Monday, February 25, 2013

Topic 6: General Aviation in China

As I stated in my first blog topic a few weeks ago, China's aviation industry is experiencing a large amount of growth at a quick rate, but what about their general aviation sector?

When talking about China's general aviation sector, there is not too much going on. In 2012, there were still fewer than 200 business jets and just over 1,500 general aviation aircraft registered in the country. These numbers include turbine jets, propeller driven aircraft and rotorcraft. Most of the aircraft registered are not modern imports either, they are mainly crop-dusting aircraft, poorly built old domestic planes and run down Soviet-era trainers. With so few general aviation airplanes, there are not many flights that take place from day-to-day. More general aviation aircraft operations occur in one minute here in the U.S. than occur in a whole day in China. To further break it down, there is a larger general aviation industry in North Dakota alone than in all of China (Jackson, 2012).

Another big limiting factor for general aviation in China is the number of airports for general aviation aircraft to use. According to a Civil Aviation Administration of China report, at the end of 2011 there were only 70 airports and 216 landing points for general aviation in China. The CAAC is said to be working on subsides including grants for airport building and pilot training to help boost the general aviation industry (Wen, 2012).

Recently a few things have occurred to get China's general aviation industry moving. Airspace regulations had previously been a huge limiting factor for general aviation in China. As of late November in 2012, approximately 36 percent of airspace below 4,000 meters is open to general aviation. This was a huge step forward and one that was needed to allow general aviation to get a start (NBAA, 2012).

In June 2011, Cirrus and the China Aviation Industry General Aircraft Co., Ltd. (CAIGA) announced that the merger between the two companies was complete. The deal was not a very popular one here in the U.S. because people were afraid that Cirrus would close down its U.S. operations in Minnesota and North Dakota, putting many people out of work in an already struggling economy. A Minnesota congressman also raised concerns that it may lead to national security concerns, but all of these factors were negated by Cirrus' co-founder Dale Klapmeler. The partnership will benefit the customers and the business, according to Cirrus CEO Brent Woulters, because Cirrus and CAIGA both have a vision of worldwide growth. He also says that CIAGA has resources which will allow them to accelerate global expansion and to possibly expand its facilities and staff in the U.S. (Grady, 2011).

I believe that Cirrus merging with this Chinese company is a good strategic move as long as they do not start doing all of their production in China. As long as they keep people here in the U.S. at work, as well as employing people overseas, I think it is a good thing. As the CEO said, merging with CIAGA allows them to utilize more resources and expand more quickly, both here and there. I also believe that Cirrus, and other U.S. companies, merging with chinese companies is a good thing. Not only will it help to get China's general aviation sector going, but it also provides a good foot in the door for other American companies and people to the Chinese aviation industry. If the Chinese benefit from and enjoy the relationships they make with American companies, it may open doors in other areas of the industry as well.

Thanks for reading,
Kyle Wagenknecht


References

Grady, M. (2011). Cirrus finalizes China deal. Retrieved February 25, 2013, from, http://www.avweb.com/avwebflash/news/CirrusFinalizesChinaDeal_204886-1.html

Jackson, C. (2012). China's general-aviation flight of fancy. Retrieved February 25, 2013, from, http://online.wsj.com/article/SB10001424052702304451104577391650977428024.html

NBAA. (2012). China accelerates opening of low-level airspace. Retrieved February 25, 2013, from, http://www.nbaa.org/ops/intl/mid/20121126-china-accelerates-opening-of-low-level-airspace.php

Wen, W. (2012). Sky's the limit for booming general aviation sector. Retrieved February 25, 2013, from, http://usa.chinadaily.com.cn/business/2012-11/27/content_15962670.htm

Sunday, February 17, 2013

Topic 5: The Merger of American Airlines and US Airways

This Thursday American Airlines and US Airways announced that they are going to merge which will create the worlds largest airline. What does this mean for consumers? It can be argued two ways. The first argument is that larger airlines can better serve their customers overall than can two smaller airlines. The second, is that while the first side may be true, customers do not care as much about the benefits they receive as they do about prices and this merger will decrease competition and raise ticket prices in the long run (New York, 2013).

The two airlines are going with the first argument and saying that it will be good for passengers because it will allow the "New" American to better compete with Delta and United. There are also some analysts that say the deal should not result in higher fares because most of the routes of each airline complement each other (New York, 2013).

In the same article in The New York Times, it is stated that even though the route overlaps are not too large, it would still almost eliminate competition in certain cities such as Dallas, Phoenix, Philadelphia and Miami which are all hub airports for both airlines. Another concern that will cause a larger impact on competition is the dominance the "New" American will have over the percent of total flights out of large airports. At Dallas-Fort Worth they will control 86 percent of all the flights, 78 percent at Philadelphia, 60 percent at Washington's National Airport and 92 percent out of Charlotte. These percentages are kind of intimidating in a current airline system where control of major hubs is everything (New York, 2013).

I believe that when it comes to mergers, customers are more concerned with their bottom line and want cheaper prices. Decreasing competition, in my opinion, is never a good thing. As Joe Cahill (2013) states, "The merger of American and US Airways ... means three things for consumers: fewer choices, poorer service and higher prices. We're already suffering from all three." Once there is little to no competition left, companies are free do to whatever they want and the customer is left with no decisions and is at the mercy of whatever the one company is offering.

Customers are not the only people who have concerns when it comes to a merger, the pilots of the two airlines have a lot at stake. Each airline has a pilot seniority list which determines how much money they make, which airplanes they fly and what schedules they get. Another factor that is determined by the seniority list is who loses their job if/when the new airline downsizes. When you combine two airlines, with two different seniority lists, things tend to get messy. Someone who was at the top of a seniority list in one airline may end up closer to the middle once the merger happens. This is often one of the most difficult things to deal with during a merger (Kaufman, 2013).

ALPA has a manual that can help with the merger process, but each merger is different and may require different steps to come to a final conclusion (ALPA, 2006). If I were in charge of creating an industry standard for merging pilot seniority lists, I would make it very simple. Whoever has the earlier hire date has higher seniority. People that were hired on the same date would be further distinguished by alphabetical order of their last name. There truly is no good way to merge seniority lists because no matter what you come up with, there will be people who are unhappy. By using the pilots hire dates as the primary factor in determining seniority there is nothing to argue about, either you were hired before or after the next guy. When it comes to two pilots hired on the same date, the alphabetical system is something used in many applications and is something you can not argue. As I said earlier, you are not going to make everyone happy but you have to be as fair as possible about it.

Even though American and US Airways have stated they are going to merge, there are a few steps left in the process to make it final. One of these steps is the review by the U.S. Department of Justice's Antitrust Division. The goal of the Antitrust Division is to protect consumers by making sure that competitive markets continue to exist which create high quality and low prices. This review is done to determine whether or not it will lessen competition. They do not look at the entire industry to see how it will affect competition, they look at relevant markets to make a more accurate assessment (Department of Justice, 2005).

After doing a little bit of research and looking at some of the numbers I stated earlier, I think that at certain airports, such as Dallas-Fort Worth and Charlotte specifically, this merger may lessen competition and creates the potential to affect the consumer. Obviously I do not know all of what the Antitrust Division looks at when making their final decision, but based on their statement of what they do this merger may raise a red flag in my opinion.

If this merger does get approved, which is the current prediction, then 70 percent of the domestic market will be controlled by four airlines. I believe that this has the potential to affect my future career by lessening the amount of jobs available through consolidation. With the merger of each airline comes the eradication of jobs. I am not sure that I intend on working in the domestic airline industry but if jobs are being cut there, those people will be looking for work elsewhere which will increase competition across the board.

Thanks for reading,
Kyle Wagenknecht




References

ALPA. (2006). Merger and fragmentation policy. Retrieved February 17, 2013, from, http://www.wearealpa.org/about/adminmanual/Section_045_Merger_and_Fragmentation_Policy.pdf

Cahill, J. (2013). Why this airline merger is a bad deal. Retrieved February 16, 2013, from, http://www.chicagobusiness.com/article/20130216/ISSUE10/302169983/why-this-airline-merger-is-a-bad-deal

Department of Justice. (2005). Antitrust for airlines. Retrieved February 16, 2013, from, http://www.justice.gov/atr/public/speeches/217987.htm

Kaufman, W. (2013). Airline mega-mergers: 'Good, bad and ugly'. Retrieved February 16, 2013, from, http://www.npr.org/2013/02/14/172018757/airline-mega-mergers-good-bad-and-ugly

New York Times. (2013). American Airlines bulks up. Retrieved February 16, 2013, from, http://www.nytimes.com/2013/02/15/opinion/american-airlines-bulks-up.html

Monday, February 11, 2013

Topic 4: Corporate Aviation: A Political Punching Bag

Corporate aviation has been under a lot of scrutiny the past five to ten years. Many believe that companies do not need their own airplanes to fly executives and other employees around. I understand why people think it is a source of money that could be better spent on other things, but at the same time I do not think people understand all of the benefits that corporate aviation offers. As most people know, aircraft are not cheap to purchase, maintain, and fly, which I believe is the first, and only, thing they think about when hearing or talking about a businesses aviation department. When used correctly, these corporate aircraft can save a company a good bit of money in the long run.

Everyone has heard the saying "time is money", and downtime is one problem that corporate aviation aims to solve. Think of the different times you have flown on a domestic airline, I am sure there is one instance that you can remember where you were stuck in an airport because of some sort of delay. Think of the long lines at security checkpoints and while waiting to board the plane. Remember sleeping in the hotel room bed the night before your flight because you had to be at the airport at five in the morning? All of these things cost a business money when it is their executives or employees involved. These are all areas that corporate aviation can improve upon (Donnelly, 2012).

It is understandable that airplanes occasionally break down and require maintenance, but delays due to transporting mass numbers of people and congestion at airports is an area that can be targeted. Business aviation allows people to go where they want to go, when they want to go there, that is the beauty of it. No need to worry about making your connecting flight in Atlanta. Business aircraft can get into significantly more airports than commercial passenger jets can, which takes out the need to stop at unnecessary points along the way. All of the meals and hotel rooms that employees require while on the trip are payed for by the company, so less nights in hotels and less meals on the road means more money for the company. Many companies conduct meetings while they are in the air traveling from one place to another, this is another advantage that flying on a business plane has over flying commercially. "Business aviation has simply become a way of life for the successful, thriving business of today," says Kim Showalter, the president of Showalter Flying Services (Donnelly, 2012).

I agree that corporate aviation is a very important tool that businesses can take advantage of. Any downtime that the business person faces while on the road is not only a hassle for the traveler, but it is also time that they could spend being productive which costs the company money in the long run. I do think that corporate aircraft have been used for the wrong reasons in the past, but when used in the right way they are a great tool for companies to utilize.

President Obama made comments that if business can afford corporate aircraft, then they can afford the elimination of accelerated depreciation for purchasing the plane. Accelerated depreciation allows companies to account for most of the depreciation expense the first year the asset is used. This lowers the amount of depreciation that the company has to pay in future years (Murray, n.d.), Obama's comment refers to a very small number of the businesses that actually use corporate aircraft. Sure the huge multimillion dollar corporations could afford this elimination of tax break. But what about the small to mid-sized businesses, which are the largest number of companies that use corporate aviation, that cannot afford to lose this tax break? Not only would eliminating this procedure hurt the small to mid-sized companies, but it would also hurt the smaller less traveled airports that these planes fly into (Loyd, 2012).

I agree with president Obama when referring to those very large businesses that have a lot of money to spend, but I disagree completely with eliminating the tax break for the small to mid-sized companies. If it is cut these companies aviation departments would most likely be gotten rid of or receive smaller funding. If their aviation departments were to get cut, it would make them much less competitive in their market and would only stimulate the large corporations even more. Eliminating this tax break would affect the small airports that these business planes fly into as well. If an airport gets one of these business planes every week, they will lose out on that money which the plane brought in.

The NBAA does not agree with president Obama's plans and Ed Bolen, president and CEO of the NBAA, has written to Obama letting him know that he does not agree. In his letter to the president of the United States he explains that Obama illustrates a complete "lack of understanding" about the role corporate aviation plays in business in the United States. Bolen brought up that business aviation accounts for 1.2 million American jobs and contributes around $150 billion annually to the U.S. economy. During the debates, Obama was quick to point out the auto industry in Detroit and how it is helping to re-build America. Bolen pointed out to the president that the business aviation workers deserve his support as well and concludes his letter with, "Please consider promoting, rather than disparaging, business aviation -- it's a great American industry," (Patiky, 2012).

In conclusion, I believe that corporate aviation is a good thing when used correctly. By correctly, I mean for businesses to send employees to meet with potential/current customers to discuss business, for sending officials to meetings, etc. I do not agree with how fancy some corporate planes are or when corporate officials use company planes to go on vacation with their families or to travel the world, that is not how they are intended to be used. I believe that president Obama's plan to cut accelerated depreciation for companies that buy business aircraft will only hurt the business that benefit the most from having these aircraft. I think that when used properly and effectively, corporate aviation planes can be a great tool for companies to use.

Thanks for reading,
Kyle Wagenknecht





References

Donnelly, B. (2012) Business aviation: The unfair advantage. Retrieved February 11, 2013, from http://www.forbes.com/sites/businessaviation/2012/08/06/business-aviation-the-unfair-advantage/

Loyd, L. (2012) Aviation group: Obama off base on corporate jet breaks. Retrieved February 11, 2013, from http://articles.philly.com/2012-10-06/business/34280737_1_business-jets-corporate-jet-national-business-aviation-association

Murray, J. (n.d.) Business tax savings using accelerated depreciation. Retrieved February 11, 2013, from http://biztaxlaw.about.com/od/businesstaxes/a/acceldeprec.htm

Patiky, M. (2012) Zinger from the president stings business aviation. Retrieved February 11, 2013 from http://www.forbes.com/sites/businessaviation/2012/10/05/zinger-from-the-president-stings-business-aviation/

Saturday, February 2, 2013

Topic 3: UAVs: A Commercial Future?

The idea of having Unmanned Aerial Vehicles (UAVs) flying alongside commercial passenger jets and other aircraft seems like something out of a sci-fy movie, but this idea is actually becoming a reality. UAVs have become a popular topic in recent years and the potential commercial uses of these aircraft have created a lot of excitement and questions.

UAVs are not a new idea by any means, in fact, during World War I the Navy funded research to develop an unmanned aircraft that was essentially a flying bomb. The military continues to use UAVs today for surveillance and reconnaissance, as well as combat missions. The military frequently operates unmanned aircraft in U.S. airspace for research, development, testing and training (Elias, 2012). Using UAVs inside the United States for a variety of reasons has been a hot topic along with the issues involved with doing so.

One of the issues involved with using these UAVs in the United States is how to integrate them into flying in the National Airspace System (NAS) with other manned aircraft. Obviously having unmanned aircraft flying around amongst all of the manned aircraft could create some safety issues. Other concerns include airspace restrictions, security risks and disrupting manned flight operations (Elias, 2012).

The first and most obvious safety issue is the ability of the UAV to sense and avoid other aircraft. To date, there is no suitable technology available that will allow UAVs the ability to sense and avoid other aircraft. This lack of available technology limits unmanned aircraft to line-of-sight scenarios where operators on the ground provide the see and avoid capabilities. The creation of Automated Dependent Surveillance-Broadcast (ADS-B) technology, which is required to be installed on all manned aircraft by 2020, may be the future in detect and avoid technology for UAVs (Elias, 2012).

Once that issue is resolved, the next focus needs to be on reducing risks to people and property on the ground. If communications with the UAV are lost, the aircraft needs to be able to realize this and automatically return to its' base so that it does not run out of fuel and crash into a populated area (Elias, 2012).

Even though these aircraft are unmanned, human factors still plays a huge role in the safety of their operation. The most important human factors related issues are operator interfaces and controls and the training and qualification requirements of pilots, among other involved personnel. Currently the Air Force requires their drone pilots to be pilot-rated military officers, while the other branches of the military do not require their operators to be pilot-rated (Elias, 2012).

NASA is leading a project called the Unmanned Aircraft Systems Integration in the National Airspace System which is intended to contribute capabilities designed at reducing technical barriers related to safety and the operation challenges of UAVs routinely accessing the NAS (NASA, 2011).

Once the technology that allows these UAVs to detect and avoid other aircraft is developed and ready for implementation, I believe we will begin to see unmanned aircraft slowly be put to use in certain applications. I think that the FAA will create a certain set of regulations that pertain to UAVs and that pilot, and other personnel, training standards will be similar to that of which exist for current manned aircraft. I believe that the implementation of NextGen technology will help the advancement of UAVs and their uses in our NAS. I think that within the next ten years or so the use of UAVs inside the United States NAS will be extensive and may replace some current manned aircraft operations and create a more cost effective alternative.

Another issue that is popular when talking about UAVs and the practicability of their use in the United States, is the lack of regulation that exists to govern flight safety. Currently there are very few countries that have regulations which pertain specifically to UAV operations. With the idea of UAVs entering the commercial market and serving other purposes, regulations will need to be put in place to provide a safe operating environment. These regulations will set the tone for the UAV market and determine how their uses will be implemented (DeGarmo, 2004).

Currently in the United States, UAV flights that occur in the NAS that are not operated as model aircraft or under FAR part 101 (Moored Balloons, Kites, Unmanned Rockets, and Unmanned Free Balloons) must be approved under a certificate of authorization (COA) from the FAA. These COA guidelines were formed for the military to use when conducting their flights with UAVs in the NAS, but are now being applied to civil UAV operations. The process of obtaining a COA is a lengthy process and requires a lot of planning prior to the UAV mission. Each COA is reviewed by the regional FAA authority which results in differences in standards between the approving authority. More information on COAs, and how to obtain one, can be found here. Differences between civil and military procedures are also approved through separate FAA departments. With there being so much difference in approval standards, there is no clearly defined standard for users to follow when developing UAV applications. Without standards, the formation of regulations will be difficult (Weibel, 2005).

Another thing that is important to the formation of regulations for unmanned aircraft is development of the definition of a UAV and different types of classification. There is no universally accepted definition or standard classification for UAVs and without these, it will be difficult to make regulations and apply them. The formation of regulations related to UAV air traffic management, airworthiness and flight operations is another vital step that needs to be completed in order to enable the successful UAV integration in the NAS (Weibel, 2005).

I think that once these regulations are formed, UAV operation in the NAS will follow closely behind. This is assuming that the safety issues concerning UAV flight alongside other manned aircraft are taken care of and no longer a problem. I think the topic of UAVs is very interesting and I am excited to see how they are implemented in our industry in the future. I think that there is a lot of potential for the use of these aircraft, but it may come at the cost of replacing human jobs with computers.

Thank you for reading,
Kyle Wagenknecht

References

DeGarmo, M. T. (2004). Issues concerning integration of unmanned aerial vehicles in civil airspace. Retrieved February 02, 2013, from http://www.mitre.org/work/tech_papers/tech_papers_04/04_12 32/04_1232.pdf

Elias, B. (2012). Pilotless drones: Background and considerations for Congress regarding unmanned aircraft operations in the National Airspace System. Retrieved February 02, 2013, from http://www.fas.org/sgp/crs/natsec/R42718.pdf

NASA. (2011). Unmanned aircraft systems integration in the National Airspace System. Retrieved February 02, 2013, from http://www.nasa.gov/centers/dryden/news/FactSheets/FS-075-DFRC.html

Weibel, R. E. (2005). Safety considerations for operation of different classes of unmanned aerial vehicles in the National Airspace System. Retrieved February 02, 2013, from http://dspace.mi t.edu/bitstream/handle/1721.1/30364/61751476.pdf?sequence=1