AVIATION 1000 AVIATION: AN OVERVIEW

Aviation Institute University of Nebraska at Omaha

THE FIRST FLIGHT

When Did It All Start? December 17, 1903

Wright Brothers Kitty Hawk, NC

WRIGHT BROTHERS

Wrights did not invent the airplane Wind tunnel usage to develop aircraft Four successful flights Nothing about their success appeared in the newspapers

3 TYPES OF AVIATION

Commercial Aviation General Aviation Military Aviation

AEROSPACE INDUSTRY DEFINITION

Includes those firms engaged in research, development, and manufacture of all of the following:
Aerospace systems, including manned and unmanned aircraft; Missiles, space-launch vehicles, and spacecraft; Propulsion, guidance, and control units for all the foregoing; And a variety of airborne and ground-based equipment essential to the testing, operation, and maintenance of flight vehicles

AEROSPACE INDUSTRY
Aerospace Industries Association General Aviation Manufactures Association

AEROSPACE INDUSTRY

Dual nature is important to national interest

Federal Government Commercial Market

AEROSPACE INDUSTRY

Aerospace industries vital to the U.S. economy

Trade balance Employment Research and development Impact on other industries

PRIOR TO THE 1950S

Unsophisticated industry Product line entirely aeronautical Long-run production R & D considerably less significant than today

TRANSFORMATION

Transformation took place in the early 1950s Highly specialized industry

UNIQUE CHARACTERISTICS

UNIQUE CHARACTERISTICS
High degree of risk and uncertainty High R & D costs due to long lead times Government resource availability Shorter production runs Higher skilled personnel Advance estimation of costs is difficult Fierce competition Profit percentages are consistently below average manufacturing industries Investment return is lower than average

ECONOMIC PROFILE OF THE INDUSTRY

Principal Product Line
55% aircraft 21% space systems 6% missiles 17% engines, parts, equipment (other) Performance Reliability Technology Unit Value

High:

U.S. AEROSPACE IN THE 1990S

Difficult time
Industrys worst downturn in 40 years

1996 began to see a turnaround Industry shift from military focus to civil Demands greater number of scientists, engineers, and technicians

ECONOMIC IMPACT OF AVIATION

Entire industries can be changed radically by air transportation
Examples: Flowers and Food; human tissue

Air transportation can develop only as far as facilities permit Public interest concept includes:
Commerce Postal Service National Defense

MANUFACTURING
Includes R&D, design construction, fabrication, assembly, sales, maintenance, and modification Commercial air transport industry represents the strongest segment of the U.S. aerospace industry General aviation aircraft production is increasing

THE TWO BIG MANUFACTURERS

Airbus (380)
Government subsidization by France, Germany, the UK, and Spain

Boeing (787)
Large military contracts over the years have allowed them to offset their R&D costs

COMMERCIAL AIR TRANSPORTATION

Economic effects of the industry:
Shrinkage of distance in terms of time Expanded transport capacity of the jet in comparison to propeller-driven aircraft Increase in the number of people using air transportation for business and pleasure Shift of traffic volume from surface to air

CIVIL AVIATION MARKET

Characteristics
Requires an enormous amount of capital Manufacturers must wait about 4 years before deliveries begin and revenue is generated from initial investments Limited customer base Volume of orders low 400 to 600 aircraft must be sold before a program reaches the break-even point (variable, depending on the manufacturer, market, economy, etc.)

AIR TRANSPORT
Principal civil aviation product is the airline transport Number of Manufacturers
Prior to WWII 1980s and 1990s Boeing/McDonnell-Douglas

FACTORS AFFECTING SALES

Economic Growth
World economic growth

Inflation Fleet Capacity

Passenger load factor

Replacement Aircraft Airline Profitability

New regulations

Cyclical Industry

AIR TRANSPORTATION INDUSTRY

All civil flying performed by certificated air carriers and general aviation Direct and indirect contributions to the economy

CERTIFICATED AIR CARRIERS

Scheduled Airlines Class of air carriers holding certificates of Public Convenience and Necessity issued by the Department of Transportation (DOT) & authorized to fly scheduled air transportation over specified routes and a limited amount of nonscheduled operations
Includes passenger and cargo operations

MAJOR CARRIERS
Southwest American Delta United Account for more than of the total traffic of the industry

DEREGULATION
Airline Deregulation Act of 1978 Competition Slow start due to:
Airline managements lack of experience Economic recession World oil crisis

Chapter 11 bankruptcies

DEREGULATION
Low fares resulted in increase passenger traffic Many communities saw improved air service

SEPTEMBER 11, 2001

Devastating impact Air carriers already in a weak financial position due to slight recession Federal government relief fund
$15 billion to industry

Boeing announced a reduction in the number of aircraft to be produced Many employees laid off

GENERAL AVIATION - DEFINITION

Aviation other than military and commercial common carriage

Including business flying, instructional flying, personal flying, and commercial flying such as agricultural spraying and aerial photography. Everything else

GENERAL AVIATION
Represents over 98% of total U.S. civil aircraft Over 80% of operations at FAA- towered airports and over 80% of total hours flown by general aviation and air carriers combined Access to over 17,000 airports Benefits: Business use, time, emergency applications, training, etc.

GENERAL AVIATION MANUFACTURERS

Gulfstream, Dassault, Bombardier, Cessna, Piper Major decline in manufacturing Cessna resumed production in 1996. New manufacturers: Eclipse, Adams, Honda, Diamond

FACTORS AFFECTING SALES

High aircraft prices High interest rates Increased operating expenses Product liability laws Changing lifestyles Tax laws Foreign competition

Challenger 604

Gulfstream V

Questions/Comments?