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Author Topic: [-] Aircraft depreciation  (Read 496 times)

Offline [ATA] StefanPeturs

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[-] Aircraft depreciation
« on: November 01, 2015, 07:40:58 AM »
I would like to ask how a 25 year old MD90, owned by me since manufacture can depreciate by Weekly depreciation   -476 770 USD per week....

the aircraft should then be written off in a few years and not depreciate any more, right?

Also

Original purchase price: 50 000 000 USD
Weekly depreciation: 476 770 USD
Yearly depreciation: 24 792 040 USD

so if we calculate it this way, I have written it off 10 times during the lifetime of the aircraft, and lose money according to this model...
« Last Edit: November 01, 2015, 11:36:34 AM by sami »

Offline Sami

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Re: Aircraft depreciation
« Reply #1 on: November 01, 2015, 11:36:30 AM »
The aircraft was just in a D check and this has increased the book value of the aircraft. And since the model states that the plane must be depreciated when it reaches 25 years, and D checks depreciation (and what small amount of plane's previous value was left to depreciate) will be high since there is only 0.3 yrs left when it reaches the 25 yrs mark. -> not a bug.

(Also, you are not losing any money on this. Depreciation is not cash out of your account...)


Offline gazzz0x2z

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Re: Aircraft depreciation
« Reply #2 on: November 01, 2015, 03:13:40 PM »
The aircraft was just in a D check and this has increased the book value of the aircraft. And since the model states that the plane must be depreciated when it reaches 25 years, and D checks depreciation (and what small amount of plane's previous value was left to depreciate) will be high since there is only 0.3 yrs left when it reaches the 25 yrs mark. -> not a bug.

(Also, you are not losing any money on this. Depreciation is not cash out of your account...)

it's WAD, but the design is counter-intuitive. Most of the time, the 3rd D check happens at 24 years, is horribly costly, and then value of the plane decreases an insane speed. I know it's WAD, but still, it's confusing for many players.

Offline [ATA] StefanPeturs

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Re: [-] Aircraft depreciation
« Reply #3 on: November 01, 2015, 09:51:05 PM »
then why does it show as loss, and again, the book value of the aircraft is only 9m, not 50m, shouldn't it go from there instead of original purchase price?

I have to say its very difficult to find out if you are in profit or not with these kind of figures....

For a solution, since i try not to complain if i don't have a solution, couldn't the depreciation be moved to a separate area where it makes more sense, i.e company value instead of operating profits or losses?

Taken from my aircraft generating most losses....

Ticket revenue   0 USD
Line maintenance (A+B)   0 USD
Insurance   -3 186 USD
Fuel cost   0 USD
Route fees (1)   0 USD
Weekly depreciation   -567 860 USD
Total estimated   -571 046 USD

I understand that to be a financial loss of 571k, with with an aircraft valued at 14m.

Offline Sami

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Re: [-] Aircraft depreciation
« Reply #4 on: November 01, 2015, 10:09:57 PM »
The depreciation is calculated and presented in a way that is correct for the proper and real accounting system that real companies use. (Won't be changing it to anything less realistic ..). Depreciation is part of normal operating expenses since it involves the conversion of the value of operating equipment into expenses.

Simply stated: You paid $10mil for an item (let's say D check) and the $10mil leaves the bank account immediately, visible at cash flow statement. But since it is not a directly deductible expense it does not appear at income statement. Instead it is depreciated over a given time, let's say 10 years. So your income statement will show a loss of $1mil per year until it has been fully depreciated.   ..Normal accounting practice for larger expenses.   The cash going in/out is a different thing than the calculated profit figure that includes these depreciations etc
« Last Edit: November 01, 2015, 10:15:45 PM by sami »

Offline [ATA] StefanPeturs

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Re: [-] Aircraft depreciation
« Reply #5 on: November 01, 2015, 10:23:34 PM »
Ok, that makes sense, thank you for giving such an answer, obviously I am not an accountant....   and i don't think that is likely to change in the near future!

Offline [SC] - King Kong

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Re: [-] Aircraft depreciation
« Reply #6 on: November 02, 2015, 08:46:35 AM »
Ok, that makes sense, thank you for giving such an answer, obviously I am not an accountant....   and i don't think that is likely to change in the near future!

But you fly 747's so we forgive you  ;D

Offline [ATA] StefanPeturs

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Re: [-] Aircraft depreciation
« Reply #7 on: November 02, 2015, 09:49:39 AM »
yes, i real life they are great, and very profitable, but here,,,, oh well....

 

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