Aircraft components and depreciation

An aircraft is not one asset for depreciation purposes. Its airframe may fly for 25 years, its cabin may be refitted after ten, and its engines need overhauls every few years that restore much of their value. IAS 16 requires these parts to be accounted for separately, and the choices made about lives and residual values move airline profits significantly. This guide works through the component split of a new aircraft and covers residual values, overhauls, spare parts, pre-delivery payments, leased aircraft and US GAAP.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. 4 minute read.

Short answer

Aircraft components are the significant parts of an aircraft with different useful lives, which IAS 16 requires to be depreciated separately: typically the airframe, the engines, the maintenance condition of the engines and airframe at delivery, and cabin interiors. The airframe and engines are depreciated over the aircraft's expected life in the fleet, often 20 to 25 years, to a residual value reviewed every year. The maintenance components are depreciated until the first shop visit or heavy check, and each later overhaul is capitalised and depreciated until the next. Spare engines and rotable parts are property, plant and equipment, while consumable spares are inventory. In this guide's example, splitting a US$ 60 million aircraft into five components gives depreciation of 3.10 million a year in the first six years, against 2.10 million if the aircraft were treated as one asset.

At a glance

Separate depreciation
Significant parts with different lives
Airframe and engines
Fleet life, often 20 to 25 years
Maintenance condition
Depreciated to first check
Residual values
Reviewed every year
Rotable spares
Property, plant and equipment
Pre-delivery payments
Assets under construction
Aircraft components and depreciationSeparate depreciation: Significant parts with different lives; Airframe and engines: Fleet life, often 20 to 25 years; Maintenance condition: Depreciated to first check; Residual values: Reviewed every year; Rotable spares: Property, plant and equipment; Pre-delivery payments: Assets under construction.KEY FACTS AT A GLANCEAircraft components and depreciationSeparate depreciationSignificant parts withdifferent livesAirframe and enginesFleet life, often 20 to25 yearsMaintenance conditionDepreciated to firstcheckResidual valuesReviewed every yearRotable sparesProperty, plant andequipmentPre-delivery paymentsAssets under constructionTax BakersAircraft components and depreciationSeparate depreciation: Significant parts with different lives; Airframe and engines: Fleet life, often 20 to 25 years; Maintenance condition: Depreciated to first check; Residual values: Reviewed every year; Rotable spares: Property, plant and equipment; Pre-delivery payments: Assets under construction.KEY FACTS AT A GLANCEAircraft components anddepreciationSeparate depreciationSignificant parts with different livesAirframe and enginesFleet life, often 20 to 25 yearsMaintenance conditionDepreciated to first checkResidual valuesReviewed every yearRotable sparesProperty, plant and equipmentPre-delivery paymentsAssets under constructionTax Bakers
Key facts at a glance, as set out in this guide.

Why does IAS 16 require components?

IAS 16 requires each part of an item of property, plant and equipment with a cost that is significant in relation to the total to be depreciated separately, so that depreciation reflects how each part is consumed. For an aircraft, the parts that wear out or are replaced on different cycles are the obvious components. Parts with similar lives and patterns can be grouped. Getting the split right matters because the maintenance components are consumed quickly, so a single-asset approach would understate depreciation early in an aircraft's life and leave overhaul costs with nowhere to go. See component depreciation.

Aircraft components: splitting a new aircraft

An airline takes delivery of a narrowbody aircraft costing US$ 60 million after manufacturer credits. It identifies five components, using the manufacturer's price breakdown, engine values and the cost of the first maintenance events.

Annual depreciation by component, years 1 to 6 (US$ thousand)Annual depreciation by component, years 1 to 6 (US$ thousand)1,224Airframe480Engines667Engine overhaul333Heavy check400Cabin interiorsAnnual depreciation
Maintenance components are used up in the first six years.
US$ millionCostUseful lifeResidual valueAnnual depreciation
Airframe36.025 years5.41.22
Engines14.025 years2.00.48
Engine overhaul4.06 years0.00.67
Heavy check2.06 years0.00.33
Cabin interiors4.010 years0.00.40
Components60.07.43.10
Single asset, for comparison60.025 years7.42.10

The engine overhaul and heavy check components represent the value of a new aircraft's maintenance condition, which is used up by the time the first shop visit and heavy check are due, here after six years. Componentisation therefore adds 1.00 million a year of depreciation in the early years. When the first shop visit and heavy check are carried out, their cost is capitalised as new components and depreciated until the next events, so the pattern repeats over the aircraft's life. See maintenance reserves and checks.

How are useful lives and residual values set?

The useful life is the period the airline expects to operate the aircraft, which can be shorter than its physical life. The residual value is the amount the airline would get today for the aircraft if it were already of the age and condition expected at the end of that life, often based on appraisals of mid-life and end-of-life values. Both are reviewed at least every year, and changes are applied prospectively. Early retirement of a fleet type, weaker values for older aircraft, or new aircraft that burn much less fuel can shorten lives or cut residuals, raising depreciation; a significant fall in values is also an impairment indicator. See airline impairment testing. See depreciation methods.

How are spare engines and parts accounted for?

Spare engines and rotable parts, such as avionics units and landing gear that are repaired and reused, meet the definition of property, plant and equipment because they are used over more than one period. They are depreciated, usually over the life of the fleet they support. Expendable parts that are consumed when used, such as filters and fasteners, are inventory under IAS 2 and expensed when fitted, with allowances for obsolete stock when a fleet type is retired.

How are pre-delivery payments treated?

Airlines pay manufacturers instalments years before delivery. These pre-delivery payments are recognised as assets under construction, and they become part of the aircraft's cost at delivery. An aircraft is a qualifying asset under IAS 23, so borrowing costs on financing used for pre-delivery payments are capitalised. Manufacturer credits and concessions, such as credits for training or spare parts linked to the aircraft purchase, reduce the cost of the aircraft unless they relate to other goods or services. If an aircraft is sold to a lessor on delivery, the payments are recovered through the sale; see aircraft sale and leaseback.

What about leased aircraft?

A right-of-use aircraft is depreciated over the lease term, or over its useful life if ownership will transfer. Overhauls the airline performs on leased aircraft are capitalised and depreciated over the shorter of the period to the next event and the remaining lease term, and cabin modifications the airline installs are leasehold improvements, depreciated over the shorter of their life and the lease term. Obligations to return the aircraft in a specified condition are covered in lease return conditions.

How does US GAAP differ?

US GAAP permits but does not require component depreciation, and US airlines generally depreciate aircraft as whole assets over 20 to 30 years to residual values, while choosing a method for planned major maintenance: expense as incurred, deferral or built-in overhaul. Impairment testing also differs, with an undiscounted cash flow recoverability test before any write-down. See IAS 16 vs US GAAP and airline accounting. Ship owners split vessels in the same way; see vessel components and depreciation.

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Questions people ask

Which aircraft components are depreciated separately?

Typically the airframe, engines, the maintenance condition of engines and airframe at delivery, and cabin interiors, as IAS 16 requires for significant parts with different lives.

Over what period are aircraft depreciated?

Over the period the airline expects to operate them, often 20 to 25 years for airframes and engines, to a residual value reviewed every year.

Are spare engines property, plant and equipment?

Yes. Spare engines and rotable parts are used over more than one period, so they are depreciated; consumable parts are inventory.

Are borrowing costs on pre-delivery payments capitalised?

Yes. An aircraft is a qualifying asset under IAS 23, so borrowing costs on financing for pre-delivery payments are capitalised.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IAS 16 Property, Plant and Equipment
  2. IFRS Foundation: IAS 23 Borrowing Costs
  3. IFRS Foundation: IFRS 16 Leases

Rules and fees change. If you are reading this long after October 9, 2026, confirm the figures with the source before you rely on them.

AirlinesAirline accounting: the key IFRS issuesIAS 16Component depreciationAirlinesMaintenance reserves and checks

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This guide is general information. It is not tax or legal advice for your situation.