Sharks are dropping like flies

[Kastor]

I noticed that huge, well established airlines with hundreeds of A/C and thousands of stuff are declaring bancrupcy.
At least 3 major airlines in game #2 falled out within last few days.

I was wondering about the reason, because if they managed to reach the leading position in the market, that may not be their wrong management. I thought about economic conditions like double fuel price since six years, but this should first kill small, who have other costs to high, like fleet maintainance.

Competition ? No, everybody knows, that bigger can kill any competition by lowering prices on the routes as bigger airline has more cash and can sacrify even a few millions to gain dominantion on the market, at least this is how it works in real world.
And this counter-competition techniques has been discussed in another thread recently in context of route flooding.

I think I have the answer, because I am now getting a bit bigger and see how dramatically my cost raise as I open new routes and get more planes. Especially stuff cost. I think this is outrageous, that I need to hire more than 150 people (including 90 F/A) after buing one aircraft like A330-200 that flies 3 times a week  on one route. That will kill every airline. I think this has to be urgently viewed by Sami and liberated.

I will follow the responses in this thread and for now I am very sad to stop my expansion until the issue is discussed and investigated.
Your thoughts, guys ?

EDIT: by the way, why press releases dispappear after the issuing airline bancrupts ? Press releases are kinda history of the game and it is odd when airline, especially large one, which had a strong influence on forces arrangement in the game dissappear, it also dissappear from the history record. Example: Sherwood in game #2. IMO the user places the announcement, so it should remain in the record of press releases.

greets
Kastor

[Kontio]

I think the costs are high in this game. They seem especially high if you start counting number of employees versus number of planes operated, for example. However, it has been stated before that you shouldn't view the numbers like that. Staff salaries are meant to be a cost that take a chunk of your profit away. They are supposed to be modeled after real airlines but it probably isn't a very easy thing to model. We probably wouldn't be complaining so much if we could only see "Staff salaries X dollars" without any breakdown of hown many staff are employed and at which salary rate.

On the other hand I like it that the economy in this game is so harsh. In many similar games once you get started it is exponential growth all the way. There is no way of going bankrupt, the only problem is how you are going to spend all the cash you are making. We all know that in real life the airline business is not like that but the complete opposite. Even big airlines can go bankrupt. The industry is heavily influenced by fuel prices and other events in world economy.

[isuzu777]

Being one of the big airlines to go bankrupt in game 2 (Sonata Airways), I can say this is pretty much true. High costs, employee salaries plus training are killer, and when things got bad, those charges every Tuesday would put me like 30-40mil in the red (Those costs were usually $40million weekly). Because I was in the red, my leased planes up for lease extension would fail and be returned to lessor. I would come back to the game the next day to learn that I had lost so many aircraft, and was still paying tons in salaries. Some of the returned planes were on really profitable routes, which would chip away at income. The red kept piling up and it was a death spiral from there.

The airlines that went bust, including me, I think had a mostly leased fleet. This allows huge, rapid growth but leads to problems later. Plus, you can not borrow against leased planes. I don't know how some of the big airlines afford to buy so many planes with cash, but I am going to find out next game. I have learned a lot, and I think I will do much better in the next game by starting at the beginning.

It was really surprising though, Sherwood, Mercy, and Sonata all went bankrupt in the same couple days. The market is flooded with my planes lol, anyone seeking some nearly brand new MD-83s and 747-400s is lucky!

[Kastor]

Thank you Kontio and Isuzu777 for your opinions. I also asked by PM deepblue501, the CEO of Sherwood for his opinion, hope he will also come and throw his two cents.

I agree, Kontio, that economy should not be easy so spending tons of cash was not your only problem and I agree that world economy, especially fuel prices should have most impact. But the economy of the game should not be harsly pulled to difficulty by making some cost factors outrageous and unrealistic, like hiring 150 people for one A330 because it is annoying and spoils the joy of the game.

The real joy of the game is when you can predict situation, logically act and the result is what you expected.
Of course, there must be difficulties like in real life, but they should be possible to counter in logical manner.

I think there need to be more economic events involved in the game, like wars in some part of the world, outbreaks, terror, global economic crisis like recently which affects possibility of taking loan which should be ocasionally refused...
Things like that, but tools and cost for airline management should be as realistic as possible.

[tofen]

I think I's actually 4 big airlines in the last couple of days that are gone now. Sonata, Sherwood, Mercy and Cooper. And if you look at Zzz's transported passenger numbers he is not that far behind even if he still have 25B USB in value.

My guess to why many are failing is that now is the time when many of the first new bought plans are due for D-check. I have that problem myself and it costs a lot! At the same time it's a shame to dump 7-8 year old birds that you have order new and matched to your needs.

I still make money, but it's really becoming a fine line.
But close to all of my planes are leased, and I'm based at FRA which has 3 airlines in the very top of the statistics list so competition is fierce. If I still can make money, most others should be able to do so as well.

It would be fun to see who has the most cash on hand!

[Gwaneum]

Mercy CEO chiming in.

150 FAs for a single A330 is outrageous. But you do need several dozen. While you only need around half a dozen per flight, you do need several teams of flight attendants to keep them fresh and safe. Plus a few extras as reserves, just in case one of the assigned FAs is sick or whatever..

Real airlines pay their FAs by actual flight time, and reserve FAs who don't fly much will be paid a nominal minimum. FAs during ground delay, and FAs without much seniority, can be paid a pittance (maybe USD $2/hr for ground delay).

I am writing a novel about a United Airlines FA, so I know some of the things that go on for FAs. I do like the economics in this game, but it can always use improvement. FA requirements should become more realistic - i.e. 60 per an A330 rather than 150. It'd be even better if we can have seniority, reserve, flight hours, etc. modeled into FA pay, but that may complicate the code too much. My personal belief is that real world FAs should be paid a bit more, and that's what I wanted to do here as well, but I can't do it when I need to hire twice as many FAs as I actually need.

On other fronts, I do like the AWS system, but yes, real-life events should be modeled. For example, Afghanistan should be off-limits after the Taliban takeover, the US should be off-limits for a few days following 9/11, and Iraq should be available on a limited basis before 2003. Demand should change as well to reflect economic situations (i.e. Asian Financial Crisis should hammer all Asian routes in 1998). And if we ever have a future game that goes back to the Cold War era, flying across the Iron Curtain should be made a bit difficult, if not impossible, depending on the airline's nationality. (And if you base yourself in the Communist Bloc, you can forget about buying Boeings, but your government should give you subsidies to keep those thirsty IL-62s flying.   )

I did learn one thing. Leasing too many heavies WILL kill you. My decision to acquire 3 used 747s and 24 new ones in a short timespan, all through leases, for a fast international expansion, is what did me in. Except for a small token 777 fleet, I should've kept to 767s and smaller, preferably 737s/A320s/MD-80s (owning many of them) as my backbone. But Seoul was simply not a good hub for operating like that - after tapping the obvious biggies (Beijing, Shanghai, Hong Kong, Tokyo, Osaka, Taipei), most of my short-hauls were very low-demand, and my CRJ-100s running them were losing money even at 100% yield and reasonably high fares. There were other good routes in Asia (Singapore, Bangkok, places in Vietnam, etc.) but they were kinda long and not as profitable. If I ever start another game here, I'll make sure to base myself in Beijing, Hong Kong, or Tokyo, where I'll have huge domestic demands to build my new airline on, and actually buy my planes rather than leasing. In any case, owning an A320 can be more profitable than leasing a 747 - and the A320 turns around faster and spends less time being C-checked. Of course, I could start at Heathrow or a major US city, and use the same tactic - but then, I'd have to change my airline name to something less Asian.

There is a reason why Southwest does so well, running only 737s and limiting itself to the 48 contiguous United States. There is also a reason why Pan Am, despite its immense international network and all its glory, died such a painful death. My usual airline in real life, United, became strong thanks to its Southwest-like tactic back in the 1970s, but after it overextended itself internationally in the 1990s, got clobbered.

[blair21088]

leasing anything bigger than a 767 is death unless the leased plane is on a really high demand route. 1.5-2 million per month in leasing fees will destroy the margin on most routes.

[Kontio]

So this begs the question are the leases for big planes too high? How much would a 747 lease for in real life?

[tofen]

I don't have any problem with leasing big planes. Most of my Widebodys are 767s but there is a few 747s and A340s in the mix to, and specially the A343s are making me quite a profit.
Leased B767s are actually the backbone of my fleet.

It's great to have the option of dumping the lease right before that multi million D-check is due.

[Gwaneum]

And if you look at Zzz's transported passenger numbers he is not that far behind even if he still have 25B USB in value.

I'm kind of surprised that Zzz is weakening. Hong Kong has such tremendous demand that Zzz could afford to buy most of his fleet.

But then, on the other hand, he did order 200 773s, and they are all leases AFAIK. They must be killing him.

If I were him I'd have stuck mostly to the A321 fleet as much as I could, and run a smaller 773 fleet (more like 50, many of them owned).

But Hong Kong is a dream hub, and at least Zzz had the revenue base to purchase his fleet. Same with China International in Beijing.

(Speaking of China International, that could qualify as a real airline name, as that's the Chinese-language name of Air China.)

[Gwaneum]

So this begs the question are the leases for big planes too high? How much would a 747 lease for in real life?

Don't think lease rates are unreasonably high. It's just that the market doesn't allow you to make money off of them unless you run them right, or purchase them.

It's actually preferable to take out a big loan to buy a 747, rather than lease one. The interest is cheaper than lease costs, and you save a bundle on insurance too. The bought 747 then becomes collateral for more loans for more planes. But be careful with this - massive loans, even backed up with collateral, do kill, especially if you don't have an income base to more than cover your loan costs.

[tofen]

Damn there are many big airlines that are loosing HUGE amounts of money if you look at the bottom of the "pre-tax income" list.

Zzz, MaxAir, Europe Connect, Lemon, C A Airways, SnowWay and UK international is all among the 10 most money loosing airlines right now!
That's over 4 Billion lost in the last 4 weeks just by the bottom 10 alone.

[ollik]

Hi guys, I'm the owner of Dubair (https://www.airwaysim.com/game/Info/Others/Airline55), which is currently #10 in value in game 2. I took the strategy to only lease planes temporarily and strive for a fully owned fleet. I feel I'm doing pretty well, with only 500k pax delivered weekly and less than 200 planes I've managed this position, with 30-50 million weekly profit depending on maintenance. So I do think overexpanding with leased planes causes problems. It's so easy when you earn your first $1 billion, to order hundreds of leased planes.

[Sami]

like hiring 150 people for one A330

I have to disagree on that..

[Kastor]

Sami, its fact. I had to hire 90 F/A and plenty of management, ground service, customer service, pilots and others just after I received A330-200 and assigned a WAW-SIN route for it 3 times a week.
But in four game days I am taking delivery of my 4th A332. Now I hire 1829 people, 1821 required. After I asign routes for it I will come back here and write how many I will be hiring.

[ollik]

Sami, its fact. I had to hire 90 F/A and plenty of management, ground service, customer service, pilots and others just after I received A330-200 and assigned a WAW-SIN route for it 3 times a week.
But in four game days I am taking delivery of my 4th A332. Now I hire 1829 people, 1821 required. After I asign routes for it I will come back here and write how many I will be hiring.

This happened to me too when i was receiving a big order, a plane every few days for months. So I checked the recruitment need for each plane and on some planes I had to recruit like a hundred people, then on some I didn't have to get almost anyone. So it evened out. You should monitor it for several planes and tell us what you saw.

[elleana]

In Game #3 some of the top airlines (in terms of pax and value) are also running fully leased (or close to fully leased) fleets. As time progresses, do you think they will also fold?

[Seattle]

It is possible..... but not extremely likely, as they will probably start buying up their planes.

However, when fuel prices jump, the ones with less stable route structures will probably fall.

[damar_cahsolo]

Hi guys, I'm the owner of Dubair (https://www.airwaysim.com/game/Info/Others/Airline55), which is currently #10 in value in game 2. I took the strategy to only lease planes temporarily and strive for a fully owned fleet. I feel I'm doing pretty well, with only 500k pax delivered weekly and less than 200 planes I've managed this position, with 30-50 million weekly profit depending on maintenance. So I do think overexpanding with leased planes causes problems. It's so easy when you earn your first $1 billion, to order hundreds of leased planes.

I totally agree with you... I guess owning a plane will cost more at the beginning but in the long run it saves a lot of money compared to leasing. Right now, I don't own any plane at all. As you can guess, with the rising fuel prices, I suffered a lot. My cash are gone just like that...
I guess the only thing that makes me survive right now is the fact that majority of my routes are domestic routes with no competition at all 
Well, maybe in the next game I just operate entirely domestic route with all A320 fleet just like JetBlue. Well, why not, after all their headquarter is in my neighborhood 

[Kastor]

Ok, next fact: My F100 was retired from the fleet and I got overstuffed. Previusly I needed 1821, after F100 is gone I need 1749.
NOW, I replaced F100 with A320. And what happens ? I need 1850 !! As I already have 1829, I hire additional 24 people and now I have 1853.

But I still have my new A330-200 with no crew. I am oppening a new route WAW-LAX and go to personnel office...and see tha I need now 1976 people. 123 additional crew for 231 seater that flies 3 days a week. That is what I call outrageous.

Follow up - this is who I had to hire:

- Hired new 'Middle level management'. (+1 people)

- Hired new 'Economics and finance'. (+ 2 people)

- Hired new 'Corporate communications'. (didn't notice)

- Hired new 'Human resources'. (didn't notice)

- Hired new 'Technical services and maintenance'. (+10 people)

- Hired new 'Route strategies department'. (didn't notice)

- Hired new 'Pilots'. (+10 people)

- Hired new 'Cabin crew'. (+90 people)


EDIT: Shinosuke Nohara, JetBlue also has Embraer 190