Lufthansa Group finalizes sale and leaseback deal for twelve short-haul aircraft

Friday, December 15, 2023

The Lufthansa Group has recently finalized an agreement for the sale and leaseback of twelve short-haul aircraft, aligning with the Group’s financial strategy to fund investments in new aircraft using a combination of cash, Japanese Operating Leases (JOLCOs), and operating leases. This strategic move supports the ongoing modernization of the Lufthansa Group Airlines’ fleet, as newer and advanced aircraft contribute to decreased fuel consumption, lower emissions, and improved ex-fuel unit costs.

The transaction involved two key counterparts, namely Clover Aviation Capital and the longstanding business partner BBAM (Babcock & Brown Aircraft Management). These parties facilitated the sale and leaseback arrangement for twelve Airbus A320 family aircraft, all under favorable commercial terms. The aircraft, which are up to two years old, currently serve Lufthansa Airlines, Lufthansa CityLine, and Eurowings. The completion of this transaction results in proceeds of approximately EUR 600 million in the fourth quarter of 2023. The leased back aircraft are committed for a 72-month term.

Under the International Financial Reporting Standards (IFRS) 16, the resulting lease obligation of around EUR 200 million is recognized as debt. Simultaneously, a book gain of approximately EUR 100 million stemming from the sale will be acknowledged in EBIT (Earnings Before Interest and Taxes). It is important to note that this book gain will not be factored into Adjusted EBIT.

It is worth mentioning that this transaction was previously factored into the Lufthansa Group’s financial outlook. The financial outlook anticipates net capital expenditures ranging between EUR 2.5 billion and EUR 3 billion in 2023.

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