Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
Value Of Planes On The Balance Sheets.  
User currently offlineLMML 14/32 From Malta, joined Jan 2001, 2565 posts, RR: 6
Posted (13 years 1 week 6 days 19 hours ago) and read 2738 times:

I wonder if you have come across a recent airline balance sheet (since 9/11) and had the opportunity to compare the aircraft values with last year's accounts. Have you noticed any significant depreciation?

10 replies: All unread, jump to last
 
User currently offlineCeilidh From , joined Dec 1969, posts, RR:
Reply 1, posted (13 years 1 week 6 days 18 hours ago) and read 2718 times:

Airlines will only depreciate aircraft they actually own - most airlines lease their aircraft which is an off-balance sheet transaction.

Aircraft are generally written down to a 25% value over a 10 - 20 year periodfrom new; and young second hand the same residual value over a 5 - 10 year timescale. Much older aircraft will be written off entirely on the remaining balance of a D check.


User currently offlineLMML 14/32 From Malta, joined Jan 2001, 2565 posts, RR: 6
Reply 2, posted (13 years 1 week 6 days 17 hours ago) and read 2699 times:

Yes, but with all these airlines grounding their aircraft the residual value of aircraft is a lot less now than it was 6 months ago. I think that this should be reflected on the balance sheet even though it may be temporary.

User currently offlineCeilidh From , joined Dec 1969, posts, RR:
Reply 3, posted (13 years 1 week 6 days 17 hours ago) and read 2696 times:

No, it doesn't work that way. The only companies that would accellerate the write-downs are those which are parking the aircraft. Remember, this serves to make a bigger dent in your profits - or a deeper hole in your losses!

User currently offlineLutfi From China, joined Sep 2000, 781 posts, RR: 0
Reply 4, posted (13 years 1 week 6 days 17 hours ago) and read 2692 times:

Yes, as follows.

SQ
Singapore airlines has changed its depreciation policy from 10 years to 15 years, therefore reducing its depreciation bill by 134m SGD. It also transferred its freighter fleet to SQ Cargo (100% owned) therefore was able to recognise a 267m SGD revaluation surplus on those aircraft.

UA
UA took a big charge to reduce value of B744. 20m USD an aircraft IIRC

AA
AA wrote off the value of the F100 fleet

TG
TG bought a 12 year old B744 off lease for 21m USD, gives a good idea of the sort of market value these days

B747-200 are now going for 2m USD each, which is basically the value of the engine life until the next overhaul.

Ceilidh, off balance sheet depends on the nature of the lease. An operating lease just goes through the P&L account. Finance leases in most jurisdictions must be capitalised and put on the balance sheet. Sort of like the difference between renting a house (operating lease) and having a mortgage (finance lease)


User currently offlineLMML 14/32 From Malta, joined Jan 2001, 2565 posts, RR: 6
Reply 5, posted (13 years 1 week 6 days 17 hours ago) and read 2685 times:

Lutfi - The SQ practice of slowing down depricitation is typical of most asian carriers. This will result in reporting greater operating profits.
$M21 for a 12 year old B744 illustrates what I am trying to say.
Maybe that is why most airlines are reporting major operating losses. This is artificial in a way and only reflects the present slump, which, hopefully, will only be temporary. The job cuts may be more permanent.


User currently offlineCeilidh From , joined Dec 1969, posts, RR:
Reply 6, posted (13 years 1 week 6 days 16 hours ago) and read 2679 times:

Lufti - you're right, I'd forgotten about finance leases. They're amortised over the term of the lease, which gives them a neutral effect unless defaulted on.

SQ used to use their accellerated depreciation to avoid taxes - they would make huge tax losses as a result, then when they sold their aircraft (usually for a decent price as they would be under 10 years old) they would make a tax free profit.

However, the move to international accounting standards for airlines has forced them to move away from this.


User currently offlineETA Unknown From Comoros, joined Jun 2001, 2089 posts, RR: 0
Reply 7, posted (13 years 1 week 3 days 22 hours ago) and read 2633 times:

... or in the case of Royal Brunei (and some creative Bruneian accounting) you try to write off a 767-300 over 6 years. And they wonder why they never come close to making a profit- bring in professional accountants!

User currently offlineLMML 14/32 From Malta, joined Jan 2001, 2565 posts, RR: 6
Reply 8, posted (13 years 1 week 3 days 17 hours ago) and read 2619 times:

Perhaps it is because Royal Brunei are not interested in making a profit. They are a state owned airline which flies unprofitably for social reasons.

User currently offlineJhooper From United States of America, joined Dec 2001, 6206 posts, RR: 12
Reply 9, posted (13 years 1 week 2 days 19 hours ago) and read 2593 times:

Which method of calculating depreciation do most airlines use?

straight-line depreciation?

double-declining balance depreciation?

sum-of-years-digits depreciation?

another method?



Last year 1,944 New Yorkers saw something and said something.
User currently offlineLMML 14/32 From Malta, joined Jan 2001, 2565 posts, RR: 6
Reply 10, posted (13 years 1 week 2 days 18 hours ago) and read 2585 times:

The straight line method is the most commonly used.

Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
Are New Planes On The Way For Virgin Atlantic? posted Thu Jun 22 2006 04:00:47 by Ctang
Smoothness Of Flight On The Twin V/s Quad posted Wed Dec 21 2005 10:36:57 by Deaphen
I Saw A Lot Of Contrails On The Sky... posted Thu Oct 20 2005 18:13:55 by Musapapaya
Economic Impact Of Airbus On The US Economy posted Mon Oct 17 2005 18:42:00 by Flying-Tiger
What Types Of Planes At The FLL Air & Sea Show? posted Mon Apr 11 2005 02:49:43 by IslipWN
Impact Of Aviation On The World. posted Tue Mar 8 2005 21:30:47 by Dan2002
Future Of Aviation On The Iberian Peninsular posted Sun Jul 18 2004 00:50:45 by JoFMO
Where Can I Get The History Of Delta On The Net? posted Fri Dec 14 2001 03:21:52 by DeltaBoy777
Should There Be Some Kind Of Lock On The Cockpit posted Wed Sep 12 2001 16:05:04 by Simon Cooper
FF Miles As Liabilities On The Balance Sheet posted Fri Sep 7 2001 06:59:46 by Bigo747