Aircraft Depreciation before delivery

JDubman · **on:** March 25, 2007, 03:36:28 am

Is it realistic that aircraft are depreciating before we even get them delivered?

For example, two of 747-400's, which still have 41 hours left before delivery, have already depreciated nearly 25 million dollars! That's nearly 10%!

Air Elbonia · **Reply #1 on:** March 25, 2007, 04:44:23 am

Yeah. it somewhat is, though not accurate to actual accounting systems I know of.

A car, when purchased, loses a substantial portion of its value the second it leaves the lot.

technically speaking though, depreciation only occurs when purchased and is (depending on the system) taken off at a certain rate (variable or fixed) throughout its expected service life.

Steeler83 · **Reply #2 on:** March 27, 2007, 04:11:37 am

A car already loses substantial value the instant it leaves the lot? Aw man, I guess that means my 5 month old Elantra is next to worthless... and given that I already was in a wreck with it! :-( (really intended for comic pleasure!)

I noticed that with some of my aircraft as well. Some of my 737s will be delivered in another month, and yet, they've lost value by about 2 million...

tomauer · **Reply #3 on:** March 27, 2007, 07:46:50 am

Yeah, I don't think its that realistic for aircraft to lose value once they leave the Manafacturing plant, they will in time, but not a few million off of there overall value the in 2+ mths of NOT being operated!! thats like the car issue, in this case the car would be losing value on the car lot while being made!

BTW, my advice on purchasing cars, and also agreed by everyone else i know, do NOT buy a new car!! Unless of course your rich enough to lose so much money..

StephenM · **Reply #4 on:** March 27, 2007, 08:55:00 am

I have a concept for you, just gotta write it up. It will stop that issue but your going to kill me as it will include aircraft order queues!

tomauer · **Reply #5 on:** March 27, 2007, 01:22:19 pm

:? arghhh ..

that would be a hard sacrifice

SCA CEO · **Reply #6 on:** March 27, 2007, 03:09:45 pm

If the only option is aircraft quese, then leave the stuff where it's at.

StephenM · **Reply #7 on:** March 27, 2007, 04:35:38 pm

Quote from: "SCA CEO"

If the only option is aircraft quese, then leave the stuff where it's at.

No its not a final solution. Basically it would involve the mix of firm orders and options, ability to sell aircraft order and option slots. Possible broker features for doing part ownership of orders and part leasing. Also loans and finance would come into effect here. I want to develop it a bit more and try and release a document on it. The way I would like to have it in the end will simulate real world.

StephenM · **Reply #8 on:** March 28, 2007, 03:50:02 pm

Quote

The Plan:
1.   Airlines will be able to order aircraft as normal, using improved browsing and searching methods while not loosing the current character of the system.
2.   Engines will be available to be selected as previously has been done.
3.   The aircraft order screen will consist of a drop down menu with the following options:
a.   Maximum number of aircraft available to purchase based on the amount of cash available
b.   No maximum number of aircraft so benefits of leasing some of the order/part finance of the order can be calculated
4.   Aircraft orders can be placed with options, allowing a mix of firm and option.
5.   The sale of order slots and options will be permitted with the following rule:
a.   They will be sold via private sale and not on a public market
b.   Options of aircraft may only be sold to alliance partners (Possible)
6.   Orders for aircraft will have the option of different finance methods including loans. These can be in the form of:
a.   100% Finance of the order by the airline.
b.   50% Finance of the order by the airline and 50% by way of bank loan
c.   0% Finance of the order by the airline and 100% by way of bank loan
7.   Part leasing of orders and part full purchase, this will link in with brokers.

From a document I hopefully will have finished soon.

What do you think?

Air Elbonia · **Reply #9 on:** March 28, 2007, 04:17:32 pm

There'll have to be some loan cap, or day 1 i'll buy 500 747-4's on bank loan. (as well as 500 of the best aircraft from each manufacturer)

sounds alright though.

James · **Reply #10 on:** March 28, 2007, 04:27:33 pm

This is a little off this topic but Stephen now that you're planning to allow airlines to sell their aircraft slots to other airlines, would you also look into my previous suggestion in the Suggestion Forum, whereby airlines can sell slots on to other airlines unrestricted?

StephenM · **Reply #11 on:** March 28, 2007, 04:41:20 pm

Quote from: "Air Elbonia"

There'll have to be some loan cap

Of course, loans cannot exceed fixed assets. Small airline = small loan. There has to be something to be sold off if the loan is defaulted on.

Quote from: "James"

Taken From a previous topic. Would it be possible to add a function whereby airlines can sell slots they've bought for an airport to other airlines?

From what I can think of at the moment it may be very hard to do so, I'll have a word with Martin Bergin and see what he says, he normally has good logic for these things.