Etihad Selling 38 Aircraft For $1 Billion.


One Mile at a Time

Wow. Not only did Etihad cancel a lot of new plane orders last year, but now the airline is selling over three dozen of their long haul aircraft, some of which are still in service, and some of which the airline has already retired.

Etihad has been trying to reduce losses

Etihad has been struggling financially for quite a while, and is undergoing a restructuring, as we see them try to increase revenue and cut costs. The airline has lost $5 billion in the past three years, and is trying to turn that around.

In addition to cutting off or reducing support for many of their unprofitable airline investments (airberlin, Alitalia, Air Serbia, Air Seychelles, etc.), the airline has been trying to cut costs for their own operations as well.

At the beginning of 2019, Etihad had over 150 new planes on order, including A321neos, A350-900s, A350-1000s, 777-8s, 777-9s, 787-9s, and 787-10s.

Last year it was revealed that the airline was canceling many of their new aircraft orders, given that the airline is trying to become more “boutique” (aka shrink). The airline still plans to take delivery of 26 A321neos, five A350-1000s, six 777-9s, and some 787s.

Etihad now selling 38 of their long haul aircraft

KKR (an investment firm) and Altavair AirFinance (a commercial aviation finance company) have announced a definitive agreement to acquire 38 Etihad Airways aircraft for $1 billion.

With this, Etihad is selling all of their Boeing 777-300ERs and A330s (both -200s and -300s) with Trent engines. Etihad has been retiring their A330s over the past year or so.

What’s interesting is that just because these planes are being sold, doesn’t mean they’re actually leaving Etihad’s fleet:

  • The 777-300ERs will be leased back to Etihad upon the purchase being finalized in early 2020
  • The A330s will be placed on lease with other operators over the next 22 months, either for passenger operations, or as converted freighters

As Tony Douglas, Etihad Group CEO, describes the deal:

“We’ve made great strides in optimising our fleet structure over the past year, and this investment from KKR and Altavair AirFinance will allow us to take another step forward in this area. This deal will ensure we stand by our strategic and financial sustainability targets by replacing aircraft with the most technologically-advanced and fuel-efficient fleet types. The structure of this transaction also provides us with significant flexibility, meaning we are well placed to respond to future growth requirements.”

This isn’t as desperate as it may sound

On the surface you might say to yourself “wow, Etihad must really be in a cash crunch.” But this actually doesn’t seem like a horrible idea.

I mean, they’re getting an average of ~$26 million per plane, which isn’t exactly great when you consider the list price for these planes is about 10x that much. Then again, airlines never pay listed prices, and realistically that’s just how much planes sell for on the secondhand market. Furthermore, Etihad already has many of these planes parked, so…

Realistically this actually seems like a fair enough strategy for Etihad. The airline is no longer looking to become a massive global airline, but rather wants to become a smaller airline primarily serving Abu Dhabi.

They still have 787s, 777X, and A350s on order, so even if they take delivery of only a portion of them, realistically they’ll be looking to retire other planes in the process. This allows them to lease the 777-300ERs for the time being, and then eventually replace them with newly delivered aircraft.

Bottom line

Etihad is selling over three dozen aircraft for $1 billion. This includes their 777-300ERs, which they’ll be leasing back in the short term, as well as their A330s, which they’ve been in the process of retiring.

Airplanes come at a huge discount on the secondhand market, so the pricing seems reasonable, and the strategy seems to make sense when you consider Etihad still has wide body planes on order.