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Author Topic: DEPRECIATION  (Read 241 times)

Offline Mr Rufian

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DEPRECIATION
« on: January 25, 2016, 09:15:12 AM »
Depreciation is killing my profit!!!

What is better in your opinion? leasing or buying?

I thought it was better buying. I was paying
40M in LEASINGs and i thought of buying the airplanes... i bought them... and the next year i was paying 30M in DEPRECIATIONS and another 10M in leasings of other planes... but suddenly the next year i paid 50M in DEPRECIATIONs and 10M in other leasings...

So i guess DEPRECIATION will go up hugely each year...

Any thoughts?

Thanks!
« Last Edit: January 25, 2016, 02:33:22 PM by Mr Rufian »

Online wildavidson

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Re: DEPRECIATION
« Reply #1 on: January 25, 2016, 09:22:39 AM »
You dont pay depreciation. Its not a 'cost' but a reduction of the value of your owned aircraft which in this game is reflected on the profit and loss account. In effect this is saving you from paying tax on another 30m profits. Always better to own a/c outright than lease.

Offline gazzz0x2z

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Re: DEPRECIATION
« Reply #2 on: January 25, 2016, 11:26:37 AM »
Let's imagine you find a brand new 737 at 80M$ on the used market.

You buy it : you pay 80M$ now. After the first Dcheck, it will be valued at 50M$ or 55M$. Total devaluation : 30M$
You lease it : every month god makes, you'll pay roughly 1M$ in lease. After the first Dcheck, you don't own the plane. And you paid as much.

Leasing is interesting when you need to grow quickly, and cannot afford the cash to expand. But if your depreciation is 30M$, leasing the same planes will be 80M$. And leasing is a cash-flow bleed, while buying is a ont-time hit.

That being said, buying planes that you are currently leased can be a bad idea in some circumstances. If you went for a popular model(737 or 320), demand is so high that prices skyrocket. And your leasing conditions may be much more interesting than what the would be on the used market for the same plane. In that cas, leasing is not always a good option. Maybe it's what happened : you over-bought planes that you under-leased.

Offline Mr Rufian

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Re: DEPRECIATION
« Reply #3 on: January 25, 2016, 02:49:08 PM »
Fact:
I made 250M in profit using only LOANS (100M in loans and 0 in depreciation), the next year i BOUGHT almost all my planes and keep almost the same schedules and routes and only made 80M in benefits[/b] (0 in loans and 200 in depreciation).

mmmm... Wildavidson:
Actually, im paying depreciation. Is on my Operation Expenses and reflects directly on my weekly- margin.

gazzz0x2z:
I do not pay Dchecks on loaned aicraft. I carefully make the loan so it ends right before DChecks on medium-large aircrafts.

It just doesnt makes sense because everytime i buy a new plane (lets say 100M my Company Value goes up 50M, because i have an new active, but my Depreciation is huge (10M per a 100M a/c) so it kills my benefits).

Oh and i only buy "good deals" that'd be high loans.

I just dont get it... it is MUCH better to LOAN....

> With some planning you never make DChecks (can go up to 10M).
> Insurance is high (just in case).
> You wont have Depreciation
> Easy to change fleet when needed
> You can set all the loan contracts to end (be renewed) at the same time so or differ within months if you want...
> ...

So i guess i just made a big mistake... unless somebody proves me wrong.

: )

« Last Edit: January 25, 2016, 02:52:37 PM by Mr Rufian »

Offline gazzz0x2z

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Re: DEPRECIATION
« Reply #4 on: January 25, 2016, 03:02:46 PM »
You don't pay depreciation. On the main screen, click on "money", above your current bank number. It leads you to the cash-flow page. "Adjustments of items where a payment is not included" contains the "Depreciation" line.

Depreciation is, in accounting, a loss, but there is not cash-flow associated with it. Your cash-flow is your blood. With bought planes, you don't bleed. You may lack fresh cash to go on expanding, but you don't bleed. By leasing, you bleed.

In fact, both options are useful. Just, when you begin to swim in cash, it's better to own 100% of your fleet. I've got 16B$ in reserve in current GW3. All my planes are owned. Hint : the first 10 years, most of my planes were leased. Same for most successful players.

Online wildavidson

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Re: DEPRECIATION
« Reply #5 on: January 25, 2016, 09:40:51 PM »
mmmm... Wildavidson:
Actually, im paying depreciation. Is on my Operation Expenses and reflects directly on my weekly- margin.
mmmm - actually you are not paying depriation. As mentioned no cash is deducted. This is classed as a loss on p&l account on this game and will affect your weekly profit/loss but actually saves you money in taxes paid, with reductions on weekly expenses on leases and insurance. So it is always more cost effective to own planes rather than lease them assuming you have the funds to purchase - fact.

Offline gazzz0x2z

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Re: DEPRECIATION
« Reply #6 on: January 26, 2016, 12:38:27 PM »
ah, and I forgot : you pay less in insurance with owned planes. As yuo only need the liability insurance, you divide your insurance costs by more than 2 with owned aircraft.

 

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