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Author Topic: when to start buying/leasing new A/C  (Read 367 times)

Offline Ali hill

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when to start buying/leasing new A/C
« on: May 06, 2019, 08:43:10 PM »
hey guys, just hoping for a wee bit of advice,

i have been a member for years and had varied success in every GW however my current small airline seems to be making money.

my question is when is best to take the leap and start buying new A/C as opposed to used. i started off with 4 leased A/C and now own 2 of them hopefully going to buy the 3rd very soon.

i am undecided as to when to start leasing these A/C out and upgrading my own flying fleet to the latest model in production.

any advice would be appreciated.

Online gazzz0x2z

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Re: when to start buying/leasing new A/C
« Reply #1 on: May 07, 2019, 07:45:06 AM »
rule of a thumb I always had success with : when leasing planes does not allow you for quick and easy growth anymore, it's time to consolidate.

Though it can be earlier, if your growth has been so successful that you can begin to purchase new planes while still growing fast. IT's not common, though, it happened to me only during my CDG game.

Offline Ali hill

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Re: when to start buying/leasing new A/C
« Reply #2 on: May 07, 2019, 12:29:19 PM »
thanks gazzz

in over a year of playing this is the first airline i have started that's consistently making money, however C and #d checks have impacted on this for the last 2 months. 

Online gazzz0x2z

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Re: when to start buying/leasing new A/C
« Reply #3 on: May 07, 2019, 01:02:06 PM »
when first C check happen, you need to be big enough to have them irrelevant. which means, 15/20 planes after 9 months or so of gaming. Below that size, you are actually vulnerable.

D checks should not happen at all the first years of the game. You should (1)avoid leasing planes nearing their D-Check, or at least (2)be able to replace them when the d-Check is looming. D Checks are killers for a small company.

From what I see of your company, you're barely at 5 aircraft after 236 days of gameplay. It's not enough, espacially in a HQ like Aldergrove where you should be able to schedule dozens of your ATRs(excellent choice for the location, by the way, stick to it). From what I see, the near-market is rather flooded, but you can make some money with a ATR-42 that sells 30 seats. ATR-42s are the same fleet group than your ATR72s, so you won't have any additional costs flying them.

Above 200NM, you've got quite a few destinations worth a look, if you mapr everything possible, like Stornoway, Newquay, Norwich(3 planes there, 200 demand, you'd net 50 pax per flight, enough for a ATR72 to be profitable), Exeter, Southampton, East Midlands, and taht's just between 200 & 300NM. Look up to 600NM, your ATRs should do well within this range, if they fly a lot. Which seems to be the case, I see yours are flying 15.6 hours per day, that's excellent.

That's too much, in fact, some of your flights take off between 0000 & 0455. Landing at night is dangerous, taking off at night is losing a lot of money. I'm pretty sure you'll see surprises if you compare the load factor of your 2 flights to Aberdeen, for example(assuming your pricing is the same for both flights). One flies at night, the other one during the day. Most succesful players never take off during the night, and there is a reason to that. It might explain why your margin is tad low, considering the fuel prices. Fuel sometimes reaches 1200$, you'd be in hard times if this was to happen.

Also try tinkering with prices, to see how your income(not load factor) is increasing when you increase prices, especially on lines with not much opposition, like Hahn, you should be able to improve your margin there as well. I know that you cover more than demand in Hahn, but without opposition, it does not matter. Better 38 pax paying 110% than 40 pax paying 100%.

Offline Ali hill

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Re: when to start buying/leasing new A/C
« Reply #4 on: May 07, 2019, 10:04:28 PM »
thanks GAZZZ that's great information, yes i may be a small airline but i am making profit and that is not so easy in this game world, i would like to upgrade my A/C if i have the means to do so, but i don't see the financial benefit of leasing more A/c as opposed to building my bank account.

maybe i im wrong but i feel that this strategy is working.

i will upgrade all A/C to the one in production and lease or sell the old birds.

whats your opinion on that?

ali

Online groundbum2

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Re: when to start buying/leasing new A/C
« Reply #5 on: May 08, 2019, 03:38:13 AM »
one thing with BUYING aircraft is you then have the option of accessing secured loans. Usually the bank will offer a small amount unsecured, at high interest rates, then a larger amount secured against planes you own, at a lower interest rate.

Simon

Offline knobbygb

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Re: when to start buying/leasing new A/C
« Reply #6 on: May 12, 2019, 07:04:35 AM »
I'd second everything gazzzz has told you - it's the most sound advice I've read and I think he covers everything. I've little to add but I'm just chipping in as another fairly 'big' player who does exactly what he recommends.

When thinking about buying over leasing, try to think of the long term future of each aircraft and the fleet as a whole. Try to know where you'll be in 7 to 10 years (at least!)  A good rule of thumb is that if you plan to lease any aircraft (including it's replacement(s) if you're swapping them regularly for D checks) for more than about 6.5 to 7 years then it will be cheaper to buy it outright (IF you have nothing better to do with the cash, of course). 6.5 years of lease payments usually equal what it would cost to buy the aircraft (when you take into account the long term resale/scrap value of said aircraft and the tax breaks you'll get on the depreciation and end-of-life 'loss').

Of course growth is more important. If buying aircraft would stop you opening new markets and would allow your competition to outstrip you, then it's only going to hold you back overall.

Just one point - you talked about hoping to buy all your existing aircraft.  I NEVER (well, VERY rarely) buy an aircraft I already have on lease.  You can usually replace it with something better/newer/cheaper if you are patient. Look how much your leasing costs are as a percentage of the revenue of each aircraft (on the individual 'my aricraft' screen). You'll probably find, with second-hand turboprops, that it's not a huge amount - i.e. there is not that much to be saved here.  That is less true with larger aircraft such as widebodies where the leasing costs would kill you unless you have VERY strong routes. Compare a leased and an owned ATR of similar age on similar routes, see how much you are saving and work out if you could have earned more than that spending the $10m (or whatever) somewhere else.

You're spot on to realise that there is a point in the game when you switch from all-out growth mode to consolidation mode. Pinpointing that moment is the skill and it'll just come naturally with experience.
« Last Edit: May 12, 2019, 07:07:06 AM by knobbygb »

Online Tha_Ape

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Re: when to start buying/leasing new A/C
« Reply #7 on: May 12, 2019, 07:30:34 AM »
Of course growth is more important. If buying aircraft would stop you opening new markets and would allow your competition to outstrip you, then it's only going to hold you back overall.

I'd add a nuance: sometimes growth can hamper your future consolidation by making it harder, and in the longer run it could lead you to a nice BK. Thus, sometimes it's better to put a hold on growth to consolidate, and then start growing again.

Just like said below: "pinpoint that moment" for consolidation. In a regional/MH airline, it is usually no problem. If you're flying LH, consolidation is usually in order before you start being a LH behemoth.

You're spot on to realise that there is a point in the game when you switch from all-out growth mode to consolidation mode. Pinpointing that moment is the skill and it'll just come naturally with experience.


Offline knobbygb

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Re: when to start buying/leasing new A/C
« Reply #8 on: May 15, 2019, 04:35:53 AM »
Yeah you're right. I should have said sustainable growth. Uncontrolled big-for-the-sake-of-it has been the downfall of many airlines, both in AWS and real life  ;D

Offline elsholtzd

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Re: when to start buying/leasing new A/C
« Reply #9 on: May 28, 2019, 08:06:27 PM »
Ive just sorta bought most of my aircraft outright, however they are small and old so maybe not the most sustainable idea

 

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