Airline & Cargo Management

Trends in Aviation Industry

Contents :

Introduction. Trends in Aviation. Innovative Ideas promoting the industry. Trends in Indian Aviation Industry. Critical Financial Issues & Strategies. Why airlines fails to achieve Success ? How airline can achieve success ?

Introduction

The aviation industry encapsulates the development, operation and management of aircrafts. While the common perception about the sector is that it’s only about pilots and airhostesses, there are numerous other, equally significant job options that the industry cannot function without; from in-flight trainers and aircraft maintenance engineers to baggage handlers and reservations agents.

Research indicates the global aviation industry is poised to grow at a healthy 5.6% CAGR (compound average growth rate) over the next 15 years. While major conventional mature markets such as the US and Europe will witness a significant fall in market share from 61% to 52%, emerging markets, such as India, China and the Middle East, offer a great growth potential.

Compared to other transport modes like road transport, trains or shipping the traffic increase in civil aviation is a relatively recent phenomenon. Passenger air transport became relevant around 1940. Following aspects contribute to the trends in aviation industry.

Trends in Aviation Industry

The trend in passenger numbers and total flights The trend in engine development and efficiency The trend in understanding impacts of aviation on atmosphere and climate

1.The trend in passenger numbers and total flights

Civil aviation for widespread transport of citizens did not really start before the second world war. Before, aircrafts were mainly constructed for military purposes. After the war, many qualified pilots were available and still many planes suitable for transport of passengers as “left over” from the war as well. This caused a first boom in civil aviation, at the beginning in particular in the United States. Soon, it became a common trend in all industrialized countries in the world.

The following pictures give an impression, how quickly passenger planes with high capacity are developed in the world.

The Boeing 247 was a civil aircraft produced in the United States since 1933. Besides from 3 staff members it could transport 10 passengers.

The Junkers 90 was available in Germany since 1938. Designed for 40 passenger it was one of the largest passenger aircrafts before the war but never produced in large numbers.

The Douglas C54 Skymaster / DC-4 has been produced since 1942 in the United States for 30-40 passengers. It became together with the Douglas DC-3 famous as “Rosinenbomber” during the blockade of Berlin from June 1948 to May 1949.

10 years later: The Douglas DC 7 (produced 1952 – 1958) was the biggest propeller aircraft with space for 100 passengers and the last major piston engine powered plane, coming just a few years before the advent of jet aircraft.

2. The trend in engine development and efficiency

Most passenger aircrafts use nowadays jet engines (turbojets and turbofans) which dominate civil aviation since the 1960s. While airlines have been for some decades under the authority of the respective states, latest with the international liberation of the markets the consumption of fuel became an important factor in the competition.

Therefore, not only environmental but also economic interests drive the permanent improvements of engine efficiency. However, these improvements never compensated for the increase in passenger kilometers flown and therefore fuel demand and carbon dioxide emissions.

3. The trend in understanding impacts of aviation on atmosphere and climate

In the late 1960s aircraft engineers thought about the construction of a supersonic aircraft fleet. At this time the understanding of atmospheric processes was sufficiently advanced in order to see risks in such plans. Scientists discussed the potential impact on the ozone layer, which raised strong concerns, before a wider development of the technology was seriously approached.

Since the supersonic fleet was never developed, also for technical and economic reasons, attention of science shifted in the 1990 more to ozone development in the upper troposphere (here, ozone is a strong greenhouse gas) und greenhouse effects in general. Besides from easier to estimate direct carbon dioxide emissions, in particular the impacts of condensations trail and potentially developing cirrus clouds have been of special interest.

Innovative Ideas which promotes the Aviation Indusrty

In - flight beverages go functional

Virgin America Passengers can register for the US elections at 35,000ft

Aeroflot teams up with nutrition experts to develop in-flight ‘sports menu’ for the 2012 London Olympics

American Airlines embarks on ambitious upgrade program -- Fleet Modernization -- Long haul fleet upgrades

Tesco trials virtual grocery shopping at Gatwick Airport

Airlines ‘crew-source’ new on board duty free products

Austrian gives passangers the option to purchase a premium meal at the airport

Trends in Indian Aviation Industry

Consolidation in aviation sector The number of passengers traveling by air is on the rise For the traveling public, price is paramount in choosing

a carrier Capacity is growing without much constraint Cost structures will continue to handicap legacy carriers

as they compete with newer airlines, as well as with overseas carriers

Oil prices are not expected to fall Outsourcing

• Cost Controls• Access to Capital Markets• Insurance• Foreign Currency Exposure• Fleet Replacement and Price of New Aircraft• Industry Losses and Inconsistent Profitability• Cost of Funds and Low Yield on Surplus Funds• Productivity and Labor Reform

• World Economy• Irrational Pricing and Predatory Action by Major Carriers• Over-Capacity• Cash Flow and Ability to Self-Finance• Debt/Equity Ratios• Taxation• Ownership Issues

Critical Financial Issues & Challanges

Why airlines fails to achieve success ?

•Overexpansion• Undercapitalization •Lack of flexibility•“Wrong” leadership•“Wrong” money•Unable to obtain sustainable, competitive advantage•Failure to demonstrate revenue growth and profitability

• Solid “airline” business plan• Flexibility• Diversity• Leadership• Steady and moderate growth strategies• Effective cost cutting strategies• Fleet commonality• Reasonable capital requirements• Long-term vision

How airline can achieve success ?

Conclusion

Air traffic demand is usually expressed in revenue

passenger kilometres (RPK) or in revenue tonne

kilometres (RTK) for freight. Growth rates have been and

are expected to be in the range of 5 - 6% per year (5.2%

per annum over the period 1992–2005), although year to

year growth varies strongly depending on regional crisis

factors and years of recovery after a crisis. The challenge

is to produce forecast scenarios which are often based on

the extrapolation of present trends.

Presented By …… Ajay Joshi Vigneshwar Vivek Vinay