US Aviation Industry Pushed to the Brink... United Airlines to Sell 22 Aircraft

Sale to Global Aircraft Operating Leasing Company BOC Aviation Followed by Leaseback

To Secure Cash Liquidity

[Image source=AP Yonhap News]

[Asia Economy Reporter Kwon Jaehee] United Airlines in the United States has sold a total of 22 aircraft from its owned assets. Facing a direct hit from the sharp decline in passenger demand due to the COVID-19 pandemic, the airline has tightened its belt to reduce costs.

According to CNBC on the 19th (local time), United Airlines signed a sale and leaseback agreement for 22 aircraft with BOC Aviation. BOC Aviation, owned by Bank of China, is a global aircraft operating leasing company headquartered in Singapore.

The aircraft sold by United Airlines this time include six Boeing 787-9 aircraft and sixteen 737-9 MAX aircraft. United Airlines owns a total of 800 aircraft.

This sale is interpreted as a cost-cutting measure in response to the closure of air routes due to the COVID-19 crisis. United Airlines reduced its flight schedule by 90% in May compared to the same period last year, and it is expected that June will be similar.

Oscar Munoz, CEO of United Airlines, stated, "The expected demand for the month of May is anticipated to be less than any single day in May last year," calling it "the biggest challenge in United Airlines' 94-year history."

CNBC reported that this sale will help United Airlines secure cash liquidity amid enormous losses caused by the COVID-19 demand slump.

Previously, United Airlines converted a significant number of employees to unpaid leave, and CEO Munoz also announced that he would forgo his base salary until June.

While U.S. airlines have been hit hard by the COVID-19 crisis, they tentatively agreed on the 14th to receive $25 billion (approximately 30.4 trillion KRW) in support from the U.S. Treasury. In return for the support, the Treasury will receive warrants equivalent to about 10% of the support amount from each airline. United Airlines is set to receive $4.9 billion (approximately 5.96 trillion KRW) of this support.

Meanwhile, U.S. airlines reported that fewer than 200,000 passengers boarded aircraft during the first two weeks of April, a 97% decrease compared to 6 million passengers in the same period last year.