Final post

At the beginning of the course of my Aviation 422 Senior seminar course I had the plan to find an internship in the aviation industry and complete my graduate degree in the spring semester of 2013. After applying to a few jobs and not receiving an internship, my career path has come to a crossroad. I have made the decision to broaden my search for jobs outside of Michigan upon finishing my degree. I have taken into consideration in looking at places I wouldn’t mind settling down in for example Houston or Austin TX. My other option is the military.  The military has been an option I have considered prior to committing to the aviation program at Eastern Michigan University. After talking it over with family I agreed with them that it was best to complete a Bachelors before making the decision to join and if I still had an interest after college then it would be a great option. Throughout the class we have gone over many topics that related to specialized industries in aviation. The topics that drew my attention the most were those considering China. With China’s growing population and simultaneously their growing aviation industry I think finding a job that is related to doing business in China would be great. Not only do I think that there is something there to make money and provide a means to living but there is also opportunity to be apart of something. Being part of the establishment of Chinas growing aviation industry would provide a gateway into one of the largest markets in the world throughout the next twenty years. With that being said the topic I found most interesting during this course was our Topic on leveling the global playing field. During this topic the research I did during the class was the topic I did the most research for this topic while I was comparing data between imports and exports from the U.S. to China. I was also able to see how large of a scale the aviation industry was stimulating our own economy and generated an opinion on how well China would do if they were able to produce their products on their own.

            During the course we had many guest speakers come and speak to our class from several different areas of the Industry. Although it was hard to me to choose between my top two speakers the guest speakers I enjoyed listening to the most were the speakers from ATC at DTW. The speakers came into class and gave us a crash course on how a tower operates and their day-to-day routines and their career paths that brought them to where they are.

Upon finishing my degree at Eastern MI. I plan on continuing professional development by learning the facet of the industry on which I can find a job in, provided I find a job in the industry. Although my career plans for my future are not set n stone there are still some goals in life that I have for myself I would like to achieve while I am still young. I enjoyed the diversity of professionals and areas of the aviation industry senior seminar provided to the students this semester and hope that over the years that more professionals will and share their experiences in the industry with students of the program.

Associations

Professional organizations are common among many Industries. They can provide the opportunity to network and become active in the field of individuals with common practices. Being part of an organization allows people to share information that can benefit one another while in an industry. It is important for students and individuals just starting out in their field to join organizations because they can provide scholarships for students, mentors for those interning, insight on how the industry works and how to navigate it, and professional development courses (Anderson 2013).

            There are various aviation organizations out there with different goals and backgrounds such as commercial, educational, governmental, military, nonprofit, media, international, recreational, and social organizations. Since the spectrum is so broad it is important to join an organization that identifies with your career goals. Two organizations that I could see a potential benefit from joining within the near future would be the American Association of Airport Executives (AAAE) and the Aircraft owners and Pilot association (AOPA).

            The AAAE is the largest professional organization for airport executives around the world (AAAE 2013). Their goal is to grow their organization in order to better serve airport executives by providing ever improving products, services, and Washington representation. Examples of the AAAE recent initiatives in recent years are the creation of the Transportation security Clearinghouse, a program in which AAE manages the processing of airport/airline employee background checks and provides Training services, and on-site training programs to address the needs of the airport industry. Joining AAAE provides benefit to its members that include a subscription to Airport Magazine and Airport Report today. Members also receive access to an information database that lists names, titles, phone/fax numbers and E-mail address of AAAE members for networking. Joining the AAAE would be beneficial to me because not only would I receive all the benefits of becoming a member it provides a easy way for a soon to be newly graduate to put their foot in the door and get out there.

            Another organization, which would be beneficial to me, would be the Aircraft Owners and Pilot Association (AOPA). Although I do not plan on being a professional pilot in my near future I do plan on flying with friends and finishing up my private and instrument ratings. AOPA’s Mission is to preserve the freedom to fly by advocating on behalf of it’s members, educating pilots non pilots and policymakers alike, among keeping general aviation accessible to all (AOPA 2013). AOPA provides its members a 12-month magazine subscription access to AOPA’s pilot information center access to AOPA Air safety Institute courses and seminars and discounts to member insurance and protection plans. AOPA is an important organization to me because it represents and advocates for safe practices in General Aviation. It also speaks up on behalf the general aviation community when congress tries to restrict GA. Recently the president proposed a budget in which a $100 per flight user fee would be put in place generating 7.4 billion in revenue a fee that AOPA voiced their opinion on claiming it would be disastrous to general aviation. Since then 223 bipartisan members of the House of Representatives have signed a letter asking the president to abandoned the idea (Aopa communications Staff, 2013). I believe being part of AOPA would allow me to network and stay in touch with the General Aviation side as I continue on my career path.

            Although I am currently not a member of any aviation organizations I have opened my eyes to see the benefits in which they provide in the industry.  The professional organizations I have mentioned both represent two different facets of the Aviation Industry but act very similar in the way in which they operate and advocate on the behalf of their members to Washington. I can say with confidence that I will be joining the AAAE within the next four months after researching this topic.

           

Sources

AAAE (n.d.) (2013). AAAE: A Rich History, A bright Future. Retrieved April 09 2013 from : http://www.aaae.org/about_aaae/a_rich_history_a_bright_future/

AAAE (n.d.) (2013).  Membership Information Benefits. Retrieved April 09 2013 from:http://www.aaae.org/membership/membership_application/06MemBrochure.pdf

Anderson L. (2013) 5 reasons to join a professional Organization. Retrieved April 9 2013 from:http://college.monster.com/training/articles/2131-5-reasons-professional-organizations-are-worth-joining

AOPA Communications Staff (n.d.) (2013) Association pledges to work  with congress, GA Community to oppose fees. Retrieved April 09, 2013 from: http://ww w.aopa.org/advocacy/articles/2013/130410aopa-warns-user-fee-proposal-could-cripple-ga.html?CMP=News:S1T

How do you make a small fortune in aviation?

-->

The Cliché “ How do you make a small fortune in aviation? Start with a very large fortune.” is a phrase that is directly related to aviation. Many people who have an interest in the industry may know that it is very costly to start up a business, hence to make a small profit one most start out spending a lot of money to get things rolling and if the nuts and bolts hold and your business plan is successful your business may churn out a small profit.

If we think back to 2008, there was major hype generated around Eclipse Aviation; who would later be bought out and become known as Eclipse Aerospace. They were a leading producer of a fleet of jets, known as VLJ’s (very light jets), which were promised to fly 1800nm, and cost fewer than 1 million dollars. The production of VLJ’s were said to make owning and operating a jet affordable to everyone. On November 25, 2008, Eclipse filed for Chapter 11 bankruptcy due to unprecedented economic challenges on Wall Street. The promises and commitments made by the company were wiped away (VLJ news 2013). Filing for bankruptcy may have been the best decision for the business but it also took a huge toll on its investors and customers. J. Mac McCllean, chief editor flyingmag, reported, “Eclipse 500 owners and order holders suffered losses well over 1 billion”. and that “shareholders lost hundreds of millions”. Talk about starting with a large fortune. Eclipse was eventually bought out and became Eclipse Aerospace were they continue to be the lead producer in VLJ’s today.

Like any successful start up business the key to becoming successful is be one of the first to get a piece of the pie. A company DayJet, a commercial American aviation operation, had the business plan to provide on demand jet travel at low cost to private fliers. Companies like Dayjet were going to simplify flying for frequent travelers and make it cost-effective with the use of their VLJ’s. On May 26, 2008 DayJet announced it was unable to raise 40 million in financing and that it would slow down its expansion. On October 19 the same year Dayjet had shut down operations abruptly later filing Chapter 7 bankruptcy liquidating the companies assets (Aviation Today 2008).

Although these companies cease to exist, losing money in the aviation industry is a daily occurrence. Airline carriers providing flights daily are struggling to stream profit today. In 2010 a one way flight from LAX to DTW costs Delta Airlines $13,880, from DTW to JFK the remaining flight segment costs $3,872 totaling $17,752 (Vandermey 2011). According Vandermey, in the third Quarter of 2010, ATA reported that a $506 ticket was pulling an average of $33 in profit.  $33 dollars may not seem like much but is way more than the airline had seen in the last decade!

Aviation isn’t all about losing money there are companies out there that have been successful in generating profit. According to Seth Stevenson, an editor for slate magazine, in 2012 South West Airlines reported its 39^th consecutive year of profitability. Stevenson reports that South west’s business model is the key factor for success of the company. South west operates domestically within the U.S. providing 3,000 flights per day and reporting $17.1 billion in total operating revenue in 2012 (SWAmedia 2013). What is unique to South Wests operations compared to other airlines is that the fleet of which they operate is only made up of one type of aircraft, the Boeing 737, while others may operate up to 10 different types of aircraft. Operating a fleet consisting of one type of aircraft allows Southwest’s employees to make simple changes in day-to-day operations without effecting all operations.

Another successful Aviation company I came across was Ascension Aircraft, an airplane sales and leasing company in Augusta Georgia consisting of four employees. Jamail Larkins, a graduate from Embry-Riddle, founded ascension Aircraft, in 2006. By 2008 the company generated over $7 million in revenue (Leiber 2009). The company sells and leases aircraft with fractional ownership with four-year contracts After the four years are up the aircrafts are then sold and the money is then divided amongst the owners based on ownership. In an interview Jamail’s advice to other entrepreneurs is “Take advantage of every available resource and learn from the lessons of other small business owners”.(Matisiak 2011) .Ascension Aircraft objective is to provide out-of-the box solutions to complicated problems.

Starting up a successful company in any industry is no simple task. When it comes to the Aviation industry factors such as the condition of the economy can make or break your company as seen with Eclipse and Dayjet. Although those companies were unsuccessful in their endeavors companies like South West and Ascension prove that even when the market is suffering for some it doesn’t mean that it is impossible for start ups or established business to turn a profit.

Sources:

Aviation Today (n.d.) (2013) DayJet Continues Slower Expansion Retrieved April 1, 2013, From: http://www.aviationtoday.com/vlj/categories/bga/22199.html#.UV p6NRkXfgV

McClellan J.M.(2009) What went wrong with Eclipse? Retrieved April 01, 2013 From: http://www.flyingmag.com/what-went-wrong-eclipse

Vandermey A. (2012) Where your airfare really goes. Ever wonder what’s behind rising price of an Airline ticket? The cost breakdown may surprise you. Retrieved April 01, 2013 From:http://money.cnn.com/magazines/fortune /storysupplement/ airline_costs/

Leiber N.(2009) America’s Best Young Entrepreneurs 2009. Retrieved April 01 2013 From: http://www.businessweek.com/stories/2009-10-06/americas-best-young-entrepreneurs-2009businessweek-business-news-stock-market-and-financial-advice

Matusiak A. (2011) Aviation Entrepreneurs Says American Jobs Act is “Critically Important” to Small firms. Retrieved April 01 2013 From:http://www.white house.gov/blog/2011/10/11/aviation-entrepreneur-says-american-jobs-act-critically-important-small-firms

SWA Media (n.d.) (2013) Southwest Coporate Fact Sheet. Retrieved April 01 , 2013 from:  http://swamedia.com/channels/Corporate-Fact-Sheet/pages/corporate-fact-sheet#2011stats

 VLJ new’s (n.d.) (2013) Eclipse seeks court Approval for Restructuring Retrieved April 01, 2013 from: http://www.vljnews.com/index.php/latest-news/eclipse-aviation-seeks-court-approval-for-restructuring.html

The Sequester

Sequestration, “The Act of taking legal possession of assets until a debt has been paid or other claims have been met”. In 2013 March 1, Congress was unable to come to an agreement and the United States has now entered the Sequester. What does this mean? On Aug 2, 2011, members of Congress passed the Budget Control Act, which contained budget cuts. The Sequester will reduce the Budget for 85 billion dollars reducing government funded services throughout the nation. (Dwyer 2013) The Original intent of sequestration was to act as an incentive to help lower the Deficit of United States but it seems to have the reverse affect actually only lower the deficit about 0.5%.(Tatum 2013)

Seeing as how the Sequester directly affects government-funded agencies the question that concerns us is how does the Sequester affect the Aviation industry. Well this means that the Federal Aviation Administration will have to make cuts in its spending due to the reduction of funding. One way the FAA has reported doing this is FAA employees may have to take 11 days of without pay.(Shea 2013) The budget reduction to the FAA and its programs total to 619 million ,which will reduce its workforce and oversight capacity. (ARSA 2013)

Reducing workforce is not the only way the FAA has reduced its 619 million budget during the Sequester. Sequestration has affected General Aviation with closing control towers with less than 150,000 total operations and commercial towers with less than 10,000 the duration of these cuts/closers is Unknown. (Chapman 2013) The effects of these closers will have an adverse reaction to safety of General Aviation, Airlines and Airports. Reducing ATC’s will make it harder for pilots to communicate with one another and will increase the risk of incidents in these areas without a Controller communicating with the masses. “Pilots and Passengers at smaller airports will be looking at longer waits and “uncontrolled” airport environments”.(Sabullis 2013)

It is safe to say that the Sequester will have a negative impact on Aviation within the upcoming months. With all the negative impacts resulting in aviation I was unable to see any part of the aviation community gaining from the Sequester.


Sources:



Bruce M. & Dwyer D. (2013) Obama Signs Order to Begin Sequester Cuts After President, Congress Can't Reach Deal. Retrieved from:http://abcnews.go.com/Politics/OTUS/obama-signs-order-begin-sequester-cuts-president-congress/story?id=18628023

Shea B. (2013) The Sequester: furloughs hit Fort Dodge: FAA employees face days off without pay; impact on local airports remains unknown Retrieved from : http://www.messengernews.net/page/content.detail/id/555478/The-sequester--FAA-furloughs-hit---.html

Chapman C. (2013) Wholesale cuts risk safety, efficiency Retrieved from:http://blogs.ajc.com/atlanta-forward/2013/03/14/local-airports-hit-by-sequester-plans/

Sabulis T. (2013). Local Airports Take a hit by Sequester :Moderation Retrieved from: blogs.ajc.com/atlanta-forward/2013/03/14/local-airports-hit-by-sequester-plans/

Tatum W. (2013) Culture Fail: The Sequester: All Pain No Gain Retrieved from: ARSA (2013) FAA too big to take a hit under sequestration. Retrieved From : http://www.corvallisadvocate.com/2013/0314

Aviation Markets from U.S. to China

Recently Chinese investors have been in the market to buy out U.S. general aviation companies. In 2012 Hawker Beechcraft Inc. of Wichita, Kan was offered a 1.79 billion dollar offer by Superior Aviation Beijing Company, Limited (Arkansas, 2013). In their article Arkansas Business states that Hawker Beechcraft abandoned the deal when they weren’t able to come to an agreement and will emerge as a standalone company changing their name to Beechcraft Corporation. Although Beech aircraft is making an attempt to bounce back without financing from Chinese investors what about other general aviation companies facing financial difficulties?

In 2011 Cirrus officials announced Cirrus Aircraft would be sold to China Aviation Industry General Aircraft Co. (CAIGA)(Hirschman 2011). CEO Brent Wouters explained the negotiation process took 20 months and that “it will allow Cirrus to expand its product line and grow throughout what he expects to be a period of consolidation within the aviation industry.”(Hirschman 2011). Although the recent purchase will allow them to expand their product base into a new market and Wouters assured that CAIGA plans on supporting the facilities in the U.S and that “this is were they will add jobs when the market rebounds”. CAIGA may find it to be more cost affective in time to pack up and move locations. Shortly before this purchase was approved for Cirrus Aircraft, Teledyne – Continental a producer of the jet engine in the Cirrus SR22 and SR29, was purchased by Technify Motors a subsidiary of AVIC International (Aviation Industry Corporation of China), a Chinese government owned holding company (Avweb Staff 2010). Wouters said that the two transactions and the companies making them aren’t related. If you take a look at CAIGA’s website under the tab about CAIGA company profile you will also see that the company are subsidiaries of f AVIC which one would think two aviation related companies, both subsidized by the Chinese government, with components that are directly complementary, may have something to do with one another. Although both agreements these companies came up with keep the jobs in the U.S. how long will the agreements last? Brian Foley, with Foley Associations mentioned this in an interview with the Wichita Eagle

In buying up established companies, China gets the management know-how, brand, distribution, and technology in days, not decades. (Mcmillin 2013)

When purchasing U.S. companies Chinese investors will be able to dissect these companies and modify them to fit the growing industry in China.

The middle class has grown tremendously in China and in return so has the market for travel. Chinas middle class accounts for 300 million people, that’s already about as many people who live in the United States (Luby 2012). As a result “Air travel is closely tied with economic growth” and “The number of passengers flying domestic airlines has almost quadrupled in the past decade from 67.2 million in 2000 to 267.6 million in 2010” in Chinese Aviation markets (Parker 2012). Although there was an existing market in China prior to the expansion of its middle class, as the economy begins to grow at exceptional rate so will the need for travel.

As Asian markets continue to grow and expand their aviation industry, these developing countries will take time to catch up with already established industries like the U.S. These growing global markets open up the opportunity for future business partnership with Asian markets like China and the U.S While China is playing catch up; the time gap gives skilled and knowledgeable U.S. workers the to find jobs across the globe and established companies in the U.S. opportunity to venture into foreign markets. If Chinese companies continue to buyout U.S. companies and they decide to move their headquarters and not produce in the U.S. it could lead to job loss and less cease job growth.

Merger of American Airlines and US Airways

Recently US Airways and American Airlines have announced an 11 billion dollar merger. We have seen mergers before, Delta and Northwest more recently. From mergers in the past we have a learned a little about what to expect from airline mergers, but the question posed now is what will this merger means for the consumer with narrowing down competition playing field from four major carriers to three.

Larger consolidated airlines pose some benefits to the consumer when it comes to looking at aspects such as airlines ability to provide better service as well as connections, but consumers such as business travelers are concerned with prices and bottom lines. Although airfares didn’t see any notable increases in airfare when delta and northwest merged (Perkins 2013), some business traveler analysts are skeptical that reduced competition and options will result in higher fares (US DOT 2013).

Another important concern in this merger specifically to flight attendants and pilots are seniority lists and how they will be merged. Seniority list are airlines ways of tracking progress with employees in which seat they hold or how long they have been with companies and pay grades.  There currently is not an industry standard for seniority list mergers but it still remains a very serious matter to employees when it comes to mergers. In the past we have seen that each company involved in the merger will develop a committee of about 3 to 4 to hash out the seniority list usually with an arbitrator (Jones 2013). These committees can take months sometimes even years to hash out seniority lists. There is no standard to help guide through the process, which hasn’t help, smooth out the process. If industry standard were to be set some key rules I think would help smooth out the process would be a deadline, and representatives from both merging companies for a start. Although I am sure there are far more complications that go into setting up seniority list.

There is a merger guideline that companies must follow when applying for a merger of businesses. One specific step an airline must take in merging of airlines is the merger process is review by the Justice Department’s antitrust division. During this process the company is reviewed by the Department of Justice to see if the merger will result in a monopoly (Brandenburger 2012). The prediction of the major airlines controlling 70% of domestic flight operations of the U.S. will affect my career in the result that these airlines will be the bulk of the domestic industry. Most of the regulations in which I will be familiar with pertain to these airlines and more than likely in my future career I will end up working for or with these airlines.


United States Department of Transportation (2013) Annual U.S. Domestic Average Itenerary Fare in Current and Constant Dollars. Retrieved from: http://apps.bts.gov/programs/economics_and_finance/air_travel_price_index/html/annual.html



David J. (2012) Pilot Seniorty a Hot issue at Merging Airlines. Retrieved from: http://fapa.aero/content.asp?ID=69&Gateway=Industry



Perkins E. (2013) American-US Airways merger: Why worry? Retrieved from: http://www.smartertravel.com/blogs/today-in-travel/american-us-airways-merger-why-worry.html?id=14023955



Rachel Brandenburger (2012) Merger Enforcement in the Americas: Update for the U.S. from the Department of Justice. Retrieved from : www.justice.gov/atr/public/speeches/285173.pdf

Topic 4

Corporate aviation has been the seen as a luxury abused by large corporations, “Nothing symbolizes corporate excess in this economy like a private jet (Demerjian 2009). I remember in 2008 executives were scrutinized for flying their private jets to a hearing in front of congress for their hearing regarding their 25 billion dollar bailout. As of recently these companies have begun to ditch their jets in hopes to better their image from abusing such luxury. Business jets have helped executives and employees of companies get from destination to destination faster and easier than having to wait for a commercial flight. Many people think of corporate aviation and think of expensive jets and used in excess but in big business companies are always looking to save money an a business jet may be the answer in some cases when it comes to investing in travel.

I personally feel that corporate aviation is vital to our economy because it is a market in which provides goods in services in return this provides jobs. I think the most important aspect of corporate aviation is that it is domestic, which means that the utilization of this service contributes to the U.S. economy.

In 2012 during his debate with Mitt Romney, President Barrack Obama made the following comment "My attitude is, if you got a corporate jet, you can probably afford to pay full freight, not get a special break for it,”(Obama, 2012). When he made this comment I believe he was referring to the tax break corporate aviation receives with accelerated depreciation on assets. Accelerated depreciation as defined by Investopedia, is “Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset.” Although he may or may not be right that these companies may be able to afford to pay “full freight” on taxes the purpose of these stimulus package is to encourage purchase of services goods and services in corporate aviation.

Aviation Advocates have completely different views than the president. Through my research I stumbled across a website called NoPlanenoGain.org a website used by the General Aviation Manufacturers Association (GAMA) and the National Business Aviation Association. These companies believe that the use of aircraft in corporations can be vital to their success as long as they are used properly (No Plane No Gain 2013).

I don’t believe that the mass abundance of business jets of some corporations is completely justified when it comes to luxuries of use of aircraft for non-business purpose. On the contrary I believe I agree that the use of corporate jet aircraft can be extremely beneficial when used properly and efficiently.





Sources
Accelerated Depreciation (n.d) Investopedia online, Retrieved from http://www.investopedia.com/terms/a/accelerateddepreciation.asp#axzz2KeoScL4O

Demerjian D. (2009) Gerneral Aviation Sounds MayDay as Fat Cats Ditch Their Jets (2009) Retrieved from. http://www.wired.com/cars/coolwheels/news/2009/05/corporatejets0513

NoPlaneNoGain (2013) It's A Fact: Business Aviation Is Essential To America (2013) Retrieved From http://www.noplanenogain.org/Quick_Facts.htm?m=47&s=391

Obama (2012) Federal News Service (2012) Retrieved from http://www.npr.org/2012/10/03/162258551/transcript-first-obama-romney-presidential-debate

Accelerated Depreciation (n.d) Investopedia online, Retrieved from http://www.investopedia.com/terms/a/accelerateddepreciation.asp#axzz2KeoScL4O