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Buy or rent?

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THERE is a saying in the transport business that if it flies or floats, you should rent it (there are also much ruder versions of this epigram). Nevertheless, airlines have traditionally bought their planes, even if many purchases were arranged as “finance leases”, with the installments dressed up as rent payments so as to make them tax-deductible. (www.economist.com) Mais...

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canuck44
canuck44 0
Big airlines with big fleets get big purchase deals to lower capital costs. Trouble is they have to be kept on the books. Lease companies would not necessarily pass on the discounts especially in a long term lease where the residual value (loss) might not have been covered....eg: American. Since bondholders and leasers have been stiffed they will now require front end loading of leases and/or major deposit which would be forfeited within a bankruptcy. Likewise with financiers of any instrument (loan, bond, etc) for purchases. All increase the cost.
StymieHo
Chris Donawho 0
Still, the prospect of turning a fleet every 10 yrs, as opposed to 30 yrs, will keep the airline at the forefront of fleet tech. Think of all the cash a major carrier pours into its aging fleet just to keep the cockpit up to date, or TVs in the seatbacks, wireless services, etc.

Leasing provides a much better cost benefit in the long run, with no concerns of residuals.
N5DW
N5DW 0
I'd like to see a list of those "ruder versions" just in case I've missed any ! :-)
StymieHo
Chris Donawho 0
Me too... Ive been in the transport business for a while now, including equipment leasing. Nothing comes to mind so far.....
StymieHo
Chris Donawho 0
Drum Roll? Only one ... "If it flies, floats, or fucks; it's always cheaper to rent than to buy."

Not my normal language in the forum here fellas. Hopefully FA will buy my quotes and pardon me.

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