Hi, I was wondering if someone could explain the advantages of subsidiaries, over the "all under one roof" concept instead. And why one may even bother opening a subsidiary. Thanks
Just a few examples:
- Maintenance categories: You get three more of them. Otherwise, from the fourth category onwards, you pay a premium for ALL of your maintenance costs (+15% per category). It pays off if you have a mainline that works primarily with jets and you would like to serve a bunch of smaller airfields with several turboprop powered models. If you'd add LET 410s, S340s and Dash8/ATRs, you could cover the whole range between 10 and approx. 80 seats. For your mainline, this would result in +45% maintenance. For used and older props with less capacity, this might break your neck.
- Different maintenance provider: Choose another one. If you plan e.g. on entering a market or airport with a night-time ban, you could stick to a cheaper, less efficient one to counteract the loss in utilization, especially for short-haul ops
- Risk mitigation: Suppose your new approach for a different market entry goes bust, your subsidiary can be liquidated on its own. All proceedings will be fed back to your enterprise one level above.
To further add a couple of examples:
- Operating in a different country or having a different approach. For example if I want to operate in another country I can't do it with my main carrier.
- Because I do not have the time to micromanage I prefer offering exactly the same throughout my carrier so that i can price everything at the same price point. If I for instance want to be running an even more luxurious product I need a different carrier.
- I might have a different carrier if i want more long haul ILs. An IL with IndoSky costs at least 250,000 AS$ per week (that both have to pay), if I for example offer a weekly flight to a destination neither my partner or myself will recover the cost, thereby I can use a subsidiary which has significantly cheaper IL costs.
Is there an easier way of transferring money to a subsidiary yet?
You mean than buying and selling planes? No.
+once you reach flight number 9999 and want to add more flights you also need a subsidiary which has another 9999 flight numbers to use.
Is there an easier way of transferring money to a subsidiary yet?
You could in a way do it with share transfers (buy for -10% and sell for +10%) but it might sometimes be almost borderline cheating. But watch out so nobody takes your shares.
It’s plain cheating and can be prosecuted.
Really shouldn’t be recommended by anyone…
Can or will?
If it´s between two fully owned enterprises it is actually legal, if you are playing with somebody else's money or multi accounting then it very illegal.
Since when?
My understanding is that a single transaction to sell/buy shares is fine. But as soon as you return the shares again to the same player at a different price (within a short time), then it is clearly a money transfer and deemed illegal.
If you can transfer money using planes, why would anyone involve third party and do many stock transactions just to transfer money…
Even if it was legal, just consider logistics to transfer 100 million, you are willing to invest 10 million into the endeavor.
With 10 million worth plane, you do 20 transactions total, 10 sales and 10 transfers without compensation.
With stock transactions, stock worth 10 million would generate you 2 million max per 4 round robin sales. So to transfer 100 million, you would need 200 stock transactions.
Compare 200 stock transactions to 20 aircraft transactions. Also each stock transaction takes 15 minutes, so 50 hours time total. You can do 20 aircraft transfer transactions in under 10 minutes.
So even if it was legal between two fully owned companies, why would anyone do it?
I agree that it´s kinda stupid but it is possible in a way. Though as i said it's kinda illegal.
NO. It’s not kinda illegal.
It is definitely illegal.