Originally Posted by
Aero1900
When Indigo placed the massive 400 aircraft order back some years ago they negotiated a significant discount on the planes. When we take possession of a new aircraft we immediately sell it to a leasing company and then lease the aircraft from them for 8 to 12 years. When we sell it to the leasing company they pay market rate for the aircraft which is maybe 10 Million more than our negotiated discount price from Airbus. Frontier then pockets the $10 M and we begin making monthly lease payments on the aircraft
On a very basic level, all this tracks. I guess what I really don't understand is the total effect of recent policy change and how that will affect us going forward. (i.e. 100% Bonus Depreciation, ~30% Tariff hikes, etc.).
From 2024 10K:
Gains on Sale-Leaseback Transactions
The Company enters into sale-leaseback transactions for its aircraft and spare engine assets, whereby the Company sells one or more aircraft or aircraft engine assets to a third-party and simultaneously enters into an operating lease for a right to use such assets for a fixed period of time. Gains on sale-leaseback transactions are recognized in the period in which title to the asset transfers to the buyer-lessor and the lease commences, as a component of other operating expenses within the Company's consolidated statements of operations. Gains on sale-leaseback transactions are calculated as the excess of the sale price of the set over its carrying value. The carrying value of the assets sold will generally include the price paid for the asset, net of the amount of cash or the fair value of non-cash credits and incentives received from equipment and component manufacturers and any liquidated damages received from the manufacturer, the costs associated with delivery of the asset including any taxes or tariffs, financing costs capitalized in connection with the construction of the asset, capitalized maintenance and other improvements, and accumulated depreciation. Gains on sale-leaseback transactions may also be adjusted if it is determined that the terms of the sale transaction or the lease agreement are at a price other than fair value.