Originally Posted by
Sailvi767
Here are what are believed to be the best lease terms available.
The purchase price by the lessors is reported to be $198.6 million with a lease rate of $1.7 million a month, for what’s know as a lease-rate factor of 0.85%.
If you apply a 4% interest expense to purchase which is probably low for 2008 you could apply around 8.5 million a year against the note with a 10 year payoff around 85 million against the note.
So crunching the numbers:
1.7 x 12 x 10 = 204 million in lease fees received
198.6 million = cost of purchase
204 - 198.6 = 5.4 million "profit" over 10 years. (which equals 2.72% rate of return over 10 years)
198.6 x .04 = 7.9 million (earnings if the same amount was invested in mutual funds at a lousy 4% rate. You can buy an annuity that yields 4% with zero risk!)
Bottom line: Lousy investment with low returns yet relatively high risk.
It makes sense that they're breaking up the aircraft for parts so they can squeeze out as much return on their investment as possible.
What's sad is that they can apparently get more money by breaking up the aircraft than by leasing it at a discounted rate. Like the thread title says, this can't be good news.