Leasing costs

English Boards General
21

This is where I see the general problem with interest rates in AS:

In AS, interest has to be paid on a weekly basis, calculated on the loan remainder. We've 260 interest periods for aircraft bound loans and 50 periods for unbound loans.

This vast number of periods is what makes loans so expensive in AS.

Just for comparison:

A real loan often has a duration of 12 years, with monthly installments but interest paid annually. That makes 144 installments and 12 interest periods as opposed to 50 or even 260.

Now let's do a quick calculation (please report possible errors as I'm writing this down quickly):

Say we buy an aircraft on loan for 100m$, interest is 1.5%, 260 periods:

The total interest is (100m/2)*0.015*(260+1) = 196m$ - that's twice as much interest as the aircraft itself would cost us if paid "cash".

Initial weekly charge: 100m$/260+100m$*0.015 = 1,884,615$, average weekly charge: 1,135,573$

A 100m$ airframe on lease would cost you 500,000$/week - the extra 635k$ can hardly be considered self-supporting.

Now let me try a different approach with the following suggestion:

Let's adapt the real business model of 144 installments and 12 interest periods => 144 weeks with interest only maturing every 12 weeks.

Again 100m$, interest 1.5%, 144 installments, 12 periods:

Total interest: 9,75m$

Initital weekly charge: 100m$/144+100m$*0.015/12 = 819,444$, average weekly charge: 761,686$

We're fairly close to the leasing costs here and rising or decreasing interest rates have a much lesser effect.

Bear in mind that all this has to be considered with reagards to a balanced gameplay, neither favouring lease nor loans! But the above example looks fairly close to this approach IMO.

Martin, sk? ;)

22

Even more so i would like to choose myself the loan period. Not something to be imposed on me. Maybe i want to take out a loan of 10 million and i can afford to pay 1 million each week, then i would want to pay back the loan in 10 installments. This is how it works on real life too. You can choose to pay back a loan in 5 years or 10 years or anything else you can afford.

Of course i can pay back any sum anytime (which is good). But then that is an additional task which i have to remember each time. I do, but it would be more comfortable to choose the number of installments myself.

23

I think I should put some historic perspective to this discussion, sorry for lengthy explanation.

It wasn't mean like "player trap" and some year-two ago loans were quite useful tool. Before introduction of current plane market the only way how to get second-hand plane was to buy it. Way back than there was two ways of developing, especially on newly launched words: either go with new leased planes or with second-hand machines bought on loan. Loan rates were tuned to balance those two branches reasonably and this balance remained, I feel.Higher loan rates compensated much lower acquisition costs for second-hand, so none of players get major advantage.

With introduction of current market, when player is able to lease anything he want, loans became of little use. Additional "fraud protection" limits made it even worse for loans, in current system they can be used only in time of deep "AGEX crisis". Some changes would've been nice, but I don't think it's the most pressing matter in current AS.

Personally, I was able to rise 2 airlines with loans, both deleted in blooming and expanding state. It's just AS landscape changed since than.

24

So when I am looking at specific flights, the line that says Leasing/Depreciation  is already deducting my lease payment from my profit for me? I just cancelled a schedule because it seemed that there was no way the plane would be profitable when thinking about what it needed to be making per flight to make its lease. 

25

So when I am looking at specific flights, the line that says Leasing/Depreciation  is already deducting my lease payment from my profit for me? I just cancelled a schedule because it seemed that there was no way the plane would be profitable when thinking about what it needed to be making per flight to make its lease.

Only the direct costs (fuel, catering, passenger/cargo/aircraft handling, ATC, landing fees) need to be covered by your revenues, those are paid out when a flight is scheduled to depart. All of the indirect expenses are paid out weekly, all staffing costs as part of your week-end closing, and lease payments as the weekly lease payment that you make. The indirect costs that are detailed to you are a proportion of that weekly cost based on the time that the aircraft is in use. Depending on the route and competition, you can sell seats where only the direct costs for a flight are covered at full load, because you can make up the difference in the weekly costs with your other services.

26

Only the direct costs (fuel, catering, passenger/cargo/aircraft handling, ATC, landing fees) need to be covered by your revenues, those are paid out when a flight is scheduled to depart. All of the indirect expenses are paid out weekly, all staffing costs as part of your week-end closing, and lease payments as the weekly lease payment that you make. The indirect costs that are detailed to you are a proportion of that weekly cost based on the time that the aircraft is in use. Depending on the route and competition, you can sell seats where only the direct costs for a flight are covered at full load, because you can make up the difference in the weekly costs with your other services.

Ok, I see. That makes sense. I wasn't looking at direct/indirect there. I appreciate the answer, thank you.