Summary Frontier Airlines entered into a sale and leaseback agreement with BOC Aviation for 15 A320 neo aircraft. Sale & leaseback increases liquidity and reduces operating costs for airlines. Frontier Airlines adjusts future fleet by deferring deliveries, canceling orders, and swapping aircraft.
American Low-Cost Carrier Frontier Airlines has entered into a sale and leaseback agreement with BOC Aviation. The agreement will cover 15 of the airline's Airbus A320 neo aircraft, which are due to be delivered between 2025 and 2026. This move will enable the airline to strengthen its liquidity while expanding its network and operations.
Long-time customer American carrier Frontier Airlines has announced that the airline has entered into a sale and leaseback agreement with the Singaporean leasing company - BOC Aviation . According to reports from FlightGlobal , the agreement will include 15 Airbus A320neo, which is meant to be delivered to the airline in 2025 and 2026. By entering such an agreement, the carrier will not only be able to maintain liquidity, but it will also help the carrier expand its operations and fleet in a sustainable manner for the future.
Considering that the airline is a long-time customer of BOC Aviation, the partnership was the obvious choice when the airline needed to enter such an agreement. The carrier is the largest operator of the A320neo aircraft type within the United States, and data shows that Frontier Airlines has 197 aircraft of the A320neo family type on order, which are now scheduled to be delivered by 2031. What is sale and leaseback? Sale and leaseback is essentially the practice wherein the airline will "on paper" sell the aircraft currently in its fleet or aircraft due to be delivered to the carrier to a leasing company of their choice, who will then lease the aircraft back to the carrier itself.
This essentially results in the aircraft still being operated by the airline, but there will be a change in the ownership of the said aircraft. This is a particularly useful move for an airline that wishes to increase its liquidity without losing access to its aircraft or related operations. In fact, several airlines entered such agreements during the peak of the COVID-19 pandemic, which allowed the carriers to reduce their financial burdens while maintaining their fleet.
By entering sale and leaseback agreements with lessors, the airline not only increases the liquidity available, but essentially also reduces its operating costs, thus allowing the airline to have some breathing room if needed. Changes to Frontier's future fleet The airline recently released its financial results for Q2 and H1 of 2024. While the airline recorded a small profit during this period, its revenue has decreased compared to the same period in 2023.
As such, the airline has lately made a few changes to its future fleet. Frontier Airlines had ordered 18 Airbus A321XLRs in June 2019. While the airline has entered into a sale and leaseback agreement for 15 A320s that are due to be delivered in the next two years, the carrier has also deferred some aircraft deliveries that were due to be delivered during this period.
Furthermore, the airline has canceled its order for 18 Airbus A321XLR aircraft while converting 18 of its A320neos to the larger A321neo jets. While the airline has slowed down its fleet expansion, Frontier has also reduced its route network by axing over 40 routes . The carrier states that it will assess these routes and reintroduce services in 2025, depending on the capacity available and the travel season, to better optimize the airline's performance.
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