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Author Topic: Mega Loan Strategy/Owning All Those Suckers  (Read 456 times)

Offline Jackson

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  • Posts: 279
Mega Loan Strategy/Owning All Those Suckers
« on: December 18, 2013, 06:30:39 PM »
Hey guys. Me again. Got a very interesting topic for consideration.

My previous airlines over the years have all been failures due to aggressive expansion vs fuel/competition.  All but one. And then in that case, I had no time for AWS so that even crashed and burned.

This is the first airline with great potential that has already been able to aquire 12 owned ATRs with a combined value of $180,000,000. I have 8 A300s and 2 A310s on lease with leases expiring from 1993 all the way to 2001.

This is my dilemma. My gut instincts are telling me to take out this mega loan against all my owned ATRs, starting by purchasing the A300s with the nearest lease termination dates. Then take out additional loans againsts them to buy the other $80-120M A300/A310s.

Or. Wait?

I have already made a bold and risky (natural risk taker) decision by ordering 21 brand new Saabs. I guess I felt a bit invincible since at the time of placing orders for both regional a/c, I was earning $3.4M pw. I know what I want to do with them but in order to recieve them all and still have paper in the bank, I would need to increase my profit quite considerably or take the loan out for the Saabs.  At this moment in time, I am at war with other airlines in the region for route domination. Whilst my ATRs are successfully bullying the other airlines (no offence to the CEOs, )the A300s I initially scheduled short 600-1000nm flights for are serverly underachieving.

So. Do I rearrange my A300 routes by removing them from all poor income routes (already done so, even with some European route pairs) even if it means 1 flight per day to routes as small as 1200-2440NM and wait for my bank account to increase (battles have taken it's toll. Not currently making $3M anymore. More like $1M-$2.7M on a good day) slowly whilst hoping my 70+CI improves LF across both fleets or...do I try to force a higher profit by taking out this mega loan to buy my existing fleet?

$800k repayment per week for $180,000,000 over 6 years.

Additional loans will ofcourse bring that weekly cost up.

My A300 leases vary from $170k to $190k each per week.

If I do take this loan out, could I leave the leased A300s and go for some B733/4s. These seem to be the perfect a/c for my 1000-2700NM routes.

Not in trouble. ..yet. Just want to prevent it this time.

Offline LemonButt

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Re: Mega Loan Strategy/Owning All Those Suckers
« Reply #1 on: December 18, 2013, 08:47:37 PM »
If you are expanding, just lease aircraft--no reason to buy them outright as it will just slow you down.  Save your cash for slots.  If you are gunning for A300s then don't even think about buying them--you will never be able to sell them.  Also as a best practice, never take out a loan with more than one aircraft as an asset.  If you use all 12 ATRs as a security and half the loan is paid back, all 12 are still locked up as a security that can only be released with payment in full.  Instead, take out 12 loans and you can pay off one loan early and use the freed up asset to re-leverage if you need to.

I'm not sure why you would order the Saab 2000 when you already have ATR 72...you should be flying one or the other, but not both.  IMO you should sell off the ATR 72 once the Saab 2000 show up because it is costing you money have two regional props that are the same size, especially when the ATR fleet is so small.  You should be able to change the ATR routes to Saab 2000 without much hassle.

As far as the 737 goes, your probably better off getting MD-80s as they are bigger and easier to get a hold of right now.  You could then upgrade to MD-90s pretty seemlessly in the next 10 years which are more fuel efficient and easier to get a hold of than the 737.

Offline Jackson

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  • Posts: 279
Re: Mega Loan Strategy/Owning All Those Suckers
« Reply #2 on: December 19, 2013, 01:35:29 AM »
Yeah replacing the ATRs with the Saabs was my initial intention but remains only an option for now. The Saab 2000 is an excellent a/c and Im sure there will be CEOs interested in brand new available airframes in the used market instead of 2-3 year old ATRs. Will make that decision later.

I was looking at the MDs but I need range up to 3000nm also and wanted to keep all medium a/c as one fleet type so I crossed.that option out but seeing as tje other similar a/c types have emmense backlogs, I'll prob lease some.
And on the subject of loans, I will take what you said onboard and not bother. I didn't think of the individual asset backed loans before. Thanks. Makes absolute sense. Cheers.

 

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