ABSTRACT
Airlines continually assess their aircraft fleet requirements in light of changing macroeconomic conditions and opportunities and threats within the industry. The fleet may be expanded during economic booms or downsized during recessions. Aging aircraft must be replaced. Commercial aircraft vary greatly in capacity, performance, acquisition, and operating cost. Airlines must choose aircraft of one or more types that its market and operational requirements. Most LCCs can operate a single fleet type whereas the typical FSNC with routes extending across globe requires several types ranging from regional aircraft to long-range wide-body aircraft. Though most airlines opt for new aircraft for fleet replacement and expansion, used planes that meet the operational needs are usually available at prices far below those of new aircraft. However, the operating costs of used aircraft are higher and maintenance reliability is often lower than for new aircraft. Several methods are available for an airline to finance the purchase of aircraft, including internal cash flow, borrowing from a commercial bank or directly in the capital markets, or leasing from aircraft-leasing firms. A large airline, whether LCC, FSNC, or hybrid, gains flexibility with a portfolio of new and older aircraft funded by several financing methods.
Upon completion of this chapter, you should be able to:
