High CI for a regional airline worth it?

[Wayfarer]

Gentlemen, Maybe a "newbie-question" but I have been thinking about this a long time. The question of the benefit of increasing CI for my regional airline with many small/medium routes and turboprops Y64. There is competition on the main European hubs. Is it worth the money spend? At the moment I have approx CI=43 , slowly increasing and a marketing cost of around 20%. I am not sure about this but maybe someone can explain it? 

[Sami]

Don't spend too much on marketing. Around 40/50% image is fine there in my mind.

[knobbygb]

20% is still a LOT to spend on marketing though!

You don't mention how the competition is, but I guess it's quite fierce on short European routes. Personally, unless I had more money than I knew what to do with I'd keep CI around 30. That seems to be a sweet-spot - a kind of 'glass-ceiling' that you can get to quite cheaply but is a lot more expensive to better. I can't see 40%, 40% or 50% making that much differece. You could probably half your marketing costs (or more) and still hit 30.

The old conventional wisdom is never to spend more than 10% on marketing but I'm not sure how true that has remained as the game has developed.  As you get bigger, your routes are more mature and you have larger aircraft and multiple frequencies, you'll find relative marketing costs decrease A LOT.  It seems to be almost exclusively based on the NUMBER of destinations you serve so medium a/c flying to 4 or5 different places a day suffer the most. As an example, I have 2100 aircraft in my current game, serving 822 destinations and I have 100 CI for one third of one percent marketing!

Advanced Tip:  Early in the game, if you DO have the money to spend (unlikely), and the time to micro-manage, you might better spending it on more targeted marketing for new routes. Only the total marketing spend matters, not how or where you spend it so, each time you open a new route, open a route-specific campaign for 2 or 3 months (You decide what level of spend you can afford). That way, your new routes will mature more quickly and you'll still get the CI boost.  Just be careful not to let all of them expire or your CI will drop again.

[knobbygb]

p.s How can you possibly manage 2100 a/c?? I feel stressed at times with my 15! 

HA. Never again! Well, until the next game of course.  I am a bit fed up with it to be honest. I'm a micro-manager and I worked out - to do it justice and do everything exactly as I would like would require 8 hours per day, 6 days a week! I suppose the only tip is to do everything "right" from day one - get proper 7-day schedules set up which work well and yet are a little flexible. I think probably 90% of my a/c or on 7-day schedules, the only ones that aren't being (some of) the turboprops. My game ends in 5 days but there are SO MANY things I'd like to have done better.

[schro]

The old conventional wisdom is never to spend more than 10% on marketing but I'm not sure how true that has remained as the game has developed.

I'd say it's pretty accurate. The growth rate of CI is limited, so you shouldn't see a change whether you are spending 10% or 20% in how fast it is going up. When you have a small airline that needs to grow, that extra 10% is better off being spent on leases and slots as opposed to marketing. A very common rookie mistake is going all in on marketing and not building the airline instead.

Of course, as you get larger, marketing costs as a percentage of revenue will decrease - I'm at 1.2% to maintain 100 CI on a ~800 plane fleet in speed world right now.

Another thing to note is that having multiple/varied campaigns is better than having a single campaign for the same dollar amount. You may be able to get more CI out of your budget in that case...

[knobbygb]

Ha, the ATR 72-600 is also my regular ride here in Greece.

I do prefer the Q400s that they replaced though, both in looks and as a pax. And the ATR takes SO LONG to load (relatively) because of the single door!

I see you have the luxury of airstairs, so you win    Although, I can better it!  I don't want to clog up the thread with personal photos but do you wanna see what they sometimes use at ATH - I assume for wheelchairs?

[knobbygb]

There you go.  I think this was actually on the same flight after arrival in ATH. 

It took them AGES (well, at least 4 or 5 minutes) to set up the ramp before we could disembark.  It seemed to be brand new and there were rather a lot of people stood around watching.  My guess is that it was just a test/trial/training and it will normally be used for wheelchairs only.  I haven't seen it since. And look, it's even solar powered!

[groundbum2]

just to drag this back from pretty planes to CI

An airlines credit rating is dependent on CI, and this could save a fortune when comparing APR between a CCC airline and an AAA airline. I don't have the exact figures but CI depends on company profitability and general finances but also the CI. So no chance of getting a B rating until you have a CI of 60 or so. And an A seems to require 80CI. Just appro figures, but the logic is in the game.

Simon

[schro]

Ok, thank's. Yes there is that side of the coin too.. Good point which makes the strategy decision even harder 

Not really though. Credit rating from an ability to be profitable perspective is quite immaterial in this game. I suppose it counts towards airline score (would end to reconfirm in the manual), but aside from that, you're talking maybe an extra 3-5% interest rate margin for loans. Therefore:

1. The overall return on any loan used to expand a (decentishly run) airline will exceed the cost of the loan by a large margin due to the high level of profitability built into the game model. If we make a simple example - suppose some single aisle plane gets leased for 5m, and you take out a loan for that amount to lease it. Let's just plug a 20% interest rate in, so we will have $1m in interest expense for the year, or roughly 20k per week in interest expense. A single aisle plane in a typical modern times era game will make $500k-1m per week after all expenses are considered (not considering share of overhead here). Thus, the business decision is - would you pay 20k per week in interest to earn 500-1000k in profit? The answer is always yes. It's still yes at a 200% interest rate.

2. Because there is a cap in total loans you can have outstanding (about 400-500 million if I recall right), they are of very limited use when you get big. Sure, early on it helps you get those extra planes and slots sooner, but if you're placing a 5 billion dollar plane order, the loans really don't help you get there much faster.

[knobbygb]

If I remember correctly CRJs are particularly good for their cargo capacity compared with other regional jets.  I'm not sure how much you can base a strategy around Light Cargo, but if you choose routes wisely it could give a nice little boost to your profits when other opportunities are limited. I remember one of the 'old hands' here saying he was flying extra overnight flights with his CRJ solely for the cargo income.  They seem rather expensive to aquire though, when compared to older metal that is often available very cheaply on the second hand market.