Proposal: real joint ventures as a solution to dummy investment holdings

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1

My proposal is to implement real joint ventures as a solution to dummy investment holdings.

The most important characteristic of a joint venture company would be a shared control.

I have been thinking of two type of joint ventures that could be implemented, and they can work independently one from another.

1. Private Investment

Private placement investment would allow airline to invest capital to an existing airline, and receive an agreed upon share percentage. This setup could be used to help a struggling airline, for example. The features of this setup would be:

- An investor company must have equity of 100 million or more and be existent of 6 months (24 weeks) of more

- Beneficiary company must have equity of 25 million or more and be existent for 3 month (12 weeks) or more

- Beneficiary company must have at least 20 million in leasing deposits or more

- Beneficiary and investor would agree on % (less than 50%) that would be given to investor

- Investor would receive exact % of profit of the beneficiary airline (e.g. 49%, if 49-percent share is agreed upon)

- Investor could invest up to double the amount of equity of the beneficiary company, in return for a maximum of 49% share

- Both investor and beneficiary would have shared control of the airline, but investor would have limited control

- Investor's limited control would allow: a) Scheduling, activations, and cancellations, b) Price adjustments, c) up to 2-3 new airplane leases per day, d) create and apply seating and service profiles

- Investor would not be allowed to: a) cancel leases, b) sign interline contracts, c) pick maintenance provider, d) do anything finance-related, e) purchase aircraft, f) lease out aircraft to others or within holding, g) establish new subsidiaries, h) liquidate ... and maybe some more things that have not crossed my mind

2. New joint venture

The feature of this would be for two airlines to create a new joint venture, with 51/49 share. However, both would have 100% control of the airline with the exception of liquidation (which would require voting-like setup as is present with alliances with 100% voting for liquidation).

This would allow two partners to establish an airline for mutual benefit which they both could control and operate (e.g. establishing a long distance airline for two short haul airlines, or establish a feeder/regional operation that would serve two mainlines etc.) The JV could be either in one country or in two countries, and would have traffic rights of the majority shareholder.

In this setup, the profits would be agreed upon percentage, and would be distributed by the percentage ownership ratio. E.g. partners could agree that 50% of profits be paid out, split according to ownership stake (e.g. 51/49 %). The value could be changed weekly, by voting of the partners.

The main feature is that both partners would have absolute control of the joint venture airline with the above-mentioned exception of liquidation.

To make the second case attractive for AS, it could be set up that a pure joint venture company would be charged 2 credits per day, 1 for each partner.

The above listed proposals would enhance player cooperation and would eliminate the need for players to come up with solutions-to-the-alike of dummy investment companies, etc.

2

Personally, I'd like to see an expansion of the stock market side of the game, but every time I suggest something, I get told "This is AirlineSim, not InvestmentSim". I think you're going to run into that.

The "private investment" looks like it'd be tedious to code at best. I'm curious why anyone would hand over decision-making abilities to someone else? Also, if someone invests in a company after it's on the stock market, the money goes to the holding (or company owner), not the airline in question. If it added to the holding, the airline's position wouldn't be changed much, if any at all. If it added equity to the airline, it'd be circumventing the rules about adding equity to publicly traded companies.

For the joint venture -- this can, generally, be done, and is actually being done by myself and another player. He wanted a long haul carrier to work exclusively with his airline. We were competitors at a hub. We entered private negotiations, and I ended up creating a long haul carrier for both his airline and mine (but mostly his). When there was enough money to do the IPO, I did that. We are getting to the point where he will have 49% control of the company, I will have 51%. In return, he let me have the hub. It's not as in-depth as your idea, but a good portion of it can be accomplished.

The above listed proposals would enhance player cooperation and would eliminate the need for players to come up with solutions-to-the-alike of dummy investment companies, etc.

I'm confused by this. Players form alliances, make agreements between themselves, and compete against others quite efficiently. What do you consider a dummy investment corporation and why do they need to be eliminated? I own an investment corporation. It doesn't have a lot of money, but it's fun to mess around with.

3

I'm confused by this. Players form alliances, make agreements between themselves, and compete against others quite efficiently. What do you consider a dummy investment corporation and why do they need to be eliminated? I own an investment corporation. It doesn't have a lot of money, but it's fun to mess around with.

!!!!

I didn't say dummy investment companies must be eliminated. The UAB said that. (Aren't you in UAB yet?)

http://community.airlinesim.aero/topic/6962-en-user-advisory-board-decission-deletion-sweet-rio-airline-on-fornebu/

http://community.airlinesim.aero/topic/6961-en-user-advisory-board-decission-deletion-airline-for-you-holding-on-aspern/

and the subsequent heated discussion in German forum (use Google Translate, it's an interesting read)

http://community.airlinesim.aero/topic/6969-l%C3%B6schung-von-sweet-rio-arline/

Dummy investment company was defined by UAB (see Sweet Rio case) as a company/holding set up by a player (on a server that allows multiple holdings per player) with the purpose to give traffic rights in his holding's country to a different player's airline by using investment schema and stock market.

Again it is not me saying that kind of setup is bad. It was being tolerated by AS for years now, however a recent UAB decision made clear such cases will no longer be tolerated.

My suggestion was to offer solutions to such cases (probably too late for now, but could be used in the future).

The first proposal (private investment) would allow to inject capital to an existing airline. To assure it's a bona fide transaction, I outlined some proposed limitations. Why would somebody cease control of his company (or partial control)? Well... maybe the airline is struggling and could get help and guidance of someone more experienced. For that reason, I outlined what would be a "limited control". And yes the private placement would inject capital to the airline, to help expand/restructure the airline, etc. But again the airline would not be traded on a stock market. For this, a parallel "private placement marked" could be constructed, but shares could not be traded. It would be only to index/track/list such companies, without any possibility of transacting. So it would be really just an indexing tool. Also financial information from such private-placement joint ventures would not be available to third parties.

But now onto a more probable case, the new joint venture setup. I know of your case and you explained it to me in private messaging some time ago. But one issue I see is that the majority partner has control. The other partner cannot do anything, but message you and ask you to do something. In this case, for new joint venture setup, a shared control would be ideal. Also one of the problems I see is that the company only distributes 15% in dividends. If a true joint venture is created as per my proposal, in such scenario players could decide to distribute any amount of profits they want, e.g. 50% of profits as dividends, or even 100% in good times. That's the main difference between your setup and the proposed setup.

While your setup helps both of the airlines (you and other player), the proposed setup I suggested would not only help both the airlines (players), it would also allow them both to control such a joint venture airline equally. And for a joint control, thus, the proposed increased credit consumption 1+1 credit.

4

@rubiohiguey2000

First I would like to thank you for your proposal. But this is in the complete oposite of the aims of AirlineSim. I can understand that it is interesting to expand and expand and at the end to be the best of all. But that is not the way AirlineSim wants to work. If we wanted something like this, we wouldn't have some rules we currently have. To help strugling airlines, we consider a kind of bonds. But it will never be a partly control of the airline. On the one hand this would mean an extensive workload for coding this and on the other hand we would see the large airlines to add further power in the market. One airline will always be in control of only one player at the same time.

There is a reason that we do have slots and market restrictions and this is the variety of players. We do not have the intention to have one player owning the world ;) And to make this clear ... there was no toleration of pure investment holding with the sole aim to gain traffic rights. The toleration is having such a jount venture with the interest of both (and not only in dividends, but in operations).

The dividends are currently limited to 15%. This means if you hold 100% of the shares or only 1% - the total amount of dividends is 15%. If we want to change that, it would be a way to let the player increase/decrease the dividend by himself. But the percentage from the complete dividend sum is paid to the shareholder by the percentage of their shares. So we currently have the 51% and 49% payment of the dividend. But from the complete dividend sum and not from the earnings.

@caithes

The stock market is not working in AirlineSim and is higly risky to be used for cheating in a more or less intensive way. That's the reason why we consider to throw it away in favour of a bond-system and other solution for airline take-over. But this is more likely a mid-term issue.

5

@caithes

The stock market is not working in AirlineSim and is higly risky to be used for cheating in a more or less intensive way. That's the reason why we consider to throw it away in favour of a bond-system and other solution for airline take-over. But this is more likely a mid-term issue.

I didn't know this. Personally, I like the idea of a stock market, but I know and have seen how easy it is to cheat with it. Ah well. If it has to be changed, it has to be changed.