Liquidation Calculation

English Boards General
1

When you liquidate a subsidiary, I know you have to pay your staff the severance package, but what happens to lease deposits?

1. E.g. if you have 80,000 weekly payroll, you have to pay your staff 320,000 when they are fired, correct? (4x weekly payroll)

2. What happens to aircraft lease deposits? Wouldn't the lease rate be taken, and the remainder of lease deposit returned to you?

e.g. if you have 8x $10,000 lease, that means you have $1,000,000 in lease deposit. Shouldn't  $920,000 be returned back to you when you liquidate?

Thanks,

2

I'm not 100% sure, so correct me if I'm wrong, but I guess you are correct with 2....it will be the same as if you just cancel the leasing contract

3

Hi,

yes indeed. You get the deposit back, minus the last weekly leasing cost.

Jan

4

Thanks for input. I did a test subsidiary which had wrong traffic rights (I created in investment-friendly country and wanted to fly holding home routes) which obviously can only work if you place subsidiary in investment-restricted country... I lost about 3 millions in the process.. well lesson learned.

But either the employee liquidation is inanely expensive, or I am somewhere missing 800k in the liquidation process...

5

But either the employee liquidation is inanely expensive, or I am somewhere missing 800k in the liquidation process...

Yup, you made a mistake here:

1. E.g. if you have 80,000 weekly payroll, you have to pay your staff 320,000 when they are fired, correct? (4x weekly payroll)

It´s six weeks, not four.

6

Even at 6 weeks, still missing around 650k

7

What about the cancelling of booked flights?

8

What about the cancelling of booked flights?

None ... as i said the subsidiary was an experimental thing for basing in a different country and flying back home, the airline did not have any traffic rights back home so no flights books, thus no compensation.

Btw it is really illogical that a subsidiary based in an investment-friendly country cannot fly in mother company's country, but a subsidiary based in traffic-restricted country, can.

E.g. A holding based in USA. A subsidiary based in Panama (investment friendly) cannot fly domestic US. But a subsidiary based in Venezuela (traffic restricted) can fly domestic US.

9

but the subsidary based in Venezuela can't fly in Venezuela

10

but the subsidary based in Venezuela can't fly in Venezuela

Yes that's correct, but it can fly in US at substantial lower overhead cost.

11

the difference in wages is only about 1%. using this, thou, might be considered bug using and would then be punishable.

12

Using what? You mean an airline based in one country flying in another so they don't have to pay so much in salary? There are a lot of companies already doing this. I have a feeling I'm not understanding what you're saying.

13

looks like you got me right ;)

and I guess, only the team can tell us, if this is something desired or if it wasn't considered so far. if the latter, it might be called bug using. but that is not on me to decide.

and, as I pointed out, the difference in average salaries appears to be only 1% or 2%. Considering, that HR only accounts for no more than 10% of expenses, that's nothing I would be too concerned about.

and we are getting really off topic here ;)

14

the difference in wages is only about 1%. using this, thou, might be considered bug using and would then be punishable.

I don't think so.

As per AS: I don't see any reason why this should not be allowed.

15

Yeah, back to the topic. I am still missing some liquidation money.

Had 1.58 million cash, 900k in lease deposits, 80k in wages. So that would be 80x6 = 480k in severance pay, plus 810k returned in lease money. I should have ended up with roughly 1.9 million returned. I was returned 1.36 million.That's like 550k missing right in there...

16

the difference in wages is only about 1%. using this, thou, might be considered bug using and would then be punishable.

Hm... somebody better tell O'Leary (Ryanair) that is bug using  ;-)

Yeah, back to the topic. I am still missing some liquidation money.

Had 1.58 million cash, 900k in lease deposits, 80k in wages. So that would be 80x6 = 480k in severance pay, plus 810k returned in lease money. I should have ended up with roughly 1.9 million returned. I was returned 1.36 million.That's like 550k missing right in there...

Hi,

how did you calculate severance pay ? Your salaries, or the country average ? Maybe there's a difference in what they got.

Did you subtract the weekly lease from the deposit ?

And if you thought you would get the balance value minus salaries and lease, did you perhaps have any seats that had to be written off ?

Jan

17

Hm... somebody better tell O'Leary (Ryanair) that is bug using  ;-)

Hi,

how did you calculate severance pay ? Your salaries, or the country average ? Maybe there's a difference in what they got.

Did you subtract the weekly lease from the deposit ?

And if you thought you would get the balance value minus salaries and lease, did you perhaps have any seats that had to be written off ?

Jan

Not only O'Leary... also Norwegian based its international long haul operation in Dublin, so they can hire Thai crews with average salary of 500 USD.

how did you calculate severance pay ? Your salaries, or the country average ? Maybe there's a difference in what they got.

My salaries, which i reduced to absolute minimum before liquidation. But even if we calculate country average, the liquidation difference is still high

Did you subtract the weekly lease from the deposit ?

Yeah, 900k in lease deposits = 810k in lease return (90k in lease)

And if you thought you would get the balance value minus salaries and lease, did you perhaps have any seats that had to be written off ?

I do not understand this part... I paid for the seats, when installed, deducted form balance. What other "writing off" seats is there?

18

The payment to your staff is not based on your settings nor the average of the country. It is based on a standard salary where it all began and where your settings and the average country  values may differ.

19

Oh, good to know. I used to think it was based on the country´s average.

20

And if you thought you would get the balance value minus salaries and lease, did you perhaps have any seats that had to be written off ?

[quote] I do not understand this part... I paid for the seats, when installed, deducted form balance. What other "writing off" seats is there? [/quote]

Hi,

sorry for not being clear enough.

I wondered how you started your calculations. If you used the balance value of your airline, then subtracted the last lease and the salaries/severance payments, you forgot the seats. The seats are paid for, but they are still in the balance as an investment. When you return the planes or delete the airline, the value of the seats is written off.

But you also deducted the value of the seats from your balance, so it cannot be the seats either that caused the difference.

Jan