AirwaySim
Online Airline Management Simulation
Login
Username
Password
 
or login using:
 
My Account
Username:
E-mail:
Edit account
» Achievements
» Logout
Game Credits
Credit balance: 0 Cr
Buy credits
» Credit history
» Credits FAQ

Author Topic: Leasing company  (Read 2611 times)

R.uben

  • Former member
Leasing company
« on: February 24, 2010, 01:49:08 PM »
Hi there, this may be a dumb question but i still wanted to ask you.

Is it possible to run a profitable leasing company in this game or is that just impossible since the little amount you get for leasing...
And I mean especially in this game there is currently a lot of demand for used jet planes to lease, but they are not available. IS it profitable to buy jet aircraft and lease them against a quite high price since there is a high demand?

Gr
Ruben

Offline swiftus27

  • Members
  • Posts: 4395
Re: Leasing company
« Reply #1 on: February 24, 2010, 03:13:55 PM »
I am leasing a 707 that will pay for itself in 4 years.
The problem is getting the capital to start a leasing company and being in a game long enough for you to make ROI

Dashek

  • Former member
Re: Leasing company
« Reply #2 on: February 25, 2010, 07:48:14 AM »
I guess only trying will show you.   I personally doubt it in this game.   Many people (like me :-) ) return aircraft just before their major checks.   So you profits will steam up in maintenance your lessor should have been doing.   And that is just one aspect.  The other ist:  Airlines just going bust and no compensation.   I think most people considered it but the influence on the contracts is just too little.   But go ahead and prove me wrong :-)

Good luck .-)
M.

Offline Pai

  • Members
  • Posts: 577
Re: Leasing company
« Reply #3 on: February 25, 2010, 10:09:58 AM »
spend the money for your own route will be much better off than to be a leasing company.

Leasing company should only become the option when your airport/routes are full and no room for expand..
Lunar Airways

Offline Maarten Otto

  • Members
  • Posts: 1276
    • My photo site
Re: Leasing company
« Reply #4 on: February 28, 2010, 03:06:06 PM »
Well I leased out two BAC's for a premium fare and they will be payed back in 5 years time. After those 5 years who knows what will happen to them.

auerbacs

  • Former member
Re: Leasing company
« Reply #5 on: February 28, 2010, 05:13:55 PM »
Well I leased out two BAC's for a premium fare and they will be payed back in 5 years time. After those 5 years who knows what will happen to them.

That may be true, but I think that once you factor in inflation and the opportunity cost of having your money sunk in those planes for 5 years, the profit wouldn't be that significant. I agree that it's really only a play once you have filled the slots or demand from your airport, or perhaps if you have a change of plans and want to take that aircraft off of your commonality list.

Offline lastchancer

  • Members
  • Posts: 142
Re: Leasing company
« Reply #6 on: February 28, 2010, 10:28:20 PM »
Hi there, this may be a dumb question but i still wanted to ask you.

Is it possible to run a profitable leasing company in this game or is that just impossible since the little amount you get for leasing...
And I mean especially in this game there is currently a lot of demand for used jet planes to lease, but they are not available. IS it profitable to buy jet aircraft and lease them against a quite high price since there is a high demand?

Gr
Ruben

Hi Ruben!

I asked myself the same question and try it out since 1 1/2 gameyears in Dawn of the Millenium.
I had a big profitable airline with approx. 200 aircraft, half of them were leased when the idea of doing leasing only came in my mind.

I ordered 100 new planes and returned all planes I had leased when leases expired.
Whenever one of my airplanes got a c check, I didnīt let them fly routes after that but put them to the used market for lease (or sometime for sale).
New airplanes delivered to my fleet go directly to the used market.
In about 3 month, my company will be a leasing only company.
So,  I did something like a slow transfer. I could have done a fast transformation, but in this case I would have floated the used market for exemple with 40 B 737-400 in one time.

An aircraft on a profitable routes might always make more money than beening leased out.
But on the other hand you have no fuel costs, very few personal costs, slots and all other stuff.
This means: a leased out airplane earns quite well.

But: your leasing fleet is never completely leased out, maybe 30-40% of my fleet is in the used market waiting for beeing leased out.
So they donīt make money (they donīt cost that much, only assurance wich is nearly nothing), but much more important: every day the are not leased out they are loosing value. And the next c check is coming closer.
Thats why I offer prices 10-25% below the suggested default prices. Because it is better to get a lower rate, than let the plane hang months in the used market.

An interesting thing I learned: Popular, well known planes, BUT totally brand new are difficult to lease out. But the same type but 3-7 years old are easy to lease out.
My business model was to lease out old types below default prices and new above default prices.
Didnīt work.
Why? 
Because mostly new airlines leases out aircraft. The have small money and prefer to get two 6 years old B 737-300 instead of one brand new B 737-700.
And the airlines with the big money have their own huge orders for the brand new fleet types.
I have to give a 10-15% discount on brand new A 321 and Bombardier CRJ to get them leased.

Next pain:
So, your clients are mostly starters. The lease 1-3 planes that just had a c check and... 6 month later they bankrupt.  You get your planes back and have to do a extra c check before returning them to the used market. 

I cannot say yet how profitable it is, may bank is something like balanced because I have large ordes of new delivered planes to be paid and still 20-30 airlines flying on routes and making extra money.
Lets see in some month when my hole fleet is in the used market, if a leasing only company works.

Iīm not sure, if a plane in average can make the hole money you paid for it (Return of investment).
But, it think this might take up to 10years, due to the many c/d checks that has to be done and the "waiting time" in the used market where they are not making money and the lowering leasing rates you get the older the plane gets (by climbing c check costs at the same time).

Iīll keep you updated.
See Last Chance Aircraft Leasing Ltd in DOTM.

Best regards,
Lastchancer

coopdogyo

  • Former member
Re: Leasing company
« Reply #7 on: March 10, 2010, 05:58:58 AM »
Being based in SCEL where I have eaten up most of the short haul routes and need to wait for the DC8-62 I have started a small leasing company.So far 2 planes leased out but I have more on order that are gonna go straight to the leasing market. I think I will have success because they will be some of the only jets on the market.

Online schro

  • Members
  • Posts: 3064
Re: Leasing company
« Reply #8 on: March 10, 2010, 06:11:57 AM »
I"ve been having good luck snapping up any jet that I can get my hands on and then releasing it due to the high demand for anything modern.  I'm sure the floor will fall out of the market in a few game years.. but meanwhile, I"ve got 10 leased planes out there making money.  I may buy out some of my leased planes because I dont' feel like schedulign them just to lease them out....

Aahz the Pervect

  • Former member
Re: Leasing company
« Reply #9 on: March 10, 2010, 03:18:29 PM »
I"ve been having good luck snapping up any jet that I can get my hands on and then releasing it due to the high demand for anything modern.  I'm sure the floor will fall out of the market in a few game years.. but meanwhile, I"ve got 10 leased planes out there making money.  I may buy out some of my leased planes because I dont' feel like schedulign them just to lease them out....

THAT'S where all my damn Boeing's were going!! You need to send me your sleep schedule so I know when I can shop - hehehe

Online schro

  • Members
  • Posts: 3064
Re: Leasing company
« Reply #10 on: March 10, 2010, 11:00:08 PM »
Hmm. There's a ton (six) of Trident 1C's on the market... I"ve already got over 100 tridents... they are quite tempting, but I think all the Boeing fanboys make them difficult to own once 727s become more prevelant...

pfmboidi

  • Former member
Re: Leasing company
« Reply #11 on: March 12, 2010, 12:47:59 PM »
It can only work with planes for which the waiting list is long and that have an advantage over all the other planes on the market.

If you cannot set the highest price possible or a decent mark-up is absolutely not profitable.

Misterfeep

  • Former member
Re: Leasing company
« Reply #12 on: March 18, 2010, 01:49:29 PM »
Watch Owl Express in the Jet Age.  He is at ATL and has a dominant market position and high company value but he has invested heavily in 727s and other A/C and is leasing them out.  He has done OK with the leasing to this point but the market seems to be reaching saturation.  He lost money in the previous quarter. 

Offline swiftus27

  • Members
  • Posts: 4395
Re: Leasing company
« Reply #13 on: March 18, 2010, 02:15:07 PM »
It doesnt help when OWL is selling/leasing his planes for more that ones you can get cheaper.  He maxes out the price and hopes.  While it may work early, it doesnt work mid to late game. 

pfmboidi

  • Former member
Re: Leasing company
« Reply #14 on: March 18, 2010, 02:30:15 PM »
unless its the first plane that comes out of production and it is strategic (747 for example)?

Online schro

  • Members
  • Posts: 3064
Re: Leasing company
« Reply #15 on: March 18, 2010, 09:39:01 PM »
It doesnt help when OWL is selling/leasing his planes for more that ones you can get cheaper.  He maxes out the price and hopes.  While it may work early, it doesnt work mid to late game.  

It has been paying off hansomely so far, and its basically giving me time to build up an owned fleet of 727's to replace the 130+ Tridents that I have.  I've noticed that there's more and more planes available on the market, so I'll have to start dropping prices soon enough, though as soon as some slots open up in ATL I'll need to get to rescheduling (bugger the 40 minute turn time of the tridents compared to the 45 minute with the 727s).

What I really enjoy is a company starting up, leasing 3 planes, then BK'ing on the same game day :-).

Ultimatly, when I look at the amount of investment versus the income I get from it, its nothing compared to actually flying the planes. About 10% of my income is being made from about 750 million of owned planes via leasing - which is likely about the same amount that my flying planes are worth and generating 90% of my revenue.  Sure, from a traditional ROI perspective in context of real world business, its a great ROI/ROA (i.e. 25%+), it pales in comparison to the ROI/ROA you get by flying the plane on a profitable route.

MisterFeep - due to the whacked accounting system in this game, airlines that buy planes are often showing that they are making losses even though its a capital asset. If the game broke that out appropriatly, you'd see that i'm operating at about a 33% profit margin, with that third being reinvested into plane purchases. My goal is to end each year on an even keel to minimize the tax impact of being so bloody profitable (which also boosts the ROI on the leasing venture)
« Last Edit: March 18, 2010, 09:41:13 PM by schro »

Misterfeep

  • Former member
Re: Leasing company
« Reply #16 on: March 19, 2010, 09:35:18 PM »
It has been paying off hansomely so far, and its basically giving me time to build up an owned fleet of 727's to replace the 130+ Tridents that I have.  I've noticed that there's more and more planes available on the market, so I'll have to start dropping prices soon enough, though as soon as some slots open up in ATL I'll need to get to rescheduling (bugger the 40 minute turn time of the tridents compared to the 45 minute with the 727s).

What I really enjoy is a company starting up, leasing 3 planes, then BK'ing on the same game day :-).

Ultimatly, when I look at the amount of investment versus the income I get from it, its nothing compared to actually flying the planes. About 10% of my income is being made from about 750 million of owned planes via leasing - which is likely about the same amount that my flying planes are worth and generating 90% of my revenue.  Sure, from a traditional ROI perspective in context of real world business, its a great ROI/ROA (i.e. 25%+), it pales in comparison to the ROI/ROA you get by flying the plane on a profitable route.

MisterFeep - due to the whacked accounting system in this game, airlines that buy planes are often showing that they are making losses even though its a capital asset. If the game broke that out appropriatly, you'd see that i'm operating at about a 33% profit margin, with that third being reinvested into plane purchases. My goal is to end each year on an even keel to minimize the tax impact of being so bloody profitable (which also boosts the ROI on the leasing venture)

Thanks for speaking up schro.  I have been following you regularly to see if the leasing game works.  I have been watching your value climb so assume it is working.  Since it is nearly impossible to separate out the leasing and flying profitability from the outside, your comments are appreciated.  And I definitely agree on the accounting issues in the game.  We really need a separate income statement and balance sheet. 

The only metric that I have any confidence in is value.  I wish we could see a line graph of value for each airline.  The trend would be a good tool for assessing the health of the competition.  I also think making a big order early with the idea of leasing the a/c is a service that should be compensated.  You are taking the risk with the order and it should payoff.  On the other hand, I played it conservatively and placed small orders.  Hence my interest in your operations. 

Now maybe we can speak about those flights between IAD-ATL?  Got to love a world without the Department of Justice.

Online schro

  • Members
  • Posts: 3064
Re: Leasing company
« Reply #17 on: March 20, 2010, 03:55:03 AM »
Value isn't a good measure of airline health either because its so easily inflated.

The main reason my value is climbing so fast is the order of 74 B722's that are in process of beign delivered to me as a purchase.  I paid 3 million each as the prepayment, and i'm forking over about 4.8 million each time they're delivered, however, when they arrive, they have a value of about 8.8 million each.   The way the accounting works int he game is that the prepayment is deducted from my CV until I receive the plane - so the 3M * 74 was effectively a hidden asset off the books that I had paid with cash.  Now that the planes are coming in, my CV increases by 8.8M, but I only spend 4.8 in cash for each plane received, thus, CV goes up 4M everytime I get a 722 in.  As you wish, I've attached a screen grab of my CV over time.  You can see where I sent on buying binges (i.e. the big drop in Aug-69 was an order for 20 purchased A300's).

If I can make myself spend a few hours doing it, I've offered to write up a bunch of requirements for the accounting system.. just need to find the time to do it.

For IAD-ATL, as soon as there's enough slots for me to play with my schedule in ATL, I'll make sure to meet demand on the route :-).  I'm intentionally not torpedoing anybody, and aim to put about the same number of seats as there is demand on each route I fly... so i owe ATL-IAD about 400 more seats daily :-).  When building up, there were still plenty of other routes with unmet demand... sow hy fly it something thats only marginally proftitable?


Misterfeep

  • Former member
Re: Leasing company
« Reply #18 on: March 20, 2010, 01:34:52 PM »
Thanks for the info schro.  I am still learning the game.  Nice to hear you aren't looking to "torpedo" anyone.  Let's be friends!  ;)


Online schro

  • Members
  • Posts: 3064
Re: Leasing company
« Reply #19 on: March 26, 2010, 03:08:40 AM »
I really need to lay down some weed pre-emergant in atlanta... I suppose thats why I'm trading up from the Tridents to 722's :-).

Anyhow, an update on the leasing operation -

Q3 of this year, I did 506M in total revenue, 35M of which was leasing.  This Q with 21 days left, I've got 387M in total revenue with 24M of it being from leasing operations... basically, i'm at about the 5-7% mark of total revenues thats dropping to the bottom line as pure profit. (It seems the numbers for the views are a bit tiggered - on 12/10 the weekly and monthly views are showing the same revnue for me... odd...)

From a weekly profit perspective, if I'm not buyign planes or changing tons of seats out, I'll have revenues of 43M with a net profit of about 20M.  Of that 20M, 3.6M of it will be from leasing - not a significant portion.

So now lets look at whats generating the money -

I have 176 planes in the fleet plus 76 that are currently leased out - so basically 2/3s of the planes are generating 85%+ of the profits, not accounting for the tards that ditch leases 2 days before c-checks/d-checks (though I do laugh at those who pay me more in a terminatoin fee than a C-check costs just to duck the c-check).

So basically, when looking at a plane leasing operation, the opportunity cost is too high, unless you have no other ways to grow your revenues (i.e. you've soaked up all possible demand and/or slots).

Sadly, when you look at it from a return on assets perspective, plane leasing is VERY attractive - On the 722's that I paid about 7M for, I'm raking in about 2M per year leasing them out, which is a stellar ROA in the real world, especially when the residual value is climbing.... There's been some that have been leased out repeatedly  in a year due to the one day wonder airlines leasing them and then BK'ing making the ROA even higher, but still not as high as flying the plane...

 

WARNING! This website is not compatible with the old version of Internet Explorer you are using.

If you are using the latest version please turn OFF the compatibility mode.