# Is $24.01 million for 15 used A320 reasonable? A few hours ago the insolvent Austrian airline Niki was bought by the owner of British Airways, IAG for a whopping \$24.01 million (plus a further \$19.08 million to provide liquidity to the company). This was the highest offer available. The acquired assets include 15 Airbus A320 and landing rights for some European airports. So far this was basically a summary of the Reuters article. Given that Niki kept their business up until December 14th, 2017 it can be assumed that the aircraft are well maintained and properly working. So summing up and getting to the question, the price seems rather low for 15 airworthy A320 aircraft in my opinion. Did IAG get those aircraft for unbelievably low cost, or is the amount in the ballpark for such a deal? Edit: The article also states that the landing rights are the most valuable asset of the deal, thus further devaluating the aircraft. Update: As many comments point out, the aircraft enclosed in the deal were not Niki's own, but leased. To date I have only found German-language sources that indicate this. Update 2: This source (as hinted by @Eike Pierstorff) clearly states, that the aircraft themselves are not included in the deal. They are in possession of Lufthansa, which in turn is bound by this document (section 5 paragraph (40)) to lease or sell the aircraft to any possible acquirer of Niki (IAG in this case) at market terms. • Apparently Niki does not own any planes (they are leased, mostly from the now defunct Air Berlin, according to various German news outlets), so saying that the prices includes 15 Airbuses seems to be a misunderstanding. – Eike Pierstorff Dec 29 '17 at 22:02 • According to Reuters: "Assets include 15 A320 aircraft..." So I assumed that the aircraft were maybe somehow dissolved away from the Air Berlin assets. – pat3d3r Dec 29 '17 at 22:25 • Yes, I meant a misunderstanding on the side of Reuters. Tagesschau.de (biggest German news programme) specifically mentions that these are leased planes, airliners.de says the planes have actually been bought by Lufthansa as part of their failed bid. However I am just googling things, so let's hope somebody who knows the industry answers the question. – Eike Pierstorff Dec 29 '17 at 22:38 • Those leases are examples of the "liabilities" (debts) that I described in my answer below. Its likely that British Airways agrees to assume those leases (i.e. continue to pay them) in exchange for the discounted sale price for the company. – Devil07 Dec 29 '17 at 22:39 • Often, airlines don't buy the airplanes. They lease them. Sometimes the leases are for the commercial life of the aircraft, which means that at the end of the lease the airline basically can opt to by the airplane for a nominal amount, such as$1. Basically, it is a purchase, but it can be structured as a lease for tax purposes. – Devil07 Dec 29 '17 at 22:42

Short Answer: If the 24 Million was for just 15 airworthy A320s, then yes, its a steal because $24 Million is barely enough to buy 2 or 3 A320 engines. However, Niki Airline likely has hundreds of Millions of dollars in debt that British Airways is also "buying", that is why the final price seems so low. Longer Answer: There is so much that goes into the value of an aircraft that this cannot be definitively answered. Even a properly maintained aircraft may be of little value if it has too many cycles (landings and take-offs) and total hours. For example, if those 15 A320s all need engine overhauls then its going to cost a lot more than$24 Million to get those done, not to mention the downtime.

Additionally, and adding even more uncertainty to your question (sorry), is that the $24M was for the airline. As you probably know, the airline includes other assets, such as the landing rights that you mentioned, but it also includes other liabilities, such as debts to previous creditors (i.e. vendors, debt service, etc). So, just as a simple illustration, lets say that the 15 A320 are collectively worth 150M and the landing rights are worth 200M for a total combined value of$ 350M, if the company has liabilities (debts) of 300M, then the net value would be 50M for the whole company, and paying 24M would be a steal! But on the other hand if the company had liabilities of 400M then the company would be worth -50M. Usually, when a company is insolvent it is in this situation where it may have some valuable assets, but it has more liabilities than the assets or cash flow it generates. British Airways is likely hoping to streamline the business and turn it around, or just scrap it and take the landing rights for its own fleet.

• I am aware that my question lends itself to some uncertainty, unfortunately. Factoring in the debt makes sense, and there are for sure other variables that are not known yet. Still I like the information included in your answer, if it is only to get an understanding of the costs involved in such aircraft. – pat3d3r Dec 29 '17 at 22:13
• @pat3d3r BTW you were right to suspect it was too good to be true, according to wikipedia the unit cost of one A320 is $99.0M (USD). So even if it is used and is worth 25% of initial cost, a single A320 would still be worth approximately 25M. – Devil07 Dec 29 '17 at 22:36 • @pat3d3r It is most likely that they bought the leases for the aircraft, not the aircraft themselves. That still means that they have to make lease payments on them for whatever terms are left on the aircraft. The \$24m was most likely to pay for the equity in the aircraft leases among other tangible/intangible assets of the airline. – Ron Beyer Dec 30 '17 at 0:56
• @Devil07 Factory list prices are way inflated, nobody pays that much. Further, quite a number of A320s have already been scrapped, the first 500-1000 made are reaching their end of life. So it's pure speculation without any knowledge of the condition of the airframes. – user71659 Dec 30 '17 at 21:01

Back in the Eighties British Airways bought Dan-Air, which was on the point of failing. They bought all the assets (aircraft, engineering base, etc), staff, and liabilities for one pound Sterling.

They immediately laid off all the staff, ceased all Dan-Air operations and incorporated the routes into their own network, flown with their own aircraft. What BA wanted was the scheduled routes, but the cost was substantially greater than one pound.

In the case of Niki-Air IAG (owners of BA) have paid \$24million, but they have bought much more than 15 A320s (or the leases on them), so it's not realistic to equate that asset with the published purchase price. It's quite likely that the real reason for the purchase is wrapped up in landing slots or some other less tangible asset, and the aircraft represent a liability that IAG is assuming as part of the overall deal. Its unlikely we'll ever know the true cost to IAG as that's likely to be a matter of commercial confidentiality.

I speculate that with the possible upcoming changes to European aviation as a result of Brexit, IAG see the purchase of a ready-made European airline as an insurance for their business. 15 A320s just happen to come along too.