Can anyone please guide me how are investment helpful?
Egs purchase of an aircraft or bulding a terminal.
Can anyone please guide me how are investment helpful?
Egs purchase of an aircraft or bulding a terminal.
If you leased and aircraft you lose money to pay for the leasing fee
if you bought it however, the value of your company wouldn't decreased
lets do some math:
- You have $500,000,000 and you leased 10 aircrafts for $100,000,000 then your company would have $400,000,000 in cash.
But because the other $100,000,000 goes to the leasing company. Your company would only worth $400,000,000.
- You have $500,000,000 and you buy 2 aircrafts for $100,000,000 then you would be left with $400,000,000 in cash.
But your company would still worth $500,000,000 because you have $400,000,000 in cash and 2 airplane valued $100,000,000.
the buildings, you can't leased them, so you would lose some cash building it, but your company worth would still be the same.
And you don't have to extend the leases all the time.
And you don't have to extend the leases all the time.
Not to mention. if you own all your planes, you save yourself the cost of leases in the long term.
When beginning the airline, it is better to lease, so that you can expand faster.
But when you have a lot of cash, it is better to buy the aicraft because depreciation costs are wayy lower than leasing costs.
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