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Overview

BOC Aviation enters into a sale-and-leaseback agreement worth $410 million USD with Southwest Airlines for 10 Boeing 737 MAX 8 aircraft

Commitments (Constant USD, 2023)$412,581,481
Commitment Year•2018Country of Activity•United StatesDirect Recipient Country of Incorporation•United StatesOverseas Jurisdiction•SingaporeSector•Transport And StorageFlow Type•Loan

Status

Project lifecycle

Completion

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
May 11, 2018
End (actual)
Aug 3, 2020
Last repayment (originally scheduled)
May 8, 2031

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Ultimate beneficial owners

At least 25% host country ownership

Funding agencies

State-owned companies

  • BOC Aviation Limited

Receiving agencies

Private Sector

  • Southwest Airlines Co.

Loan description

BOC Aviation enters into a sale-and-leaseback agreement worth $410 million USD with Southwest Airlines for 10 Boeing 737 MAX 8 aircraft

Interest type•UnknownMaturity•13 years

Narrative

Full Description

Project narrative

On May 11 2019, BOC Aviation — a Singapore-based Chinese state-owned leasing company — announced that it had entered into a sale-and-leaseback agreement worth $410 million USD with Southwest Airlines — a Texas-incorporated major American airline — for 10 Boeing 737 MAX 8 aircraft. Southwest gained $153 million USD with the sale. The aircraft were to be leased back for a period of 13 years. The aircraft were delivered by August 3, 2020. The aircraft are equipped with CFM LEAP-1B engines.

Staff comments

1. A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. Under a capital lease (a financial arrangement where the lessee/borrower uses an asset and pays regular installments plus interest to the lender/lessor), rental payments are usually classified as interest and obligation payments, similarly to a mortgage (with the interest calculated each rental period on the outstanding obligation balance). AidData codes capital leases as loans. 2. Sale and leaseback (or sale-leaseback) agreements are generally considered to be off-balance-sheet hybrid debt products.