Topic Author
Posts: 448
Joined: Sat Sep 25, 1999 12:01 pm

Paying For New Planes

Mon Apr 03, 2000 12:56 pm

I have a question regarding how airlines pay for planes. What sort of payment plans do airlines work out with aircraft manufacturers? For example, is it like my 4-year car loan or my 30-year house mortgage?

Secondly if airlines are flying planes that are paid for, when does it come time to buy new planes? For example, let's assume that Delta's L-1011 planes are fully paid for. Granted, they pay for a flight crew of 3 and less fuel effeciency and arguably more maintenance on an older jet. But certainly this is still far less expensive than buying a new plane.

many poke fun at Northwest for flying aging planes and surely they are taking a beating on fuel bills as their less economical planes suck up the fuel. But from a financial standpoint, is it cheaper than buying new planes?

I know that many of you will argue that newer planes are safer and that's not the point I am wondering about. But fomr a financial standpoint, what would you rather have: 3 brand new 757's that you will be paying for for a long time, or 3 aging 727's that are completely "paid off." Again, from a FINANCIAL standpoint only (not load capacity, reputation, maintenance, number of crew members, etc...)

RE: Paying For New Planes

Mon Apr 03, 2000 1:31 pm

Generally speaking the manufacturer does not finance the aircraft, it's usually financed through a bank or other financial institution or, from the airlines point of view, a leasing company such as ILFC or Itochu or GECAS. Some airlines are able to pay cash for the aircraft but it not the general rule. No doubt it's better to have newer aircraft if the airline can afford the expense because of fuel efficiency, labor costs both inflight crews and maintenance, dependabilty. It may look cheaper to fly the old paid for equipment and most airlines try to maximize there investment but there is a point where it's not worth it. It's a very complicated formula and this is not even taking into account the tax advantages which I don't have the expertise to address.