Prior to July 1, 1986, substantially all of the Delta Air lines� flight equipment was being depreciated on a straight-line basis to residual value (10% of cost) over a 10-year period from dates placed in service (exhibit 4). Consequently, per $100 of gross aircraft value, Delta Air Lines is able to depreciate $90. With a useful life of 10 years, the annual depreciation expense equals $9. Depreciable value = Acquisition cost � residual value = 100 � (100*10%) = $90 Annual depreciation expense = [100 � (100*10%)] / 10 = $9 / year After July 1, 1986, Delta increased the estimated useful lives of all of its flight equipment from 10 years to 15 years. The company still uses the straight-line method to residual value of 10% of cost. The new method decreases the annual depreciation expense from $9 to $6 per $100 of gross flight equipment. Concretely, Delta Air Lines saved a total of $130 million in depreciation expense for the year 1987. (exhibit 4) Annual depreciation expense = [100 � (100*10%)] / 15 = $6 / year On April 1, 1993, Delta Air Lines increased the estimated u......

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