Airline Lease
 

Hi,
I'm building a game which runs a airline, i want to know the price of leasing a plane against the list price per month. as a percentage

For example a $1M plane at 1% is $100,00.00 would this be about right???

Lease rates do vary very widely (to the extent that it can be worthwhile to send the aircraft back and lease another from someone else). I think you have your comma in the wrong place in your example, but I think you meant 1% of purchase cost per month, which is a good "rough" average. This would mean that over an 8 year period you would pay pretty much the purchase price, which with financng etc is what you might expect at current interest rates.

Most leases have at least some aspect of their costs dependent on the number of flying hours and/or cycles as well, as this impacts on the depreciation and what the aircraft might be worth at the end of the lease. As we are talking very round figures stick on another 0.0001% of the original purchase price per flying hour as well.

Thanks, I realise this question is a bit like how long is a peice of string however something "realistic" is what I'm after.

Also what about a % for operating costs per month??

Operating costs are highly dependent on the flying hours done rather than by the month. This is obvious for fuel, but also for many other aspects, such as crew costs. If your crews do 90 hours per month, how many crews you have to pay depends principally on how many hours you are flying. Optimising all this is what those people in suits going to the airline head office, and who get parodied by the flight crews (OCCASIONALLY with good cause !) do for a living.

For a good indication, look at a major airline annual report. Many of these are now published on line in the airline's "investors" section of their website. There you will see reported the total costs for the year, which you can divide by their total flying hours (also often in such reports) to give costs per hour. When you have looked at a few you will notice wide variations. Don't forget that a brand new A320 and a 15-year old A320 will have somewhat the same operating costs, despite one being worth maybe 10 times what the other is worth. There will just be more maintenance costs for the older aircraft. When these get too excessive, you sell it and buy a new one. That is a hugely simplistic statement, there's a lot of arithmetic to be done to work it all out.

What actually makes up the "costs", and how you allocate the share of the Chairman's Bentley and everything else, is something that every accountant and manager, in aviation and in general business, has a different view on. Many of us make a career out of it :)

Don't forget, once you have looked at all the costs, to look at revenue as well, to be sure you are making an adequate margin. Otherwise, what's the point ..... ? Now you're well on your way to Airline Management 1.01. Actually you are on your way to being an Aviation Consultant. That Airline Management university course tells you how to do all the calculations. The consultant knows what all the key values typically are off the top of their head.

As already stated these figures can vary significantly and there are lots of variables, but the CAA airline profit/loss accounts might be quite a useful read:

Major UK Airlines Profit & Loss Accounts 2007

For example, the data shows that Monarch Airlines spent £37,779,000 on aircraft leasing during that year. They have about 30 aircraft so that's over £100,000 per aircraft per month. They mainly operate A320/A321/B757 sized aircraft.

Virgin Atlantic spent £208,870,000 leasing their 35 or so much bigger (and more expensive) B747/A340 aircraft - closer to £500,000 per aircraft per month.

Not a perfect calculation by any means (both airlines might actually own some of their aircraft outright for all I know and so they won't pay leases on those), but it is decent for ballpark figures.

When you look at the figures for an airline like Virgin it becomes quickly apparent that aircraft leases at £208m/yr are far from the biggest financial burden - £550m goes on fuel, £218m on pilot and cabin crew wages training and other expenses, £173m on maintenance. Total annual expenditure in fact is £1,994m :sad:

Not sure why anyone gets into this business really!!