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Author Topic: [ok] Loans  (Read 760 times)

Offline OLIBA

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[ok] Loans
« on: February 13, 2009, 06:34:36 PM »
Hi all,

changes how you take a loan. In my view every loan should have a fixed maturity date, and depending from this maturity different interes rates, e.g.

you can choose a loan for 1 year and pay 5 %
                               for 3 years and pay 7,5%
                               for 5 years and pay 12%   and so, but at all it's not only your choice when you repay the loan, but the bank will force you to repay the amount at maturity.

regards
OLIBA
« Last Edit: March 17, 2009, 10:57:31 PM by sami »

Offline Sami

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Re: Loans
« Reply #1 on: February 15, 2009, 07:32:44 PM »
I'd like to get a bit more info on how companies negotiate their loans, what kind of terms they usually have, how the payments back to bank are arranged etc... From someone who has some experience on this field.

There are also the other fundraising methods like issuing new shares, corporate bonds etc but those are not dealt yet.

CrazyMiner

  • Former member
Re: Loans
« Reply #2 on: February 15, 2009, 09:35:39 PM »
In regards to shares... I think it would be a good idea for a company to have shares as in real life, and to raise extra capital they can do a share issuing, and there can be like a share market where shares can be bought or sold, with the share price being affected by the performance of the airline. BUT, i would suggest that the CEO needs to buy the shares out of his own money - this makes it more relevant to pay a wage to the CEO of the airline, because I think every airline here pays $0 to their CEO  ;)

ban2

  • Former member
Re: Loans
« Reply #3 on: February 15, 2009, 10:15:45 PM »
well i think to prevent takeovers companies can only release a total of 49% shares, i don't know what happens in RL when a company wants to release more shares do they split or something?? and a dividend must be paid as a minimum certain % of a companies profit

elleana

  • Former member
Re: Loans
« Reply #4 on: February 16, 2009, 11:08:25 AM »
I'd like to get a bit more info on how companies negotiate their loans, what kind of terms they usually have, how the payments back to bank are arranged etc... From someone who has some experience on this field.

There are also the other fundraising methods like issuing new shares, corporate bonds etc but those are not dealt yet.

Hi sami,
For the aviation sector, large loans are usually betwen the carrier and a syndicate of banks, each of which puts up a portion of the loan and are collectively represented by a lead bank who will negotiate with the carrier on behalf of all the banks involved. Generally loans will be made for the specific to purchase aircraft, which will be used as security for the loan. Terms of such loans are varied and depend on factors such as the standing of the carrier (whether its an established national flag carrier or a new budget start up, for example).

Repayment is usually on a monthly basis and is fixed at the beginning of the loan depending on interest rates and the size of the loan. However, refinancing is common.

There is also the option of buying aircraft on 'hire purchase' - although of course it would be a lot more complicated than buying a car on hire purchase. The financing involved woud be similiar to loans described above, and the aircraft would be 'mortgaged' to the bank/financing company and the carrier would repay a sum each year until expiry of the contract.

Shares and bonds are issued by carriers to banks and the general public and work slightly different from loans, and is a whole new ball game. I'd be glad to elaborate on those as well though, they'd be a great feature and add commercial realism to the game.
« Last Edit: February 16, 2009, 11:11:25 AM by elleana »

Offline Sami

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Re: Loans
« Reply #5 on: February 16, 2009, 11:36:03 AM »
Yea I thought that usually the loans are tied to a/c purchases like you said. But I think I will still make a general loan system (like now) where you can request a loan anytime you want, and then perhaps add a financing/loans system to new aircraft purchase window too as a separate module (haven't though of that at all yet though, feel free to write up any info).

No idea how the loan security would be made though .. Of course I understand the principle that if you fail to repay it they will eventually take away the secured item but I was wondering that what kind of tolerances they'd have on those (again depends highly on the company and bank, and their negotiations). Perhaps just so that you'd need to tie every loan to a number of securities (=aircraft) that are at least 50-100% of the total value of the loan, depending on how well established your company is ... hmm.

CrazyMiner

  • Former member
Re: Loans
« Reply #6 on: February 16, 2009, 12:19:13 PM »
Yea, a way of financing new aircraft purchases would be great. I suppose it would work in the way of a loan, in that you are given a lump sum and the security is the item that you are purchasing, with the repayments made over a certain amount of weeks/months with a varying level of interest for the amount of loan and duration of repayments.

xolon

  • Former member
Re: Loans
« Reply #7 on: February 16, 2009, 12:49:49 PM »
Just wanted to add that the percentage on loans should become cheaper on longer periods. So, the other way around as Oliba put in his post. Bank rather prefer to see a long term loan, then a short term. The loans seems less costly with a lower percentage, but since you agreed on a 5yr/5% loan instead of a 1yr/12% in the end, your paying more rent in total.

Also banks often have a clousule, saying you can´t payoff more then xx% of the loan still standing. This to prevent you from paying off your loan within 2yrs after an unforeseen financial profit.

sircris

  • Former member
Re: [ok] Loans
« Reply #8 on: May 16, 2009, 07:26:33 PM »
1. Loan Rates are often fixed. I would NEVER in real life take a koan of any kind where the interest rates/repayments are not fixed for the loan length !


Offline Sigma

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Re: [ok] Loans
« Reply #9 on: May 16, 2009, 08:24:44 PM »
1. Loan Rates are often fixed. I would NEVER in real life take a koan of any kind where the interest rates/repayments are not fixed for the loan length !



Agreed completely.

The loan system should be fixed interest for Secured loans at the very least.  You would almost never have a secured loan with a variable rate, homes excluded.

Actually variable interest is pretty much gone thesedays.  And there's much higher rate differences between Secured and Unsecured.  Within the game, the differences is only 1-2% depending on the security percentage, but in reality, the interest rate difference between Secured and Unsecured is a factor of 2-3 times the rate for Unsecured.

The new loan system is a lot better than the old, and has had some nice improvements in this game.  I like how it handles loan amounts between Secured and Unsecured.  It just needs some tweaking on the interest rate side.

This is where a game based on history with a fixed loan system kinda gets screwy.  Because, historically, variable loans have actually been popular.  Whenever rates get high variable rates get popular -- in the early '80s for example.  Whenever rates get low, as they historically have been for the better part of the last 25 years in most the Western World, fixed interest comes in vogue.

If the game models interest rates historically, then perhaps Variable is the best way to go.  For the same reason there'll never be Fuel hedging.  Otherwise everyone will know not to take long-term fixed interest rate loans in the early '80s because you'll be paying out the butt for it, likewise you'll know precisely when the best time to finance plane acquisitions is for fixed terms.

Right now it wouldn't make that much difference.  Profit margins in game are massive and interest rates aren't much of a concern.  But if they ever get more in line with reality (and I wouldn't bet on that because it's not much fun to make a small margin and wait years and years for money for planes) then having knowledge of historic interest rates can be abused if we turn more towards fixed interest loans.
« Last Edit: May 16, 2009, 08:30:42 PM by Sigma »

 

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