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When is it still cost effective to own the airplanes for a commercial carrier?

For a modern airline the planning of a fleet composition is fraught with complexity and consists in considering a multitude of variables due to the purpose that they have to meet. Building a successful fleet plan require engineering and commercial knowledge plus a management that is able to review the airline's market positioning and aspirations in order to select the best assets necessary. Fleet planning is a process that considers the needs a carrier is facing, ranging from the very starting up phase, the launch of new route or temporary needs, leads its management to choose a manufacturer and consequently an airplane model that provides the best fits for them with a final view to maximise the company wealth. To acquire the most appropriate liner, and take account of the business plan, modern carrier must focus on three main issues together and at the same time.

The first are the operational necessities that include the existing fleet composition, and how this could influence the decisions based on common costs, the training of pilots, cabin crews and engineering. When an airline operate only one or few aircraft models a lot of costs could be shared with the new assets entering the fleet such as maintenance facilities, with no full time usage, or increasing the negotiating power allowing the management to obtain a lower price for more spare part.

Secondly the decision process should pass through the technical evaluation of the operating costs giving the decision maker an assessment on fuel consumption, performances, number of personnel needed to fly the liner, the specific ground services and all the environmental conditions which the planned routes will face. Different airport facilities with variable conditions and every single country with its own laws and regulations can influence or limit the possibilities in choosing the airplane that should be purchased, for example in India many small regional airport are located amid the mountains requiring a higher climbing rate performances.

Thirdly, the non-technical or operational assessment considers all variables resulting from the market segments with its size, growth and economics, and the level of service provided as the lcc and fsc have different goals to be achieved. The airline development objective and the eventual alliance partnership are also relevant variables since they require the management to anticipate the possible future usage and load factor, when the size of the liner is under question, due to the virtual mergers of operations and the code share flight for sharing costs and revenue.

At the end of the decision process, influenced by any specific considerations, an airline must select which aircraft is the best suited for its needs and at that stage, given the aircraft trading market availability, move onto the purchasing method.

Mostra/Nascondi contenuto.
6 1.2 GIVEN THE CHOICE OF “WHAT” TO ACQUIRE, THE AIRLINE’S CHOICE IS BETWEEN LEASE OR PURCHASE OF THE AIRCRAFT Nowadays, the purchasing methods in the aircraft trading market can be considered, in general, disconnected from the selection criteria that determine the choice of one aircraft instead of another. The decision process itself, after the deregulation 9 , is much more released from some unstated limitations such as the national pride that once induced the flagship carrier to buy national. Also the manufacturer willing and ability to sell worldwide with a reasonable timescale allows us to consider every single airplane as virtually available. Starting from the mid 1980s, on one side the financial institutions began to consider airplanes as potential collateral for a lot of investment with relatively low risk and high profit, whilst on the other hand, the emerging leasing companies started to build up the biggest commercial fleets taking advantages of massive discount and economies of scale on maintenance services. Until the early 1980s we can argue that every commercial carrier had to pay in full the new assets they wanted to introduce into service with their own financial resources or by means of a bank mortgage. Sometimes this was done with the bank itself becoming stockholder in order to allow lower interest rate. However, today’s airlines rarely have the resources to buy and pay in full to the manufacturer and the ownership itself is no more a certainty or a need. As discussed earlier, when it is clear what an airline wants to purchase, the decision process moves to how to get it and, at this point, the possibilities are numerous because its management can choose from many variants of a leasing agreement: these include wet lease, dry lease, finance lease, sale and lease back, bank mortgage, full cash, or in combination with two or more operators arranging agreement on possessions and property, actual or future and the relative transaction. Considering all this innovation, airlines can not only choose the aircraft that is a best-fit for their technical and commercial needs but can also then decide on the best purchasing method to make the deal as cost effective as possible. 9 The Airline Deregulation Act is a 1978 USA federal law aiming to remove government control over fares, routes and market entry from commercial aviation.

Laurea liv.I

Facoltà: Economia

Autore: Andrea Sperini Contatta »

Composta da 53 pagine.

 

Questa tesi ha raggiunto 33 click dal 17/04/2014.

Disponibile in PDF, la consultazione è esclusivamente in formato digitale.