Air Transportation: A Management Perspective Summary Chapter 1: Aviation Overview In less than 100 years aviation has gone from basically nothing to a huge world industry that connects every corner of the world together. Virtually all major firms in the industry are part Aerospace Industries Association (AIA) or General Aviation Manufactures Association (GAMA). The Industry is heavily controlled by the government, but yet it still has to compete on a commercial marketplace. This makes the industry important to national interest, and vital to the world economy.

Prior to the 1950’s the industry was less sophisticated. There was no need for research and development because product lines were built for years. The economic profile is one of the worlds most important to this day. Today there are about six major firms, 1000 facilities backed by thousands of subcontractors, vendors and suppliers. The 1990’s were difficult times for the aerospace companies. There were world conflicts and a recession was looming on the United States. Over the years there have been spikes in growth and decline. The aerospace industry is one of the world’s largest employers.

The industry employs a vast number of skilled workers ranging from scientists, engineers, technicians, and aviators to name a few. The products associated with aerospace industry are very sophisticated, complex, and costly. Most companies specialize in certain areas. Most are based in America, which helps drive the economy. Recently the U. S. Department of Defense has been postponing new research on weapons and avionic upgrades. Instead they are updating existing equipment to save money. The firms in the industry provide a variety of goods and services like legal assistance, advertising, accounting, and data of aerospace.

The government in the form of NASA and Department of Defense are vital to aerospace industry. During the Post- Cold War period government aerospace sales consistently fell until 9/11. These DOD cutbacks lead to a great deal of unemployment in the industry. Companies keep key technical teams in place in hopes for future contracts. By 1990’s the industry began to consolidate and companies either merged with other companies or were faced with bankruptcy. During the days of the Apollo program NASA increases in annual spending were the norm.

The Challenger disaster resulted in greater congressional security, the Columbia disaster only added. There was also no more competition with the Russian space program. With the DOD shedding workers some move to the space sector. Telecommunications has helped sustain space industry in recent years. Also greater concern with environmental problems like global warming, ozone depletion, and climate charges have helped the space industry. The U. S. civil aviation market has been one of the worlds largest outside of the Soviet Union. Most sales today are international.

To start a commercial transport program an enormous amount of capital is required. Companies must also wait up to four years before deliveries begin and companies can generate income. Recently, since 1990’s, 70% of sales have been to foreign companies. Air transport sales depend heavily on the health of another industry, the world’s airlines. The 1990’s brought the need for newer more efficient jet aircraft because most fleets were ageing. In earlier years of large commercial airline manufactures there were close to 24 different companies. Now it is down to two, Boeing and Airbus.

Airbus is subsidized by France, Germany, and United Kingdom. In response to this Boeing and McDonald Douglas claimed that this was unfair and merged. Airbus in turn claimed Boeing and McDonald Douglas benefited from years of military contracts which offset research and development costs. The position to manufactures was very important to each with foreign aerospace market expanding rapidly. One major factor that affects commercial sales is economic growth. Economic growth causes more demands in air transport services, which results in more orders and deliveries.

Family income is most likely to increase with leads to more leisure travel the reverse is true when the economy is on a downswing. Businesses tend to close which leads to unemployment and less travel by all people. Another factor that affects commercial sales is inflation. When inflation is stable interest is low, which leads to more investment. When interest is high there is less borrowing for aircraft financing. Fleet capacity is also a factor in aircraft sales. When loads are high there are more people and companies need more and larger aircraft. The opposite is true when loads are low usually during hard economic times.

When fleets age they are subject to meet efficiency standards and new noise laws. The aerospace industry has been subject to many cycles. When times are bad companies try to stick it out. They do this to not fall behind when business picks up. The two key factors to a profitable aerospace industry are economic growth and low interest rates. With factors in place the industry tend to thrive. The general aviation industry has also struggled with economic spike through its history. Since 1978 there has been a 16 year downslide in growth. The General Aviation Revitalization Act of 1994 was put into effect to counteract this.

General aviation has many perks that commercial aviation does not. It is very fuel efficient, it requires less ground support facilities, and you can fly closer to your destination. Business people favor general aviation for these reasons. The air transportation industry consists of all certified flying by general aviation and certified air carriers. Air transportation has played a huge rule in business trips. Now business trips can be made in a couple of hours instead of days. The air transportation industry has allowed for regions like Hawaii, Florida, Las Vegas, Puerto Rico, Phoenix, San Diego, and Europe to develop.

Chapter 2: Historical Perspective During the formative period between 1918 and 1938 the first use of air travel came in the form of mail carriers between Washington, Philadelphia, and New York. The Post Office Department Service received planes from the navy and war department. During that time weather was one of the most serious difficulties. Also night flying was a new concept. They used a lighted airway between Cheyenne and Chicago. This concept became very important by the mid 1920’s. In 1925 the Contract Air Act also known as the Kelly Act was passed.

This act allowed the postmaster to enter into contracts with private citizens and companies. Also 80% of the mail was given to contractors. The most prestigious route was the Columbia route which was the transcontinental route. By 1928 technology was improving making the flight more efficient and important. In 1930 the Air Mail Act was passed. Postmaster general Brown consolidated mail carriers by picking the strongest ones. Scandals erupted between selected companies and the mail service was turned over to the army. The turning point for the airlines came with the Boeing 247.

It was faster than most fighters of that period and could carry ten passengers in luxury. It also won the Collier Trophy for speed and endurance. United ended up buying sixty. Around the same time McDonald Douglas had the DC-1 and DC-2 which carried four more passengers at the same cost. Boeings decision to use smaller engines, which equaled fewer passengers, stimulated McDonald Douglas. Another turning point come for the airlines came on December 1, 1935. On that day the first airway traffic control tower formed in Newark, New Jersey. It was built because of the horrible safety record in the prior years.

Around the same time the Bureau of Air Commerce takes over giving government more control of the airlines. The technology was also greatly improving; the British had developed radar transceivers. They were the early transponders known as IFF (identify friend or foe). Better aviation fuel, known as 100-octane, was developed by Socony-Vacuum oil. During the growth years WWII brakes out which increased aircraft production. Most airline fleets and pilots contracted to the army. The Civil Air Patrol was created to patrol the coasts. Post WWII lead to newer planes with high performance like the DC-4 and Constellation.

These were large planes designed to carry large amounts of weight. After the war planes were in surplus as well as pilots. Technology had seen vast improvements in radar and communication. In 1948 the DME and VHF were developed which are still in use today. United States had emerged as an aircraft manufacture after WWII. By 1949 de Havilland Comet Jetliner made its first flight. Only to be grounded by 1954 because Comet airframes began suffering from catastrophic metal fatigue, which in combination with cabin pressurization cycles, caused two well publicized accidents where the aircraft tore apart in mid-flight.

Airplanes were becoming so complex government developed the Civil Aviation Authority (CAA). During the war years Boeing had its thunder stolen by McDonald Douglas but that all changed when the KC-135 was built for the Air Force. The civilian version was the Boeing 707. This brought in the maturity of jets age which was roughly through the years if 1958 to 1978. During this period FAA was created after Midair collision over the Grand Canyon between TWA Super Constellation and a United DC-7. To meet the huge growth in passengers Boeing developed the 747.

The development of jets led to even more advancements in technology like, flight recorders, weather radar, and terrain avoidance. During this era airlines passed from a period of high risk to a period of virtually no risk. There were many economic developments prior to Deregulation. From 1938 to 1978 the number of airlines foreign and domestic grew, number of passengers carried, and revenue increased at astonishing rates. Throughout 40 year period prices were relatively stable. Public was satisfied and rated highest for “giving the costumer good value for money” (US News & World Report survey).

Only problem was they were not profitable though. Around this time the Federal legislation wanted to get more involved with the airlines. The believed the industry was unstable and government needed to regulate for the good of the nation. They wanted to improve air safety by regulating design, operation, and maintenance of aircraft. The government wanted to reduce cash subsidies. Air carriers had been subsidized since mid-1920, a financially strong airline industry would need smaller subsidies. Earlier federal legislation came in the form of the Kelly Act.

The Air Commerce Act of 1926, which basically stated, Air commerce was in whole or in part by aircraft, persons or property for hire, and navigation of aircraft in furtherance of business. It also stated a need to decentralize industry so no one branch was overwhelmed with the rapid expansion. Addition mail contracts gave postmaster complete authority over air mail route system. These contracts gave mail routes to army in February1934 because of conspiracy and to defeat completive bidding. Air Mail contract 1934 made air carriers provide books, accounts, contracts and business records and to file semiannual reports of free transportation.

The Federal Aviation Act of 1958 began after a midair collision. PresidentEisenhower wanted to establish a system of air traffic management. FAA was given authority of over nation’s airspace this lead to Dep’t of Transportation being created which held FAA and NTSB. Airline Deregulation Act of 1978 lead to airlines given choice in routes. Original subsidy program directed to sustain carries than maintaining specific service to smaller communities as in the earlier years was phased out in 1985. Lead to end of CAB authority of subsidies.

Foreign air transportation was given to US. Dep’t of Transportation. Routes of highest volume and financial appeal were now open to any trunk carrier. Most carriers moved into other carries territory. This movement gained new opportunities but lost markets to other carriers when they moved into their markets. With the deregulation act many of the hundreds of airlines that sprung up with the rising profits were left with no choice but to merge together in order to not lose everything. Rising oil prices of the 1973 oil embargo also stimulated merges.

Because of high cost today more virtual, low cost, regional feeder and mega- carriers exist more than ever. These regional/ commuter airlines spurred by deregulation. Major airlines and regional airlines began code- sharing agreement which was more profitable for both airlines. Since 1981 number of regional/commuter airlines fell but number of passengers has increased. Although decreasing in number they are growing in size, results: increased market share, longer flights and better utilization of aircraft. The success of many regional airlines is closely tied it larger carriers.

In 1950’s business aviation really took off (turbine engine a/c). Aircraft builders began to built turboprop and turbine jet aircraft. To business and executive travelers time is of the essence so they were willing to by business aircraft to avoid the common in convinces in hub airports. This lead to a spike in general aviation sales. Chapter 3 Air Transportation: Regulations and Associations Alan S Boyd first secretary of DOT (Department of Transportation) appointed on April 7, 1967. Secretary is a cabinet member appointed by president with advice and consent of Senate.

He reports directly to congress The DOT has 70,000 full time employees, 3000 field officers, and 10 administrations within it. The FAA is Chief among day to day operations. Very concerned with promotion of aviation safety while ensuring efficient use of the nation’s navigable airspace. They issue and enforce safety rules and regulations. In charge of certification of aviators, aircraft, aircraft components, air agencies, and airports. FAA Conducts aviation safety-related research and development, as well as managing and operating the national airspace system. Traces ancestry back to Air commerce act of 1926.

Dept of Commerce certified pilots and aircraft, developed air navigation facilities, promoted flying safety, and issued flight information. Almost half FAA’s workforce dedicated to air traffic control. FAA in charge of standards relevant to the training and testing of aviators, manufacturers, and continued airworthiness of aircraft. One of FAA’s most significant efforts is aimed at expanding, and modernizing the nation’s airport facilities to meet project traffic demands. Enviromental protection has also been a concern lately with new engine noise and emission standards.