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Author Topic: New accounting  (Read 1441 times)

Offline Sami

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New accounting
« on: February 20, 2014, 07:16:38 PM »
So how's the new accounting working out in this first full game featuring it. Any noticeable effects based on taxes and stuff, which you can't really "avoid" any more? Probably slows you down a bit?

Offline CUR$E - God of AirwaySim

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Re: New accounting
« Reply #1 on: February 20, 2014, 07:23:15 PM »
It made me to lease more aircraft instead of purchasing it. It also increased the amount of time I invest to think if I should purchase or lease an aircraft I want to use for 8-10 years.

Also the big orders that usually were placed at the end of the year disappeared - that's one thing I really like.

Offline Troxartas86

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Re: New accounting
« Reply #2 on: February 20, 2014, 07:48:12 PM »
In the past year I was still able to get a small tax return by using the old trick of placing a large order in December. I considered it a small victory for nostalgia. It's hardly worth doing now but you can still get a little back.

Online schro

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Re: New accounting
« Reply #3 on: February 20, 2014, 07:48:26 PM »
I don't like how the element of tax strategy has been removed from the game. There's really no way to avoid paying it no matter how you structure your transactions, and that doesn't feel as realistic as the old system where you could avoid taxes with proper planning (but at the same time, it was much further from the true accounting basis). The only fix to that which makes sense to me would be more accelerated depreciation and/or keeping a separate set of tax books from the financial reporting books (as is common in companies today) -i.e. your financial statements will state a 1B operating profit, but you tax books might say you only made 400m.

Other than higher taxes, it really doesn't feel any different than the prior system. I was thinking that the effect of slots being counted as assets rather than expenses would be far greater than it has been (though, my base selection might be skewing that ever so slightly).

Offline Troxartas86

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Re: New accounting
« Reply #4 on: February 20, 2014, 07:54:27 PM »
This was after placing an order for 8 Il-14s around December 28.

Quote
TAX CALCULATION OVERVIEW: 1955

The financial department has finished calculating the bookkeeping records from last year. The figures have been submitted to the tax officials.

Total result last year: 3 275 531 USD

Withheld taxes during the year: -1 336 299 USD
Tax level: 40%
----------
Taxes returned: 26 086 USD

Offline LemonButt

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Re: New accounting
« Reply #5 on: February 20, 2014, 07:58:53 PM »
So how's the new accounting working out in this first full game featuring it. Any noticeable effects based on taxes and stuff, which you can't really "avoid" any more? Probably slows you down a bit?


sami--I BK'd my airline in GW2 to start a CRJ airline in the late 90s.  It is a bit unrealistic as the goal is to run 100s of CRJs out of ORD, but there are plenty of regional jets flying there IRL (I've been on more than one).  There are a few concerns I have starting an airline mid-game that include accounting:

1. Taxes.  Weekly taxes are going to be a huge issue.  It can take me months to save up the cash to buy slots, especially since slots are not a tax deductible expense.  IMO taxes need to be collected much less frequently to give small airlines a chance.

2. Salaries.  They need to be allocated daily IMO.  Otherwise the tax calculation is useless 6 out of the 7 days/week because you can be midweek with a 40 million loss that turns into a profit by Sunday.  The cashflow can come out on Tuesday, but really the once/week allocation of salaries doesn't help one bit.  I find myself extrapolating all the time to determine estimated revenue/expenses etc to figure out if it will be a profitable week or not as if I'm losing money I want to raise prices, hedge fuel, etc.

3.  Slots.  This isn't really accounting related, but slot prices are a killer for players starting any time other than day 1 of a gameworld.  I am based out of ORD which has grown to 122 departures/hour.  I have "inverted" my scheduling efforts because of slot costs.  Instead of taking off at 5am out of ORD, I am taking off at 3am and then taking off at 5am from the destination airport instead.  Even in doing this and flying out of the hour blocks with the 4 most available slots, I'm paying $1.4 million for 4 flights/day despite the fact the hours I'm flying have 30-70 slots available.  There seems to be too much emphasis on the relative number of slots available versus absolute.  Thus trying to give established airlines competition is that much more difficult as slots will set you back significantly.  Thus I think there should be some sort of adjustment in slots for players who aren't starting in the first several game years during the landrush, whether it be a 'subsidy' from the airport to reduce slot costs in the first few years of operation or adjusting the slot pricing equations.  Otherwise, these big airlines will sit there with zero competition for perpetuity because it is financially impossible to start an airline at their base.  I have already BK'd my CRJ airline once and restarted because I couldn't afford to pay for slots on my second aircraft.  I'm smarter than the average player and am 'inverting' my scheduling as I mentioned, but a normal player should be able to start an airline at ORD right now in GW2 without using 12 layers of strategy as I am doing now.

Offline Sanabas

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Re: New accounting
« Reply #6 on: February 20, 2014, 09:11:24 PM »
1. Taxes.  Weekly taxes are going to be a huge issue.  It can take me months to save up the cash to buy slots, especially since slots are not a tax deductible expense.  IMO taxes need to be collected much less frequently to give small airlines a chance.

I think this is a bad idea for a couple of reasons. If it takes you months to save up the cash for slots, that means you'd need tax deductions to occur less frequently than once/month in order to have that money available to spend on slots.

Especially because slots no longer lessen your tax burden, that would lead to more problems than simply having cash accumulating slower. Say you make 125k/week, 500k/month, and you need 1.5 million to buy your next big batch of slots, and tax is 30%.

Under the current system, you'll pay 37.5k in tax each week, cash will steadily accumulate at 88.5k/week, it'll take 17 weeks, ~4 months to accumulate the cash.

If tax was assessed once/month, you'd pay 125k in tax, accumulate 375k in cash. So no difference, 4 months to get the cash.

If tax was assessed once every 3 months, you'd get your batch of slots one month earlier, spend all your available 1.5 million in cash to get your slots. And then, at zero cash, you'd have 375k deducted, you're well into the red with increased marketing & staff costs from the extra new routes. You *should* make it all back by the end of the 4th month, but you'll be more vulnerable, and could easily have unexpected problems like a lease being terminated because you don't have the cash to renew it.

It's basically the same thing as when you couldn't go into negative cash to buy slots. You said that would dramatically hurt small airlines, too. Which it didn't.

What both things do is slow the expansion of very aggressive airlines, the ones who use every available scrap of cash for expansion, before dropping into the red for a bit. It won't hurt your average small airline in any way, because they don't plan to spend more cash than they have on hand, their expansion speed will remain the same.

Quote
2. Salaries.  They need to be allocated daily IMO.  Otherwise the tax calculation is useless 6 out of the 7 days/week because you can be midweek with a 40 million loss that turns into a profit by Sunday.  The cashflow can come out on Tuesday, but really the once/week allocation of salaries doesn't help one bit.  I find myself extrapolating all the time to determine estimated revenue/expenses etc to figure out if it will be a profitable week or not as if I'm losing money I want to raise prices, hedge fuel, etc.

Don't see the point. Tax calculation is pretty useless anyway. If you're making a profit every week, you lose some in tax. If not, you don't. If you can't figure out whether your airline is making money because salaries come out once/week, then your airline probably has bigger problems. If you want to see if you're profitable, just look at the previous, completed weeks.

The actual reason why daily salaries might be a good idea is the same reason weekly tax assessments and no buying slots on credit is a good idea. Spending all available cash on planes/slots, and then dropping a couple of million into the red to pay staff for the week, is one more way for aggressive airlines to get a bit more advantage, expand a little quicker.

Offline LemonButt

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Re: New accounting
« Reply #7 on: February 20, 2014, 09:48:53 PM »
1.  If the 3yr carryforward loss was calculated into the weekly deductions, it wouldn't be an issue because you wouldn't have money taken away that would be guaranteed to be given back to you.  I am pretty much guaranteed to have a loss for year 1, then if I make money year 2 the taxman will be taking it and I will get it back year 3.  That puts me much more than just a month behind.  BTW the negative cash thing does (still) hurt small airlines--as I said I couldn't afford to schedule aircraft #2 because the slots for aircraft #1 were so high despite there being ~30 slots/hour avail.  Granted I'm at a large airport, but the situation wouldn't be much better if I were to base at CVG which used to have a ridiculous number of CRJs flying regional routes.  The biggest obstacle is running small aircraft (as you know) is getting over the overhead hump and if you can't scale up quick enough, you're doomed.  If you spend too much on leases, you end up with aircraft you can't schedule.  You have to be very meticulous which brings me to salaries...

2. Unless your online all the time, it isn't.  Since tax is deducted every week, it pays to know how much you will owe on Sunday and whether or not you can spend money.  If you have $10 million in cash and are losing $1 million/day you'll know next week you'll start with $3 million.  If you are earning $100k/day you know you'll have $700k more than you started with on Sunday.  I don't think you'll argue the point that the current week's income statement is useless 6 out of 7 days of the week and that is the problem.  It's not that I can't figure out if I'm making money--it's a matter of figuring out how much.  The airline I BK'd had $50+ million in weekly staff costs.  I was profitable almost every week, but when it said -$40 million on Wednesday I couldn't tell you with any sort of precision how much profit per day I was earning, how much I'd end the week with, or if I would even be profitable that week.  When you are facing slots costs of $20 million per aircraft, you don't want to unknowingly blow your cash cushion if you are in fact going to have an unprofitable week due to heavy maintenance or otherwise (and soon random events).  And the tax calculation IS useful when you have carryforward losses.  I scrapped a bunch of aircraft in a fleet replacement and had hundreds of millions in paper losses as a result.  Knowing how much I paid in taxes and what the tax basis was means I could plan around my tax return, which was $50+ million.

Offline Sanabas

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Re: New accounting
« Reply #8 on: February 20, 2014, 10:24:43 PM »
BTW the negative cash thing does (still) hurt small airlines--as I said I couldn't afford to schedule aircraft #2 because the slots for aircraft #1 were so high despite there being ~30 slots/hour avail.  Granted I'm at a large airport, but the situation wouldn't be much better if I were to base at CVG which used to have a ridiculous number of CRJs flying regional routes.  The biggest obstacle is running small aircraft (as you know) is getting over the overhead hump and if you can't scale up quick enough, you're doomed.  If you spend too much on leases, you end up with aircraft you can't schedule.  You have to be very meticulous which brings me to salaries...

That's not hurting you for being a small airline, that's hurting you for being an aggressive airline, for running small planes (i.e. lower revenue, more slots to buy) in an expensive airport. You are taking challenges unique to a busy size 5 airport, and claiming they matter to small airlines elsewhere. They don't. I can think of 7 different 'small' airlines I've started in the last couple of years, and the only thing needing to have cash for slots has done is slow down the aggressive expansion of one of those airlines. Be less aggressive, and you don't need to be so meticulous with your budgeting. Be less aggressive, and you can still be profitable with just a couple of planes, and then keep expanding once you have more cash. It's slow and it's boring and it takes forever to save up for the next set of slots, sure. But that's a problem caused by needing to buy expensive slots, not a problem caused by trying to run a small airline.

Quote
2. I don't think you'll argue the point that the current week's income statement is useless 6 out of 7 days of the week and that is the problem.  It's not that I can't figure out if I'm making money--it's a matter of figuring out how much.

I won't argue the point, but it's because I think the current week's statement is near-useless always. If I have money to spend, I'll spend it, and simply assume future profits will make up for future staff or tax or whatever. If I am cutting things really, really fine, the best place to get an estimate of what will happen at midnight is actually the route management page, the overall revenue minus fuel+other expenses for each day. But the only reason to cut things so fine is because I'm being aggressive, because I'm trying to get every last bit of expansion I can. I briefly had an airline in LCY recently, ended up with 11 planes from my initial cash, and I think got down under $1000 in the bank before staff got paid and I went into the red for a month. I was looking on the Monday afternoon to see how much cash I'd get that night, in order to buy the remaining slots/plane before staff got paid. Income statement won't help much with that, regardless of how staff payments are treated.

If I want to know how much I'll make for the week, it's the previous weeks that are the best guideline. Not the extremely small sample of the first 3 days of this week. If I do want to try and extrapolate from just the first few days of this week, it's pretty easy to remove the non-daily expenses of staff, of loans, of slots, of leased planes.

If you have 50 million in weekly staff costs, 20 million for a new plane's slots, I don't think you count as a small airline. And if you're operating on that scale but still so close to unprofitable, or trying to cut things really fine wrt having enough cash for a soon to be delivered plane or similar, then the problem is aggression, not airline size. I had moments with my last big airline where I wasn't quite sure if I'd be able to pay for a glut of purchased planes being delivered. Profit was fine, I was just really, really close to running out of ready cash, going too deep into the red and crippling my airline. (Or more accurately, being forced to cancel a dozen future purchases to get a refund and some extra cash on hand.) But again, the problem was over-aggression, over-expansion, too big a gamble. If I was a little more conservative, if I wasn't trying to make a big airline quickly, it would have been no problem at all. And looking at my airline's health would have involved looking at weekly, monthly, quarterly numbers. Not trying to take the first 3 days of the week and determine exactly how much cash I'd have available on the 7th.

Offline LemonButt

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Re: New accounting
« Reply #9 on: February 21, 2014, 12:23:55 AM »
If you aren't aggressive in the beginning, you'll never overcome the overhead hump and end up bleeding out when C-check season rolls around, especially with lower profit margin regional jets (that sit idle for 10 days in C-check that you're still paying the staff for).  I'm good enough at AWS that if I'm not pushing the limits when it comes to expansion etc. then it is pointless to play.  As I've outlined in other threads, any clown can be successful with a click and deploy 737 airline--I have no interest.  If I weren't flying CRJs, I may be able to get 2 B737 and buy slots for them out of ORD.  Either way, we should be encouraging competition and finding ways to keep the game interesting versus preserving monopolies or oligopolies late in the game.  Flying 2 B737 out of ORD would be less slow and painful than building a regional airline, but if an airline can't start fresh mid-game at an airport with an abundance of slots/demand and try to stir the pot, why even play the game?  The only thing more boring than slowly and conservatively building an small airline (small jets are much more difficult than small props as you already know) is sitting around with a big airline and nothing to do but fleet replacements.  Thus, knowing how much money you'll have at the end of the week is crucial when your running razor thin profit margins.  Yes, I may be an outlier, but the only reason I play AWS is because of outlier challenges.  Starting a regional airline out of a level 5 airport should be difficult, but not impossible because of arbitrary measures.

Per the "what is competition" thread, any player should be able to have the opportunity to go into any airport anytime and give established airlines a run for their money.  We aren't at that point yet, which is why there are ~400 open player slots in GW2 whereas a 700 player MT scenario would be full in 1998.  At this point, if my airline fails it will be because I can't overcome the intiial overhead hump, and if I can't overcome that it will because I wasn't aggressive enough/able to expand fast enough (mostly due to slots being prohibitively expensive) versus expanding too fast, because if I don't expand fast enough the overhead will doom me.

In the back of my mind, I also think about the educational uses for AWS for which sami has been increasing the marketing.  When I was in grad school (for a non-financial major BTW) we did a business simulation that was supposed to be the most comprehensive on the market, but we had no less than 20 extra spreadsheets to run financials, do forecasting, etc.  My professors had consulted with the simulation makers and they stated we were 6 standard deviations beyond what everyone else was doing at other universities across the country.  The whole point is to be able to understand and explain what is happening in your business and in hindsight, the most comprehensive simulation on the market is pretty pathetic because the management tools simply weren't there.  I have a financial analysis feature request that IMO would step up the AWS game substantially in helping players understand where their money is going and what is happening with their airline.  Here is the financial analysis spreadsheet I built for AWS: https://docs.google.com/spreadsheet/ccc?key=0Amcds0fmuZpedGRpWGhLeEJXYWhGZzBsNWJTc1l2a0E&usp=sharing#gid=0

So the bottom line is that the average player might only care about the bottom line, but for educational use and for nerds like me, I want to make decisions--whether it be pricing or route planning--based on hard data versus speculation and hope, which is what many features of AWS are reduced to because the data is simply not available, such as how much money will I have in my bank account at the end of the week?  This is oversimplifying it, but you get the point.  It's about having better data available to make better decisions to better run an airline.

Offline tcrlaf

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Re: New accounting
« Reply #10 on: February 21, 2014, 07:09:34 PM »
" If I weren't flying CRJs, I may be able to get 2 B737 and buy slots for them out of ORD."

Just like real life, eh?

There is a REASON you don't see any real-life independent airline flying just 50-seat CRJ's in the Real World (In the USA at least), despite dozens available and being literally given away. The economies of scale simply no longer work.

Salaries, fuel price volatility, the extreme costs of regulation now, etc. (not too mention the new mandated duty rules.), simply make flying them a marginal process, at best. To someone like Delta,etc., they can justify the slim margins in the greater scheme for reasons of competition, slot-holding, or contract obligations, but not much else.

In the future, I think we'll see them relegated to the third world, where staffing and fuel costs are lower, and specific mission use (For instance, CHQ makes BIG money doing college sports charters).

 

Offline Troxartas86

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Re: New accounting
« Reply #11 on: February 21, 2014, 08:30:53 PM »
The real world regional jets also benefit heavily from government subsidies to keep smaller cities connected to the major hubs and from contracts with major airlines to provide short connections and feeder service. I've flown on ERJs and tiny turboprops like the E120 in the US and they were always smaller outfits operating under one of the big names. I remember one of these flights being announced by the flight attendant as "Continental Connection operated by Chautauqua Airlines a division of Republic Airways." Hard to say where exactly my money was going.

In AWS you are financing the whole operation yourself without those subsidies and without those contracts, often in direct cut-throat competition with the big fish rather than working in tandem with them. Thus it's impossible to reproduce the real world business model of an American regional carrier which makes things extremely difficult.

Offline LemonButt

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Re: New accounting
« Reply #12 on: February 21, 2014, 08:42:51 PM »
Just like real life, eh?

There is a REASON you don't see any real-life independent airline flying just 50-seat CRJ's in the Real World (In the USA at least), despite dozens available and being literally given away.

The year is 1998 in GW2 right now.  IRL Comair had 70+ CRJs flying out of CVG with a whole 80 gate concourse dedicated to them.  Despite all this, my fuel cost for 3 CRJs flying 16.7 hours/day was only $120k which only made up half of my operating loss of $240k last game week.  It's not really a matter of CRJs failing, but any 50-seater not being viable.  The CRJ700 isn't out yet, but will be an option and the CRJ1000 there should be no excuse not to be profitable.  I ran a successful CRJ airline in a previous gameworld, but that was starting on day 1 (instead of entering an airport with established competition) and didn't use the new slot pricing system: http://www.airwaysim.com/forum/index.php/topic,43993.msg240330.html#msg240330  Ironically, I was flying nothing but CRJs and was able to bankrupt a guy flying nothing but Dash-8s.

AWS doesn't distribute demand in the same manner as IRL.  I believe that once RI increases I can fly with 90%+ load factors based on a demand algorithm I developed to determine how many flights to schedule and where to.  If CRJs can't be profitable at 90%+ with reasonable fuel prices (assume no blatant mistakes were made), I think it is safe to say there are some game mechanics issues as it pertains to small airlines/aircraft/jets and/or late entrants starting out in an airport with established competitors.

Offline tcrlaf

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Re: New accounting
« Reply #13 on: February 21, 2014, 09:40:08 PM »
The real world regional jets also benefit heavily from government subsidies to keep smaller cities connected to the major hubs and from contracts with major airlines to provide short connections and feeder service. I've flown on ERJs and tiny turboprops like the E120 in the US and they were always smaller outfits operating under one of the big names. I remember one of these flights being announced by the flight attendant as "Continental Connection operated by Chautauqua Airlines a division of Republic Airways." Hard to say where exactly my money was going.

In AWS you are financing the whole operation yourself without those subsidies and without those contracts, often in direct cut-throat competition with the big fish rather than working in tandem with them. Thus it's impossible to reproduce the real world business model of an American regional carrier which makes things extremely difficult.

In the US, the Gov only subsidizes service (it's called EAS) to a few dozen lower 48 cities, and only a couple get RJ service (they step up and local subsidize, like Paducah and Springfield, Il did.) Only one or two regionals do "risk" flying with RJ's now (meaning they pay all expenses for the route, and keep a split of the revenue. (Mesa/Go and Transtates, and even that is just a small percentage of the total flying. Skywest does some with the EMB-120's, but they are phasing that out now.)

As a former employee (and current contractor) of one of those companies you mentioned above, I'll add that you were most likely to be on a "Fee-For-Service" flight, with CHQ/RP paid to fly on an hourly basis, dry. (Meaning the mainline carrier pays for fuel. Also it means no-fly, no-pay, so you always try to fly the complete schedule, no matter how late it runs.). In some cases, the mainline also directly owns the aircraft, and places it with the regional, on a "Fee-Per-Hour" basis.

The mainlines use this to play one regional off against the other, always driving for lowest-bidder service. I sat in a meeting with Brian Bedford and Micheal Boyd back in the early 90's, where they predicted exactly the situation that exists today.

I agree, it is impossible to recreate that situation in a sim like this. Also, this is a situation unique (mostly) to North America, as well.

Offline tcrlaf

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Re: New accounting
« Reply #14 on: February 21, 2014, 09:54:17 PM »
The year is 1998 in GW2 right now.  IRL Comair had 70+ CRJs flying out of CVG with a whole 80 gate concourse dedicated to them.  Despite all this, my fuel cost for 3 CRJs flying 16.7 hours/day was only $120k which only made up half of my operating loss of $240k last game week.  It's not really a matter of CRJs failing, but any 50-seater not being viable.  The CRJ700 isn't out yet, but will be an option and the CRJ1000 there should be no excuse not to be profitable.  I ran a successful CRJ airline in a previous gameworld, but that was starting on day 1 (instead of entering an airport with established competition) and didn't use the new slot pricing system: http://www.airwaysim.com/forum/index.php/topic,43993.msg240330.html#msg240330  Ironically, I was flying nothing but CRJs and was able to bankrupt a guy flying nothing but Dash-8s.

AWS doesn't distribute demand in the same manner as IRL.  I believe that once RI increases I can fly with 90%+ load factors based on a demand algorithm I developed to determine how many flights to schedule and where to.  If CRJs can't be profitable at 90%+ with reasonable fuel prices (assume no blatant mistakes were made), I think it is safe to say there are some game mechanics issues as it pertains to small airlines/aircraft/jets and/or late entrants starting out in an airport with established competitors.

Funny you mention Comair...

They did indeed run a ton of RJ's, but Delta subsidized almost all of them, and owned many of them. Comairs direct prurchase by Delta was the beginning of the end. They spent most of the time from circa 2000-on stumbling from crisis to crisis. The strike was encouraged and subsidized by the Delta pilot's Union, pushing SCOPE, of course.

Comair was also "Fee-For-Service" on most routes, getting hit by the double-hammer of high maintenance costs on an ever-aging fleet, and employee unions that priced themselves right in to the unemployment line.

Even at the end, the Union groups wouldn't acknowledge the truth, or even try to save the company. But, I did get some great equipment, dirt cheap, at the fire sale!

(P.S.-The remote Comair Terminal at CVG, though a major simplification of Ops for Comair, was always a major point of contention with Delta. It took DL pax out of thier own direct control, and they did not like that at all. 

BD

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Re: New accounting
« Reply #15 on: February 22, 2014, 12:44:56 AM »
On salaries:  The "predictability" issue is not so much of a concern.  But, smoothing the cash expenditure out over the course of the game week helps relieve some of the burden on the player to time their RL around game cycles - something I think AWS needs to work towards.

Besides, IRL, companies of reasonable size have some form of a line of credit that effectively does this for them (smooths out the daily cash flows).

On taxes:  Taxes are relatively smaller hit, so not as worried about the cash flow smoothing issue.  Once the airline is sizable and if taxes overtake salaries, does it matter?

Offline LemonButt

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Re: New accounting
« Reply #16 on: February 22, 2014, 02:44:53 PM »
Yes, Comair was fee for service, but that doesn't change the fact you shouldn't be able to fly them profitably in AWS (it has been done before).  My points were that the system we have setup may inevitably take CRJs frin being difficult to fly to impossible.  I grew up in Cincinnati and had family that worked for American/Delta/Comair and have flown for free on standby most my life.  Delta had Comair which was technically profitable because of the connecting traffic and everything else it did for Delta, however they weren't flying with high load factors.  In AWS, the demand model allows you to consistently fly with consistently high load factors.  I have been on standby on Comair where there were only 2 passengers on a 70 seater.  Flying CRJs out of ORD may not be entirely realistic, but it is more realistic than people think.  I flew on a CRJ from AVL to ORD to FAR about 18 months ago.  Growing up, I flew on American Eagle Jetscreams from CVG to ORD which is nearly half the size of a CRJ200 and has a higher fuel burn per pax (8% more based on my spreadsheet).

Truthfully, if the AWS slot prices and tax accounting were implemented IRL if wouldn't make a difference because airlines IRL are able to use future revenue to fund today's operation.  If you buy a ticket today for a flight in a month, that ticket is money in the bank and a liability on the books.  Those future tickets put jet fuel in the plane today, at least when your starting out.  This goes into the credit line that BD mentioned.  Businesses will have a credit line where they can borrow against future revenues/profits.  If I am flying an airline with an 80% LF then the bank will feel pretty confident I'm going to be flying with 80% LF in a month with a high level of confidence and thus will lend me money against future revenues.  Currently, I can't use the $3 million in future revenues to lease another aircraft and buy slots to turn that $3 million into $4 million etc.

Despite all this, the point still stands on slot pricing that even if I were to start an airline with B737 out of ORD that the slot prices would still be killing me despite the fact there are 50+ slots available in many hour blocks.  The accounting surrounding it only makes the problem worse.  If the goal is to increase competition versus preserving monopolies/oligopolies then the mechanics need to be tweaked so players who don't start on day 1 and participate in the landrush have a realistic chance of breaking into mature markets, whether that means adjusting the slot pricing algorithm, providing late starters a slot discount or subsidy, or simply making the first x number of slots free.

Offline tcrlaf

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Re: New accounting
« Reply #17 on: February 22, 2014, 06:07:16 PM »
"the mechanics need to be tweaked so players who don't start on day 1 and participate in the landrush have a realistic chance of breaking into mature markets,"

That isn't how it works in real life. Don't believe it? Borrow a hundred million or so, pop in to Atlanta or ORD, and see how long it takes you to BK. Post-BK Delta was stomping on AirTran, which is why they went looking for a buyer. In the end, the only thing Southwest will keep is the access to International/ETOPS that owning Airtran has given them, and some LGA/DCA slots.

This is a sim, not real life. In real life, the major airports are controlled by the "legacies". Fortress hubs are a reality, whether anyone likes it or not, and the game does reflect that.

Try to start a new airline at LHR, and see where that gets you, real-life politics aside.

Offline LemonButt

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Re: New accounting
« Reply #18 on: February 22, 2014, 07:04:02 PM »
"the mechanics need to be tweaked so players who don't start on day 1 and participate in the landrush have a realistic chance of breaking into mature markets,"

That isn't how it works in real life. Don't believe it? Borrow a hundred million or so, pop in to Atlanta or ORD, and see how long it takes you to BK. Post-BK Delta was stomping on AirTran, which is why they went looking for a buyer. In the end, the only thing Southwest will keep is the access to International/ETOPS that owning Airtran has given them, and some LGA/DCA slots.

This is a sim, not real life. In real life, the major airports are controlled by the "legacies". Fortress hubs are a reality, whether anyone likes it or not, and the game does reflect that.

Try to start a new airline at LHR, and see where that gets you, real-life politics aside.

IRL pax don't restrict their demand to ORD.  Allegiant has made a killing flying into secondary airports like Phoenix Gateway, Orlando Sanford, St Pete, etc.  Until city-based demand shows up, this is impossible.  The problem with your above example is that you aren't thinking in terms of disruptive innovation.  If there are 1000 B737 flying out of ATL, of course starting an airline flying B737 is going to be nearly impossible because you aren't differentiating or innovating.  jetBlue setup hubs in JFK and BOS and was able to penetrate a very mature market (with $128 million actually which isn't much more than your $100 million figure) using strategy.  Allegiant has done what they've done using strategy.  Same goes with Virgin and even Southwest.  Right now AWS isn't to the point where you can differentiate yourself in the same manner as real life, so some adjustments have to be made.

If AWS is "supposed to" have fortress hubs, what is the point of having ultralong game worlds?  To force fortress hub airlines to do extra fleet replacements?  This is the reason large airlines BK--they are bored to tears.

Offline LemonButt

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Re: New accounting
« Reply #19 on: February 27, 2014, 10:28:12 PM »
Another reason to do staff salaries daily versus just on Tuesday is credit lines.  I assume the bank is looking at the current week's financials which is why my credit line goes from $1 million to completely unavailable depending on the day of the week (I'm only doing $1 million in revenue/week right now).

 

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