Boeing vs Airbus

Boeing vs. Airbus

The two major airline manufacturers Airbus and Boeing have been in close competition for aircraft orders and production since the early 2000’s.  There is a significant difference between the companies in global presence, manufacturing, products, and company philosophies.  Boeing was founded in 1916, a year later was building aircraft for the U.S. Navy, and by 1928 built their first 12 passenger airplane for the sole purpose of commercial air travel.  Today Boeing employs approximately 170,000 workers.  A relatively young company, Airbus was founded in 1970 and dove right in to the commercial airline industry; their first A300 flew in took flight in 1972.  Airbus made a number of technological advancements along the way to becoming a competitor for Boeing, among these were the first commercial aircraft to have a two man crew, eliminating the flight engineer, and the first to have a completely fly by wire flight control system.  As of August this year, Airbus claims around 7,400 aircraft in operation.  Today the two manufacturers compete fiercely for aircraft orders from major airlines. 

Both of these massive aircraft manufacturers rose to the top by producing innovative aircraft that are able to carry a large number of passengers an incredibly long distance.  The manufacturer Boeing holds a strong market position that includes defense contracting and aerospace production.  Additionally Boeing has a strong technological research and development department, increasing their capabilities to provide advanced products such as airframes comprised of up to 50% composite materials.  Conversely, Airbus has produced quality aircraft to rival Boeing’s, such as the A380 which is the largest in their fleet carrying a high volume of passengers.  Airbus’ A320 series presents direct competition to Boeing’s 747 as both companies’ continue to improve their wide body aircraft with any upgrade to get an advantage over the other. 

Air transport is growing on a global level, creating demand: this year alone Airbus received 1,062 aircraft orders and Boeing close behind with 942.  An increase in defense spending in China and India produces an opportunity for Boeing; the company is already established in country and boast of almost a century of defense contracting experience.  Boeing has diversified globally and receives a large amount of materials from around the globe, whereas Airbus is almost strictly contracted with European countries.  Airbus too has experienced demand for their aircraft globally, and will likely produce in part for the major increase in defense spending for India and China. 

As airline demand continues to increase, both companies are receiving more orders than they can fulfill, Boeing leads deliveries with 476 and Airbus at 445.  While Airbus leads with orders it is contested that both companies are producing almost equally.  This provides strength to the argument the two create duopoly and control the entirety of the commercial airliner market.  A determining factor in the next two decades will be the growth predicted in China, India, and much of the Southeastern seaboard.  The unionization of Boeing’s manufacturing employees creates an uncertainty in production from labor strikes and work stoppages that has the potential to give Airbus an advantage if resolutions are not quickly implemented. 

It is likely Boeing will still be the leader in aircraft manufacturing for years to come due to their size, global diversification, and the quality of advanced aircraft they produce.  Further, Airbus is a subsidiary of the European Aeronautics Defense and Space Company (EADS), unlike Boeing which is publicly traded globally as part of the Dow Jones Industrial Average.  Direct competition such as Bombardier, Commercial Aircraft Corporation of China, and Russia’s Irkut Corporation will likely cut into Airbus’ share of the market on a global scale before Boeing’s well established manufacturing industry is affected.

References

Airbus. (2013). Orders and Deliveries. Retrieved from http://www.airbus.com/

Boeing. (2013). Orders and Deliveries. Retrieved from http://www.active.boeing.com/

Burdick, D., DiPonzio, J. (2013). Which airline manufacturer will be the industry leader in the next 5 years – Boeing or Airbus? Science College, Alfred University, New York.

Wilhelm, S. (2013, October 4). Boeing leading Airbus in 2013 deliveries, but trailing in orders. Puget Sound Business Journal. Retrieved from http://www.bizjournals.com/seattle/news/2013/10/04/boeing-bests-airbus-in-deliveries.html

General Aviation in China

General Aviation in China

The general aviation sector in China was established as early as 1951 and has seen minimal growth over the past four decades.  Some applications of aviation in China during the 60’s and 70’s included agricultural pest control, forestry, and cartography.  Although little industry growth was seen due to a lack of understanding the benefits general aviation could bring to the country’s economy.  Additionally China housed a severely underdeveloped aviation infrastructure that incorporated a restrictive regulatory environment and airspace access.  Contributing to these issues was a lack of airports and pilot training programs in the country, which created an expensive dependency on foreign aircraft and training.  Today China is experiencing rapid growth within their general aviation sector because of the General Administration of Civil Aviation of China (CAAC) creating new policies in 1996 to promote and develop the industry.  Included in the new policies are creating pilot schools, refining general aviation regulations, and encouraging businesses with a simplified process to starting a business in the industry.  These efforts have been successful as general aviation flight hours in 1996 were approximately 40,000 (mostly public use and agricultural) and by 2005 reached roughly 80,000 logged hours.

 As a country developing an industry from infant stages China has collaborated with other countries that have a developed infrastructure supporting general aviation to model their own national system.  Despite struggles to open this market and see expansion, China has yet to realize the potential economy and social benefits of opening their airspace to general aviation.  Cessna aircraft manufacturer has built production facilities in China to produce aircraft for significantly less overseas through joint ventures, and also has made a mentoring program with the CAAC to promote safety and efficiency.  Another American aircraft manufacturer, Cirrus, was sold to the China Aviation Industry General Aircraft Company (CAIGA) a government owned company; the acquisition may mean investment in Cirrus’ development and investment capital growth.  In addition to Cirrus China has also acquired general aviation companies Continental aircraft engines, Epic Aircraft, and Superior AirParts to name a few.   All this foreign investment may serve as a crutch for now as now companies struggle in a turbulent economy, but likely down the road China will have a lot of weight to throw around in the general aviation arena.

The future of general aviation in China is predicted to one of growth, and Chinese aviation businesses likely have seen a glimpse of what may come in the future decades.  In response, buying into general aviation companies may be a form of preparation for the rapid growth that will ensue in China once a reform is passed.  These Chinese acquisitions of struggling companies have created a major advantage for each side of the coin.  First, the investment aids American manufacturers by providing financial means to continue operation and incorporate ingenuities.  Secondly, when Chinese airspace opens to the general aviation public, the aircraft and technologies will be provided by Chinese manufacturers.  An incredibly large market will be entirely provided for in the future by the acquisitions China is making now.  Although joint ventures and cooperation between manufacturers and Chinese state owned businesses are in good health today, it is more than likely the American manufacturers will be left out when production blooms on Chinese soil.

References

Booz and Company. (2009). General Aviation in China: Seizing Growth Opportunities. Retrieved from http://www.booz.com/media/file/General_Aviation_in_China.pdf

J Morris.  (2013, July 30). Will China be the savior U.S. general aviation? [web log post]. Retrieved from http://www.aviationweek.com/

Laboda, A. (2013, April 15). Aircraft sales in China increasing, says Cessna. Aviation International News Online. Retrieved from http://www.ainonline.com/

Niles, R. (2011, February 28). Cirrus acquired by Chinese company. Aviation Publishing Group. Retrieved from http://www.avweb.com/

Corporate Aviation: A Political Punching Bag

Corporate Aviation: A Political Punching Bag

When auto industry CEOs arrived in Washington to support the 2008 pending taxpayer bailout, they unintentionally compromised their position in the public eye.  At first glance the hypocrisy of nearly bankrupt corporations asking for bailouts from taxpayers while travelling in corporate business jets is glaring.  This event directed the attention of many critical eyes to speculate on why these corporations are struggling to begin with, and in this way the practicality of the corporate aviation industry was questioned.  Public perception concerning companies utilizing business jets quickly solidified in to the generalization that it is a luxurious toy for corporate executives, and not a profitable business asset.  The incident lead to a large amount of negative exposure for an American industry that creates thousands of jobs, promotes business growth and efficiency, and enables companies to expand markets. 

Within the economic stimulus package put in to effect in 2009, President Obama included a tax break called accelerated depreciation.  The break allows companies to write off a larger portion of an asset’s value, such as a business jet, earlier in the asset’s life while it is still most useful.  As a result, a company’s taxable income is reduced while the asset is most profitable to the business, and encourages the acquisition of new assets.  Obama’s support of this tax break indicated support of company’s using private jets.  His stance has significantly changed to the opposite as he now proposes tax hikes for general aviation, and moves to close the corporate jet tax loophole that promoted economic growth.  The National Business Aviation Association (NBAA) retorted with only relevant argument and more than a little disbelief to his back pedaling, saying the industry employs 1.2 million people and generates $150 billion of revenue yearly.  The company’s that utilize business jets are relatively small or midsized operating in areas where airline service is unavailable.  Although the facts support business aviation, the damage to public perception has been altered to generate political opposition.  A small portion of corporate aviation that belongs to multi-billion dollar companies is the tip of the iceberg, and unfortunately this completes the public’s knowledge of the industry, further, the public’s opinion is politically influential to Obama’s decisions.  This may be the root cause of the NBAA’s struggles; defending business aviation from false public perceptions that create negative attention from political figures.

The benefits that companies obtain from operating their own aircraft are substantial to revenue, market growth, and efficiency.  Having the capability of transporting key personnel, equipment, and resources quickly can be invaluable to time sensitive business opportunities, and also strengthens business relationships by providing face to face contact.  As alluded to above, business jets are a necessity to companies operating outside the reach of major airline routes, where time and resources would be wasted on travel to a major hub, passing through security, and airline delays at the gate. 

In conclusion, proposed actions to increase taxes and close ‘loopholes’ that allow tax breaks to acquiring business jets are politically sound, and factually unjustifiable.  Results could include endangerment of business livelihood, but will very likely cause loss of jobs, revenue, and stunt market growth industry wide.  Business aviation needs associations like the NBAA to defend the industry from skewed public image and actions politic that seek to ameliorate, rather than correct this gross misperception.

References

Andersen. (2001). Business aviation in today’s economy: A guide to the analysis of business aircraft use, benefits and effects on shareholder value. Retrieved from http://www.nbaa.org/news/backgrounders/AndersenPart02.PDF

Fernholz, T. (2011, June 29). Obama’s taxing corporate jet policy. National Journal. Retrieved from http://www.nationaljournal.com/

Hartwig, R., Hodkiewicz, W., Nelson, C., Neveau, N., Safford, M., Wille, T. (2010). Corporate jet upset. Cessna.

Lucas, F. (2011, June 30). Obama for corporate jet tax break before he was against it. CNS News. Retrieved from http://www.cnsnews.com/

Patiky, M. (2013, July 31). There are no fat cats on these corporate jets. Business Aviation Voice. Retrieved from http://www.forbes.com/sites/businessaviation/

UAVs: A Commercial Future?

UAVs: A Commercial Future?

Joe Shonk

AVT 422

Unmanned Aerial Systems (UAS) are not only advancing technologically, but are also becoming more capable and versatile.   A growing number of aerial applications such as border patrol, pipeline patrol, and wildfire detection are a few that are now being considered as a job for a drone.  This additional air traffic, however, is going to pose problems in our current National Airspace (NAS) systems.  The Federal Aviation Administration (FAA) is issuing Certificates of Authorization (CoA) to users allowing them to operate their UAS.  This affords the FAA a way of tracking all current drones operating in the country and will prove invaluable information as drones become fully integrated.  Several issues stand the tallest concerning this integration in the years to come, such as the regulations for these drones to operate under.  Additionally the regulations will have to outline certification and classification of the aircraft themselves based on the mission, size, equipment, and operating ceilings.  The National Aeronautics and Space Administration (NASA) is working directly with the FAA in an effort to seamlessly bring UAS to operational civilian and commercial status.  The FAA will collaborate with NASA to construct 5 testing sites for UAS where they will collect a working knowledge of abilities, tolerances, and determine levels of safety they can be operated at.  Although military uses of UAS have been implemented since 1994, NASA looks to employ research roles to include high altitude atmosphere sampling, measurement of crops, and conduits for telecommunications.  The FAA is working diligently to regulate and introduce UAS to our country’s airspace; it is only a matter of time before they become commercially implemented.

Overcoming the regulatory obstacles for UAS to become commercially available will not likely be difficult as more applications of drones are discovered.  The technology is more than capable of handling a large variety of tasks, and many blooming companies are willing to take advantage and provide brand new aerial applications to the public.  Government funded projects will likely be the biggest consumer, providing initial UAS integration, with research related tasks such as weather and atmosphere observations, and environmental monitoring.  Other prospective markets for UAS are emergency cargo delivery (e.g. organs), agricultural spraying, volcanic activity observation, forest fire sighting, and pipeline & power line patrols.  These and many more applications of surveillance and research are going to create tens of thousands of jobs over the next decade; the growth of a practically brand new industry. 

References

Bauer, J. (2012). Integrating UAVs into the national airspace system. National Aeronautics and Space Administration. Retrieved from                                                                 http://uvs-info.com/phocadownload/05_3g_2005/10_NASA-ACCESS5.pdf

Finn, R. L., Wright, D. (2012) Unmanned aircraft systems: Surveillance, ethics and privacy in civil applications. Computer Law & Security Review, 28, 184-194.

Federal Aviation Administration. (2012). FAA makes progress with UAS integration. Retrieved from http://www.faa.gov/news/updates/?newsId=68004

Nonami, K. (2007) Prospect and recent research & development for civil use autonomous unmanned aircraft as UAV and MAV. Journal of System Design and Dynamics, 1(2), 120-128.