Originally Posted by Iver
How will operating older generation fleet like the 400s and 767s help Qantas weather the rising cost of fuel?
Those old aircraft are paid off one presumes.
So let's say you spend $100M (to make the maths easy) on a new aircraft.
The interest component alone on that purchase will be about $10M p.a.
Depreciation over a 15 year period will be another $6M p.a. if we allow for a $10M salvage value.
So that new aircraft costs you $16M p.a. over the old paid off fully depreciated aircraft.
That buys a lot of fuel and maintenance before you break even.
think of the cars you see on the road. If the true cost of car ownership was fuel and maintenance then everyone would be driving pretty much brand new cars. Instead we get a mix, some people who can afford it buy new toys because they get a real buzz out of it, others like me usually buy cars that are 3 years old as they come off someone else's lease because that way you get pretty much everything a new car had but someone else has worn the first 50% of depreciation, others buy cars in the 4-8 year range because they have depreciated by 50% of the remaining value (i.e. now at about 25% of original cost), all the way down to people who buy clapped out old bangers that just scrape through registration checks because they're dirt cheap. Sure they use a bit more fuel, they break down a bit more, but you get a car that goes from A to B (usually) and it just costs you a few bucks extra a week instead of a whole lot of cash up front (and whilst it's important the net present value of cash is another reason to use older equipment) or committing to a loan that has a weekly payment exceeding the cost of that extra fuel and maintenance.