Bancrupt - Gone down the drain

[BizFlyer]

Hallo All,

this is not to complain, but to find out, what I could have done better.

I had just declared bancrupcy on my airline Fly Andy, based at EDDH (Hamburg, Germany).

All in all things ran quite well, I had slowly enhanced my fleet and my network and it looked, like I had a pretty good competitive situation on my routes.
Load-factors were overall (good and bad in average) at approx. 70%, which, I feel, is not so bad.
On routes, where I could find that load-factors were well into the 90s, I applied careful price-increases.
My planes earned per week between 35k and over 200k and I thought at first, "that is not bad".

One of my weak spots was perhaps advertizing. I invested in continent-wide (Europe) newspaper and radio advertisements. In my view that was already expensive enough. Nevertheless, my company-image never went above 51.

The route-image was in most cases after a while at 100, however.


OK, why have I then gone down the drain:

One reason I can imagine in not good enough utilization of my planes. Some planes flew just 8 hours per day. This was a problem all the time, as EDDH is curfewed (23 - 06) and some routes just didn´t want to fit in and if it was just by minutes...

Another reason, however, certainly was that from a certain point on the C-checks and the D-checks killed me.

They had a double effect on my business:
A) They cost a hell of a lot of money, so expenses were rocketing UP, UP, UP and at the end of the month there was nothing left over.
B) The C- and D-checks take quite a long time - that is their nature, I understand that.
The consequence of this long period in which a certain plane will not fly, means that revenue is lost and that competitors can pretty easy take over a route and suddenly one is not anymore the number one on a route, but the number two or even number three.

My problem was, that I could not control the C- and D-checks in such a way, that I could space them for my convenience.
When I leased a plane, I often had to either take it or forget about expansion-plans and thus accept the dates of the respective checks.
On the other hand, it is quite costly to lease and/or buy an extra plane just for redundancy in the event of a C- or D-check coming up.
Moreover than that, one plane often is not enough.

OK, that is the situation, as I understand it.

Now my question to the old hands is:

If you had to operate from a curfewed home-base such as Hamburg (EDDH), what would you do different?

For your guidance:

My fleet consisted roughly of
5 x B707
7 x B737
6 x F27
5 x F28
I owned 3 planes, 2 x F 27 and 1 x B737

For the real short-range planes I had just the standard-seat Y-configuration
For medium-range (say more than 1500 miles or high premium-routes such as Paris CDG and London LHR) I used in Y-class the 1st step above standard-class seats and a small number (about 5) C-class seats.
On long-haul routes (intercontinental) I used the second-best Y-class seats and the second-best C-class seats. My C-class was then at about 18 seats.
Of course the capacity was reduced by the better seating.

My routes were mostly European, with 3 routes to North America and a few routes to Africa and Asia(Middle East).
On some routes I did indeed enjoy a monopoly, no competition, but I also had full planes on those routes.

OK, that was it from me for the time being.

I would be happy to hear some good advice.

As said at the beginning, this is not to rant and to complain. I want to learn and find out, how I could have survived.

Good luck to all the other entrepreneurs,

Best regards,

BizFlyer

[swiftus27]

Too many fleet types, your commonality must've killed you.  For your size, going over 3 types will be the bk waiting to happen.

[Aoitsuki]

like swiftus27 mentioned, moving from 3 -> 4 fleet type will have a huge effect on commality. Which is probably why you BK-ed

[BizFlyer]

Thank you for your replies.
That is interesting, I would have not come to that conclusion.

Is it really pushing down the maintenance-cost so much?

Or is the cost for keeping the crews with different type-certificates the real killer?

Do I get better prices in the maintenance, if I have a bigger fleet of one certain model against a fleet with smae size but mumerous different models/makes?

And what I still do not get: No matter, if I have a fleet of say, only 737-100/200 or a mix of the same and Fokker F28, the number of Checks remains the same. As I understnd it, then the cost would also remain the same. Where am I thinking wrong?

Best regards,

BizFlyer

[Mr.HP]

If you still have the airline around to look at, we may see what is wrong

My problem was, that I could not control the C- and D-checks in such a way, that I could space them for my convenience.

Did you have D checks done on your owned or leased A/C? A few D checks on old 707 kill you in no time. And since you mostly can't avoid C checks, what do you mean by controlling them? You had several of them came at the same time?

Load-factors were overall (good and bad in average) at approx. 70%, which, I feel, is not so bad.

Agree, 70% LF is good. I have only 60% on average, but still earn good profit. Mainly because I have pretty efficient fleets, and I only operate short haul (< 1500nm). Maybe, your problem lied in the LH routes. They are costly, especially with leased A/C and with this high fuel

Do I get better prices in the maintenance, if I have a bigger fleet of one certain model against a fleet with smae size but mumerous different models/makes?

The more A/C of a fleet you have, the less maintenance/training/administration cost you have per frame, very logical right? Rule of thumb is to have at least 20 A/C of one type, so that the cost per frame is close to minimal

Then, we have something totally different. Any additional fleets you have (4 and above), the cost is actually amplify a lot

My MT airline has 300+ A/C, and by introducing the first A/C of 4th fleet, my commonality cost jumped from 24M to 90+M/monthly. Haven't tried 5th fleet, but I think the cost isn't gonna below 200M

Just some of my thought

HP

[Zombie Slayer]

One big thing I am surprised no one mentioned...

Always stick with standard seating, even high density on flights under 3 hours. The boost you get from premium seats doe not even come close to outweighing the loss of revenue from operating with fewer seats. I have, and currently am, obtaining 95%+ LF's on LH flights over 6000nm with standard seats in all classes.

[exchlbg]

You mentioned your expansion plans, for that you had to take everything that was coming up, maybe that´s what killed you.Expansion isn´t everything, don´t let it dictate you to lease some crap material. Better wait for better offers.
You can control dates for c- and d-checks, but only by making them earlier, spreading dates apart so you can at least switch schedules and keep flying your best routes. D-checks? Never do one on a leased plane !I would rather skip that plane /flight type if there is no plane in sight on market.8 hrs. airtime is not enough to make certain profit, better scheduling is essential.
Better have a plan what kind of company you want to run, don´t just fly any route that comes by and so serving domestic/long haul from the start, it´s better to keep fleet lean and go for more types only after running a little fleet each. 4th type is especially expensive in every aspect, not only for itself, it may double costs even for the rest of your fleet, so avoid flying 4/7/11 types as long you can.
Don´t open up new routes very fast one after another, it takes such along time before they earn money.
Think twice about LH before reaching high CI (70/80), you won´t get any C/F PAX without especially with competition.

[Sanabas]

Thank you for your replies.
That is interesting, I would have not come to that conclusion.

Is it really pushing down the maintenance-cost so much?

The jump from 3 to 4 isn't that much when your total fleet is so small. The cost per plane for each of the individual small fleets will still be high though. If you didn't have the 6 f27s, I think you would have ended up the same way.

Do I get better prices in the maintenance, if I have a bigger fleet of one certain model against a fleet with smae size but mumerous different models/makes?

You get better prices for the fleet commonality component of maintenance. Prices for A/B/C/D checks won't change.

And what I still do not get: No matter, if I have a fleet of say, only 737-100/200 or a mix of the same and Fokker F28, the number of Checks remains the same. As I understnd it, then the cost would also remain the same. Where am I thinking wrong?

I'm currently D-checking quite a lot of 737s, and replacing a lot of about to be D-checked old 707s with other, further away from D-check, old 707s. The D-check on a 16 year old 707 is ~3.5 million. The D-check on an 8 year old 737 is 1.2 million.

Load-factors were overall (good and bad in average) at approx. 70%, which, I feel, is not so bad.

For medium-range (say more than 1500 miles or high premium-routes such as Paris CDG and London LHR) I used in Y-class the 1st step above standard-class seats and a small number (about 5) C-class seats.
On long-haul routes (intercontinental) I used the second-best Y-class seats and the second-best C-class seats. My C-class was then at about 18 seats.

Looking at my own planes, that works out to be 85/18, 103 seats altogether on the 707s. So 70% LFs is ~72 seats sold. My 707s have 169 seats, 144/25 config. 72 seats sold is 43% LF. I've attached a screenie of one of my 707 routes that only sells 72 seats. As you can see, it can barely pay for its own fuel now that prices have increased. I wouldn't be making profit if I only had routes like that. So your good looking LFs are misleading.

My planes earned per week between 35k and over 200k and I thought at first, "that is not bad".

With fuel where it is now, my 707s range from not quite breaking even to 250k profit. The 737s are mostly in the 100-240k range.

One reason I can imagine in not good enough utilization of my planes. Some planes flew just 8 hours per day. This was a problem all the time, as EDDH is curfewed (23 - 06) and some routes just didn´t want to fit in and if it was just by minutes...

Yep, that is a major problem. A curfew is annoying, but it shouldn't drop your utilisation that low. Even if you're keeping the planes parked overnight, 17 hours to use, even if you've got 5 destinations on an f27, that's 9 x 45 minute turns, a utilisation of just over 10 hours. And that should be worst case. Fly overnight, take off at 2255 headed for Egypt, or land at 0600 coming back from Casablanca. Fly shorter european routes where you turnaround at 1 or 2am local time.

One of my weak spots was perhaps advertizing. I invested in continent-wide (Europe) newspaper and radio advertisements. In my view that was already expensive enough. Nevertheless, my company-image never went above 51.

Doesn't sound like a problem. Don't know how your marketing budget compared to revenue, but my guess is it was reasonable. Jacking it up higher to try and have a 90 CI would have been a path to BK.

If you had to operate from a curfewed home-base such as Hamburg (EDDH), what would you do different?

Nothing. It makes scheduling more annoying, and eventually you run out of routes to fly overnight, and start leaving planes parked for 8 hours/day. If you search the forum for 'project portugal' you'll find a pretty efficient schedule running BACs from Lisbon, late in a DOTM.

My guess for the primary reason you went BK: simple lack of revenue. Paying to put in premium seats means your LFs are deceptive, you actually weren't selling that many seats, and couple that with low fleet utilisation means your ticket sales would be very low.

Then as the secondary reasons, there are the extra expenses. Fleet commonality costs per plane on fleets of 5-7 each are going to be higher than on a fleet of 30+. Paying for D-checks is generally a bad idea for leased planes, unless they're really tough to replace (which 737s currently are, 707s are not.) So, I suspect your airline had been in an unhealthy state for a couple of game years, even if it was showing some week to week profit.

And what actually delivered the deathblow would be the rising fuel costs, turning your very thirsty 707s and f28s from making a bit of money to losing it.

[BizFlyer]

To all the responses I want to say many thanks!!!

It was interesting and I think, my bancrupcy and your replies have taught me a lot!!!

Thanks once more and let us see, how I fare in the remainder of the game.
It will not be easy, but what is easy is no fun.
Only the difficult situations are interesting.

Good success to all and to good and fair competition.

Best regards,

BizFlyer

[Karl]

It seems inevitable to me that at some point, every airline in this simulation begins a downward spiral.  The culprit seems to be C and D checks.  

No matter how slowly an airline expands, there comes a point when heavy maintenance is required.  Then, it seems to me, income is not able to cover maintenance costs.  The downward spiral begins.  Borrowing (if possible) helps for a while.  

Bankruptcy (for most players) seems inevitable.  
Look at the number of participants in Jet Age 7 (currently down from 350 to 215).  Look at the number of daily bankruptcy notices.

Does this mirror real-world airline experience?  Maybe!  

[brique]

I would disagree : if c-d checks kill your airline, it was never profitable enough to survive long-term : that's simple enough economics ; your profit margin wasnt good enough to deal with any adverse revenue event.

Its not like they are an unexpected crisis, like fuel spikes and demand drops : they happen once a year on the due date for c-checks and only once every 8 years for d-checks : look at the maintenance sub-section on the 'my aircraft' page and all the dates are there to see.

If you have a cluster where many aircraft hit their due date on the same week/month, plan ahead; pull some into a quieter period by doing the check manually earlier. That benefits your cash flow every year afterwards, so easily repays the trouble taken and the 'loss' of a month or twos' check validity.

Its not the actual checks that BK airlines, its not planning for them : and like I said earlier, if they do kill you, the airline was never profitable enough to survive anyway.

my view only, of course.

[exchlbg]

I don´t agree.Most bankruptcies are declared by new, unexperienced players after only a few days of company existence.Most of the times because of definitely unreasonable choice of HQ,routes and aircraft or shocked by initial losses and red numbers everywhere.
Everybody knows that c- and d-checks have to be done and regard them while calculating business.It seems you don´t and are surprised the moment they hit.I never had a big airline , but was always successful despite of checks.
Bankruptcies of big airlines mostly are caused by growing competition, extreme fuel spikes or lack of time to correct business plans. Some mistakes you make in the beginning show results only much later, if world gets tough.

[Karl]

I don´t agree.Most bankruptcies are declared by new, unexperienced players after only a few days of company existence.Most of the times because of definitely unreasonable choice of HQ,routes and aircraft or shocked by initial losses and red numbers everywhere.

Today, an airline based in MCO with 86 aircraft declared bankruptcy.

It happens to the best and biggest even in good hubs.

[Karl]

I would disagree : if c-d checks kill your airline, it was never profitable enough to survive long-term : that's simple enough economics ; your profit margin wasnt good enough to deal with any adverse revenue event.

my view only, of course.

Probably true; however, not every airline can operate out of the best hubs in the simulation.

And, once a choice of hub has been made, there is really no econimical way to get out of it and make a change without delcaring bankruptcy and beginning with a new airline some place new.  Plus, by that time, most good hub choices are over crowded anyway!

[exchlbg]

Do you definitely know why player BK´ed? Once it´s closed you can´t watch it´s way down anymore. Sometimes you have to leave the game despite of being successful, because RL takes it´s toll, and you don´t have any spare time to care for your "baby" or you just lose interest.

[brique]

Probably true; however, not every airline can operate out of the best hubs in the simulation.

And, once a choice of hub has been made, there is really no econimical way to get out of it and make a change without delcaring bankruptcy and beginning with a new airline some place new.  Plus, by that time, most good hub choices are over crowded anyway!

That is also the players fault, not the simulation : trying to run a LH operation out of a category 3 airport with a curfew, limited slots and short runway is a non-starter, but folk do try it and then they will fail because it just doesn't work. However, run a small aircraft regional out of that same airport and you can build a successful airline that can survive to game-end without any real traumas. The inverse is also true, try to run a small aircraft regional out of a major hub and failure is pretty much a certainty there too, slot fees alone will strangle your growth, then slot shortages will kill your later expansion, never mind the guaranteed competition on your choicest fattest routes, which is where your profits have to be found.

It's about planning and developing the best airline you can build from that airport, with whatever limitations exist. Or go find another base that suits better, if your airline must be a particular type : but, as you say, everyone wants one of those 'perfect' bases and the competition for them is harsh. 'Quelle surprise', as they say in Bermondsey....

[BizFlyer]

The further development of this thread is interesting to follow, although I also have a firm view on this.

1) It is for newbees (me included) not very easy to decide on a suitable airport. When a world begins, then the first come - first serve principle applies. coming in later makes things much more difficult, but that is not a cause for bancrupcy. I full agree with others on this point.

2) A very important factor for the rate of success in this sim is, how much time you are able and willing to invest, or how frequently you are able to drop in at least for short chekings of the situation and perhaps at least small adjustments. If you cannot invest, say, an hour every ay for this sim, then forget it. Probably more is better.

3) I agree, that either the airline earns enough to cover for all operational cost - or it doesn´t. Result: Bancrupcy. It is, however, not very easy to plan the economics, when you are not yet very practised in this sim.


Regards,

BizFlyer

[Sanabas]

The further development of this thread is interesting to follow, although I also have a firm view on this.

1) It is for newbees (me included) not very easy to decide on a suitable airport. When a world begins, then the first come - first serve principle applies. coming in later makes things much more difficult, but that is not a cause for bancrupcy. I full agree with others on this point.

Coming in later means the bigger HQs are normally full, so your choices are more limited. However, it is much clearer what the result of your choices will actually be. When you open on day 1, you have no idea who else is in your airport with you, if they are extremely agressive, if they are only ever going to have 10 planes, if they're going to play badly and BK quickly. When you open 5 years in, you can see exactly what your competition is, you're much less likely to get nasty surprises.

2) A very important factor for the rate of success in this sim is, how much time you are able and willing to invest, or how frequently you are able to drop in at least for short chekings of the situation and perhaps at least small adjustments. If you cannot invest, say, an hour every ay for this sim, then forget it. Probably more is better.

I disagree. If you are in a big, slot restricted airport with 1 or 2 very aggressive competitors, then sure. But if you're in an airport where slots aren't an issue, if you're in an airport without extremely aggressive competition, then you can build a sucessful airline with very little time investment. The biggest limitation you'll have is ability to get planes from the used market.

Today, an airline based in MCO with 86 aircraft declared bankruptcy.

It happens to the best and biggest even in good hubs.

Well run, efficient airlines don't get forced into BK without making a major mistake, such as using all their loans, all their available cash to place plane orders, and then have a fuel spike/maintenance/plane deliveries appear when they're low on cash, pushing them into the red for long enough to kill them. Airlines that aren't run so well go BK. But airlines that aren't run so well can grow fairly large before their mistakes catch up with them, and you can sometimes watch them decline for a year or more after you notice they're in serious trouble. I have watched a billion dollar MT airline spiral into an inevitable BK because it wasn't run very well. I even got to buy one of their 777s and put it right back to work as their competition. 

[Tiberius]

"Well run, efficient airlines don't get forced into BK without making a major mistake, such as using all their loans, all their available cash to place plane orders, and then have a fuel spike/maintenance/plane deliveries appear when they're low on cash, pushing them into the red for long enough to kill them."

My personal experience says that before a bankruptcy I have too much confidence in my airline, and then a combination of things happen at once...too many loans, too much maintenance, too little cash, and not enough cash to use leased plane deliveries properly (and one memorable occasion when they were purchased, and I went very negative before BK).

Building up cash and making full payment direct purchases is the way to transform your airline into something more long lasting, but you have to grow too so its a careful balance.

[Karl]

...making full payment direct purchases is the way to transform your airline into something more long lasting, but you have to grow too so its a careful balance.

This is not a bad way to go; however, two points:

1) In Away Sim, direct aircraft purchase is difficult, but I agree that this is the way to go.  Unfortunately, the "Jet Age 7" scenario spans several generations of aircraft.  Newer aircraft have to to obtained.  If an airline purchases aircraft, after their usefulness, old aircraft can be hard to sell or dispose of.  I realize that  aircraft on the market are off the books, so to speak.  However, they can still be a drain.  Plus, it apparently takes a great deal of time and neglect to scrap an aircraft. 

2) One of the major attractions of the Sim (in my humble opinion) is to have fun experiencing the challenge of growing an airline. 

It is an even more difficult challenge for a sim creator to find the correct balance between providing the player (the paying customer) with a mission that has enough incentive to keep coming back and a realistic simulation that does not let every player dominate the world. 

I think, however, compared to other available airline business simulations, Airway Sim is just a little too challenging - for MOST players.       

How many times have the airlines of even experienced players fallen into bankruptcy?