air transportation (week-3) -

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AVM 202Introduction to Aviation

Air Transportation(Week-3)

Dr.Hakkı Doğankaya

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• Contracts for maintaining technology• Increase productivity and competitiveness• Eliminate less profitable lines of business• Add new capabilities• Balance military and commercial work

The US Goverment Market

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• Defense business move to commercial business;

• Application of technology to commercial avionics• Air traffic controls system• a/c maintenance• a/c up grades

The US Goverment Market

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• Civil Business Opportunities:

• Highway traffic management• Potential hybrid car market• Hazardous waste and weapon disposal• Environmental sensing • High speed data transmission• Space satellite communication

The US Goverment Market

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• Civil Business Opportunities:

• Law enforcement• a/c surveillance• Smart computer-linked police –cars• Biosensing of drugs and bomb making chemicals • Tv satellite services• Software conversion• Factory automation • Light rail system• Cellular telephone system

The US Goverment Market

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• NASA :• Zero growth• Recognize importance of space programs from technical, environmental and commercial standpoint

The US Goverment Market

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• National market is vital• International market is compelling • Invesments for new programs • $5 billion (development and tooling cost- commercial transport program)• 4 years wait for deliveries and revenue

Civil Aviation Market

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• Commercial passenger jets order volume is limited and low• 400-600 a/c must be sold for break-even point• % 40 general aviation a/c sales: $55 billion• International strategies is important for civil a/c manufacture

Civil Aviation Market

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• Need for new jetliners is evident• Fleets older, less efficient; need replaced• Economy: • 1990- recession; lost $ 13 billion• 1999-peak-profit• 2001- slow down

• Earlier over 20 big companies• Now is two: Boing, Airbus

Air Transport

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• Cost of developing new a/c is higher• Generation of a/c – successor a/c is higher• Uncertainities of the marketplace• Spiral cost of development• New a/c risky venture

Air Transport

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• Long distance, more passenger, low cost• Developing new cost efficient a/c • Composite materials – less fuel cost • The cost of development is high• The cost of no development is higher

Challenges in Air Transport

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• International collaboration is key strategy• Joint programs• Offset programs• Strengthen foreign industry• Know-how sharing

Challenges in Air Transport

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• % 40 commercial jets – US Airliners• After 1997:• Order and sales increased• 256 to 620

• Civil aviation has history of cycles

Factors Affecting Sales

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• Economic Growth : • Influences the demand• Companies build on• Service new outputs• Unemployment declines• Business travels increase• Income rises, leisure travel increases• Air traffic inresases :• Every % 1 increase in growth• 3 % increase in air traffic

Factors Affecting Sales

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• Inflation : • Escalate labor • Escalate fuel costs• Prices get higher :• Interest rates get higher• Business declines• Air traffic declines

• Profits decline• Aircraft financing becomes prohibitive• Long term programs inrease

Factors Affecting Sales

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• Fleet Capacity : • The passengers load is used to measure ailine capacity utilization• High load factors improve airline revenues • Purchase or lease planes• Fleet capacities increasing

Factors Affecting Sales

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• Replacement Aircraft : • To increase capacity• To replace older a/c (less efficient models)• Aviation regulations :• Necessities• Low stage noise level – US, 1999• 3000 a/c grounded

• There is a constant demand for replacements

Factors Affecting Sales

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• Airline Profitibility : • Small models : $ 25 million• Jumbo jets : $ 140 million• Need to raise capital in the finacial market• Show to investors that they are profitiable• US Airways filed for bankruptcy• Over % 90 of the passengers flies on discount fares or low-cost airlines• Stock pricess get low• Only source of funds is debt market• Not easy business

Factors Affecting Sales

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• A Cyclical Industry : • Since 1970, five peaks in orders for three years period• Since 1960, six peaks in deliveries• Decline is usually deep (% 50) • Growth and recession together• One year lag between order and delivery• Two years to double the production rate• Inbalance between demand and supply• Lack or excess capacity

Factors Affecting Sales

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Factors Affecting Sales

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• Future Trends : • Economic growth and low inflation• Nevertheles cycles, deliviries rising for the past 40 years• Deliviries will continue to climb (will double in 2020 and 2030’s) • Will depend on international economic growth

Factors Affecting Sales

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• The highest shipment in 1978• The lowest shipment in 1994• High :• A/c prices• Interest rates• Operating costs• Product liability costs

• Downward cycle• Change in :• Life style• Tax laws• Foreign competition

General Aviation

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• Broad structural change from bankruptcies, collaborations, joint ventures• 1994 General Aviation Revitalization Act :• Limited product liability for older a/c

• Small business jets : Fuel efficiency• Requirement of considerable ground support :• Facilities, terminals, offices• Shuttles, trucks• Energy• Personnel...

General Aviation

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• Hub airports will be established• Efficient use of time will be driving factor• Big carriers will fly only high load factored centers (hihg density markets)• Regional airlines will grow to satisfy regional needs

General Aviation

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• Technology is simply knowledge• It is transferable• Aerospace industry has pursued a program of technology transfer• Increase in sales : $ 3 billion to $ 28 billion• To transfer technology:• Medical instrumentation• Hospital management• Mas transportation• Public safety• Environmental protection• Energy

•Contracts for maintaining technology• Increase productivity and competitiveness• Eliminate less profitable lines of business• Add new capabilities• Balance military and commercial work

Related Products and Services

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• No one questions aviation’s importance as an essential form of transportation • Quick, efficient, safe• Aviation’s final products are passengers and cargo• In 2004, scheduled :• 698 million passengers• 2.8 billion ton miles of cargo• 9 million departures • Unscheduled :• 11 million passengers• 6 billion ton miles of cargo• 400 thousands departures

Contribution to the Economy

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• Increase will continue• In 1970, with economic derequlation of airlines, Just In Time (JIT) shipping facilitated :• Expanded services at lower costs• Shorthened production and development cycle times• Eliminated excessive inventory in logistics chain

• Without air express service, business unable to realize JIT

Contribution to the Economy

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• Air Transport :• Lower lead times• Quicker customer response times• Improved flexibility• Reduced inventory• Cost and time advantage• Reliability• Time definite quarantee

• Less complicated logistics chain :• One stop shopping• Door to door service• Single vendor• Seamless trucking, warehousing, distribution

Contribution to the Economy

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• Economic impact types :• Direct impacts (in 2000) :• $ 343.7 billion (financial transactions for passengers, air cargo and provision of a/c)• 4.2 million jobs

• Indirect impact :• $ 254.9 billion (financial transactions linked to the use of aviation, off airport expenditures by travellers)• 3.2 million jobs (supply chain related industry)

Contribution to the Economy

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• Economic impact types :• Induced impact :• $ 903.5 billion (multiplier implications of direct and indirect impacts)• 11.2 million jobs

Contribution to the Economy

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“Thank you”

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