AC sells 9 Max

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goldeneagle
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AC sells 9 Max

Post by goldeneagle »

An interesting strategy. Sold 9 of the max to leasing companies, and kept them with long term lease.

https://ca.finance.yahoo.com/news/air-c ... 03008.html
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Oxi
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Re: AC sells 9 Max

Post by Oxi »

capitalization
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L39Guy
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Re: AC sells 9 Max

Post by L39Guy »

It's called a sale-leaseback, a common financial tool in this capital intensive industry to raise cash. PWA did it in the 80"s to raise cash to buy CP then Wardair, AC did it in the 90's to raise cash in a war of attrition with CAIL (the AC aircraft were all paid off by the Government of Canada prior to privatization so this yielded huge cash for AC).
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pilotbzh
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Re: AC sells 9 Max

Post by pilotbzh »

Needed the cash to buy Transat at 5$ a share :rolleyes:
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Blue42
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Re: AC sells 9 Max

Post by Blue42 »

goldeneagle wrote: Fri Oct 09, 2020 11:49 am An interesting strategy. Sold 9 of the max to leasing companies, and kept them with long term lease.

https://ca.finance.yahoo.com/news/air-c ... 03008.html
Airlines do this all the time, it’s nothing new
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co-joe
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Re: AC sells 9 Max

Post by co-joe »

it may be nothing new, but they did sell them for 400 Million less than they were worth.
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RippleRock
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Re: AC sells 9 Max

Post by RippleRock »

co-joe wrote: Fri Oct 16, 2020 8:55 am it may be nothing new, but they did sell them for 400 Million less than they were worth.
Apparently they were not worth $400,000,000 more. CR isn't known for getting ripped off.
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co-joe
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Re: AC sells 9 Max

Post by co-joe »

RippleRock wrote: Fri Oct 16, 2020 9:22 am
co-joe wrote: Fri Oct 16, 2020 8:55 am it may be nothing new, but they did sell them for 400 Million less than they were worth.
Apparently they were not worth $400,000,000 more. CR isn't known for getting ripped off.
No, but the list price is basically 100 Million USD each. What they're worth is subjective. I just can't take any positives away from selling off brand new assets even as unusable as the Max is currently.

https://www.cbc.ca/news/business/air-ca ... -1.2460560

According to this article from 2013, CR paid 106 ish Million per aircraft on the first 65 firm orders. Not saying it's a bad deal now, just bummed we are where we are. The new normal sucks.
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rudder
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Re: AC sells 9 Max

Post by rudder »

co-joe wrote: Fri Oct 16, 2020 9:43 am
RippleRock wrote: Fri Oct 16, 2020 9:22 am
co-joe wrote: Fri Oct 16, 2020 8:55 am it may be nothing new, but they did sell them for 400 Million less than they were worth.
Apparently they were not worth $400,000,000 more. CR isn't known for getting ripped off.
No, but the list price is basically 100 Million USD each. What they're worth is subjective. I just can't take any positives away from selling off brand new assets even as unusable as the Max is currently.

https://www.cbc.ca/news/business/air-ca ... -1.2460560

According to this article from 2013, CR paid 106 ish Million per aircraft on the first 65 firm orders. Not saying it's a bad deal now, just bummed we are where we are. The new normal sucks.
That article quotes “estimated value of the deal based on list price”.

There is zero chance that was the purchase contract price. Boeing (and Airbus) typically offer discounts of 25-50% off list price for preferred customers and large orders.

I am guessing that AC got at least 25% off list price, and are prevented from disclosing actual price per unit as a condition of the purchase agreement.
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Splash
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Re: AC sells 9 Max

Post by Splash »

rudder wrote: Fri Oct 16, 2020 10:19 am
co-joe wrote: Fri Oct 16, 2020 9:43 am
RippleRock wrote: Fri Oct 16, 2020 9:22 am

Apparently they were not worth $400,000,000 more. CR isn't known for getting ripped off.
I am guessing that AC got at least 25% off list price, and are prevented from disclosing actual price per unit as a condition of the purchase agreement.
From the initial deal, 25% would be a good guess. With the grounding and the potential for AC to cancel the remaining deliveries, I would add another 25%. Calin will be remembered for, " Never letting a crisis go to waste".
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Gino Under
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Re: AC sells 9 Max

Post by Gino Under »

Financially, and in ordinary times, a Lease Back could make sense in the right circumstance. These are anything but ordinary times.
When you've lost 90% of your revenue base, it's probably a good idea to not buy anything, let alone Lease Back. All you've done is tried to reduced (slightly) your monthly payments. And, even that's not a sure thing. But however disguised monthly payments are, they're still payments.

With the nightmare controversy surrounding the MAX, it should be one of the first aircraft types for AC to consider getting rid of, just from a marketing standpoint. The passenger issue directly tied to the MAX doesn't auger well when and if this aeroplane ever sees revenue service in Canada again. I believe it will return to service, but I also believe it will be only until AC and WJ get tired of re-booking passengers who simply refuse to fly on it.

Most people I talk to about aeroplanes couldn't tell a Boeing from and Airbus. A 727 from a 787. But they do know the story behind the MAX and most have said they have no desire or intention of boarding a MAX, with the FAA's blessing (also steeped in controversy), TC's blessing, or Air Canada's blessing.

Looking at the original offer for Transat and comparing it to what was just agreed to, plus the fact Air Canada has lost $2 billion in each of the last two quarters...

Ego purchaser buying a desperate company. Does anybody remember PWA's purchase of Wardair? How PWA was warned they'd regret it? We weren't even in a pandemic back then and look at the financial position of both TS and AC. Where's Canadian Airlines today? How'd that purchase work out?

We have to get back to the old normal, and soon. Now is not the time for mergers and acquisitions.

Stay safe. Do the right things. Listen to the scientists.
cheers, :drinkers:
Gino Under
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fish4life
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Re: AC sells 9 Max

Post by fish4life »

co-joe wrote: Fri Oct 16, 2020 8:55 am it may be nothing new, but they did sell them for 400 Million less than they were worth.
List price isn’t what they are worth, airlines get huge discounts on airplane orders. United bought 700’s for 22 million each with a list price around 80 million just a few years ago as an example. I’d be shocked if AC paid more than 50-60 million per max especially since Boeing never had any 737 products at AC so they must have priced them extremely cheap to win the order.

https://www.google.com/amp/s/www.busine ... 16-3%3Famp
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