The Business of Aviation

            There are a lot of sayings that one may hear as they go through life.  One of these sayings that is found in the aviation world is “How do you make a small fortune in aviation? Start with a large fortune.”  This saying may hold some truth to it in that it can be very difficult to make a successful business in the aviation world.  The reason this statement is around is there are many companies that have attempted to rise up and make it big.  Not too many companies actually make it big in aviation though.  Back in 2008 a company called Eclipse had to file bankruptcy and sell off the company for a fraction of what it was purchased for despite having launched a big effort to manufacture light jet aircraft and was successful in bringing them to the market faster than many of its competitors.  Problems arose after certification problems led into a market collapse.  It isn't uncommon to hear of people who started flight schools only to have them close their doors after a short period of attempting to build their business.  If you look at the larger airlines and what it takes to make them successful, you will see a very harsh environment.  Only recently have fuel prices started falling.  In the past, skyrocketing fuel prices and a market collapse have forced airline merging and bankruptcies.  In 2012 it was reported that some of the top airlines saw a profit margin as low as 0.8%.  With margins that are this low, it is surprising to me that there are still start-up attempts of other airlines hoping to make it big. 

            Despite business in aviation being tough, it is not impossible.  It is important for any business to find its niche in the market.  Finding a portion of the market that has untapped potential is huge in trying to start a successful business.  A start-up airline could not hope to succeed if they are trying to start on routes that are already covered.  Baltia Airlines is attempting to find its niche as the first airline to offer non-stop flights from JFK airport to Russia.  Aviation is a constantly evolving industry and this means that companies have to adapt to survive.  Over the past decade there have been mergers as one airline absorbs another to continue to evolve. With an industry so unpredictable, only those that catch the trends quickly survive.  Alaska Airlines has positioned themselves well to make 33 of their past 39 years in business profitable.  Their marketing strategy keeps them on top of the game in the Alaska region.  They built their corporate image well and it has made them successful.

References:

JetAviator7. (2008, December 17). To Make A Small Fortune in Aviation Start with a Big One. Retrieved March 29, 2015, from https://all-things-aviation.com/aviation/to-make-a-small-fortune-in-aviation-start-with-a-big-one/

Kalb, I. (2013, March 7). Why Alaska Airlines Has One Of The Best Corporate Images In The Industry Read more: Http://www.businessinsider.com/alaska-airlines-outperforms-the-airline-industry-with-more-effective-marketing-2013-3#ixzz3VvKdo3Bs. Business Insider.

Mouawad, J. (2012, May 25). The Challenge of Starting an Airline. The New York Times.

Patruno, A. (2013, April 1). How do you make a small fortune in aviation? Retrieved March 29, 2015, from http://aviationstationx.blogspot.com/2013/04/how-do-you-make-small-fortune-in.html

Sankaranarayanan, V. (2014, May 28). Starting a New Airline: Now Harder and Easier. Retrieved March 30, 2015, from http://www.thoughtworks.com/insights/blog/starting-new-airline-now-harder-and-easier

Welcome to Baltia Airlines. (n.d.). Retrieved March 30, 2015, from http://www.baltia.com/flights.html

Leveling the Global Aviation Playing Field

There are many challenges the US aviation industry has to face when trying to compete globally.  Several of these issues are discussed below.

1.                     Competition of foreign air carriers with an unfair advantage. Recently the three largest air carriers in the United States released a report stating that several of the three fastest growing air carriers in the Persian Gulf have been receiving illegal subsidies to the amount of $42 billion over the past decade.  This unfair advantage has allowed these airlines to grow substantially and compete when they would be losing money.  This puts stress on the domestic air carriers since they fear they will begin losing business to these carriers. 

While competition is nice in terms of making products and services cheaper for the consumer, it is bad when companies compete with an unfair advantage.  This will put stress on domestic air carriers and if left unchecked, can cost domestic jobs.  The domestic air carriers are suffering from this competition while the domestic aircraft manufacturer Boeing is making out since these foreign air carriers order a lot of their aircraft.  Despite this fact, the domestic air carriers must be heard and the illegal funding of their competing air carriers must cease if they are to maintain the ability to remain competitive in the international spectrum.

2.                     Another issue the U.S. aviation industry is faced with is the rapidly expanding foreign markets.  Many new markets are rising every day with some of the notable ones being Dubai, China, and Brazil.  These markets are quickly catching up to the United States and are very competitive.  These markets force the U.S. aviation oriented manufacturers to find new ways to compete with the constantly evolving global market.  From 2003 to 2013, domestic air carrier revenue from international markets increased 86% while revenue from domestic markets only increased 10%.  While these numbers are promising, the increase in competition will continue to push domestic companies to new ways to target international markets.

            This issue poses a large threat to the domestic aviation job market.  People in the aviation industry hear about the “pilot shortage” almost on a daily basis.  This issue is exacerbated by the rising competition from international air carriers.  The domestic major airlines are a great place to go as an airline pilot, however some find it a better option to go fly for a domestic carrier in Dubai or China where a pilot can make double or triple what they make as a pilot in the same aircraft in the United States.

3.                     Another issue that the U.S. aviation industry faces is in the attempt to get new products certified for use by the FAA.  This issue arises with the fact that companies need to have new products certified by the FAA in order to market them.  The FAA does not have enough resources to process all of these product certification requests in a timely manner.  This means that some business opportunities could be missed before the product can be certified.  This issue prevents the industry from growing at the pace it could. 

            This issue poses a great threat to the U.S. aviation industry when international markets are rising as quickly as they are.  It becomes clear why markets such as Dubai and China are growing so quickly when we struggle to continue moving forward.  This issue could be remedied if the FAA certification process could be streamlined.   I feel this is essential when the domestic market has to deal with all of the issues that are currently around.

References:

Aviation’s second golden age: Can the US aircraft industry maintain leadership? (2013, December). Retrieved March 14, 2015, from http://www.themanufacturinginstitute.org/Research/Other-Institute-Reports/~/media/D52A363E0D804DDBA5C76856DA9FA182.ashx

Bellamy III, W. (2013, December 12). US Aviation Industry Faces Global Challenges. Aviation Today.

Bunce, P. (2012, July 18). Hearing: The Global Competitiveness of the U.S. Aviation Industry: Addressing Competition Issues to Maintain U.S. Leadership in the Aerospace Market. Retrieved March 15, 2015, from http://www.gama.aero/node/11517

Commercial Aviation: Global Outlook, Opportunities, and Challenges. (2013, August 12). Retrieved March 14, 2015, from https://www.aiaa.org/Secondary.aspx?id=18317

Karp, G. (2015, March 5). U.S. airlines to Gulf carriers: 'Compete fairly' Chicago Tribune. Retrieved March 14, 2015, from http://www.chicagotribune.com/business/breaking/ct-airline-subsidies-0306-biz-20150305-story.html

UAVs

The use of drones in the United States has grown significantly in the past decade as the technology and popularity continues to grow in the field.  These drones are used for various tasks including recreational use, aerial photography, film making, and surveying.  As the technology continues to grow, it is also becoming more affordable to the average person.  The LA Times reports that drone use is becoming an issue as they note that drone crashes are becoming more frequent (Serna, 2014).  Eric Hansen stated in an article for Outside Online that the United States National Parks Service banned the use of all drones within any of the national parks (Hansen, 2014).  There are little to no regulations on civilian use of UAVs in the United States and this is a growing concern for some.

In order for UAVs to continue to be used by civilians for personal use I feel that they will need to be integrated into the NAS.  As the technology continues to become more advanced, some regulations or restrictions will have to be placed on civilian use.  It is only a matter of time before civilian UAVs become large enough to cause potential harm to aircraft in the skies.  If these UAVs remain out of the NAS, accidents and incidents are practically inevitable.  Communication would be a big potential problem between UAVs flying near airports because of landing and departing traffic. A system would have to be implemented to prevent this issue.  The FAA is already working to propose regulations to attempt to regulate UAVs for the civilian market in order to make the system safe.

The military has seen a large rise in the use of UAVs.  These are very popular in our overseas campaigns to assist the war being fought outside of the United States.  The application of drones for military use is huge since it prevents having to put a human life in the way of danger in order to carry out tasks such as military strikes.  A plan drawn up for the future of the US air force shows a plan to continue to implement more UAVs and fewer manned aircraft as well as aircraft that can enter combat without human intervention (Pappalardo, 2010).  As for cost of military UAV operation, it is much more cost effective.  Given that the new F-35 fighter jet can cost roughly $91 million USD with an operating cost of $16,500 per flight hour.  The Reaper drone used in many attacks in Pakistan has a unit cost of nearly $6.5 million USD plus an operating cost of about $3,250 per flight hour to operate.  This is not to mention the benefit of not putting the pilot in danger during operation.

I found a local position available for a start-up company looking for a software engineer to assist designing algorithms for UAVs that will be designed to assist in disaster relief.  The potential for UAVs is large given they can pretty much replace any job that would require air transportation of goods.

References:

Bennett, W. (2014, September 1). Civilian Drones, Privacy, and the Federal-State Balance. Retrieved March 1, 2015, from http://www.brookings.edu/research/reports2/2014/09/civilian-drones-and-privacy

Ehrenfeld, R. (2015, February 20). Drones in the U.S. National Airspace System. Retrieved March 1, 2015, from http://acdemocracy.org/drones-in-the-u-s-national-airspace-system/

Hansen, E. (2014, August 20). Drones Grounded. Retrieved February 28, 2015, from http://www.outsideonline.com/outdoor-gear/gear-shed/design-tech/No-More-Drones.html

McLean, W. (2014, June 25). Drones are cheap, soldiers are not: A cost-benefit analysis of war. Retrieved March 1, 2015, from http://theconversation.com/drones-are-cheap-soldiers-are-not-a-cost-benefit-analysis-of-war-27924

Pappalardo, J. (2010, February 25). The Future For UAVs in the U.S. Air Force. Retrieved March 1, 2015, from http://www.popularmechanics.com/military/a5383/4347306/

Serna, J. (2014, June 21). As hobby drone use increases, so do concerns about privacy, security. LA Times.