الملخص الإنجليزي
SUMMARY :
Chapter One is an introductory chapter of this research project. Purpose of the project, which is to compare cost of leasing to cost of borrowing to an airline, is explained. Proposed methodology, which takes into account the tax accounting laws of various countries is explained. Significance of the project relative to the aircraft prices is stated. The key assumptions used in the analysis are provided.
Chapter Two provided a review of literature concerning the leasing industry and debt financing, as well as statistics that showed a trend towards leasing of aircraft rather than outright ownership. Various types of lease such as wet leases which are short term, dry leases which are medium term operating leases and finance leases which are long-term with title transfer to the Lessee at the end of the lease period (normally) through option pricing in the lease or a token price. This chapter also provided major reasons for leasing namely: avoiding the risk for obsolescence, growth without large initial outlays of cash, to cover for seasonal variation in demand, better utilization of tax shields evidenced by lower lease rentals and increase in borrowing capacity through off-balance sheet financing. The chapter concluded on lease negotiations showing involvement of several parties, sometimes with conflicting interest, but each with clearly defined goals and objectives. At least six.
agreements are concluded among various parties to the lease transaction prior to the consummation of a lease.
Chapter Three describes the research hypothesis, methodology used, data collection and scenarios adopted.
Chapter Four showed the analyses using discounted cash flow methods for comparing the present value of the costs of borrowing versus leasing. Tax considerations, which form an integral part of the analysis, are taken into account. Scenarios of a "no tax" environment are compared with scenarios of leasing under tax environment. Where tax laws permit the benefit of depreciation by Lessee as well. these are included in the analysis of the PV of the cost of leasing versus PV of the cost of borrowing.
Chapter Five provides concluding remarks on the analysis and summarizes the preceding four chapters of the project.
