Air New Zealand/Ansett and Qantas have warned the Canberra Government that an Australian Tax Office (ATO) plan to slash depreciation rates on new aircraft would force them to consider offshore ownership and other alternatives. The warning comes as both airlines are preparing for major fleet upgrades.

The ATO wants to extend the life of new commercial aircraft for depreciation purposes from eight to 20 years - a move industry sources say may shift the balance against ageing aircraft replacement decisions in favour of life extension programmes, and force carriers into offshore leasing options at the expense of capital investment plans. The plan would affect all commercial and business aircraft.

One financial analyst says the proposed changes could cost Qantas A$1.4 billion ($720 million) over the next decade, based on the carrier's planned A$10 billion, 31-aircraft fleet upgrade.

The changes would not affect depreciation rates on existing aircraft, but could determine what mix of ownership and leasing an airline chooses.

Ansett says the cost impact would depend on the final details of its fleet upgrade, now on hold pending funding decisions involving Qantas' and Singapore Airlines' bids for part ownership.

"Obviously it's an unwelcome disincentive to owning assets in Australia," says Ansett. "It's a bit premature for us to go into detail as to what options we might look at as an alternative to owning aircraft, because we're still in dialogue with the ATO to let them know our views on the matter and what the impact would be. But it would be such a big impact that you would have to look at alternatives to ownership in Australia."

Qantas has warned Australian treasurer Peter Costello that the changes would put it at a competitive disadvantage.

Source: Flight International