Southwest Airlines enters sale-leaseback deal for Boeing planes

This move aligns with Southwest Airlines' fleet modernization strategy outlined during its Investor Day in September 2024. "Lease terms for the aircraft will range from 26 to 37 months, during which the Company will pay aircraft rents. Aircraft ownership costs will increase by approximately $2.6 million per aircraft, annually, as aircraft rental expense will exceed previous depreciation expense levels," explained Southwest Airlines.

Proceeds from this transaction, along with surplus cash reserves, are intended to support future aircraft purchases such as Boeing's upcoming models once certified, as well as shareholder returns. As of Q3 2024, Southwest reported a net income of $67 million and held $9.4 billion in cash and equivalents.

During an investor day event, Bob Jordan, CEO of Southwest Airlines, emphasized plans to unlock value trapped within their existing fleet due to Boeing's delivery delays: "While that settles the issue, it effectively creates a significant pool of value that is trapped in our fleet and order book."

Tammy Romo, CFO of Southwest Airlines, added that their unencumbered assets were valued at around $40 billion: "And our existing fleet and order book with Boeing also have tremendous value that we intend to unlock as we moderate our capacity growth and manage our capital commitments."

Romo assured stakeholders that even without pursuing aggressive fleet strategies, they aim to achieve a return on invested capital (ROIC) goal of 15% by 2027.