Gulf Air opts for operating leases for new fleet additions

Gulf Air CEO, Samer Majali, announced the two Embraer 170 jets added to its fleet last week are on operating leases, instead of capital leases (or lease-to-own), which the carrier normally operates under (TradeArabia News Service, 08-Mar-2010).

Gulf Air: "Gulf Air has traditionally paid the pre-delivery payments of around 20% and financed the rest, gaining control of the jet at the end of the leasing period. However, now we are looking towards utilising operating leases instead, which means that at the end of a lease you are not faced with trying to get rid of the plane. For example, we are leasing the two Embraer aircraft on a three-year contract and when that concludes we simply return them; it means that you don't build up your liabilities, which can be a problem. We're facing a battle at the moment with our Airbus 340s because there's no market for them. We're going to have to sell them at rates, which we're not happy with because the bottom's fallen out of the 340 market as it's an older airplane, which is expensive to operate and maintain. If we look at a 50:50 mix between operating and capital leases it gives us the flexibility of bringing in new aircraft quickly without going through the lengthy full-evaluation process needed for a permanent solution. It also gives us more time to carry out a full evaluation of the Embraer C series and the Airbus A-318 and decide by the summer a permanent solution of up to 10 aircraft," Samer Majali, CEO. Source: TradeArabia News Service, 08-Mar-2010.