The common saying in aviation is “to make a million dollars in aviation you first need to start out with 2 million”. Although this has proven to be true, there are companies out there that have started with limited funds and have risen to the top. For example probably the best example is South West. Southwest, “Started in 1971 with just three planes, Southwest now flies more than 100 million passengers a year on a fleet of 680 planes and employs 45,000 people”(El-Erian, 2012). When South West was first formed, the US government still regulated the airline industry.  South West avoided the rules of government regulation because they initially only operated within the state of Texas. This means they did not have to bid for routes. South West also did not receive any government subsidies. During this time it was thought that the only way a passenger airline could survive and turn a profit was by receiving such subsidies, but the little airline known as the Love airline proved them wrong. Love airline was example the government needed to deregulate the industry.

            During the period following deregulation there were many newcomers to the aviation industry. Most of these new airlines didn’t last long or were swallowed up by the bigger airlines in merges. “Pan Am the airline that led America into the jet age in the 1950s” couldn’t compete anymore with the new structure of cost cutting and low fares and in 1991 therefore, they filed for bankruptcy (Dallos, 1991). So how did this tiny airline from Texas survive against all odds? Was their success considered a fluke or did they just have the secret recipe for success?

            South West succeeded “By keeping the important things simple and implementing them consistently, Southwest manages to succeed in an industry better known for losses and bankruptcies than sustained profitability”(El-Erian, 2012). They maintain a fleet of Boeing 737. With this type of aircraft there is less training for your flight crews. Also every maintenance technicians knows how to fix every plan. It seems like the management over at South West took the old saying “Keep it simple stupid” to heart. Maybe the best trick in Southwest’s bag is fuel hedging. Backing in 2008 “with oil hovering about around $100 a barrel, South West has come out on top. For 2008, it has locked in the price for about 70% of its jet fuel based on oil priced at $51 per barrel. For 2009, it has locked in 55% of its jet fuel based on that same price.”(Masson,N.D.) Then, is South West the only carrier that can compete with other large corporations since all the others have failed?

            The answer is no. There just so happens to be another smaller, but growing carrier that also flies Boeing 737s. This Airline is Sun Country and for those who are unfamiliar they are based in Minneapolis flying to select cities all over North and South America. Their success didn’t come easy.  It all started “In 1982, a group of pilots and flight attendants from the defunct Braniff International banded together to form their own airline with the help of businessmen in the Twin Cities of Minneapolis/St. Paul, MN.”(Sun Country). They started with one 727 flying primarily charter operations for MTL vacation flying from Minnesota to Las Vegas. Within six weeks the company turned a profit and within 8 paid back their initial startup loan. By the late 90s Sun Country was knocking on Northwest’s door as it competed for the seasonal summer vacation travel market. In 2008 Sun Country was in bankruptcy court at the hands of their owner Tom Petters, after the F.B.I. found out he had been allegedly "siphoning" over $3 billion. With a 5 million dollar loan in bankruptcy court the little airline fought its way out of debt and turned around their finances. By 2011 “reported profits of $13 million last year after combined losses of nearly $60 million in 2007 and 2008. The airline posted a profit of $1.4 million in 2009”(Phelps, 2011). Now under the new owners Cambria the airline strives not to be the cheapest, but the best airline for its customers. They are once again providing amenities to their passengers that have long been slashed due to the price wars. With their new business model and their attention to details they are the 4^th largest volume carrier in Minneapolis.

            So as you can see the aviation industry isn’t just full of failure and heart break. There are companies that find success. All you need is a positive work ethic and the right business model, which seems to be keep things simple and take care of your customer base. If you can keep those to philosophies in mind and can get the financial backing it is possible to make a small fortune in the aviation industry.

References

(2015). Retrieved from https://www.suncountry.com/page/1/our-company.jsp

Dallos, R. (1991, January 1). Pan Am, a 50-Year Leader in Aviation, Goes Bankrupt : Economy: Carrier cites fuel costs, downturn and Flight 103 bombing. It says travelers will not be affected. - latimes. Retrieved from http://articles.latimes.com/1991-01-09/news/mn-7223_1_fuel-costs

El-Erian, M. (2014, June 14). The Secret to Southwest's Success - Bloomberg View. Retrieved from http://www.bloombergview.com/articles/2014-06-13/the-secret-to-southwest-s-success

Masson, M. (n.d.). Southwest's fuel gamble: Hedges keeps fares in check - ABC News. Retrieved from http://abcnews.go.com/Travel/story?id=5918252

Phelps, D. (2011, July 21). Cambria deal gives new life to Sun Country | Star Tribune. Retrieved from http://www.startribune.com/business/125906638.html

Phelps, D. (2013, September 23). Five years later: Tom Petters' Ponzi scheme | Star Tribune. Retrieved from http://www.startribune.com/business/224430151.html

Platt, A. (2014, October 31). Retrieved from https://www.minnpost.com/twin-cities-business/2014/10/after-15-years-turbulence-sun-country-finding-clear-air

sun country airlines history. (n.d.). Retrieved from www.braniffpages.com/syhistory.html

 

 

The United States airline industry is facing competition from the foreign market, particularly from the Gulf region and Asia. This competition that the United States is currently experiencing is more substantial than in the past. This is primarily due to government subsides, cheaper labor, cheaper equipment costs and little to no taxation of foreign airline by their governments.

Foreign airlines excel with their government subsidies. According to the Economist  “a group of airlines disclosed details of “obvious and massive” Gulf-carrier subsidies totaling $42bn since 2004”(Economist, 2015). As you can see foreign governments are pumping billions of dollars into their countries airlines so they will succeed. To add insult to injury “The U.S. airline industry faces higher taxes than the three Gulf majors. The aviation industry has 17 unique federal taxes and fees. Airlines-for-America estimates that about 20% of a $300 ticket for a typical, domestic round-trip itinerary with a single connection in both directions is composed of taxes. The federal tax rates paid by airlines are higher than federal taxes paid on alcohol, tobacco, and firearms, which were originally intended to discourage use”(Ropazo, 2014 ). Therefore, the US carriers are at a big disadvantage over the foreign carriers due to taxes. This could easily be changed with lower taxes on airlines and a possible government subsidy.

Even though foreign carriers succeed with their own subsidies, our government is aiding their efforts. The Import Export Bank “is the official export credit agency of the United States” (EX_IM, 2015). The mission of the Import Export bank is to assist in financing the export of goods and services from the United States to international markets (EX_IM, 2015). This bank has been financing foreign carrier purchases; particularly United State’s manufactured aircrafts such as Boeing. In fact, “The U.S. Government Accountability Office said in a 2014 report that 28 percent of Ex-Im’s total exposure is solely wide-body aircraft. That constitutes nearly $32 billion worth of subsidies from U.S. tax revenues providing foreign competitors an unfair advantage as U.S. companies are ineligible for such discounted financing”(Crane, 2014). Therefore, with foreign carriers stocking up on new wide body Boeing aircraft (which are financed through Ex-Im bank) they are actually saving an estimated amount of 20 million dollars per aircraft throughout its useful life. While this does aid our own manufacturing industry, it is hurting our airlines.

Finally, it is hard for airlines in the United States to compete with foreign labor; this is a commonality within many other industries. There are certain parts of the world where the cost of living is considerably less than living within the United States. The airlines in those areas of the world can pay their pilots, management and maintenance crew less than what the United States carriers have to pay. Foreign airlines have taken advantage of their savings. These airlines in turn provide their customers with lower ticket prices and more amenities on their flights. This is a problem that the United States carriers and our government cannot fix. You cannot ask a pilot or technician to take less money due to the high price it costs them to get their certifications. Norwegian Air is a perfect example of this incongruity.  There is a Norwegian airline that is based in Ireland that employs Thailand based crews through a Singaporean pilot company. They have based their company in Ireland because “Ireland has weaker labor laws that will allow the airline to keep labor costs low by outsourcing its crew to Asia”(Zillman, 2014).

With all that is mentioned above it is easy to see why US carriers are struggling in the international market. Our government need to make policies that help our U.S. based airlines and not hurt them. If they don’t make changes now the US airlines will soon become domestic only airlines.

Judson, C. (2014, September 8). Guest: How the Export-Import Bank hurts U.S. airlines. Retrieved March 17, 2015, from http://www.seattletimes.com/opinion/guest-how-the-export-import-bank-hurts-us-airlines/

Feeling the heat. (2015, March 6). Retrieved March 17, 2015, from http://www.economist.com/blogs/gulliver/2015/03/airline-subsidies-gulf

Rapoza, K. (2014, April 1). Why UAE And Qatar Have The 'World's Best' Airlines. Retrieved March 17, 2015, from http://www.forbes.com/sites/kenrapoza/2014/04/01/why-uae-and-qatar-have-the-worlds-best-airlines/2/

The Facts about Ex-Im Bank. (n.d.). Retrieved March 17, 2015, from http://www.exim.gov/newsandevents/the-facts-about-ex-im-bank.cfm

Zillman, C. (2014, May 8). Pilots battle against ‘Walmart-ing’ of airline industry. Retrieved March 17, 2015, from http://fortune.com/2014/05/08/pilots-battle-against-walmart-ing-of-airline-industry/

 

 

 

 

UAV Blog

Recently, UAVs have been frequently mentioned in the news and not just in the context for military application. UAVs have also become popular in the civilian world. According to Corrall (2013) the most popular civilian applications are Hurricane Hunting, 3D mapping, Wildlife Protection, Agriculture and Search and Rescue. The FAA is looking into regulating the use of UAVs due to an increase in civilian use. As of now the only regulation that the FAA has is carried under model aircraft, which does not permit commercial use of UAVs. On February 15, 2015 the FAA issued a NPRM for comments on new proposed regulation for small UAVs (NPRM, 2015). Since UAVs are being used for a variety of reasons, it is only logical that some kind of regulation is implemented in order to protect other users in the National Airspace System.

Before legal regulation of UAVs in the National Airspace System is implemented many factors will need to be defined. The public and current users of the NAS will need to feel comfortable that the operators of these UAVs will act in a safe matter.  I believe this is the strongest argument for UAVs to not be allowed in our airspace. If these small UAVs were to collide with an aircraft there is a possibility for a fatality. Therefore the problem at hand is that these operators are safely controlling their UAVs on the ground and the only negative consequence for these operators is the potential to lose their UAVs. They do not consider the lives that are at risk if the UAV were to collide with an aircraft. Hence the reason for the strong initiative fighting against the use of UAVs in the NAS. One may question how an operator can see their UAV and be certain that they are flying their aircraft 500 plus feet away from other aircrafts. Also will the operators be familiar with VRF flight rules and how can they be confident with monitoring their aircrafts through a video feed?

The Military has had great success with the implementation of UAVs. “In 2005, tactical and theater level unmanned aircraft (UA) alone, had flown over 100,000 flight hours in support of Operation ENDURING FREEDOM (OEF) and Operation IRAQI FREEDOM (OIF)”(The UAV, 2015). UAVs serve the military in many different roles including Target and Decoy, Reconnaissance, Combat and Research and Development. Their success is related to long duty times and their ability to maintain safety for pilots. Another reason UAVs are popular is that they save the government a considerable amount of money. “Auditors estimate the Air Force would save at least $500,000 per pilot if it revamped its training programs”(Hoffman, 2009). The UAV has become an important part of the United States arsenal. Their success so far has solidified their future in the military. In addition, the cost savings allows the government to expand the production of UAVs.

            Although the UAV market is primarily militarily, there are employment opportunities for civilians. These jobs are mostly civilian contractors working for the military in either an operator role or an instructor role. The qualifications for a career in the UAV market requires a non-specific four year college degree and a FAA private pilot’s certificate. The following are two examples of jobs a civilian can obtain in the UAV industry:  

UAV Operator

http://www.glassdoor.com/job-listing/avo-uav-operator-JV_IC1133980_KO0,16_IE488.htm?jl=1231038694&utm_source=CNNMoney&utm_medium=synd&utm_campaign=6985&jas=Y&paoIdKey=NDA=

UAV Trainer

 

http://www.glassdoor.com/job-listing/shadow-flight-crew-net-reset-sut-goco-uav-trainer-JV_IC1128275_KO0,49_IE654.htm?jl=1329934163&utm_source=CNNMoney&utm_medium=synd&jas=Y&paoIdKey=NDA=

References

Carroll, J. (2013, June 7). Five ways UAVs are being used by civilians. Retrieved March 1, 2015, from http://www.vision-systems.com/articles/2013/06/five-ways-uavs-are-being-used-by-civilians.html

Hoffman, M. (2009, March 1). UAV pilot career field could save $1.5B. Retrieved March 1, 2015, from http://archive.airforcetimes.com/article/20090301/NEWS/903010326/UAV-pilot-career-field-could-save-1-5B

Northrop Grumman AVO / UAV Operator Job in Sierra Vista, AZ. (2015, March 1). Retrieved March 1, 2015, from http://www.glassdoor.com/job-listing/avo-uav-operator-JV_IC1133980_KO0,16_IE488.htm?jl=1231038694&utm_source=CNNMoney&utm_medium

Small UAS Notice of Proposed Rulemaking (NPRM). (2015, February 23). Retrieved March 1, 2015, from https://www.faa.gov/uas/nprm/

Textron Shadow Flight Crew NET RESET SUT GOCO UAV Trainer Job in Dugway, UT. (n.d.). Retrieved March 1, 2015, from http://www.glassdoor.com/job-listing/shadow-flight-crew-net-reset-sut-goco-uav-trainer-JV_IC1128275_KO0,49_IE654.htm?jl=1329934163&utm_source=CNNMoney&utm_

The UAV - The Future Of The Sky. (n.d.). Retrieved March 1, 2015, from http://www.theuav.com/