Advice: When to buy first aircraft?

[Karl]

I understand that there are a number of variables in AWS when it comes to every aspect, but I am looking for input on purchasing/leasing aircraft.

My most successful airline to date lasted for over 30 game years with a mix of leased and purchased aircraft.  I have found that leasing has benefits.  While leasing can be expensive, one can return aircraft when D checks begin to get very expensive and returning aircraft helps keep fleets up to date and compliant with noise regulations.  Purchasing makes daily operations cheaper, but then one has aging, expensive aircraft that become difficult to sell.  Even scrapping has a negative effect on the bottom line.

Nevertheless, it seems to me that the most successful airlines in AWS own most of their fleet.

So, I am looking for advice/guidance/opinion:

-When is the best time for a new, growing airline to switch from leasing to owning?

-Is it better to wait until an airline has enough cash to purchase a new/used aircraft outright?

-Is it better to purchase an older aircraft first?  How old is too old?  How expensive is too expensive?

-Does being a part of an alliance help?  How?

And the real question:

-Is it worth it to take out a loan to cover the cost of purchased aircraft?

[Zobelle]

I understand that there are a number of variables in AWS when it comes to every aspect, but I am looking for input on purchasing/leasing aircraft.

My most successful airline to date lasted for over 30 game years with a mix of leased and purchased aircraft.  I have found that leasing has benefits.  While leasing can be expensive, one can return aircraft when D checks begin to get very expensive and returning aircraft helps keep fleets up to date and compliant with noise regulations.  Purchasing makes daily operations cheaper, but then one has aging, expensive aircraft that become difficult to sell.  Even scrapping has a negative effect on the bottom line.

Nevertheless, it seems to me that the most successful airlines in AWS own most of their fleet.

So, I am looking for advice/guidance/opinion:

-When is the best time for a new, growing airline to switch from leasing to owning?

-Is it better to wait until an airline has enough cash to purchase a new/used aircraft outright?

-Is it better to purchase an older aircraft first?  How old is too old?  How expensive is too expensive?

-Does being a part of an alliance help?  How?

And the real question:

-Is it worth it to take out a loan to cover the cost of purchased aircraft?

Best time to own is once you’ve settled into a long term fleet is that you will use for 2-3 D checks (16-24y) but exception is made for Soviet/Russian metal.

Older aircraft can be a bargain at times, for example your alliance mate is quitting game and selling off their fleet cheaply and it fits into your rotation.

How old is too old? I seldom buy aircraft more than 13y of age unless by some miracle a second D check has already been performed on it already (Usually from AI brokers)

Alliances can help in a big way once you cross the line of 200 aircraft give or take as when it comes to mass fleet replacements you will want some help for it not to take 10yrs to replace a fleet type or renew aging frames. Alliances can also aid regarding advice and general camaraderie.

Regarding loans. If you need a loan to make an order during launch period and you’re sure you can repay it, take it.

[Tha_Ape]

-When is the best time for a new, growing airline to switch from leasing to owning?
When you got a stabilized cashflow. Sufficient money, sure, but above all regular, so you know what to expect and can plan accordingly.
Also, you want to buy an aircraft type you'll keep for a while (recent and/or long lasting).

-Is it better to wait until an airline has enough cash to purchase a new/used aircraft outright?
Not sure about what you mean, but the growth of an airline is a mix of pure growth (through -cheap- leases) and consolidation (through buying). You need to alternate these phases, and they are not necessarily the same for all your fleet types (could be buying your props while still leasing your workhorse, whatever the reason is).

-Is it better to purchase an older aircraft first?  How old is too old?  How expensive is too expensive?
An aircraft's lease for 6-7 years is usually the same than the price of the a/c upfront. If "old" is 8 years and you plan to keep the plane for 15 more years, then yes, you can buy. If on the opposite it's gap-filler, lease. Note that a/c meant to fly cargo can usually last longer than pax ones: 1°) they earn more money, so the offset with maintenance is different; 2°) cargo doesn't dislike aging planes as pax do.

-Does being a part of an alliance help?  How?
Depends for what aspect. Alliances help getting the planes (many suppliers), but they won't as for prices, as min alliance price can sometimes still be quite high. That's why airlines starting in the middle of a GW usually don't enter their alliance right away, as thus they're able to get cheaper prices. Or they rely on other players outside of that alliance.
However once you're settled, have a nice margin etc. and just need replacements, yes, the alliance helps very much.

And the real question:
-Is it worth it to take out a loan to cover the cost of purchased aircraft?
It also depends, it's a strategic matter:
 - If you see an opportunity in a prod line (newly released plane still cheap, freed slots, etc.) for a plane you need, yes
 - If you need that plane (expiring lease on another same one that would leave your schedules crippled), yes
 - If it's just to add one more plane and is only for your own pleasure, no.
Usually, loans are mostly used to order new planes from the manufacturer rather than from the UM: they cover the initial cost and let you time to grow and increase your cashflow for when the planes will be delivered.

[schro]

I understand that there are a number of variables in AWS when it comes to every aspect, but I am looking for input on purchasing/leasing aircraft.

My most successful airline to date lasted for over 30 game years with a mix of leased and purchased aircraft.  I have found that leasing has benefits.  While leasing can be expensive, one can return aircraft when D checks begin to get very expensive and returning aircraft helps keep fleets up to date and compliant with noise regulations.  Purchasing makes daily operations cheaper, but then one has aging, expensive aircraft that become difficult to sell.  Even scrapping has a negative effect on the bottom line.

Nevertheless, it seems to me that the most successful airlines in AWS own most of their fleet.

So, I am looking for advice/guidance/opinion:

-When is the best time for a new, growing airline to switch from leasing to owning?

-Is it better to wait until an airline has enough cash to purchase a new/used aircraft outright?

-Is it better to purchase an older aircraft first?  How old is too old?  How expensive is too expensive?

-Does being a part of an alliance help?  How?

And the real question:

-Is it worth it to take out a loan to cover the cost of purchased aircraft?

Lots of questions and a misconception to address...

First, as a general rule, the breakeven point of owning vs leasing in terms costs is about 7-8 years (cost of the sum of lease payments vs cost of purchasing the entire plane). At the end of those 8 years of ownership, you have something you can sell, scrap or continue to use - any of those being better than what you get with leasing (continued payments). So, if you lease a plane for 16 years, you're paying for it twice - you're far better off buying, flying and scrapping as you'll be financially better off for it in the end (even if the scrapping generates a loss at that time). D check costs below 24 years of age (other than Russian metal/jet age area planes) are fairly immaterial to the whole ownership benefits equation from a big picture perspective.

Now, answers:

Switch from leasing to owning - Typically you want to lease when you are in initial expansion mode. Once you have enough profit/cashflow to 1. Lease the max from the used market each week and 2. Stay ahead of the 2-3 production lines you're in for new deliveries, it's time to look at ownership. Alternatively, if you are getting close to saturating demand, you'll want to start pivoting ahead of that and use your cash to own your fleet instead of continued expansion.

Waiting to purchase outright - You generally want to purchase planes outright, so yes, you'll need the cash to do that.

Age of aircraft to buy - You don't want to buy older aircraft unless you're going to get at least 8 years of flying out of them. Otherwise there's not much advantage over leasing and dumping them. As for used vs new, depends on the stage of the game - if you're in a fairly new world, you'll want to be buying in the new production lines 40+ at a time to get the 20% discount (as the used market will be barren). If you're in an older world with a healthy used market, there can be a lot of bargains to be had with decent but less than very popular planes (i.e. 777s on the used market that are a couple years old can cost half of a new plane).

Being in an alliance helps through swapping planes - you order 737NGs for someone and sell them to them, and they send you A320s to buy. Allows you to grow or replace aircraft more quickly and predictably than you can from the used market alone.

Loans are tricky - from a cost perspective, interest is an immaterial rounding error of expense compared to the profits that an owned plane will generate. However, the amount of loans you can get is limited - you're not going to be able to finance 40 planes with loans, period. I would suggest only using loans if you need downpayment assistance with your first big new order and otherwise save loan availability for when something goes sideways.