AirwaySim
Online Airline Management Simulation
Login
Username
Password
 
or login using:
 
My Account
Username:
E-mail:
Edit account
» Achievements
» Logout
Game Credits
Credit balance: 0 Cr
Buy credits
» Credit history
» Credits FAQ

Author Topic: please explain to me like I am a 6 yea old  (Read 942 times)

Offline saetta

  • Members
  • Posts: 536
please explain to me like I am a 6 yea old
« on: March 23, 2016, 03:59:58 AM »
Hi fellow players...I have been around for a while and have run, and are running some relatively successful airlines.
What always seems to elude me, is company image and credit rating. My airlines are hardly ever in debt, own almost all the equipment, profit margins are always higher the value ranking, and advertising $ is consistently between 10 and 15%. Yet my credit rating is only AA, and my company image is stuck in the 50's . Also airline score is almost aways lower then my value ranking. It seems to me if you have zero debt, you advertise, and make consistent double digit profits these measurements should reflect this !! I have heard confusing and vague answers before ...none of them I quite understood. All I know is that there is a bunch of airlines that are in a lot worse shape then mine, with better credit rating, company image etc.
Please explain to me simply ( if possible)  what I am doing wrong ...

AVIACO 

Offline JumboShrimp

  • Members
  • Posts: 5992

The 2 people who like this post:
Re: please explain to me like I am a 6 yea old
« Reply #1 on: March 23, 2016, 05:05:08 AM »
Company image is very simply a function of general marketing spending.

The credit rating is mostly related to company performance.  Other smaller variables that go into credit rating (to a smaller extent) are age of the company and company image.

Meaning, if your company is young, you will not have AAA rating.  You will have to wait some time.
Also, 2 companies that performing equally well (financially) and are same age, company that has a CI of 100 will tend to jump to AAA before a company that has a CI of 50.

Offline gazzz0x2z

  • Members
  • Posts: 1390
Re: please explain to me like I am a 6 yea old
« Reply #2 on: March 23, 2016, 08:04:07 AM »
company size matters, in my experience, but also its worldwide coverage. Especially for image. Having several international lines helps you going to the level higher.

EDIT : just had a look at your airline in GW2. You're definitively a local airline, even if important on site. It's a sound strategy that gives you a high profit structure. But it's a local strategy. You're not going to be 100 CI like that. Maybe 90, and I'm not even sure.

Go on growing, and if you can land a few more long-range flights(that are not losing money), it should help. It's a slow process, anyways.
« Last Edit: March 23, 2016, 08:10:02 AM by gazzz0x2z »

Online Elladan

  • Members
  • Posts: 546
Re: please explain to me like I am a 6 yea old
« Reply #3 on: March 23, 2016, 10:41:44 PM »
And if you are a regional airline without international long haul presence then you don't need to have 100 CI. In fact you don't want to have 100 CI due to the cost involved.

Offline JumboShrimp

  • Members
  • Posts: 5992
Re: please explain to me like I am a 6 yea old
« Reply #4 on: March 23, 2016, 11:33:16 PM »
And if you are a regional airline without international long haul presence then you don't need to have 100 CI. In fact you don't want to have 100 CI due to the cost involved.

That's right.  It is just too expensive (as a percentage of revenue) for an airline that has a lot of thin routes (regional airline).

And CI of 100 is not a prerequisite for AAA rating.  It will come, just a little later.

Offline johndd1

  • Members
  • Posts: 222
Re: please explain to me like I am a 6 yea old
« Reply #5 on: March 24, 2016, 02:18:41 AM »
That's right.  It is just too expensive (as a percentage of revenue) for an airline that has a lot of thin routes (regional airline).

And CI of 100 is not a prerequisite for AAA rating.  It will come, just a little later.

I'm glad these two points were raised because I've been struggling with trying to decide what CI to target.

I have a relatively insignificant US-based regional airline and can maintain a 60 CI with ~$1M/week marketing cost. Recently I decided to up my marketing by ~500K/week (~1.5M/week total) to get my CI to 70. I'm sure in the world of competitive airlines $500K/week isn't even a blip, but that represents a pretty significant portion of MY weekly profits.

So, my question is this: For a regional fighting for every passenger on relatively thin routes, what is an optimal CI to shoot for? Or, better yet, Assuming my target market is predominately Y-class with little-to-no C-class, is there a true qualitative or measurable difference between 60 and 70 CI which justifies a (relatively) considerable increase in marketing expenditure?

Or, given my airlines current situation, is even a 60 CI necessary? I leave it open to possibility that I'm over spending on marketing. I just don't know....

Offline schro

  • Members
  • Posts: 3077

The 3 people who like this post:
Re: please explain to me like I am a 6 yea old
« Reply #6 on: March 24, 2016, 02:44:39 AM »
company size matters, in my experience, but also its worldwide coverage. Especially for image. Having several international lines helps you going to the level higher.

<snip>

Go on growing, and if you can land a few more long-range flights(that are not losing money), it should help. It's a slow process, anyways.

No no no no no.

Offline schro

  • Members
  • Posts: 3077

The person who likes this post:
Re: please explain to me like I am a 6 yea old
« Reply #7 on: March 24, 2016, 02:51:13 AM »
For credit rating, you can basically ignore it. It really has zero impact on how well your airline will do. The only thing it will change is the margin you pay on your loans (AA vs AAA is a 1% difference), but as has been mentioned many times before, the cost of capital compared to what you can earn with it is ridiculously unbalanced such that even 20% interest rates are easily sustainable to pay.

For CI, assuming there are no limiters in play for you (i.e. delays, cancellations, etc), it takes incrementally more money to achieve each higher level of CI. Debt/credit rating has nothing to do with CI.


Online Elladan

  • Members
  • Posts: 546
Re: please explain to me like I am a 6 yea old
« Reply #8 on: March 24, 2016, 08:21:21 AM »
I'm glad these two points were raised because I've been struggling with trying to decide what CI to target.

I have a relatively insignificant US-based regional airline and can maintain a 60 CI with ~$1M/week marketing cost. Recently I decided to up my marketing by ~500K/week (~1.5M/week total) to get my CI to 70. I'm sure in the world of competitive airlines $500K/week isn't even a blip, but that represents a pretty significant portion of MY weekly profits.

So, my question is this: For a regional fighting for every passenger on relatively thin routes, what is an optimal CI to shoot for? Or, better yet, Assuming my target market is predominately Y-class with little-to-no C-class, is there a true qualitative or measurable difference between 60 and 70 CI which justifies a (relatively) considerable increase in marketing expenditure?

Or, given my airlines current situation, is even a 60 CI necessary? I leave it open to possibility that I'm over spending on marketing. I just don't know....
For a exclusively regional (no long haul at all) airline all that is needed is 50-60 CI. Anything above that does not add any value and comes at a prohibitively high cost.
For Y pax only you could possibly live with CI as low as 30 but the cost difference between 30 and 50 is not all that big so if you are not struggling too much with achieving profit I would still go up to 50. Those C pax can make a difference even if most of your routes do not have many at all.

Offline gazzz0x2z

  • Members
  • Posts: 1390
Re: please explain to me like I am a 6 yea old
« Reply #9 on: March 24, 2016, 08:49:43 AM »
For a exclusively regional (no long haul at all) airline all that is needed is 50-60 CI. Anything above that does not add any value and comes at a prohibitively high cost.
For Y pax only you could possibly live with CI as low as 30 but the cost difference between 30 and 50 is not all that big so if you are not struggling too much with achieving profit I would still go up to 50. Those C pax can make a difference even if most of your routes do not have many at all.

OTOH, climbing up to 60 is important, IMHO, especially if you're using high-density seating. My experience is that for high-density seating, there is a hard limit on the price you can set. Go 5 $ over it, and your LF goes down from 95% to 65%. It's especially strong in the early game, when your CI is low. But even at CI:90, in previous GW3, I had to be cautious with my SW3 in terms of pricing. It could still fall from 93% to 82% for just a few dollars per seat. In 2025. Which made the standard seating interesting for that plane : you don't earn more money(19% seats less is a killer, for a plane already very costly per seat), but you can afford mistakes in pricing, the decrease in LF is far smoother, at least in my experience.

For my 300/400NM ERJ routes in the late 1990s, I remember raising up my CI from 30 to 50 allowed me to have a standard price going up by 15%, roughly. IIRC, from 220$ to 250$, or something like that. Less for routes to eastern Europe(I guess People living in Tivat or Skopje are more price-sensitive than those living in Geneva). Anyways, it just costed me 3 or 4 % of total expenses in marketing, so it was definitively worth it. It helped also my 737 routes(with standard seating), though I was less impressed by the effect.


Saetta is using Viscounts & DC-6, whose standard seating is hi-density. Though he already has 66 CI. It's already good. Going up will still allow him a better pricing policy with the viscounts & DC6(unless he switched to standard seating). But, at 23,5% of margin, I am not worrying for him.


Offline johndd1

  • Members
  • Posts: 222

The person who likes this post:
Re: please explain to me like I am a 6 yea old
« Reply #10 on: March 24, 2016, 02:47:08 PM »
Ok so bottom line, for a regional with no long haul and relatively few C class seats, 70 CI is not necessary if it causes financial stress. 60 CI is great if it can be maintained with little hardship. 50 CI should be viewed as a floor target considering it can be reached in all but the most extreme financial harships?

Would this be a good rule of thumb for a rookie like me to shoot for?

Offline LotusAirways

  • Members
  • Posts: 846
Re: please explain to me like I am a 6 yea old
« Reply #11 on: April 04, 2016, 06:36:29 AM »
Ok so bottom line, for a regional with no long haul and relatively few C class seats, 70 CI is not necessary if it causes financial stress. 60 CI is great if it can be maintained with little hardship. 50 CI should be viewed as a floor target considering it can be reached in all but the most extreme financial harships?

Would this be a good rule of thumb for a rookie like me to shoot for?

Yep, 50-60 is enough. And for a regional taxi with props only, no business class seats, 30 is enough.

Online Joshua Jordan

  • Members
  • Posts: 2060
Re: please explain to me like I am a 6 yea old
« Reply #12 on: May 31, 2016, 12:04:51 AM »
So I get from this that it doesn't matter what your competitors CI is, you should just aim for these levels, even if the competitor has a ci of 80?

Offline gazzz0x2z

  • Members
  • Posts: 1390

The person who likes this post:
Re: please explain to me like I am a 6 yea old
« Reply #13 on: May 31, 2016, 07:42:06 AM »
So I get from this that it doesn't matter what your competitors CI is, you should just aim for these levels, even if the competitor has a ci of 80?

Globally, yes. I did face in GW3 opponents with CI 30 and CI90 on the same market(500-1500NM domestic USA lines), and there was not much difference between them. BTW, the CI90 did collapse, the CI30 is now at 40, and still thriving(while many companies begin to cough).

What makes a difference is the pricing policy. Against an opponent who does NOT wage a price war, you can safely increase your prices yourself, and everyone survives. When price wars begin, many players go BK, and go on crying about the fuel prices(hell, it's just 500$ now in GW3, could be 1700$.....).

Don'g get me wrong : in some situations, it's mandatory to lower prices(I had several monopolies on 140 demand lines with 1 737, and now, it's flooded with S2000, I had to divide ticket prices by 2 not to lose money on the line any more, 15% LF does not work, even at double price). But more often than not, players kill themselves trying to wipe out opposition through low prices. Or through excessive marketing. This guy that attacked me in Memphis was so : He had 120 planes or so, flooded Memphis with CRJs, and lowered his prices to 20/30% under the standard, or so(wild guess, compared to my then-CI70 and my own pricing policies). He wanted to kick me out, obviously. He had 2-3% margin, I had 16/18% margin. I could afford a price war on a secondary airport. Memphis was 40% of his flights, and I think that's where he died.

In other words : don't get obsessed by your opponents. Try to find the best price/image setting for making money. The agressors will die before you if you defend your area correctly - without excessive counter-attack.

Online Joshua Jordan

  • Members
  • Posts: 2060
Re: please explain to me like I am a 6 yea old
« Reply #14 on: May 31, 2016, 09:24:27 AM »
Thank you gazzz0x2z, that is very informative and very helpful.


 

WARNING! This website is not compatible with the old version of Internet Explorer you are using.

If you are using the latest version please turn OFF the compatibility mode.