Financing and whatnot

[Fegelein]

I have a few questions, if anyone can be so kind as to help point me in the right direction. I'm playing Jet Age 6 right now for context.

1. Is it better to buy a really cheap plane that you don't need if you can, use it as collateral to get a large loan, and then sell the little plane and leverage the new cash flow to buy planes you need? Or should you just try to save up?

2. Is it ever a good idea to buy a plane you've been leasing? If so, when?

3. Lease terms. I've been trying to stagger my leases so they run out before D checks. On a whim I ordered some new planes on operational lease at the beginning of the game, and I think at least one of them has a lease term longer than the D check. Should I try to dump the lease before the D check or just eat the cost? I haven't had any of my planes long enough to see what the lease termination fee is, so I don't have a figure to compare to the D check cost.

4. New planes on operational lease: is this ever a good idea? Is there really an advantage to this over getting a used plane, besides being able to lease a plane you can't afford to buy that isn't available used?

[schro]

1. No, not really. Loans mess with your taxes to the extent that I really dislike using them.  Plus, you can't use the plane for collateral for more than it is worth, so if you buy a $4m plane for cash, you can then get a $4m loan... which puts you back to the same place with a weekly payment. For the first 30ish planes, I would stick to leasing to grow your airline, especially with all of the unmet demand out there. When you run out of demand to service or have more cash on hand than is required to keep leasing more planes, then start buying planes with the excess.

2. It can be. If you plan on keepin gthe plane for a significant portion of the game and it is newer, then its quite a good idea. Typically the purchase price of the plane runs about ~7 years of leases. With regards to JA, profit margins tend to be very high AND there's newer and better planes coming out all the time. Study your commercial aviation history to figure out what plane type you will move to during the game and save up money to purchase those.  Typically, I will also buy planes as a tax management strategy, as I'll true up my airline's profits to zero at the end of the year to make sure I get all of my tax paid refunded.

3. When leasing planes, you'll want to avoid paying for the D check if at all possible. I'd run the math when it gets closer to date - paying a 1 year lease cancellation penalty is sometimes cheaper than paying for the D check. The longer length leases certainly make sense when they are based on a price that is approximately at the plane's value or lower, otherwise, sticking with a 1 year and autoresetting/renewing will be better in the long run. FYI, lease termination = 50% of the sum of the remaining lease obligation (i.e. term fee for a 500k/month lease a year early will be 6m).

4. New planes are a great way to augment plane acquisition. At first, used market is the best way to go. Once you're getting your limit weekly from the used market, keeping a fresh flow of new planes on top of that is a great way to keep growing (so you'll get 3/week + 1-3 per month new). I avoid having too much money tied up in new plane leases - I tend to only add orders to keep my supply from being interrupted (i.e. if there' s a 1 year wait for new planes, order no more than 1.5ish years into the queue).

[Sami]

1) getting rid of the old/small plane may be hard. Not worth it.

2) Depends entirely on the price, and plane specs (age,maintenance...)

3) The general consensus has been to not to make D checks yourself (though that is not entirely how it is supposed to be......) But this would again depend on what alternatives are available and what is your fleet plan in long term. And keep in mind that when the D is done you have again another 8 "paid" years for that...

4) New planes are new, and you can spec them exactly like you want. But popular planes have high prices and long queues. But on the other hand used market can have slim pickings too....

[Fegelein]

Thanks for the answers, guys. They helped!

One other question. If I order a new aircraft to *purchase* and I have enough for the down payment, when the aircraft is delivered and whatever percentage is due is charged, if I don't have enough money at that point, will it just put me in the red or will I not get the aircraft?

[schro]

Thanks for the answers, guys. They helped!

One other question. If I order a new aircraft to *purchase* and I have enough for the down payment, when the aircraft is delivered and whatever percentage is due is charged, if I don't have enough money at that point, will it just put me in the red or will I not get the aircraft?

You will get the plane and go into the red. If  you go too far in the red, that is very bad news  (unless you can be at the computer the moment it is delivered to pull a loan out of it). Deep red funds will do all kinds of bad things to your daily operations...

Usually, for buying my first few planes, I just buy out leases that are nearing an end, or pull one from the used market. Buying new is best when you can afford to get a volume discount...

[knobbygb]

Is it ever a good idea to buy a plane you've been leasing? If so, when?

It would kinda annoy me to buy something when I'd already made hefty payments on it.  As the other poster said, 6 or 7 years of lease payments would have bought the plane anyway!  After a few years there's almost certainly going to be something else available in the used market with longer to run until D-Check and probably cheaper too.

On a whim I ordered some new planes on operational lease at the beginning of the game, and I think at least one of them has a lease term longer than the D check

If you work out how much cheaper the longer lease was (for example 15years instead of 7.5years) you've probably saved more than the D-Check would cost anyway.  If you dump the plane before it's first D check then, as well as the penalty, you're going to end up with another short (<8yr) lease on the replacement (and another D-Check decision in 8 years).  I can't see your figures but I suspect the longer 15 year lease, even having paid for a D-Check, might end up cheaper.

If you have one of your aircraft on, say, a 10 year lease and you DO decide to keep it through the D-Check you should IMMEDIATELY extend the lease to the full 15 years - the lease payments will drop right away and you'll save money.

My strategy is:

For the first few years of the game, only take leases - 7.5years where possible - ideally on cheaper, used aircraft.
For the last 16 years of the game, try to buy everything new. This way I get the maximum use out of each aircraft - 16 full years with just one D-Check.
For the last 8 years of the game, buy used, but ONLY if the aircraft is for sale at less than it's value AND D-check won't run out before the end of the game.

In MT worlds, there's not usually enough cash for this, but I do it when I can.