https://assets.kpmg/content/dam/kpmg/ie ... iation.pdf..lenders as well as rating agencies and investors are sort of converging around that 22 year number.
while there can be factors justifying an increase or decrease in the rate of depreciation, most respondents agree that the 25 year depreciation policy for new technology aircraft is reasonable.
Calculating a market-to-market value of an aircraft is difficult as the market is grey and includes an array of variables, many of which would be unknown without firsthand knowledge of the transactions. Further, while straight-line depreciation is a valuable tool, it is inefficient in modeling an aircraft’s economic value over a discrete period in time.
Valuing assets accurately for sale and secured transactions has been, and is, a hotly debated subject. One of the problems is the paucity of publicly available market data for appraisers to access to be able to accurately value aircraft.
One of the persistent themes in life is getting value from a purchase over time. Time and money are finite resources. Salespeople represent the antithesis of wise consul. Motivated by creating a transaction, they are one of the pressure factors disregarding decision maker time and distorting value propositions.
Would the reader consider that the ANetters assume roles as armchair C-Suiters… Using ANet as a posting outlet, they turn the tables from the pressure they face at home as the spouse and kids are experts in manipulation attempts to direct family resources. The biased reflective behavior is more of an impulse as most have industry knowledge and seek to expand their data driven perspectives.
* How does this affect purchase discussions? If a B787/A350 are 25 year assets and B777/A330neo are ~19? year assets; how does this affect your thinking on many of the ANet asset topics being discussed?
* Costs can be factored by: 1) Aircraft economic depreciation used + financing, 2) labor, 3) fuel, 4) gate costs…. When discussing factor 1, how does newTech v. old Tech factor into a discussion?
* How does aircraft depreciable life factor into elasticity of revenue? IE, industry revenue is comparatively elastic and the effect of shocks can be pronounced. Richard Anderson intuitively knows the costs of grounding planes with respect to economic depreciation and financing. He also has experience based knowledge on economic cycles and the speed at which it can affect an airline. This is in contrast to current decision makers career variability experiences.
* What is a relevant freighter useful life expectancy with bounds? How do conversions factor into the topic's dimension?
The topic holds relevance to the boundaries of common knowledge on the board. The post attempts to present analytical perspectives and global views of decision makers versus prescribing superficial solutions in a way that is meaningful to data driven board participants.