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Author Topic: airlines with negative value  (Read 1000 times)

Offline Andriy

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  • Posts: 226
airlines with negative value
« on: October 04, 2009, 06:49:44 PM »
I noticed that there is plenty of airlines with negative value, which means its losing money.
How does it work? - if you go into red, how do you pay all the expenses (fees, salaries, maintenance, etc.) and keep your airline alive?
Anyone to explain?

Offline Brockster

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  • Posts: 1889
Re: airlines with negative value
« Reply #1 on: October 04, 2009, 06:57:37 PM »
Just because an airline "has a negative value" doesn't mean their cash flow is negative. In most cases, at least this early on in the game, the airlines with a negative value have most likely taken out a loan, which could be used for ordering new planes, etc.

Offline Sigma

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  • Posts: 1920
Re: airlines with negative value
« Reply #2 on: October 04, 2009, 06:58:03 PM »
I noticed that there is plenty of airlines with negative value, which means its losing money.
How does it work? - if you go into red, how do you pay all the expenses (fees, salaries, maintenance, etc.) and keep your airline alive?
Anyone to explain?

Negative Value has nothing to do with losing money.

It's your Cash-on-Hand + Value of Aircraft - Loans.  

I make $20M profit per week, own $150M in aircraft, but I have a negative value.   I simply have lots of loans.  With the length that order queues get, you're far better of borrowing money to get your order in as soon as possible rather than waiting for the cash.   You'll wait longer for the cash and then the queue can be months or even years longer.  You might push the delivery of a plane back 2 years, along with all that lost revenue it could have earned you in that time, just to avoid taking a loan.

Likewise, you can own a lot of planes, have a lot of "Value", but be a bankrupt airline -- i.e. have no cash to pay your bills.  This happens a lot in these games.  Ideally you can sell your owned aircraft for cash if you hit a rough spot.  But if the market is flooded, yours may be hard to sell.  And even when you do sell, you may end up with a lot of employees sitting around.  Make the mistake of firing all those people (or have to, if you need to reduce salary) and your morale falls, this increases delays exponentially, this can hurt your CI in a big way, followed by collapsing revenues.... and you crash and burn.  Or, more likely, you find yourself unable to pay for maintenance, since that requires cash, and all the owned aircraft in the world won't pay for a maintenance (unless you can borrow against them).  You get too negative you can't do your C-Checks, you get caught by the Feds for flying unmaintained aircraft, your CI plummets, and your traffic falls to nothing.

In other words "Value" doesn't mean to terribly much of anything in regards to the general health of an airline.
« Last Edit: October 04, 2009, 07:09:20 PM by Sigma »

 

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