601
Game News / New, increased penalties
« on: March 29, 2008, 07:35:02 pm »
But evidently 4 frequencies on one plane is okay 
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602
General Chat / What's Your DOP?
« on: March 29, 2008, 03:30:39 am »
13 million at the moment. I have a free EMB-120 and 8 MD83EJs getting delivered tomorrow. I'm hoping to get it up to 15 million.
603
General Chat / Cutting Costs
« on: March 28, 2008, 10:39:05 pm »
When I make the decision to buy planes, I'm usually sitting on more than enough to cover the cost of the purchase. :wink:
My business model hinges upon me serving and developing a niche market-premium services to be more specific. It doesn't hinge upon wild uncontrolled growth. Thus based on my model it's critical that costs are kept under tight control.
The work isn't a concern because a real company would hire someone to do it.
My estimates for costs are conservative anyway....at any given moment, I'll tell myself that it's 40% of revenue, and now it's sitting pretty at 34% of revenue and going down. Yes, I could operate on paper thin margins, but I like to have a financial cushion. i.e. if my revenues were slashed by 50% tomorrow, I'd still be making money.
dktc-have you considered the risk management factor also? That having a higher profit margin is actually risk mitigation......running on a 5% margin requires constant growth to be successful. Running on a 50-60% margin does not.
My business model hinges upon me serving and developing a niche market-premium services to be more specific. It doesn't hinge upon wild uncontrolled growth. Thus based on my model it's critical that costs are kept under tight control.
The work isn't a concern because a real company would hire someone to do it.
My estimates for costs are conservative anyway....at any given moment, I'll tell myself that it's 40% of revenue, and now it's sitting pretty at 34% of revenue and going down. Yes, I could operate on paper thin margins, but I like to have a financial cushion. i.e. if my revenues were slashed by 50% tomorrow, I'd still be making money.
dktc-have you considered the risk management factor also? That having a higher profit margin is actually risk mitigation......running on a 5% margin requires constant growth to be successful. Running on a 50-60% margin does not.
604
General Chat / Any advantages of B733
« on: March 28, 2008, 10:11:58 pm »
I buy my planes based on my business model. So far the plane of choice has been MD83 executive jets.
605
General Chat / Cutting Costs
« on: March 28, 2008, 10:05:07 pm »
By the way, I do have close to 200 million euros in profit. My revenues are a smidge under 300 million euros. If I were to leverage, I could grow a lot more wildly. But the wave of cost optimizing that's gonna come afterwards is going to be a LOT of work. The top airlines have 3000+ routes. I have 340. If you were to look at it graphically, you have the price curve, the ATC curve, the marginal cost curve, and in a saturated market, the marginal revenue curve IS the price curve.
Let's suspend belief that the price curve is actually above the minimum point of ATC for a moment. It is in the short run. In the long run, on the other hand, that's the graph. I'm at what I like to call cost optimization, and another company that has the same profit with twice as much revenue is a profit maximization which is MC=MR. Because I'm before MC=MR, I still have a ways to go. At the end of the day, I'll make more money.
Cost is handled internally. More revenue can only be achieved by selling more stuff. In a saturated market, which is easier? When I make the decision to buy planes, I consider them a sunk cost in the short run, so it doesn't matter what the cash outlay was. I assume that the money can't be recovered. But what I do see on my income statement is my lease expense going down. For faster growth, yeah, by all means, buy planes and expand, but for sustained, stable growth, cost optimization is necessary every step of the way.
By the way the number one reason startups fail is because their costs were out of control.
Let's suspend belief that the price curve is actually above the minimum point of ATC for a moment. It is in the short run. In the long run, on the other hand, that's the graph. I'm at what I like to call cost optimization, and another company that has the same profit with twice as much revenue is a profit maximization which is MC=MR. Because I'm before MC=MR, I still have a ways to go. At the end of the day, I'll make more money.
Cost is handled internally. More revenue can only be achieved by selling more stuff. In a saturated market, which is easier? When I make the decision to buy planes, I consider them a sunk cost in the short run, so it doesn't matter what the cash outlay was. I assume that the money can't be recovered. But what I do see on my income statement is my lease expense going down. For faster growth, yeah, by all means, buy planes and expand, but for sustained, stable growth, cost optimization is necessary every step of the way.
By the way the number one reason startups fail is because their costs were out of control.
606
General Chat / Cutting Costs
« on: March 28, 2008, 09:35:38 pm »Quote from: "MrOrange"
Quote from: "yourefired"f costs weren't such an important part of business, why are so many companies out to cut costs? Hmm? I thought costs didn't matter as long as you're making enough money to cover them.
Even if you're making enough money to cover the costs, cutting them is one more way to optimize your profit margins.
Exactly. That's what I'm saying. Say a company makes 1 billion euros a month. Say another company makes the same amount. Company 1 has costs of 800 million vs. company 2 which has costs of 500 million. Who makes more money?
By the way, in microeconomics, the cost of the plane minus the going lease rate would be considered sunk, and therefore not considered when making decisions.
What I'm saying is a company that doesn't optimize costs will get to diseconomies of scale SIGNIFICANTLY faster than a company that does. And because I optimize costs, and I keep more of my money, and my profit/expense ratio is actually 2/1, I'm nowhere near reaching diseconomies of scale. Remember MC=MR?
607
General Chat / Cutting Costs
« on: March 28, 2008, 09:32:20 pm »Quote from: "dktc"
Quote from: "yourefired"That's lovely.
Simple, right?
Usually people don't understand without some kind of numbers. Don't sweat it though. You are normal :wink:
*comment by dktc: I deleted my post in preparation to respond to yourefired's previous post... but... I was a tag too late obviously. Just want to say that this quote was really a post before*
Here's the thing though: When you make 1 billion euros a month on a 20% profit margin, or 300 million euros on a 67% margin, you're netting the same amount of money, only your 20% profit margin company can only expand so far, while the 67% margin company still has a ways to go in terms of expansion.
608
General Chat / Cutting Costs
« on: March 28, 2008, 09:24:33 pm »
That's lovely. But if costs weren't such an important part of business, why are so many companies out to cut costs? Hmm? I thought costs didn't matter as long as you're making enough money to cover them.
Speaking of accounting, can we have balance sheets next time? i.e. Assets=liabilities+equity.
PS. By the way, I did take financial accounting. I know why businesses leverage. I didn't say leverage was a bad thing.
Speaking of accounting, can we have balance sheets next time? i.e. Assets=liabilities+equity.
PS. By the way, I did take financial accounting. I know why businesses leverage. I didn't say leverage was a bad thing.
609
General Chat / Near World's End...!
« on: March 28, 2008, 09:21:49 pm »
Do we get to do stopovers sometime soon?
But a 15 year round would be interesting....then I can actually implement my long term strategy
But a 15 year round would be interesting....then I can actually implement my long term strategy
610
General Chat / Cutting Costs
« on: March 28, 2008, 07:47:21 pm »
Here's what I do:
Average gate cost:
Total gate rentals/(#routes*24)
Average cost of gas:
Total projected cost of gas/(#routes*24)
Average lease cost:
Total lease cost/(#routes*24)
Average staff and misc cost:
Total projected staff cost+total project misc cost/(#routes*24)
Average maintenance cost:
Total maintenance cost/(#routes*24)
Average projected total cost=The sum of the above
Average DOP:
DOP/#routes
If average DOP per route is about double average projected total cost, then great, keep expanding. If APTC is more than average DOP, then you'll want to consider cutting costs.
Who said a major in economics is useless?
Average gate cost:
Total gate rentals/(#routes*24)
Average cost of gas:
Total projected cost of gas/(#routes*24)
Average lease cost:
Total lease cost/(#routes*24)
Average staff and misc cost:
Total projected staff cost+total project misc cost/(#routes*24)
Average maintenance cost:
Total maintenance cost/(#routes*24)
Average projected total cost=The sum of the above
Average DOP:
DOP/#routes
If average DOP per route is about double average projected total cost, then great, keep expanding. If APTC is more than average DOP, then you'll want to consider cutting costs.
Who said a major in economics is useless?
611
Bugs / [Not a bug]Instant red in airline cash for no reason
« on: March 28, 2008, 05:56:28 pm »
Puts management consultant hat back on
Well at a 30% profit margin, the OP could use some cost cutting. On revenues of 300 million euros, I'm currently netting a smidge less than 190 million euros. For the OP to net 190 million euros, he would have to make 600 million euros. Thus the company will grow slower. I start cutting costs when expenses start to become more than 40% of revenues. An airline can only get so big and what determines who will make the most money is whoever has the lowest expenses.
dktc, you're right, cost cutting isn't always necessary a good thing. But I learned to control my costs early on when I was having cash flow trouble. Fast growth a such small margins is unsustainable, because your revenues will only go up so much in the short run. In the long run, however, yeah, it may be sustainable. Like I said, I approach expansion without regard to the cost of such expansion. I do it even if the growth results in a reduction in profit. But once I have finished the phase of expansion (I expand in phases i.e. phase I is North America, phase II is Europe, phase III is Hawaii, etc.) I look at where costs could be cut and cut them accordingly. Most of the time, it's lease costs. I eventually phased out ALL my regional planes and I'm currently only leasing longhaul planes. Plus when you're replacing leases with your own planes, you're no longer putting money in a competitor's pocket. If you don't have the cash flow to buy planes, then scour the lease market once in a while. If you see a cheap lease (or a lease that's cheaper than the current one you're paying for the same or comparable plane) then don't even have second thoughts about replacing it. There is no penalty for terminating a lease early.
Remember that lower costs and higher revenue are both money in the bank. Do what you like, but remember that maintaining 300 flights (a good 30-40% of which have little or no competition) is much easier, more fun and less time consuming than maintaining 700+ flights. Remember that you're only one person and you can only play so much Airline Mogul. If you want exponential growth, I have it right here. I used to have 150 routes. I made 2-3 million DOP. I now have 280 routes. I now make 12 million DOP.
Well at a 30% profit margin, the OP could use some cost cutting. On revenues of 300 million euros, I'm currently netting a smidge less than 190 million euros. For the OP to net 190 million euros, he would have to make 600 million euros. Thus the company will grow slower. I start cutting costs when expenses start to become more than 40% of revenues. An airline can only get so big and what determines who will make the most money is whoever has the lowest expenses.
dktc, you're right, cost cutting isn't always necessary a good thing. But I learned to control my costs early on when I was having cash flow trouble. Fast growth a such small margins is unsustainable, because your revenues will only go up so much in the short run. In the long run, however, yeah, it may be sustainable. Like I said, I approach expansion without regard to the cost of such expansion. I do it even if the growth results in a reduction in profit. But once I have finished the phase of expansion (I expand in phases i.e. phase I is North America, phase II is Europe, phase III is Hawaii, etc.) I look at where costs could be cut and cut them accordingly. Most of the time, it's lease costs. I eventually phased out ALL my regional planes and I'm currently only leasing longhaul planes. Plus when you're replacing leases with your own planes, you're no longer putting money in a competitor's pocket. If you don't have the cash flow to buy planes, then scour the lease market once in a while. If you see a cheap lease (or a lease that's cheaper than the current one you're paying for the same or comparable plane) then don't even have second thoughts about replacing it. There is no penalty for terminating a lease early.
Remember that lower costs and higher revenue are both money in the bank. Do what you like, but remember that maintaining 300 flights (a good 30-40% of which have little or no competition) is much easier, more fun and less time consuming than maintaining 700+ flights. Remember that you're only one person and you can only play so much Airline Mogul. If you want exponential growth, I have it right here. I used to have 150 routes. I made 2-3 million DOP. I now have 280 routes. I now make 12 million DOP.
612
General Chat / Near World's End...!
« on: March 28, 2008, 05:41:34 pm »Quote from: "Iguana"
I want a 50year game please
Um....maybe not. How bout a 25 year round starting in 1985? And require a plane replacement every 15 years.
613
General Chat / new to the game
« on: March 28, 2008, 05:04:59 pm »
It does. I often charge 2500+ on my US to Europe routes, even the competitive ones. On the noncompetitive ones, I can often get 3200-3700 or thereabouts. I think the highest fare I charge is 3626 for one of my European flights (I can't tell you which-my lawyers would kill me). I have 20 in operation right now (including 4 leases and excluding the 3 BBJs I have in operation), and I'm taking delivery of 4 more this evening. I probably have one of the largest business jet fleets of any mixed service airline with my net worth (about 700 million).
I actually picked up an MD83EJ for the range, but I saw that it was a viable approach to completely shift my focus to using these exclusively, I switched. My regional fleet consists of mostly EMB-120s.
I have 15 EJs and 12 on order and 5 leased. Plus 3 BBJs. For an airline worth less than a billion euros, I probably have the biggest operational fleet of EJs and BJs.
I actually picked up an MD83EJ for the range, but I saw that it was a viable approach to completely shift my focus to using these exclusively, I switched. My regional fleet consists of mostly EMB-120s.
I have 15 EJs and 12 on order and 5 leased. Plus 3 BBJs. For an airline worth less than a billion euros, I probably have the biggest operational fleet of EJs and BJs.
614
Bugs / [Not a bug]Instant red in airline cash for no reason
« on: March 27, 2008, 11:59:40 pm »
Puts management consultant hat on
As the owner/CEO of an airline that has grown ten fold in 8 game months (though I did have some help), I can tell you that your expenses are too high. Your profit margin is in the 30% range. The optimal profit margin for growth is about 60-70%, which is where I am right now.
This is my approach to growth: I am either maximizing revenue or minimizing costs. It's a cycle. You maximize revenue for a while, then take a break and optimize costs, and then grow more. Otherwise, with your profit margin, you'd have to make as much as 6 times as much as what I'm making to make as much profit as I am. And profit is money in the bank...your costs are money that's disappearing into thin air. You always want to keep long term growth in mind.
Feel free to PM me if you want more pointers. I've grown enough and well-enough established in my niche market to not be threatened by beginners
Puts management consultant hat back
As the owner/CEO of an airline that has grown ten fold in 8 game months (though I did have some help), I can tell you that your expenses are too high. Your profit margin is in the 30% range. The optimal profit margin for growth is about 60-70%, which is where I am right now.
This is my approach to growth: I am either maximizing revenue or minimizing costs. It's a cycle. You maximize revenue for a while, then take a break and optimize costs, and then grow more. Otherwise, with your profit margin, you'd have to make as much as 6 times as much as what I'm making to make as much profit as I am. And profit is money in the bank...your costs are money that's disappearing into thin air. You always want to keep long term growth in mind.
Feel free to PM me if you want more pointers. I've grown enough and well-enough established in my niche market to not be threatened by beginners
Puts management consultant hat back
615
General Chat / What is your aim this round?
« on: March 27, 2008, 05:03:49 pm »
To be the first successful airline with the name Independence Air.
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