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Author Topic: A320 Price?  (Read 1936 times)

Offline Richard

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Re: A320 Price?
« Reply #20 on: December 31, 2011, 12:46:10 PM »
Sami, I do not want to go against you but when you're on a financial leasing and you lease, say, a car, you can buy the car in the middle of the leasing, without having to pay 70% of the remaining installments. At least that's what happened at the beginning of december in my company: we had pretty good results and, in order to pay less taxes, our CEO went on buying some of our cars that were on a leasing contract. We had to pay the difference between what we had paid so far and the cost of a brand new car, but that was not 70% of the remaining installments! :)



For financial lease that is correct since it is like a mortgage. Sometimes it is financially attractive and better to pay the whole mortgage in advance just like in your case. In case of a financial lease you buy the airplane in small amounts with interest and after some years you will be the owner.

However, the way you lease airplanes in AWS is an operational lease. In this case a leasing company is and will remain 100% owner of the plane and you just pay a lease fee and do not pay for ownership of your plane.

If you want to financially lease an airplane in AWS, take out a loan for the airplane and buy a new one directly from the manufacturer with that money.

So I think the way it is set up now is correct.
« Last Edit: December 31, 2011, 12:53:53 PM by richard79 »

Offline Troxartas86

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Re: A320 Price?
« Reply #21 on: January 01, 2012, 08:36:49 AM »
Cars are not airplanes. We are talking multi-million dollar agreements here. Those don't get broken easily.

Offline Sigma

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Re: A320 Price?
« Reply #22 on: January 01, 2012, 11:03:58 AM »
These are not $30,000 cars that one can replace within 2hrs with a phone call to a dealership.  These are $100,000,000 airplanes that take can take multiple years to replace.
  
If I was a lessor and you wanted to buy the car outright that you were leasing from me, sure, I'd let you have it for the remaining balance and a nominal fee for early contract termination.  I've got no appreciable worries because I can take the money you just paid me, go buy a new car, and lease that to someone else (if I had some reason to think I couldn't get a new lessee on a new vehicle, I would be more hesitant or charge a larger fee, but that's usually not the case in that business).  
This is even less comparable for the auto leases that most people deal with (as opposed to a fleet leasing company that most businesses deal with), which are usually directly from the manufacturer (or their associated financial arm) -- they're in the business of selling cars, one way or the other, so if you want to buy it outright that's great for them, so they're not about to charge you much (if anything) for it.

But if I am leasing a plane to you, I'm betting on making $1M a month (or whatever) for the next 10 years.  If you come and want to buy-out the contract, I've got to go order a new plane to replace the one you want to buy from me, and I'm now stuck without a plane to lease for a solid 2-3 years while I wait for a new one to roll off the line.  That's a LOT of income that I'm not going to be getting anymore.  I'm in the business of leasing planes, not being some sort of dealership for a manufacturer (and if I was, I'd  be charging you a significant mark-up over the price I paid to the manufacturer, essentially the same as a lease termination fee).  I need planes out on lease making me monthly income.  Sure, maybe 70% is too high, it makes more sense for the amount to change based on the remaining term of the lease compared to the production queue (time for lessor to replace) -- 70% is appropriate for a 2-year lease as most of that time (if not all of it and more) I'm no longer making a dime that I was expecting to because I cannot get a replacement plane that quickly.  But 70% is far too high for a long-term contract as the lessor's costs to terminate the contract are nowhere remotely near that much and such onerous terms on lease termination would never hold up in court as you cannot charge appreciably more than actual foreseeable damages.

« Last Edit: January 01, 2012, 11:10:46 AM by Sigma »

Offline EYguy

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Re: A320 Price?
« Reply #23 on: January 02, 2012, 03:49:12 PM »
Yeah, Sigma, you get the point. 70% is just way too high as "contract cancellation fee". And, as you pointed out, we talk about financial leasing, not operating ones. But, as you know, ILFC stands for International Leasing and Finance Corp., so I'd say that we're basically talking about financial leasing.
I reckon that operational leasing managed directly by a/c manufacturers would be an incredible mess: they'd have to revolutionise their own financial structure in order to cope with the new business model and, in the end, their risk would just be too big. I mean, they sell a/c and they get the money they asked for 30 days after invoicing their customers.
Getting the price of an used a/c right away (if the leasee wanted to buy out the contract) is better for the lessor: because he get's money immediately and can order a new a/c, because his financial position will be stronger (more cash against long term credits) and, eventually, lot of airlines just buy the a/c out well before their D-checks.

So, tu sum up everything, IMHO the whole leasing system should be overhauled a bit and made more flexible and realistic... :)

Offline alexgv1

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Re: A320 Price?
« Reply #24 on: January 02, 2012, 03:54:04 PM »
Airbus and Boeing both have financing arms for their aircraft. Most purchased aircraft purchased from manufacturers rely on leveraging finance options, especially more in this current market climate. Sorry no source am on iPhone but there was a good story on flight global about all the deliveries in the next decades. I agree it is different for leasing corps as that is their business model, whereas airframers just want to sell the planes and give options to facilitate this. Maybe 70% is too high for long term leases 5-15 years long. It would help newbs with the mistakes they make for example the OP is now stuck with this mistake.
CEO of South Where Airlines (SWA|WH)

Online Sami

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Re: A320 Price?
« Reply #25 on: January 02, 2012, 03:54:16 PM »
ones. But, as you know, ILFC stands for International Leasing and Finance Corp., so I'd say that we're basically talking about financial leasing.

Aircraft lease deals via these global companies are mainly (if not even fully only) operational leases. And in AWS you are not leasing from the manufacturer either but from a lease company (the name is visible as plane's owner).
« Last Edit: January 02, 2012, 03:56:21 PM by sami »

Offline Richard

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Re: A320 Price?
« Reply #26 on: January 02, 2012, 05:31:39 PM »
Aircraft lease deals via these global companies are mainly (if not even fully only) operational leases. And in AWS you are not leasing from the manufacturer either but from a lease company (the name is visible as plane's owner).

Sami, to my opinion you are correct. From experience I know that ILFC, ALC, ACG, Aercap, you name them, they lease-out most (if not all) airplanes as operational lease airplanes to airlines. They are the owner of the airplane. When a leasing contract ends they will need to find a new customer or try to extend the lease with your airline.

When an airline enters a financial lease they will go to a bank to finance the airplane or use some other financial agreement with for example Ex-Im Bank support for medium-term finance leases.

I understand what people are trying to point out though; a possibility to choose for a financial or an operational lease. However, as I wrote before it is also possible to use the current loan application in the game for financial leases. That’s how I see it and also use it.

 

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