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Author Topic: Discussion about expanding too fast  (Read 2673 times)

munipandita

  • Former member
Discussion about expanding too fast
« on: July 26, 2010, 10:06:12 PM »
Hi dudes..

I think it's a "philosophycal" question..

Why isn't good when you expand too fast?

I am talking about numbers... Because, in a straight logic, as more planes you buy, more money you get.
Of course your costs with maintenance, personnel and so, but those costs should increase in the same ratio as the number of aircrafts..

Of course it's not that simple, and this is what i am trying to understand here.. hehe

So, anyone can explain?
I think it will be useful for newbies users too.

takasito

  • Former member
Re: Discussion about expanding too fast
« Reply #1 on: July 26, 2010, 10:19:18 PM »
It is always important to take a notice how much leasing cost will be like after 5 months initial payment.

Offline CVACEO

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Re: Discussion about expanding too fast
« Reply #2 on: July 26, 2010, 10:22:02 PM »
Hi dudes..

I think it's a "philosophycal" question..

Why isn't good when you expand too fast?

I am talking about numbers... Because, in a straight logic, as more planes you buy, more money you get.
Of course your costs with maintenance, personnel and so, but those costs should increase in the same ratio as the number of aircrafts..

Of course it's not that simple, and this is what i am trying to understand here.. hehe

So, anyone can explain?
I think it will be useful for newbies users too.

The key here is "too fast" ... as opposed to just "fast" ...

Expansion needs to be done in a stabile manner - picture construction of a building ... if expansion progresses at a rate the foundation can support than all is good.  If expansion exceeds the stability of the foundation then all will come crumbling down.

I think the most common mistake in expanding too fast is not waiting for your foundation to "cure" (i.e., waiting for routes to mature and become profitable in order to support the expense of new growth).  With leases requiring pre-payment of 4 or 5 months in advance, a lot of players see huge profits when these aircraft are first received and fail to realize that those profits are going to be hugely impacted by monthly leases once they kick in a few months down the road.  Also, not taking into account the additional expenses associated with growth - such as advertising and (most importantly) fleet commonality when new aircraft models are needed for longer routes.  Additionally, relying too heavily on borrowed money to support new growth instead of exercising the patience it takes to let that growth money accumulate from profits.
« Last Edit: July 26, 2010, 10:25:40 PM by GoGreenCEO »

Offline ekaneti

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Re: Discussion about expanding too fast
« Reply #3 on: July 26, 2010, 11:29:09 PM »
Say you buy 10 used planes:

1. If you create schedules, youll have staff costs with no revenues for a couple of weeks
2. Start up load factors are low, so youd have 20+ routes with poor load factors that are probably losing money

Offline CUR$E - God of AirwaySim

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Re: Discussion about expanding too fast
« Reply #4 on: July 26, 2010, 11:53:16 PM »
To be honest, I don't think such a problem exists.

At the start of all game worlds fuel is very cheap. Even if you ignore fleet commonality a bit (for example: Order 4x A, than 2x B and 4x C until you order A, B, C at the same time) you will have no problems.

Every large or very large aircraft pays for themselves, eben with low RI and CI. You might only have LF of 60% or 70%, but this is enough if the route is not over fullfilled.

There are many ways why airlines fail and I could name a lot of them, but nearly all of them make no difference between time - if you do it wrong at the start or after five years doesn't matter.




But to go for some points called here in this thread;
Quote
It is always important to take a notice how much leasing cost will be like after 5 months initial payment.

No. Normally a route is profitable at the first moment you create it. So the profit after this pre paid month is only not this much, but you shoudln't lose money. If you lose money, your aircraft is bad (too thirsty), your route is bad (not enough demand, too far, too much competition) or your marketing expenses aren't enough (CI!, not RI).

Quote
Additionally, relying too heavily on borrowed money to support new growth instead of exercising the patience it takes to let that growth money accumulate from profits.

That's a good point. For myself I don't borrow money and than look what to do with it. If a perfect aircraft appears on the used market, I will borrow the exact amount I need. Also you should never borrow more than 5x your starting money.

Quote
1. If you create schedules, youll have staff costs with no revenues for a couple of weeks

Because of that you must schedule aircraft not if they appear in the list... you must wait until they arrive or only one or two days before. In most cases it is cheaper to let a leased aircraft unflown until you stand up/have time for AWS, instead of scheduling it and employee staff with nothing to do for two or three weeks.

Quote
2. Start up load factors are low, so youd have 20+ routes with poor load factors that are probably losing money


At CI ~50 even with standard prices LF are good enough to make profit from the first day.






L1011fan

  • Former member
Re: Discussion about expanding too fast
« Reply #5 on: July 27, 2010, 01:21:42 AM »
Simple. You'll use up all your resources too fast. Take it from some one who knows! :)

Offline Maarten Otto

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Re: Discussion about expanding too fast
« Reply #6 on: July 27, 2010, 09:00:14 AM »
And it can't be told too many times.... Stick to one fleet type for as long as financially viable. I had 15 Fokker 100's in the air before I ordered 30 Saab 2000's. After the 40th Saab I ordered 20 AVROliners, later to be extended with another batch of 15 or so. Then I replaced the Fokkers for MD90's. I got 46 of them now. And it took 20 MD's before I went long haul with A300/310. And after I had 40 of those in the air I gave the 744 a go and took the oldest ones on the market... And they are still earning a good profit these days.

Al in al it took me months (real time) to get to 225 aircrafts on a decent way, starting with just local flights. 

Ansettaddict123

  • Former member
Re: Discussion about expanding too fast
« Reply #7 on: August 19, 2010, 02:26:35 PM »
to me there is no such thing as 'too fast', if anything there is only expanding too slow:P
So long as you are entering routes which still have latent demand, stick with a sensible fleet stratergy (not too many types, ie: <3, whilst building critical mass of fleet types) and manage you airline well (spend time with it, check back everyday at least once etc) then you should be fine.
Sure setting up an airline takes a long time to start with, but in the future you will be well placed to enjoy it:D

Offline JumboShrimp

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Re: Discussion about expanding too fast
« Reply #8 on: August 19, 2010, 07:06:13 PM »
to me there is no such thing as 'too fast', if anything there is only expanding too slow:P
So long as you are entering routes which still have latent demand, stick with a sensible fleet stratergy (not too many types, ie: <3, whilst building critical mass of fleet types) and manage you airline well (spend time with it, check back everyday at least once etc) then you should be fine.
Sure setting up an airline takes a long time to start with, but in the future you will be well placed to enjoy it:D

When every aircraft you purchase/lease is turning in good profits, there is no such thing as too fast.  It is only if the frist flights are only marginally profitable, and once the lease payments kick in, they lose money,  that's when expansion was "too fast".  But it was not really too fast, it was just a wrong way to expand.

Offline raptorva

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Re: Discussion about expanding too fast
« Reply #9 on: August 19, 2010, 11:43:45 PM »
I always take the slow and steady route with my airlines to ensure that they are proffitable and stable before expanding.
For example with my Airline Jet Horizons in MT2, I started initially with just two 732s and flew them on routes while I placed orders for the then empty production line of BAe-146's. Once the BAe's starting arriving, I phased out the 732s and flew the BAe's on exactly the same routes, placing orders of BAe's only until I had a fleet of about 28 and then ordered Fokker F.50's for the smaller density routes (all domestic pretty much at this point). One the Fokkers and BAe's were getting consistent incomes with LF's averaging 85%, I started to order Boeing 757's for my forays into International Routes.

Now my BAe's and 757s are pending retirement once my order for 737-700s start to arrive to replace both types. My Fokkers are for sale as they have been replaced by the faster Saab 2000 and my international fleet comprimises 757s and 767s with about 40 aircraft per type.

Now I'm letting the profits accumulate so that I can start purchasing whole fleet types at once when possilbe.

As a side note, I have never taken out a loan and never plan on it. I much rather the bank pay me with interest rather than them pay me.
As my last Tax overview stated, I had to pay 27 million extra tax as my airline had earned a consistent profit even with the order for 80+ 737-700's.

That's what it means to be successful. Small slow steps that lead to an airline with no financial problems ever in its history (never once have I been in the red).

Hugamuga

  • Former member
Re: Discussion about expanding too fast
« Reply #10 on: August 22, 2010, 10:40:17 AM »
after every airline died in Australia me and a load of other airlines started up, but i decided to expand really quickly, using just the 737-400 i got to about 50 planes in under a year until i had all the potential used up... it worked pretty well for me, as far as i see it expand as fast as you can as long as there is enough potential, and you stick to one fleet type

Offline schro

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Re: Discussion about expanding too fast
« Reply #11 on: August 22, 2010, 03:39:01 PM »
I think my angle hasn't been very well covered in this thread.

From what I've found, there's nothing bad about expanding too quickly in this game if you do it well and are patient with the decisions that you make. Keeping your fleet simple, not paying a stupid amount for your planes and don't pick a fight with a big airline until you're able to do proper battle with them.

Expanding too fast will cause a collection of poor but not lethal choices snowball into a tidal wave of red ink that sinks your  airline in a manner that could be classified as "expanding too fast".  The prepaid leasing effect gives the less experienced players the impression that they are making money rather than losing money, so they continue to make the same bad decisions over and over until it catches up to them.

coopdogyo

  • Former member
Re: Discussion about expanding too fast
« Reply #12 on: August 23, 2010, 05:54:55 AM »
It is not really how fact you expand as to how you do it. In MT I was able to grow to over 100 MD-80's in less than a year. If you have the right plane and know how to make money they sky is the limit as to how fast you can expand.

Talentz

  • Former member
Re: Discussion about expanding too fast
« Reply #13 on: August 24, 2010, 12:00:10 AM »
To me the art of death by rapid expansion is expanding without a solid foundation.

That could be based on a number of variables.


Ask yourself, if after 4-5 aircraft (s) of expanding in a new game, if your competition floods your best route... could you still expand with the same pace your were just at? If yes, then your choosing the correct set of variables to maximize your expansion.

If however you say no, then your not choosing the correct variables and your growth is mainly sustained by not paying monthly leases and little/ no competition.



Guess I'm more tactical about expansion  :laugh:


Talentz


 

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