United Begins To Sell Off Assets
04-19-2020, 05:38 AM
#1
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United Begins To Sell Off Assets
United is selling 22 airplanes (6 Boeing 787-9 and 16 737 MAX 9 airplanes) to a leading company.
https://www.reuters.com/article/unit...-idUSL4N2C7081
I imagine you’ll see more of this as the cash crunch continues. How many airplanes does United currently own?
https://www.reuters.com/article/unit...-idUSL4N2C7081
I imagine you’ll see more of this as the cash crunch continues. How many airplanes does United currently own?
04-19-2020, 05:55 AM
#2
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United is selling 22 airplanes (6 Boeing 787-9 and 16 737 MAX 9 airplanes) to a leading company.
https://www.reuters.com/article/unit...-idUSL4N2C7081
I imagine you’ll see more of this as the cash crunch continues. How many airplanes does United currently own?
https://www.reuters.com/article/unit...-idUSL4N2C7081
I imagine you’ll see more of this as the cash crunch continues. How many airplanes does United currently own?
As of 12/31/19, UAL had 777 mainline aircraft with 635 owned and 142 leased. Note that "owned" aircraft can still be mortgaged so it does not mean that UAL owns all of them outright.
Prior to the spam hitting the fan, UAL had nearly $20B in "unencumbered assets" on the books, and almost all of it was aircraft.
Given the global collapse in demand, I'm gonna assume that aircraft valuations have plummeted from the peak so the number is no longer $20B.
04-19-2020, 06:42 AM
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Trying to prevent a liquidity shorfall? I don't know if it's "moving money around", but it's definitely getting cash out of an asset that you otherwise can't get revenue out of. Squeezing the lemon and then putting it in a vice to squeeze it a little more.
04-19-2020, 07:02 AM
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It's pretty common to buy new airplanes and turn around and sell them to a leasing company. In this case it's new airplanes that UAL bought at deep discounts and paid cash. Absent the crisis, UAL was content to own the assets, but today having the cash back in hand is more important. The downside is UAL will be making lease payments going forward.
All the owned aircraft are an advantage for UAL compared to other airlines that started the crisis with a much greater ratio of leased airplanes and/or mortgaged airplanes.
04-19-2020, 07:07 AM
#6
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The brand new planes are not like lemons at all. As a matter of fact, United will be flying these “lemons” and getting “juice” from them within a few months - not throwing them away as your analogy implies :/
04-19-2020, 08:12 AM
#7
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Yes and no.
It's pretty common to buy new airplanes and turn around and sell them to a leasing company. In this case it's new airplanes that UAL bought at deep discounts and paid cash. Absent the crisis, UAL was content to own the assets, but today having the cash back in hand is more important. The downside is UAL will be making lease payments going forward.
All the owned aircraft are an advantage for UAL compared to other airlines that started the crisis with a much greater ratio of leased airplanes and/or mortgaged airplanes.
It's pretty common to buy new airplanes and turn around and sell them to a leasing company. In this case it's new airplanes that UAL bought at deep discounts and paid cash. Absent the crisis, UAL was content to own the assets, but today having the cash back in hand is more important. The downside is UAL will be making lease payments going forward.
All the owned aircraft are an advantage for UAL compared to other airlines that started the crisis with a much greater ratio of leased airplanes and/or mortgaged airplanes.
and in many cases they may even get more money than what they paid for. You can finance an aircraft up to 100% of the value. At least in normal times that results in getting more cash out than what you paid for.
04-19-2020, 09:38 AM
#8
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Delta started doing this too a few weeks ago. To me it seems like a way to generate a bit of liquidity, but also makes a bankruptcy smoother because they can just cancel the leases via bankruptcy. Also less assets on the balance sheet for the bankruptcy judges to plunder.
04-19-2020, 12:51 PM
#9
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Selling to lease back? We should simply cancel all remaining MAX orders, and pressure Boeing to facilitate extremely favorable leases.
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