Norwegian has said that it was close to closing a transaction to purchase ten of its leased Boeing 737-800 aircraft that are currently flying with the airline in a step to ensure its future fleet and reduce ownership costs.
Acquiring leased 737-800s
In a statement published on the Oslo Børs (Oslo Stock Exchange) on March 3, Norwegian said that, subject to "customary closing conditions," it will purchase ten 737-800 aircraft that it has been operating under a lease agreement with an unidentified aircraft lessor.
"This transaction represents a key step in securing the company's future fleet, enhancing financial flexibility, and increasing asset ownership to support long-term operational and strategic growth, in addition to reduced overall ownership cost."
Photo: Markus Mainka | Shutterstock
Norwegian expects to finalize the transaction within the coming weeks. The purchase will be initially funded with its own cash reserves, with the airline currently negotiating long-term financing agreements for the decimal of 737-800s.
Once completed, the transaction should result in a non-recurring gain of around NOK570 million ($51 million), reflecting the pricing it has achieved for the ten aircraft and the corresponding reduction of existing lease liabilities. The purchase should generate an additional cost savings of around NOK200 million ($17.9 million) net of financing costs.
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Norwegian, which has two air operator's certificates (AOC) in Norway and Sweden, added that it remains committed to managing its balance sheet and will continue exploring opportunities to optimize its fleet composition.
Geir Karlsen, the chief executive officer (CEO) of Norwegian, stated that the transaction's overall terms were attractive to the airline, fitting in with the carrier's long-term fleet and ownership strategy. The ten 737-800s are an integral part of its existing fleet and, through this deal, will continue flying across its route network, the CEO added.
"This move is expected to deliver both short and long-term cost savings, as well as provide additional flexibility for future fleet planning."
According to ch-aviation data, Norwegian's Norway-based and Sweden-based AOCs had 39 and 25 737-800s, respectively. All of them are leased from a number of lessors, with Norwegian also leasing all of its 737 MAX 8s, of which it has 25 (six registered in Norway, 19 in Sweden).
Photo: InsectWorld | Shutterstock
Meanwhile, Cirium Ascend Consultancy, which provides aircraft valuation services and has won numerous Appraiser of the Year awards, pointed out that it reviewed its 737 Next Generation (NG) family market values and lease rates following recent transaction-related data points.
"The market remains strong and continues on a shallow positive trend. Values for the oldest vintages have further strengthened supported by demand for engines and spare parts."
As such, the market value of a 737-700 increased by up to 9% due to demand in the part-out market, while the value of a 737-800 increased by up to 3%.
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Norwegian's Q4 2024 financial report, which the airline published on February 13, showed that in 2023, the company's aircraft lease, depreciation, and amortization costs were NOK3.5 billion ($313.4 million), while in 2024, those expenses rose to NOK4.3 billion ($385.3 million).
To note, the latter figure does not include Widerøe's costs. Norwegian acquired the Norway-based regional airline in 2023, finalizing the transaction in January 2024, and in the Q4 2024 report, warned that financial results before 2024 do not include Widerøe . Including the latter airline's financial performance, the group's aircraft lease, depreciation, and amortization expenses would go up to NOK5 billion ($447.9 million).
At the end of 2024, Norwegian had a total of 135 aircraft, including 86 in Norwegian (64 737-800, 22 737 MAX 8) and 49 in Widerøe's fleet. Since the end of the year, Norwegian's Swedish-based carrier has taken delivery of three 737 MAX 8s (per ch-aviation records):
SE-RTN (first flight on November 30, 2024, delivery on January 10) SE-RTR (first flight on December 11, 2024, delivery on January 14) SE-RTV (first flight on January 17, delivery on February 12)
However, the airline should add more 737 MAX 8s in the coming years. Its Q4 2024 report disclosed that its pre-delivery payments (PDP) for aircraft amounted to NOK3.4 billion ($304.5 million).
"During the quarter, Norwegian entered into agreements with three reputable banks and lessors for the financing of the initial 18 aircraft deliveries for the company's aircraft order with Boeing. "
Photo: Soos Jozsef | Shutterstock
In addition, Norwegian also signed letters of intent (LoI) with two banks for an additional seven aircraft, noting that 13 of the 25 737 MAX 8 aircraft will be owned by the company, while the remaining 12 will be subjected to sale-and-leaseback (SLB) transactions.
In 2022, Norwegian confirmed an order for 50 737 MAX 8 aircraft, with the deal also incorporating an additional 30 options. At the time, the planned delivery dates of the ordered aircraft were between 2025 and 2028, with the schedule closely corresponding to the current aircraft lease expirations.
However, considering chronic delivery delays, which is a problem experienced by both major aircraft manufacturers, including Airbus and Boeing, it could be that Norwegian is protecting its fleet from being subjected to lessors' decisions about their assets with the acquisition of ten 737-800s.
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