Browntail

Because UPS is such a great and stable company that it can afford to pay CASH for every airplane. It's so superior financially that it could buy every airline in the US and just make a small dent in the amount of free cash on hand it has.

hatetobreakit2u

ive always wondered this and some of it makes sense and some of it doesnt.
indeed if you are starting up and cant afford to outright buy planes then you lease them because it costs you practically nothing and you just give a percentage of your earnings back to the leasing company.

But take my old flight school as an example. He leases all his planes and I heard for each hour that he rents the plane he owes 50 bucks back to lease company and then the rest of the money, lets say $40, is his to go towards whatever. Once he makes enough money to actually buy a plane wouldnt that make more sense cause then all $90 bucks an hour goes back to him?

This seems like the smart idea but, im the pilot not the managment, and managment are the really smart guys who get paid millions of dollars to lose billions of dollars, so there must be something im missing?

SkyBusDriver

You're an idiot.

tomgoodman

Perhaps. Unless he wants to use the money he has saved up to expand and diversify his business or send a kid to college. Lots of small businessmen want to limit the amount of money tied up in depreciating assets, in case of an economic downturn. Many small businesses fail for lack of a cash reserve.

TravisUK

I think part of it is that the Airline industry requires SOOOOO much cash just to operate that they really cant afford to buy a plane. They have to use the capital to pay for other things (i.e. Fuel, Wages, Etc.) If you look at their financial statements they are operating on a 10% margin, meaning for every dollar they earn, they actually get to keep .10, the .90 cents goes to paying for operations. I didn't realize the margin was so low.

I was/am considering the trucking industry, however they are almost like the airline industry in that there is a low operating margin and it is hard to even show a profit.

Pilotpip

Let somebody else deal with the aircraft when it's old, and unmarketable. By leasing an aircraft you don't have to deal with. You also don't have the aquisition costs and depreciation associated with owning.

Also, Boeing and Airbus usually have huge markdowns for large orders. An airline with a fleet of 100 or so aircraft of various needs. If they were to purchase them outright it would be much more expensive than GECAS or IFLC, who purchase dozens of the type and then leases them.

calcapt

That is the silliest thing I have read in a long time. Come on Browntail, are you serious? If UPS decided tomorrow to buy Southwest, I can assure you that it would make a significant dent in your beloved's pocketbook. And that's only one airline.

Pilotpip

Don't have to pay for much when the majority of the fleet is second-hand and at least 10 years old. God, those DC-8s have to be pushing 40.

Browntail

Let's see, 75 NEW 757s, 32 NEW 767s, 53 NEW A300s, 8 NEW 747-400s, 10 (possibly 20) NEW A380s.

cac737

Well when I read browntail's pompous statement of UPS's financial ability, I did research because I just wanted to quash that attitude......
unfortunately, he is right....to a point. From a financial perspective when you measure everyone's market capitalization (company's liquid worth) UPs is one big elephant. here are the #'s as of the time of this writing:
Airtran 1.2B (Billion)
Jetblue 1.8B
Continental 2B
Usairways 3.5B
United 4.5B
American 4.7B
Delta/Northwest virtually worthless as compared to above #'s.

total worth of above RELEVANT legacy/LCC's equals 17.7Billion

Southwest Airlines alone is 13B
Fedex is 35B

UPS TOTAL WORTH IS 51 BILLION.

they may be bigger, but UPS cannot buy out industry with "pocket change" as browntail implies. Now for the question of lease vs. buy....if you are a UPS and have no pax to woo away from a competitor with a shinier plane, then buying is the better road since you will most likely either scrap your airplanes 100 years from now and they will pay for themselves many times over. But if you are a start-up and have limited Capital, then lease may work better because you can get brand new assets with full warranty,with the option to renegotiate when markets are better or to dump them in favor of a new model (787) which may have far better economics than your A330's that you are stuck with. I guess it all depends on what your circumstance are.
after 9-11, lease rates were dirt cheap, and even power by the hour.

Airplanes, like cars are not good investments, but like a Hertz or enterprise leasing companies like ILFC or GECAS can make some serious $$$ while allowing smaller, or tighter airlines to quickly move in and out of planes allowing them to adjust to changing market conditions and economics more aptly than the bigger gorillas with hundreds of DC-9's or early 737's.

hey Browntail, I think it's awesome that you have the fortune and blessing to work for UPS. Im sure you worked hard to get there and deserve every bit of what they allow your family in terms of QOL,...but please never forget the big airlines of yesterday that had god-like status and ended up being bought for piecemeal by the very small-fries they thumbed their noses down on. Im sure their pilots had change of hearts when they now changed their white hats for widgets and were just happy to stay in a cockpit...let alone any cockpit.