Unit 6 managing aviation services

1. Unit 6managing aviation services

2. Learning outcome 1 Explore the key milestones and issues in the development of the aviation industry

3. p2 Explain current key issues within the aviation industry

4. KEY ISSUES IN AVIATION

5. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY • What is meant by the term infrastructure? The Merrian-Webster dictionary defines the word as: • the system of public works of a country, state, or region also: the resources (such as personnel, buildings, or equipment) required for an activity • the underlying foundation or basic framework (as of a system or organization) • the permanent installations required for military purposes

6. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY • What are infrastructure in the aviation industry? Markovich (2015) described infrastructure in aviation as the airports, air traffic controls, and aircraft. More people travel by air in the United States than on any other nation’s system but the U.S. system ranks behind other major industrialized states in performance. Its airports perform poorly on international rankings, and no U.S. airline rates among the top performing global carriers.

7. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY Civil aviation is a critical enabler of U.S. growth. It accounted for 5.4 percent of U.S. GDP in 2012 (compared to 3.4 percent for the United Kingdom and 3.5 percent for the entire world) and supported 11.8 million jobs, more than 20 percent of the global total. Americans take more trips annually (593 million in 2013) than any other nation, ranking seventh globally in air trips per capita. While non-U.S. aviation industries are expected to outpace U.S. aviation growth in the coming years, it is still expected to have the most trips in 2020.

8. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY Although U.S. travelers benefited from falling fares in the initial decades following deregulation in the late 1970s, prices have begun to rise again in recent years and may continue to rise as bankruptcies and mergers limit competition among airlines. The Federal Aviation Administration’s (FAA) NextGen program and planned airport improvements may cut costs. At the same time, the FAA faces challenges to safety regulations from the emergence of drone technology, a potentially promising area for commercial aviation.

9. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY Infrastructure investment is one of the most significant factors in the ability for airlines to operate around the globe and yet it is also something which they have no control over. Airlines are dependent on governments around the globe to maintain air traffic control services, for example, or on a mix of public and private operators of airports to ensure that passengers are cared for prior to and after their flights. And in every corner of the world the airlines are struggling to realize the level of cooperation and services they need to operate reliably.

10. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY With each government managing its airspace independently rather than the countries in the region working together, similar to how Europe developed its Eurocontrol operations, conflicts within the airspace remain a challenge. On top of this, the region sees a highly disproportionate level of military traffic – roughly 40% – which further limits the ability for commercial airlines to operate smoothly.

11. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY In the United States the main concern remains delays in building out the NextGen infrastructure. Budget cuts and delays continue to plague the very necessary upgrade to air traffic control services in the USA. And, while many airport terminals are not considered luxurious, they generally are sufficient to handle passenger needs.

12. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY U.S. aviation infrastructure moves more people than any other nation’s system—more than twice as many as China, the world’s second largest. Yet the United States lags on performance indicators compared to other leading industrial economies. No U.S. airport made the top twenty-five of the latest World Airport Awards, an annual customer rating of best airports. No U.S.-based airline made the top ten for on-time performance among global airlines compiled by FlightStats, a flight data services company. Four U.S. airlines ranked in the world’s top six for oldest aircraft fleet.

13. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY Airports and FAA face challenges in building new runways and in determining at what point runway pavement conditions warrant repair in order for existing runways to be maintained in the most cost-effective manner. In the case of new runways, airports must address the potential environmental impact of aircraft noise and air pollutant emissions that new infrastructure is likely to generate.

14. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY Despite playing a smaller role than local authorities in airport investment, the federal government has a substantial role in aviation. The FAA spends over $7 billion annually on air traffic control operations, and over $1.2 billion in developing and enforcing new safety standards and aircraft certifications. The federal government also controls air travel security through the Transportation Security Administration and negotiates Open Skies Agreements, agreements aimed at creating a free-market environment among international carriers, with other nations.

15. example community concerns with aircraft noise are already high around many airports, and adding new runways may generate additional noise and community concerns.

16. INFRASTRUCTURE REQUIREMENTS AND SERVICING OF THE AVIATION INDUSTRY Airport construction is a hot topic in Asia and Latin America as the booming growth in passenger numbers demand more facilities. In many cases the governments are establishing public-private partnerships to build and operate these airports. IATA remains concerned that these partnerships are flawed far too often and result in projects which are ultimately financially unsound. That means higher costs for the airlines operating in those airports and, ultimately, higher costs to passengers as well.

17. Operational Costs And Low Profit Margins Air carriers are responsible for maintaining air travel security. Part of this responsibility entails developing and using a security program that includes screening all passengers. Operationally, this responsibility means that air carriers purchase equipment, design and set up checkpoints covering access to their outbound flights, and hire and train personnel to operate these checkpoints. The costs associated with this security-screening program include both the security screening equipment and the personnel to operate the equipment and to resolve alarms.

18. Operational Costs And Low Profit Margins For air carriers, quick and inexpensive screening of passengers and carry-on baggage is a major concern. Based on estimates of traveler loads throughout the day at a particular airport, air carriers must purchase and deploy an optimum number of screening devices and screening personnel. Air carriers often hire independent firms to operate security checkpoints. These firms provide both equipment and personnel, but the ultimate responsibility for security screening remains with the air carriers.

19. Operational Costs And Low Profit Margins Operators of airport facilities are also charged with developing and implementing security procedures. The goal of airport operators is to provide a secure environment in which air carriers can operate. This includes offering law enforcement support to air carriers when threat objects are identified through passenger screening procedures.

20. Operational Costs And Low Profit Margins Airport operators are most interested and concerned with the space requirements of safety and security programs instituted at airports. The space requirement issue encompasses the physical area required to set up or establish a security checkpoint and the area required for the queuing up passengers or baggage. Unusual power requirements or nonstandard equipment needs, such as liquid nitrogen, are also of concern to airport operators.

21. Operational Costs And Low Profit Margins Newer designs for airport terminals have taken into account the requirements of passenger screening operations, based on the best estimates of the demands for equipment and operational space and for the queuing space required for projected passenger loads. Equipment and operational space is determined by the number of checkpoints and the size of the equipment the air carrier wishes to install.

22. Operational Costs And Low Profit Margins Older airport facilities designed and built before hub operations or passenger screening are often strained to meet current space requirements, especially when changes in operational procedures require additional equipment for each passenger screening point.

23. example the need of some air carriers for additional space for a second metal-detector portal for screening passengers who trigger the alarm at the first metal-detector portal.

24. Operational Costs And Low Profit Margins Air carriers and airport authorities are concerned with the cost of new technologies, although each emphasizes a different aspect of the cost. Air carriers bear the cost of the equipment and the personnel to operate it; they also bear the cost of delays incurred when security screening interrupts the orderly flow of flights. Airport facility operators are responsible for providing appropriate space and other building requirements.

25. Operational Costs And Low Profit Margins Before implementing new security-screening technologies, both airport operators and air carriers will demand well-supported data showing that the new technologies will add significantly to existing security-screening capabilities. Airports and air carriers will also have to consider carefully whether the new technologies will offset added costs for new equipment by lowering costs for other factors, such as the number of personnel or checkpoints

26. Pricing pressure and low yields Some airlines are good at balancing the operational tradeoffs that they face. These companies tend to have a couple of things in common. First, they make an explicit commitment to what they see as essential. Delta Air Lines, for instance, is the “on-time machine.” Alaska Airlines’ promise is “safe, on time and with your bag at the lowest cost.” In Europe, Ryanair has been famously direct about what customers can expect onboard, and it is equally well known for its low fares and excellent OTP. (Ryanair has more recently acknowledged the value of investing more in customer satisfaction.)

27. Pricing pressure and low yields A number of Asian and Middle-Eastern carriers have set expectations for, and consistently deliver, high levels of service; they are achieving impressive growth rates despite all the challenges faced by the industry. Second, successful airlines invest in and develop advanced analytical capabilities that help them weigh the tradeoffs. Qatar Airways, for example, recently launched a new advanced performance management system, which allows for real-time decision making in addition to providing detailed performance management data.

28. Pricing pressure and low yields Southwest Airlines has developed an advanced disruption-management tool, with the goal of improving its OTP by more than 30 percentage points on days when its service is disrupted. Many low-cost carriers are able to not only sustain OTP rates well above industry averages but also maintain their high customer satisfaction rates and low-cost structures. Azul in South America is an example.

29. Pricing pressure and low yields But for plenty of airlines of all types and sizes, the challenges of improving operating performance while also maintaining or even improving profitability are real and seemingly becoming only more complex. The interplay of such issues as OTP, crew productivity, and aircraft utilization, under widely varying circumstances and in the face of daily uncertainties related to weather, mechanics, and air traffic control, bedevil even the most sophisticated companies. 

30. Pricing pressure and low yields We find that airlines face three common issues: an inability to connect the tradeoffs they make, inadequate data and reporting systems, and a focus on the operating system rather than on the customer.

32. Environmental impacts and sustainability Like any other form of public mass transport that relies on finite planetary resources, aviation cannot (in its present form) be considered sustainable in the very long term.Because of the finite nature of the resources upon which aviation relies, it is more realistic in the medium term to think how best to improve the sustainability of air transport rather than it achieving sustainable development. Demand for air transport is continually growing and, if this demand is to be met with all the attendant benefits, society must also accept the costs (noise, pollution, climate change, risk, resource use etc).

33. Environmental impacts and sustainability Whilst it is not possible to make aviation sustainable (in its present form) in the very long term, much can be and is being done to improve aviation’s sustainability including: • ensuring safety and security; • efficiently optimising available capacity; • collaborating to achieve a shared vision for more sustainable aviation; • making decisions based on optimising the balance between social, economic and environmental imperatives; • serving the need for mobility in a manner where the greatest overall benefit will arise, meeting the needs of stakeholders; • taking every opportunity to minimise adverse impacts and resource use by creating and operating more efficient ATM systems, equipment and technology; • targeting efforts where they will produce the greatest improvement in our citizen’s quality of life; • investing in adequate research, training, education and awareness; • being transparent and honest about both the good and bad aspects of air transport; • avoid conflicting policy and regulations.

34. Environmental impacts and sustainability Noise disturbance is a difficult issue to evaluate as it is open to subjective reactions. Its impact is not a lasting one on the actual environment, but it can have significant adverse effects on people living close to an airport, including: interference with communication, sleep disturbance, annoyance responses, learning acquisition, performance effects and cardiovascular and psycho-physiological effects. Unless there are very many aircraft following a route, it is widely recognised that aircraft flying at a height of at least 10,000ft above the ground do not usually produce “significant” noise impact. But because of the subjective nature of disturbance and the wide variance of local factors, this is not an absolute rule. It is normal for aircraft noise to be associated with airports, because of the low height involved.

35. Environmental impacts and sustainability Aviation air quality concerns are principally related to the areas on and around airports. Further, for most airports the most significant air quality related emissions presently come from ground transport (cars, buses, trains etc). However, because of factors such as growth in demand, more public transport access to airports, and the long service life of aircraft, it is widely expected that aircraft will eventually become the dominant air quality related pollution source for many airports.

36. Environmental impacts and sustainability Climate change is a change in the "average weather" that a given region experiences, including such factors as storm frequency, temperature, wind patterns and precipitation. Since society becomes increasingly reliant on energy consumption in work at home and for mobility, the heat-trapping nature of the atmosphere has increased. As our scientific understanding of this situation increases, so does public concern and the requirement for a policy response. Aviation contributes a small but growing proportion to this problem (less than 4% of man-made atmospheric emissions). A key factor however, is that some of aviation's emissions are emitted in the upper atmosphere and may have a more direct effect.

37. Vulnerability to fluctuation fuel prices, terrorism and forces of nature Fuel costs represent one of the biggest expenses for the aerospace and airline industries. On average, fuel costs account for 29% of all operating expenses and 27% of the overall airline industry revenue. Because the fuel costs per gallon declined by 6.4% in 2014, the decrease accrues to the airline industry's bottom line. If there is complete pass-through and all other factors remain constant, the 6.4% decline in the cost of fuel improves the profit margin for the airline industry by almost 1.7% in absolute terms. However, the fuel cost savings usually do not accrue fully and immediately since airline carriers often sign forward purchase agreements that fix the fuel price a few years in advance.

38. Vulnerability to fluctuation fuel prices, terrorism and forces of nature For the airline industry, jet fuel represents one of the largest expense items along with other non-fuel costs such as airport charges, flight crew costs and airplane maintenance. Airline carriers sign purchase contracts with oil refinery operators, which refine oil into jet fuel. Oil is the main component in the production of jet fuel, so the price of oil and the price of jet fuel are positively correlated. As the price of oil declines, so does the price of jet fuel.

39. Vulnerability to fluctuation fuel prices, terrorism and forces of nature The air travel system remains one of the most high-profile targets for terrorists. Despite heightened security measures, airliners remain an attractive target for terrorists, as evidenced by the revelation in August 2006 of a plot to simultaneously down as many as ten of them over the Atlantic Ocean. In order to counter the persistent and ever-changing threat of terrorism, experts say officials need to do more to ensure the safety of air travel.

40. Vulnerability to fluctuation fuel prices, terrorism and forces of nature Shortly after the 9/11 terrorist attacks, Congress passed the Aviation and Transportation Security Act, which created the Transportation Security Administration (TSA) and mandated that federal employees be in charge of airport security screening. The TSA has implemented more thorough screening procedures for passengers and their baggage, whereby passengers go through metal detectors, carry-on bags are x-rayed, and checked baggage passes through an explosive detection system. Minor changes to these procedures—such as requiring passengers to remove their shoes or the more recent prohibition of carry-on liquids—have had some effect

41. Vulnerability to fluctuation fuel prices, terrorism and forces of nature Some critics say that by focusing so heavily on screening passengers, security officials have left aircraft vulnerable to attack in other areas. Foremost among these, experts say, is air cargo security. In addition to carrying travelers’ baggage, the lower deck of many airliners holds a sizeable amount of air freight. Though 100 percent of passengers’ checked luggage is required to be screened for explosives, according to an insider, only a small portion of the air cargo is ever inspected.

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43. bibliography • Miller, S. (2014). INFRASTRUCTURE CHALLENGES REMAIN HIGH FOR THE AVIATION INDUSTRY. Airways Magazine. [online] Available at: https://airwaysmag.com/industry/infrastructure-challenges-remain-high-for-the-aviation-industry/ [Accessed 15 Jan. 2019]. • Molenaar, D., Boutin, N., Jhunjhunwala, P., Ramos, P. and Bosch, F. (2017). Inside Airlines’ Struggle to Balance Profitability and Performance. [online] https://www.bcg.com/. Available at: https://www.bcg.com/publications/2017/aviation-operations-inside-airlines-struggle-balance-profitability-performance.aspx [Accessed 16 Jan. 2019]. • National Research Council (U. S.) (1996). Airline Passenger Security Screening: New Technologies and Implementation Issues. National Academy Press. United States. • General Accounting Office. (2000). Aviation Infrastructure: Challenges Associated With Building and Maintaining Runways. Washington: United States. General Accounting Office., pp.1-3.