Calculating an Aircraft’s Depreciation

Aircraft depreciation is a measure of the decrease in an aircraft’s value over time and is important for financial planning, tax purposes and assessing the market value of an aircraft. The most common method to calculate depreciation is the straight-line depreciation method, which involves calculating the Initial Value of the aircraft, taking into consideration associated costs such as tax, delivery fees and any modifications required. Then calculate the Residual Value, which is the estimated value of the aircraft at the end of its useful life. Then estimate how long you expect the aircraft to be in operation, based on its age and expected use. Annual Depreciation = (Initial Value – Residual Value) / Useful Life. For example, if the initial value of the aircraft is $1,000,000, the estimated residual value is $200,000, and the useful life is 20 years. Annual Depreciation = ($1,000,000 – $200,000) / 20 = $40,000 per year.

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