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Author Topic: small airline experiment, take 2  (Read 6007 times)

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #20 on: August 06, 2013, 04:41:28 AM »
Napoleon Complex is now up & running.   ;D

The rules: nothing but small planes. Ever.

The aim: HQ + 3 bases eventually, and as many planes as possible. 100+, 200+, 300+, who knows?

The long term plan: EMB-120s, Fairchild Metros, and possibly a 3rd group of 9 seat Pipers.






Only 1 Metro in the used market to start, so I grabbed that. Like any other airline, a bigger plane at the start could mean more revenue, and if I can get up to 6-8 planes quickly, I can hopefully have a decent revenue stream for ordering new planes, rather than just having a single metro and then waiting for new ones to arrive.

Biggest plane available to me is the Aerospatiale N262. 29 seats, a bit slow, but low fuel use, and more importantly, low maintenance costs. The Metro I just got costs me 25k/month to lease, 5k/month to maintain with A+B+C checks.

An old IL-14 has 30 seats, only 13k/month to lease. But over 40k/month to maintain.

There are 4 N262s there now. Cheapest is 13.8 years old, 24k/month to lease. Next best is 5.3 years old, 35k/month to lease. Looks like an easy choice, but the older plane costs 13k/month to maintain, the newer one only 7k. Older one uses 20% more fuel, too. So it's much closer. I'll actually take both, lease them for 1.5 years each, should be able to replace them with Metros by that point.
« Last Edit: August 06, 2013, 05:27:14 AM by Sanabas »

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #21 on: August 06, 2013, 05:12:07 AM »
5 routes on 1 262 = 39 staff
12 routes on 1 262 + 1 Metro = 90 staff.

Only got the 262 routes assigned in time for the end of day 1. Don't know what sort of profit margins I'll need later. But day 1 results:

Orly: Cancelled due to weather.
Milan: 6 seats, $151/hr
Stuttgart: 6 seats, $180/hr
Luxembourg: 6 seats, $177/hr
Frankfurt: 16 seats, $485/hr.

If breakeven point is around $200 again, that's pretty promising.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #22 on: August 06, 2013, 05:20:55 AM »
In the Phillipines, high level managers cost me $1925.75/month each.
Customer Service $325.12/month
Small pilots $475.19

In France, it's now:
High level managers $5277 (174% increase)
Customer service: $925.37 (185% increase)
Small pilots: $1275.50 (168% increase)

So looks like France's wages are roughly 2.75 times Phillipines' wages. I'd have needed $280/hr to break even if I was paying those French wages in the Phillipines, so likely similar this time.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #23 on: August 06, 2013, 01:00:24 PM »
First full week, and I actually made 10k profit, 16.5k without the loan payments. Or roughly break even if I had to pay leases. Not a bad start.

3 planes, 145 staff.

Commonality with 1 of each type:

262: 24k/month

262 engines: 30k/month - 40k/month for lease + maintenance, 54k/month for commonality.  :o

Fairchild: 17k/month

Fairchild engines: 30k/month - 30k lease + maint, 47k commonality.

Need those to drop relatively quickly as planes arrive, and suspect it'd be halved if I only had one fleet group.


2nd 262 delivered, and...

262: 24k --> 36k

262 engine: 30k --> 31.5k. All good, 54k for one plane drops to 29k/plane for 2.

However, with that third plane, there was also:

Metro: 17k --> 23.5k

Metro engine: 30k-->30k (rose by $200 only.)

Strange that it changed at all.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #24 on: August 06, 2013, 01:54:23 PM »
Really long term goal: Run some 7 day schedules to Dubai, Egypt, India, NE USA if I can find the tech-stops, Uzbekistan, etc, and find at least a couple of virtual pax silly enough to pay for tickets.  :laugh:

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #25 on: August 06, 2013, 02:49:17 PM »
5 routes on 1 262 = 39 staff
12 routes on 1 262 + 1 Metro = 90 staff. (+51)
3 planes, 145 staff. (+55)
4 planes, 215 (+70)
5 planes, 305 (+90)
6 planes, 367 (+62)

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #26 on: August 06, 2013, 04:42:14 PM »
2 of each plane now, commonality at:

262: 36k --> 43k - going up when a model of a different type gets delivered. Hoping this is just some sort of small airline discount for the first handful of planes that is slowly disappearing. Will check later as more Metros arrive.

262 engine: 32.7k

Metro: 23.5k-->29k - I went from 3 planes to 4, 1 metro to 2, but it was actually the 262 that had the bigger jump in total price.  ???

Metro engine: 32k.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #27 on: August 07, 2013, 05:54:55 AM »
LFs are up to 50%, and profit is slowly climbing.

Week 8 was 12k profit on 223k revenue.
Week 9 was 17k profit on 248k revenue, and was a B-check week.
Week 10 is only 2 days old, but will hopefully be close to 100k profit on 330k revenue based on extrapolating the current numbers.

Have 3 of each plane, and won't get more 262s for now. Will simply collect Metros, end the 262 leases after 18 months, and wait for the E120 & Metro3 to launch. I aim to have at least 15 planes after 18 months, so I can open my 2nd base quickly and get access to more short routes.

Commonality with 3 of each:

262: 76k (25k/plane, vs only 21.5 when I had 2 of each)

262 engine: 38k

Metro: 49k (16/plane, also higher than when I had 2 of each)

Metro engine: 36k.

I remember it being similar in the previous test, that commonality on a per plane basis actually peaked at ~6 planes. With staff doing something similar. A 2 plane airline actually seems easier to run than a 6 plane airline, in terms of making it profitable. Of course, if the 6 plane airline is profitable, it makes a higher volume of money, so it's easier to get up to 20+.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #28 on: August 07, 2013, 09:36:23 AM »
Week 10 is only 2 days old, but will hopefully be close to 100k profit on 330k revenue based on extrapolating the current numbers.

83k on 315k revenue. Would lose maybe half that to leases, if I was paying them yet. Still with ~50% LFs.

7th plane arrived, staff up 64 to 431.

Nord's commonality stayed at 76k/38k for engines. So seems like 5 or 6 planes is where the discount stops.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #29 on: August 09, 2013, 11:52:29 AM »
There was an airline there already when I started, with 11 planes, in 3 fleets. I think it was F27, BAC and one other large type. I was closing in on their market share, and they just BKed. :( Hope it wasn't because of me.

I'm about to schedule plane #14, staff increases have been more or less consistent. A 19 seater, 190 daily seats in 5 return trips is about 60-65 extra staff. With 6 or 7 daily trips, it's more like 70-80 staff. Profit is decent as leases just start to kick in, most recent full, non B-check week was 830k revenue, 390k profit, if all leases had kicked in that'd still be over 300k.

I'm running out of routes, flying short stuff with only 8 daily pax, or 400 NM+ stuff with my 250 NM range Metros. An almost full (17 pax), 5 hour, 400+ route is making me $400/hr still. Don't know what my break-even point is, I'll have a look tomorrow.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #30 on: August 10, 2013, 10:39:10 AM »
14 planes now, and plenty of profit. $1.05 million in revenue, 470k profit the previous week. 400k if paying all leases.

14 planes, and the expenses are:

leases: 30k/month metro, 35k 262

commonality: 11k/month metro, 39k 262

marketing (smallest possible) 8.5k/month/plane

insurance: 4.7k

staff: 84.3k/month/plane

maintenance: 5k Metro, 9k 262

Overall: 144k/month Metro, 181k 262.

Assume 18 hours/day, that's $263/hr for the Metro, $331 for the 262. Cut the wages bill in half, the way it'd be in the Phillipines, and the Metros only need $186/hr.

Shortest flight is Dijon, 2:20 round trip, 16.5 seats sold, $886/hr. Short, tiny, new route to Saarbrucken only sells 2.5 seats so far, still $96/hr profit, needs 8 seats to break even. Longer, emptier route is Perpignan, only 7 seats sold, 350 NM, $183/hr. It only needs 9.5 seats to be breaking even. Interesting that going out to 350 NM, 4.5 hours only needs 1.5 more seats to be worth it than 100 NM, 2.33 hours. My longest route is Brest, 5.5 hours, almost 500 NM, 15 seats, $340/hr.

So seems like no problems flying anything with even 10 pax out to ~350, anything with 15 pax out to 500.

Might be time for a few more planes, buy one or two to dodge tax, and fly some even thinner stuff. With 63 airports served already, I'm in the top 50 on that stat depsite having less total seats than a single DC-10.
« Last Edit: August 10, 2013, 10:43:24 AM by Sanabas »

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #31 on: August 14, 2013, 10:42:08 AM »
Coming up to the end of the first year. Income statement is attached. Take out the plane purchases, and I've got over 13 million in operating profit for the year, which is above 30% profit margin, even taking into account slot fees, waiting for RIs to climb, etc.

Actual profit for tax purposes is ~8.87 million, plus whatever profit I make for the last 11 days, as it's currently Thurs 23 Dec. Weekly profit is around 500-600k, so I'm looking to spend roughly 9.5 million to dodge most of my tax. I've got almost 8 million in cash on hand. Metro III still hasn't launched, unfortunately, so I'm stuck buying Metro IIs and their poor range. I already own 2, they cost roughly 2.5 mill each. So use one as loan security, and see what 4 of them with 100% prepayment will cost...

9.8 million, very close to my target number.  So, 4 brand new planes ordered, and I should be very close to 0 for the taxable income result, which is ideal.

I'm in a boring holding pattern for now, I don't want to go overboard getting Metro IIs, as I don't want them long term. I fly every good route I have under 400 NM, and quite a few dodgier/longer ones. So I'm just waiting to hit 18 months and open my next base, and for the longer range Metro III/E120s to launch, looking at wiki it seems like 1980 for the first Metro III delivery, and 1983 for the Embraer. A bit later than I realised, maybe I will get more Metro IIs on lease, at least enough to keep the production line open. I could be going much better by adding a medium turboprop group like the NAMC, but that'd be against the rules.

Before placing that new order, I was at 16 planes, 2 owned, CV of 10.8 million. I fly to 72 different destinations, which ranks me 52nd of over 400 airlines. And even with the curfew and the miniplanes, my fleet utilisation is over 15 hours/day, which puts me in the top 100. 1112 weekly flights also puts me in the top 100, that's somewhere over 80 sets of slots at HQ, but a full new set is still under 15k.  ;D

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #32 on: August 14, 2013, 04:54:03 PM »
End of year result for tax purposes is a loss of 41,391.

Don't think I've ever managed to get it quite so close to the ideal of 0 before.

3.2 million refund coming soon, and as the recent order wasn't enough to stop the production line from closing, I'll have to order some more planes.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #33 on: August 19, 2013, 01:26:20 PM »
I'm now 18 months old, so time to open a 2nd base. Things are rolling along nicely. 10 million in the bank, 6 owned planes worth 16 million, 3 million in loans gives a CV of 23 million. Have 27 metros overall, with 7 more on order. I've just dumped the 3 N262s, redone their routes and added a few more. I have 19 Metros actually scheduled, 99 daily departures from Basel to 79 destinations.

1264 staff, 67 staff per 19 seat plane, 88k/month/plane. Actually a little higher than it was before.

Cutting back to a single fleet certainly saves on commonality, it's 100,495 for planes, 94,313 for engines, that's only 7.2k/plane. Maintenance, insurance, marketing are all below 7.5k/month/plane, too.

Staff is the biggest expense, by far. It's higher than all the other overhead combined.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #34 on: August 19, 2013, 02:02:34 PM »
Slightly disappointed that Swiss airlines can open in Basel, but Basel-based airlines can't open in Switzerland.

New base is Strasbourg. 3.13 million to open it. 8 planes transferred, didn't realise that's now free.

New fleet commonality costs are 104,961 for planes, 94,313 for engines, i.e. practically identical for planes, and actually identical for engines.

New staff levels are 1433 people, 75/plane, 100k/month/plane. About a 14% jump, though hopefully it's not quite so bad once I schedule the 8 planes + 3 on order. We'll see.
« Last Edit: August 19, 2013, 04:43:37 PM by Sanabas »

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #35 on: August 19, 2013, 06:15:15 PM »
Just having the new base also increased marketing by about a third. I have the smallest possible campaign, which has my CI around 13-14. It was 33k/week, went up to 44k/week.

Route planning now remembers which of your bases you were last doing planning from.  Yay! ;D

Blew a bit of the budget on slots by flying into a couple of big airports. Including 300k for one set of peak morning slots at Orly.

Number of staff:

19 planes: 1433 staff
20 planes: +50
21: +46
22: +82
23: +71
24: +77
25: +90
26: +62
27: +83
28: +64
29: +80
30: +82
31: +58

31 planes: 2278 staff, 73.5/plane, 97.5k/month/plane.

The jump in numbers seems a bit erratic. Almost every plane had 5 daily routes, so maybe had something to do with adding airports I'm not flying to yet from Basel.

I bought slots for 62 daily flights from Strasbourg, for 12 planes. Total cost was almost exactly 4 million. It could have been less than half that if I avoided all size 5 airports. Another set in Strasbourg is still just ~10k, depending on time of day.

Will now sit back, let it run overnight. I'll have 3 more planes to schedule from my current order, I'll only order more if I need to keep the production line open. I'm already flying all decent (13+ pax) routes under 400 NM from Strasbourg, except to airports without slots. See what the cost per plane and the breakeven point is compared to earlier, wait 12 months until I can open base #3.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #36 on: August 23, 2013, 08:12:36 AM »
Coming to the end of the year again, and I just spent ~22 million on 15 more metros to keep the line open and minimise my tax. I'll end up with a small (~1 million) profit for the year. With 31 planes scheduled, 4 planes sitting on the tarmac, I'm making roughly 1 million/week on 2.5 million in revenue. Of my 1.5 million in costs, roughly half (703k/week) is staff.

Overall monthly cost breakdown for 31 planes, across 2 bases:

Staff: 3 million, 100k/plane.
Commonality: 240k, 8k/plane
Insurance: 160k, 5k/plane
Marketing: 260k, 8k/plane
Leases: 33k/plane
Maintenance: 6k/plane

Total overhead: 160k/plane/month.

Breakeven point for flights: $300/hr.

Shortest route: actually between my two bases. BSL-SXB, 57 NM, 2:20 round trip, $2160 profit (17 of 19 seats sold), $926/hour.

Longest route: SXB-BIQ, 488 NM, 5:35 round trip, $2179 profit (16 of 16 seats sold), $390/hour.

Least raw profit: BSL-VBS, 174 NM, 2:55 round trip, $730 profit (6 of 19 seats sold, actual demand looks like 8), $250/hr

Possibly worst route: BSL-ZAG, 368 NM, 4:45 round trip, $898 profit (7.5 of 17 seats, due to competition), $189/hr.

Overall, making money comfortably, even though I need ~$180/hr to pay the staff. I have comp on some routes, but not a lot. And on the bigger (60+) routes, the comp doesn't make much difference, as I still get my 15 pax. I can afford to subsidise the longer, narrower stuff for now. And even though those longer routes aren't too far above break-even at the moment with 16 pax, there's an extra $80/hr available when I have a Metro III on the route and can sell all 19 seats.

Doesn't seem to be much volume discount as the size of my fleet increases. Owning more of the fleet will make a difference, as it costs $60/hour to pay a plane's lease. Will be interesting to see how much the staff per plane changes when I open in a 3rd airport in 6 months.

My 2212 weekly flights actually puts me in the top 50 overall, and at more than 50% of 10th place. Though I'm outside the top 300 for ASK/RPK.

rvh1011

  • Former member
Re: small airline experiment, take 2
« Reply #37 on: August 26, 2013, 04:22:10 AM »
Nice reading about your experiment with small planes.

I do operate a fleet of small planes (N262's) as well, which actually goes better then expected.

But on the routes with a higher demand and competition I had to use 737's.

How will you deal with your competitors on your higher demand routes?

Rudy.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #38 on: August 26, 2013, 05:24:27 AM »
I'll just stick my 2-4 daily flights on the route, and ignore the competition.

Offline Sanabas

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Re: small airline experiment, take 2
« Reply #39 on: August 30, 2013, 02:14:07 AM »
Been ignoring airline while I take care of my attempt to make a giant fleet of russian planes in JA. Have 18 idle planes, so will open a 3rd base sometime in the next day or two and schedule those. Just logged in to see all the staff wanting raises, that'll be staff costs up over 20%, from 700k to over 900k. Since profits at the moment are ~1 million/week on 2.6 million in revenue, it shouldn't be an issue. It's the end of September 78, I've basically done nothing the whole year, and the operating profit is ~36 million. I've got 27 million in the bank, no loans (but 24 million available if I want it), and I own 14 Metros, valued at $40 million.

Going to have very solid base to expand from when the Metro III/E120 finally show.

 

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