FRA Decision tree - Depreciation at Delta Air Lines and Singapore

Airlines (A)

Renil J Kotak PGP12262

The topic concerns two large airlines, Delta Airways and Singapore Airways, and their depreciation
methods.

Delta Airlines:

• It is one of the largest passenger airways in the United States, and the third largest in terms of
operating income and passenger miles travelled.

• In fiscal year 1993, international flight revenue accounted for 21% of overall operating revenue.

• During the 1990s, the Aviation Company faced numerous challenges, including industry deregulation,
which resulted in pricing competition, and the Iraq invasion of Kuwait, which caused fuel prices to rise.

• Delta Airlines had an average age of 8.8 years, which was fairly low by industry standards. Delta
announced a revision in its depreciating assumptions for flight equipment in April 1993.

Singapore Airlines:

• Singapore's expanding economy's biggest private employer

• Its aircraft had an average age of 5.1 years, the lowest of any large airline in the planet.

• The company's projections about depreciation of flying equipment remained constant during the fiscal
year 1993.

Until May 1, 1993, the Company depreciated essentially all of its flight equipment on a straight-line
method to residual values (10 percent of value) over a 15-year duration from the time it was put in
service.

Prior to July 1, 1986, the Company depreciated essentially all of its flight equipment on a straight-line
method to residual values (10 percent of cost) over a period of 10 years from the day it was placed in
service.