Airline Mogul Forum
Airline Mogul => General Chat => Topic started by: overworked on July 13, 2009, 01:21:23 am
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Can a lease be terminated by the person who is leasing out their planes at any time or do they have to wait until either the lease expires or the plane is return to them?
Secondly can some one explain why owning is actually better than leasing? Only reason I ask is that I'm leasing a bunch of planes and I looking at this example below. In the game I'm playing, I'm leasing a bunch of planes, with some having a lease of 120 months. In my case, the lease rate seem quite reason while still able to make a decent profit.
Example
My assumption is that the plane will run the same routes and will be make money. I know that there are a lot of variable involved that have an affect on the game. So I'm just keeping it very simple.
So assuming I making an average daily profit of $500,000 using a Boeing 737-200
In the 120 months I would make a total of $1,440,000,000 profit
Leasing
Boeing 737-200
Cost: 4,000,000/month
Period: 120 months
Total Cost at the end of 120 months lease: $480,000,000
Profit through leasing
1,440,000,000 - total lease = 1,388,163,232
Purchasing
Boeing
Cost $51,836,768/plane
Period: 120 months.
Assumptions: replacing every 3 yrs. since maintenance skyrockets after 3 yrs.
Therefore I would need to have replace the plane 40 times
Total Cost of purchase is for 40 planes over the same terms (120 months) is $2,073,470,720 + maintenance cost (whatever that works out to)
Profit through purchase
1,440,000,000 - purchases (40 planes) = -633,470,720 + maintenance cost
I assume that there's is not such thing as plane crashes or accidents in this game.
As I see it, leasing a plane on a long term deal seem to be a better deal than owning, assuming that a lease cannot be canceled by the plane's owner.
Please correctly me if I'm wrong.
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You'd only need to replace planes 3-4 times in 120 months (per plane)
12 months to a year
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Ooops.. Ok re-did the calculation at again. Still the leasing options comes out slightly better that purchasing
Replacing the plane only 4 times, the profit came to 1,232,694,982 - maintenance cost.
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1st, leases cannot be cancelled by the plane owner. Leased planes would be automatically returned at the end of the duration. They could also be returned by the lessee (ie. the operting airline).
2nd, you forgot the salvage value for the purchase part of calculation. You should be able to sell the old planes off, or at the very least, scrap them.
BUt yes, generally speaking, leasing provides a better return. The downside is that your cash-flow would fluctuate greatly.