Southwest Scores $815M With Sale-Leaseback of 20 Boeing Planes

Southwest Airlines (LUV) has entered into sale-leaseback transactions for 10 of its Boeing (BA) 737-800 aircraft, as well as 10 of the company’s Boeing 737 MAX 8 aircraft, a filing has revealed.

From the transactions, Southwest expects to receive gross proceeds of approximately $815 million. The company intends to use this money for ‘general corporate purposes.’

The filing does not reveal who is buying the planes, or how long the leaseback agreement will last.

According to the company website, LUV could restart flights to Cancun, Los Cabos, Havana and Montego Bay as soon as June 7.

“I think we’ve seen the bottom in April. Each week after the first week of April has gotten successively better. I think May will be better than April was,” Southwest CEO Gary Kelly said in an interview on CBS News, adding ““I don’t think June will be a good month, but hopefully it will be a bit better than May.”

US airlines have been burning through billions of dollars in the first quarter incurring huge losses and implementing cost-cutting plans as the coronavirus-related global lockdown orders have brought air travel to an almost complete halt.

However the stock currently shows a cautiously optimistic outlook on TipRanks, with a Moderate Buy consensus- and multiple rating upgrades.(See LUV stock analysis on TipRanks).

Cowen & Co’s Helane Becker calls Southwest “arguably the most successful airline of all time and has survived through other crises and come out stronger.” Unlike other airline stocks, she believes Southwest could gain market share post-pandemic, arguing that it represents a “flight to quality stock in times of uncertainty.”

Nonetheless the stock has plunged 50% year-to-date, and as a result the $45 average analyst price target now indicates significant upside potential of 64%. In comparison American Airlines (AAL) is trading down 65% year-to-date.

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