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Old 12th Oct 2008, 17:18
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Golf Charlie Charlie
 
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The profits on a sale and leaseback are like any other profits the company earns, and they just go back into the business to finance expansion and/or working capital, as they see fit or as needs arise (minus amounts paid out for dividends). It's a perfectly legitimate activity, especially if (assuming what I read on this forum is true) the airline acquired the aircraft at a good price (post-9/11 ?) and feel able to take advantage of the rise in the strong asset price of used 737-800s worldwide as new airframes are delivered to Ryanair. At the same time, leasing the aircraft offers several useful tax advantages and strengthens the balance sheet (eg. reduces net debt, other things being equal). The risk is that if they come to depend on the income/cash/profit from these transactions, their luck could run out eventually if residual values worsen or demand levels change around the world, and it might expose a poorer quality/profitability of the underlying core business at Ryanair than we might think. I stress, I have no axe to grind here on any side of the argument, and I don't know Ryanair's financial position other than what is publicly available and/or what I read here.
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