Sample Aviation Research Paper on Issues in Aviation

Issues in Aviation

Recent years have seen great stride in operational efficiency and profits for the aviation industry. Low oil prices have continued to bolster the industry’s profits, to levels far higher than the industry’s performance during the foundation of the industry in the early years of the 20th century. In addition to profitability, the industry has continued to develop, stretching in the number of scheduled flights and passengers the industry transports across the world and within different territories: each year, the aviation industry transports an equivalent of half of the world’s population to different destinations across the world (Ives, 2017). Perhaps one of the greatest strides for the industry has been on safety, wherein the industry’s incidence of accidents has reduced tremendously to only one in 7 million passengers (Oster, Strong & Zorn, 2013). Industry experts attribute the reduction in the number of accidents to technological improvements, particularly in the aircraft and engines. Despite the boom, however, the industry continues to face different issues including thinning profitability due to increased, labor disputes with workers, financial and environmental sustainability, as well as safety in the face of recent accidents.

Recent years have seen increased profits for many airlines in the aviation industry. Most airlines have recorded increased revenues. One of the aviation industry players, KLM, indicated that its profits had increased to €480 million from a previous €86 million in 2014 (Wall &Luandauro, 2015). It is apparent that the low fuel prices have occasioned the increased profits in the past three years within the aviation industry. The fuel prices have remained low for the past three years, cutting fuel costs—one of the highest operating costs. KLM’s improved earnings are reflective of the entire aviation industry, as airlines continue to enjoy low operating costs due to the low fuel prices.

Sad, however, is the fact that while they continue to enjoy these low fuel prices, the pressure is piling on profitability and traffic from low-cost airlines. The development of the aviation industry has been that while there have been technological improvements that have increased safety and efficiency in running airlines, more low-cost airlines have joined the industry challenging the more established airlines on the route they (big airlines) previously dominated. While flights across the Atlantic were a preserve of the big airline companies including KLM, Delta, British Airways, United, Emirates, and Lufthansa among others, many small airlines are joining the industry offering cheap flights, and eating into the big airlines’ profits and passenger traffic (Wall &Luandauro, 2015). Airlines such as WOW and Norwegian Air have cheap flights traversing across the Atlantic, routes that were previously a preserve of the big airlines such as KLM (The Economist, 2016). The cheap flights’ onslaught on the big airlines is of concern given the projected growth of some of the operator of the cheap flights. Competition for the transatlantic route saw new entrants such as the Norwegian grow by 44 percent in the number of passengers they carried across the Atlantic (The Economist, 2016). Such growth in traffic for the company comes even as its traffic grew 34 percent in 2015, while traffic for big airline companies such as KLM remains stagnant.

While it may seem like the onslaught of the new entrants only affects passenger volume and traffic of the big airlines given the high revenues currently reported in the industry, profitability is certainly a casualty. Operational efficiency and cheap flights from the small airlines mean that airlines have to reduce the price of tickets. Lorenzetti (2015) informs that even with increased collective revenues, the dollar sum for every passenger (unit revenue) has been on the decline—a direct result of lower ticket prices (Shankman, 2014). To put this into perspective, airlines earn $6 on each passenger, translating to 2.4 percent profit margin, which is extremely low considering the investment in technology, staff, and aircraft that the airlines have to incur.

Safety is of additional concern for the aviation industry, especially in this age of terrorism as well as political instability in some countries over which aircrafts fly. While there were only 16 fatal accidents in 2013 out of the 36.4 million flights, this increased to 210 fatalities in 2014 (Shankman, 2014). Flights MH 370 and MH 17 are among the most recent accidents that continue to raise the question of safety in the air. In particular, MH 17drew attention to aviation safety over conflict zones, given that military insurgents shot it down from the sky as it flew over Ukraine. Concern here is that the plane was a civilian aircraft, and there was therefore no need to shoot it down (Shankman, 2014). Safety in the sky is therefore a concern for the aviation industry, especially with increasing conflict across the world. Current conflicts in Iraq, Afghanistan, Syria, Somalia, and the hard stance in North Korea, put civilian aircrafts at risk of shooting if they fly over such conflict areas. Moreover, there is no guaranteed safety in landing in such areas due to the ongoing conflicts. Safety additionally includes the ability of the pilots to have more control over the plane, even as most of the operations become automatic. More pilot control is a concern in light of the Asiana Airlines flight caused by overreliance on the aircraft automated system.   

Aside from safety issues, companies in the airline industry have to deal with the fluctuating economy. Operating from Europe, KLM is facing one of the greatest challenges in its recent history. The European economy is in turmoil, as it has not recovered fully from the effects of the 2008/09 economic recession. Moreover, the Euro-crisis continues to bite as consumers become frugal in their spending in observation of the economic and political crises playing out in Europe. Greece crisis, Brexit and the recent call for self-determination of the Catalonians from Spain continue to deepen the European crisis, events that are collectively bad for business. Additionally, the US economy has been on the rise, becoming more stable, even as the dollar gains against other currencies. The strength of the dollar greatly diminishes the purchasing power of foreign currencies such as the Euro, a factor that increases the price of flights to the US and other destinations that use the dollar as their unit of trade. Passenger demand for air transportation also continues to take a beating from the current economic uncertainty. The uncertainty in the European economy continues to dent cargo and passenger traffic, particularly for premium passengers. The situation therefore rightly reduces revenue for airlines, KLM among the countries with regular flights to the US and other dollar-trading countries.

Tied to the economic environment are regulations concerning operations for airline companies. The sensitivity of the airline industry, particularly with regard to security of the passengers is a live issue. Flights MH 370 and MH 17 have specifically highlighted the need for regulation of the industry. While traditional regulations have captured issues such as operation, safety, and ethical competition, the two tragedies have highlighted the need for even more regulations, especially those that cover aircraft tracking (Shankman, 2014). While the new regulations may mean well, they come with operational cost and inconveniences and sometimes may cause hitches and hindrances in the overall operation of the airlines. Following the two tragedies (MH 370 and MH 17), regulators proffer the installation of improved aircraft tracking. Although such moves are commendable and necessary for the safety of both passengers and crew, in addition to reducing the risk of losing the aircraft for operators, such technologies are not cheap, are complex and inconveniencing. Moreover, they risk causing hitches given the complexity of airline and aircraft systems.

Regulations also include the use of the same by big airlines in bullying smaller companies out of eating their market share. Big airlines such as KLM, Delta, Lufthansa, and United Airlines have repeatedly used regulations as a tool to prevent small airlines’ onslaught on their market share and profitability. For instance, Delta Airlines in the US is on record requesting the Department of Transportation to curtail Norwegian Air’s operations between America and Dublin (The Economist, 2016). The request follows consistent Norwegian presence on the route, with a resultant dip in Delta’s traffic. The request, in this case, follows the regulators’ role in checking competition and ensuring that all players compete fairly.

An additional issue for the aviation industry is a disease outbreak. The risk involved, the rate of spread, and the consequent effect that a contagious disease outbreak can have on the industry and health is especially a concern for the aviation industry. Elliott (2015) informs that airlines must be alert due to the ease the industry can spread contagious diseases across the world such as Ebola, swine flu, bird flu, and most recently Middle East Respiratory Syndrome (MERS) virus. In 2015, there were 11 deaths, and 126 MERS reported cases, and while the outbreak did not qualify as a public emergency, it provides insight into the risk that such diseases pose for the industry (Elliott, 2015).

Sustainability is additionally a concern in the aviation industry. Dwindling profitability means that companies have to devise new ways of maintaining profitability with increased competition and reduced revenue per customer. In the same breath, sustainability also means environmental awareness. Customers are increasingly becoming environmentally conscious, and prefer service from companies that show commitment to environmental sustainability. Given that planes use fossil fuel; their carbon footprint is particularly high given the fact that planes traverse the whole world. Many airlines are looking at biofuels, fuel-efficient aircrafts, as well as other modifications to increase efficiency and reduce greenhouse emissions from planes. So far, many airlines including KLM are flying fuel-efficient planes, even as they look into the constant and consistent supply of biofuels, which is currently scarce. Climate change and global warming are issues that are not exclusive to the aviation industry, however, given the aviation industry’s contribution to world carbon footprint; it is of concern to the stakeholders. The need to reduce the industry carbon footprint and the pressure from regulatory authorities and customers is bound to push the industry into innovations and inventions to see to it that they reduce the carbon footprint and greenhouse gas emissions to the possible minimum.

References

American airlines can no longer ignore cheap European rivals on transatlantic routes. (2016, Oct 19). The Economist (Online), Retrieved from https://search.proquest.com/docview/1830760804?accountid=1611.

Carey, S. (2015). Dark Clouds Loom for Airlines Even as Their Profits Take Off; Stocks remain in a slump as airlines face labor woes, competition probes, and investor fears. Wall Street Journal. Retrieved from https://search.proquest.com/docview/1704859682/DB7E0FC1704D17PQ/1?accountid=1611.

Elliott, C. (2015). Best airlines for germaphobes. Fortune. Retrieved from http://fortune.com/2015/06/23/cleanest-airlines/.

Ives, M. (2017). In a warming world, keeping the planes running. The New York Times. Retrieved from https://www.nytimes.com/2017/09/30/business/airports-climate-change-global-warming.html.

Lorenzetti, L. (2015). Here’s why the airline industry is in for a rough ride. Fortune. Retrieved from http://fortune.com/2015/08/19/airline-industry-challenges-ahead/.

Oster, C., V., Strong, J., S., & Zorn, C., K. (2013). Analyzing aviation safety: Problems, challenges, opportunities. Research in Transportation Economics, 43, 148-164. Retrieved from http://faculty.wcas.northwestern.edu/~ipsavage/104-13.pdf.

Shankman, S. (2014).3 biggest challenges facing the global aviation industry. Skift. Retrieved from https://skift.com/2014/10/14/3-biggest-challenges-facing-the-global-aviation-industry/.

Wall, R., &Landauro, I. (2015, Oct 29). Air France-KLM, Lufthansa face a new challenge with unions; both European airlines enjoy sharply higher earnings, but pressure still on to lower costs. Wall Street Journal (Online) Retrieved from https://search.proquest.com/docview/1727964550?accountid=1611.