I'd like to know how the credit rating is calculated with the new accounting system...
I'm seeing strange things with this
For example, in BW2, 261 out of 284 airlines are rating B... not BB, not CCC... 261 seems just stuck in B rating... On top of that, just 2 airlines. has D rating.. even tho BKs in BW are count by the dozens
I don't know how full worlds are working (since I'm not playing any right now), but that seems pretty odd to me...
Maybe the system needs a revamp...
PS.
Apparently something similar is going on in full worlds...
https://www.airwaysim.com/forum/index.php/topic,50464.msg292937.html
https://www.airwaysim.com/forum/index.php/topic,51401.msg293072.html
Quote from: LemonButt on January 23, 2014, 03:04:02 PM
https://www.airwaysim.com/forum/index.php/topic,51401.msg293072.html
Well, I guess we can say transition is no longer part of the equation since BW2 started with the new accounting system...
Same prob. here in MT8
Went from AAA to BB and has stuck there since the accounting change. I'm one of the most profitable, most valuable and no loans... My competitor is going down, had a CI at 90 down to 76, his value is plummeting, pax are going down but manages to have a AA credit ???
Sorry, but the CR system is either broken now since the new accouting came in, or it's amazingly accurate considering the banks behaviour since the crash of 2008...
I'm running a series of silly doomed experiments in BW and I currently have a proper D to go along with my mountain of debt.
I've gone from aaa to bb also. Making 70 to 100m a week
My credit rating has gone from B to BB to BBB to AAA over the past 4 game weeks, so something must have been changed or somehow interest rates going down improved my credit score substantially.
Quote from: LemonButt on February 03, 2014, 10:39:10 PM
My credit rating has gone from B to BB to BBB to AAA over the past 4 game weeks, so something must have been changed or somehow interest rates going down improved my credit score substantially.
No one knows, and everyone is talking about it :P
I now own about half my fleet and about 70% of the aircraft I own are used for collateral for financing the aircraft I bought.......the other 30% are free and clear.
Buying and financing is a lot cheaper than if you leased these aircraft......... which maximizes profits.
My profits have never been better, leasing costs are $168,000 week and those planes bring in about 60% of my airlines profit and financing for the planes I own costs $32,000 week and those aircraft bring in the other 40% of the profit.
It would make sense that doing this would improve my credit rating over just leasing and not owning any aircraft.
But just the opposite has happened, my credit rating has gone down with having these assets that I own free and clear.
It's like the credit system only takes into account the amount of money you owe..........and doesn't give you credit for owning planes or saving money by not leasing.
It doesn't make sense.
Sami.............maybe you can explain what's happening and how you have this credit system set up.
If you have the system set up so it downgrades the credit rating for airlines that own their aircraft........please tell us.
My airline just went back from B to AAA.
I think it is ignoring cashflow and looking solely at operating net profit, which includes non-cash items such as depreciation. I don't have any explanation other than that :(
From GW#4 speaking it's purely value based.
Value based on what ?
In the real world assets go a long way towards establishing value.
But that doesn't appear to be the case in AirwaySim.
Incorrect. Credit rating is calculated based on your airlines' assets mainly, but company age and company image also play a role there. Assets as a whole in this usage are counted from the balance sheet and cash is also included there (Shareholders' equity line).
https://www.airwaysim.com/game/Manual/Office/Loans/#Rating
Ok.
The issue then is how the value of an airline is determined in this game.
This still appears to have very little to do with assets.
An asset is something you own.............like aircraft that have no loans against them.
It's a stretch to call your rep rating an asset because it can go down very quickly........and the bank doesn't even treat it as an asset, it treats planes as assets.
But there's this disconnect between the bank using aircraft as collateral for borrowing money and having aircraft you own and clear of any debt being part of the value of your airline.
It was much easier to borrow money when I didn't own any planes or have millions in cash in the bank.
This isn't that much of an issue now because I have the cash to buy or lease planes without borrowing.
It's just that this is very odd and nothing like the real world.
Assets / value determination: https://www.airwaysim.com/game/Office/Balance
The owned planes do count in your overall 'assets portfolio' and thus shouldn't have any effect in the credit rating. $500 cash or $500 in airplanes = same thing.
well I guess I don't understand it then.
I own 27 low hour C-46's
About 14 are used as collateral for low interest loans ( a heck of a lot cheaper than leasing those planes)
The other 13 I own free and clear, bought them with my profits........I got good deals on those planes, the bank value is a lot more than what I paid.
I have 3 million in the bank......that's after buying another plane and leasing a bunch more.
My profits are the best they have ever been and I payed off all the unsecured, high interest loans from before.
And yet my credit rating remains at CCC and I can't borrow a penny.
One thing that did effect my credit was all the money I spent starting a second base.
But that was a long time ago now, it turned out to be a good business decision as my sales and profits went way up and it didn't take long to make up the startup costs.
Secured vs unsecured doesn't really play into your credit rating, it just decides what rate you're going to pay for any loans you do take.
Looking at the financial info we can now see you already have a lot of loans, up to around 50% of your assets.. You also don't have an exactly huge amount of cash on hand. I honestly don't find your CCC rating that surprising. I currently have a BB rating and even if I had the physical assets to secure all of the secured loans the bank will offer me it would only take me a bit beyond the level of leverage you currently have. Save up some cash to improve your asset:liability ratio and your rating will go up.
Something that I also just noticed.
When I bought those aircraft I was very careful what I bought......only the newest, good quality C-46's that had a bank value of at least 40% higher than what I was paying.
But the way this game is set up.........it doesn't care what the bank value is, it only cares what you paid for it.
Even if you pay twice what it's worth.......that's what your asset worth is based on.
Not on it's value.
That's what I didn't count on.
The value that the bank ascribes to the aircraft (say for loan purposes) will not match your book value. But you are right that you no longer get an immediate CV boost from buying undervalued aircraft. However, your weekly depreciation expense will be less. SO you will recognize the benefit of your good decision over time instead of all at once.
Quote from: Gevans on February 13, 2014, 10:08:02 PM
But the way this game is set up.........it doesn't care what the bank value is, it only cares what you paid for it.
This is exactly how accounting works.
Sami........I know that's not how it's done in the real world.
Any substantial asset like that would be appraised for it's real value, which is represented in AirwaySim by the banks appraised value.
No lender that can't count on government bailouts would ever lend against an asset based what the purchaser paid for it instead of it's appraised value.
So I'm not an accountant but I also know what a liability is.
In this situation it would be a payment and debt you are responsible for.
Of coarse when you borrow money to buy an asset like a plane the loan that's using another plane as collateral is counted as a liability.
And in this game......... planes you lease are not considered a liability.
So that should mean that if your not liable for that aircraft lease you should be able to cancel it without financial consequences.
But that's not the case is it.
In fact.....unless the lease is nearly up your on the hook for a substantial amount of that aircraft's worth.........usually 1/4 to 1/2 of it's value.
That's a lot of money going away with nothing to show for it.
If that's not a liability I don't know what is.
And it still doesn't make sense why airlines that have all their planes leased, own nothing............. would have a higher net worth than a similar sized airline that owns all it's aircraft but has 1/2 used as collateral for loans that have a much lower interest rate than leasing.
And in a few years when the loan is paid off this airline now as another asset with no debt......... while the airline that leased at a much higher cost has nothing when the lease ends.
Yes, indeed, the lease liabilities are not currently counted in balance sheet. (I'm looking how to add that in the future)
The ironic thing is....
Even though financing and owning is considered a negative in this game this is what's saved my airline's butt.
My DC-4's and 6's are all leased but most of them are a little too big for the routes there on and mostly running at 50% - 80% capacity.
It's easier to fill up my C-46's and so there running at 60% - 99% capacity.
Normally the larger aircraft are more efficient and they should still be fine but it is very competitive on my routes.
But almost all my C-46's are owned and only half are financed, my cost's of owning these has worked out to about 1/6 of leasing and combined with the higher load percentage of these smaller planes I'm making as much or more profit per C-46 as I do with each of my much more expensive DC-4/6's........at a fraction of the cost.
If it weren't for buying and financing those C-46's I wouldn't have had the money to order new, better planes, I might of even gone bankrupt by now.
Quote from: Gevans on February 15, 2014, 06:44:41 PM
The ironic thing is....
Even though financing and owning is considered a negative in this game this is what's saved my airline's butt.
My DC-4's and 6's are all leased but most of them are a little too big for the routes there on and mostly running at 50% - 80% capacity.
It's easier to fill up my C-46's and so there running at 60% - 99% capacity.
Normally the larger aircraft are more efficient and they should still be fine but it is very competitive on my routes.
But almost all my C-46's are owned and only half are financed, my cost's of owning these has worked out to about 1/6 of leasing and combined with the higher load percentage of these smaller planes I'm making as much or more profit per C-46 as I do with each of my much more expensive DC-4/6's........at a fraction of the cost.
If it weren't for buying and financing those C-46's I wouldn't have had the money to order new, better planes, I might of even gone bankrupt by now.
It's not a negative, whatever gave you that idea...
Because...........owning and using low interest financing is considered a liability while using high interest leasing is not.
read my post # 41
Quote from: Gevans on February 15, 2014, 08:52:40 PM
Because...........owning and using low interest financing is considered a liability while using high interest leasing is not.
While I agree that leases should show up as a liability that difference in and of itself is not sufficient to turn owning into a negative compared to leasing. As you pointed out there are numerous other upsides to owning. Namely improved cash flow, increased access to lower interest loans, and increased flexibility.
I agree 100%
That's why I think the game is backwards...........leasing should be more of a liability than owning & using low interest loans, if you don't like an aircraft you own sell it or lease it out.
If your in a long term lease you are stuck, if you cancel the lease you are penalized a significant value of that aircraft.
I think the only advantage leasing should have over buying is reducing your cash outlay for acquiring aircraft quickly, especially when it can take years before new aircraft are delivered.
It defiantly should not have the extra bonus of adding to your company's value.........which is what happens when leasing aircraft is not considered a liability and owning with financing is.
Quote from: Gevans on February 15, 2014, 09:43:26 PM
I agree 100%
That's why I think the game is backwards...........leasing should be more of a liability than owning & using low interest loans, if you don't like an aircraft you own sell it or lease it out.
If your in a long term lease you are stuck, if you cancel the lease you are penalized a significant value of that aircraft.
let's see, first you pay the full amount of the aircraft, then you found out the aircraft does not work(happens to me many many times unless you start in the exact same HQ/time era everytime) you might get stuck unable to sell it. You will need to store(something sami added) and then pay maintience(D check) to wait til 10 years to be scrapped because your piece of junk is not wanted in the market... ending up with major loss
Well, if you make a really bad choice of buying an aircraft nobody else wants to lease or buy even at below market value then you likely have a lot more problems than with just picking aircraft.
Likely in that case you won't be able to buy aircraft because your airline doesn't make enough money anyways.
I have one of my lowly C-46's leased out for more than I paid for it right now and it's one of my oldest planes.
I make fun of them but there actually a very profitable small aircraft......I think the most profitable small aircraft in 1955 anyways.
The problem is going to be my leased DC-4's and later my DC-6's........the new aircraft I have ordered are going to be faster and more efficient for my routes but I can't get rid of those leased planes without a huge penalty.
If I'd bought them I could sell them for close to what their value is because airlines are still ordering new ones.
But because I leased .........I'll be better off to keep them flying even if it's at a loss.
I know, I'll put them on my busiest routes and double the already tripled overcapacity..... that way my competitors can lose just as much money as me.
I agree, it is important to understand how to calculate credit rating to avoid credit risk. Apparently, VantageScore 3.0 is the most recent form of the credit rating (http://personalmoneynetwork.com/moneyblog/2013/03/13/vantagescore-3-0-could-help-millions-get-credit/) model produced by Experian, Equifax and TransUnion, the three major credit rating bureaus. With it, thousands of Americans will see a hike in their credit rating, and millions of others can get the credit that has hurt them in the past.