Professional Documents
Culture Documents
Session 1: Introduction
General Tourism
Aviation Industry
Air Transport
Industry
Government
2
Aerospace Industry
All firms engaged in research, development and
manufacture of aerospace systems, aircraft missiles,
spacecraft, and propulsion, guidance and control systems
Large defence component
High concentration in US, EU and Russia
Outsourcing to third countries depending on sensitivity to
security
Likely cross-subsidisation between defence and civil
programmes (Boeing vs Airbus debate)
3
General Aviation
All other civil or commercial flights apart from scheduled
and charter air services
Includes:
Air taxi operators
Corporate aircraft
Privately-owned aircraft
Gliders, balloons, microlights etc
Generally use smaller more local airports
Can be alternative to scheduled and charter flights
4
Government
National government
Aviation legislation
Air transport industry regulator
Can own airports and national airline
Planning framework for airports and related infrastructure
Taxation (business and personal)
Local or regional government
Can own airports
Local taxation
Promotion of business
Can support regional air services
5
Tourism Industry
Main driver of leisure travel by air (also visiting friends and
relations or VFR)
Air has major share of longer haul leisure trips
898m international tourist arrivals (all modes) in 2007,
around half of which in Europe:
16% were business or professional trips
50% arrivals were leisure, recreation and holidays
26% of arrivals were VFR, health or religious (pilgrims)
Tourism receipts total around US$700 billion
43% of total tourist arrivals travel by air (just under 400m)
6
Trade and Commerce
Main driver of business travel by air
Main driver of air cargo traffic
Trade liberalisation (Doha?)
Globalisation
Offshoring
Exchange rates may impact direction of travel
7
Corporate Travel Example
PriceWaterhouseCoopers, PwC UK
Business travel and the environment is one part of their four
sustainability quadrants (with Marketplace, Community and
People)
Business flights account for around 50% of its total CO2
footprint (£30m spend on air tickets)
Annual business travel distance: 165m kilometres in 2007, of
which 130m (79%) by air
Absolute reduction goals for CO2: 2.1% pa
Investment in phone/video conferencing facilities
40% of business travel for internal meetings and training
8
Surface Transport
Air travel consumed together with surface transport mode
(eg car, taxi, bus, rail)
Connecting infrastructure required at airport interface
Foreign air visitors generally need good and cheap
connection to nearest city (eg rail, bus or taxi)
Resident air travellers often use private car and need good
and convenient car parking facilities at airport
Surface transport congestion can affect attractiveness of
airport (London Heathrow?)
9
Impact of system changes on
air transport
Changes in one part of system impact on other parts:
What if?
Defence no longer subsidises civil aircraft?
Governments impose aviation fuel tax on international
flights?
Surface transport alternatives improve significantly?
………………………?
……………………….?
10
The Air Transport System
11
Direct employment in air transport: Europe (2004)
Airport operators
Aerospace 8%
20%
Other on-site
airport
25%
Airlines
47%
Source: The economic and social benefits of air transport, ATAG, 2006
12
Air Transport: suppliers
Airlines
13
Airports
Crucial interface between flight and ground transport
Customers are airlines and passengers
Capital intensive, long-term investments
Impact on local and regional community
Dependence on local road and rail infrastructure
Dependence on government planning systems
Competition between airports for airline business
somewhat limited
Compete with off-airport stores for passenger retail
spending
14
Air Traffic Services (ATS)
Also called Air Traffic Control (ATC)
Responsible for en-route and approach/take-off control
Many different suppliers in Europe, almost all government
owned or part of government
UK NATS privatised and part owned by airlines
German DFS awaiting privatisation???
EU Single European Sky (SESAR) project, 2008-2020
15
Top six commercial aircraft manufacturers
16
Top six commercial aero-engine
manufacturers
Manufacturer Sales in 2017 (US$m)
Rolls-Royce 10,711
Snecma 7,601
MTU 3,563
17
Banks and leasing companies:
airlines
Lending to airlines (secured against aircraft)
Leasing to airlines (finance leases)
Advising and arranging finance (corporate finance)
Short-term (operating) leasing to airlines
Advice and arranging risk management:
Foreign exchange
Interest rates
Fuel and oil
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Banks and leasing companies:
airports
Lending to airlines (usually unsecured)
Leasing to airlines (not widespread)
Advising and arranging finance (corporate finance)
Advice and arranging risk management:
Foreign exchange
Interest rates
Fuel and oil
19
Oil Companies
Delivery of aviation kerosene (and Avgas) to aircraft on
aircraft stands
Invest in pipeline/rail/road tanker link to airport
Invest in airport storage facilities
Invest in delivery system by bowser or hydrant
Charge for fuel, transport and refuelling
A number of ‘competing’ suppliers at larger airports
Suppliers (Air BP, Total, Shell etc) part of very large
multinational companies
20
Ground
handling companies
Provide passenger and cargo handling services at airports
Aircraft handling on stand (eg cabin cleaning, boarding etc)
Passenger handling in terminal (eg check-in, gate)
Cargo handling at cargo terminal and for cargo/passenger flights
Airlines generally do this themselves at home base and busier
outstations (and on reciprocal basis to other airlines)
Many airports offer these services, eg Fraport
Growing number of third party suppliers, eg
Servisair/GlobeGround (French owned): US$1 billion + turnover
Swissport: $900m turnover
Worldwide Flight Services, Aviance UK, Menzies etc
21
Flight catering companies
Some airlines still have their own flight catering, especially at
home base
Many airlines have outsourced this to third party suppliers, even
at home base (eg British Airways to Gate Gourmet)
Larger airlines provide third party catering (air and ground): only
22% of LSG SkyChefs turnover of €2.4 billion billion for
Lufthansa (2007)
LSG SkyChefs global market share of around 30%, operating in
47 countries serving 119 customers
Gate Gourmet (originally owned by Swissair Group) in 25
countries with 250 airline customers; 2007 turnover €1.5 billion
22
Aircraft and engine maintenance and overhaul
23
IT companies
Information processing and communications a key part of
airline and airport operations
Airlines need reliable reservations and booking system, as
well as specific tools for crew/aircraft scheduling, load
control, passenger boarding, flight information display in
airports etc
Larger airlines provide third party IT: 59% of Lufthansa IT
division turnover of €679m billion for Lufthansa (2007)
Airline Global Distribution Systems (GDS) providers such
as Amadeus, Galileo and Sabre also offer IT solutions
24
Return on invested capital by sector, 1996-2004 (%)
25
Airport investor value by region
26
Expected impact of recent structural changes on investor returns
27
Main points
Dependence of airports and air transport industry on other
parts of the system
Airlines worst performers in terms of return on capital
Economic value of air transport much larger than industry
itself but depends on investment throughout system
Airport crucial role in air transport system, providing the
platform for airlines and other operators
Airports less sensitive to economic cycle, but its long-term
investments lack flexibility to adapt to shorter term trends
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