Etihad seals spare engine sale and leaseback deal

Etihad Airways has concluded a $367 million (Dh1.348 billion) deal with Sanad Aero Solutions (Sanad) and Engine Lease Finance Corporation (ELF) to finance its 23 spare engines (16 in-service spares and seven future deliveries) in a sale and leaseback arrangement, the Abu Dhabi-based carrier said yesterday in a statement. As part of the deal, while Sanad will purchase and lease back to Etihad Airways five GE90 and six Rolls-Royce Trent 500 engines, ELF will purchase and lease back to Etihad Airways six Rolls-Royce Trent 700 and six IAE V2500 engines. Both transactions are for a 10-year operating lease, Etihad stated, adding that the spare engines are for the carrier's entire fleet of passenger and cargo aircraft. ‘Smart thing to do' Article continues below Asked how the move will prove to be financially beneficial to Etihad Airways, Addison Schonland, partner at AirInsight, an aviation and aerospace consultancy focused on industry competitive intelligence, told Gulf News: "The idea here is to save capital and utilise cash flow. Doing a deal like this gets the airline money in the bank and allows it to pay for the engines out of operational revenues. It's the smart thing to do and many airlines do this with not only engines, but even airframes." Another analyst, who did not wish to be named, said: "Airlines with healthy or unhealthy balance sheets will engage in sale/leasebacks. Typically this is a cash-flow management manoeuvre or a fleet management solution, depending on the circumstances at the time." A sale and leaseback arrangement is one in which one party sells a property to a buyer and the buyer then immediately leases the property back to the seller. This allows the initial buyer to make full use of the asset while not having capital tied up in the asset. Long-term solution "These spare engine sales and leaseback transactions provide the airline with a long-term financing solution for its entire spare engine fleet while mitigating residual value risk and providing competitive cost of ownership over the long term," James Hogan, Etihad Airways President and Chief Executive Officer, said in a statement. From its hub at Abu Dhabi International Airport, Etihad Airways serves 82 passenger and cargo destinations in the Middle East, Africa, Europe, Asia, Australia, and North America, with a fleet of 64 Airbus and Boeing aircraft, and 100 aircraft on order, including 10 Airbus A380s. The carrier recently made news by raising its stake in Air Berlin to 29.21 per cent, becoming the loss-making German carrier's largest single shareholder. The deal increased Etihad's total number of destinations served to 269. While Mubadala Development Company-owned Sanad Aero Solutions provides purchase, leasing and management solutions for spare components and engines to the commercial airline industry, ELF is an independent spare engine financing and leasing company.