Quote:
Originally Posted by gloopy
The only way a fake virtual airline could get the credit to actually get planes to lease to other airlines to operate would be through the credit chain generated by rock solid long term deals. I really doubt the investment community is so ignorant and stupid that they can be so easily tricked into thinking an airline can operate brand new planes on a lease as magically "debt free". If it is done that way, every single red cent of the debt associated with DL doing it themselves will still be DL debt because DL will still be 100% committed to it for the exact same dollars, years and terms...PLUS a guaranteed profit for the bogus service to begin with. IOW DL will still bear 100% responsibility for the debt plus the additional overhead of the fake shell corporation that offers nothing other than the illusion of accounting trickery that not even the dumbest first year MBA 101 student would fall for. I really don't think the investment community is that ignorant as to fall for such a simplistic and sophomoric trick.
Gloopy, it has been done for a few decades now. DAL owns jets, we then let a regional operate them, which in turns pays us a "fee" for this jet, which covers the lease. It does go farther than that, the fact is that after they pay us that "fee" we in kind pay them a them this fee back as an expense of the ASA. This is for the jet we own.
For the jets that the third party carrier owns, we basically pay the lease payment in a "fee" as part of the ASA. DAL is still committed though the ASA to the lease payment and committed to it by that agreement, but now it is a cost item and not one that hits DAL's debt side of the ledger. It is a commitment and part of the operational expense of the ASA.
It is accounting 101. The debt from those jets does not hit delta's debt ledger.
Bringing this forward. Could they do this with new metal? This time doing it with the regional becoming a debt holding company? Maybe. They could also use other outfits as well. Point is that you can take the debt off the balance sheet, make it a cash flow expense item depending on how it is allocated. Yep, delta loses the depreciation of an owned asset. It is not the smart answer. It is always better to own your assets and take the depreciation.
It could also be that TSH just wants to get in line for all of these jets so they can sell the slots at a premium to their mainline partners.