Tui Travel signs sale and leaseback deal

LONDON (Reuters) - TUI Travel (TT.L), Europe's biggest travel firm, said on Monday it has signed an agreement with AerCap Holdings (AER.N) and Deucalion Aviation for the sale and leaseback of 19 of its aircraft for $526 million (266 million pounds) in cash.

TUI said the transaction has no impact on its ongoing discussions with Lufthansa (LHAG.DE) regarding a potential merger of Germanwings and TUIfly, on which it said it will update the market in due course.

TUI Travel said it expects the transaction to be earnings neutral for the year to Sept 2008.

It said the deal will allow it to "further increase the flexibility of its business model while securing access to modern and fuel-efficient aircraft".

The deal proceeds will be used to pay down existing debt.

The group will continue to operate all 19 aircraft on operating leases with one to seven year terms, within its TUIfly, Thomsonfly, and TUIfly Nordic fleets.

The aircraft comprise eleven Boeing 737-800s, six Boeing 757-200s, and two Boeing 767-300ERs.

The book value of the assets at May 31 was $681 million and the resulting loss will be treated as a separately disclosed item in for the year to Sept 30, 2008.

(Reporting by Matthew Scuffham; editing by Rory Channing)