The End of Senior Seminar

My career plan seems unlike most others in this program.  My career does not involve aviation, and the future of my career may not either.  I love aviation, and I have worked on this degree to explore new interests.  I plan to work part time as a flight instructor one day, and I am always open to new opportunities.  This plan has not changed during senior seminar.

This class has been fun and interesting.   The guest speakers have brought a sense of reality to our classroom environment.  The blog topics have discussed topics that have been well covered over the years, but it was great reading the responses from classmates.  We have a great group of intelligent students, and it is rewarding to read what others have to say.  The most interesting blog topic for me was the response to the article "How Can We Compete - 7+ Ways To Level The Playing Field."  I enjoy the business side of the discussion, I wish we spent more time on that topic.  The least interesting blog topic was either the discussion about China, or the NPRM that will make changes because of the Buffalo New York accident.  Some of the blog topics have been thoroughly covered in other classes, which makes them less exciting to cover again.

There were two guest speakers I retained the most from.  Mark Johnson gave a great presentation over material that I relate to the most.  I have been involved in business for most of my career, and I would enjoy the career that he has.
The second guest speaker(s) that I retained the most from was the FAA air traffic controller(s).  It was fun to hear about the aviation world from her perspective.  I look forward to a tour of their facility.

I'm not sure what my plans are for professional development after graduation.  Although my required classroom classes are now finished, I have a lot of flight training to finish before I graduate.  I MIGHT begin working on a Master's program, or more likely, I will continue to work hard in my existing career.

EU Emissions Trading Scheme (ETS)

The Emissions Trading Scheme (ETS) is a policy of the European Union designed to help reduce industrial emissions.  "The EU ETS covers some 11,000 power stations and industrial plants in 30 countries."  Companies are given a certain number of "allowances" each year, the majority of which are given out for free.  Each company self monitors and reports the amount of green house emissions it produces each year.  If they go over their allowance, they must purchase additional allowances.  The allowances may be purchased from a different company that did not use all of their own.  If a company doesn't use all of its allowances, it may keep them for future use, or sell them to other companies.

Aviation was brought into this system in the beginning of 2012, however the EU has postponed enforcement on flights into and out of countries not within the EU.  There has been a large protest by non-EU countries over the implementation of the EU ETS.  The United States has been opposed to it as well, mostly because the EU would be charging flights from start to finish.  This would include time flights spent in airspace over the United States.  Many feel this is unfair.

On November 27, 2012, President Obama signed a law enabling the transportation secretary to prohibit US airlines from participating in the EU ETS.  These clearly demonstrates that the United States is opposed, and will not participate.

The EU has postponed the ETS on flights into and out of the EU while a more "global friendly" solution is reached.  What should this solution be?  If I knew the answer, I would be working on a formal report for ICAO instead of typing a blog.  I think that we all have a responsibility to reduce our impact on the environment, and I also believe that companies rarely put restrictions on themselves to reduce their own impact.  I don't think it is Europe's responsibility to regulate the globe.  Europe should try to encourage others to follow their lead.  They can have global influence just by setting the standard. 

NextGen

The Next Generation Air Transportation System (NextGen) is a new way to control traffic in our national airspace.  This plan will control air traffic with satellite based equipment instead of radar based equipment.  According to the FAA, "new, satellite-based technologies will significantly improve safety, capacity and efficiency on runways and in the nation’s skies while providing environmentally friendly procedures and technologies that reduce fuel burn, carbon emissions and noise."  NextGen will take many years to implement, and a hybrid system will most likely be used for a long time.

The FAA has built the NextGen system on four major pillars:  economic impact, sustainability, flexibility, and safety.  I feel safety is the most important pillar, as does the FAA.  It seems obvious that a change this large should make our system safer, or not take place at all.  I feel safety during the change is also important, and users must be educated well during the process.  The new technology promises many advantages, some of which include less spacing between traffic.  Well educated pilots are mandatory to keep the skies safe.  Closer spacing of traffic will offer less room for pilot error.

Sustainability of NextGen would be the next important pillar, in a close tie with economic impact.  I feel the two are somewhat tied together.  The system will be very expensive, both for the government, and the users.  If the economic impact is not great enough, it will not be sustainable.  The economic impact is hard to predict at this point.  There are many statistics and predictions about how beneficial NextGen will be, but it will be nice to see the results as it is implemented.  The FAA predicts the NextGen will help sustain the growth of aviation.  This will happen if the FAA's promises come true.

Flexibility is important to continue the growth of aviation.  The NextGen system is supposed to increase the flexibility of routes, and provide better alternatives for routing around airspace disruptions.  This also contributes to the economic impact.  If the flexibility can help bring down costs of aviation, more people and businesses will find uses for aviation.

The topic of user fees to help fund air traffic control and NextGen is a very difficult topic.  Our systems needs a way of raising funds, but I do not feel implementing user fees is the best way to do it.  I think fuel taxes provide a better way of spreading the cost more fairly.  I also think the general public should help fund the system.  People who never fly still benefit from aviation, and could help with the expenses.

NextGen could potentially affect me in a few ways.  I look forward to being able to use some of its advantages, and experience the benefits the FAA describes.  It will add more technology and automation to the cockpit.  It will make flying safer for those who are properly trained.  It will also create more jobs, some of which are with FAA.  Maybe it would be fun to work on the NextGen system with the FAA......

Business Aviation

It is difficult for me to form an opinion about the financial benefits of business aviation departments.  Joe Moore had discussed a Forbes article about business aviation, and it drew a comparison between share holder returns for companies with and without flight departments.  The article didn't really explain why AVIATION helped produce more profit for the shareholders, it only mentioned why having a flight program could be convenient.

While reading the National Business Aviation Association's website, I was able to find even more conveniences for a company having a flight department.  It really seems like any organization doing research to figure out if an aviation department is beneficial for a company develops an opinion first (either for it or against it) and then finds ways of supporting their opinion by any means necessary.  There are some facts that cannot be argued.  Business aviation can save a TON of time.  Businesses can travel whenever they want, and often to airports closer to their final destination.  Their is also opportunity for companies to lease their aircraft, providing an additional source of income.  However, it is difficult to find a source that outlines the exact costs, side by side, for a company's expenses if they were to use commercial aviation versus having their own airplane.


My personal opinion is a mixture of viewpoints.  I am in support of a company spending money on a flight department for any reason at all (to increase efficiency, cut down on travel time, or just have fun) if the company can support it financially, even if it costs the company MORE than traveling on commercial aviation.  However, I feel it was very irresponsible for the auto company's executives to fly to Washington when they asked for taxpayer bailout money.  There were other means of transportation that would have cost less, and any company asking for a bailout should be saving money in any way necessary.  This doesn't necessarily mean their flight programs should be shut down, but they should only be used when it saves the company money.

Aviation User Fees

Aviation is an expensive industry.  The FAA is responsible for regulating and promoting aviation, and this is an expensive task.  The FAA is funded by tax payers, and this has been a recent source of controversy.  Dana Hyde, associate director for general government programs, Office of Management and Budget, feels that an aviation user fee is the best way to make sure everyone pays their "fair share," according to a recent AVWeb article.  Her proposal is to assess a $100 per flight fee for using the air traffic control system.  The current proposal would exclude piston aircraft.

The public seems to have many different ideas on who will have to pay what if user fees are ever established.  User fees will definitely have an impact on an industry that relies on very slim profit margins.  Many people involved in the industry, including AOPA, feel that a fuel based tax (in addition to the taxes already on fuel) is a better answer.  Their argument is that a longer flight that uses the air traffic control system for an extended time should have to pay more than a flight making a shorter trip.  They feel that the fuel used during a flight is more representative of how long that specific flight used air traffic control services.  The airlines are opposed to that argument.  They don't feel like they should have to pay more for a flight because they operate larger aircraft.  They would use an equal amount of air traffic control services as a business jet flying the same route, but would use a much greater amount of fuel.  

There isn't a good prediction about what will happen in the future, especially 5 years out.  There have been talks about adding aviation user fees in past years, but it seems to be materializing more.  The impact user fees could have on aviation will depend on if they are ever added in the first place.  If user fees become a reality, some fear that piston aircraft will not be excluded forever.  This would greatly affect flight training, especially for those training for an instrument rating.  Currently, there is no talk about that happening.

General Aviation in China

The aviation industry in China has drastically changed in the last decade.  The reasons for the change include some of the demands that have created a large aviation industry in the United States.  Here in the US, we use aviation for the movement of goods and people, medical purposes, and pure enjoyment.  Unfortunately, the people of China are not able to make decisions for themselves.  The government (more specifically the military) of China has always been in control of aviation and the country's airspace.  In the last decade, the government has decided that they would like to develop a general aviation industry.  The military has worked on opening and redeveloping airspace.  The most likely reason for this change is the government's interest in making more money, and growing their country and economy.  In 2003, China ended their ban on private airplane ownership, opening a whole new world for the country of China.
As everyone knows, people and companies in the United States ARE free to make their own decisions.  Several aviation companies in the United States have used the Chinese aviation boom to their advantage.  Hard times in the US economy have severely hurt our aviation industry.  A few general aviation companies have been near bankruptcy, or have already filed bankruptcy.  Hawker Beechcraft filed bankruptcy in May, 2012, and shortly after, engaged in talks to sell to a Chinese company.  The sale DID NOT happen, and Hawker Beechcraft is still a US based company.  This attempted sale is just another example of a relationship that has been created between the United States and China.  The economy in the United States has been hurt, and the economy in China is growing.  Companies in the United States are in need of money, and have technology that Chinese companies are looking for.  Chinese companies can buy American companies, and their technology, for a lot less than doing research to develop their own technology.

The development of general aviation in China has affected other companies based in the United States.  A few companies in the United States are developing relationships with China, and will begin to manufacture airplanes in China.  Other US companies are being sold entirely to Chinese companies.  One such example is the United States kit plane company, Glasair.  Glasair was sold to the Chinese company, Fang Tieji, on July 20, 2012.  Fang Tieji plans to keep Glasair based in Arlington, Washington.  The Chinese company also plans to fully certify the Glasair Sportsman airplane.  The purchase of this company will allow Fang Tieji to bring this technology to their country as well.

This activity creates opportunity for the US general aviation sector.  Companies can help rebound financially by getting involved in the Chinese market.  This can be done in a few ways.  Companies can sell all or part of their business.  There are Chinese buyers, and it might be a great way to stop losing money.  US companies that do not want to sell could try and get involved with sales in China.  Individuals could also find creative ways to make a profit.  Working in China might be a great way to find a job.  Transporting general aviation airplanes to China might eventually create a job market.  There are many opportunities to make money for both companies, and individuals looking for jobs.

Comair

This week's post is about Comair, a company I know little about.  I've heard bits and pieces about Comair over the past few years, and have studied the unfortunate accident of Comair Flight 5191.  A few of our classmates have also posted blogs about the airline before this assignment was due.  Wikipedia has been my friend for this post, and I am regurgitating their information.  Comair started as a private operation in 1977 by four guys in Cincinnati, Ohio.  They began scheduled service with two Piper Navajo, but in 1981, made the company public to raise funds to update their fleet.  In 1984 Comair became a Delta Connections carrier.  Things worked out well, and Delta purchased 20% of Comair in 1986.  Finally, in 1999, Delta purchased the rest of Comair for over two billion dollars.

Since 1999 Comair has been owned by Delta, and has ridden the waves of the airline industry.  They have experienced a strike, bankruptcy, poor management, and even two years of having the lowest percentage on on-time flights.  The industry has changed, and Comair's practices and fleet of airplanes have not kept up with the times.  Their fleet of 50 passenger jets was finally deemed inadequate to do business, and on July 27, 2012, Delta announced the closure of Comair.  Crain's Detroit reported that federal law requires companies to give 60 days notice to state and local governments before closing companies that will affect 50 employees or more.  Crain's also reported that Delta plans to reduce their 50-seat regional jet fleet from 350 to 125.  The 50-seat jets will be leased to other airlines and will be replaced with 76-seat regional jets.

The outlook for regional carriers is grim.  According to Reuters, there are currently 61 regional carriers.  This is down from 247 three decades ago.  Earlier this year, both Pinnacle Airlines, and American Eagle Airlines filed for chapter 11 bankruptcy.  Most of this business shifting is due to the rising costs of fuel.  It is causing airlines to focus more on longer routes.  Larger airports are seeing an increase in travel, and smaller hubs are seeing the opposite.  More people are flying to larger airports and then commuting the rest of the way.

Regional airlines have typically relied on contracts from major carriers.  Regional carriers will need to update their fleets in order to stay in business.  They might also want to think about operating as their own company, and scheduling their own routes.  Maybe it is time for airlines to operate all of their own flights, and regional carriers to be out on their own.

ExpressJet is currently hiring pilots.  It doesn't list the starting pay, but an inside source says the first year pay for a first officer is $23.00 per hour.

After a quick glance at the chart on the left, one could quickly figure out why a road trip could potentially cost less than a flight.  Oil prices have been on the rise for many years, and airlines have failed to adjust their prices accordingly.  Scott McCartney of the Wall Street Journal reported that in 1958 a round trip airline ticket from New York to Los Angeles was $208.  I could fly this same route in late October 2012 for $280.  Fifty-four years have passed, and the price of the ticket has barely changed.  If the 1958 price was adjusted for inflation, the ticket price today would be $1570.  The price of oil has changed dramatically and heavily influences the price of gasoline.  The price of gasoline in the 1950s was $0.27 per gallon according to CNN.  Our national average is currently $3.79 per gallon.  Oil companies are posting huge profits year after year.  They continue to raise their prices, and WE continue to pay them.  The cost of driving to a destination is sometimes more than flying to that destination because of the increase in fuel for our cars.  Airlines have not followed the same business model.  Instead, airline ticket prices remain low, not reflecting the price of fuel.  I feel the airlines could raise their prices without making flying commercially less accessible to the general public.  Increasing airfare 20%-30% would probably not change the plans of many people.  However, if only one airline changed it's prices, it would probably go out of business unless it found a way to offer a unique or special service.

It is difficult trying to answer the following questions:  "Should the ability to take a commercial flight on an airline to get from point A to point B be affordable to most of the public? Or, should it be a luxury?"  An airline ticket should cost what it costs....  What in the world does that mean?

Businesses are able to charge whatever they want for a service.  If the prices for a service are unreasonable, people will do without or buy those services from a different business.  A reputable company will charge enough for a service to cover its expenses and produce a profit.  If a company is purposely pricing a service to discriminate against people with lower income, the company is not breaking any laws, but is acting extremely unethically.  This applies even more to the topic of air travel.  This is an industry that relies heavily on tax money, and that tax money doesn't only come from airline tickets.  Portions of property tax, income tax, and sales tax all help fund aviation.  Even though airlines are private companies, they could not operate without the public support.

Fortunately this has not become a problem.  The airlines have done the opposite, and priced airfare low.  They should increase their prices enough to consistently make a profit.  If there is ever a day where airfare is grossly overpriced, intentionally making it too expensive for the general public, the industry would be very different.  There would be negative feelings from the public, wondering why they help pay for a system they could not afford to use.  There would probably be hatred for the airlines from the public, and the lack of volume would eventually put more airlines out of business.

The industry is currently heading in a good direction.  There is variety to choose from when looking for air travel.  People can pay the price they want to make the trip what they want it to be.  Both low cost carriers, such as Spirit Airlines, and airlines that offer a bit more, such as Delta Airlines, are able to run a successful business.  This is a great direction for the industry.

Preparing For Change

The aviation industry is constantly changing, just like most complex industries are.  The US government plays a large role in shaping this industry, most effectively by passing laws.  The most talked about new law is PL 111-216.  This law addresses an array of topics that include amendments to aviation funding, handling of the FAA pilot records database, regulations for airlines, and changes to the way airline pilots are trained and licensed.  This law is mainly a response to the Colgan Air Accident of Flight 3407.  Aviation businesses that run 121 operations will feel the biggest impact, but it affects 91 and 135 operations as well.  People who have dreams of becoming an airline pilot should be concerned with a few of the law's key changes.  The FAA will now be required to keep a pilot records database.  It will be regulatory to include certain aspects of a pilot's training and employment history.  It will also be regulatory for an air carrier to access and evaluate that information before hiring a pilot.  The National Business Aviation Association has a short discussion about how that will affect 91, 121, and 135 operations.  Perhaps the most controversial change is the requirement that flight crew members for a part 121 air carrier be required to have an airline transport pilot certificate.

The requirement for a flight crew member of a part 121 air carrier to have an ATP certificate has the potential to affect students at EMU more than other changes resulting from this law.  Previously, first officers were only required to have a commercial license.  A commercial license can be obtained after 250 total flight hours.  Once the proposed change takes affect, first officers would be required to have an ATP certificate.  Currently 1500 hours are required for an ATP certificate.  Under the new proposed law, there would be only one option to obtain a restricted ATP certificate with fewer flight hours.  Candidates that were to receive an aviation degree and flight training from an accredited 4-year institution could obtain a restricted ATP certificate with 1000 flight hours.  This would greatly affect EMU students that were hoping to quickly begin careers as airline pilots.  These students may need an extra stepping stone before obtaining their final career goal.

The same part of this law could also affect EMU's future in flight training.  There is not a current degree requirement for an ATP certificate.  Under the proposed change, a restricted ATP certificate could be obtained if the candidate had earned an aviation degree and received flight training from an accredited 4-year institution.  This would affect EMU because more people than before may pursue an aviation degree from a 4-year institution. An aviation degree program is not very common, and EMU could possibly benefit with increased enrollment.

The intended benefits of these changes include having more competent pilots, and safer airlines.  Established programs such as EMU could benefit financially from increased enrollment and longer training.  These are just theories, and I don't personally agree with the changes being made.  The captain of flight 3407 had 3,379 flight hours, and the first officer had 2, 244 flight hours.  The first officer did not have an ATP certificate, but certainly had enough flight hours.  I do not think the proposed changes properly address current flight training issues.  I think one of the simplest changes that should be made is a requirement for a significant amount of actual instrument time required for a commercial license.

The FAA has mandated changes in airlines' safety cultures, and encourages a preventative approach to safety instead of a reactive approach.  In all fairness to the FAA, they are being mandated by Congress to make changes.  Unfortunately, these changes show what a lack of aviation education Congress has.  The FAA is now forced to violate their own safety culture, and make reactive and hasty regulation.  On the other side, we also have human nature at its finest.  Humans are sometimes best at being negative and complaining.  Many of the flight instructors at Eagle Flight Centre do not leave for airline jobs until after they have 1000 flight hours.  Airlines have "rarely" hired commercial pilots with 250 hours.  The minimum hiring requirements of the airlines have generally been above the FAA's minimums. I feel there will be an impact on the supply of airline pilots, but I do not feel it will have a long lasting affect on the industry.

OIL SPECULATION

Oil speculation is a very interesting topic that relates to more than just aviation.  It affects the cost of heating many homes, and more importantly, the cost of transportation.  Of course transportation doesn't only include the population driving or flying, but the shipping of goods.

This post will try to explain what oil speculation is for those who may not know.  There is an article by Money Magazine that really does a nice job.

Oil speculation is the process of purchasing oil futures with the intent of making a profit.  This is usually done by people or investment companies that have very little to do with the oil industry.  Oil is a commodity that can be purchased just like grain or livestock.  When an investor purchases a commodity at a certain price, they are hoping the market price increases so they can eventually sell at a higher price.

The Commodity Futures Trading Commission (CFTC) was established by Congress in 1974.  Their purpose was to regulate the trading of commodities.  Enron, as well as others, lobbied Congress in 2000 to help reduce CFTC's powers.  Enron created specialized software for oil futures to be traded.  In the same year, a group of oil companies and financial institutions, headquartered in Atlanta Georgia, created the Intercontinental Exchange (ICE) in London.  It was an exchange set up to trade European oil futures, and since it was in London, CFTC did not have any regulatory power.

After this groundwork was done, investment companies and financial institutions heavily increased their oil futures trading.  Their buying and selling created a "false market" that was no longer dependent upon supply and demand.  Oil companies enjoy this type of trading.  As the price of oil futures increases, oil companies recognize that they can charge in elevated price regardless of supply.  They will stock pile oil and gasoline anywhere they can if production is higher than demand.  I have personally known gasoline distributors that fill empty tanks at gas stations that were closed in order to store some of the excess gasoline. 

Money Magazine featured a different article that discussed airlines' fuel consumption.  They estimated that fuel can consume up to 40% of an airline's budget.  It is easy to see how falsely elevated fuel prices can affect the airlines.  Fuel costs alone can determine if an airline makes a profit or not.

So what is the difference between oil speculation and fuel hedging?  Southwest Airlines has arguably had one of the best fuel hedging programs since the 1990's.  It has been the biggest reason for their financial success (unless you think people actually enjoy lining up like cattle to board without an assigned seat).  The biggest difference between Southwest Airlines pre-buying fuel, and an investment company buying oil futures is that Southwest Airlines will be using that fuel themselves.  An investment company is only hoping the price of oil increases so that they can sell for a profit.  It is now estimated that 60% of what is paid for fuel is due to oil futures trading!

It is very difficult for me to express how I feel about this topic.  I HATE paying the current prices for gasoline, and I would love to be able to purchase cheaper airline tickets.  I would also like to know that the airlines in this country could compete better in the global market.  However, I am an advocate of living in a free country.  I do not always think that more regulation is the answer.  I think that the free market should be allowed to work itself out.  The airlines continue to find new ways to earn income.  Delta has a large maintenance program (which performs maintenance on more than just Delta airplanes) that produces a nice profit for them.  UPS has become a large player in small business loan lending.  Maybe the airlines could create an organization that is somehow involved in the oil industry.  In my opinion there are many options to explore before trying to have the government pass more regulation and have more control.

There is a current bill that was assigned to a congressional committee on September 21, 2011.  Click here for a discussion about the bill, or to track its progress.  The part of the bill that could most impact the airlines would be the limit on any single trader to only be able to hold 5% of the oil futures.  This would prevent some of the excessive prices, but I do not feel it would eliminate the problem completely.  Investment firms will always find loopholes, and creative ways to get what they want.  In addition, every company involved in futures trading is attempting to make money, and can easily coordinate with other companies to continue making money.

I would predict that I have the least amount of aviation knowledge of anyone involved in aviation!  I am behind the curve and have a lot of ground to cover.  With that being said, it is one of the reasons for my involvement in and fascination of aviation.  

Prior to 2010, I had flown commercially many times, but I had only participated in General Aviation once.  I was 8 years old and traveling on a road trip with my mother and older sister.  While we were driving, we passed a sign that said, "Airplane rides - $50."  I went for a 30 minute flight, and had a wonderful time.  

Fast forward life into 2010....  I was working on a project in Salt Lake City, Utah, and developed a friendship with the person I was working for.  His son is an instrument rated private pilot, and his good friend is an instrument rated, multi-engine private pilot.  His son flies a Cessna 182, and his friend flies his Cessna 310.  During that year, I was able to fly with each of them a few times.  One of my favorite trips was to Driggs, Idaho, to a place called Warbirds Cafe.  It made me realize that there was a whole new world just waiting to be discovered.

So, why Eastern Michigan University?  I did not get involved at Eastern because I was looking for a career change.  The brief introduction I had with aviation made me realize I wanted to inquire into a new hobby.  I thought that one day, it would be fun to have my own airplane, and I would want to be as safe as possible.  There are more cost effective ways to get a private pilot's license than while earning a degree at EMU in Aviation Flight Technology.  I have chosen this route to become the safest and best pilot I can.

I returned to Michigan on Thanksgiving, 2010.  I had applied to EMU that summer, and started classes in January, 2011.  My flying began in March, 2011.  The title to this blog sums up my life since January, 2011.  I have learned an incredible amount since then, and it is just the start!!  The time has FLOWN by, and I am in my last semester of classes.  I will have some flight training to finish up before I finish my degree; however, I will be finished with required classes on campus.

My future goals have not changed much while attending EMU.  I did not intend to change careers, as I have maintained working full-time while taking classes.  I am always open to new ideas, so if something interesting comes up, I will evaluate it at that time.  I would, however, like to work part-time as a flight instructor when the time comes.  This would allow me to keep my skills sharp.

The day I earned my private pilot license, Bill Clark told me he was issuing my "license to learn."  He couldn't be more correct, and that learning will continue for the rest of my life.

Here are a few pictures taken during my time in Utah