I've established my airline, been running for 12 months and its making a nice profit.
I can't expand much more at my key hub due to lack of free slots so money is just accumulating.
Given I am not earning any interest on the money in my bank account why wouldnt I buy some of the aircraft that I'm currently leasing? That would save me on the lease payments, and the reduction of costs would go straight to my profit figure.
I cant work out why this wouldnt be a good idea - yet I see hardly anybody buys their aircraft in AS?
Lease payments is to leasing as depreciation of flight equipment is to ownership. The magnitude of the costs is much less though, so while you will save money, you won’t save all of the money you think you would be. If you can’t continue to expand at your home hub, then you can start scheduling to a secondary hub.
Most people don’t bother to purchase their aircraft, as the $65m list price that I pay for a single 737-900ER BGW could be spent leasing twenty of them ($3.25m). Once operating, each would earn more than enough to cover their lease and operating costs. This generates more funds that I can use to lease more aircraft, furthering my plans for world domination.
That being said, I do own a few of my longhaul aircraft. I liked seeing a detailed costing report go from 1% net profit up to 40%.
My main Airline has 416 owned aircraft, 187 are 739, 160 are 737 (21.000.000.0000 invested total in a/c), and its worth the money, even with a SLF under 50% I can make profit. This is usefull since the AGEX exist. A low AGEX is no problem, I can still earn money and have a big advantage in competition. Of course you can lease more than 20 739 for the money you need to buy one, however, I have no use for 20 more 739 ... so I buy them and replace 737s or EMBs.
I'm unsure as to how often we had this discussion already.
One needs to be careful when looking at the flight costing with owned aircraft. The costing might show you some good profit (being it a 40% margin or a slight profit at only 50% load factor) - but do you really make a profit as the costing makes you believe? In the short term, yes. But remember: the costing calculates with a depreciation of 24 years. Now who wants to operate his aircraft that long?
So, unless you really plan to operate the aircraft this long or are certain to get the full book value when selling it, you should make your own individual costing as the given is useless most of the time.
I however agree that owned fleets help a lot in surviving an AGEX low as you do not have to pay weekly lease rates.