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### Author Topic: [-] Recommended price, Alliance Min / Max all screwed up  (Read 464 times)

#### JumboShrimp

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##### [-] Recommended price, Alliance Min / Max all screwed up
« on: June 15, 2015, 10:34:43 PM »
My understanding is that the Alliance Min and Max were

Min: 90% of market price
Max: 130% of market price

By Market price, I understand that to be the Recommended Price.

I am looking at what the system is suggesting, and it does not follow any rhyme or reason.

The "Recommended Price" seems to be just a random number.  I open a page, I get \$67m.  I refresh it, I get \$81m.  I keep refreshing it, and I get a random number anywhere in that range.  So that "Recommended Price" is 100% useless.

The Alliance Min, Alliance Max seems to be going off of some firm mystery number, that does not change, but it is as meaningless as the Recommended Price.

To investigate this mystery number, I take a look at a freshly delivered new aircraft.  Price of the freshly delivered new aircraft should be identical a list price.  For the model in question, MD-90-55:

List Price: \$81,464k

Now I take a brand new aircraft, just delivered, try to sell it.

I get following Alliance Min / Max:
Min: \$59,459 =  72.9% of the aircraft real value
Max: \$89,189 = 109.4% of the aircraft real value

Since the alliance Min was clearly stated several times to be 90% of aircraft value, and 72.9% is very far from that, the system is using some mystery calculation do determine what the base for the alliance Min / Max should be.

The mystery number in this case 59,459 / .9 = 66,065

Where is this number coming from?  It is based on nothing resembling reality.  The aircraft is worth \$81,464, which is 23.3% higher.

I have a theory:  The price is based on recent sales on the UM, including privately listed aircraft.

Here is why this is wrong:  This aircraft is never on the UM.  The only thing that ever appears on the UM is privately listed aircraft.  Majority (if not all) of the privately listed aircraft of this kind on the UM was at Alliance Minimum.  So this is feeding on itself.  The system calculates 90% of a flawed number, and then in the future, in theory, does it again and again.  it can keep on going to .9 x .9 x .9.

Can this whole aircraft pricing be completely scrapped, and can we go to the old system?  It was clear, straight forward, it worked consistently and flawlessly.
« Last Edit: June 16, 2015, 07:31:06 AM by sami »

#### JumboShrimp

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##### Re: Recommended price, Alliance Min / Max all screwed up
« Reply #1 on: June 15, 2015, 10:47:54 PM »
Just to add to my post, it seems that there was one last place where the good / old value used to be used, when using the aircraft as a loan security.  Now that seems to be screwed up as well.  Yet another mystery number is introduced.  It seems it has been introduced just recently.  So this aircraft brand new aircraft:

Value = list price = \$81,464k

Value as security: \$59,467k

The aircraft in question: GW3, MD-90-55, (#51089)

#### Sami

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##### Re: Recommended price, Alliance Min / Max all screwed up
« Reply #2 on: June 16, 2015, 07:31:02 AM »

The price advisor is not looking for used marked sales / listings. And the variation is because of the 'staff efficiency' factor, but I've removed it now. Bank loan security value calculation is not related to the selling prices or book value. And alliance min/max price calculation is not simply 90/130%, but a more complicated formula these days taking into account for example the age of the aircraft and other factors.

MD-90-55 new unit price is 81.3m and your was payment 64m, and rec.price for 0h/0y plane is 74.1m, alliance limits being 59/89m. ..all ok there.
« Last Edit: June 16, 2015, 07:41:54 AM by sami »

#### JumboShrimp

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• Posts: 6478
##### Re: Recommended price, Alliance Min / Max all screwed up
« Reply #3 on: June 16, 2015, 08:00:40 PM »
The price advisor is not looking for used marked sales / listings.  And the variation is because of the 'staff efficiency' factor, but I've removed it now. Bank loan security value calculation is not related to the selling prices or book value.

Why can't it be straight forward?

And alliance min/max price calculation is not simply 90/130%, but a more complicated formula these days taking into account for example the age of the aircraft and other factors.

Again, why can't it be straight forward and predictable?

There is a point in time to test what is really going on, when a new aircraft is delivered.  At that time, the value should be identical to list price.  That is what my example is about, to filter out all the other complicating issues.  And using this test, the system calculations fail spectacularly, being off by 23%

MD-90-55 new unit price is 81.3m and your was payment 64m, and rec.price for 0h/0y plane is 74.1m, alliance limits being 59/89m. ..all ok there.

So are the alliance limits then 70% / 110% ?

There was a lot of abuse in the past with transferring money between airlines through sales.  That's why the firm limits of 90% / 130% were set, and announced.  Now we have no idea what it is.

The prices don't look fine at all.  My price is irrelevant.  The alliance limits should be global, not related to an aircraft I own.

Suppose that I bought the aircraft at ~110% of list price at \$90m, which would be my book value in that case.  Will the limits change because of the special case of one aircraft?  Does it mean that if I want to sell it, I can only sell it at a loss?

I think this thing really needs to be straightened out.  It is unpredictable.  There is nothing player can do to predict what how the system is going to behave.  It is certainly nothing that would resemble the market behavior.  This aircraft is in such a demand that it never shows up on UM, yet the system is valuing it significantly below list price, once it is delivered.  A desirable aircraft should be valued at or slightly above the list price (if the production line is has a lot of orders)

And there is no official guidance how the system works.
« Last Edit: June 16, 2015, 09:21:54 PM by JumboShrimp »

#### JumboShrimp

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##### Re: [-] Recommended price, Alliance Min / Max all screwed up
« Reply #4 on: June 16, 2015, 09:24:27 PM »
Consistency between pricing models:

We have
a) pricing model for new aircraft, how the list price is determined.  It is a point
b)
pricing model for used aircraft.  It is a line or curve that takes into account demand, age etc.

There needs to be a consistency between the 2.  The line / curve b) needs to start at point a)

#### JumboShrimp

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##### Re: [-] Recommended price, Alliance Min / Max all screwed up
« Reply #5 on: June 17, 2015, 11:55:53 PM »
Here is my theory what went wrong, and why this is a bug:

The Used aircraft value calculation probably did not change much from the past.

However, the calculation for the List Price for New aircraft changed substantially.  Very popular aircraft can have its list prices go up 20% or more, just due to popularity.

This created a disparity that I am talking about.  These 2 calculations need to be brought back in sync.

(I don't have a theory on what happened to value calculation for loan security)

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