|Quoting StarGoldLHR (Reply 59):|
If the A350 has a life of 15 years or less.. then it's going to be a "cheap disposable" plane.
If its cheap.. airlines can buy instead of lease...
if they buy instead of lease... it threatens ILFC and SUH's business... hence SUH needs to stick the knife in first hard and deep to save his company in the long term.
In simple.. the A350 threatens his business... as it makes the cost of the plane more affordable.
While there may be economic advantages of a "disposable" airframe, buying them instead of leasing them isn't one of them. The amortization of a purchased airframe would be over 10 to 15 years under most tax codes I am familiar with. The advantage of purchasing is that you have a lower total cost, but you do not have many tax deductions. Indeed, you carry the airframe you purchased as an asset, and are able to deduct only the amount amortized during the tax year. And if you had to borrow money to purchase the airframe, you still have to pay interest,etc.
On the other hand, if you lease, you can deduct the total cost of the lease as a business expense, and not have to deal with borrowing money. That is what SUH business is based on. He as owner of the airframe amortizes it over a 15 year or so period and then "salvages" the now amortized asset for whatever he can get. Naturally, he pays taxes on whatever he gets for salvaging, but he has that all worked out. And naturally, the more money he can get from salvaging the airframe - such as selling the airplane complete for a premium, the better.
The decision to purchase verses lease is a cash flow issue, plus concerns about just how long you need the airframe. If you only need it for say 5 years, leasing is a safer way to go. If you need it for 15 years, then you look a the cash flow. If you have lots of money in the bank and don't need to borrow to buy the airframe, purchase makes sense.
From SUH's point of view, it is not the first lease that is important, but the second and perhaps third lease that makes or breaks the deal. If he buys a very popular airframe everyone wants, he can get a higher lease rate on it for at least the first lease. But let's say that there is a serious design fault in it which requires the leasee to pay out large amounts of money for unexpected maintenance, then suddenly nobody wants to lease it and so the when the airframe is return after the first lease, it sits, even though he is still paying interest on the money he borrowed to buy it.
SUH is concerned about what happens in 10 or 12 years when these planes are now sitting in the desert because nobody wants them on the second or third lease period.
As noted, I am sure Airbus can sell SUH all sorts of A350s with the proper warranty and buy-back guarantee.