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Author Topic: Opening a base  (Read 1743 times)

Ilyushin

  • Former member
Opening a base
« on: November 14, 2010, 08:17:01 PM »
So I heard that opening a new base airport can get you bankrupt easily. I want to open a new base soon, but I was wondering what you have to look for to avoid going bankrupt? Advice would be appreciated, thanks :)

takasito

  • Former member
Re: Opening a base
« Reply #1 on: November 15, 2010, 12:22:58 AM »
What the most costly expense that you will have to pay is hiring excessive numbers of operating labor cost (+35%? 40%?). Plus whichever ACs that you will are operating from new base will cost more in terms of maintenance (fleet commonalty). In order to avoid bankruptcy, you need to earn enough profit :)

Offline Sigma

  • Members
  • Posts: 1920
Re: Opening a base
« Reply #2 on: November 15, 2010, 02:33:04 AM »
Take whatever your salary is and add about 35%.  That's roughly the increase a new base will cost is weekly expense for all the additional people you'll have to hire.

If you can't continue to turn a profit with that much more salary expense, don't do it.

Offline ZombieSlayer

  • Members
  • Posts: 3923
Re: Opening a base
« Reply #3 on: November 15, 2010, 05:43:27 AM »
In my experience, the viability of a second (or third, or fourth....) base depends heavily on where you are based in the world. Areas with lower labor costs tend to be much easier to operate multiple bases from. Also, if you bases will support multiple widebody flights daily, it makes it easier to absorb the extra labor costs.

In short, it has been said that multiple bases are essentially for your entertainment and should not be relied upon for additional profit. This is generally true, but if you plan well, extra bases can be marginally profitable.

Co-Founder Elite Worldwide Alliance
CEO PacAir
Designated "Tier 1 Opponent"

Ilyushin

  • Former member
Re: Opening a base
« Reply #4 on: November 15, 2010, 06:11:48 AM »
Well, at the moment I operate from Gran Canaria (Canary Islands, Spain). My fleet consists of 15x ATR 72-500 and 11x Boeing 717-200 (+ 5 on order).

This is how my income statement looks like:

Result    -444 383 USD    1 711 489 USD    2 800 057 USD    2 293 291 USD

The -444k is because the week just started, it'll be like the other 3 weeks later.

I'm planning to operate AVRO RJ-85s from LCY flying to European cities.

I'll have enough cash on hand to get at least 5 immediately. I have got 11 million atm and I will not be spending on 717s before my new base opens, I think.

Is this reliable? Realistic?

ICEcoldair881

  • Former member
Re: Opening a base
« Reply #5 on: November 15, 2010, 06:15:44 AM »
secondary at LCY? don't bother. ;)

Go for something like Malaga, Sevilla or Palma de Mallorca. ;)

Offline Sigma

  • Members
  • Posts: 1920
Re: Opening a base
« Reply #6 on: November 15, 2010, 06:21:54 AM »
Well, at the moment I operate from Gran Canaria (Canary Islands, Spain). My fleet consists of 15x ATR 72-500 and 11x Boeing 717-200 (+ 5 on order).

This is how my income statement looks like:

Result    -444 383 USD    1 711 489 USD    2 800 057 USD    2 293 291 USD

The -444k is because the week just started, it'll be like the other 3 weeks later.

I'm planning to operate AVRO RJ-85s from LCY flying to European cities.

I'll have enough cash on hand to get at least 5 immediately. I have got 11 million atm and I will not be spending on 717s before my new base opens, I think.

Airlines operating smaller planes have MUCH more problems with bases than larger ones.  Because, for them, salary is a much larger percentage of their expenses and their profits are small.  So when their salary expenses go up by 1/3rd they head towards unprofitability in a hurry.

Is this reliable? Realistic?

Again, it depends on your salary.

You're only netting about $2M/week in profits.

So if your weekly salary payments are any more than about $5.5M/week then a new base will cost you more to open than you can afford because your salary will increase by about $2M/week, which is more than you're making.
« Last Edit: November 15, 2010, 06:23:59 AM by Sigma »

Ansettaddict123

  • Former member
Re: Opening a base
« Reply #7 on: November 15, 2010, 08:10:34 AM »
In my experience, the viability of a second (or third, or fourth....) base depends heavily on where you are based in the world. Areas with lower labor costs tend to be much easier to operate multiple bases from. Also, if you bases will support multiple widebody flights daily, it makes it easier to absorb the extra labor costs.

In short, it has been said that multiple bases are essentially for your entertainment and should not be relied upon for additional profit. This is generally true, but if you plan well, extra bases can be marginally profitable.



I couldn't agree more.
I find it VERY easy to open new bases profitably; due to the low costs of Asian labour.
It is also very true with the widebody point; in essence, your new base has to have an economy of scale. Opening a new base at a small regional airport WILL NOT make you any money; particulary if you are based in the US/ Europe/ Aus

Offline romeozulu

  • Members
  • Posts: 452
Re: Opening a base
« Reply #8 on: November 16, 2010, 11:34:47 AM »
Hi,

Opening a base could be dangerous if you have a small airline that is making small profit. My airline got bankrupted because of that and also because I took a loan to lease new aircraft that would have taking me so many years to refund  :-\

Anyway I lost an airline but improved my experience  ;)

Ansettaddict123

  • Former member
Re: Opening a base
« Reply #9 on: November 17, 2010, 01:58:09 AM »
Anyway I lost an airline but improved my experience  ;)

And thats what its all about  8)

Ilyushin

  • Former member
Re: Opening a base
« Reply #10 on: November 17, 2010, 05:59:10 AM »
Thanks for your guys advice. I decided to expand in Gran Canaria and wait a little more before opening a 2nd base.

Ansettaddict123

  • Former member
Re: Opening a base
« Reply #11 on: November 17, 2010, 01:17:51 PM »
Thanks for your guys advice. I decided to expand in Gran Canaria and wait a little more before opening a 2nd base.

Expanding existing bases is always preferable; get yourself onto a good, solid footing before you branch out. ie: minimise your risk

Offline romeozulu

  • Members
  • Posts: 452
Re: Opening a base
« Reply #12 on: November 17, 2010, 03:28:34 PM »
minimise your risk

Oh yes, It took less than 24 real hours for me to close down my airline after opening the second base  :-[

 

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