Based on my observation, under the current credit financing system, it is still much more expensive to buy than to lease an aircraft. The current leasing system is equivalent to a 95% lender contribution purchase with a much lower weekly installment.
One way to quickly solve this - significantly increase the weekly leasing cost (it should be even more expensive than a 95% lender contribution purchase), and make the initial capital to 50,000,000 (from the current 10,000,000). In this case leasing will be good for initial quick expansion, but it’ll be more costly than purchasing in the long run.
Alternatively, make the purchase borrowing rate much lower. Currently in Yeager III, the rate for loans with securities is 32.5%. This is crazy! Your credit card rate is lower than this. The IRR for the distressed aircraft leasing business is only ~10%, and 10% is already a very profitable return rate.
In a nutshell, leasing is de facto purchasing with very little down payment. It should be good for initial quick expansion, but more costly than purchasing in the long run. And long-run in AirlineSim often means only several months.
@AS-Team
Is there any chance that you could comment about the ‘normal’ (not aircraft-buy) loans situation?
One of my airlines is depending on re-financing by new loans and after the loan update the normal interst rate changed from 1-1.5 % p.w. to around 7 % p.w.
Was this development planned?
If no, could you please react to it and bring the interest rate back to what it was before?
If yes, why was there not the smallest piece of information about that for us players? And is there any way you would help out an airline which may go bankrupt due to the extreme rise of the rate?
Btw, I sent this question to the support mail address a while ago, but haven’t received an answer.
I do not know the interest rates on Yeager, but on my server the IRR for financing a bought aircraft is presently around 0,2%. The thing is you only see it if on the right bottom of the page for new orders. The given interest rates on the overview page can be easily forgotten, they are nor correct nor of any relevance as the IRR differs for each individual company.
Which server are you in? I’m not sure what kind of IRR do you mean. When I mentioned IRR, I was talking about the distress aircraft leasing desk at a huge American bank in real life. It was not about the IRR of your AirlineSim airline.
No matter what, currently leasing an aircraft is still much more appealing than buying due to much lower cost.
Leasing will hopefully be addressed in a future update. We were thinking about switching leasing to new, more dynamic formulas alongside the loan overhaul but eventually decided against it because there were too many moving parts.
Re interest rates for “normal” loans: While an upcoming maintenance patch will likely bring them down, expect them to remain higher than they were in the past. Cash loans in their current form add very little to the game except a cheap source of cash for enterprises that already have enough (otherwise they wouldn’t get loans), granting them even more leverage and hence fueling the “large vs. small airlines” problem. I hope we can properly address this issue together with a working replacement for the stock market…some time.
Re interest rates for “normal” loans: While an upcoming maintenance patch will likely bring them down, expect them to remain higher than they were in the past.
Ok, thanks. Any word on when that will be approximately? If it will take several month the airline I’m currently trying to save will most likely not exist then anymore.
Can you elaborate? I’d like to understand how this works.
Very easy. Your airline is earning some money. Enough to pay the interest, but not enough for the pay downs of the loans. Therefore the balance of the bank account is going down. So at least for a part of the pay downs of the loans you have to take new loans. As long as the statement of profit and loss is positive you can get fewer new loans as you pay back older ones. So over time the total loan amount will reduce.
Example:
You have to pay down 5 millions per week at your old loans (leaving out the interest here). You make a profit of 1 million per week (after paying the interest). To avoid running out of money on your bank account you have to get a new loan of 4 millions. Overall your total loans reduce by 1 million.
Let’s say the interest rate of the old loans is 1%, so you saving 50.000 (since you paid back 5 million) of interst payment the next week.
The new loan is 4 million, but with an interest rate of 8%. So you have to pay 320.000 per week for this now. Hence you have to pay 270.000 more of interest than the week before. Calculate this for some more weeks. If you fail to get your airline very profitable in a fast way it will last not much longer.
If you need new loans to pay back principal on old loans, your loan base increases, not decreases. Getting new loans to pay off installments of old loans is called a loan spiral… And it will come a moment it will spiral out of control.
If you need new loans to pay back principal on old loans, your loan base increases, not decreases. Getting new loans to pay off installments of old loans is called a loan spiral… And it will come a moment it will spiral out of control.
If you need just 4 million of new loans to pay back 5 million old loans (like described in the example), the loan base decreases by 1 milliion. Sure, it is a long way out, but it can work. A loan spiral would be if you need more new loans than you pay back old ones. Then the base increases.
As a reminder for you: my airline still has the difference between the accounting liabilities and the loans in the credit overview. Meanwhile 3 (!) Weeks have passed and I have no news about the result of your research.
Thanks a lot!
Hallo Admins,
zur Erinnerung für euch: Es gibt bei meiner Airline noch immer die Differenz zwischen den bilanbuchhalterischen Verbindlichkeiten und den Krediten in der Kreditübersicht. Mittlerweile sind 3 (!) Wochen vergangen und ich habe keine Nachricht über das Resultat eurer Recherche.
Cash loans in their current form add very little to the game except a cheap source of cash for enterprises that already have enough (otherwise they wouldn’t get loans)
Well, that what you called “little” is for me trying to rescue my airline. I know I was lazy for quite some time and have mounted a lot of debts in that time. But now I depend on getting new loans for at least parts of the pay backs I have to make for the old loans. With 7-8% per week (!!) this is impossible.
This seems unlikely to me. I had two affected airlines on Riem as well and the balance sheet now shows the correct debt amount again.
If that’s not the case for you, send the details to AS Support, that’d be more useful.
By saying it seems unlikely to you do you mean that I am creating non existent bugs or what? As soon as my other support reports sent months ago are solved we can talk about it, until then it is a waste of time for me. All I wanted to say is, that the mistake in my case is still there I do not really care if you believe me or if it is changed. It was ment as feedback for Martin, not for you. Anyways thanks for your wasteless reply.