12 replies to this topic

[TorqueWrench]

Why do airlines have to pay for the Aircraft Depreciation...

Sure its a cost that businesses have to take into account but its the airlines responsibility to budget for depreciation.

Its supposed to work almost like a "savings" account, you set an amount up each month from your profits to pay for a new aircraft when you need one.

My account is being debited for "Aircraft Depreciation" but when am i going to see this money again? It appears to me that the AE bank is stealing money from me...

[Pacific]

I flunked accounting so I'm not a good person to answer this question but:

Assets lose value as they age. Therefore the AE accountants take some value off your assets every month. It's a little annoying because you only see aircraft lose value every year but it actually gets taken away every month.

Just like a car - a 3 year old car is worth less than a brand new car. That loss of value is depreciation.

[TorqueWrench]

Originally posted by Pacific
I flunked accounting so I'm not a good person to answer this question but:

Assets lose value as they age. Therefore the AE accountants take some value off your assets every month. It's a little annoying because you only see aircraft lose value every year but it actually gets taken away every month.

Just like a car - a 3 year old car is worth less than a brand new car. That loss of value is depreciation.

Then my question is, when do we get to see this money again?

If I buy a car, and i decide i'm going to factor in the depreciation of the car... say $100 per month on depreciation...

i keep the car for two years and I sell it... now, with the money that i sell the car for and the money i've saved from depreciation, i can buy a new car for exactly the same price as my last car and it wont cost me anything... correct? I got the money back from the depreciation cost when i sold the car. Is this true with AE?

[Pacific]

You LOSE money with depreciation.

You buy a new car for $9000, sell it 2 years later for $7000.

Buy another one for $9000 = $2000 loss.

[TorqueWrench]

you dont loose MONEY you loose VALUE...

Depreciation should be taken from the airlines VALUE not my monthly profits... if the aircraft was to not depreciate for one month, my earnings wouldn't go up...

An aircrafts value should have no bearing what so ever on my monthly cash flow... (Only when buying and selling )

[Pacific]

Now that you remind me, I don't recall seeing "depreciation" in the statement of cash flows. I doubt miller's a hardcore accountant so oh well...

Edit: Now I'm confused...there was also an income statement. Nor wonder I flunked it...

[Edited on 10/30/2005 by Pacific]

[TorqueWrench]

have a look at this image...



I've circled "Aircraft Depreciation" this should be taken from the company value... not the company account...

[Mecanita]

I real life, depriciation is taken from profits.
That's also the reason why airline stocks don't make it as good as other companies in the real life stock market with investors.
The aircraft has a very high value.

[ziliu]

It is taken from the company value not the company cash account. It's just that page being a little unclear. :cool:

[jackthestrip]

Who really cares if it comes out of the accounts of your value?

[legion242]

I see what you are saying- you are essentially losing the money twice- once a month and when you sell the aircraft. It should only effect you when you sell the aircraft.

[TorqueWrench]

Originally posted by jackthestrip
Who really cares if it comes out of the accounts of your value?

What i'm trying to say is that i'm PAYING for depreciation just like i would a bill for fuel or gate charges etc etc

[ziliu]

No you are not. You're paying for the aircraft when you first buy it. But at that time, the aircraft cost is not shown in your accounting, but it is spread out over time as "Aircraft Depreciation".