Depreciation of delta airlines- Case B

1. Made BY::-
MAYANK AGARWAL
MANISH MUTYALA
THARUNI AMBATI
RUCHI AGARWAL
RENU BISHT
ARJUN P.A.

2. Introduction of Delta airlines
 Annual revenue $12 billion
 In 1993 third largest airline U.S.
 Operated flights in 33 foreign countries.
 Average age of delta aircraft was 8.8 years

3. Singapore airlines
 Largest private sector in Singapore economy 1993 at
route network covered 70 cities in 40 countries.
 In 1993, its operating revenue $3.1.
 They would have made it seventh largest airlines in
U.S.
 Average of age of Singapore aircraft was 5.1 year.

4. Depreciation
Depreciation is an accounting convention that allow a
company to write-off the value of an asset over time,
but is considered a non- cash transaction.
Depreciation=(assets value- residual value)/asset life.

5. Why the companies depreciate aircraft
using different depreciable lives and salvage
value?
 Due to companies are different and they have different
authority.
 Due to lesser usage and higher maintenance.
 Due to technical.
 Due to need of the time.

6. Lease
A lease is a contract outlining the terms under which one
party agrees to rent property owned by another party. It
guarantees the lessee, the tenant, use of an asset and
guarantees the lessor, the property owner or landlord,
regular payments from the lessee for a specified number
of months or years. Both the lessee and the lessor face
consequences if they fail to uphold the terms of the
contract.

7. Operating lease
An operating lease is a contract that allows for the use of
an asset, but does not convey rights of ownership of the
asset. An operating lease represents an off-balance sheet
financing of assets, where a leased asset and associated
liabilities of future rent payments are not included on
the balance sheet of a company.

8. Capital Lease
A capital lease is a contract entitling a renter to a
temporary use of an asset, and such a lease has economic
characteristics of asset ownership for accounting
purposes. The capital lease requires a renter to add
assets and liabilities associated with the lease if the
rental contract meets specific requirements.

13. What is the possible reason that the Delta airline’s
operates almost half of its aircraft on operating leases,
where as Singapore airlines operates no aircraft on
operating leases?
In the year of inflation the delta airlines focused on cost
cutting by decreasing its staff and reducing flights where
as Singapore airline did not do the same.

14. Comparable study between the 2 airlines on assets, long
term debt and depreciation expenses in the year 1993.
Delta Airline Singapore Airline
Total assets (in $ millions) 11871 9417
Long term debt (in $
millions)
3717 0
Depreciation expenses (in
$ millions)
679 708

17. Thank You