a340pilot
Posts: 554
Joined: Mon Sep 01, 2003 10:22 am

Why Buy More Planes?

Wed Oct 08, 2003 3:09 pm

I don't understand why airline company's are buying 20-30 new aircraft when there is hundreds of there own aircraft at storage facilities like Mojave (MHV) I'm pretty sure that most (not all) of these aircrafts have some years left in them!! Why would they waste money on buying new 737's when they have like 40 perfectly flyable 737's! I've seen some pictures where there was good airplanes at the desert and some years later they are sitting on pallets because of collapsed landing gears! IM Happy to see that they wrap them all up nice and neat in tinfoil only to let them rust! Is there not some way of selling these dilapidated aircraft to people to either restore them to make them into a restaurant or for display! And IM sure that aviation technology schools can use a few that could be donated ( Yes, I am aware that westjet has just donated a 737 and that's great!) But IM just curious what all of you think should be done or opinions on the desert??


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a340pilot
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elwood64151
Posts: 2410
Joined: Fri Feb 08, 2002 10:22 am

RE: Why Buy More Planes?

Wed Oct 08, 2003 10:19 pm

For the tax breaks.

It's simple: As an airline depreciates an aircraft, they get a tax break because it shows up as a loss on their profit/loss statement, and is reflected in their balance sheet.

An airline with 100 fairly new aircraft in Mohave can actually cut its taxes in half by a) leaving them out there to rot and b) buying new planes to cover the route, but also showing depreciation.

Many of NW's DC-9s were depreciated years ago. That's why they're still flying. They can drop off new aircraft in the desert and depreciate them more quickly while using the DC-9s that are, technically, worthless. This also saves on insurance, since the replacement cost of a DC-9 is next to nothing (maybe $1M for a parked, opeational DC-9).

Like many things in accounting, it's a farce accepted as a Generally Accepted Accounting Principle. They're allowed to do it simply because there is no way to actually measure depreciation, but it does exist and is something that needs to be dealt with. So each company chooses an accepted method and depreciates the planes. If they're sitting out in the desert, they don't use fuel, and they do give you a tax break... Nice, huh?
Those who fail to learn history are doomed to repeat it in summer school.
 
luv2fly
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RE: Why Buy More Planes?

Wed Oct 08, 2003 11:04 pm

Also a reason a lot of planes are not donated or turned into restaurants and such is, there is a lot of money to be made parting out the aircraft. A whole lot of money.

And some of the plane orders you speak of, the orders had been placed in better times, and the airlines would face hefty fines to cancel now.
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CanadianNorth
Posts: 3133
Joined: Sat Aug 24, 2002 11:41 am

RE: Why Buy More Planes?

Wed Oct 08, 2003 11:40 pm

Well after this, it makes sence, but still doesnt seem right.

You have a perfectly fine aircraft there, why the hell would you wanna park it.. whats rong with it? Couldnt you donate it/sell it/keep it at yer maintenance base for parts/use it for charters/training/maintenance training?/or something? It just seems such a waste... buying new aircrafts when the ones you already have work just fine, its rediculus.

CanadianNorth
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BeltwayBandit
Posts: 474
Joined: Tue Mar 11, 2003 4:25 am

RE: Why Buy More Planes?

Thu Oct 09, 2003 5:12 am

Boeing and Airbus are giving great deals; and for several years you get a complete maintenance holiday. It has a way of making the financial statements look very good for a few years.

Of course, in a few years, you have a dilemma.
 
a340pilot
Posts: 554
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RE: Why Buy More Planes?

Thu Oct 09, 2003 1:19 pm

Elwood64151: Thank you for the Input  Big thumbs up It does answer a lot! But it still seems to be a shame to leave all these beautiful aircraft on the closet shelf when they should be in the sky. Am I Mistaken or do they not lease some of these aircrafts to other company's (I.E: united airlines to air Canada for example) or do they lease there planes from an active list of aircraft?



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a340pilot
Go! Canucks Go!
 
Guest

RE: Why Buy More Planes?

Thu Oct 09, 2003 1:46 pm

Airlines and accountants do not give a rats hairy butt about "all those beautiful aircraft". They do care about thinks like share prices. They are legally obligated to take the new airplanes because they signed a document saying so with the manufacturer before it was built. Pissing backwards on the order would probably cost them more than parking the silly thing. To an accountant that airplane exists to make money, granted it does not make a dime parked in the desert but then again they are not losing nearly as much on it as if it were flying where they were paying landing fees, fuel, maintence and salary to a crew. Elwood is exactly right about why they park what airplanes. Also airlines are not around for charity, yes its great to donate an airplane to a school or sell it to the school for cheap. But that is bad for business when they can make big bucks parting the thing out to other airlines flying the same thing, or save on their own parts costs using the parts themselves. Too many people on here think too emotionally.. Airlines are businesses if they do not make money they cease to exist then threads start appearing about how they should come back and operate from their old hubs and doing the very same things that lead to their demise.
 
a340pilot
Posts: 554
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RE: Why Buy More Planes?

Thu Oct 09, 2003 2:00 pm

Well it seems like you are a minority in this a.net forum! Go into the search and look at the threads............A hell of a lot of them are in regards to the beautiful shape and sheen look of the aircraft! If You were to run the airline industry with dirty, rusty aircraft I can guarantee that you would be out of business in a week! Everyone on a.net is entitled to there own opinions, If you don't think that shape or beautification matters....That's Fine! But don't come in here and call us "Emotional" because we think its a waste of airplane, Keep it to yourself!

Best regards,
a340pilot
Go! Canucks Go!
 
Guest

RE: Why Buy More Planes?

Thu Oct 09, 2003 2:21 pm

So when do you propose TWA relaunch itself with Super Constellations? I am not saying that I don't find airplanes beautiful. I also never said to keep the rattiest looking bucket they have in the sky. I am saying to use a little common sense if its cheaper to fly the older Airplane and park the new one do that... If it is best for business to park 727s and L1011s by all means do it.. Do not keep something flying only on the basis its pretty.. sheesh it sounds like my girlfriend managing an airline
 
Guest

RE: Why Buy More Planes?

Thu Oct 09, 2003 2:25 pm

On the flip side of cash/asset depreciation, an airline can also lease new aircraft and write of the lease cost. In addition, if the aircraft value depreciates rapidly, an airline has room to re-negotiate the leases to cut costs. MEH is a perfect example of this cost cutting measure. Leases also reduce aquisition costs allowing a start up (i.e. JetBlue) to expand rapidly to meet demand.

[Edited 2003-10-09 07:26:14]
 
a340pilot
Posts: 554
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RE: Why Buy More Planes?

Thu Oct 09, 2003 2:42 pm

"Do not keep something flying only on the basis its pretty.. sheesh it sounds like my girlfriend managing an airline"

AH! HA! So its your girlfriend that operates the ZIP airline fleet with all the "pretty" aircraft! I've always wondered who was behind the gawdly pink zip!  Big grin But seriously, I agree with you that beauty doesn't keep the aircrafts in the air.......But there nice to look at!


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a340pilot


PS: to all you AC fans I am not anti air Canada, I just think they could have picked a better color  Nuts
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Guest

RE: Why Buy More Planes?

Thu Oct 09, 2003 2:43 pm

BTW When was the last time anyone saw aluminum rust? I know it can oxidize a bit but if your aluminum is rusting it may be a sign of a deeper problem. Oh and I have flown on some ratty looking airplanes, I recall a Delta 727 a few years ago that had most of the widget missing.. It still flew ok as far as I could tell and I am quite confident that competent mechanics signed off on it being safe to fly. Was it the norm for the Delta fleet? At the time maybe but the new livery was just starting to pop up so its forgivable. Did the airplanes rough appearance away from its ability to generate income for the airline? HELL NO. Would that airplane have made as much money for the airline had it been a spanking new 737.. Doubtful when you relate what Elwood said earlier.. Which is exactly right. Every airline has a few airplanes that look like ass.. Its a fact of life, the key is to not have the whole fleet looking awful. Also when you make decisions based on nostalgia for a type, or the attractiveness of its lines, or just thinking it looks cool, that is making a decision based on feelings or emotions. Run your airline or any business on emotion instead of financial data and YOU will be out of business in a week. If the thread was about how attractive a particular type is I would probably be participating whole heartedly but this particular thread relates to a basic dollars and sense question of fleet management, where there is little room for emotion.
 
Guest

RE: Why Buy More Planes?

Thu Oct 09, 2003 2:49 pm

ok example time:
I personally always sort of found the 737-200s ugly no matter how they were painted. That is an Emotional response... The 737-200 was the best match for Zips needs based on the acquisition cost, fuel usage, range, maintenece costs and seat mile costs for the markets it serves and probably a few other factors, some it does better than other airframes on other aspects it does worse but overall its the best choice.. That is a logical response.

oh and a paint job costs a lot less than a new airplane

[Edited 2003-10-09 07:52:16]
 
a340pilot
Posts: 554
Joined: Mon Sep 01, 2003 10:22 am

RE: Why Buy More Planes?

Thu Oct 09, 2003 3:02 pm

OK Truce, I have heard your reasons and I agree with you 100%. But as seeing that I will never own an aircraft (not even a Cessna) I have to live by what I can watch and fly-on at YVR, LAX, SEA and In my opinion I would rather see a nice looking aircraft, than the NW 747 cargo plane. IM Not going to break down in tears and require years of counseling if a plane looses its colors or becomes dilapidated, all IM saying is it would be nice to see them in the air. And as for the aluminum, I am fairly new to the aviation world as stated in my profile and didn't even know they where aluminum, as far as I knew they were "metal birds" ! I run a trucking company, and the only thing that I know for sure about airplanes is they bring me my cargo for shipment. So I apologize if some of the things I said don't make sense, but its all I know!  Smile


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a340pilot
Go! Canucks Go!
 
Guest

RE: Why Buy More Planes?

Thu Oct 09, 2003 3:15 pm

This was never anything personal we were debating an issue. Actually trucking companies were sort of a way of life for me growing up, my father is ops manager for a small one in Ohio. I used to work there part time (until I moved) and I picked up more than I ever cared to know about moving the nations crap. He does fleet management along with a lot of other things... Many of the same concepts apply only its far more complex with airplanes but what it comes down to in both cases is what equipment is going to make the company the most money. I agree fully it would be nice to keep the old workhorses we all love seeing in the air flying but the old pretty stuff has had its day. And while you and I may find the howl of old jet engines nice, it tends to tick the airport neighbors off. Now its time to fall in love with a new pack of airplanes, each generation more similar looking than the last. Someday we will all remember the 757 and the A321 fondly.

Those are just examples, insert whatever types best fit your criteria of blah to prevent this becoming a what type is better looking thread.

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