THEINTERNATIONALSCENE
TheQuestionofSovereigntyinAirspace
InternationalAirLaw
TheFormationofIATA
TheBermudaAgreementof1946
ThreeDecadesLater:FromBermudatoDeregulation
ThePursuitofOpenSkies
Globalization
FutureChallenges
NewAirlineBusinessModels
Appendix:CareerPlanninginAviation
Introduction
ChoosingandGettingYourFirstJobinAviation
CoverLettersandtheRésumé
TheInterview
Glossary
Index
ListofFigures
3-1
Thefirstcontractairmailroutes Airlinefeederrouteswerecontractedtoprivateoperatorsin1926 Thetranscontinentalexpresssectionsweresetupin1927,andcommercialairtravelacrosstheUnited Statesbecameareality
3-2 AnnualpassengersonallU.S.scheduledairlines(domesticandinternational)andforeignairlinesto andfromtheUnitedStates,2006–2012
4-1 OrganizationoftheU.S.DepartmentofTransportation(USDOT)
4-2 OrganizationoftheFederalAviationAdministration
4-3 NationalTransportationSafetyBoard
6-1 Thestructureoftheairlineindustry 2013
6-2 OilPrices
7-1 PartialBoeing757routingpattern(twodays),summer200X
7-2 Dailyseatsandpassengers,oneMiami–NewYorkschedule(hypotheticalscenario)
8-1
Typicalairlinepyramidofauthority.Thedarkershadingindicates“doing”kindsofwork,suchas gatheringstatistics,makingreservations,andmaintainingaircraft Thelightershadingindicates activitiessuchasplanning,conferring,andformulatingpolicy
8-2 Typicalneworganizationalstructurefornew-entrantandlow-costcarriers
8-3 OrganizationalstructureforSpiritAirlines
8-4 Managementbyobjectives
8-5 Theadministrationsinamajoraircarrier’sorganization
8-6 OrganizationalStructureofTurkishAirlines
8-7 Atypicalmajoraircarrier’sfinanceandpropertyadministration(employsapproximately10percentof thecarrier’sworkforce)
8-8 Atypicalmajoraircarrier’sinformationservicesadministration(employsapproximately2percentof thecarrier’sworkforce)
8-9 Atypicalmajoraircarrier’spersonneladministration(employsapproximately1percentofthecarrier’s workforce)
8-10 Atypicalmajoraircarrier’smedicalandlegaladministrations(employlessthan1percentofthe carrier’sworkforce)
8-11 Atypicalmajoraircarrier’scorporatecommunicationsadministration(employslessthan1percentof thecarrier’sworkforce)
8-12 Atypicalmajoraircarrier’seconomicplanningadministration(employslessthan1percentofthe
carrier’sworkforce)
8-13 Atypicalmajoraircarrier’sflight-operationsadministration(employsapproximately10percentofthe carrier’sworkforce)
8-14 Atypicalmajoraircarrier’sengineeringandmaintenanceadministration(employsapproximately25 percentofthecarrier’sworkforce)
8-15 Atypicalmajoraircarrier’smarketingandservicesadministration(employsapproximately50percent ofthecarrier’sworkforce)
8-16 Atypicalmajoraircarrier’sregionalsalesandservicesdepartment
8-17 Anaircarrier’sfoodservicedepartment
9-1 HypotheticalcorrelationbetweenGNP(independentvariable)andnumberofactivegeneralaviation aircraft(dependentvariable)
9-2 Time-relatedchangesinadependentvariable(revenue)
9-3 Compositetime-seriestrendlineusedforforecastingpurposes,aftersmoothinghasbeenaccomplished
10-1 Marketsegmentation groupsofcustomerswhosharequalitiesthatrenderthesegmentdistinctand makeitofsignificancetomarketing
12-1 Anindividualaircarrier’sdemandforairtransportationpermonthbetweentwocities(hypothetical data)
12-2 Effectofchangesindemand
12-3 Elasticdemand Whendemandiselastic,adecreaseinpriceresultsinanincreaseintotalrevenue,and anincreaseinpriceresultsinadecreaseintotalrevenue
12-4 Basicruleofelasticdemand
12-5 Inelasticdemand Whendemandisinelastic,adecreaseinpriceresultsinadecreaseintotalrevenue, andanincreaseinpriceresultsinanincreaseintotalrevenue
12-6 Basicruleofinelasticdemand
12-7 Commonfare PassengersinthisexamplepaythesamefarewhethertheyareflyingfromChicagoto SanFranciscoortoFresno
12-8 TotalrevenueandRPMsforanindividualairlineoveraparticularperiodoftime(hypotheticaldata)
12-9 Yieldexpressedinfareper1,000RPMsforanindividualairlineoveraparticularperiodoftime (hypotheticaldata)
12-10TotalcostsandASMsforanindividualairlineoverashortperiodoftime(hypotheticaldata)
12-11Totalrevenueandtotalcostsforanindividualairlineoverashortperiodoftime(hypotheticaldata)
13-1 Generalcommodityratesvarybyweightoftheshipment.Thegreatertheweight,thelowertherate (hypotheticalexample)
13-2 Containersprovidedbyairlines.Thesecontainersareownedbytheairlinesandarecertifiedasan integralpartoftheaircraft Theseunitsareavailablefromthecarrierforshipperuse Thespecifications
mayvaryslightlybyowner;thisinformationisprovidedasaguideonly
13-3 Containersofferedbyshippers.Thesecontainersareshipperownedandareavailablefrommany commercialsourcesandfromtheairlines Mostcarriersoffercontainerincentiverateswhenused Specificationsmayvaryslightly;thisinformationisprovidedasaguideonly
13-4 Assemblyservicechargebytotalshipmentweightovera24-hourperiod(hypotheticalcase)
14-1 Conceptualframeworkforthescheduledevelopmentprocess
14-2 Maintenancefacilities(hypotheticalcase)
14-3 Boeing757routingpattern(hypotheticalcase)
14-4 StationplottingforthehypotheticalAll-AmericanAirport(AAA)
14-5 Trafficflow(hypotheticaldata)
14-6 Schedulesaresensitivetodeparturetime(hypotheticaldata)
14-7 Schedulesaresensitivetochanges(hypotheticalcase)
14-8 Schedulesalabilityvarieswithdirection(hypotheticalcase)
14-9 Schedulesalabilityvarieswiththeairport(hypotheticaldata)
14-10Timezoneeffectonschedules
14-11Local-stationactivitychartforairplanecleaners(hypotheticalcase)
14-12Staggeredarrivalsanddeparturesofafternoonjetserviceavoidcostlyduplicationofgroundcrewsand groundequipment(hypotheticalcase)
14-13Chainreactioneffect(hypotheticalcase)
14-14Cross-connection(hub-and-spoke)service(hypotheticalcase)
14-15Multipliereffectofhubconnections
15-1 Majorcharacteristicsofcompetingcommercialjetliners(hypotheticaldata)
15-2 FleetOptimizationModel
18-1 Theninefreedomsoftheair
ListofTables
1-1 RegionalRegulatoryTrends
1-2 FinancialIssuesandChallengesImpactingAirTransportation
1-3 ChallengesImpactingGlobalAirTransportation
1-4 StrategiesforGlobalAviation
2-1 AerospaceIndustrySalesbyProductGroup,2002–2013
2-2 AerospaceIndustrySalesbyCustomer,2002–2013
2-3 CivilAircraftShipments,2002–2013
2-4 USCivilAviationEconomicImpactStudyDetail–2007
3-1 GrowthofCertificatedDomesticRoutes(miles)
3-2 AverageYieldperRevenuePassengerMile(cents)
3-3 US ScheduleAirlinesOperatingRevenuesandProfits,BeforeandAfterInterestExpense(millionsof dollars)
3-4 TopUS airportsforregionalflights(rankedbynumberofregionalairlinedepartures)forthemonthof July2013
5-1 ActiveUS GeneralAviationAircraft,1973–2011
5-2 GAMAGeneralAviationAircraftShipmentsbyTypeofAircraft,1962–2013
5-3 NumberofGeneralAviationandAirTaxiAircraftbyTypeandPrimaryUse,2001–2012
5-4 US CivilandJoint-UseAirports,Heliports,STOLport(ShortTake-OffandLanding)andSeaplane BasesbyTypeofOwnership,December31,2008
5-5 WorldwidePiston-EngineAirplaneShipmentsbyManufacturer,1999–2013
5-6 WorldwideBusinessJetShipmentsbyManufacturer,1999–2013
5-7 ActiveUS PilotsandNon-PilotCertificatesHeld,2011
6-1 US AirlinePassengerTrafficfortheTop12AirCarriers,1978
6-2 TopU.S.AirlinesbyPassengerTraffic,2013
6-3 AirlineIndustryOperatingandFinancialResults,2000–2010
6-4 RegionalAirlineFleet(AsOfJuly2013)
6-5 SelectedTrafficandFinancialStatisticsfortheCertificatedAirCarriers,1965–2010
7-1 Financialsfrom26U.S.scheduledpassengerairlines(millionsofdollars)
7-2 Top25U.S.Airlines 2010
7-3 Top25AirlineGroups(19May2014to25May2014,Systemtraffic),rankedbySeats(m)
7-4 RevenuePassengerLoadFactorforU.S.ScheduledAirlines,1970–2013
8-1 BTSemploymentatmajorairlinesandselectothercarriersforAugust,2013
101BaggageFeesbyAirline2013
10.2CurrentTrendsImpactingAirlineMarketing
12-1Averageairpassengerfaresfordomesticairlines,1926–2008
12-2Averagefarein2013(Dollars$)
12-3Anindividualaircarrier’sdemandforairtransportationpermonthbetweentwocities(hypothetical data)
12-4DemandandRevenueScheduleforanAirlineoveraParticularPeriodofTime(hypotheticaldata)
12-5TotalFixed-OverheadCosts,TotalVariableCosts,andTotalCostsforanAirlineoveraParticular PeriodofTime(hypotheticaldata)
12-6SystemwidePassengerLoadFactorforanAirlineoveraParticularPeriodofTime(hypotheticaldata)
12-7Profit-MaximizingOutputforanAirlineoveraParticularPeriodofTime(hypotheticaldata)
13-1FreightandExpressTon-MilesandRevenuesforU.S.AirCarrierScheduledServices,1975–2013
14-1MaintenanceSystemforaJetAircraft(hypotheticalexample)
15-1US PassengerandCargoAirlineFleet
15-2ACarrier’sCurrentInventoryof737s(hypotheticaldata)
16-1AirlineEmployment,2009(U.S.Airlines–Averagefull-timeequivalentsinthousands)
16-2DurationofAirlineStrikesBetweentheFallof1958and1970(thefirst12yearsofthejetageandthe mutualaidpact(MAP))
16-3IncreaseinUS ScheduledAirlineWagesandFringeBenefitsComparedtoConsumerPrices(Index 1970=100)
16-4FringeBenefitsasaPercentageofWagesforSelectedWorkers,U.S.ScheduledAirlines,1970–1979
17-1NetProfit(orLoss)andRateofReturnonInvestmentfortheUS ScheduledAirlines,1960–2010
17-2AssetsPortionoftheBalanceSheetfortheUS ScheduledAirlines,asofDecember31,2004
17-3LiabilitiesPortionoftheBalanceSheetforUS ScheduledAirlines,asofDecember31,2004
17-4SourcesandUsesofFundsfortheU.S.ScheduledAirlinesasEvidencedbyChangesintheIndustry BalanceSheets
17-5ActualDepreciationandAmortizationfortheU.S.ScheduledAirlineIndustry,1960–2004
18-1AirlineAllianceNetworkComparison
A-1 AviationandaerospaceindustrieslistedintheWorldAviationDirectory
A-2 Selectedflight-relatedjobtitleswiththeairlines
A-3 Selectedmaintenance-relatedjobtitleswiththeairlines
A-4 Selectedmanagement-andnon-management-relatedjobtitleswiththeairlines
A-5 SelectedFlight-RelatedJobTitlesinGeneralAviation
A-6 SelectedJobTitlesinAirportAdministration
A-7 SelectedJobTitleswiththeFederalAviationAdministration
A-8 SelectedJobTitlesinManufacturing
AbouttheAuthor
Dr JohnWensveenisHeadoftheDepartmentofAviationTechnologyatPurdueUniversitywhereheserves astheChiefAcademicandAdministrativeOfficer Inadditiontohisadministrativerole,Dr Wensveenisan activeresearcherandexpertspeakerwithaconcentrationontheairlinestart-upprocessandcreationofnew businessmodels HeisalsoPresidentandCEOofAirlineVisions,anindustry-leadingaviationadvisoryand futuristfirmspecializinginbusiness,strategy,andmarketingplansfornew-entrantandestablishedairlines
Priortotheaboverole,Dr WensveenwasPartneroftheAmericasandExecutiveVicePresident,Airline Start-ups,atMangoAviationPartnersresponsibleforoverseeingairlinestart-upandairlinerestructuring projectsfromconceptthroughlaunchofcommercialoperations.HewasalsoManagingDirectorofVentana AviationAcademy,Mango’ssubsidiarytrainingcompany
Dr WensveenwasGlobalHeadofAirlineServicesatRadixxInternationalwherehewasresponsiblefor buildingandoverseeingtheadvisoryservicesdivision UntilJune2010,Dr WensveenwasDean,Schoolof Aviation,atDowlingCollegewherehewasChiefAcademicandAdministrativeOfficerforthe120-acre BrookhavenAirportcampus Priortothisrole,heheldanexecutivepositionatInterVISTAS-ga2wherehe wasresponsiblefordevelopinginternationalpartnershipagreementsforaircarriersworldwide
Dr WensveenwasoneofthefoundingteammembersofWashington-DullesbasedMAXjetAirways,the firstUSaircarriertoreceivecertificationsincetheeventsof9/11 UntilMarch2005,hewasVicePresident andSeniorDirectorofInternationalDevelopment.WhileatMAXjet,heledpartnershipnegotiationsandthe set-upoftheEuropeaninfrastructure
From1999to2004,Dr WensveenwasemployedasProfessorofAirlineManagementwiththeCollegeof BusinessatEmbry-RiddleAeronauticalUniversitywhereheinstructedairlinemanagementandoperations courses.Priortopursuinggraduatestudies,DrWensveenheldvariousmanagementpositionswithCanada 3000Airlinesandwasalsotheairline’sofficialmascot,AirBear.
Dr.WensveenisaCertifiedIATAinstructorandconductstrainingprogramsforTerrapinnTrainingand EuromoneyTrainingatvariousgloballocations Hepublishesfrequentlyinmajoraviationpublicationsandis anaviationanalystforthemedia Heisauthoroftheindustry’sleadingaviationtextbook,AirTransportation: AManagementPerspective,andisauthoroftheairlineindustry’sonlybookonhowtostartanairline,Wheels Up:AirlineBusinessPlanDevelopment
From1996to1999,Dr WensveenhostedanumberofleadingradioshowsintheUnitedKingdomand wasawarded‘BestMalePresenter’in1997attheBBCRadioOneAwards Hisinterestsincludeinternational travel,cruisingthehighseas,flying,boating,scubadiving,fishing,andhittingtheopenroadinhisdiesel pusherbus Dr Wensveenwasrecentlymarriedtohiswonderfulwife,Lisa,andresidesbetweenasunnylittle islandnearKeyWest,FloridaandahomeinWestLafayette,Indiana
Dr Wensveen,bornandraisedinVancouver,Canada,earnedPhDandMPhildegreesinInternational AirTransport/BusinessfromCardiffUniversity(UK)andaBAinGeography/TransportationLandUse PlanningfromtheUniversityofVictoria(Canada).HealsoearnedaCertificateinAirlineFinanceand
Foreword
Aswecelebrate100yearsofcommercialaviationand70yearsoftheInternationalCivilAviation Organization,letusrememberthatacountry’sorregion’scompetitivenessisdirectlyrelatedtoits connectivity.
Takingitswidersupplychainimpactsintoaccount,theWorldTravelandTourismCouncilfoundthat travelandtourism’stotalcontributiontoglobalGDPgrewby3.0percentin2013,fasterthanoverall economicgrowthforthethirdconsecutiveyearandoutperformingotherglobalsectorssuchasmanufacturing, retailanddistribution,publicservices,andfinancialandbusinessservices.
GloballytravelandtourismrepresentsUS$7trillion,266millionjobs,andUS$13trillioninexports
Themultipliereffectofairtransportisamazing,asICAOestimatedthateveryUS$100ofrevenue producedbyairtransporttriggersanadditionalUS$325andthatevery100jobsgeneratedbyairtransport triggersover600additionaljobsinotherindustries.
Itisthereforesimplysenselessandcounter-productiveforanyonetryingtostimulatesocio-economic growthandjobstofailtoeffectivelypromoteconnectivity
Intheseexceptionallydifficultfinancialtimes,governmentsshouldnotclipthewingsofasectorthat makeseconomiestakeoff
ThefollowingstatementbyPresidentObamainhisradiospeechofMay17,2014,appliestoallcountries:
IfwemakeiteasierformoreforeignvisitorstovisitandspendmoneyatAmerica’sattractionsandunparallelednationalparks,thathelps localbusinessesandgrowstheeconomyforeveryone
UNWTO-WTTCresearchshowsthatvisafacilitationwillbringUS$206millionextrareceiptsand5.1 millionadditionaljobsinG20economiesaloneby2015
However,wecannotpromoteconnectivityifweignoreprofitabilityandwecannotpromoteprofitabilityif weignoreallthatundermineit
Dr JohnWensveen’sinsightfulAirTransportation:AManagementPerspectiveremindsusthatevenifair transportisthestrongestlinkinthejobcreationandeconomicdevelopmentchain,itremainstheweakestand mostexposedlinkinthetravelandtourismvaluechain.
Inefficientnationalandregionalairspacemanagement,misguidednationalorregionalregulationofthe commercialandoperationalaspectsofinternationalcivilaviation,andunreasonabletaxes,feesandcharges underminebothconnectivityandprofitability
ICAOandUNWTOmusturgetheUN,regionalgovernmentalorganizations,headsofstatesand governmentstostopunderminingthegreatcontributionsoftravel,tourismandaircargo
Theseleadersmustbepersuadedthat,asageneralrule,aviationandtourismtaxrevenueswillbeoffsetby thelossestotheeconomyandjobswhereasaninitiallossinrevenuefromabolishedaviationandtourismtaxes willbeoffsetbyanincreaseintrade,travelandtourism.
Theymustbepersuadedthatairspacemismanagementimpactsnegativelyonboththeenvironmentand
airlines’costs.
Theymustbepersuadedthattheobviousinterdependency,synergiesandvitalimportanceofbothtourism andairtransportrequirealignednationalsectorialpoliciesonairtransportandtourism
Travelandtourismwillindeedflowsmoothlyinacountryandinaregiononlyif,andwhen,allthe stakeholdersdevelopthenecessarysynergyandworkinharmonyinthepursuitofasharedvision
Toachievethisalignmentrequiresaworldwidecultureofcommunicationandcooperationbecauseas states,ICAOandUNWTO,asairnavigationserviceprovidersandCANSO,asairlinesandIATA,as airportsandACI,ascargooperatorsandTIACA,astravelandtourismprofessionalsandWTTC,as consumers,asemployees,asaircraftandenginemanufacturersandasgroundhandlers,weneedeachother andwedependoneachother
Weareandwewillremainacommunityoflinkedinterestsandwewillmakeaformidabledifferenceif andonlyifwecanworktogethertoharnesstheformidablepoweroftravelandtourismtobringaboutsocioeconomicgrowth,jobs,understandingandhappinessworldwide.
VijayPoonoosamy VicePresidentInternationalandPublicAffairs
OfficeofthePresidentandCEO
EtihadAirways President,HermesAirTransportClub
Foreword
Theyear2014marksamilestoneforcommercialaviation Ithasbeen100yearssincethefirstcommercial flighttookoff,andeversincetheworldhasbeenliterallytransformedintoasmallvillage Todaythanksto aviation,peopleandbusinessesenjoyunfetteredmobility.Frompracticallyanypointinourplanet,peoplecan connecttheentireearthinaneversafer,morereliable,morecomfortableandmoreaffordablemanner But thewondersofaviationanditscontributiontoamoreintegratedandprosperousworldhaveyettobefully recognized,especiallyhereinAfrica,whereoursectorissubjectofmanyrestrictionsandexcessivelevies.
Despitehighfuelprice,excessivetaxationandextremesensitivitytoeconomicshocks,ourindustry continuestoshowanincessantabilitytoadaptandremainresilientthroughnewtechnology,consolidation andmoreimportantlythroughtheskillofitstalentedworkforce
Goingforwardasweenterthesecondcenturyofaviation,Iammorethaneverconvincedthatitisnotthe amazingprogressinaircrafttechnologyortheintroductionofnewandgame-changingproductsandservices, thatwilldeterminesuccessorfailure,butratherhoweachairlinenurtures,developsandmanagestalent.
PeopleoftenaskmethesecretoftheamazingEthiopiansuccessoverthelast10years,especiallyina contextofanAfricanairlineindustrywithstagnatingmarketsharesandcontinuouslyinthered.Ialways repeatthesameanswer BehindEthiopianexceptionalresultsliethededication,competenceandskillofits managementandemployees
Ourinvestmentintalentandskilldevelopmentisattheheartofthesuccessofourfast,profitableand sustainablegrowthstrategy,Vision2025.ItisouremployeeswhohavemadeitpossibleforEthiopianto continuouslyregisteranaveragegrowthof20percentto25percentperyearinalloperationalparametersover thelastdecade Justtogiveanexample,in2004weweremaking$390millioninrevenue In2013,wehada turnoverofcloseto$2.5billion,becomingthelargestAfricanairline.Thisisstaggeringgrowthbyany standardinanyindustry.Itisevenmoreremarkablethatweachievedthisfeatinanindustrythatishighly capitalintensive,skill-drivenandhypercompetitive
Ourperformancealsospeaksvolumesaboutthesoundnessofour15-yearstrategicroadmap(Vision 2025),inanindustrythatisnotaccustomedtothenotionoflongtermplanning Givenourcurrentgrowth track,wearewellonourwaytobecominga$10billioncompanyby2025.
Ofcourse,itisagreatpersonalsatisfactionandhonorformetobeatthehelmofmybelovedairlinein suchexcitingtimes IliterallygrewupatEthiopian,havingjoinedtheairlinerightafterschool,andhave remainedwiththecarrierforalmost30years Ethiopianisnotjustmyworkplace Itismysecondfamily My passionandlovefortheairlineknowsnobounds.Thesameholdstrueformycolleaguesinsenior managementpositions IthinkthatEthiopianmanagementandemployeesloveanddedicationtotheir nationalcarrieristrulyuniqueandwithoutparallelinourindustry
Iremainoptimisticthatinthetwenty-firstcenturyAfricawillhaveastrong,globallycompetitiveand indigenousairlineindustry Myoptimismisbackedbythecontinent’sstrongfundamentals:abillionand youngpopulation,rapidurbanizationandfast-growingmiddleclass,mostoftheworld’suncultivatedarable
land,andmanyoftheworld’smineralandnaturalresourcescombinedwithimprovedgovernancemeanthat Africa’sGDPwillgrowatsixpercentfortheforeseeablefutureandthatFDIflowswillberobust Thiswill translateintohighertraveldemand,whichinturnshouldgeneratemorebusinessforAfricanairlinesifthe continent’sdecisionmakersandairlinesgettheirpoliciesandstrategiesright.
InhisbookDr.JohnWensveen,aleadingexpertonaviationwithnotjustacademicbutextensivehands onexperienceofourindustry,coversallthecriticalissuesthatareshapingourindustry Hisastuteandindepthcoverageofthemegatrendsinourexternaloperatingenvironmentandthewayourindustryis respondingtothesechangeswithnewbusinessmodelsandeconomicsaswellasthesuccessfactorsincritical areassuchasfleetplanning,scheduling,marketing,pricingandlaborrelations,makeshisbookparticularly relevantforairlineindustryexecutiveswhowanttounderstandthebigpictureandhowtocomeoutontop Butthescopeanddepthoftheissueshecoversmakeshisbookpertinenttoallwhoareinterestedinour industry,whethertheyarepolicymakers,academiciansoroutsideobservers Itisdefinitelyamustread
TewoldeGebremariam
CEO,EthiopianAirlinesGroup
Preface
Sincethelasteditionofthisbookwasprinted,theglobalaviationindustryhaschangedasaresultofnew trendsandchallenges Alongwithsuch,theindustryhasalsobeenfacedwithnewopportunitiesand strategies.TheeightheditionofAirTransportation:AManagementPerspectiveaddressesthereasoningbehind suchchangesandattemptstoforecastthefuturetoacertaindegreeintermsofhowairtransportationwill evolve
Aviationcontinuestobethemosthigh-profileindustryinexistencebutperhaps,oneofthemost neglectedintermsofinfrastructureinvestment.Thetechnologyexiststomaketheindustrymoreefficientand profitableandyet,suchtechnologyisnotutilizedtothefullestextentduetoalengthylistoffactors.This bookattemptstoaddresssomeoftherelatedissueswiththegoalofstimulatingthereadertoseriouslyreflect onthehistoricalandcurrentaspectsofaviation Itistheauthor’sdesiretoeducatethereaderontheinner workingsoftheindustrysoweallhaveabetterunderstandingofhowtopredictthefutureandimplement strategieswithpositiveresults Intheairlineindustryspecifically,successisoftenmeasuredbyone’sabilityto showupattheofficeandturnthelightson Theindustrymustmakechangeseliminatingthementalityof short-termvisionandthinkabouthowtoachievelong-termsuccesswhileaddressingthevariousinternaland externalvariablesthrownone’sway
Theeightheditionremainsintroductoryinnatureprovidingthereaderwithasolidfoundationoftheair transportationindustryandagreaterappreciationofthemajormanagementfunctionswithinanairline Variousreferencesareprovidedattheendofeachchapterencouragingthereadertoexploreandkeepabreast ofcurrentperiodicalsandwebsites Thereadershouldgraspenoughknowledgetoreasonaccuratelyand objectivelyaboutproblemsfacingtheindustryandthedevelopmentofalastinginterestintheair transportationindustry.Thebasicconceptsandproblemsfacingtheindustryinastraightforwardandlogical fashionarepresentedthroughouteachchapter
CHANGESINTHEEIGHTHEDITION
Theairlineindustryisconstantlyevolving,makingitdifficulttodocumentcurrenttrendsduetothedelay betweenwritingandpublishingthebook.Theeightheditionofthistexthasbeenupdatedtoaddresstrends, challenges,opportunities,andstrategiestothefullestextentpossible Additionally,thereisanincreasedfocus ontheglobalindustrywithmanyhighlightsonthesixregionsoftheworldasdefinedbyIATA(North America,LatinAmerica/Caribbean,Asia-Pacific,Europe,MiddleEast,Africa).Thereaderisguided throughtheinsandoutsoftheairtransportationindustryaswellasthroughthedetailsofmanagement functionswithinairlines Anewchapteronairlinesinsocialmediahasbeenadded Tables,figures,statistics, keyterms,websites,andreviewquestionshavebeenupdated.
TEACHINGANDLEARNINGAIDS
Thesubstantivecontentofatextbookisonlypartofwhatmakesitusableintheclassroom;forthebooktobe effective,itscontentmustbetaughtbyinstructorsandlearnedbystudents Tofacilitatetheprocess,this editioncontinuestopayparticularattentiontoteachingandlearningaids,suchasthefollowing:
1 Chapteroutlines Eachchapteropenswithanoutlineofthemajortopicstobecovered
2.Chapterchecklists Aftertheoutline,eachchapterincludesachecklistofobjectivesthatstudentsshouldbe abletoaccomplishoncompletingthechapter.
3 Relevancy Mostoftheexamples,applications,andextensionsofthebasicmaterialaredrawnfromand applytotheairtransportationenvironmentofthe1990s
4.Stayingpower.Thetextisdesignedtohavestayingpowerovertheyears.Itemphasizestheunderlying principles,practices,andpoliciesthatwillnotchangeappreciablyovertime Itisrecognizedthat instructorswillsupplementthematerialwithcurrent,topicalapplicationsandevents
5.Figuresandtables Importantpointsineachchapterareillustratedwithstrongvisualmaterials.
6.Logicalorganizationandfrequentheadings.Airtransportationcaneasilybecomeoverwhelminginits multitudeoftopics,concepts,practices,andexamples Thematerialcoveredherehasbeenputina systematicframeworksothatstudentsknowwheretheyhavebeen,wheretheyare,andwheretheyare goinginthetext.Frequentheadingsandsubheadingsaidorganizationandreadability.
7 Keyterms Eachchapterconcludeswithalistofkeytermsusedinthetext
8 Reviewquestions Reviewquestionsattheendofeachchapteraddressimportantpoints
9 Appendixandsuggestedreadings Onechapterincludesanappendixthatisofpracticalinterestandthat reinforcesthematerialcovered.Alistofsuggestedreadingsisincludedineachchapterforstudentswho wishtopursuethematerialingreaterdepth
10 Careerappendix Thiseditiononceagainincludesanappendixonjobsintheairtransportationfieldand waystogetthem.
11.Glossaryofairtransportationterms.Allkeytermsappearingattheendofeachchapter,aswellasmany othertermsusedinthetextandothersofsignificanceinairtransportation,areincludedintheglossary
12 Completeindex Thebookincludesacompleteindextohelpstudentsfindneededinformation
INTENDEDAUDIENCE
Becausetheaspirationsofmoststudentsofairtransportation(and,forthatmatter,mostcareerpaths)leadto theairlinesegmentoftheairtransportationindustry,themajorfocusofthistextisonthemanagement functionsandorganizationofairlines However,thesignificanceandcontributionofgeneralaviationisnot overlooked
Thisbookisintendedforthreesomewhatdifferentaudienceswithsimilarinterests:studentsenrolledina coursesuchas“AirTransportation”or“AirlineManagement”;studentsintransportationandtraffic managementprogramswhowishtogainmoreinsightintotheairtransportationindustrybecausemostof theirclassesconcentrateonsurfacetransportationmodes;andindividualswhoworkforanairlineandwantto gainabetterunderstandingofmanagerialaspects Toooften,anairlineemployee,asaspecialist,seesonlya limitedpartoftheoveralloperationandhaslittle,ifany,knowledgeofsuchimportantsubjectsasmarketing, pricing,scheduling,andfleetplanning.Evenindividualswithinmarketing reservations,forexample have littleappreciationoftheircompany’sgrowthstrategiesandmarketsegmentation Theseemployeesaresimply toobusyfulfillingthefunctionsoftheparticularjobdescription.
ORGANIZATIONOFTHETEXT
ThefollowingisanoutlineofAirTransportation:AManagementPerspective,eighthedition.
PartOne
AnIntroductiontoAirTransportation
Chapter1 “TheAirlineIndustry:Trends,ChallengesandStrategies.”Chapter1providesthereaderwitha solidoverviewofthedifferentstagesofdevelopmentimpactingtheairlineindustryalongside past,presentandfuturetrends Inaddition,themainchallengesandstrategiesarepresented leadingintoadiscussiononthenewbreedofairlines.
Chapter2 “Aviation:AnOverview”Chapter2introducesstudentstothecharacteristics,scope,and economicsignificanceoftheaerospaceindustryanditsmajorsegments thegovernment marketandthecommercialmarketforairtransportandgeneralaviationaircraft.Theair transportationindustryisclearlydefined,anditscontributiontotheeconomyisdiscussedin depth
Chapter3 “HistoricalPerspective.”ThischapterprovidesahistoricalsketchofU.S.airlinesandgeneral aviation,includingthefederallegislationthathasaffectedtheirgrowthanddevelopment The AirlineDeregulationActof1978andthecircumstancesleadinguptoitarethoroughly explored.Thepostderegulationerafrom1978totheearly2000sisdiscussed,includingchanges inthestructureoftheindustryandnewairlinersenteringthemarket(low-costcarriers,virtual carriers,andmega-carriers)
Chapter4 “AirTransportation:RegulatorsandAssociations.”Thischapterdiscussestherolesplayedbythe fourprimaryfederalagenciesthatinterfacewithbothsegmentsoftheairtransportation industry:theDepartmentofTransportation(DOT),theFederalAviationAdministration,the TransportationSecurityAdministration,andtheNationalTransportationSafetyBoard.The officesattheDepartmentofTransportationresponsibleforcarryingouttheremainingfunctions oftheformerCivilAeronauticsBoardarethoroughlyexplored Thepurposeandmajor functionsoftheprominentaviationtradeassociationsarealsodescribed.
Chapter5 “TheGeneralAviationIndustry”ThischapterconcludesPartOnebyreviewingthegeneral aviationindustry,includingitsstatisticsandadescriptionofwidelydiversesegmentsaccording totheirprimaryusecategories.Othertopicsincludetheroleofgeneralaviationairports,FAA servicestogeneralaviation,andthegeneralaviationsupportindustry,which,likeathree-legged
stool,ismadeupofthemanufacturers,thefixed-baseoperators,andtheusersofgeneral aviationaircraft
PartTwo StructureandEconomicsoftheAirlines
Chapter6 “TheAirlineIndustry”ThischapterreviewsthecurrentstructureoftheUS airlineindustryand itscompositefinancialandtrafficstatistics Acompletediscussionofthepostderegulation expansion,consolidation,andconcentrationoftheindustryisincluded.Thegrowingroleof regionalcarriersandnewtypesofairlinesisthoroughlydiscussed Thischapteralsoincludesa sectiononairlinecertification,includingtypesofandrequirementsforcertificationandoffices withintheDOTresponsibleforthisimportantfunction.Thecurrenttrendofintra-industry agreements,suchascodesharingandothercooperativeefforts,aredescribedindetail
Chapter7 “EconomicCharacteristicsoftheAirlines”Thischapterdealswiththeeconomiccharacteristics ofoligopoliesingeneralandtheuniquecharacteristicsofairlinesinparticular.Attentionisalso giventotheeconomicforcesinthepostderegulationperiodthathaveledtosuchmega-carriers asAmerican,United,Continental,andDelta Thesignificanceofairlinepassengerloadfactors isthoroughlyexplored.Thischapteralsodiscusseshowtheindustryhaschangedsincethe eventsof9/11andcurrentglobalevents
PartThree ManagerialAspectsofAirlines
Chapter8 “AirlineManagementandOrganization.”TheopeningchapterofPartThreeintroducesstudents totheprinciplesandpracticesofairlinemanagementandorganization Thedifferentlevelsof managementwithinanairlineareexplored,alongwiththefunctionsofmanagementplanning, organizing,staffing,directing,andcontrolling.Thisisfollowedbyacomprehensivereviewof organizationplanningandadescriptionofatypicalmajoraircarrier’sorganizationalstructure, includingthepurposeandfunctionofvariousadministrationsanddepartments Departmentalizationandtheneedfornewdivisionswithintheorganization,suchassafetyand securityandtraining,areintroduced
Chapter9 “ForecastingMethods”Forecastingisextremelyimportantinthemanagementofairlines All planninginvolvingpersonnelandequipmentneedsisbasedonforecastsoffuturetrafficand financialexpectations Forthisreason,thischapternaturallyprecedesallofthechaptersrelating totheothermanagerialaspectsofairlines Thepurposeofthischapteristoexposestudentsto theprimaryforecastingmethodsusedbyfirmsengagedinairtransportation.
Chapter10“AirlinePassengerMarketing”Thischapterbeginswithadiscussionofhowthemarketingof airtransportationhaschangedovertheyears Themarketingmix(product,price,promotion, andplace)isanalyzedindepth,andtheconsumer-orientedmarketingconceptofthelate1990s andearly2000sisdiscussed Variouscurrentairlinemarketingstrategiesarethenexplored, includingsuchintensiveapproachesasgainingdeepermarketpenetration,increasingproduct development,anddevelopingnewtargetmarkets.Directmarketing,computerizedreservation systems(CRSs),travelagents,frequent-flierprograms,business-classservice,codesharing,huband-spokeservice,andadvertisingandsalespromotionareallhighlighted
Chapter11“#AirlinesinSocialMedia.”Thischapterdiscussessocialmediaandhowairlinesexercisetheir presenceonsocialmedia Theobjectivesoftheairlines’presenceonsocialmediaaswellasthe majoraspectsofsocialmediacampaigndevelopmentarepresented.Severalexamplesofairline bestpracticesincrisismanagementthroughsocialmediaareincludedaswellasairlinebest practicesindrivingcustomerserviceandrevenue
Chapter12“AirlinePricing,Demand,andOutputDetermination.”Thischapterfocusesonpricing, certainlyoneofthemostvolatileofthe“fourPs”ofmarketingsincederegulation.Subjects includethedeterminantsofairlinepassengerdemandandelasticityofdemand Thetypesof airlinepassengerfaresarediscussed,followedbyin-depthcoverageofthepricingprocess, includingpricingstrategiesandobjectives,pricinganalysis,andthestepsinvolvedinanalyzing farechanges Theimportantroleofinventory,oryield,managementisaddressedaswell Thisis followedbyanin-depthdiscussionofairlineoperatingcosts,profitmaximization,andoutput determinationintheshortrun.
Chapter13“AirCargo”AfterabriefdiscussionofthehistoryofaircargointheUnitedStates,studentsare introducedtotheimportanceofairexpressandairfreighttodayandtotheexpectationsfor futuregrowthintheindustry.Themarketforairfreightisthencovered,includingthetypesof airfreightrates Specialairfreightservicesarediscussed,asarefactorsaffectingairfreightrates Theconceptoftheverylargeaircraft(VLA)isalsodiscussed Chapter14“PrinciplesofAirlineScheduling.”Unquestionablyoneofthemostcriticalandyetmostdifficult tasksfacingairlinemanagementisschedulingequipmentinthemostefficientandeconomical manner Thischapterdealswiththemanyinternalandexternalfactorsthataffectschedule planning.Typesofschedulesarediscussed,alongwithseveralexamplesofhowacarriergoes aboutputtingascheduletogether Thechapterconcludeswithadiscussionofhub-and-spoke schedulinganditsimportanceinthecompetitivepostderegulationenvironmentofthe1980s, 1990s,and2000s.
Chapter15“FleetPlanning:TheAircraftSelectionProcess”Thedecisiontopurchasenewaircraftis certainlyoneonwhichmanagementexpendsagreatdealoftimeandeffort.Thiscrucial decisionwillentailmillionsofdollars,anditseffectswillremainwiththecarrierforyears Studentsareintroducedtotheaircraftselectionprocess,firstfromthestandpointofthe manufacturerandthenfromtheindividualcarrier’sviewpoint.Thetrendtowardleasingis thoroughlyexplored,alongwiththegrowingproblemofnoiserestrictionsonolderaircraft All oftheinputstotheprocessareaddressed,asarethecriteriabywhichacarrierevaluatesa particularaircraft.Thenewgenerationofaircraft,includingtheregionaljetandnewlong-range twin-engineaircraft,areintroduced Thechapterconcludeswithanappendixdemonstratingthe fleet-planningprocessatAmericanAirlines
Chapter16“AirlineLaborRelations.”Representingover35percentofatypicalcarrier’soperatingexpense, laboriscertainlyoneofthemostimportantareasofconcerntomanagement Thischapter openswithathoroughdiscussionandanalysisoftheRailwayLaborAct,followedbyareviewof thecollectivebargainingprocessundertheact.Ahistoricalsketchofairlineunionactivityinthe UnitedStates,beginninginthe1930sthroughthepostderegulationperiod,isalsoprovided
Thischaptereducatesthereaderontrendsaffectingfuturedevelopmentofhumanresources departments Thechapterendswithanoverviewofthecollectivebargainingprocessinrecent yearsanditsimpactonthecarriers.
Chapter17“AirlineFinancing.”Thischaptertakesuptheproblemofairlinecapitalfinancing.Themajor sourcesoffundingareexamined,followedbyadiscussionofthesourcesandtheuseoffunds overthetwodecadesfollowingtheintroductionofjets.Thefinalportionofthischapterdeals withfundingsourcesinthe2000sandtheimportantsubjectsofcashmanagementandfinancial planning
PartFour TheInternationalScene
Chapter18“InternationalAviation”Thefinalchapterroundsoutthetextcoverageofairtransportationby addingthedimensionofinternationalaviation Airtransportationplaysasignificantroleinthe movementofpassengersandcargobetweencountries,andthischapterdiscusseshowthe variousinternationalconferencesandconventionshaveshapedworldwideaviation Thelast sectionofthechaptercoverstheinternationalaviationmarketfollowingthepassageofthe InternationalAirTransportationCompetitionActof1979.Thesubjectsofglobalizationand internationalairlineandairportalliancesarethoroughlyexplored Appendix “CareerPlanninginAviation”Thisappendixprovidesastructuredapproachtotheall-important subjectofcareerplanning.Studentsaretakenthroughthestepsofchoosingandgettingtheir firstjobinaviation,identifyingsourcesofcareerinformation,developingrésumés,andpreparing foraninterview Includedarenumerousjobdescriptionsfromallsegmentsoftheaviation industry.
ANOTETOINSTRUCTORS
Anyonewhohastaughtcoursesinairtransportationhassurelyrecognizedthepaucityoftextsonthesubject Thefewbooksthatareavailableeitheraretoobroadinscope,resultinginashallowoverviewofmosttopics, orexamineaparticularsegmentoftheindustryorphaseofmanagementindepthbutwithverylittlebreadth. Ihaveattemptedtotakeabalancedapproach,recognizingthatmostinstructorswillhavetheirownideas regardingtheimportanceofthesubjectmatterunderdiscussionandwillsupplementthetextwiththeirown materialsaccordingly.Statisticsappearingintablesandchartshavebeendrawnfromeasilyaccessedsources, suchasAerospaceFactsandFigures,FAAStatisticalHandbook,andATAannualreports,sothattheycanbe readilyupdatedbyusersofthetext
Thisbookisdesignedtocarryitsfairshareoftheburdenofinstruction Studentsusingthistextshould notrelyonyoufordetailed,repetitiveexplanations Lessclasstimeisrequiredtogeneratefunctional understandingofthesubject,somoretimeisavailableforclassdiscussionandtheapplicationofthematerial tocurrentissues Inresearchingthisbook,Iacquiredawealthofmaterials,mostofthemfree,fromnumerous sources,includingtheDOT,RITA,FAA,NTSB,ICAO,A4A,RAA,andWorldAviationDirectory Theair carriersarearichsourceofmaterialthatcanbeusedtosupplementyourcourse:writetotheparticular departmentaboutwhichyouareseekinginformation GAMA,AIA,A4A,andindividualaircraft manufacturerscanalsosupplyahostofmaterials
AnothersourcethatIhavefoundhelpfulinourcoursesistheHarvardBusinessSchoolCaseServices, HarvardBusinessSchool,Boston,Mass 02163 Someoftheairtransportationcaseswillbeappropriatefor yourcourses,andthestudentswillenjoythem.
SuggestedOutlinesforaOne-SemesterCourse
Coursesinairtransportationvaryincontentandemphasis,andsowilltheusesofthisbook Somecourses maycoverthematerialfrombeginningtoend;otherswillfocusoncertainsectionsandomittherest.Parts OneandTwoofferabroad-basedintroductiontoairtransportationandshouldbesuitableformostusers AirlinemanagementcoursesmightfocusonPartsThreeandFour
Theserecommendationsareflexible Othercombinationsarepossible
ANOTETOSTUDENTS
IhearandIforget IseeandIremember IdoandIunderstand Confucius
Themosteffectiveandinterestingwaytolearnanysubjectisbydoingit Noprofessorortextbookcouldever
teachyouallaboutairtransportation;alltheycandoishelpyoutolearnit Muchofthelearningprocessisup toyou Thistexthasbeendesignedtobeeasytounderstand Usually,asyoureadthetext,youwon’thaveto struggletogetthemeaningofaconceptorprinciple.Butunderstandingisonething;learningsomethingwell andapplyingittocurrenteventsissomethingelse.
Beforestartingachapter,reviewthechapteroutlineandchecklist.Takenotesandhighlightthemajor pointsasyouproceedwithyourreading Afterreadingthechapter,seeifyoucanaccomplishtheobjectives listedinthechapterchecklist Thereviewquestionsattheendofeachchapterarealsodesignedtobringout themostimportantpointsmadeinthechapter.
Becomefamiliarwithaviationtradejournalsandmagazines Youwillbesurprisedtoseehowmany articlestherearerelatingtothematerialdiscussedinclass.Thisliteraturewillnotonlyenhanceyourown knowledgeofthesubjectmatterbutalsoenrichyourclassroomexperienceasyoudiscussthematerialwith classmates
Thisisprobablyoneofthemostexcitingperiodsinthebriefhistoryofourairtransportationindustry WiththepassageoftheAirlineDeregulationActof1978,andtheemergenceofliberalizationandopenskies wehavewitnessedtheemergenceofacompletelynewstructureforairtransportationservicesintheUnited Statesandaroundtheworld Theindustrystandspoisedforanewsurgeofgrowth Manynewcareerpaths willsurfaceinthenextseveralyearsforthoseofyouwhohavepreparedforthem.Goodluck!
Acknowledgments
MypassionforaviationbeganattheageofthreewhenIhadtoevacuateaBoeing747withanenginefire I wasdressedinaUSAirForcepilot’suniformproudlydisplayingmywings LittledidIknowtheeventsof thatdaywouldchangethecourseofmylifeandflymedownapathtoalifelongcareerinaviation.Asasmall child,mydreamwastolearntoflyandafterafewhoursplayingwiththestickandrudder,andafewyearsof maturity,Irealizedmyrealpassionwasaviationbusiness
Iowemanythankstothepioneersofaviationandtheentrepreneursoftodaythatcontinuouslyamazeme withnewdevelopments.Therearefewindustriesinexistencewhereonecangotosleepatnightandwakeup thenextmorningfacedwithchallengesthatdidnotexistthedayprior.Theexcitementcreatedbythedaily stressesofthisbusinesskeepsmegoingandstrivingtowardthedesignoftheultimateairlinebusinessmodel Isthisevenpossible?
Manythanksareowedtoindustrysourceswhoprovidedagreatdealofmaterialthatwasextremelyhelpful inputtingtogetherthistextbook.ThankyoutotheDepartmentofTransportation,ResearchandInnovative TechnologyAdministration,TransportationSecurityAdministration,NationalTransportationSafetyBoard, FederalAviationAdministration,Airlines4America,RegionalAirlineAssociation,NationalBusiness AviationAssociation,AircraftOwnersandPilotsAssociation,InternationalCivilAviationOrganization,and theInternationalAirTransportAssociation AdditionalthankstoAirbusIndustrieandTheBoeing Company
ThankyoutoVijayPoonoosamy,VicePresidentInternationalandPublicAffairs,OfficeofthePresident andCEO,EtihadAirways Aspecialthankyoutoagoodfriendandcolleague,RobertStangarone,Vice President,CorporateCommunications,NorthAmerica,Embraer.
Averyspecialthanksisowedtothreeaviationprofessorsforassistingwithrevisionsoftheeighthedition ofthistext.Dr.BenediktBadanik,AirTransportDepartment,UniversityofZilina(Slovakia)authored Chapter11,“#AirlinesinSocialMedia”Dr RicoMerkert,InstituteofTransportandLogisticsStudies,The UniversityofSydneyBusinessSchool(Australia),assistedwithrevisionstoChapter7,“Economic CharacteristicsoftheAirlines”,andChapter13,“AirCargo”.Dr.XiaowenFu,InstituteofTransportand LogisticsStudies,TheUniversityofSydneyBusinessSchool(Australia),assistedwithrevisionstoChapter 18,“InternationalAviation”.
AveryspecialthanksisowedtoDr RhettYates,DavisAviationCenter,JacksonvilleUniversity,and threehard-workingstudentsforassistingwithdatacollection:StevenPaduchak(President,Jacksonville UniversityAviationAmbassadorProgram),ChrisManis,andJoshuaHolt Averyspecialthank-youisowed tomygraduateresearchassistantsatPurdueUniversity(DepartmentofAviationTechnology),WesleyMajor andLukasRudari.Boththeseguysaresuperstarswithbrightfuturesinaviation.
Atextbookofthisnaturecannotcometogetherwithouttheassistanceofateam.ThankyoutoDr. AlexanderWellsforbelievinginmetocarryonthelegacyandAshgatePublishing,especiallyGuyLoft
