Secondly, two of my 73G's are for sale at 36 million. But the question "what is a reasonable price" is a secondary question. That is an easy question, depending on some discussion and compromise. The first question is: is there enough demand on the buy market ? If there is enough demand, there is no need to regulate things. In my opinion there is not enough demand. Only 1% of the 73G's is owned and younger than 5 years.
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So I can only say again, in a game where only 1% of the nearly new planes is owned, there is no second hand market for them.
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Sure you didn't. Sorry if I sounded this way.
Well, I thought I gave you a good explanation for why the 2nd hand market doesn't work the way you want it.
It would work the way you want it if:
- either players would want to operate their aircraft much longer (20 years)
- or if the old market would still be active (ability to sell used planes at book value to AS)
Neither is true, so the true value (on the market) more and more differs from your book value the older your plane gets. In the example I showed you (depreciate over 5 years to scrap value), a 2.5 years old 73G would go for 26m. There's demand, just no supply at reasonable prices. ;)
The easy and quick availability of all aircraft for lease sure hinders the buy/sell market, there's no doubt about it.
You need to be prepared to get much less for your aging aircraft on the 2nd hand market than what your books tell you.
if I understand you well, a younger plane would sell for a better price ? I mean, closer to the book value ? I would have thought that a younger plane would even be more difficult to sell... I have the impression people only buy planes if they see a bargain ;-)
Anyway, at this moment my planes are up for sale at lower prices than AS is willing to sell them. At least, I have never seen a 2.5 year old 73G on the market for 36 million.
if I understand you well, a younger plane would sell for a better price ? I mean, closer to the book value ? I would have thought that a younger plane would even be more difficult to sell… I have the impression people only buy planes if they see a bargain
Anyway, at this moment my planes are up for sale at lower prices than AS is willing to sell them. At least, I have never seen a 2.5 year old 73G on the market for 36 million.
Jan
In a theory, yes.
Practically I’d rather order a new one then. At the recently asked interest rates anyways.
And yes, everyone’s after a bargain. You might be able to sell your 73G at 36m if there wouldn’t be too many on the market right now. At the moment, I see a price of around 30m for them.
Wasn’t it you who recently leased some 2.5 years old 73Gs?
in theory I should be able to sell any plane if it is offered at a competitive price. The problem is that only 1% of the recent planes are bought.
I have seen 73G's on offer for much less than 30 million. But they were older than 2.5 years ;-)
Out of my 60 owned 73G's, one has costed 30 million. All the others were more expensive, most of them around 39 million. I think that is a fair price for a nearly new 73G.
By the way, I just noticed that the book value of my planes doesn't go down... Purchase price and book value are all the same. That is not correct as planes decrease in value every week.
And it is quite possible that I leased "older" planes. I lease anything that is cheap if I want to try out new routes. But they will be replaced when the new 73G's are delivered.
I have done some rough calculations... it takes 3 years for a nearly new plane to repay itself if you sell it at scrap value. And then you haven't made any profit. In other words, no growth whatsoever. So if I want to keep my average fleet age around 1.5 years, game play means simply replacing planes every now and then.
in theory I should be able to sell any plane if it is offered at a competitive price. The problem is that only 1% of the recent planes are bought.
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Jan, I think you first need to understand how markets work - the much simplified AS-market in particular.
In order to know whether you offer at "competitve" prices, you'd need competition in first place. This however is not the case here. The official AS-aircraft trader has zero interest in selling anything below a certain rate and is driven by some programmed routine without any obvious intention to make profits. If it can't sell an airframe for standard-(book)-value minus 30% (not sure on the exact number) it is either scraped when more than 50 are on the market or is put up again at standard rate.
The problem here is that supply and demand on the buy/sell market is rather unbalanced due to the above explained price limits.
If the customer's (player's) price perception is only 30m for a 73G right now, but AS wont go lower than 36m, then we don't have a working market.
So while you offer at prices comparable to AS, you still offer way above the player's price perception => we have no deal.
Like I said, the perceived disadvantages of older aircraft results in a declination of price perceptions that is far bigger than the calculated depreciation in your books.
Just btw, the main problem with the aircraft market is, that AS offers everything for both leasing and buying - and at strictly constrained rates.
That's IMO where the trouble with the unbalanced market starts.
Prices for buying should not be bound to leasing and vice versa.
I'd suggest something like the following to boost the buying option - and to make the market more flexible:
If an airframe wasn't leased after its full offer cycle (after the prices dropped to the aforementioned ~-30% standard three times?) the leasing-option should be omitted with only the buying option remaining - free of any downward limits for the price from this point on.
Right now, if an airframe doesn't find any takers after the first round, it simply is put back up for the same standard rates as before. We do have a never ending cycle without the chance to ever find a taker for this airframe.
did you just say the the second hand market doesn't work properly as far as buying/selling planes is concerned ?
:P
You suggest AS should sell second hand planes without a bottom price. That would not be serious either. If there is little demand, a nearly new plane could be sold for peanuts... If a 73G decreases in value by 2 million per year, a one year old plane should not be on offer for 30 million.
It would also mean that old and rich airlines can buy cheap, while new and poor airlines have to lease expensive...
As far as I am concerned, AS may remove planes from the market (or put them through the cycle again) when they are 10% or 20% below their book value. And with book value I mean price of a new plane minus depreciation. I don't mind paying good money for a good plane.
I have taken a look at Pearls, a server that is one year old, and I have checked the 8 biggest users of airplanes that my airline also uses.
Antonov 148A
The 8 top users of this type operate 160 planes. 15 of them are owned...
and all 15 of them are owned by my airline.
Boeing 73G
the 8 top users of this type operate 1162 planes. None of them are owned.
My airline is not in the top 8 users, but owns 16 73G's.
Boeing 739 (900ER BGW)
The top 8 users of this type operate 954 planes. 25 of them are owned, but...
of these 25 planes, 21 are owned by my airline.
Now tell me how on earth there can be a functioning second hand market if nobody owns planes. As I have said before, it's lack of intellectual integrity to deny the problem.
did you just say the the second hand market doesn’t work properly as far as buying/selling planes is concerned ?
You suggest AS should sell second hand planes without a bottom price. That would not be serious either. If there is little demand, a nearly new plane could be sold for peanuts… If a 73G decreases in value by 2 million per year, a one year old plane should not be on offer for 30 million.
It would also mean that old and rich airlines can buy cheap, while new and poor airlines have to lease expensive…
As far as I am concerned, AS may remove planes from the market (or put them through the cycle again) when they are 10% or 20% below their book value. And with book value I mean price of a new plane minus depreciation. I don’t mind paying good money for a good plane.
Jan
No I did not as far as the inter-player market is concerned and I thought this at least was clear.
Take no offense, but as you’re either unwilling or unable to understand my points, I better not try any longer.
If an airframe wasn't leased after its full offer cycle (after the prices dropped to the aforementioned ~-30% standard three times?) the leasing-option should be omitted with only the buying option remaining - free of any downward limits for the price from this point on.
Huh ?
I understand the cheapest lease would be standard minus 30% (or whatever the limit is). And if the plane is not yet leased or sold, the price would go down further with only the option to buy.
That means airlines who don't have enough money to buy, can get a maximum discount of 30% when they lease a plane. Airlines who have enough money to buy, can get a better discount if they wait a bit. I am not unwilling to understand, I am only unwilling to agree ;-)
I understand the cheapest lease would be standard minus 30% (or whatever the limit is). And if the plane is not yet leased or sold, the price would go down further with only the option to buy.
That means airlines who don’t have enough money to buy, can get a maximum discount of 30% when they lease a plane. Airlines who have enough money to buy, can get a better discount if they wait a bit. I am not unwilling to understand, I am only unwilling to agree
Jan
Wasn’t it you complaining about the market? This would be an easy way to boost aircaft sales through the official channel. Sure wouldn’t help you to get the prices you’re expecting…
Anyways, I was aiming at your understanding of market mechanisms and buyer preferences and not about my halfways off-topic post about the AS aircraft trader you’ve quoted.
As far as your rich vs. poor airline argument is concerned…
There’s always the option of a loan purchase. I leave it to you to calculate when a loan purchase is to be preferred over a lease.
I am indeed complaining about the buy-market. Loud and clear :D
For a balanced game play, there should be enough offer and demand. I guess we agree on that.
The game depreciates a plane over a period of 20 years. Let's say plane X depreciates at a rate of 2 million per year. You get the most balanced game play if theory/concept and reality go together. In other words, a 2 year old plane should be leased/sold at roughly 4 million less than a new one, give or take 20%, depending on demand. A 10 year old plane should be sold at half price, again with a margin of 20%. I hope you agree with me so far.
If AS allows a 2 year old plane to be sold at half price, they push down the prices of all planes. Everybody would wait a bit longer before they buy a plane... because the price will drop further. And that would make the gap between book value and "real" value bigger.
Lowering the prices would indeed encourage people to buy planes... to look for bargains, but it would also increase the gap between book value and real value. And that would not improve a balanced game play. I guess that is also the reason why AS scraps planes if they are not sold at their bottom price.
Besides, I shall sell my planes on the Pearls server at scrap value. Will that stimulate people to buy planes ? I don't think so. They will buy 100 cheap bargains. That's all :-)
As for the "new and poor" airlines in my previous posting. I hadn't thought off buying on credit. But buying on credit is expensive and I would not recommend it. I save money until I have enough cash to buy.
You can put them on market too and sell them before you close down the airline.
Another possibility- if this is a subsidiary, then before you close down the airline, do an asset transfer of the aircraft either back to the holding, or to another subsidiary in the holding. You can do this if you own the aircraft outright and there is no outstanding loan. You still have the problem of selling the aircraft but at least you can specify the asking price.
I am indeed complaining about the buy-market. Loud and clear :D
For a balanced game play, there should be enough offer and demand. I guess we agree on that.
There is a general problem in that the number of players appears to be declining. Gatow is the only game world at near full capacity, followed by Pearls. The oldest gameworlds have the least players. If you look at the thousands of unemployed pilots and unused planes, it's no surprise that the market is rock bottom.
Maybe AS should consider offer incentives for the players to move off the older worlds and close them down.
