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Profitability with Older Airplanes

New-model commercial airplanes are much more fuel-efficient than older models. How is it possible for airlines flying older models to make money when its competitors are flying newer planes? Explain briefly.

I believe because the price of the older planes drop drastically when they are purchased in the second-hand market allowing the airlines to make up for some of the costs that are attributed to higher fuel consumption. Older planes are often used on routes where fuel efficiency is less important such as shorter routes where less fuel, weight and passenger number and ticket sales are involved
Do you think at some point there is a trade-off between a new plane and an old plane? You mention where one plane outweighs the other, but in the end, do you think the financials just might even out? It seems like you are either going to spend the money upfront, with the old plane, or later with the new one. It seems that one would just have to weigh out where all the variables play out and where they are most beneficial to "you."

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There are likely leases or loans on the newer planes. Also with this, like autos, the replacement insurance and the taxes ...

Solution Summary

This solution contains an expert perspective that explains in detail how an airline that utilizes older model planes can still be profitable.