Finally got around to do some number crunching. You can find the read-only sheet here (but feel free to make your own copy to play around with), the relevant sheet is the “Harmonized Models” one:
Assumptions and AirlineSim specifics
- All this is based on the weird relationship of real time to game time in AS (everything in practice works on a weekly basis but the parameters are based on years)
- The goal is to achieve an initial improvement with minimal changes to existing code/systems/practices, so leasing and credit financing work (more or less) exactly the same way they do today, but the underlying formulas are different.
- The model assumes the purchase of a new aircraft with respective depreciations. Need to look into the best parameters for the purchase of used aircraft.
- To keep things simple, I assume that the leasing rate is simply the annuity the lessor would have to pay to finance the aircraft (without a down payment) + the weekly depreciation of the aircraft (because the lessor is and possibly remains the owner of the aircraft) + an arbitrary profit margin (covering anything from risk over re-marketing costs to…well…profit).
- Since leasing in AS is essentially a renting-model, the down payment for a leasing contract is actually a deposit refunded after the contract ends. I’ve ignored any imputed capital costs for that in my model.
Parameters
- Periods: This is more or less the key parameter, because it determines how big the weekly installments both for leasing and financing will be. Currently a leasing rate in AS is 0.5% of the aircraft value, which one could interpret as 200 periods. The current loan contracts use 260 periods for repayment. The latter actually leads to leasing rates in the general ballpark of the current model. Anything considerably lower than 200 periods would increase the overall leasing rates quite a bit.
- Interest rate: One of the less logical parameters, the interest rate in AS is based on the prime interest rate which in turn is computed based on the global weekly success of all airlines. In my model I treat it as an annual interest rate, though. All in all, this seems to work rather well if one of the goals is to not throw everything we have overboard and introduce a completely new pricing scheme for aircraft financing. You can plug in values anywhere between 1 and 25% and IMO, the resulting values look pretty feasible.
- Depreciation to Zero: Another years-based parameter I took this straight out of AS as it currently works. I wouldn’t touch it for now.
- Lessor Profit Margin: Could be anything, really. In my opinion, it should be something > 0%, though.
- Down Payment %: 5% is what is currently used on the aircraft market. When buying new aircraft it actually starts at 10% and can go up to 90%. Need to look into what makes sense here.
Assuming we leave everything else untouched, leasing contracts would just run forever with the option of purchasing the aircraft at some point at its book value (change of those terms are a different story). All in all, this is a very simple and risk-free model that players know and love.
Credit financing would also stay pretty much the same except for the hugely different way repayment and interest are computed and paid. We need to think about what that means for early redemption. I also think that payments for loan contracts should be able to drive you into the reds as they do now, meaning they carry a higher risk for a lower price (compared to leasing).