What is the benefit of building Terminal and/or Cargo?
Reducing costs mainly, also provides collateral for loans.
Should I build one of them myself or hire someone to do it?
Thats up to you. However, i would not recommend it to you, since building terminals is really expensive. Also, the outcome is so small, that a terminal only pays after a long time (years i guess).
Correct me if I’m wrong, but it appears it would take 127 weeks to pay off a terminal at the price of $11 per unit.
As far as I can see, even when you increase the size of the terminal it ends up at 127 weeks! (126.912121212) to be almost exact. It has a return rate of approx 40.96 over the period of a RL year.
As an added incentive however it drags your flight image up slightly - not sure how much however.
Thanks Dita…I am not good in mathematic so that I would rather focus on my core business Flying customers to their destination safely.
Unfortunately it is LONGER than that
Although your saving $11 per unit ($22000 a week on 2000 units) there is actually additional costs in overheads for the Staff to run the terminal.
Not sure on PAX terminals but on Cargo terminals I recall the figures work out to about $8.5-9.5 per unit in staffing costs so your actually only saving about $16 per unit rather than $25
Assuming the same cost for PAX staff, your saving just $1.5-2.5 per unit. Divide that into the 2.7 million… takes anywhere between 400-600 weeks…
However as stated it does increase ORS rating, which cant really be measured in terms of additional income via increase of prices etc
one of my smaller airlines runs just one terminal, and the figures are.
termina capacity: 24.103
employees ground handling: 101
so i´m saving 24.103*11 - 111 (I added 10% for additional administration)*727(wich might be more or less in other countries)
building that terminal cost 33.632.285
So you´´ll get your money back in something around 184 weeks, or 3,5 years
So, terminals are not the best thing to invest in if your planing do become rich quickly.
However, later on in the game they may make the difference.
I, for example, am the only one operating flights between ORD and LHR on Croydon, 5star terminals on both ends. 8 daily flights with an A380, load factor is at around 98%
Just out of curiosity I started the same route with a different company, same price, same seats, same service, same interlining, but no terminals, loads were at around 10%,
I then made same space in my terminals for the second airline, and voilá, sold out.
So, if at one point in the game, you don´t really know what to do with all those extra billions you have earned, I would invest them in terminals, but if there is still enough other things to do,
like new destinations, more planes, daughter companies, whatever, do them first.
I find them useful. I spend £2m on a terminal to reduce my costs for 2500 pax I think it was. I averaged it out at costing me $7/pax vs $11 std. I could then use the terminal as collateral for $1.5m in loans to add an A/C when the interest rates were at 0.80%. So to me, it averages out nicely. Reducing costs whilst also aiding expansion.
The bigger airlines in AS do this constantly. It saves them a fortune in the long term. They can often use the big 30k terminals as collateral for aircraft purchasing etc also.
There’s another way to do this - if your airline is a subsidiary of a holding, the holding can build the facility and let it at a reduced rate to the airline. That’s assuming the holding has enough cash in the first place, but since the airline is paying a reduced rate and if the holding is at least not losing money on the deal, there’s a net benefit.
However I assume you wouldn’t recommend this to start up with? Say 3 mil in the holding for initial terminal then 7 mil for the Sub airline to open initial routes?
Was debating trying this on Stapleton I must admit as ORS is now so important on busy routes the 5* terms could make the difference
I totally agree because at first thing I think I had better focus on building up the number of passengers, finding the profitable routes, and signing interling with potential airliners.
I wasn’t recommending it as a general policy. In my case I put $7 million into the airline and left $3 million in the holding, hoping that I could make a killing on the stock market , so I figured that at least the money could be put to use building a cargo terminal - $3 million is nowhere enough to build a passenger terminal, but you can build a small cargo terminal.
How do you create on.
Station then facilities then select what kind of terminal you want to build then just wright in the capacity and srart construction and boom you have a brand new terminal.
It is not that straight a calculation. As you can borrow back the money you invested, as loans. So you are essentially going to have to include that in your accounting as well…
Suppose you built for 100k
Then you get a loan of 80k @ 5%
Your returns are terminal rent savings/income + (profit%-interest%)*loan
Never calculated it to the point, but in a really long term seems to be raising income by a percent or two over baseline. I have 8 terminals with capacity more than 500,000 per week and more with lower capacity. Anyhow, since I profit ~600m per week the cost wasn’t an issue…