<p>Finances and Expenses</p>

By Nabeel

• February 21, 2010

Factors

phpVMS actively takes into account the financial data associated for your virtual airline. The financial model consists of several different factors:

• Revenue
• Pilot pay
• Expenses

Revenue

Revenue involves the money being brought in by your operations. In your schedules, you can define several options for the flight type:

• Passenger flight - These are well, passenger flights
• Cargo flights
• Charter flights

The flight type determines the revenue brought in through the operations. The basic equation is:

 REVENUE = (FLIGHT_LOAD * PPU (Price per Unit) 

The flight load is determined, based on the flight type, and a variable called LOAD_FACTOR. By default, the LOAD_FACTOR is 62, meaning 62%. This is an industry average from the ATA. Depending on the season, etc, there is a global “load factor”. While in the future it will be possible to define a load factor per-airline, for now, it's a global average. This number cannot exceed 95%. This LOAD amount can be adjust on a per-pirep basis however.

The system will take a variance of +/- 10%, to determine the actual load of a flight. This is to account for the fact that airlines rarely operate at 100% capacity. The equation for the load is:

 FLIGHT_LOAD = MAX_LOAD * [(+-)LOAD_FACTOR/100] 

Where MAX LOAD is defined in the schedule when you create/edit that schedule.

There is one loop hole: Charter flights. These always operate at MAX_LOAD, with a LOAD_FACTOR of 100%.

PPU is price per unit, meaning the ticket price, or if a cargo flight, the price per unit. Meaning, if your MAX_LOAD on a cargo flight is 1000lbs, then price will be per lbs. The unit has no real effect, but can be defined in the config file as lbs, kg, etc.

Pilot Pay

Pilot pay is determined on the rank of the flying pilot, before any promotions to the next rank. For instance, if a pilot is promoted from FO to Captain on a flight, the pay rate used for that flight will be the FO rate.

Pilot pay is:

 PILOT_PAY = FLIGHT_HOURS * PAY_RATE 

Where FLIGHT_HOURS is the length of the flight.

Setup

To setup your financials, you have to first modify your schedules to include:

1. Max load
2. Flight type

Next, goto “Site Settings”, then “Maintenance”. Select “Reset PIREP Finances”, to populate the PIREPS with prices and load factors. Financials should now work, and future PIREPS will automatically be populated with the appropriate data.

Expenses

Now the fun part. Running an airline isn't pure profit! There are several types of expenses:

• Monthly
• Per flight
• Percent (month)
• Percent (per flight)

Monthly Your per-flight expenses can include a number of things, including salaries, staff costs, insurance, leases, etc. Some examples:

• Insurance - let's say your insurance is $500,000/year. Since costs are monthly, divide the 500,00/12, yields $41,666/mo. So you can add that
• Salaries - for example, you have two people on your customer service staff, and you pay them 28,000/year. You can either add them separately, or a combined “Staff Salary” expense. Remember to divide by 12.
• Taxes - Oh Lord, taxes. They are not included YET. But Uncle Sam will get you… don't worry.

Some more expenses:

• Plane leases
• Loans
• Bulk fuel purchases
• Additional crew and staffing costs
• Gate costs
• Ramp agents
• Marketing costs
• Salaries for executives
• Office rental
• Supplies
• Maintenance costs
• etc

Different intervals - The “month” is the smallest interval expenses go for. So if it's yearly, divide by 12. You can indicate in the expense that it's a yearly cost. If it's weekly cost, multiply by 4, and indicate in the title it's Weekly. All expenses are calculated from the gross amount.

Per Flight

You can have per flight expenses. While costs may vary across your fleet, there will be an average. Some examples can be:

• Meals - An cost could be $10 per passenger, you have 3 planes - a A320 with 120 people, a 767 with 200 people, leaving an average cost of about $1,066 per flight in catering ((120+200 * 10)/3).
• De-icing - In winter time, you have to pay for deicing. Again, an average across your fleet.

These are just some examples

Viewing the Reports

Since expenses can vary month-to-month, the expenses are saved at the time for a report when a previous-months report is viewed. Phew… for example: It is February 1st. You have 3 expenses, each $10. When you view a January report, those expenses will be saved with the January report. THEN you change your expenses so they all cost $20. You view the reports for February, they are $20. When you view it in March, and it's $20, and you view February, the costs are SAVED. Then you can change it.

Basically, when you view a previous month's report, the expenses and prices you have at the time of viewing are saved for that month you view. This is important to remember!!

Note: This is the behavior as of 2.0.854. For 2.1, this behavior is changing to calculate all finances in real time, with expenses only being cached from month to month. This means much more accuracy for financials.