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Author Topic: [-] Airplanes with expired heavy maintenance are overvalued  (Read 673 times)

Offline LotusAirways

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[-] Airplanes with expired heavy maintenance are overvalued
« on: January 22, 2014, 08:11:52 AM »
Problem:
The present used aircraft pricing system doesn't seem to account for C and D checks timing.
  
Example:
See today's DOFM used market (10-Feb-1995), pick B727-200Adv, 19 birds are listed, organize it by age, and compare two similar aged aircraft, say 15 years old, one with almost expired heavy check, the other not:

(a) 15y old, C check expires in less than one month, D check expires in ten months, "fair price to be between 16.1m - 18.9m"
(b) 15y old, C check expires in ten months, D check expires in over 6 years, and... "fair price to be between 16.9m - 19.8m"

Similar aicraft,
Similar "fair price",
But the D check alone costs more than 5m... So the "fair price" should be around 4m lower on (a).

Comment:
As long as the book value doesn't incorporate the timing of C and D checks, players will (1) continue to buy planes, (2) used them for 14 to 15 years, and (3) with a few months of D check deadline, dump them in the used market; the end result is (4) no other player will buy or lease them because the planes are wrongly priced, and (5) the player will keep them in the market/storage until they are 25y old or until the end of the game -- all along their own airline value is inflated with an asset that is clearly overpriced.

Suggestion:
Planes with D check expired should have an extra charge of insurance. After all, they are most at risk of catching fire or damaging something with an oil leak  :P

LA

PS: my point being, in real life planes on sale are correctly priced to attract buyers. In airwaysim, they are priced in view of the airline value because of the accounting system set-up (book value = purchased price + depreciation). Therefore, players that have airplanes on sale/storage with expired heavy maintenance checks should be penalized, at present the ones penalized are players that just enter the game and want to have access to normal priced aircrafts.  
« Last Edit: January 24, 2014, 06:39:03 PM by sami »

ucfknightryan

  • Former member
Re: Airplanes with expired heavy maintenance are overvalued
« Reply #1 on: January 22, 2014, 01:39:31 PM »
I thought the system was in the process of being changed so that you couldn't have an aircraft with expired heavy checks on the market?

Offline LotusAirways

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Re: Airplanes with expired heavy maintenance are overvalued
« Reply #2 on: January 22, 2014, 02:11:31 PM »
Hi,
Correct, but you are missing the point entirely.

Let me clarify:
At present the book value of an aiplane is purchased value + depreciation.
In other words, D check in 7 years or D check in 7 days is the same. Just try by yourself in any game world, any aircraft type. Pick two planes with similar age, similar price, but very different D check dates.

Example:
Say you bought an airplane seven and half years ago and I also bought one at the same time. Say we both bought the planes at exactly the same price, same specifications. Today, both planes have the same book value. Now say I do my airplane D check, but you don't. What happens? Both airplane book values have not changed, they remain the same. This is not realistic.

But why is this negative for the game?
At present a player has no incentive in doing D checks on planes for sale/lease. After being used, the aircraft goes into the lease market 1 year or so before the end of the next D check, stays there for one year and nobody buys/lease it because the price is unreal (remember the system doesn't account for D check in one year); after this fake "I want to sell" period the player stores the plane with expired D checks, and, it still counts in the company value at purchased value + depreciation.

Who the F. cares?
Start-up players care as they need access to airplanes. Players that hope to see Airwaysim replicate better and better real life also care.

PS: made some minor corrections on my first post after Ryan's comments.
« Last Edit: January 22, 2014, 02:27:44 PM by LotusAirways »

ucfknightryan

  • Former member
Re: Airplanes with expired heavy maintenance are overvalued
« Reply #3 on: January 22, 2014, 02:37:30 PM »
Actually I wasn't missing your point, I was arguing that your point is probably largely irrelevant in light of changes recently made to the game.

Quote
At present a player has no incentive in doing D checks on planes for sale/lease. After being used, the aircraft goes into the lease market 1 year or so before the end of the next D check, stays there for one year and nobody buys/lease it because the price is unreal (remember the system doesn't account for D check in one year); after this fake "I want to sell" period the player stores the plane with expired D checks, and, it still counts in the company value at purchased value + depreciation.

Why would anyone put an aircraft they don't want to actually sell on the market for a year before putting it into storage?  And why would anyone put an aircraft into storage that they own and never intend to use again as opposed to just scrapping the damn thing or pricing it aggressively to sell it?

Quote
As long as the book value doesn't incorporate the timing of C and D checks, players will (1) continue to buy planes, (2) used them for 14 to 15 years, and (3) with a few months of D check deadline, dump them in the used market; the end result is (4) no other player will buy or lease them because the planes are wrongly priced, and (5) the player will keep them in the market until they are 35y old or until the end of the game -- all along their own airline value is inflated with an asset that is clearly overpriced.

Why, esp under the new accounting system, would anyone do this as opposed to either (A) actually trying to sell the aircraft for real by pricing it reasonably and/or bringing checks current or (B) just scrapping the damn thing, or (C) flying it themselves until the end of the 25 year depreciation period? 

Esp since you now can't keep aircraft with expired checks on the market anyway and are charged storage fees so the scenario you present here no longer makes any sense as they would be spending money for no gain.

Offline LotusAirways

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Re: Airplanes with expired heavy maintenance are overvalued
« Reply #4 on: January 22, 2014, 02:44:27 PM »
- Putting a plane on the used market with one year to go until D checks gives them a possibility that an AI broker will buy the plane. And sometimes they do. Bingo!

- Storage costs almost nothing. The company value stays artificially inflated and that in turn gives a better credit rating, higher borrowing power.   

Offline ezzeqiel

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Re: Airplanes with expired heavy maintenance are overvalued
« Reply #5 on: January 22, 2014, 02:59:13 PM »
- Storage costs almost nothing. The company value stays artificially inflated and that in turn gives a better credit rating, higher borrowing power.    

It shouldn't count towards company value... At least that's what sami said... if it does I'm thinking it's unintended and should be reported as a bug (because the new accounting system may have changed that)...

Quote
* Planes in long-term storage have no staff costs, no commonality costs, no insurance costs, no maintenance costs (& no automatic maintenance checks) etc. Storage fee is the only cost. Planes stored do NOT count towards your company value.

Offline LotusAirways

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Re: Airplanes with expired heavy maintenance are overvalued
« Reply #6 on: January 22, 2014, 03:03:55 PM »
Thanks Ezzeqiel. "Planes stored do NOT count towards your company value" is new to me... I understand better your surprise now Ryan.

So why are some players storing old models by the dozen? No time to scrap them? That is strange as the time/energy for scrapping a plane or to place it on storage is the same.
Can planes on storage be used for collateral purposes?

« Last Edit: January 22, 2014, 03:12:52 PM by LotusAirways »

ucfknightryan

  • Former member
Re: Airplanes with expired heavy maintenance are overvalued
« Reply #7 on: January 22, 2014, 03:11:40 PM »
Thanks Ezzeqiel. "Planes stored do NOT count towards your company value" is new to me...
So why are some players storing old models by the dozen? No time to scrap them? That is strange as the time/energy for scrapping a plane or to place it on storage is the same.

I understand better your suprise now Ryan.

 :laugh:  I'd actually forgotten that bit, and it makes me even more surprised that people would be doing that.

Offline LotusAirways

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Re: Airplanes with expired heavy maintenance are overvalued
« Reply #8 on: January 22, 2014, 03:13:24 PM »
Can planes on storage be used for collateral purposes?
Selling an airplane below book value is considered a loss and will appear under "Loss on sold aircraft", reducing the company value. Not sure what happens when a plane is put in storage... same?
« Last Edit: January 22, 2014, 03:19:53 PM by LotusAirways »

ucfknightryan

  • Former member
Re: Airplanes with expired heavy maintenance are overvalued
« Reply #9 on: January 22, 2014, 03:30:14 PM »
Can planes on storage be used for collateral purposes?
Selling an airplane below book value is considered a loss and will appear under "Loss on sold aircraft", reducing the company value. Not sure what happens when a plane is put in storage... same?

If they don't count as having value while in storage, then yes I'd assume they would show up as a loss on the balance sheet. 

Offline schro

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Re: Airplanes with expired heavy maintenance are overvalued
« Reply #10 on: January 22, 2014, 03:45:17 PM »
Ok guys, there's a lot of beancounting misunderstandings in this thread. I would suggest reading the manual as well as the v1.3 changelog before continuing to rattle on.

1. New game rules with regards to used market require that maintenance is valid in order to list planes (and keep them on the market).
2. Planes in storage, on the market and in the operating fleet all count towards company value (and are depreciated). This was temporarily suspended during the transition, but now it is back to being included in CV.
3. D checks performed on aircraft are NOT expensed at the time. They are added to the book value of the aircraft.
4. CV will no longer be inflated by parked airplanes as they will be depreciated over the course of their useful lives. The book value (that is used to calculate CV) is now disconnected from the market value of a plane.
5. You can not borrow against a stored plane

The real issue is that a lot of the changes to the used market has taken away the incentive for larger airlines to sell/lease planes because it is simply a PITA that does not pay much in the way of dividends. I have observed that used market pricing is FAR more aggressive (aka lower) than it used to be prior to these updates, so as the transition phase passes, I'd imagine some players will reenter the selling/leasing business. The end result of the 2nd D check is that more planes will get scrapped at the 16 year mark instead of D checked and placed on the market.

Offline ezzeqiel

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Re: Airplanes with expired heavy maintenance are overvalued
« Reply #11 on: January 22, 2014, 03:50:57 PM »
Ok... found it...

Too many changes :P

Quote
- Also, aircraft in long-term storage and aircraft due to delivery soon (available for scheduling) are now counted towards your overall company value again (according to their book value).

Offline LotusAirways

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Re: Airplanes with expired heavy maintenance are overvalued
« Reply #12 on: January 22, 2014, 04:13:56 PM »
Thanks Schro for clarifying this.
Reading http://www.airwaysim.com/game/Manual/Office/Accounting/ before posting should be the right thing to do. Mea culpa, 3 times.

Sami, disregard this "request". It is a topic for the general forum.
Thank you all.

LA

Online Sami

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Re: Airplanes with expired heavy maintenance are overvalued
« Reply #13 on: January 24, 2014, 06:38:48 PM »
Not applicable in the near future

 

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