Delta Vs Singapore Depreciation

Company Info and Overview: Delta

Currently serves over 160 million customers/yr

Headquartered in Atlanta, Ga

Over 80,000 employees

Currently investing more than $2billion through 2013 in airport facilities and global products

Almost 5,000 daily flights with a current mainline fleet of 700+ aircraft

Current stock price $10.99/share with a market cap of 9.23B

Singapore:

Operates a fleet of over 100 airplanes

22,000+ employees

Fly the most modern fleet and are the world’s largest operator of Boeing 747s

Company has been profitable every year since 1948

Current share price $10.86 with a market cap of 12.98B

Case Overview:

Delta and Singapore Airlines use base their depreciation methods on very different assumptions

Entire airline industry struggling in the 1990s

Competition from low cost carriers such as Southwest

Iraq’s invasion of Kuwait and the corresponding oil crisis

American recession

From 1990-1993 the airline industry loses 12.8B and Delta is particularly hard hit. Singapore does take a hit as well but still manages to make 1.6B during the downturn

The average age of Delta’s aircraft was 8.8yrs at this time (low compared to its US competitors) while Sing air was operating the youngest fleet in the world 5.1yrs

In 1993 Delta has approx. 412m more in total assets than Sing Air

Delta is the 3rd largest carrier in the world and Singapore is the 7th

* In 1993 Delta significantly changes its assumptions underlying its depreciation method. Sing Air does not modify their depreciation method

Delta Specific Info:

Owns 296 planes and leases 268 for a total of 564

Years till Delta plane is fully Depreciated=

(1986) 10yr useful life + 10% residual value

(1992) 15yr useful life +10% residual value

(1993) 20yr useful life + 5% residual value

What is Delta’s annual depreciation costs (per $100)?

(1986)