Higher Depreciation Rate

English Boards Suggestions and Ideas
1

I recently noticed that the depreciation rate of bought aircraft are very low.

This leads to very high book values and once you want to sell the aircraft, you end up with huge losses.

Therefore my suggestion would be to increase the weekly depreciation to a level that is similar or equal to the weekly leasing rate. I'd rather have a higher weekly depreciation and then can fly a still new aircraft at no cost or I can replace it/sell it and avoid making a loss at that time.

2

Very good idea. But half of the weekly leasing rate would be also fine.

3

Yes, currently it would take you 24 real years to depreciate the aircraft. That’s more than double the time of the whole up to date Airlinesim’s existence.

4

Hi,

if depreciation equals the monthly lease, a plane would be worth nothing after 4 years. If you then sell a four year old 73G for 10 million, your account will tell you that you made a 10 million profit by selling that plane. With the current depreciation I can sell a two/three year old 73G for about 34 million (if I find a buyer) and my accountant tells me that I lost 8 million by selling that airplane.

Whatever my accountant tells me, I know I rather get 34 million than 10 million  ;-)

At this moment a new 73G depreciates roughly 2 million per year. If after two years you sell that plane for 42 million, your accountant will not complain. It means you will have sold the plane at book value, so you made no loss.

The problem is not that depreciation goes too slowly. Problem is that there is nobody buys your plane if you ask 42 million. If I put a two/three year old 73G on the market for 34 million, that means I sell it at 80% of the book value. My accountant tells me I loose 8 million because I ask less than the book value of 42 million.

If I want to keep planes without paying extra staff for my fleet and network, I put them up for sale on the second hand market at 100%. Never has someone bought a second hand plane at the book value. I repeat, never. We're talking about buying, not leasing. If you want to sell a plane, you simply have to dive under the real value of the plane. You can sell a plane at book value when it is 10 years or older. And if you buy a 25 year old 735 for a few millions, you can probably even sell it with a profit

There are a few reasons...

AS sells second hand planes under the book value, so the game competes with you.

Return on investment is much higher if you lease planes, so a lot of people never buy.

Players know you have no alternative. If they don't buy it, you have to "give" the plane to AS for 10% (well... 15%) of the value.

By the way, you cannot sell a plane at book value. If you ask the real value, it will be on the market at 105% of the book value.

And I don't think higher depreciation rate would improve things... the result would be that AS sells second hand planes much cheaper than today. You would still have to compete with them  :-)

It would also make it a lot cheaper to lease used planes. So you would increase overall growth rate on a server.

So all in all, I don't think that just increasing depreciation rate would solve your problem.

However, I agree that 20 years (or 24 years) is a long time. Depreciation may be calculated in real time, profits are surely not in real time.

Jan

5

I agree, the main issue is the aircraft market, but I don't want to touch that.

But nevertheless I would prefer to have a higher depreciation rate (or possibly one that the player can choose).

  1. Right now your weekly profits are too high as your depreciation is too low
  2. Once you decide to sell the aircraft, you have to sell it at a discounted price. Then you are suddenly hit with a huge loss, or you are stuck with an asset you no longer want

Same applies to the cabin configuration, although here the effect is less dramatic, as the value is smaller.

6

Hi Matt,

I still don't get it... you want that your plane is worth less on paper, so if you sell it (at the same price as today) it looks as if you have not lost money. You will try to sell the plane at the same price as you do today, but it will look as if you did not loose so much money  :-)

By the way, if depreciation equals the lease, players who lease out planes actually loose money.

Anyway, if you want to get rid of a plane without loosing more money than the depreciation... put the plane in a subsidiary, lease out the plane and delete the subsidiary. You will get the book value back.

Jan

7

Well yes. It is kind of "weird" if you fly an aircraft for 3-4 (real years) and when you then decide to replace it, you suddenly show a 100M loss.

I just did replace all my 777s and I could have tried to sell them at book value (more or less). But as you said, nobody ever will buy that. So I put them out at 10%, at which they did sell. But now I show hundreds of millions in losses because my book values are still so much higher. That does not make sense.

And even accounting wise it is problematic. If you know, that there is no second market, you should be more cautious and depreciate to an effective value. And I also showed a too high profit in the last years.

Your method might work, but that could potentially be considered cheating, no?

8

@sobelair

This is an interesting information I didn't know. Now that I have tested it, it really works that way*. But couldn't that be considered ...cheating... by some people's metrics?

* Tested but not with any of my live airlines.

9

Hi Matth,

I am absolutely convinced there is no buy market for second hand triple sevens.

However, I have once started a discussion about the lack of buyers on the second hand market and I was the only guy supporting that statement. Other players said there *was* a buy market if I lowered my price enough.

I don't count the dollars, but I know from experience that you get much more than 15% if a plane is leased out. So I guess you get the book value. I have posted my experience on this very forum when I noticed it:

Hi Martin & Sascha,

last year I deleted a subsidiary that owned a few planes. The system (AS Trade and Leasing) paid me 10% or 15% of the book value of these planes. You explained me that the new system pays the minimum price (plus first bid) instead of the book value.

This afternoon I deleted another subsidiary that owned planes. However, in this case the planes were leased out. Strangely enough my holding received too much money. Much more than the 15% I expected. I can't tell exactly because I don't know how much money the holding had, but I guess the system paid me the book value of the planes.

Can you please check how the software handles the deletion procedure for planes that are leased out ?

Thanks,

Jan

I posted my question 2 years ago. So far nobody has replied to that post. That means it is a feature, not a bug. And apparently it doesn't bother anyone.

So until further notice I stick with my advice  :-)

Jan

10

@sobelair

This is an interesting information I didn't know. Now that I have tested it, it really works that way...

Hi George,

you're not the only guy who knows this game in and out  ;-)

Jan

11

Haha, very well then.

12

I agree, the main issue is the aircraft market, but I don't want to touch that.

But nevertheless I would prefer to have a higher depreciation rate (or possibly one that the player can choose).

[LIST=1][]Right now your weekly profits are too high as your depreciation is too low[/]

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I already suggested to leave it to the player to set the depreciation period for assets individually.

So you could set for example (rough idea):

739 D-AXXX, bought at 61m$

depreciate over 5 years

value at the end of depreciation: 30m$

The system would then pull this info to calculate flight costing etc.

There’s still so many believing their margins…

13

Hi,

as long as people realize that depreciation sets the maximum selling/leasing price of the plane. I mean... if you kept the plane a few years longer, you would only be able to sell it (or lease it out) for peanuts.

What about this: when a plane leaves the factory, it immediately looses 15% of its value. After that, depreciation continues at a rate that is similar to the current depreciation. Would such a system work ?

And it doesn't solve Matth's triple seven problem. He will still have to give them away if he wants to get rid of them.

Jan

14

IMO, the only way of a decent solution would be a complete rework of the aircraft market.

I don’t see a way around.

As is, the market doesn’t work, neither player to player, nor trader to player or vice versa. You just cannot run the config as is in a game that often has only one player online at a time.

I’d have different solutions in mind to get it to work and can only once again offer my help. Would this be something for the closed section?

15

The closed section ?