Airline Mogul Forum

How do you make an airline that is profitable

RAYON · 19 · 3919

RAYON

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on: February 18, 2008, 07:44:48 am
I want to know what I am doing wrong!!

Cash siduation
DOP:   €16,284
Airline Cash:   €-2,909,457
Airline Value:   €192,713

I have 1 plan! traveling from ONT to SBP
Frequency:    6
Loadfactor:   100%
Ticket Price: €99
Profit:      €16,283

That is it!!
Total Costs:     €708,809     €710,780   
Profit/Loss:    €-482,302    €-466,018
I am still suffering form my old mistakes gate cost is €700,000 actual €200,000
So I am realy earing 17,698 but with my debt it will take me 190 days to get into the black which is past the restart

So besides NOT making my gate mistake what can I do to make my small airline profitable next time??


Chavaquiah

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Reply #1 on: February 18, 2008, 07:58:57 am
Didn't it strike you as odd that your competitor could be charging €207 per seat while you had to go down to €99? :wink:

Your big mistake was that frequency 6 thing. Many seats on offer, prices came tumbling down. Instead of concentrating your single plane on a single route, you should have diversified. A single frequency would have given you pretty much the same profit (or even higher) and you could multiply that by 6 routes.

It's a little bit late but you could always email  :staff: and ask for a reset (for your company), so as to start again. With your current cash condition (that'll get worse in 1 hour) you may find it difficult to change much now.


Jps

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Reply #2 on: February 18, 2008, 08:22:02 am
Dont ask the staff for a reset.. it would waste the staff and your time because you wouldnt make profit in 6 days..

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pck

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Reply #3 on: February 18, 2008, 09:54:25 am
pm iranair777, he taught me some "rules" to become successful, and im using it next round


dktc

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Reply #4 on: February 18, 2008, 12:55:54 pm
Quote from: "pck"
pm iranair777, he taught me some "rules" to become successful, and im using it next round


His rules aren't all ideal :wink:

but yea... fly 1 freq to multiple airports would be my recommendation. Email :staff: for reset if needed.
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pck

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Reply #5 on: February 18, 2008, 12:57:22 pm
Quote from: "dktc"
Quote from: "pck"
pm iranair777, he taught me some "rules" to become successful, and im using it next round


His rules aren't all ideal :wink:

but yea... fly 1 freq to multiple airports would be my recommendation. Email :staff: for reset if needed.


True :lol:


RAYON

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Reply #6 on: February 18, 2008, 02:13:58 pm
What are the Rules?

and I wonder what it takes to run a website like this?


StephenM

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Reply #7 on: February 18, 2008, 02:20:48 pm
Quote from: "RAYON"
What are the Rules?

and I wonder what it takes to run a website like this?


About 3 years of work and a staff list of atleast 4 people together with a lot of skills in Databases, Programming, Graphics & Design, Industry Experience and a heck of a lot of research.
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iranair777

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Reply #8 on: February 18, 2008, 02:27:58 pm
Quote from: "StephenM"
Quote from: "RAYON"
What are the Rules?

and I wonder what it takes to run a website like this?


About 3 years of work and a staff list of atleast 4 people together with a lot of skills in Databases, Programming, Graphics & Design, Industry Experience and a heck of a lot of research.


he knows what hes talking about :lol: (duh!)

Ill send a copy over to you, but I agree on some points that DTKC has made to me, but I'm just writing down how I got to where I am with my airline


jameswyhk

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Reply #9 on: February 18, 2008, 02:32:07 pm
It is silly to concentrate on 1 route as a small airline.

------


Skyfox

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Reply #10 on: February 18, 2008, 03:33:42 pm
*Hits you hard with the diminishing returns stick*

Im sure this guy already gets the point, but that wont stop me from ranting.

High frequencies = Bad (in almost all cases)

The reason your not making much on a route with a frequency of 6 is due to an economic principal called 'Diminishing Returns'

Here is a defininition taken from a website

Diminishing returns
The more you have, the smaller is the extra benefit you get from having even more; also known as diseconomies of scale (see ECONOMIES OF SCALE). For instance, when workers have a lot of CAPITAL giving them a little more may not increase their PRODUCTIVITY anywhere near as much as would giving the same amount to workers who currently have little or no capital. This underpins the CATCH-UP EFFECT, whereby there is (supposedly) convergence between the rates of GROWTH of DEVELOPING COUNTRIES and developed ones. In the NEW ECONOMY, some economists argue, capital may not suffer from diminishing returns, or at least the amount of diminishing will be much smaller. There may even be ever increasing returns.


http://www.economist.com/research/Economics/searchActionTerms.cfm?query=diminishing+returns


There are other terms involved such as benefit and satisfaction. The satisfaction you recive for each additional unit, is incrementaly less than the previous. Here are some examples.

You go to a restaurant and order a piece of pie, that pie is great, its the best pie in the world. You tell the waitress, keep em coming, this pie is awsome! Second piece comes around, its also good, but somehow not as good as the first, since your already used to the flavor. Third piece is even less good, your stating to get full and you dont really want anymore. Forth piece downright bad, all you can do is sit there and poke at it. Its the same pie as before, but it satisfies you less because youve had enough.

Lets look at the practive. Diminishing returns plays many rolls in AM, alot of the mathematics are defined by this.

The most money you can extort from your passengers is by operating an aircraft with .5 frequency.  That means price per seat, not total income. So say the income you make from a .5 flight is X. You can run a higher frequenys, such as 1, but the income will not be 2X. it will be more like X+1/2X. Additional frequencies will look like X+1/2X+1/3X etc. Each additional frequencz will be worth less than the previous.

It can even get to the point where the opperations costs of the aircraft begin to detract from the finnal income. You might even be able to make more total income opperating a craft at a frequency of 2, than you would be at a frequency of 4.

All your doing through adding multiple frequencys is adding more seats into the route. Again through diminishing returns theory, the more seats there are, the lower thier value. It also helps to look at a competition, there might be 10 players running routes ONT/LAX, there are already plenty seats on this route, so you know you cant charge that much for new ones. Atleast not as much as on a route where there are fewer seats in existance.

You might argue ''But real airlines do it, why cant I'' Well Johnny, this isnt real life. This is a computerized simulation based upon mathematic equasions, simulation does not need to mean realism. The mathematics that runs this game is lined out based upon critera, there is no human element. No little suzie that is visiting her grandma in phoenix, No aunt Beru flying to her nephews graduation at the starfleet acadamy.

So all this being said, i would not recommend putting a craft on a frequency higher than 1. Out of all 500 plus flights i have, maybe 3 are above 1, and thats only to spite competators. So use your hardware well, spread it out, and look for routes with the lowest number of seats on them, with the highest number of potential passengers.


Air2000

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Reply #11 on: February 20, 2008, 07:18:55 pm
If your just starting to use AM Best way of making a proffit I found is to utilise your gates... dont start a base, and squeeze in as many routes as you can, pick destinations which willl have high loads, no more than 3... and try and get at least x2 frequencies for each route.

If you have a B99 with 19 seats and your flying to 6 destinations... you would prob end up paying more gate rental fees than proffit.

Also, try not to lease, you may find you have to initially.... and you can get some older slower aircraft for some good lease rates (Ive got some shorts skyvans leased at E100,000) ive leased one Convair 990 in this round for a total of 4 hours... (It seemed like a good idea at the time  :roll: )
Some of my top tips.....

Try and buy your own planes... not only does it increase your airline value (As you have more Assets)

Try and open a second base within resonable distance from your inital hub airport, I reccomend a close airport as if you are new to AM or at the start of a round, starting off you may have aircraft with limited range/slow etc... so by getting a second base close by it will help you utilise your rented gates you already have.

Also, try and build your own terminal at your base airports if you can... cuts down gate rental fee to nothing at that particular airport, also gives you the oportunity to expand, whereas if you rented, expansion maybe limited if there are no gate rental options left.

Thats some of the tips I would suggest.... Im not saying thats the best way to do things.... I know how a lot of people on here like to critise other peoples opinions, this is just some of my reccomended practises!
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RMAirlines

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Reply #12 on: February 21, 2008, 04:19:57 am
Your reason is probably your rental fees. Try to go for more routes over more frequencies. You're not the only one. I first freaked out when I realized my airline cash was $500,000 below.
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flyingscotsman

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Reply #13 on: February 21, 2008, 02:10:36 pm
I started out of a 'big' airpot BKK and soon realized why that was stupid.  SO I quickly moved to BKI which is within short-medium range distance and dual fed each of my routes and gates.  The one plane (where it has enough range) could serve both of my hubs.  I also concentrated on building a 'huge' regional network , and leaving the other guys to fight over the long haul traffic.  My third hub and fourth hubs added to the feed into existing gates.  From that point I had the financial backing to look at longer haul destinations, and to push traffic through BKK now that I had more secure routes out of less flown to destinations.  

All in all, I think it was a successful strategy.  I now have 23 mil in daily profit and 900 routes with value over 4 billion.  Tonnes of planes too flying almost EVERYWHERE in south east asia (competing with WAERTH and ORIENTAL) :twisted:
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waerth

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Reply #14 on: February 21, 2008, 02:27:20 pm
We will be competing again next round. I haven't updated my routes in weeks

Waerth


 

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