747Dreamlifter From , joined Dec 1969, posts, RR: Posted (2 years 1 month 3 weeks 1 day 22 hours ago) and read 2260 times:
How much does a commerical jet-liner depreciates?.... What are their value after years of earning revenue for the airlines who bought them??
Well according to data posted in Air Transport World (ATWonline) and compiled by *Avitas Inc.,there just as bad, or at times, worst than our personal cars and trucks.....
Lets compare four popular models still available in today's market: Airbus A318, Boeing 717, 737-500, 737-600NG.
(All $ figures are in US$)
1) RETAIL PRICE and (year introduced)
A318 $39 mil (2003)
717 $38 mil (2001)
-500 $37 mil )1998)
-600NG $44 mil (2001)
2) 2007 CURRENT MARKET VALUE
A318 $19 mil
717 $14.8 mil
-500 $13.3 mil
-600NG $$16.4 mil
Depreciation amount (from introduction to 2007)(% of depreciation)
A318 -$20 mil (51%)
717 -$23.2 mil (61%
-500 -$23.7 mil (64%)
-600NG -$27.6 mil (63%)
3) 2022 MARKET VALUE
A318 $10.1 mil
717 $6.8 mil
-500 $5.8 mil
-600NG $9.2 mil
Depreciation amount (from 2007 to 2022)
A318 -$9.9 mil
717 -$8.0 mil
-500 -$7.5 mil
-600NG -$7.2 mil
4) Total Average yearly depreciation (from date of introduction to year 2022)
A318 -$29.1 mil (19 years) $1.53 mil/yr
717 -$30 mil (21 years) $1.43 mil/yr
-500 -$29.5 mil (24 years) $1.23 mil/yr
-600NG -$34.8 mil (21 years) $1.67 mi/yr.
According to the data, the Boeing 737-500 provided the best results with the least annual depreciation from date of introduction. The A318 scored the worst with $29.1 mil in the least number of years of service.
Both the A318 and B737-600NG remains in production. List base price (2007) $45 mil for the A318 and $55 mil for a 600NG
Total number of units delivered to date (Dec 01, 2007)
A318 102 (last customer National Business Jets 9/28/07)
717 156 (out of production - last delivery to AirTran 5/23/06)
-500 392 (out of production - last delivery to Air Nippon 7/26/99)
-600NG 110 (last customer Westjet 8/17/06)
Bluewhale18210 From United States of America, joined Aug 2006, 98 posts, RR: 0 Reply 1, posted (2 years 1 month 3 weeks 1 day 18 hours ago) and read 2199 times:
If I remember my accounting correctly, it's a good thing for equipments to be depreciated quickly.
That $1m+ per year is counted as business expenditures as far as IRS is concerned. So if a 737 is depreciated down to ZERO in say, 20 years, then 1. Airlines would be flying it for free in terms of tax and 2. Whatever resale value after that time is pure profit for the airlines.
Now market value is a different thing, so don't mix them up.
When you look at depreciation you really should look at the airlines' books to see how much they take out of the tax for that year, calculate the residue value on the book, and compare that to the actual resale value.
For example (figure made up)
A 737 cost $40mil to start with and depreciates in 20 years, that means every year the airline gets to deduct $2mil from their income on tax for expenditures. A 737 10 years into service then is worth (theoratically) $20mil in their books. If the airline sells it for $25mil at that point then they would have gotten a $5mil in profit. If it only sold for $18mil then it would have been $2mil loss. If after the 20 years depreciation period that 737 is still flying (which it probably will), then that airline is flying passengers on, what on the books is, scrap metal, since that 737 is not worth a penny as their asset. Whatever that 737 sells for (probably would sell for $10mil at that point) would be pure profit for the airlines.
Depend on how they want their finances to appear, airlines would like their jets to depreciate faster or slower...
Blending into the Sky, onto a New Horizon - Dreamliner 747-409
PHLwok From United States of America, joined May 2007, 160 posts, RR: 1 Reply 2, posted (2 years 1 month 3 weeks 1 day 11 hours ago) and read 2070 times:
Quoting Bluewhale18210 (Reply 1): If I remember my accounting correctly, it's a good thing for equipments to be depreciated quickly.
You remember correctly. The near-complete depreciation of NW's older aircraft is how it's made sense to fly DC-9's, and even the DC-10 fleet for longer than many others, though the operating costs, notably fuel, have tapered that advantage. Without a decent chunk of revenue earned per flight being tied to depreciation costs, the break-even point for each flight is lower (though this savings can be decreased as the BEP can be raised by the inefficiencies of using older equipment, notably fuel/energy costs).
Quoting Bluewhale18210 (Reply 1): That $1m+ per year is counted as business expenditures as far as IRS is concerned. So if a 737 is depreciated down to ZERO in say, 20 years, then 1. Airlines would be flying it for free in terms of tax and 2. Whatever resale value after that time is pure profit for the airlines.
Well, sort of. Don't forget that tax accounting and GAAP accounting are different, and the book value of a capital asset under GAAP can be very different from the same for tax purposes, which can make the eventual sale of the asset look very different for tax versus balance sheet purposes. Under GAAP, you have to be able to estimate the asset's useful life, then choose an appropriate depreciation schedule that balances the asset losing most of its resale value earlier in its life with not wanting to take the hit to earnings of over-depreciating early in the asset's life. I'd guess most airlines are depreciating owned aircraft over 20-30 years, using accelerated depreciated methods, but it could well vary.
Much like leasing versus owning cars, depreciation figures into the decision to lease rather than own planes - each has its own risks and rewards.
JohnClipper From Hong Kong, joined Aug 2005, 546 posts, RR: 0 Reply 3, posted (2 years 1 month 3 weeks 1 day 1 hour ago) and read 1977 times:
I was thinking about something along these lines the other day. Is it possible or even a best guess estimate to see what an aircraft or aircraft model has earned an airline over it's service life? For example, how much did DL L-1011s earn DL over their service life? Or UA's B727s or AA's DC-10s before they were retired? Would be interesting to see...
Tdscanuck From Canada, joined Jan 2006, 6316 posts, RR: 58 Reply 4, posted (2 years 1 month 3 weeks 1 day ago) and read 1942 times:
Quoting 747Dreamlifter (Thread starter): What are their value after years of earning revenue for the airlines who bought them??
As noted in the posts above, value and book value are very different things. An aircraft never hits zero value; when it is beyond its economic life as an aircraft it's value drops to the scrap value of the metal (mostly aluminum for airplanes in that situation today).
VV701 From United Kingdom, joined Aug 2005, 3945 posts, RR: 20 Reply 5, posted (2 years 1 month 3 weeks 13 hours ago) and read 1839 times:
BA has a publicly stated policy of operating aircraft in its owned fleet for between 15 and 25 years. Clearly with the greater number of rotations per day the shorter period applies to short haul aircraft and the longer period to long haul aircraft.
The latest retirees from the BA fleet are its 320 100s the last of which is still flying but will be retired within days. This aircraft entered service on 2 December 1988 and will have its last flight on 1 January, 20 years later. So in probability BA has been flying this aircraft for up to five years without any depreciation costs.
PHLwok From United States of America, joined May 2007, 160 posts, RR: 1 Reply 6, posted (2 years 1 month 3 weeks 9 hours ago) and read 1767 times:
Quoting VV701 (Reply 5): So in probability BA has been flying this aircraft for up to five years without any depreciation costs.
It's probably a bit more likely that the depreciation costs are very low rather than zero. The overriding accounting principle is that assets should be carried on the books at their "fair market value", so, in addition to not taking a hit on earnings, this is why you wouldn't depreciate a capital asset like an airplane you plan to get decades of life out of in, say, a year. Whether aircraft depreciation schedules are different in the UK, I don't know, and there is some room for companies to use different depreciation rates, but depreciation is a core accounting principle worldwide and the goal is to value assets fairly.
Note that if an asset suddenly becomes less valuable than its current book value - for instance, if you have 15 year old equipment, depreciated accordingly, that you expected to last 25 years but there's no demand for what it makes anymore and you have to dispose of it, it's proper to take a writedown on the books to the actual market value of it, usually just the disposal/scrap value.
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