlines, said the capital will be used to support the airline’s strategic goals.
“By opportunistically monetising surplus value from a portion of our existing all-Boeing 737 fleet, Southwest is generating significant cash to drive fleet modernisation and offset capital expenditures in support of our capital allocation strategy,” she said.
This implies the airline will be using the funds for day-to-day operational needs like maintenance, upgrades, and potentially debt reduction, rather than large-scale investments.
Sale-leaseback deals are common in the aviation industry, allowing airlines to access capital while retaining operational control of their fleet and represent an attractive opportunity for investors such as public and private employee pension plans and sovereign wealth funds.
BBAM’s previous flagship aircraft leasing fund, Incline Aviation II, closed in 2022 with total capital commitments of approximately USD 1.5 billion.
PHOTO: SOUTHWEST AIRLINES