Air Berlin in $400 Million Jet Sale to Minsheng to Cut Debt

Air Berlin Plc will sell new and used aircraft to China’s Minsheng Commercial Aviation Ltd. as part of a financial turnaround plan at Germany’s second-largest airline.

“This transaction supports the management of our net debt position and our fleet alignment activities,” Chief Financial Officer Ulf Huettmeyer said in a statement. The deal is valued at around $400 million, he said earlier on a call with analysts.

Ownership of Airbus SAS A320 single-aisle jets and Boeing Co. 737s will be transfered to the new lessor, the airline said today. The deal is to be completed next year.

The sale will bring Air Berlin close to its full-year debt target of about 500 million euros ($665 million) from 706 million euros at mid-year, Huettmeyer said. The carrier is reducing its fleet to 143 planes this year from 155 at the end of 2012.

The carrier also may tap equity markets to improve finances once investors are convinced by the turnaround program, Huettmeyer said.

Air Berlin is the first international customer for Minsheng Commercial Aviation, Chief Executive Officer Johnny Lau said. The unit of Minsheng Financial Leasing will add further airlines, he said.

Challenging Target

Under the agreement, Air Berlin will lease back five A320s already in its fleet as well as one more due next year along with a 737-800, the carrier said. Minsheng also has the option to sell four of Air Berlin’s 737s on the Chinese market.

Reaching a target of breaking even before interest and taxes for the full year has become more challenging as a hot summer in Germany depressed bookings in July and August, the airline’s Chief Executive Officer Wolfgang Prock-Schauer said on the call from Berlin.

“Due to the extreme weather there was a certain slowdown in passenger movements,” he said. Business in September and October may yet allow Air Berlin to meet its target with “encouraging” signs that bookings are picking up, he said.

Air Berlin fell 4.65 percent to 2.05 euros as of 2:55 p.m. in Frankfurt. The stock has advanced 34 percent this year, valuing the airline at 239 million euros.

Capacity Reduction

The loss before interest and taxes narrowed to 8.1 million euros in the second quarter from 29.4 million euros in the same period a year earlier, the airline said today in a statement. Sales were little changed at 1.1 billion euros after an 8 percent reduction in capacity.

Passenger numbers benefited from a partnership with Etihad Airways PJSC, which holds a 29 percent stake, and code-share numbers will probably double this year, Prock-Schauer said. More travelers also came to Air Berlin via the Oneworld alliance, he said.

The airline remains on track with its cost-cutting effort that seeks to improve earnings by 400 million euros by the end of next year, Prock-Schauer said, adding that about 80 percent of the target for this year has been secured.

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