Are the Chinese Looking to Compete with Boeing and Airbus?

Airbus and Boeing currently have a stranglehold on aviation manufacturing. Their track record allows for their aircraft to have a prestige that a new company cannot match. Additionally, being certified by the Federal Aviation Administration (FAA) insures that they manufacture a safe aircraft and allows them to operate all around the world. This market is very profitable, and China wishes to have a stake in the market. The Civil Aviation Administration of China (CAAC) is the regulating body for aviation in China. The Commercial Aircraft Corporation of China (COMAC) has an aircraft called the C919, that they believe will rival the A320 and the Boeing 737. This is no small feat, and the CAAC and COMAC have run into unexpected delays in certification by the FAA. “’It is not smooth sailing right now between the CAAC and FAA on when they come together,’ says Chahrour. ‘It is a resources issue for the FAA,’ he adds” (Perrett & Pyadushkin, 2014). This is primarily because in aviation the unknown is dangerous.

           

            The certification process for the C919, I believe will be a long one. This is due to the FAA wanting to see a proven track record by the CAAC and the C919 before recognizing the regulating body of China as being effective at maintaining a high level of safety, as well as, the C919 meeting that standard as an aircraft. Being allowed to fly in the United States is an incredible advantage that provides the company a large increase in the relevancy of their aircraft in the aviation industry. Their company will not be able to rival the A320 or the B737 if they cannot fly in the United States. However, if the CAAC is proven to promote a high level of safety, and the C919 is proven to be safe while operating in China and other countries. I believe that they will receive FAA-certification.

            If the C919 were to receive FAA certification, it would largely affect the current airline industry. The US carriers would feel this effect on numerous fronts. Having a Chinese manufactured aircraft would have an impact on areas such as public perception and aircraft purchases. First, Chinese manufacturing has a stigma by the American populace. Chinese manufacturing is viewed as something that is mass-produced and of cheap quality. This stems from all of the little trinkets people accumulate being made in China. Also, the Chinese are not viewed to have safe working environments and techniques. This would cause issue will Americans not wanting to fly on the Chinese aircraft due to the feeling of it being unsafe. So, regardless if the C919 is built in a manner that rivaled the safety of the B737 or A320, it will be difficult to overcome this stigma and prove to the American public that this aircraft is not cheap or poorly constructed. Furthermore, the aircraft can be manufactured at a much lower cost than the B737 and A320. “A report published by China National Radio in June estimates the plane will cost about $50 million.   This price is significantly lesser than prices of Boeing’s 737 series of planes and the Airbus A320 (with average list prices of $75 million and $90 million, respectively).” (Johnson, 2015). This reduced price would allow the airlines to purchase more aircraft, and have larger profit margins. If the FAA finds the C919 to be safe and the maintenance cost is comparable to the B737 and the A320, there would be a large demand for these aircraft by the US carriers. However, this cheaper price point is a double edge sword. This is due to the stigma that cheaper products tend to be of inferior quality compared to high priced products. This stigma coupled with the already negative views pertaining to Chinese manufacturing could increase the image of the aircraft being unsafe and of poor quality compared to the trusted B737 and A320.

            The Chinese government owns COMAC. COMAC is the Chinese government’s way of getting into the international aviation industry and all the perks that are attributed to it. COMAC has sold hundreds of their C919s and will be a staple in aviation for the Chinese government. While COMAC has sold many of their C919s, the majority of their sales have gone to the Chinese government, and have generally not been recognized by the rest of the aviation industry. This goes back to the C919 not being FAA-certified and overall untested. COMAC also have a program for manufacturing their ARJ21, which is a regional jet. “The C919 program originally relied on timely ARJ21 certification—by the Civil Aviation Administration of China (CAAC) with FAA supervision—to pioneer U.S. acceptance of Chinese type certificates.” (Perrett & Pyadushkin, 2014). However, this plan fell through when it became necessary to push the C919 development along. The ARJ21 program is still being developed, but COMAC is putting the bulk of their effort, and resources into the C919 program.

           

            If the C919 were to receive FAA certification, and begin to gain a foothold in the aviation industry along with Boeing and Airbus, I believe other companies would enter the market. This is because Boeing and Airbus currently have a stranglehold on the industry. If they begin to lose their grip in the market, there will be other companies who will take advantage of the new opportunity, and join the market in competition. However, if the C919 receives FAA certification and Boeing and Airbus keep COMAC from gaining a place in the industry, then other companies will see that there is no room in the market for additional competition. This in turn, would ensure that the other companies would not enter the market.

            Currently, there has been no public response to the C919 by Airbus or Boeing. However, both companies have provided recent improvements to their A320s and B737s. This is not a response in my opinion to the C919, but as a normal step in aviation to continue to stay relevant and ahead of the rest of the industry. The aviation industry is constantly evolving and if the manufacturers do not continue to improve, they will eventually become irrelevant. While this may not be directly due to the roll out of the C919, I am certain that if the C919 receives FAA certification there will be a public response to the event by both Airbus and Boeing.

References

Johnson, P. (2015, December 17). Competition For Boeing As COMAC's C919 Is The New Kid On The Block. Retrieved from http://www.forbes.com/sites/pierrjohnson/2015/12/17/competition-for-boeing-as-comacs-c919-is-the-new-kid-on-the-block/#3f3f0de86c1a

Perrett, B., & Pyadushkin, M. (2014). Russia, China Plan Joint Widebody Effort. Retrieved from http://www.flightlogistics.com/widebody/

Flying Cheap: Professionalism in the Industry

            Currently, there is a lot of talk of a pilot shortage. This is a rather complex issue that has numerous factors influencing it. I believe that it is a combination of both of the major arguments that has created the current pilot shortage. The two major arguments are that the number of pilots’ retiring at the mandatory age of 65 is outnumbering the number of young pilots coming in. This I find has some validity due to the large number of pilots from the Vietnam era approaching retirement. “Upward of 20,000 cockpit seats expected to open up at U.S. airlines over the next seven years due to FAA-mandated age-65 retirements” (Aviation Week and Space Technology, 2015). However, this number may have caused an influx in the need for pilots, but that does not fully cover the extreme demand that is currently in place for pilots. The current system usually takes pilots from being a certified flight instructor, to a regional airline pilot, and then finally to a major carrier. This has its advantages, but also has numerous downsides that we are currently experiencing. Coupled with the influx of pilots retiring, the long pipeline required to become a pilot with a major carrier has caused massive shortages for pilots. The regionals cannot get pilots fast enough to fill their cockpits. Additionally, once their pilots have received enough flight time to move onto the majors they will leave with expediency. This is due to the second major point, which is that the pay for regional pilots when they initially enter the airline industry is an unlivable wage. This low wage has a trickle down effect that causes issues such as having to share small apartments with numerous pilots called crash pads. However, regional airlines get paid per flight completion by the major airlines. So with this method of profit, it is beneficial to the company to keep pilot cost low so they can increase their profit margin. This is because it is easier to keep the pilot wages low then to negotiate with the major airlines for an enhanced payment plan.

The airlines are pushing to change the safety regulations regarding to the minimum number of flight hours needed to become a first officer, which was prompted by Congress after the crash of a Colgan aircraft. The airlines wish to lower the qualifications and training requirements to widen the pool of pilots eligible to fly for the regional airlines. However, this is just a temporary fix that will only delay the pilot shortage because it does not remedy all the issues causing the current shortage. Capt. Tim Canoll, ALPA’s president said, “Given the evidence, it’s clear that today’s safety rules have no bearing on why some companies may not be able to attract qualified pilots, because there are pilots available to fly for the airlines that provide career growth and adequate work-life balance” (ALPA, 2015). So as Capt. Canoll states, there is career growth and work-life balance that has to be resolved to properly create an inviting environment to attract current pilots, as well as, influence the younger generation into wanting to become a pilot.

The new FAA regulations require “airline first officers to hold an Airline Transport Pilot certificate with a minimum of 1,500 hours of flight time” (Pope, 2013). There are caveats to this rule. However, this is the regulation that the pilot community is up in arms about. This is because this dramatically reduces the number of possible pilots that regional airlines are allowed to hire by regulation. Moreover, while the new prospective pilots will have a higher number of hours, the quality of those additional hours is up for debate. The transition from training aircraft such as a Cessna 172, to a regional jet such as a CRJ, is still a large task regardless of the additional flight hours due to the completely different environment and type of flying being done.  Some possible solutions to this issue are to reduce the minimums by instituting other types of requirements as it pertains to training and oversight by the regional companies. A requirement mandating an increase in the amount of time in training, and number of hours of flight time needed with a check airman can increase the proficiency of the pilot in the environment he will be operating in, as well as, improving the pilot as a whole. This will allow pilots to not have to wait so long building hours prior to being able to fly for the regional airlines, and also provides the regional airlines with more quality-trained pilots.

The Air Line Pilots Association or ALPA represents the regional pilots. However, this leaves many other members of the industry not represented such as, management and manufacturers. This is where the Regional Airline Association takes over in providing “a unified voice of advocacy for North American regional airlines aimed at promoting a safe, reliable, and robust regional airline industry.” (RAA, 2016). This allows the entire industry to have a voice in protecting their rights. Furthermore, providing every part of the industry with a voice creates an overall safer environment for the regional airlines to operate within.

Professionalism is having a high level of skill and knowledge on a particular activity, with the continual increase of both skill and knowledge as time and research progresses. Two ways the documentary demonstrated a lack of professionalism were the pilots coming to work in less the optimal health, and also management allowing for a pilot to have to travel all night from her home to her base with minimum rest prior to flying her route. I feel that the lack of first year pay and the overall compensation structure of the regional airlines contributed in the lack of professionalism, because it caused the pilots to make unsafe decisions. Along with causing the pilots to make unsafe decisions, the lack of compensation also provides additional stress to pilots who have to travel to their base from their home in another state. This additional travel is due to their inability to afford to live near their base airport.

Personally, I plan on maintaining professionalism by continually increasing my knowledge on current events in the aviation industry. Not only will this allow for me to properly operate in all environments, but also remain on top of any changes to standard operating procedures in different areas of the world. Lastly, I intend to continually progress in my training of aviation by becoming well versed in all aspects of aviation. I will do this by pursuing certificates and ratings in different types and categories of aviation to better cultivate myself as a well-versed and proficient pilot.

References

ALPA. (2015). No Excuses: Keep U.S. Airline Pilot Qualifications Strong. Retrieved from http://www.alpa.org/advocacy/pilot-pay-shortage

Aviation Week and Space Technology. (2015, February 16). The Coming U.S. Pilot Shortage Is Real. Retrieved from http://aviationweek.com/commercial-aviation/coming-us-pilot-shortage-real

Pope, S. (2013, July 11). FAA Finalizes ATP Rule for First Officers. Retrieved from http://www.flyingmag.com/news/faa-finalizes-atp-rule-first-officers

RAA. (2016, March 18). Regional Airline Association. Retrieved from http://www.raa.org/

Commercial Space Travel

            “Space Tourism” has come to existence on 28 April 2001. “On that date, American businessman Dennis Tito became history’s first space tourist, paying his own way to the International Space Station aboard a Russian Soyuz spacecraft.” (Wall, 2011). This set the precedent that there is potentially large sums of money to be made in the human spaceflight market. Tito was reported to have spent $20 million to travel to the International Space Station (Wall, 2011). Following Dennis Tito’s flight, there have been many companies looking to get a foothold and develop the civilian space travel industry. Between Tito’s flight in 2001 and 2011 the Virginia based company, Space Adventures, have sent seven people on eight orbital flights (Wall, 2011). This proved that Tito was not alone in his willingness to pay a large amount of money to experience space travel. Some initial hurdles that had to be navigated for private citizens to travel to space and the International Space Station were the other members of the International Space Station, notably NASA. A NASA press release from March 19, 2001 states, “NASA officials said at the time that they didn’t object in principle to the presence of a paying customer aboard the orbiting lab. They just didn’t think Tito’s training would be sufficient by April, which they said was a time of complex and crucial station operations.” (Wall, 2011). While this may have been a factor, the opposition to Tito’s space traveling exploit was predominately mitigating all possible negative outcomes for the International Space Station and any individuals in space. Tito being a 60-year-old man could also have played a part in wanting to not allow for any additional bad public relations regarding space travel.

            “On 23 December 2005, the FAA published a notice of proposed rulemaking (NPRM), ‘Human Space Flight Requirements for Crew and Space Flight Participants’” (FAA, 2006). The FAA created changes in parts 401,415,431,435, and 440 of Title 14 of the Code of Federal Regulations and created a new part 460 (FAA, 2006). These revisions and new part cover the requirements and regulations for governing crew and space flight participants. The newly created part 460 is supplemented by the regulations already in place such as part 431, which pertains to the use of reusable launch vehicle with a person on board. While the new “part 460 applies to anyone applying for or having a license or permit under Title 14 Code of Federal Regulation (CFR) Chapter III, who conducts a flight with crew or space flight participants on board a vehicle with a human on board” (FAA, 2006). This regulation was created to begin the process of outlining what it would take to safely operate flights into space. While the regulations outline the requirements and the certification level needed by the companies and operators to fly into space. I think that this level of certification is not high enough. The FAA mandated that the pilot would need an FAA medical along with an instrument rating. While this is a must, due to the operation of an aircraft in class alpha airspace, it does not address the additional expertise it will require to safely operate a space bound aircraft. Additionally, it does provide some regulations that will protect the passengers and pilots of the aircraft. The majority of regulations on space travel are about protecting property and not on protecting the occupants inside. While it is important to protect the populace from any falling debris, it is also important to have more protection for the passengers and pilots of the aircraft than just signing a waiver.

            I believe space travel is heading towards becoming a very niche market with a possibly short lifespan. This is due to the similarities it has with the supersonic commercial travel market. While I admit the space travel is much sexier, it will also be much more expensive and be of service to a much smaller pool of potential customers unless there is a dramatic reduction in price per seat. In my opinion, within the next 15 years we will have a commercial space industry. At this time, I don’t believe there will be enough of a technological jump that would provide enough infrastructure to facilitate a large influx of people being taken to space, as well as, providing a price that will allow the majority of the general public to be able to afford commercial space travel. Until there is proper infrastructure either in space or on another planet, such as the moon, which will provide a place that is an inviting vacation destination, the commercial space travel industry will stay a one-time bucket list adventure that will lose its appeal overtime.

            To work in the space tourism industry as a pilot you must comply with Title 14 of the Code of Federal Regulations Part 460.5, crew qualifications and training. Some of the requirements found under 14 CFR 406.5 are that “each crew member must complete training on how to carry out his or her role on board or on the ground so that the vehicle will not harm the public” (FAA 2016). They must also know their role in emergency situations, abort scenarios, possess and carry an FAA pilot certificate with an instrument rating, and each crewmember with a safety-critical role must have and carry an FAA second class medical no more than 12 calendar months prior to the month of launch and reentry (FAA, 2016). While there are some additional requirements needed to operate as a pilot of a space bound aircraft under this regulation, I find that it is surprising at how the regulations are less restrictive in regards to not requiring an ATP, or ATP type certificate specified for space travel. Lastly, it is interesting that the regulation only requires a second-class medical while the airlines require a first class medical.

References

FAA. (2006, December 15). Human Space Flight Requirements for Crew and Space Flight Participants; Final Rule. Retrieved from https://www.gpo.gov/fdsys/pkg/FR-2006-12-15/pdf/E6-21193.pdf

FAA. (2016, March 11). ELECTRONIC CODE OF FEDERAL REGULATIONS. Retrieved from http://www.ecfr.gov/cgi-bin/text-idx?SID=e9c1d95a2f56084125cd28e4c189c149&mc=true&node=se14.4.460_15&rgn=div8

Wall, M. (2011, April 27). First Space Tourist: How a U.S. Millionaire Bought a Ticket to Orbit. Retrieved from http://www.space.com/11492-space-tourism-pioneer-dennis-tito.html

Global Airline Issues

            Two long-haul foreign carriers that receive government subsidies that have begun to take hold of large stakes in the industry are Emirates and Qatar Airways. Emirates is based out of Abu Dubai and Qatar is based out of Doha Qatar. These two airlines are also apart of the Gulf carriers. These Gulf carriers have been utilizing government subsides to provide an advantage against the other carriers, such as the United States carriers. This is against the Partnership for Open and Fair Skies, which works to provide a fair playing field for competition in the aviation industry.

The Gulf carriers such as Emirates, Quarter Airways, and Eithad Airways have been on the receiving side of large government subsidies that have increased their market share. “Emirates confirmed that it allowed its parent company, the Investment Corporation of Dubai (ICD) to assume its fuel hedging contracts, explaining that it ‘had the option to pursue a different approach,’ one that made it unnecessary to report its hedging losses.” (PR Newswire, 2015).  This allows Emirates to increase the profit showing in their company’s books by basically removing losses from their books to their parent company. This provides an advantage by removing the risk it would normally experience in the market. Additionally, the United Arab Emirates built a $7.6 billon terminal for Emirates at Dubai International Airport. This terminal is in a class by itself. The new terminal is an impressive 11 floors, and provides luxury services such as a full service spa and fine dining. (PR Newswire, 2015).  Along with Emirates, Qatar Airways received an advantage in the industry by receiving government subsidies. “Qatar Airways confirmed it received free land worth $452 million from the government of Qatar. Its submission to the U.S. government clearly states that ‘the State provided Qatar Airways with parcels of land to ensure that the carrier had enough real estate for office and residential space’” (PR Newswire, 2015). Additionally, “Qatar Airways, it is alleged, has received $7.7bn in interest-free loans from the Qatari government and $6.8bn in reduced debt-interest charges thanks to sovereign guarantees.” (R, 2015). This allows for Qatar Airways to grow beyond what it would have been capable within the regular constraints of the market. Lastly, Eithad Airways has “admitted that it sold its frequent flyer program to itself in 2013 in order to show a profit. According to its own 2014 financials recently uncovered in Hong Kong, Etihad sold its own cargo company to itself the following year to similarly show a profit – actions that a typical commercial enterprise would be unable to take.” (PR Newswire, 2015). These types of tactics employed by the Gulf carriers have created a slanted playing field that Jill Zuckman, chief spokesperson for the Partnership for Open & Fair Skies states, "It's urgent that the Obama administration take swift action and request consultations to end these trade violations before the Gulf carriers damage the U.S. aviation industry the same way they have devastated Europe's." (PR Newswire, 2015). The Gulf carriers will continue to utilize these unfair tactics until they are punished for doing so. Without having any repercussions, and with the large business advantages to receiving government subsidies, it is no wonder why the Gulf carriers are exploiting the weakness of the countries involved in the Partnership for Open & Fair Skies thus far.

            Not only have long-haul foreign carriers been receiving subsidies, they also have been able to make aircraft purchases below market value. Companies’ are able to purchase aircraft this cheap through the use of the Export-Import Bank. The Export-Import Bank only is meant to guarantee purchases for companies that do not have the adequate capital on hand. However, under scrutiny it has been discovered that this is not the case. Many of the companies utilizing the Export-Import Bank would be able to find commercial financing easily all over the world. However, “none of these carriers would have necessarily received terms as favorable as they did from the Export-Import Bank, which gives them a cost advantage relative to a scenario where the Export-Import Bank didn’t exist” (Bhaskara, 2014). This creates an operating cost that is lower than it would be without financing for long-haul flight carriers by the Export-Import Bank. “So in effect, the US government is subsidizing non-US airlines (in many cases) to compete directly with American carriers on long-haul routes.” (Bhaskara, 2014).

            Foreign long-haul carriers are able to utilize the Export-Import Bank to purchase wide-body aircraft at a lower cost. Also, foreign carriers such as the Gulf carriers are operating at a loss, and accepting subsidizes from their governments to increase profits. This is not a fair playing field because it is impossible to compete with someone who isn’t playing for the same goal as you. A company cannot compete with another company, if the second company does not wish to profit.

References

Bhaskara, V. (2014, September 2). The Fight Over the Export-Import Bank Has No Easy Answers. Retrieved from http://www.forbes.com/sites/airchive/2014/09/02/the-fight-over-the-export-import-bank-has-no-easy-answers/#71f5930a582d

 PR Newswire. (2015, August 27). Emirates Confirms Billions in Government Subsidy for Airport Terminal. Retrieved from http://www.prnewswire.com/news-releases/emirates-confirms-billions-in-government-subsidy-for-airport-terminal-300134208.html

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