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Online Airline Management Simulation
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Author Topic: Enterprise growth  (Read 620 times)

smithch610

  • Former member
Enterprise growth
« on: May 07, 2010, 05:10:00 PM »
Hello - I am fairly new to this simlulation and find it very interesting and enjoyable. I was just looking through some of the airline statistics and see some staggering growth and I am wondering how realistic this is. Specifically, I see some airlines that were founded only 2 years ago that have fleets the size of 150 aircraft and another 150 on order. Many of these carriers don't have any assets and instead, have been using direct leases. Airlines like Jetblue in the US has a fleet size of 150 and they have been in operation for over a decade now. 150 in 2 years seems staggering!

My questions are:

Since loans are rather low when you don't own assets, do these airlines go into substantial negative cash flow without consequences of default? "How low can you go" in terms of un-financed debt and negative cash flow before there are consequences and warnings? Is there some sort of loop hole I am not aware of?

Thanks,

Chris

Port Airways (PTL)
« Last Edit: May 07, 2010, 05:13:23 PM by smithch610 »

ucfknightryan

  • Former member
Re: Enterprise growth
« Reply #1 on: May 07, 2010, 06:51:52 PM »
Growth is so rapid mainly because at the beginning of the game there is no incumbent competition.  If tomorrow united, delta, american, us airways, southwest, jetblue, airtran, and alaska all went out of business, I bet with in two years there'd be at least one totally new airline in the US with at least 150 aircraft.

There are negative consequences pretty much immediately if you go into -cash on hand.  You could lose aircraft being used to secure loans, you can't open new routes, and after a certain point you can't do heavy maintenance.  Eventually they shut your airline down.  Hope that answered some of your questions.

-Ryan

smithch610

  • Former member
Re: Enterprise growth
« Reply #2 on: May 07, 2010, 08:54:24 PM »
Thanks, Ryan. Yes the rush to the market is probably the only "unusual" part of this simulation.

Offline Sigma

  • Members
  • Posts: 1920
Re: Enterprise growth
« Reply #3 on: May 07, 2010, 11:46:37 PM »
I assume the latter part of your question is about airlines with high negative value?

You said "high negative cash flow" but there's no method of effectively determining that one (keeping manual records of an airlines value on a given day of the week over time is the only semi-effective method).

Loans are not that "low" when you don't own assets.  Once sufficiently profitable, you can get unsecured loans in the $250M range.  That means you could theoretically see an airline with a reported value of negative $250M if they borrowed all that money then spent it on planes.

 

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