Zinger Key Points
- Southwest Airlines announces sale-leaseback of 36 Boeing 737-800 aircraft, generating cash for fleet modernization.
- Analysts maintain mixed ratings with price targets being raised.
Southwest Airlines LUV shares are trading lower on Tuesday.
The firm revealed a sale and leaseback deal involving 36 Boeing 737-800 aircraft. The aircraft will be owned and leased back to Southwest by Incline Aviation III, a fund managed by BBAM.
According to a regulatory filing, the company has completed the sale-leaseback of 35 aircraft in late December 2024.
Southwest has received gross proceeds of $871 million and expects to record realized gains of $92 million in the fourth quarter of 2024 for the sale-leaseback of these 35 aircraft.
Gains are expected to be recognized within other operating expenses and were not included in the financial guidance update provided for fourth quarter 2024 on December 5, 2024. Therefore, it will result in a reduction of the company’s cost per available seat mile for fourth quarter and full year 2024 on both a GAAP and Non-GAAP basis.
The sale-leaseback for the final aircraft is expected to be completed in January 2025.
The company expects to use the transaction proceeds generated from the fleet strategy initiative, as well as excess cash from the balance sheet, in support of its capital allocation strategy, which includes funding future fleet modernization and providing shareholder returns.
Tammy Romo, Executive Vice President and CFO of Southwest Airlines, said: “By opportunistically monetizing surplus value from a portion of our existing all-Boeing 737 fleet, Southwest is generating significant cash to drive fleet modernization and offset capital expenditures in support of our capital allocation strategy. We are very pleased to partner with BBAM, one of the world’s leading aircraft lessors, on this transaction.”
Meanwhile, Susquehanna analyst Christopher Stathoulopoulos maintained Southwest Airlines with a Neutral rating and raised the price target from $33 to $38.
In addition, UBS analyst Thomas Wadewitz maintained Southwest Airlines with a Sell and raised the price target from $27 to $29.
According to Benzinga Pro, LUV stock has gained over 12% in the past year. Investors can gain exposure to the stock via U.S. Global Jets ETF JETS.
Price Action: LUV shares are trading lower by 3.29% to $32.72 at last check Tuesday.
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