Kuwait-based Jazeera Airways Group plans to sell 15 Airbus A320 aircraft for USD 507 million as part of a strategic shift to a leased aircraft operation.
The transaction will result in additional cash surplus of KWD 24 million (USD 81.5 million) and will lift Jazeera Airways Group’s cash balance to KWD 82 million (USD 278.5 million) in 2015, transform it into an asset-light, debt-free company, and enable it to further grow its profitable airline business.
The buyer purchasing the fleet is a joint venture between Investec Bank and Chow Tai Fook Enterprises.
Jazeera Airways Group (profile) comprises two fully owned companies, Sahaab Aircraft Leasing and Jazeera Airways, which is a passenger airline based in Kuwait that operates leased aircraft from Sahaab Aircraft Leasing. The leasing company’s customers also include Virgin America, TAP Portugal, flynas, and SriLankan Airlines.
Jazeera Airways Group chairman Marwan Boodai said: “The move to divest from the leasing business, though profitable, by selling our fleet and continuing with a leased-aircraft operation was a strategic decision to enhance the airline’s business model and focus on future growth opportunities, boost shareholder value and enhance return on equity. The decision has unanimous support from our board of directors, the management teams of both our companies (Jazeera Airways and Sahaab Aircraft Leasing), and our local and international advisors.”
The sale proceeds will be reflected in the Group’s Q4 2014 financial statements. The Group had announced KWD 13 million (USD 45.3 million) in net profit for the nine-month period ending on September 30, 2014.
HSBC Bank Middle East acted as the sell-side financial adviser to the Jazeera Airways Group, while Clifford Chance acted as sell-side legal counsel. Ernst & Young Kuwait advised on accounting and tax matters. The transaction is subject to customary closing conditions and regulatory approvals and is likely to be completed during the second quarter of 2015.