1. AVM 202
Introduction to Aviation
Air Transportation
(Week-3)
Dr.Hakkı Doğankaya
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2. The US Goverment Market
• Contracts for maintaining technology
• Increase productivity and competitiveness
• Eliminate less profitable lines of business
• Add new capabilities
• Balance military and commercial work
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3. The US Goverment Market
• Defense business move to commercial business;
• Application of technology to commercial
avionics
• Air traffic controls system
• a/c maintenance
• a/c up grades
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4. The US Goverment Market
• Civil Business Opportunities:
• Highway traffic management
• Potential hybrid car market
• Hazardous waste and weapon disposal
• Environmental sensing
• High speed data transmission
• Space satellite communication
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5. The US Goverment Market
• Civil Business Opportunities:
• Law enforcement
• a/c surveillance
• Smart computer-linked police –cars
• Biosensing of drugs and bomb making
chemicals
• Tv satellite services
• Software conversion
• Factory automation
• Light rail system
• Cellular telephone system 5

6. The US Goverment Market
• NASA :
• Zero growth
• Recognize importance of space programs
from technical, environmental and
commercial standpoint
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7. Civil Aviation Market
• National market is vital
• International market is compelling
• Invesments for new programs
• $5 billion (development and tooling
cost- commercial transport program)
• 4 years wait for deliveries and revenue
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8. Civil Aviation Market
• Commercial passenger jets order volume is
limited and low
• 400-600 a/c must be sold for break-even point
• % 40 general aviation a/c sales: $55 billion
• International strategies is important for civil a/
c manufacture
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9. Air Transport
• Need for new jetliners is evident
• Fleets older, less efficient; need replaced
• Economy:
• 1990- recession; lost $ 13 billion
• 1999-peak-profit
• 2001- slow down
• Earlier over 20 big companies
• Now is two: Boing, Airbus
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10. Air Transport
• Cost of developing new a/c is higher
• Generation of a/c – successor a/c is higher
• Uncertainities of the marketplace
• Spiral cost of development
• New a/c risky venture
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11. Challenges in Air Transport
• Long distance, more passenger, low cost
• Developing new cost efficient a/c
• Composite materials – less fuel cost
• The cost of development is high
• The cost of no development is higher
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12. Challenges in Air Transport
• International collaboration is key strategy
• Joint programs
• Offset programs
• Strengthen foreign industry
• Know-how sharing
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13. Factors Affecting Sales
• % 40 commercial jets – US Airliners
• After 1997:
• Order and sales increased
• 256 to 620
• Civil aviation has history of cycles
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14. Factors Affecting Sales
• Economic Growth :
• Influences the demand
• Companies build on
• Service new outputs
• Unemployment declines
• Business travels increase
• Income rises, leisure travel increases
• Air traffic inresases :
• Every % 1 increase in growth
• 3 % increase in air traffic
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15. Factors Affecting Sales
• Inflation :
• Escalate labor
• Escalate fuel costs
• Prices get higher :
• Interest rates get higher
• Business declines
• Air traffic declines
• Profits decline
• Aircraft financing becomes prohibitive
• Long term programs inrease
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16. Factors Affecting Sales
• Fleet Capacity :
• The passengers load is used to measure
ailine capacity utilization
• High load factors improve airline revenues
• Purchase or lease planes
• Fleet capacities increasing
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17. Factors Affecting Sales
• Replacement Aircraft :
• To increase capacity
• To replace older a/c (less efficient models)
• Aviation regulations :
• Necessities
• Low stage noise level – US, 1999
• 3000 a/c grounded
• There is a constant demand for
replacements
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18. Factors Affecting Sales
• Airline Profitibility :
• Small models : $ 25 million
• Jumbo jets : $ 140 million
• Need to raise capital in the finacial market
• Show to investors that they are profitiable
• US Airways filed for bankruptcy
• Over % 90 of the passengers flies on
discount fares or low-cost airlines
• Stock pricess get low
• Only source of funds is debt market
• Not easy business
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19. Factors Affecting Sales
• A Cyclical Industry :
• Since 1970, five peaks in orders for three
years period
• Since 1960, six peaks in deliveries
• Decline is usually deep (% 50)
• Growth and recession together
• One year lag between order and delivery
• Two years to double the production rate
• Inbalance between demand and supply
• Lack or excess capacity
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20. Factors Affecting Sales
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21. Factors Affecting Sales
• Future Trends :
• Economic growth and low inflation
• Nevertheles cycles, deliviries rising for the
past 40 years
• Deliviries will continue to climb (will
double in 2020 and 2030’s)
• Will depend on international economic
growth
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22. General Aviation
• The highest shipment in 1978
• The lowest shipment in 1994
• High :
• A/c prices
• Interest rates
• Operating costs
• Product liability costs
• Downward cycle
• Change in :
• Life style
• Tax laws
• Foreign competition 22

23. General Aviation
• Broad structural change from bankruptcies,
collaborations, joint ventures
• 1994 General Aviation Revitalization Act :
• Limited product liability for older a/c
• Small business jets : Fuel efficiency
• Requirement of considerable ground support :
• Facilities, terminals, offices
• Shuttles, trucks
• Energy
• Personnel...
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24. General Aviation
• Hub airports will be established
• Efficient use of time will be driving
factor
• Big carriers will fly only high load
factored centers (hihg density markets)
• Regional airlines will grow to satisfy
regional needs
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25. Related Products and Services
• Technology is simply knowledge
• It is transferable
• Aerospace industry has pursued a program of
technology transfer
• Increase in sales : $ 3 billion to $ 28 billion
• To transfer technology:
• Medical instrumentation
• Hospital management
• Mas transportation
• Public safety
• Environmental protection
• Energy 25

26. Contribution to the Economy
• No one questions aviation’s importance as an
essential form of transportation
• Quick, efficient, safe
• Aviation’s final products are passengers and
cargo
• In 2004, scheduled :
• 698 million passengers
• 2.8 billion ton miles of cargo
• 9 million departures
• Unscheduled :
• 11 million passengers
• 6 billion ton miles of cargo
• 400 thousands departures 26

27. Contribution to the Economy
• Increase will continue
• In 1970, with economic derequlation of airlines,
Just In Time (JIT) shipping facilitated :
• Expanded services at lower costs
• Shorthened production and development cycle
times
• Eliminated excessive inventory in logistics
chain
• Without air express service, business unable to
realize JIT
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28. Contribution to the Economy
• Air Transport :
• Lower lead times
• Quicker customer response times
• Improved flexibility
• Reduced inventory
• Cost and time advantage
• Reliability
• Time definite quarantee
• Less complicated logistics chain :
• One stop shopping
• Door to door service
• Single vendor
• Seamless trucking, warehousing, distribution 28

29. Contribution to the Economy
• Economic impact types :
• Direct impacts (in 2000) :
• $ 343.7 billion (financial transactions for
passengers, air cargo and provision of a/c)
• 4.2 million jobs
• Indirect impact :
• $ 254.9 billion (financial transactions linked
to the use of aviation, off airport expenditures
by travellers)
• 3.2 million jobs (supply chain related
industry)
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30. Contribution to the Economy
• Economic impact types :
• Induced impact :
• $ 903.5 billion (multiplier implications of
direct and indirect impacts)
• 11.2 million jobs
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31. “Thank you”
Questions ?
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