The first step of the aircraft monetization plan! Southwest Airlines Co. (LUV.US) signs aircraft sale-leaseback agreement.

Southwest Airlines Co. (LUV.US) will generate $92 million in revenue by selling and leasing back 35 Boeing Company (BA.US) 737-800 aircraft, the first step in a broader plan for the airline to monetize its large fleet and numerous aircraft orders. In a statement on Tuesday, Southwest Airlines Co. stated that it had total revenues of $871 million from a deal completed last December with Babcock & Brown Aircraft Management. The $92 million in revenue will be recognized in the fourth quarter of 2024. The airline said that another aircraft sale and leaseback is expected to be completed in January. Currently, Southwest Airlines Co. is working to extract additional value from its fleet of over 800 Boeing Company 737 aircraft and nearly 700 aircraft on order, as part of a comprehensive overhaul to increase investor returns that have lagged behind competitors in recent years. Other measures include abandoning traditional models in favor of premium fares with assigned seating and more legroom. The fleet transactions aim to take advantage of the surging demand and prices for aircraft, as Boeing Company and Airbus (EADSY.US) currently face production challenges that limit the supply of new aircraft. The sale and leaseback agreements allow the airline to sell some of its Boeing Company 737-800 medium-sized aircraft to lessors and then lease them back for fixed periods ranging from 26 to 37 months. The transactions will add $2.6 million in annual lease payments for the airline. The airline also stated that it may directly sell some of its fleet as well as some of the new 737 Max aircraft received from Boeing Company. The company currently does not need these aircraft, and if it does not accept the ordered aircraft, it will lose existing credits for past delayed deliveries. Southwest Airlines Co.'s Boeing Company orders are expected to continue until 2031.