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Online Airline Management Simulation
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Author Topic: Loans and Planes  (Read 1135 times)

bjflanne

  • Former member
Loans and Planes
« on: August 14, 2009, 06:07:18 PM »
Hi Guys - I have a question about the loans in this game.

How is it possible that somebody like Lunar Airways already has 225 aircraft and another 150 of them coming (and large aircraft too all 150+ pax) but he is -75 183 857 USD in debt.?

I know that initially you go into debt when you take a loan in terms of airline value, but how is it that you can get enough loans to cover that many planes in this game? I thought once you took out a couple of loans it wasn't possible to get more until you had paid back the others.

Or is there something I am missing in the loan formula? Just seems odd that this early in the game you can nearly 400 aircraft on the books when the game usually doesn't let you take a loan out if you have a few out (and for the first few weeks in the game you can't really get a loan bigger than several million, certainly not 20 or 30 million loans....and to lease a 225 aircraft fleet you need to have taken hundreds of millions in loans...)

Thanks for any clarification you can bring to this all.

Kontio

  • Former member
Re: Loans and Planes
« Reply #1 on: August 14, 2009, 06:22:31 PM »
The amount of loan is determined also by how much money you are making. It's kind of logical, if you have high profits the bank knows that you can probably pay back even a huge loan. On the other hand it makes the game a little unbalanced - when you are starting out capital is hard to come by but when you are already doing well you can expand faster and faster.

bjflanne

  • Former member
Re: Loans and Planes
« Reply #2 on: August 14, 2009, 06:47:13 PM »
Hi Kontio -

Ah yes, good point - that is what I was wondering about is the balance. But I still am unclear on how you can get hundreds of millions in loans this early in the game. Example:

Lunar Air (nothing against him, he just happens to have the most planes) has avg tix price of: 171 USD. He transports 663,000 passengers a month. This is 113M in revenue each month. However, he also has 21,000 staff to look after. That is roughly $24M a month in costs.

So the 113M becomes 90M a month. Then you have to take out other costs like maintenance, C check, etc.

Anyway a profit margin of 20% in this game would be very strong. So just for the sake of argument let's say Lunar Air makes $23M a month in profit. He has 30 Airbus A-320 200s. That plane costs approx. 3M per plane to lease since you have to pre-pay the first 4 month's payments. So for 30 of those that is 90M right there.

Then he has another 48 737-200 Adv. Those are approx. 2M a piece up front to lease. So that is another 95M. So right there just for those two plane types you are looking at 100M or 5 months profit for an airline Lunar's size to lease those two plane types.

Then you have to remember there are still several hundred other aircraft in his fleet.

I guess what I am getting at is that the formula like you said seems a bit unbalanced. Perhaps too biased toward larger airlines.

It should indeed be easy to take out a loan if you are a big airline compared to a small one, but it seems to be too easy to do so in this game. For example I do not see any bank in real life lending hundreds of millions to an airline like Lunar if they profit margin is -1.6%.

I am not sure what the formula lakes like, it just seems inaccurate.

Offline Sami

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  • Posts: 14535
    • AirwaySim - Are you the next Richard Branson?
Re: Loans and Planes
« Reply #3 on: August 14, 2009, 07:31:56 PM »
Quick example / thought: How a small airline with no assets or no incomes would be allowed to get a loan of let's say $50mil - where as for a major carrier with incomes like that in a month it poses no problems ...

The profit margin calculation includes also his investments / prepaid leases and an airline investing heavily to growth, with loaned or own money, is just normal to have a negative profit margin. Which is actually just what is happening in this example case .. But I may have a hunch that this airline is expanding too rapidly as he's getting a fully leased fleet which is largely loan funded. So he may have now enough cash or resources to get the loans and thus be able to pay the initial lease but he may get into trouble once the planes arrive and leases have to be paid every month, together with loan payments and increasing competition..
« Last Edit: August 14, 2009, 07:41:03 PM by sami »

Kontio

  • Former member
Re: Loans and Planes
« Reply #4 on: August 14, 2009, 07:42:32 PM »
Quick example / thought: How a small airline with no assets or no incomes would be allowed to get a loan of let's say $50mil

They would present a detailed business plan with proposed aircraft, routes, analysis of available routes from their hub, demand estimates, estimates of profits and costs, etc.

Offline Sami

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    • AirwaySim - Are you the next Richard Branson?
Re: Loans and Planes
« Reply #5 on: August 14, 2009, 07:55:23 PM »
True .. But how to do that here, and to make sure the plan is working. ;)

Kontio

  • Former member
Re: Loans and Planes
« Reply #6 on: August 14, 2009, 08:09:36 PM »
True .. But how to do that here, and to make sure the plan is working. ;)

I'm not sure if the answer is making loans come easier for small airlines but giving less loans to big airlines. The problem is that the game is very easy in the sense that the return of interest (is that the right term?) is very large. Lease a plane, and if you have any idea what you are doing you will have no problem having the plane pay for its lease and make a profit. Get a loan even with high (although historically accurate) interest and you should have no problem investing the money so that you can pay the loan back early and make a huge profit in the process. That way you can get an even bigger loan, lease even more planes, make even more profit, just grow exponentially.

Offline Pai

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  • Posts: 577
Re: Loans and Planes
« Reply #7 on: August 15, 2009, 08:54:29 AM »
Well, first I must say I'm quite flattered that there's someone is doing research on my airline :)

Actually I expanded in a much less progressive way than I did in ATB 1, when I was in KLAX I has many intl-long-haul routes which generated about $2-3M per plane per week.

Sami is right, currently my profitablity start to drain and I had many planes in C check so I can't get any more loan from the bank, I received a bankrupcy warning last night after I placed another order for planes.

As Kontio mentioned that it is relatively easy to get a loan with low cost and I agree with it.

I don't have the formula for calculating the maximum loan amount allowed, but I think maybe we need to put the leverage ratio not only the future cash inflow into determination. If Sami has already considered this, please disregard my suggestion :)

Pai
Lunar Airways
Lunar Airways

 

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