The adage, "How do you make a small fortune in aviation? Start with a very large fortune." would probably have a lot of people scratching their heads wondering why people would want to start a business in aviation. It is very true that to make any money in aviation industry, you must first spend a great deal of money to get started and then hope that your business can sustain for long enough to turn a profit over time. I think that this phrase came about from people realizing the fact that in order to start an aviation business, it takes a very large amount of money and a lot of times it does not work out in the end. If it does work out, the money that you make may not seem to be worth all of the work in the end.
In the commercial aviation industry, there are six different types of business models out there. You have the full service network carries (legacy carriers), low cost carriers, regional, traditional freight, integrators and hybrid carriers (German Aerospace, 2008). I will give a brief overview of each one and then name two examples of each, one success and the other not successful.
The full service network carriers are also known as the legacy carriers and are airlines that focus on providing customers with many pre-flight and onboard services. Most legacy carriers operate off of a hub-and-spoke system. They usually have different types of aircraft ranging from large to small and operate both domestically and internationally (German Aerospace, 2008). United airlines is an example of a legacy carrier that is still operating and is the first U.S. network carrier to fly the Boeing 787 (Chandler, 2012). TWA is an example of a legacy carrier that is no longer in existence (Harrison, 2012).
Low cost carriers focus on reducing their costs so that they can use a price leadership strategy on the markets they serve. Low cost carriers typically use a young and homogeneous fleet of medium sized aircraft which allows less fuel burn, maintenance, staff and overheads. These aircraft are usually configured to seat as many people as possible. Low cost carriers reduce ground times and delays by utilizing smaller, less congested airports and by using point to point flights without connections. This strategy allows the carrier to maximize the number of hours in and day and the aircraft that they have. These carriers usually do not offer free inflight services, and instead charge passengers if they would like these services. More strict baggage fee structures are implemented, as well as other fees to help these companies earn a profit (German Aerospace, 2008). Allegiant Air is a low cost carrier that is still in operation today and is doing quite well (Burkey, 2012.) ValuJet is an example of a low cost carrier that is no longer in operation (AvStop, n.d.).
Regional carriers, also known as commuter airlines or feeder airlines, typically use smaller aircraft with seating for 20-100 passengers and limit their flight routes to a geographically restricted area. Some regionals operate independently while others work as feeder airlines for legacy carriers connecting their partner airlines hub with smaller regional airports (German Aerospace, 2008). Mesa Airlines is a regional carrier that currently provides services for Delta Airlines (Grossman, 2009). Colgan Air is a regional airline that is no longer in operation (Peterson, 2012).
Traditional freight carriers typically work closely with freight forwarder companies and schedule cargo capacity with the company scheduling pick-up and delivery services on the ground. There are a few different types of traditional freight carriers and not all carry solely cargo. Some passenger airlines also actively market the belly of their aircraft for cargo services. Other airlines offer both passenger and all-cargo operations utilizing different aircraft. All-cargo operations often fly international routes delivering goods with the use of large aircraft such as Boeing 747s to carry out their duties. There are also smaller on demand cargo companies that operate smaller aircraft and provide short notice pick-ups and deliveries (German Aerospace, 2008). Delta Airlines has an all cargo operation that is still in existence in the U.S. today (Skyteam, 2013). Air Alaksa Cargo was an all cargo operation that is no longer in existence (Airlinehistory, n.d.).
The integrators are also cargo based operations, but offer hardly any ground services and focus primarily on selling air transport capacities to forwarders. Integrators use door-to-door services to control all aspects of the sales channel and the transportation process. Unlike the traditional cargo carriers, integrators do not transport all kinds of products. Instead they focus on time sensitive transportation of documents and smaller goods to ensure worldwide delivers in short, pre-defined time frames. Integrators typically operate using the hub-and-spoke network and nightly hubbing is crucial to their timely operations (German Aerospace, 2008). DHL is an active integrator type operation that is currently in existence (Rodrigue, 2013). I was not able to find a defunct U.S. integrator airline that I was sure operated under the integrator business model.
The last type of business model is the hybrid carrier model. The idea behind this model is to offer low cost flights that are not just point to point along with offering connections flights also. These type of airlines also offer services for an additional fee if the passenger choses to purchase them such as seat reservations, catering and frequent flyer programs. Some hybrid carriers offer passenger services during the day and commence cargo operations at night by utilizing convertible quick change aircraft. This allows them to get as much use out of their aircraft as possible (German Aerospace, 2008). JetBlue is a U.S. airline that uses the hybrid business model and is currently in operation (Winship, 2004). I was unable to find a defunct hybrid air carrier company, I believe this is due to the fact that this type of business model is pretty new and hard to differentiate from low cost carries at the current time.
I believe that new start up businesses would be wise to follow the low cost carrier or hybrid model of business. Some of the most successful, current businesses are low cost carriers and hybrid carriers. I believe that these models are so successful because they offer the customer many options at a very low base cost. I think that these two business models are the most progressive at the time and will continue to change to stay ahead of the pack.
References
Airlinehistory. (n.d.). All of the inactive airlines in the USA. Retrieved March 31, 2013, from, http://www.airlinehistory.co.uk/americas/usa/Extras/Defunct.asp
AvStop. (n.d.). History of ValuJet airlines. Retrieved March 31, 2013, from, http://avstop.com/history/historyofairlines/valuejet.html
Burkey, B. (2012). Low-cost carrier Allegiant Air coming to HIA. Retrieved March 31, 2013, from, http://www.centralpennbusiness.com/article/20120816/CPBJ01/120819853/Low-cost-carrier-Allegiant-Air-coming-to-HIA
Chandler, J. G. (2012). U.S. legacy carriers strike fleet update balance. Retrieved March 31, 2013, from, http://www.aviationweek.com/Article.aspx?id=/article-xml/AW_11_05_2012_p50-508587.xml
German Aerospace Center. (2008). Analysis of the European air transport market. Airline business models. Retrieved March 30, 2013, from, http://ec.europa.eu/transport/modes/a ir/doc/abm_report_2008.pdf
Grossman, D. (2009). Regional airlines thrive while big boys cut back. Retrieved March 31, 2013, from, http://usatoday30.usatoday.com/travel/columnist/grossman/2009-11-03-regional-airlines_N.htm
Harrison, J. S., Kalburgi, S., Reed, C. K. (2012). American airlines 2012: Bankrupt, like every other legacy airline. Retrieved March 31, 2013, from, http://robins.richmond.edu/d ocuments/cases/AmericanAirlines2012.pdf
Peterson, K., Prasad, S. (2012). Pinnacle airlines files for bankruptcy in US. Retrieved March 31, 2013, from, http://www.reuters.com/article/2012/04/02/uk-pinnacleairlines-idUSLNE83102K20120402
Rodrigue, J. P. (2013). Hubs of major air freight integrators. Retrieved March 31, 2013, from, http://people.hofstra.edu/geotrans/eng/ch5en/appl5en/upshubs.html
SkyTeam. (2013). Delta cargo. Retrieved March 31, 2013, from, http://www.skyteamcargo .com/en/About-us/Our-members/Delta-Cargo/
Winship, T. (2004). JetBlue's hybrid model has potential, problems. Retrieved March 31, 2013, from, http://www.smartertravel.com/travel-advice/JetBlue-hybrid-model-potential.html?id=11627
Sunday, March 31, 2013
Sunday, March 24, 2013
Topic 9: Boeing vs. Airbus
When it comes to commercial airliners there are most likely two names that people have heard of before, Boeing and Airbus. Both companies have a wide variety of aircraft which they produce and many of them compare very closely to the rival companies aircraft. Since there are only two aircraft manufacturers that dominate the market, the two companies are considered a duopoly. While Boeing and Airbus have very similar aircraft as far as capacity, structure and range, the two companies have two different approaches to their aircraft.
Boeing tends to do things the more traditional way, with a conventional yolk that hydraulically actuates the control surfaces and allows the pilot the ultimate say in what the airplane does. This system allows the pilots to feel what they are doing through the yoke. The planes computers still have built in soft limits, which warn the pilot when certain flight parameters are close to being exceeded, but the pilot continues to have control over the airplane. Airbus aircraft operate by a fly-by-wire system which is controlled through a side-stick controller. This fly-by-wire system takes inputs from a side stick and relays them through computers to hydraulically move the control surfaces. This system provides no feedback through the side stick to the pilot and requires the same amount of resistance to move the stick at all times. These computers have built-in hard limitations, or protections. These limitations do not allow the aircraft to: pitch nose-up more than 30 degrees or nose-down more than 15 degrees, bank more than 67 degrees, exceed 2.5 times the force of gravity and also has protections against overspeed. There are benefits to both the Airbus and Boeing systems. Both manufacturers have proven to be equally as safe as far as crash statistics indicate (Wallace, 2000). Boeing does have two airplanes that are completely fly-by-wire, the 777 and the 787 (Airliners, 2006). Unlike the Airbus fly-by-wire systems, Boeing's system allows the pilot to override the system in the event of an emergency if needed (Wallace, 2000).
Since the duopoly is in constant competition, the two companies different sizes of aircraft compete directly with one another. The Boeing 747-8 competes directly with the Airbus A380. Boeing's 747-8 can seat 467 passengers in a three-class configuration, cruises at a speed of Mach 0.855, has a range of 8,000 nautical miles and uses 2.8 liters of fuel per seat per 100 kilometers. The Airbus A380 is very similar except that it can seat more passengers. The A380 can seat 525 passengers in a three-class configuration, cruises at Mach 0.85, has a range of 8,300 nautical miles and burns 2.9 liters per passenger per 100 kilometers. One large difference between the two planes is the cost to purchase the aircraft, with the 747-8 costing $317.5 million and the A380 being $375.3 million (CNN, 2011). These are not the only two aircraft between the two companies which compete directly with one another. The Boeing 777 is in competition with the A330, the 737 line of aircraft compete with the A320 line and the 787 competes with the A350 (Rajagopal, 2010). As you can see, the two companies cover the entire commercial passenger aircraft market and are continuously battling for sales.
As far as marketing here in the United States, I believe the both manufacturers appeal to the same audience and when it comes down to the airlines personal preference and which they want to operate. I think that Airbus tries to promote a safer, more automated aircraft with the implementation of their fly-by-wire system and its computerized oversight, while Boeing is tries to stick with a more traditional approach that is not as automated. I personally, as a pilot, want to have complete control over what is happening with the aircraft rather than having a computer interject and only allow the inputs to do so much. This is not to say that I would not enjoy flying an Airbus plane because they are very nice planes, I just tend to favor Boeing and their whole philosophy.
References
Airliners.net. (2006). Better fly by wire philosophy: Boeing or Airbus? Retrieved March 24, 2013, from, http://www.airliners.net/aviation-forums/general_aviation/read.main/3018977/
CNN. (2011). Boeing 747-8 vs. Airbus A380 -- the airline giants face off. Retrieved March 25, 2013, from, http://travel.cnn.com/explorations/life/boeing-747-8-and-airbus-a380-death-match-152563
Rajagopal, A. (2010). How to know your Airbus from Boeing. Retrieved March 25, 2013, from, http://arunrajagopal.com/2010/08/12/identify-airbus-from-boeing/
Wallace, J. (2000). Unlike Airbus, Boeing lets aviator override fly-by-wire technology. Retrieved March 24, 2013, from, http://forums.jetcareers.com/threads/unlike-airbus-boeing-lets-aviator-override-fly-by-wire-tech.111456/
Boeing tends to do things the more traditional way, with a conventional yolk that hydraulically actuates the control surfaces and allows the pilot the ultimate say in what the airplane does. This system allows the pilots to feel what they are doing through the yoke. The planes computers still have built in soft limits, which warn the pilot when certain flight parameters are close to being exceeded, but the pilot continues to have control over the airplane. Airbus aircraft operate by a fly-by-wire system which is controlled through a side-stick controller. This fly-by-wire system takes inputs from a side stick and relays them through computers to hydraulically move the control surfaces. This system provides no feedback through the side stick to the pilot and requires the same amount of resistance to move the stick at all times. These computers have built-in hard limitations, or protections. These limitations do not allow the aircraft to: pitch nose-up more than 30 degrees or nose-down more than 15 degrees, bank more than 67 degrees, exceed 2.5 times the force of gravity and also has protections against overspeed. There are benefits to both the Airbus and Boeing systems. Both manufacturers have proven to be equally as safe as far as crash statistics indicate (Wallace, 2000). Boeing does have two airplanes that are completely fly-by-wire, the 777 and the 787 (Airliners, 2006). Unlike the Airbus fly-by-wire systems, Boeing's system allows the pilot to override the system in the event of an emergency if needed (Wallace, 2000).
Since the duopoly is in constant competition, the two companies different sizes of aircraft compete directly with one another. The Boeing 747-8 competes directly with the Airbus A380. Boeing's 747-8 can seat 467 passengers in a three-class configuration, cruises at a speed of Mach 0.855, has a range of 8,000 nautical miles and uses 2.8 liters of fuel per seat per 100 kilometers. The Airbus A380 is very similar except that it can seat more passengers. The A380 can seat 525 passengers in a three-class configuration, cruises at Mach 0.85, has a range of 8,300 nautical miles and burns 2.9 liters per passenger per 100 kilometers. One large difference between the two planes is the cost to purchase the aircraft, with the 747-8 costing $317.5 million and the A380 being $375.3 million (CNN, 2011). These are not the only two aircraft between the two companies which compete directly with one another. The Boeing 777 is in competition with the A330, the 737 line of aircraft compete with the A320 line and the 787 competes with the A350 (Rajagopal, 2010). As you can see, the two companies cover the entire commercial passenger aircraft market and are continuously battling for sales.
As far as marketing here in the United States, I believe the both manufacturers appeal to the same audience and when it comes down to the airlines personal preference and which they want to operate. I think that Airbus tries to promote a safer, more automated aircraft with the implementation of their fly-by-wire system and its computerized oversight, while Boeing is tries to stick with a more traditional approach that is not as automated. I personally, as a pilot, want to have complete control over what is happening with the aircraft rather than having a computer interject and only allow the inputs to do so much. This is not to say that I would not enjoy flying an Airbus plane because they are very nice planes, I just tend to favor Boeing and their whole philosophy.
References
Airliners.net. (2006). Better fly by wire philosophy: Boeing or Airbus? Retrieved March 24, 2013, from, http://www.airliners.net/aviation-forums/general_aviation/read.main/3018977/
CNN. (2011). Boeing 747-8 vs. Airbus A380 -- the airline giants face off. Retrieved March 25, 2013, from, http://travel.cnn.com/explorations/life/boeing-747-8-and-airbus-a380-death-match-152563
Rajagopal, A. (2010). How to know your Airbus from Boeing. Retrieved March 25, 2013, from, http://arunrajagopal.com/2010/08/12/identify-airbus-from-boeing/
Wallace, J. (2000). Unlike Airbus, Boeing lets aviator override fly-by-wire technology. Retrieved March 24, 2013, from, http://forums.jetcareers.com/threads/unlike-airbus-boeing-lets-aviator-override-fly-by-wire-tech.111456/
Monday, March 18, 2013
Topic 8: Sequestration and How it is Impacting Aviation
As everyone knows, our nation is in a great amount of debt and is constantly trying to find ways to be more efficient and to cut into the deficit. Sequestration is one solution that has been brought up several times in the past, and it appears it is the approach the government is taking to try and turn things around.
Sequestration is the idea to cut budgets across all federal agencies. With budget cuts being placed on all federal agencies, the plan is supposed to be an indiscriminate way to lower costs with a very broad stroke. Sequestration was basically supposed to be a back up plan if other solutions were not formed, and since no other plan was made it is the only solution left for a problem that requires prompt action. Looked at from an aviation standpoint, the FAA will be required to cut millions of dollars from its budget and no one is too sure what the outcome and its affects to the aviation industry will be (NBAA, 2013).
These cuts imposed by sequestration are not a short term solution as they are laid out, they are long term plans that will have lasting effects. Although most of the FAA's budget is exempt from the sequester by law, they will still need to cut their budget elsewhere. The areas of the FAA's budget that are not exempt from the cuts include: scheduling of personnel, contract work being conducted for the FAA and preventative maintenance and repair work done to facilities and equipment used by the FAA and the aviation community. As you can imagine, cuts to these areas in such a 'safety first' arena could lead to problems in the future. The FAA has said time and time again that safety will not be compromised, but that the cuts will definitely affect day to day operations (NBAA, 2013).
Their plans to cope with the budget cuts include employee furloughs at least one day of every pay period. They also plan to cut air traffic control towers managed under the Federal Contract Tower Program, as well as government run towers, which serve less than 150,000 total operations or less than 10,000 commercial operations per year. An unofficial list of the towers to be cut has been constructed and is being discussed continually before making a final decision (FAA, 2013). This has the potential to greatly impact general aviation in a bad way. The agency expects problems with providing upkeep on its services and facilities. Navigational aids are one of the biggest concerns because they will be forced into scheduling preventative maintenance with longer intervals and in some cases not even servicing them at all if they are not a high priority (NBAA, 2013).
The sequester may lead to the customers losing their ability to fly when they want and how they want it like they can now. According to a study done by the Office of Management and Budget, the cuts could delay the implementation of NextGen by at least a decade. This will definitely cause ticket prices to increase as the airlines will incur greater costs and pass those expenses onto their customers. That along with cutting air traffic control towers and controllers, security screeners and customs officers leads many to be concerned for the future of an already stressed aviation industry. The airline industry is not the only section of aviation that will be affected. As I mentioned earlier, general aviation will take on some challenges in safety and efficiency with the closing of air traffic control towers and cutting the weather and navigational aid services that they rely on (Patterson, 2012).
Cutting air traffic control towers and allowing navigational aids to deteriorate will have a large impact on general aviation operations. The negative consequences that the general aviation community will face will be passed down to the airports that they fly into and the communities around those airports. Some communities rely on their local airport because general aviation supports business, agriculture, law enforcement and medical access and provides important economic support for these communities. These cuts will have a trickle down affect to many other things linked to aviation in one way or another and there may be many other unforeseeable implications (Fuller, 2013).
So is sequestration bad for the entire aviation industry and all related fields? To look at it optimistically, no, it is not all bad for everyone that is involved with aviation. Since long delays are bound to happen, airport vendors may benefit greatly from the budget cuts. It is hard to say if this will actually be the case or not, but it is one outcome that may be positive for at least on player in the aviation arena (Katz, 2013).
Overall, I am pretty worried to see how the aviation industry responds to the cuts enacted by the sequester. I think that it could be an incredibly different industry in the next ten years if nothing is done to reform the plan. It has potential to be extremely detrimental to the aviation industry and all other industries that rely on aviation in any form. Hopefully my pessimistic outlook will be completely invalid and the aviation industry will find a way to pull through this tough road ahead.
Thank you for reading,
Kyle Wagenknecht
References
FAA. (2013). Air traffic control facilities that could be closed. Retrieved March 18, 2013, from, http://www.faa.gov/news/updates/media/Facilities_Could_Be_Closed.pdf
Fuller, C. (2013). Letter to FAA administrator. Retrieved March 18, 2013, from, http://www.aopa.org/advocacy/articles/2013/pdfs/1303012letter-to-huerta.pdf
Katz, E. (2013). Not everyone hates sequestration. Retrieved March 18, 2013, from, http://www.govexec.com/pay-benefits/pay-benefits-watch/2013/03/not-everyone-hates-sequestration/61858/
NBAA. (2013). How 'sequestration' will impact the aviation community. Retrieved March 18, 2013, from, http://www.nbaa.org/ops/201302-how-sequestration-will-impact-the-aviation-community.php
Patterson, T. (2012). Will potential FAA cuts hurt fliers? Retrieved March 18, 2013, from, http://www.cnn.com/2012/08/16/travel/faa-budget-cuts
Sequestration is the idea to cut budgets across all federal agencies. With budget cuts being placed on all federal agencies, the plan is supposed to be an indiscriminate way to lower costs with a very broad stroke. Sequestration was basically supposed to be a back up plan if other solutions were not formed, and since no other plan was made it is the only solution left for a problem that requires prompt action. Looked at from an aviation standpoint, the FAA will be required to cut millions of dollars from its budget and no one is too sure what the outcome and its affects to the aviation industry will be (NBAA, 2013).
These cuts imposed by sequestration are not a short term solution as they are laid out, they are long term plans that will have lasting effects. Although most of the FAA's budget is exempt from the sequester by law, they will still need to cut their budget elsewhere. The areas of the FAA's budget that are not exempt from the cuts include: scheduling of personnel, contract work being conducted for the FAA and preventative maintenance and repair work done to facilities and equipment used by the FAA and the aviation community. As you can imagine, cuts to these areas in such a 'safety first' arena could lead to problems in the future. The FAA has said time and time again that safety will not be compromised, but that the cuts will definitely affect day to day operations (NBAA, 2013).
Their plans to cope with the budget cuts include employee furloughs at least one day of every pay period. They also plan to cut air traffic control towers managed under the Federal Contract Tower Program, as well as government run towers, which serve less than 150,000 total operations or less than 10,000 commercial operations per year. An unofficial list of the towers to be cut has been constructed and is being discussed continually before making a final decision (FAA, 2013). This has the potential to greatly impact general aviation in a bad way. The agency expects problems with providing upkeep on its services and facilities. Navigational aids are one of the biggest concerns because they will be forced into scheduling preventative maintenance with longer intervals and in some cases not even servicing them at all if they are not a high priority (NBAA, 2013).
The sequester may lead to the customers losing their ability to fly when they want and how they want it like they can now. According to a study done by the Office of Management and Budget, the cuts could delay the implementation of NextGen by at least a decade. This will definitely cause ticket prices to increase as the airlines will incur greater costs and pass those expenses onto their customers. That along with cutting air traffic control towers and controllers, security screeners and customs officers leads many to be concerned for the future of an already stressed aviation industry. The airline industry is not the only section of aviation that will be affected. As I mentioned earlier, general aviation will take on some challenges in safety and efficiency with the closing of air traffic control towers and cutting the weather and navigational aid services that they rely on (Patterson, 2012).
Cutting air traffic control towers and allowing navigational aids to deteriorate will have a large impact on general aviation operations. The negative consequences that the general aviation community will face will be passed down to the airports that they fly into and the communities around those airports. Some communities rely on their local airport because general aviation supports business, agriculture, law enforcement and medical access and provides important economic support for these communities. These cuts will have a trickle down affect to many other things linked to aviation in one way or another and there may be many other unforeseeable implications (Fuller, 2013).
So is sequestration bad for the entire aviation industry and all related fields? To look at it optimistically, no, it is not all bad for everyone that is involved with aviation. Since long delays are bound to happen, airport vendors may benefit greatly from the budget cuts. It is hard to say if this will actually be the case or not, but it is one outcome that may be positive for at least on player in the aviation arena (Katz, 2013).
Overall, I am pretty worried to see how the aviation industry responds to the cuts enacted by the sequester. I think that it could be an incredibly different industry in the next ten years if nothing is done to reform the plan. It has potential to be extremely detrimental to the aviation industry and all other industries that rely on aviation in any form. Hopefully my pessimistic outlook will be completely invalid and the aviation industry will find a way to pull through this tough road ahead.
Thank you for reading,
Kyle Wagenknecht
References
FAA. (2013). Air traffic control facilities that could be closed. Retrieved March 18, 2013, from, http://www.faa.gov/news/updates/media/Facilities_Could_Be_Closed.pdf
Fuller, C. (2013). Letter to FAA administrator. Retrieved March 18, 2013, from, http://www.aopa.org/advocacy/articles/2013/pdfs/1303012letter-to-huerta.pdf
Katz, E. (2013). Not everyone hates sequestration. Retrieved March 18, 2013, from, http://www.govexec.com/pay-benefits/pay-benefits-watch/2013/03/not-everyone-hates-sequestration/61858/
NBAA. (2013). How 'sequestration' will impact the aviation community. Retrieved March 18, 2013, from, http://www.nbaa.org/ops/201302-how-sequestration-will-impact-the-aviation-community.php
Patterson, T. (2012). Will potential FAA cuts hurt fliers? Retrieved March 18, 2013, from, http://www.cnn.com/2012/08/16/travel/faa-budget-cuts
Sunday, March 10, 2013
Topic 7: European Union’s Emissions Trading Scheme
In a world where the two words "global warming" are a part of everyday language, carbon emissions and other contributing factors are continually scrutinized and combatted. Air travel is one area that carbon emissions, along with greenhouse gases, are looked to be reduced. Each day thousands of planes take to the skies to transport things from place to place, making it a prime target to aim reduction of emissions at.
The European Union has developed a plan called the Emissions Trading System that will help to reduce certain greenhouse gas emission across a few of the most 'guilty' industries. This scheme looks at three major greenhouse gases including carbon dioxide (CO2), nitrous oxide (N2O) and perfluorocarbons (PFCs). The industries that are required to participate in this system are energy-intensive industries such as: power and heat generation, oil refineries, steel works, production of iron, aluminum, cement, etc, and commercial aviation (European Commission, 2013).
The system works off of a "cap and trade" idea, where there is a limit set on the total amount of emissions of the green house gases listed above. This total amount will be lowered over time so that total emissions fall. Once the cap is set, companies required to follow the plan can then purchase emission allowances and trade them with other companies as needed. At the end of the year the companies will have to give up enough of their allowances to cover their emissions, and if they did not purchase enough of these allowances to cover their emissions they will receive a heavy fine. By 2020, the overall expected reduction of emissions due to this system will be 21% lower than in 2005 (European Commission, 2013).
The idea of the whole structure and plan sounds very good from an environmental standpoint and will definitely help reduce harmful emissions in the long run, but from a business standpoint it is not as appealing. The arguments in this post will be viewed from solely the aviation industry standpoint.
Many countries, including the United States, are opposed to participating in the Emissions Trading System because it will add yet another fee to an already heavily feed industry. Consumers already feel that they are hit with enough fees and costs when traveling with the commercial airline industry, adding another fee may cause customers to reconsider going on vacations or traveling if more fees are added. If the cost is relatively low to the consumer they may not mind as much, but there has to be a breaking point for people and once that point is crossed they will no longer fly. The European scheme would cost United States airlines approximately $3.1 billion from 2012 and 2020. That is a lot of money to ask from an already struggling industry (New York, 2013).
Some analysts believe that the U.S., and other countries, are making it sound like it will be extremely difficult, when really it will not be that bad. According to their calculations, the program would add around $5 to the price of a trans-Atlantic flight. Which does not sounds like much, but when airlines are already operating with almost nil margins as is, it is a lot. It could ultimately be the difference between making profit or suffering a loss. Others believe that since the price of these 'carbon credits' are like a stock, the prices could increase dramatically over time and cause prices to rise even more than anticipated (Rosenthal, 2013).
Since this plan affects international travel, the ICAO has been involved. They have been trying to come up with a solution to implement this plan worldwide. They have until fall 2013 to come up with a plan, and until then the Emissions Trading System is inactive and on the back burner. I do not know that the ICAO will be able to come up with something by this fall because it is a very difficult task. I believe that when the deadline approaches they will either ask for an extension of time, or simply say that they do not believe that the proposed system will work at the current time and state of the industry. I think that enough countries, and ones with reasonable power, are opposed to it and that the ICAO will realize that applying the system would have an overall negative effect on the industry and its progression (Keating, 2012).
While I believe that a solution to aviation emissions is a good idea and something that the industry should continue to improve on, as they have, I do not believe that we need further regulation to do so. Aviation power plant companies are always competing to create a more efficient, quiet and cleaner burning engine. I think that as long as the industry is working to improve on things through competition and is not content with keeping things as they are we will be okay. Throwing more regulation on companies that are already having a difficult time is not a good idea at all in my opinion.
References
European Commission. (2013). The EU emissions trading system (EU ETS). Retrieved March 10, 2013, from, http://ec.europa.eu/clima/policies/ets/index_en.htm
Keating, D. (2012). EU exempt foreign airlines from ETS. Retrieved March 10, 2013, from, http://www.europeanvoice.com/article/2012/november/eu-to-exempt-foreign-airlines-from-ets/75653.aspx
Rosenthal, E. (2013). Your biggest carbon sin may be air travel. Retrieved March 10, 2013, from, http://www.nytimes.com/2013/01/27/sunday-review/the-biggest-carbon-sin-air-travel.html?_r=0
The European Union has developed a plan called the Emissions Trading System that will help to reduce certain greenhouse gas emission across a few of the most 'guilty' industries. This scheme looks at three major greenhouse gases including carbon dioxide (CO2), nitrous oxide (N2O) and perfluorocarbons (PFCs). The industries that are required to participate in this system are energy-intensive industries such as: power and heat generation, oil refineries, steel works, production of iron, aluminum, cement, etc, and commercial aviation (European Commission, 2013).
The system works off of a "cap and trade" idea, where there is a limit set on the total amount of emissions of the green house gases listed above. This total amount will be lowered over time so that total emissions fall. Once the cap is set, companies required to follow the plan can then purchase emission allowances and trade them with other companies as needed. At the end of the year the companies will have to give up enough of their allowances to cover their emissions, and if they did not purchase enough of these allowances to cover their emissions they will receive a heavy fine. By 2020, the overall expected reduction of emissions due to this system will be 21% lower than in 2005 (European Commission, 2013).
The idea of the whole structure and plan sounds very good from an environmental standpoint and will definitely help reduce harmful emissions in the long run, but from a business standpoint it is not as appealing. The arguments in this post will be viewed from solely the aviation industry standpoint.
Many countries, including the United States, are opposed to participating in the Emissions Trading System because it will add yet another fee to an already heavily feed industry. Consumers already feel that they are hit with enough fees and costs when traveling with the commercial airline industry, adding another fee may cause customers to reconsider going on vacations or traveling if more fees are added. If the cost is relatively low to the consumer they may not mind as much, but there has to be a breaking point for people and once that point is crossed they will no longer fly. The European scheme would cost United States airlines approximately $3.1 billion from 2012 and 2020. That is a lot of money to ask from an already struggling industry (New York, 2013).
Some analysts believe that the U.S., and other countries, are making it sound like it will be extremely difficult, when really it will not be that bad. According to their calculations, the program would add around $5 to the price of a trans-Atlantic flight. Which does not sounds like much, but when airlines are already operating with almost nil margins as is, it is a lot. It could ultimately be the difference between making profit or suffering a loss. Others believe that since the price of these 'carbon credits' are like a stock, the prices could increase dramatically over time and cause prices to rise even more than anticipated (Rosenthal, 2013).
Since this plan affects international travel, the ICAO has been involved. They have been trying to come up with a solution to implement this plan worldwide. They have until fall 2013 to come up with a plan, and until then the Emissions Trading System is inactive and on the back burner. I do not know that the ICAO will be able to come up with something by this fall because it is a very difficult task. I believe that when the deadline approaches they will either ask for an extension of time, or simply say that they do not believe that the proposed system will work at the current time and state of the industry. I think that enough countries, and ones with reasonable power, are opposed to it and that the ICAO will realize that applying the system would have an overall negative effect on the industry and its progression (Keating, 2012).
While I believe that a solution to aviation emissions is a good idea and something that the industry should continue to improve on, as they have, I do not believe that we need further regulation to do so. Aviation power plant companies are always competing to create a more efficient, quiet and cleaner burning engine. I think that as long as the industry is working to improve on things through competition and is not content with keeping things as they are we will be okay. Throwing more regulation on companies that are already having a difficult time is not a good idea at all in my opinion.
References
European Commission. (2013). The EU emissions trading system (EU ETS). Retrieved March 10, 2013, from, http://ec.europa.eu/clima/policies/ets/index_en.htm
Keating, D. (2012). EU exempt foreign airlines from ETS. Retrieved March 10, 2013, from, http://www.europeanvoice.com/article/2012/november/eu-to-exempt-foreign-airlines-from-ets/75653.aspx
Rosenthal, E. (2013). Your biggest carbon sin may be air travel. Retrieved March 10, 2013, from, http://www.nytimes.com/2013/01/27/sunday-review/the-biggest-carbon-sin-air-travel.html?_r=0
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