TUI boosts finances with $226 million sale and leaseback on 737 MAX jets

Reuters

Published Aug 03, 2020 07:25

Updated Aug 03, 2020 08:15

LONDON (Reuters) - Germany-based holiday company TUI (L:TUIT) said it agreed a sale and leaseback deal for five new Boeing (NYSE:BA) 737 MAX-8 aircraft with BOC Aviation, raising $226 million (172.76 million pounds) to help boost its finances.

COVID-19 has wiped out air travel for Europeans for months, and now the threat of a resurgence in infections and new restrictions are causing more pain for airlines.

TUI has said it needs to cut 8,000 jobs and shed 30% of its costs to prepare for a smaller tourism market.

The company said on Monday that the sale and leaseback deal, which applies to aircraft it will receive next year, was part of its "asset right" approach to ownership and it expected further sale and leaseback financing on its deliveries beyond 2021.

The agreement was on standard commercial terms, said TUI, and would create a lifetime lease obligation of around 223 million euros to begin at the end of its 2021 financial year.

During what has become the travel sector's deepest crisis, BOC Aviation has struck an estimated $5.5 billion in deals with carriers including Southwest (N:LUV) and United Airlines (O:UAL) to buy and lease back aircraft on what it says is more favourable pricing than would have been available in a stronger market.

The chief executive of BOC Aviation, which is based in Singapore and listed in Hong Kong, has said he remains confident in the 737 MAX plane which has been grounded for more than a year pending regulatory approval following two crashes.