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Author Topic: !6 aircraft now including widebodies, fuel contract?...  (Read 1318 times)

L1011fan

  • Former member
!6 aircraft now including widebodies, fuel contract?...
« on: August 27, 2011, 05:46:02 PM »
Who is everyone recommending? 

flightsimer

  • Former member
Re: !6 aircraft now including widebodies, fuel contract?...
« Reply #1 on: August 28, 2011, 07:45:29 PM »
it doesnt matter how many aircraft you operate...

its all about how much your weekly fuel bill is... im at 30 aircraft of which 20 are DC-10's and 757's and im just now at the point where i will save money with the contracts.

Riger

  • Former member
Re: !6 aircraft now including widebodies, fuel contract?...
« Reply #2 on: August 29, 2011, 02:17:25 PM »
Who is everyone recommending? 

It's simple math.

Work out how much discount you would get from Half your Monthly fuel cost based on the % offered in the contract. (MonthlyFuelCost/2 x % discount) and compare that to the monthly contract cost.  If discount value is greater then monthly contract cost then that's good, if not then that is bad.

L1011 fan, you have been around a while, I am surprised that you even asked that !!

Regards

Richard

Offline T8KE0FF

  • Members
  • Posts: 779
Re: !6 aircraft now including widebodies, fuel contract?...
« Reply #3 on: August 29, 2011, 07:06:30 PM »
L1011 fan, you have been around a while, I am surprised that you even asked that !!

It's a new thing and some of us take time to get used to things! :P

And for those who are awful at maths, like me, I don't understand it at all. So I'll just leave it.. :laugh:

Riger

  • Former member
Re: !6 aircraft now including widebodies, fuel contract?...
« Reply #4 on: August 29, 2011, 07:16:58 PM »
It's a new thing and some of us take time to get used to things! :P

And for those who are awful at maths, like me, I don't understand it at all. So I'll just leave it.. :laugh:

Regarding the Math, I take your point, I messed it up first time out and sat with a heavy monthly premium that was money in the hole.   :-[

Regarding L1011 fan ...  now way, He's a smart cookie, I give him more credit than that ...    ;)

minerva

  • Former member
Re: !6 aircraft now including widebodies, fuel contract?...
« Reply #5 on: August 29, 2011, 10:30:46 PM »
L1011:

when making your decision don't just look at the present, look ahead. 

The best discount I've seen offered is 6.8%.  If you get an offer over 6% with a long contract length then its worth while spending some time doing the math.  And think about two variables: fuel prices and your expansion plans.  Right now, fuel is low and there is little chance of it dropping much below $200 for the rest of the scenario; the trend will be upwards, and likely there will be a spike.  When, who knows? But I think it safe to assume it will double and maybe even quadruple before the end of the scenario.  You need to factor this risk into your calculations.  Second, you are going to expand, probably, and with every additional plane your fuel consumption goes up.  But when you have a contract, the price you pay per month for your discount does not.  So if you are going to expand a lot, it pays to have a long term contract with a high discount.

Take this example: you current fuel cost is 20 million a month; the discount on offer is 6.5%; the price of the contract is 800,000 per month, and the deal is for 2 years.  At your current fuel cost, you would not be making money on this contract.  The discount on your current consumption amounts to 650,000 per month (fuel cost/month divided by two multiplied by discount) but you'd pay 800,000 a month for this discount.  HOWEVER, if fuel prices doubled and your fleet stayed the same size it would be worth it as your savings would be 1.3 million.  OR, if you were to expand and double the size of your fleet, the same thing would apply. 

So the calculation is about risk and future expansion plans. You may never get a contract that is a good deal in the present (or if you do it might only be for a short period), but you might get offered a deal that you'd pay for in the short term (four or five months of paying extra) in return of two or more years of getting an ever increasing discount.


Riger

  • Former member
Re: !6 aircraft now including widebodies, fuel contract?...
« Reply #6 on: August 30, 2011, 10:32:19 AM »
L1011:

when making your decision don't just look at the present, look ahead. 

The best discount I've seen offered is 6.8%.  If you get an offer over 6% with a long contract length then its worth while spending some time doing the math.  And think about two variables: fuel prices and your expansion plans.  Right now, fuel is low and there is little chance of it dropping much below $200 for the rest of the scenario; the trend will be upwards, and likely there will be a spike.  When, who knows? But I think it safe to assume it will double and maybe even quadruple before the end of the scenario.  You need to factor this risk into your calculations.  Second, you are going to expand, probably, and with every additional plane your fuel consumption goes up.  But when you have a contract, the price you pay per month for your discount does not.  So if you are going to expand a lot, it pays to have a long term contract with a high discount.

Take this example: you current fuel cost is 20 million a month; the discount on offer is 6.5%; the price of the contract is 800,000 per month, and the deal is for 2 years.  At your current fuel cost, you would not be making money on this contract.  The discount on your current consumption amounts to 650,000 per month (fuel cost/month divided by two multiplied by discount) but you'd pay 800,000 a month for this discount.  HOWEVER, if fuel prices doubled and your fleet stayed the same size it would be worth it as your savings would be 1.3 million.  OR, if you were to expand and double the size of your fleet, the same thing would apply. 

So the calculation is about risk and future expansion plans. You may never get a contract that is a good deal in the present (or if you do it might only be for a short period), but you might get offered a deal that you'd pay for in the short term (four or five months of paying extra) in return of two or more years of getting an ever increasing discount.



Well Stated

 

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