Buy or lease

[Curse]

Hello there,

when is the perfect moment stop leasing new aircrafts and buying them?

When every route is filled? When the first "wave" of leased airplanes expires? Or when the money income is huge enough to buy and lease at one time?

Problem is:
For the money of an A321 I can get 14 of them leased - 6 now and 8 later.


Cheers,
Curse

[d2031k]

I don't think there is a perfect moment, but buying aircraft to be delivered 7-7.5 years before the end of the game is useful to avoid D-checks.

It depends on your competiton levels too.  Getting route presence and utilising as many routes as possible is best if your competition is high, as leases are low at the start of the game.

[EYguy]

if you want to buy an a/c you should consider the following issues:
A)How much does that a/c allow me to earn? (meaning: does that a/c generate enough revenue to pay the loan fees?)
B)How much time is left before it has to undergo the D-check? Consider that D-checks do not mean that the useful life of the a/c has ran out: most of the a/c used by airlines around the world are 10 years old and even more. And keep in mind that in real life an a/c gets old faster when it goes through lot of landings
C)Consider commonality: if you buy A320 and A330/340 a/c you'll have just 2 or 3 types of engine in your warehouse. Unfortunately, this game does not fully consider the advantage of flying an all Airbus fleet: the training costs (especially for pilot) should be lower.
D)Flying a leased a/c mandates that you must keep them flying as much time as possible. If you buy an a/c you can have it sitting on the tarmac without such big losses
E)Consider the type of a/c you're going to use as security for your loan: my experience says that big a/c should be used for big a/c or you could mess up with financing operations.

No more ideas... Hope they helped!

[Aahz the Pervect]

but buying aircraft to be delivered 7-7.5 years before the end of the game is useful to avoid D-checks.

Hmm, I wonder if a future version might allow for a company's "End of Game Value" be modified by pro-rating future D Check costs out of the Value. May help eliminate a loophole that makes the sim less realistic.

[lilius]

There is definately an advantage in purchasing aircrafts BUT I fail to see the reason to purchase old or used planes. I only purchase new ones in batches for good discounts. The problem of purchasing old is that when the plane is getting closer to its end of its lifetime noone will buy it from you and you sit around with the cash tied in airplanes.

[Curse]

Hum, I meant buy new pleanes - not buying old leasing planes. My fault, sorry.

[Powi]

If you buy an aircraft and fly it around seven years you don't have to worry about "money that is stuck in that plane". If you had leased the aircraft you had paid more than its purchase sum in leases anyway. Lower insurance costs should more than balance out any costs form a loan.

[Curse]

But if I lease planes 5-6 years I avoid D-Checks and have always new planes at my fleet. Isn't this also good?

[mikk_13]

buying is better. if you lease a plane for 7 years, you could use the same money to own the thing, then you can also sell it maybe, or pay for the d check and keep it for another 7 years. It is cheaper to buy if you have the money.

[Sigma]

But if I lease planes 5-6 years I avoid D-Checks and have always new planes at my fleet. Isn't this also good?

It's "good", yes.   But perhaps a bit short-sighted.

For all you spend per month on Leasing a plane, after just 4-6 years (depending on model and discounts) you could own the thing.  That means, essentially, you're getting the next 15 years of service free.  So by the time you dump it to avoid that first D-Check you could have owned that plane outright.  So that next leasing contract (and the next one, and next one) are complete wastes of money.

Yes, as the plane gets older it will cost more to maintain every month, but that difference is minuscule compared to the fact that you're not paying a dime to a lessor.  In fact, a bigger issue is the fact that your leasing costs go up with inflation every few years.  So your planes may not get "old" and cost a lot to maintain but your planes get more and more expensive to lease every time you either renew or replace, due to both inflation and pricing adjustments.  On some models that price difference can be huge -- as much as 50% more after just a few years to replace a plane later with a new leasing contract.

And the D-Check thing is also similarly minuscule in the grand scheme of things.  Generally speaking, a D-Check is a low single-digit percentage of the value of the plane.  Only roughly equal to about 3-5 lease payments.  And you'll only have to do 2, 3 at most, over the full course of ownership.  So you've got to spend about 9 months lease payments to do the D-Checks over time but, again, you're saving 15 years of payments by buying outright.

[NorgeFly]

From my experience there are pro's and con's to both buying and leasing.

As already mentioned leasing allows you to miss out on D checks, the associated costs and the lost revenue. But, it is in the long term more expensive.

Purchasing cost less in the long term but requires large investments of capital which sometimes is not possible. It's important to keep a cash reserve in case of a "crisis" such as the 9/11 effect or a fuel price hike. But having said that, if passenger demand falls and you have a leased fleet, you have to keep them flying. If you own the aircraft, it costs nothing to park them up for a few months, or even years, until demand picks up and you can use them effectively. If it's likely to be a long term issue, you also have the option to lease the aircraft to another airline or sell them on.

In many games I have mixed my fleet with leased and owned aircraft as it provides maximum flexibility. I'll probably do the same in the current game as no doubt 9/11 will hit demand and it may be necessary to trim the schedules for a period - if I own the aircraft I can ground them and maintain load factors and cut costs.

So my verdict... there is no "better" option as it depends on your airline, your strategy and the way the game develops. I will continue to mix leased and owned aircraft as I like the flexibility.

[lastchancer]

At the beginning, it is sometimes better to lease aircraft and check out if this fleet type fits to the specific demand of your base.
If it doesn´t fit, you may easyly get rid of them. If it fit, switch from leasing to buying this fleet type.
As fleet comonality is an important factor, be carefull what you buy!
Be sure, that you  are willing to fly this fleet type for a long time. Only choose economic and popular planes that might even be sold later in the used market. (Unfortunately these fleet types always have terrible long waiting lists...)

Sometimes it is better to lease a certain fleet type first and wait until a more economic fleet type has been certified. Than you switch to the newer one by letting the leases of the old one terminate and buy the new fleet type.

Be sure, that yout fleet type you decided to buy will keep in production for a long period from now and available for further fleet expansion!
 

[knutm1980]

As you start to purchase planes, (used or new), the monthly fee's disappear meaning that you retain more of your income, increasing profits, buildign up cash faster to purchase/lease more planes. I guess it's up to each individual to deem what a good profit margin is.

[hybridace101]

With new generation A350s and B787s, the leasing cost is almost 40% of revenue.  I would like to purchase them except that I don't have enough money.  Taking out a loan will be like leasing them, only with more interest.  Any help on how to keep the leased A350s profitable?

[Powi]

---
In fact, a bigger issue is the fact that your leasing costs go up with inflation every few years.  So your planes may not get "old" and cost a lot to maintain but your planes get more and more expensive to lease every time you either renew or replace, due to both inflation and pricing adjustments.  On some models that price difference can be huge -- as much as 50% more after just a few years to replace a plane later with a new leasing contract.
---

Autorenew seems to lower leasing costs every time renewed...

[lilius]

Yes the renewals of  leases are calculated on the current marketprice of the aircraft. So yes, usually its a better deal to lease for shortest possible term and take advantage of that.

The 7 year lease trap on new aircrafts is easy to fall in to because of the small discount though! It would be interesting to make a present value calculation of it.

My guess is that its cheaper to renew the lease after 3 years and get the marketprices of year 4,5,6,7 instead of leasing at the price of year 1 - 6% for 7 years straight.

[EYguy]

Let me say that when you buy an a/c, you can better withstand episodes like the oil surge and the post 2001 crysis... When you are leasing a7c from a lessor, you have to pay those fees even if your a/c is not flying at all. While when you OWN that a/c, you can avoid the cost (or costant loss) of the monthly fees... Moreover, when you own a/c, you can also see decrease the monthly fees, if you can improve your financial rating. Because your financial situation influences the interest rate you're paying on your a/c: so, the better is your financial situation, the less you're going to pay for your a/c in terms of interests on your loans.
I also would suggest to lease a/c when you plan to buy other a/c and so your current fleet is to be only an "interim" fleet!

[Sigma]

Autorenew seems to lower leasing costs every time renewed...

Yeah, sorry, I didn't mean to put the word "renew" in there as all my comments were about replacing a plane with a new one every X years to avoid older planes and D-Checks.  If you do that, you don't get to take advantage of the decreasing value of the plane, and instead get hit with the increasing cost of a new one over and over again.

[hybridace101]

What's the best way to utilise the A350 and the B787?  A series of LH flights or several SH flights a day?

[Sigma]

Depends what you mean by "better".

They're going to be more profitable if you can do a series of shorter flights per day.  But that's not what they're designed to do and there are better planes cut out to that task.

They're "better" at going for the longer-range, thinner routes that they can pick up in a single flight per day that would be too thin for the big heavies to get good utilization on.  But you don't particularly want to use them were a heavier plane could make fewer trips unless you're replacing particularly bad guzzlers.  They're really no different than their predecessors -- the A340 and 767 respectively.

The problem is that, particularly in regards to the 767/787, there is ZERO reason to really choose the 787 unless you absolutely need that little bit more range.  Because, while about 10% more fuel-efficient, it costs a HUGE amount more, actually double the cost -- a cool $150M more(give or take).  You'll never come even remotely close to breaking even over the savings of just buying a 767.  The A340/350 comparison is a lot closer, much more of a coin-toss between the two.