Fundamentals of Aviation Management AVM152 PDF

Fundamentals of Aviation Management AVM152 © STADIO No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means – electronic, electrostatic, magnetic tape, mechanical, photocopying, recording or otherwise. Note It is important to note that t...

Fundamentals of Aviation Management AVM152 © STADIO No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means – electronic, electrostatic, magnetic tape, mechanical, photocopying, recording or otherwise. Note It is important to note that this Study Guide must be read in conjunction with the study material contained on the module site and accessed via your Learning Management System (LMS), which is Canvas. Prescribed study material is listed within the relevant topics and can be sourced, free of charge, at the STADIO Online Library or on the Internet. There is no need to purchase any textbooks. However, it is instrumental to your success that you read these materials online. Where a full textbook or another longer resource is referenced, we will indicate specific pages or chapters you must read. There may also be additional recommended reading material that might be freely available or at a cost. 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Similarly, singular may also refer to plural and vice versa. It is your responsibility to regularly access the LMS to make sure that you always refer to the latest and most updated material. General Information Our commitment to our students is to maintain friendly, fast and efficient communication. Our office hours are from Monday to Friday, between 08:00 – 16:30. Please refer to the contact details below in order to have your administrative queries addressed as soon as possible: SOUTH AFRICAN OFFICE: KRUGERSDORP Phone: +27 (0) 11 662 1444 Email: [email protected] NAMIBIAN OFFICE: WINDHOEK Phone: +264 (0) 83 331 0080 Email: [email protected] Please refer to CANVAS at https://stadio.instructure.com/login/canvas for the facilitator details and any academic inquiries. 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Prescribed Reading The prescribed material for Fundamentals of Aviation Management (AVM152) is: Meijer, G. 2020. Fundamentals of aviation operations, 1st ed. London: Routledge. [ISBN: 978-0-367-33239-6] Recommended Reading Recommended readings are not compulsory, but strongly recommended. The information at the following internet address can help you understand the terminology that you will be exposed to in your career as an aviation manager: Dictionary of Aviation: https://www.theairlinepilots.com/forumarchive/aviationregulations/aviationdictionary.pdf ASSIGNMENT Semester 1 2024 Module name Fundamentals of Aviation Management Module code AVM152 22 April 2024 Due date 75 Total marks This assignment is compulsory and must be submitted through CANVAS, inside the corresponding Module Class Course on or before 22 April 2024 by 24:00. STEP 1: COMPLETING YOUR ASSIGNMENT Your assignment answer must include the following sections: COVER PAGE Please include the following information on the first page of the assignment: Name, Surname, Student Number and Module Code. BODY 1. The assignment answers must be typed in MS Word format and saved as a PDF document (File > Save As > Save as Type: PDF). 2. Save your file (MS Word or PDF) with the following naming convention: [STUDENTNUMBER] [MODULECODE] [SURNAME].pdf E.g. 21111234 BCU101 Surname.pdf LIST OF REFERENCES Refer to the STADIO Referencing guide HERE for guidance. ©STADIO (Assignment – Semester 1, 2024) (Fundamentals of Aviation - Management AVM152) Page 1 of 5 Once you have completed your assignment and saved it, you must log in to CANVAS to submit your assignment by the due date. IMPORTANT: Ensure that you submit your assignment answers on or before the due date and time. STEP 2: SUBMITTING YOUR ASSIGNMENT ON CANVAS Once you have completed your assignment, log in to CANVAS as follows: 1. Log in to CANVAS using your MySTADIO details: (Username: [email protected] and Password: ID number) 2. A specific course inside of CANVAS for each of your modules has been created for you to submit your Assignment to. Select the desired module from the dashboard. 3. Submit your assignment before the end of the due date. PLEASE ENSURE THAT THE ANSWER THAT YOU SUBMIT IS IN MS WORD OR PDF FORMAT. NO SCANNED DOCUMENT WILL BE MARKED. The process detailed above is the same on a personal computer and mobile device. You will, however, need to ensure that you have saved your completed assignment on the mobile device and have downloaded the CANVAS Student Application before attempting to submit. You do not require a CANVAS class ID and enrolment key to access your registered module class, as you have been allocated to the class based on your registration. If you do not see your module class appear, please contact the office for assistance. If you experience any difficulties during the submission process – after reading through the guide and attempting the prescribed steps – please do not hesitate to contact the office for assistance. ©STADIO (Assignment – Semester 1, 2024) (Fundamentals of Aviation - Management AVM152) Page 2 of 5 It is important to answer the questions in your own words and link them correctly to the theory. Your answers should be guided by the mark allocation. Question 1 1.1 (25 marks) Explain how the three dimensions of the human element in aviation are relevant in a charter aviation environment by providing a practical example of each. 1.2 The aviation industry is a low-profit environment. Explain why this is, and why it is even more challenging to operate in the South African environment. 1.3 1.4 1.5 (6) (5) Briefly describe the purpose of ATNS, ACSA and the SACAA in the South African aviation industry. (3) Match the concept on the left to its most correct explanation on the right: (8) CONCEPT 1.4.1 CofA 1.4.2 Ramp service 1.4.3 GMC 1.4.4 SMR 1.4.5 SID EXPLANATION (a) (b) (c) (d) (e) 1.4.6 TWR (f) 1.4.7 AOC 1.4.8 CAA 1.4.9 AMO 1.4.10 ILS (g) (h) (i) (j) 1.4.11 ATIS 1.4.12 SAWS 1.4.13 AME 1.4.14 STAR 1.4.15 CLD (k) (l) (m) (n) (o) 1.4.16 Approach control (p) Regulatory body Arrival instructions summarised on a plate Place where aircraft are serviced/repaired Precision approach guidance Automatic voice on a VHF frequency that informs pilots of airport information and procedures in force Takes pressure off TWR at busier airports by issuing clearances on a separate frequency Person fixing aircraft Held by an Accountable Manager Aircraft that holds this is fit to fly Sequences aircraft for landing and routes them towards their destinations once airborne. Aircraft provisions such as catering Controller in charge of surface movements Standardised departure information on a plate Aerodrome control service Radar that provides information about ground movements Provides current and forecasts weather information Describe three strategies that you could employ to identify the individual strengths and weaknesses of your team? (3) ©STADIO (Assignment – Semester 1, 2024) (Fundamentals of Aviation - Management AVM152) Page 3 of 5 Question 2 2.1 (25 marks) Provide three implementable strategies that you as a manager can use to develop the three competencies required of an aviation professional on your staff. 2.2 (3) Using examples demonstrate how you as a manager can alleviate any five of the reasons why life as an aviation professional is uniquely demanding for the staff in your care. (5) 2.3 You are an entry-level aviation manager at Coastal Sky Aviation, a South African charter company that has recently expanded its operations. During your first month, you have encountered a series of operational challenges that require immediate attention. Each challenge will test a different managerial competency crucial to your role. Your task is to apply these competencies to resolve the situations effectively. Given the following scenarios, apply five managerial competencies that are vital for an aviation manager at Coastal Sky Aviation and provide a relevant example for each competency demonstrating its application: 2.3.1 Effective communication and conflict resolution: A conflict has arisen between flight operations staff and maintenance crew over aircraft availability. How would you apply effective communication and conflict resolution to address this issue? 2.3.2 (2) Decision-making under pressure: You are informed of a critical system failure that might lead to flight delays. What decision-making process under pressure would you employ to minimise disruption? 2.3.3 (2) People skills and emotional intelligence: A team member is showing signs of stress due to the high season's workload. How would you use your emotional intelligence to support and motivate this employee? 2.3.4 (2) Ethical integrity: A discrepancy has been found in the company's fuel logging records. Illustrate how you would apply ethical integrity in investigating and resolving this matter. 2.3.5 (2) Strategic vision: The company is facing increased competition from budget airlines. Apply your strategic vision to propose a plan that would enhance Coastal Sky Aviation's competitive edge. 2.4 2.5 (2) Give South African examples of the five types of airports, without listing the examples provided in your study guide. (5) Explain the purpose and usefulness of an MEL and provide a practical example. (2) ©STADIO (Assignment – Semester 1, 2024) (Fundamentals of Aviation - Management AVM152) Page 4 of 5 Question 3 3.1 (25 marks) As the operations manager at Horizon Air Charter, a small but dynamic company in the South African aviation industry, you have been asked to improve overall operations by clearly differentiating between human resource management (HRM) and human factors management (HFM). Your task is to create a plan that incorporates and applies activities from both fields to address the company's current operational challenges. 3.1.1 Establish the difference between the roles of HRM and HFM in the context of Horizon Air Charter. 3.1.2 (2) Develop a plan that includes five specific activities from each management area to tackle issues such as high turnover rates, skill gaps among employees, and recent safety incidents. Explain how the application of these activities will contribute to operational improvements and employee well-being. 3.2 (10) Explain the different roles of airframe OEMs, engine OEMs, and component OEMs in the context of a charter aviation company and how the decisions made in selecting these OEMs can impact on the company's operations and customer satisfaction. 3.3 Briefly summarise why understanding the purpose of Part 67 and Part 61 of the SACAA CATS and CARS is important to the aviation manager. 3.4 (9) (2) As part of airport economic management, you have noticed a decline in revenue over the past quarter. Explain one strategic investment that you would consider to boost profitability, and describe your reasoning. (2) ASSIGNMENT TOTAL: 75 MARKS ©STADIO (Assignment – Semester 1, 2024) (Fundamentals of Aviation - Management AVM152) Page 5 of 5 Table of Contents Heading Page number Contents MODULE PURPOSE AND OUTCOMES 1 TOPIC 1 THE AVIATION ENVIRONMENT 3 1.1 Introduction 3 1.2 Dimensions and dynamics of an ever-changing industry 5 1.3 The Central Role of the Human in Aviation 11 1.4 The Structure of Aviation Supply and Demand 14 1.5 Management and Planning in the Low-Margin Aviation Environment 19 1.6 The Roles of International and Local Aviation Authorities in a Highly Regulated Industry 26 1.7 Global Air Transport Agreements 28 1.8 Challenges to Aviation Sustainability 31 Summary 34 Self-Assessment Questions 35 TOPIC 2 THE AVIATION PROFESSIONAL 36 2.1 Introduction 36 2.2 Unique Attributes of the Aviation Professional 38 2.3 Aviation as a Demanding Career Choice 43 2.4 Various Career Options in Aviation 51 2.5 Career Development and Advancement in the Aviation Sector 56 2.6 Certification, Qualification, Medical and Recency Requirements 62 2.7 Emerging Technologies and the Future of the Aviation Professional 64 Summary 66 Self-Assessment Questions 68 TOPIC 3 THE AVIATION MANAGER 69 3.1 Introduction 69 3.2 Essential Leadership Competencies 71 3.3 Financial Management and Budgeting Skills 79 3.4 Human Resource Management and Team Building when Dealing with Aviation Professionals 88 3.5 Safety and Risk Management Skills 92 3.6 Strategic Planning and Tactical Decision-Making 94 3.7 Regulatory Compliance and Lega Responsibilities 3.8 Crises Management and Emergency Response: The Ever-Present Responsibility 3.9 100 102 Innovation and Adaptability: Navigating Change in Aviation Management 104 Summary 108 Self-Assessment Questions 109 TOPIC 4 ESSENTIAL AIRPORT OPERATIONS 110 4.1 Introduction 110 4.2 Components and Role-Players in Flight Operations 111 4.3 Airport Regulations and Regulatory Bodies 113 4.4 Types of Airports 116 4.5 Airport Economic Management 119 4.6 The Role of Air Traffic Service Providers 121 4.7 Auxiliary Services 124 4.8 Airport Capacity Management 127 Summary 132 Self-Assessment Questions 133 TOPIC 5 MANAGING AIRCRAFT OPERATIONS 134 5.1 Introduction 134 5.2 Aircraft Certification 135 5.3 The Aircraft as Production Unit 138 5.4 Aircraft Economics 139 5.5 Managing Operations with Different Aircraft Types 143 5.6 Managing Aircraft Operations in Terms of Supply and Maintenance 144 5.7 The Role of Original Equipment Manufacturer (OEM) 145 5.8 Management of Processes Related to Maintenance, Repair and Overhaul (MRO) Suppliers 5.9 147 Managing Operations with Awareness of Meteorological and Navigational Aspects 150 Summary 153 Self-Assessment Questions 154 GLOSSARY OF TERMS 155 REFERENCES 162 ANSWERS TO SELF-ASSESSMENT QUESTIONS 163 Topic 1 Self-assessment answers 163 Topic 2 Self-assessment answers 163 Topic 3 Self-assessment answers 164 Topic 4 Self-assessment answers 165 Topic 5 Self-assessment answers 166 Module purpose and outcomes Welcome to Fundamentals of Aviation Management! You are not just boarding a proverbial aeroplane when you enter the world of aviation management; you are embarking on an academic journey through one of the most complex, regulated, and fascinating industries on the planet. Aviation, with its intricate dimensions and ever-changing landscape, is more than just getting from point A to point B. It is about comprehending a multifaceted environment in which the stakes are high, the margins are slim, and the human element is indispensable. The aviation industry is a finely tuned orchestra of many moving parts, each of which plays an important role. We will begin with the basics, deconstructing the dimensions and dynamics of this ever-changing industry. What forces are at work, and what keeps this massive global operation running smoothly? We will look at how regulations, global air transport agreements, and sustainability factor into the complicated score of aviation governance, with international and local authorities steering the ship. The discussion will then shift to the economics of the situation. Managing in a low-margin environment is difficult, but it also necessitates creative solutions. You will learn about aviation supply and demand structures, financial management, and the economic realities of airports and aircraft. How do we sustain such a complex operation, and what are the potential growth and sustainability avenues? This module is about you as an aspiring aviation professional, not just the industry. We will cover everything from certification and qualifications to the essential leadership skills needed to navigate this demanding but rewarding career. Are you prepared for a job that requires not only financial acumen, but also extremely well-developed skills in human resource management, team building, and safety and risk management? Finally, we will discuss the future – emerging technologies, sustainability issues, and innovation. Given the current technological landscape and global challenges, how can you contribute to propelling the aviation industry forward? As you advance in your career as an aviation manager, adaptability and a keen sense of innovation will be essential skills. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 1 This module aims to provide a solid foundation that will prepare you for entrylevel management positions in the aviation industry, covering topics ranging from flight operations and airport regulations to human resources and leadership skills. This is your control panel. Prepare for lift-off! Upon successful completion of this course, you will be able to: 1. Demonstrate an understanding of the basic characteristics of the aviation industry that are required for proficient decision-making and strategic insight at entry-level management in the aviation industry. 2. Clearly identify the requirements of an aviation professional and the challenges inherent to their daily work activities to be able to oversee and develop teams of professionals at entry-level management in the aviation industry. 3. Proficiently apply essential aviation management competencies and skills at entry-level management in the aviation industry. 4. Demonstrate an understanding of the entry-level management of basic airport operational components to be able to make informed decisions. 5. Demonstrate the ability to articulate the diverse factors inherent to the entry-level management of aircraft operations in an environment. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 2 aviation Topic 1 The Aviation Environment 1.1 INTRODUCTION This topic relates to the following module outcome: 1. Demonstrate an understanding of the basic characteristics of the aviation industry that are required for proficient decision-making and strategic insight at entry-level management in the aviation industry. There is a complex network of factors that contribute to the dynamic and innovative nature of the aviation industry. In this topic, we will delve into just some of these multifaceted aspects, encompassing not only the physical dimensions but also the intricate interplay of human involvement. Our examination will transcend the conventional focus on aircraft and airports, revealing deeper layers of understanding. As a prospective aviation manager, it is imperative to possess a fundamental understanding of the dynamics between supply and demand in the aviation industry, the narrow profit margins that characterise its financial viability, and the rigorous regulatory framework that governs its operations. This topic will provide you with the necessary knowledge to grasp both international and domestic policies, the operational aspects of global air transport agreements, and the imminent sustainability obstacles that the industry confronts. It includes: Dimensions and dynamics of an ever-changing industry: The aviation sector is characterised by perpetual change, which is shaped by advancements in technology, geopolitical factors, and market dynamics. The ability to adjust to these changing circumstances is of utmost importance for ensuring an entity’s continued existence. The central role of the human in aviation: Although technology plays a crucial role, the human element continues to be of utmost importance in the field of aviation. The safety and efficiency of the aviation industry are greatly influenced by pilots, air traffic controllers, and policy-makers. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 3 The structure of aviation supply and demand: Comprehending the dynamics of supply and demand in the aviation industry encompasses more than just the sale of tickets. It necessitates strategic considerations such as route planning, fleet management, and scheduling to effectively address the ever-changing requirements of passengers and cargo. Management and planning in the low-margin aviation environment: The successful operation of businesses with low-profit margins necessitates the implementation of effective management strategies that effectively reconcile operational efficiency with financial sustainability. The roles of international and local aviation authorities in a highly regulated industry: Regulation in the aviation industry, ranging from the International Civil Aviation Organisation (ICAO) to local governing bodies, is characterised by a rigorous and intricate framework. Its primary objectives encompass the assurance of safety, the establishment of standardised practices, and occasionally fostering market competitiveness. Global air transport agreements: Commonly referred to as bilateral or multilateral agreements, these treaties play a crucial role in establishing the legal and operational structure for international aviation. They have a significant impact on various aspects of air travel, encompassing route entitlements and pricing mechanisms. Challenges to aviation sustainability: The pursuit of aviation sustainability is confronted by various challenges, including but not limited to fuel efficiency, noise pollution, and waste management, which have become increasingly significant due to mounting apprehensions regarding carbon emissions and climate change. We shall now proceed to start the engines and commence the process of manoeuvring the aircraft along the taxiway. Prescribed Reading Read pages 7–14 of your prescribed book before continuing. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 4 1.2 DIMENSIONS AND DYNAMICS OF AN EVER-CHANGING INDUSTRY 1.2.1 Complex interaction between multiple role-players The aviation industry can be likened to a vast and intricate mechanism, comprising numerous interdependent components, each fulfilling a distinct role. Certain components are readily observable in the aviation industry, such as airlines, airports, and manufacturers of aircraft. When the topic of aviation is raised, these are the entities that typically come to mind. Nevertheless, it is imperative to comprehend that there exists an extensive world functioning in the background. This includes entities such as Air Traffic Management, ground handlers, and leasing companies. Although less noticeable, these are just as important for the aviation system to operate properly. Like backstage at a concert, it is bustling with activity that makes the show possible, but you can not see it. The need for collaboration between these various parties makes the aviation industry particularly complex. Aviation can be likened to the challenging task of orchestrating a symphony, wherein each musician possesses distinct interpretations and preferences regarding the execution of the musical composition. Collaboration is a complex yet essential endeavour due to the divergent interests and priorities held by each party involved. The nature of these parties makes a significant difference; while some are governmental bodies concerned with safety and security, others are commercial entities looking to make a profit. If an entity operates as a government agency, its primary concern is not profit generation, but rather the assurance of safety and security in various domains. Conversely, commercial enterprises are required to generate a profit to maintain their financial viability. Finally, these organisations are motivated by distinct factors. Government entities operate based on political agendas, while airlines and airports are influenced by economic patterns. However, technological advancements consistently exert influence in various domains. Gaining a comprehensive understanding of these dynamics will enhance your preparedness for assuming a managerial position in this complex industry. To effectively operate in this intricate realm, it is imperative to skilfully manage interpersonal connections, advocate for cooperative endeavours, and demonstrate awareness of the multifaceted individuals and groups involved. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 5 1.2.2 The technological dimension of aviation management The technological aspect of aviation exhibits a wide range of diversity and plays a crucial role in ensuring the operational efficiency and safety of air transportation. To function, an aircraft's technology relies on complex interactions between physics, mechanics, metallurgy, chemistry, and electronics. For example, the airframe of an aircraft, which encompasses the fundamental components such as wings and fuselage, represents a remarkable feat of engineering. It integrates principles of aerodynamics to facilitate flight, possesses mechanical robustness to endure high velocities, and entails meticulous material selection to achieve a balance between strength and weight. In addition, aircraft engines represent a remarkable feat of technology as they use principles of thermodynamics to facilitate the generation of airflow and the subsequent production of thrust essential for the process of flight. The fact that these engines are made to run at such high temperatures makes it essential for metallurgy and chemistry to develop specialised materials that can withstand extreme heat. In addition to the airframe and engines, contemporary aircraft heavily depend on electronic components and systems, commonly known as avionics, to effectively perform crucial functions encompassing navigation, communication, and in-flight entertainment. 1.2.3 The economic complexity inherent to aviation The aviation industry is heavily influenced by economics due to the substantial financial and workforce investments involved in aircraft design, production, and operation. It is characterised by a significant requirement for capital investment, as the construction and upkeep of aircraft, as well as the necessary infrastructure such as airports and hangars, necessitate substantial financial resources. In addition, the industry exhibits a significant level of employment, encompassing a diverse range of job positions, thereby characterising it as a sector that requires a substantial amount of labour. A significant challenge faced by aviation managers is the need to effectively manage the delicate equilibrium between revenue generation and operational expenditures. The aviation sector is also characterised by intense competition, which requires the implementation of efficient cost-effective strategies throughout the entire supply chain. Moreover, the aviation industry operates on a worldwide level, wherein financial transactions frequently commence with customers making payments for airfare. The business sector's global nature renders it susceptible to substantial economic fluctuations. The susceptibility of the industry to cycles of rapid growth and sharp © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 6 declines can be attributed to various factors, including changes in consumer demand and larger macro-economic shifts such as recession or inflation. 1.2.4 The significance of political factors The aviation industry is significantly impacted by political determinations and governmental engagement. Governments frequently play a pivotal role in providing financial support to the aviation industry, either through direct ownership of airlines and airports or through indirect means such as tax exemptions, loan guarantees, and research and development grants. Political factors are also influential in the context of regulations and international treaties. The regulations governing the operations of airlines are determined by governmental authorities, who frequently engage in agreements facilitating the provision of air travel services by airlines from various nations, encompassing both inbound and outbound flights as well as transit through their airspace. Moreover, political considerations encompass matters on national security, employment, and technological progress. The aerospace industry plays a crucial role in the global positioning of certain countries, which require substantial investments in research and development to advance both civilian and military applications of aviation technology. 1.2.5 Understanding the dynamics of aviation The aviation industry experiences ongoing changes, which are influenced by three primary factors mentioned in the preceding sections: technology, economy, and politics. These dimensions are interconnected and mutually affect one another. For instance, changes in operational costs brought on by the introduction of a new aircraft type can significantly alter the economic environment and have an impact on airline networks, frequencies, and destinations. In a similar vein, the policies and regulations on aviation undergo periodic updates, prompted by technological advancements or in response to particular incidents and accidents. As an integral component of the global ecosystem, the aviation industry is susceptible to the impacts of broader global developments. The internal factor of aviation technology advancements plays a significant role in driving change, while external factors also exert a substantial influence. The phenomenon of economic growth has been observed to give rise to new aviation markets, as exemplified by the case of China's rapid economic expansion. Population dynamics, such as extensive migration and urbanisation, have the potential to © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 7 generate novel destinations and bring about substantial transformations in established aviation markets. Furthermore, the aviation industry frequently demonstrates rapid assimilation of external technological advancements, including digitisation and novel material technologies. This rapid uptake is typically made possible by the high levels of capital in the industry, which allow for significant upfront investments in new technologies that can be recovered rapidly given the industry's size. Notwithstanding its dynamic nature, the aviation sector tends to exhibit a notable degree of traditionalism. The propensity for adhering to tradition stems from a prioritisation of safety and the significant financial implications at hand. Before being adopted, new technologies and business models are carefully examined, frequently after they have already demonstrated their viability in related industries or aerospace applications like defence or space projects. The cautious approach is further influenced by the extended development cycles observed in the aviation industry. Following a development phase lasting approximately five years, an aircraft prototype may enter the production stage and is expected to maintain operational status for approximately 25 years, albeit subject to various modifications throughout its lifespan. In a similar vein, airport infrastructures are meticulously engineered to endure for extended periods, frequently undergoing modifications and adaptations while predominantly maintaining their original sites. The aviation sector can undergo substantial transformations as a result of geopolitical factors. The volatility in fuel prices has a direct influence on operational expenses and, consequently, the growth rate of the industry. The conclusion of the Cold War brought about political developments that resulted in the expansion of airspaces for commercial purposes, leading to substantial modifications in flight routes and durations. For instance, after the fall of the Soviet Union, flight times between Europe and Asia were significantly shortened, which altered the significance and usefulness of particular airports like Anchorage. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 8 Example The lifting of the apartheid-era international sanctions is one South African example that perfectly demonstrates how geopolitical factors can have an impact on the aviation industry. In the period preceding the early 1990s, South Africa experienced a significant degree of isolation from the global community as a result of the implementation of apartheid policies. This resulted in limitations and penalties that had a significant effect on the nation's aviation industry as well as other industries. Following the cessation of apartheid and the subsequent removal of sanctions, South African airlines, particularly South African Airways (SAA), were allowed to augment their international route networks. Before this, numerous direct routes were inaccessible as a result of imposed sanctions, compelling airlines to adopt longer, less optimal routes to reach different international destinations. This harmed the South African aviation market's overall competitiveness as well as the price of fuel. The removal of sanctions has created additional prospects for the establishment of more efficient flight paths, resulting in decreased flight durations and operational expenses. As a result, cities like Johannesburg became more important international hubs, significantly changing the function and network of South African airports. The lifting of these restrictions allowed foreign airlines to operate in South Africa with greater freedom, fostering competition while also bringing in significant foreign investments and tourist spending. Achieving a harmonious equilibrium between innovation and reliability is a crucial endeavour in various domains. The delicate task of striking a balance between these two factors necessitates careful consideration and strategic decisionmaking. Finally, any discussion of the dynamic nature of aviation must take into account the delicate balance between the need for reliability and safety and the drive for innovation. Due to the extended duration of life cycles in the industry and the significant financial implications involved, the integration of novel technologies, procedures, or business models is contingent upon their demonstrated reliability, resilience, and cost-efficiency. 1.2.6 What about charter aviation? Like in commercial aviation, the trinity of technology, economy, and politics is extremely important in the world of charter aviation. Technology plays a crucial © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 9 role in charter services, as these operators frequently offer specialised services such as medical evacuation, fire-fighting, or aerial photography. The utilisation of advanced technology has the potential to enhance the efficiency and accessibility of these services. Economic factors exert a significant influence as well. Economic conditions can affect the demand for charter services; during economic booms, corporations and affluent people are more likely to use private charters. Regulations are influenced by politics, and charter operations must carefully consider their compliance with governmental directives. The charter aviation industry is subject to various internal and external factors that can impact on its operations and performance. An internal factor might be the purchase of a new kind of aircraft, which might enable longer flights or operation in more difficult circumstances. Large-scale events, such as sports tournaments or political summits, have the potential to generate an abrupt surge in demand for charter services from external sources. Economic fluctuations such as recessions or booms have a significant influence on consumer behaviour, subsequently affecting the demand for charter services. Due to the specialised nature of many charter operations, charter services are frequently quicker than their commercial counterparts to adopt new technologies. For instance, a charter company that specialises in a medical evacuation will quickly adopt cutting-edge aviation technologies that improve inflight medical care. The presence of substantial capital in certain segments of the charter sector facilitates expedited recuperation of investments in emerging technologies. Even in the charter sector, there exists a significant inclination towards adhering to traditional practices and relying on established track records. This is primarily caused by the significant financial and safety risks involved. Many charter operations are smaller in scale than large commercial airlines, which may leave them less able to absorb the cost of emerging, unproven technologies. Hence, charter services commonly exhibit a tendency to await the successful implementation and validation of technologies in other industries before their adoption. Geopolitical shifts can also create or eliminate new routes and markets for charter services. For instance, improved diplomatic ties among nations may open the door for more international charter flights. On the other hand, political unrest or a civil war might restrict operations. The cost of fuel is a crucial factor that must be taken into account by all segments of the aviation industry, including charter services. An increase in fuel costs can significantly raise operating expenses, forcing adjustments to pricing plans or even downsizing. Similar to the context © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 10 of commercial aviation, the charter sector also entails a nuanced equilibrium between the pursuit of innovation and the assurance of reliability. Operators must balance the benefits of integrating new technologies with the urgent need for reliability and safety. Any misstep could lead to monetary loss or, worse yet, a compromise in safety. Understanding these dynamics will help those working in charter aviation management better navigate the challenges presented by this industry, from embracing technological advancements to comprehending the political and economic environment that influences operational choices. It is important for students pursuing aviation management as a career to possess a comprehensive understanding of the industry, as it is continuously influenced by a dynamic array of internal and external variables. These factors encompass technological advancements, economic shifts, and political influences, and understanding this intricate interplay is imperative for successfully navigating a profession in aviation management. Activity Write down three short scenarios that could bring change to the aviation industry. Each scenario should focus on a different dimension: technological, economic and political. Now adapt each scenario to illustrate how they affect the charter aviation environment. 1.3 THE CENTRAL ROLE OF THE HUMAN IN AVIATION 1.3.1 The role of human factors in aviation The aviation sector is primarily a human endeavour. Even though it is simple to concentrate on the technological aspects, such as the types of aircraft and navigation systems used, it is important to keep in mind that all of these were created, manufactured, and operated by people. The human element is inseparable from the field of aviation. Aircraft, as intricate machines, require skilled pilots for operation and mechanics for maintenance. However, in addition to possessing technical expertise, these professionals are required to collaborate effectively, often transcending various cultural, linguistic, and organisational barriers. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 11 This leads us to the notion of collaboration. The aviation industry exhibits a global rather than localised nature. People from all over the world work as pilots, air traffic controllers, ground personnel, and in many other positions. To ensure safety and efficiency, it is necessary to establish a common language and a set of uniform rules that all parties must follow. English is widely regarded as the predominant language in the field of aviation due to its ability to facilitate effective communication between pilots from diverse linguistic backgrounds and air traffic controllers across various regions, such as South Africa and Japan. Language and laws alone, however, are insufficient. Trust serves as the fundamental basis upon which the entire aviation ecosystem is built. Consider the scenario of a pilot operating a commercial aircraft, wherein they must place their reliance on the competence of the mechanics responsible for the adequate upkeep of the aircraft's engines. The mechanics, in turn, must place their trust in the parts suppliers, assuming that they have provided components that adhere to the established standards of the industry. This network of trust extends not only among individuals but also across national and international boundaries. For instance, the South African aviation authorities must have confidence that an aircraft built and maintained in a different nation, such as the United States, complies with safety requirements so that it can land safely on South African soil. Focusing on how people use sophisticated technology is the next step. The task of operating an aircraft or overseeing its operations from a control tower is a significant undertaking. It necessitates a thorough comprehension of the underlying technology. However, it is equally crucial that these technologies are engineered in a manner that enables efficient and secure human operation. The concept referred to as the man-machine interface is a fundamental aspect that pertains to the interaction between humans and technology in the field of aviation. The significance of this subject extends beyond the design phase and encompasses the production, maintenance, and operation of aviation systems. The flight deck of an aircraft is meticulously designed with careful consideration of the constraints and abilities of human performance, to enable pilots to effectively oversee and manage the aircraft. The human element in aviation encompasses various dimensions that extend beyond mere technical competence. The process encompasses collaboration, reliance on mutual confidence, and a mutually beneficial interaction with technology. Understanding these elements will be essential to navigating your career as an aviation management student because you will not just be managing machines and systems but, more importantly, people who are the backbone of the entire industry. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 12 1.3.2 Challenges of charter aviation The complexity and significance of the human factor are amplified in the charter aviation environment. First of all, charter flights frequently involve travelling to a variety of locations, some of which might be less frequently served by commercial airlines. This highlights the importance of flexibility and readiness on the part of the crew and pilot. In comparison to someone flying a routine route, they need to be more familiar with various airspaces, regulations, and possibly even linguistic quirks. To ensure safe and effective operations, this adaptability requirement extends the need for a thorough understanding of and confidence in the technology they are using. Additionally, charter aviation typically operates on a more limited scope in comparison to commercial airlines. This frequently results in a reduction in the number of support personnel and available resources. Pilots and mechanics, specifically, may be required to assume multiple responsibilities and undertake diverse tasks beyond their core functions. Because they directly rely on each other's knowledge and dependability for the safe execution of flights, trust between these professionals is essential. Due to the smaller team sizes, each team member's contribution is emphasised, making trust and teamwork not just important but absolutely necessary for operational success. Next, we must consider the dimension of customer service. The crew is frequently in closer contact with passengers on charter flights, who may have particular, occasionally demanding, needs or expectations. The inclusion of this aspect necessitates careful management of additional human interaction. It is important to ensure the comfort and satisfaction of customers who may be paying more for the service than simply getting an aircraft from point A to point B safely. The human element in charter aviation is further enhanced by this customer-focused component, which calls for exceptional interpersonal abilities. Additionally, given that the fleet may include various aircraft types with different flight deck configurations and technologies, the human-machine interface in a charter environment can be somewhat unpredictable. The training and proficiency of pilots and crew members across various platforms are crucial, thereby emphasising the significance of human interaction with technology. Finally, it is important to acknowledge that charter companies are characterised as smaller enterprises with limited financial resources, potentially affecting the extent of investment in training and the development of human resources. Notwithstanding these limitations, the demands for safety and efficacy are equally, if not more, stringent compared to those in the realm of commercial © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 13 aviation. Because there is less room for error and a greater need for each person to positively contribute to the operation, the human factor becomes even more crucial. In the context of charter aviation, the human factor is not merely a theoretical concept but rather a tangible and pervasive challenge that affects all aspects of the operation. This influence extends from the flight deck and maintenance hangar to customer service and adherence to international regulations. Anyone involved in or aspiring to work in charter aviation management needs to understand these human-centric challenges. Activity List five examples of the teamwork involved in getting a charter flight from departure to destination. Prescribed Reading Read pages 36–46 of your prescribed book before continuing. 1.4 THE STRUCTURE OF AVIATION SUPPLY AND DEMAND Think of the aviation industry as a rugby team. Not all of the players have the same job, and they do not all get paid the same. But everyone on the team has to do their part well for the team to win. Airbus, Boeing and Embraer, which are called original equipment manufacturers (OEMs) and manufacture aircraft, are like the forwards in a rugby game. These guys really and figuratively carry a lot of weight. They spend billions on making new aircraft. Like forwards, they do most of the work but are always under pressure to do well. They have to compete on price, and while they might be able to cover the cost of producing the aircraft, it will be hard for them to get back the huge amount they spent on developing it. Often, they pass on the costs to their consumers, who are airlines. Shifting from one OEM to another is not that easy, and so they mostly have a captive audience. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 14 Example In South Africa, airlines like Safair and Airlink feel these pressures very strongly, especially since the prices are often in foreign currencies. An airline like Emirates largely dictates to the OEMs, simply because of economies of scale – Emirates currently (2023) has over 120 Airbus A380 aircraft in the sky and 50 Airbus A350 on order. They also have more than 130 Boeing 777 aircraft in operation (Emirates, 2023). You can see how both of the major OEMs will take much more notice of what Emirates wants, than for instance SAA, with only 8 Airbus aircraft in operation (Odhiambo, 2023). Next, let us discuss the people who manufacture the parts. They are the rugby team's backs. They might not be as big or dirty as the forwards, but they make up for it with speed and strategy. These companies make important parts that go into different kinds of aircraft. If an aircraft is grounded (called "AOG," which stands for "aircraft on the ground"), these suppliers can set almost any price for a replacement part, since the airline is in a tight spot and does not have many choices. An aircraft like the Airbus A380 has over 4 million parts, versus something like a Robinson R44 helicopter with only a couple of thousand – again, economies of scale means Airbus has much more clout with their parts manufacturers than Robinson. They are also more likely to use that clout to assist Emirates with an AOG aircraft than SAA. FlySafair and Airlink are two South African airlines. They are like the scrumhalves. They link different things, like the cost of labour, the price of fuel, and the aircraft themselves. Even though labour may be cheaper in South Africa than in other places, the rand-dollar exchange rate makes it hard to plan a budget for fuel and maintenance. When you add in global events like the war in Ukraine, which can raise fuel prices, you have a mess that is harder to get through. The last thing we will discuss is airports. Think of them as the full-backs of a rugby team. They are often forgotten, but they are very important. Because they are important hubs, airports like OR Tambo International in Johannesburg might make more money. Some are owned by the government and are considered essential infrastructure. This means that they might not have to worry as much about making money as privately-owned airports. Just like in rugby, how well a team plays – how well they handle all the different parts of the game – can have a big effect on how well they do. The same is true © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 15 for companies that fly aircraft. Their ability to organise well, or lack of it, can mean the difference between making money and having financial problems. Aviation, like rugby, is a team sport with many moving parts. Different parts of the economy play different roles, and in South Africa, changing exchange rates and geopolitical factors add more layers of strategy and complexity. 1.4.1 Structure of aviation supply Only a few big companies like Boeing, Airbus, Embraer, Rolls-Royce, and General Electric (and a handful of others) control most of the market in the aviation business. This small number of suppliers is because of economies of scale, which means that producing more units lowers the average cost of each unit. Given how expensive it is to come up with new ideas and produce things in the aviation industry, it makes sense to have only a few big players. With so few manufacturers, you would think they would be able to charge high prices. But these companies are always trying to outdo each other in terms of technological advances, fuel efficiency, and overall value. Because there is so much competition between airlines, prices are kept in check to some extent. In addition to setting prices, these companies set the direction for technology in the industry. If one of them comes out with a new feature or technology that changes the game, the others are quick to follow. So, airlines, whether they want to or not, end up using these new technologies, whether they are big international airlines or smaller regional airlines. Because of this balance of power, these manufacturers have a lot of say in how the aviation industry moves as a whole. Both small and large airlines have to work in a technological and business framework that is mostly set by these manufacturers. Understanding this complex interaction is important for anyone studying aviation management. This is especially true in a market like South Africa, where currency volatility and economic factors add more layers of complexity to decisions about fleet upgrades, route planning, and other operational issues. 1.4.2 Structure of aviation demand Aviation demand is divided into passengers and freight. Concerning the number of passengers who want to fly, we need to look at how likely that passenger is © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 16 to fly. This is made up of two parts: the need for transportation and the ability to pay for air travel. There are many kinds of transportation needs. This demand grows as the economy grows. But economic growth is happening in very different ways in different parts of the world. This leads to mass migration on both a continental and a global scale, creating huge demand for both domestic and international air travel. When the economy grows, more people can afford to travel and there are more people in the middle class. On the supply side, the price of this transportation goes down, which increases the likelihood of flight. Here, we can see what has helped aviation grow so much in the last few decades. Each passenger's demand can be caused by several different things, which makes demand segmentation harder. The more a society integrates and grows economically, the more reasons there are to travel, until air travel becomes a normal and necessary way to get around, like in the United States (US) domestic market. In these markets, people can fly wherever they want, which means that the market is already full. When the economy improves, these markets do not grow as much, and when the economy gets worse, they do not shrink as much either. Passengers can be divided into three main groups: business travellers, travellers who fly to visit friends and relatives, and leisure travellers. This helps with planning since most passengers tend to act in one of these ways. As was already said, the demand for air travel comes from the need for transportation. Because of this, we can tell the difference between passengers who need to fly, want to fly, and like to fly. Aviation not only transports people from one place to another; it is also a key part of moving products and supplies around the world. This part of aviation is directly related to how the economy works and how goods are made. In a nutshell, aviation connects places where people produce things with places where people buy things. Even though air transport only makes up about 1% of the world's trade in terms of weight, it makes up a whopping 35% in terms of revenue. That is significant! So, what are we talking about when we talk about goods? There are three types: cargo, mail, and packages. When it comes to cargo, speed is the main reason why businesses choose air travel. When moving things like fish or flowers that go bad quickly, time is of the essence because these items lose their market value quickly. South Africa, for example, sends a lot of fresh food to different parts of the world. To keep these foods fresh, it is essential to move quickly. The same is true for valuable goods © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 17 like electronics, where faster shipping means less time spent in storage and more cash for the companies involved. Because of the strict requirements for climate control, pharmaceuticals almost always have to be shipped by air. Another big benefit of air travel is that it is safe. If you are shipping something very valuable or fragile, like art or sensitive materials, the risk of theft or damage is lower if you send it by aircraft. You can easily fly these things to the closest airport, which makes the trip safer. When it comes to mail, aviation has been around for a long time, mostly because it is faster. Mail can be anything from a letter to a package, and even though it is only a small part of all goods, it is usually very valuable. This makes sense, especially in a place like South Africa where businesses need mail to be delivered quickly and safely and the government postal service is completely dysfunctional. Finally, let us discuss parcels. In the age of online shopping, these are becoming more and more important. The ease of buying items online, whether it is a product or an important document, has skyrocketed the need for fast and safe parcel transport. In South Africa, where e-commerce is growing, the speed at which parcels are delivered often determines how happy customers are and how well a business is doing. So, if you want to work in aviation management, it is important to know how complicated freight and cargo logistics are. It is not enough to just fill the seats with people. You also need to make the most of the "belly cargo" to get the most out of every flight. This is especially important when the economy is unstable, the currency is changing, and every dollar counts. Activity Research all of the major OEMs, engine and avionics manufacturers currently in operation. How many can you list? Prescribed Reading Read pages 14–16 of your prescribed book before continuing. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 18 1.5 MANAGEMENT AND PLANNING IN THE LOW-MARGIN AVIATION ENVIRONMENT 1.5.1 Capacity management Capacity management is one of the most important things to understand about the aviation industry. First, the profit margins in aviation are very small. The margin is the difference between how much money an airline makes and how much it costs to run. Building and maintaining aircraft and airports costs a lot of money. Every empty seat on a flight or underused terminal means lost money. It is thus important to get the most out of these resources if you want to make money. To put it simply, for these high investment costs to be paid back, aircraft need to be full and airports need to be busy. How does the industry ensure this? Through careful planning of capacity. This means matching the number of seats and flight routes that are available with the number of people who want to travel and where they want to go. Keep in mind that demand is not always the same. For example, a lot more people might want to fly between Johannesburg and Cape Town than between smaller regional centres. This is where strategic planning for capacity comes in. It is a long-term plan that looks at trends and patterns of demand to figure out where to put resources in the future. Now, let us make things even more complicated. Demand changes even in a single market or route. Maybe it goes up around the holidays or on certain days of the week. This is where tactical capacity planning comes in. It changes how resources are used to meet changes in demand over a short period. Imagine, for example, adding more flights when more people are travelling, like during the holidays. The economy also has a big impact on demand. People have more money to spend and are more likely to travel when the economy is doing well. On the other hand, demand goes down when the economy is bad or when there is a crisis like a pandemic. So, planning for capacity needs to be flexible and able to adapt to these changes in the economy. Lastly, there is the management of operational capacity. To make the most money, everything in aviation runs on tight schedules. But this system is not very strong. A single broken part on an aeroplane or a change in the weather can throw all of these plans off. Operational capacity planning is based on how quickly and well an airline can fix problems and get back on schedule. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 19 With so many layers, it makes sense that data and technology are used a lot in capacity management. Capacity planning is based on data about market demand, economic indicators, and even trends from the past. Statistic models and software are used to make sense of this data and simulate different scenarios. This lets airlines and airports make decisions that are based on accurate information. 1.5.2 Types of capacity planning and management Let us look at the different parts of planning capacity in an airline setting. Strategic capacity planning is long-term planning that focuses on making sure that the airline's resources, such as the size of its fleet, its routes, and its infrastructure, are in line with market demand and the company's overall business goals. This is where you think about long-term decisions, such as buying a new aircraft or going into a new market. When looking at the medium term, we have tactical capacity planning. This changes the long-term plan to fit the real-world situation right now. Operational capacity management is all about making changes quickly and in real-time to keep things running smoothly. This means taking care of problems right away that could affect how the airline works, like weather-related delays, unplanned maintenance, or rerouting flights. Thus, strategic planning sets the long-term vision, tactical planning adjusts it medium-term, and operational management manages the airline's daily operations. Example Below are some examples to illustrate the important distinction between these concepts. Strategic planning for capacity: Let us say SAA wants to add a new route from Johannesburg to London. From a strategic point of view, this needs a lot of planning. Analysts would look at the long-term demand for this route, taking into account things like tourism trends, business travel, and the way the two countries get along with each other diplomatically. They might also look at the other airlines that offer similar routes and how full their aircraft are to see if there is enough of a market for the new route. This level of planning is important to ensure that a big investment in aircraft, crew, and other logistics will be worth it over a few years. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 20 Tactical capacity planning: Now, think about Safair, a low-cost airline in South Africa that offers flights in the country. The number of flights between popular destinations like Johannesburg and Cape Town could be changed based on the time of year as part of the planning. Safair might add more flights during busy times like Christmas or local events like the Cape Town Jazz Festival to meet the higher demand. During the off-season or when the economy is bad, the airline could also offer fewer flights or use smaller aircraft to keep costs down. This type of change over a short period is common in tactical capacity planning. Operational capacity management: Think about a small airport like King Shaka International Airport in Durban. Let us say an unexpected storm causes flights to be late or cancelled. Operational capacity management would be used to get things back to normal as quickly as possible. This could mean rerouting incoming flights to other airports, fixing and turning around aircraft that can still fly quickly, and giving passengers clear information about their options. The goal is to cause as little trouble as possible and get back to the plans as soon as possible. Each of these examples is based on a lot of information. For example, airlines and airports often work with the South African Civil Aviation Authority (SACAA) and other regulatory bodies to get access to historical data, market demand statistics, and economic forecasts. They might use special software to try out different scenarios, which helps them make better decisions. When we look at the strategic, tactical, and operational levels of capacity planning in South Africa, we can see how these complex layers work together to keep the aviation industry running smoothly and efficiently. Local details, like the effects of seasonal tourism, changes in the economy, and even weather patterns, add more layers of complexity that make capacity planning a very complex and important part of aviation management. 1.5.3 The charter environment and capacity planning In charter aviation, where the business model and client expectations create unique challenges and opportunities, planning is even more complicated. Low profit margins and high costs: Both commercial and charter air travel have slim profit margins. A charter business can succeed or fail based on the cost of aircraft, maintenance, and infrastructure. Charter operators often have a smaller scale of operations than scheduled airlines, which can spread these costs over a large number of flights and passengers. This makes the profitability of each flight very important. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 21 Capacity deployment and use: Charter airlines need to be very good at planning their capacity. Unlike commercial airlines that can predict demand based on past data, charter airlines often have to deal with more unpredictable demand. For example, there might be a sudden need for a large-capacity aircraft for a business event or a sudden rise in demand for vacation spots during the holiday season. It is important to use every seat as much as possible. An empty seat on a charter is not just a waste, but an enormous loss because the aircraft is smaller. Demand changes in space and time: Just like larger airlines, charter companies have to deal with changes in demand. In South Africa, for example, charter companies might see more traffic to game reserves during the tourist season or more business charters to mining regions, depending on how the economy is doing. Because demand changes in different places and at different times, charter services need to have good tactical capacity planning. Operational vulnerabilities: The problems with managing operational capacity are even more noticeable in charter aviation. If a charter aircraft breaks down because of poor maintenance, there might not be a quick replacement. Since charter clients often pay more for a specialised service, failing to deliver can cause not only a loss of money but also a lot of damage to your reputation. Data-driven decision-making: Because of how demand changes and how important it is to run a business efficiently, charter companies rely heavily on data analytics to plan. This could include information about what customers like, seasonal trends in the charter market, and models that can predict and handle problems before they happen. IT infrastructure: Because planning is so complex and so important to survival, the charter sector needs strong IT systems for reservations, customer management, and especially operational logistics. Given that the scale is smaller but the stakes are higher, many charter services are putting a lot of money into technology that can give them real-time insights and better operational control. The principles of capacity planning in aviation as a whole are very important for the charter sector, even though it has its own unique challenges. When each flight needs to be as close to full capacity as possible to make money and customer satisfaction is the most important thing, planning for capacity becomes a complicated dance of logistics, customer service, and data analytics. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 22 1.5.4 Aviation as a low-margin environment Running an airline or any type of aviation-related company requires a lot of capital. Initial costs are high when buying or leasing aircraft or aircraft-related items. Additionally, there is the cost of keeping these aircraft in good shape, which includes everything from regular checks to repairs that come up unexpectedly. Note The situation in South Africa adds another level of difficulty to the already difficult world of aviation. Most maintenance items are priced in US dollars, whether they are aircraft parts, specialised equipment, or even software. This makes the industry even more vulnerable to currency fluctuations. In South Africa, the rand's (ZAR) volatility relative to the US dollar (USD) is wellknown. Imagine preparing a budget for the year, allocating resources for operations and maintenance, and then the rand depreciates significantly against the dollar. Suddenly, your carefully planned budget is thrown into disarray because your maintenance costs have skyrocketed after being converted to rand, and there is nothing you can do about it. This fluctuation in currency does not solely impact on maintenance costs; it also affects fuel prices, leasing costs, and maybe even labour costs if employees have contracts that say they will be paid in a more stable currency. All of this is happening in a field where profit margins are already constrained. Therefore, in South African aviation, you not only have to be very strategic to ensure that aircraft are being used to their fullest potential, that you are effectively meeting demand, and that you have to contend with a lot of competition, but you also have to plan for the uncertainty of currency fluctuations. The volatility of the rand adds another financial risk to an industry that is already full of risks, making it even harder to make a good profit. It is like playing a game where the rules can change at any time and the stakes are high. This means that any aviation business in South Africa needs to be very good at both financial planning and risk management. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 23 Airlines also need to put a lot of money into their infrastructure and employees. It takes more than just pilots and flight attendants to do this. You also need people on the ground, engineers, customer service representatives, and the list goes on. Airports need a lot of resources to run, like high-tech systems for handling bags, keeping people safe, and controlling air traffic. Keep in mind the price of fuel, can change significantly and is affected by the international market. When oil prices go up, so do the costs of running an airline, but you cannot simply pass those costs on to the customer without losing business. Due to the global nature of the aviation industry, it is extremely susceptible to geopolitical events such as the conflict in Ukraine. These kinds of things can cause a chain reaction that affects fuel prices all over the world. During this kind of conflict, energy supplies are often disrupted. In the case of Ukraine, we are talking about a region where natural gas and crude oil pipelines are important. When a geopolitical event makes it hard to get oil, petrol prices go up almost right away. Prices can go up even if people just think about supply chain problems or political instability in key areas. This directly affects airlines because fuel is one of their biggest costs of doing business. Note Let us put this into the South African context. Let us assume that your aviation company has done everything right: You have managed to keep your aircraft nearly full, you have minimised delays, and you have planned your rand-based budget perfectly. Something like the war in Ukraine or another important geopolitical event can cause oil prices to go up around the world almost overnight. Your fuel costs go up, and because the rand is so unstable against the US dollar, you end up spending even more than you would have otherwise – not to mention your maintenance costs. None of this is within your control or was foreseeable. When something like this happens, the already very small profit margins in aviation get even smaller. Your airline must now decide if it will pay for the extra costs itself, which could cause it to lose money, or if it will pass it on to customers, which could lower demand and keep seats empty. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 24 Stringent competition adds another layer of difficulty. On the same routes, there may be more than one airline, and trains and cars are also options for shorter trips. This competition often leads to price wars, in which airlines lower ticket prices to get more people to fly, cutting into their profit margins even more. Lastly, airlines have to deal with demand that changes all the time. Think about how flights are usually full during the holidays, but might be a lot less crowded during the rest of the year. Even though those flights are not as full, the airline still has to pay for fuel, staff, and other costs, but they are not making as much money from ticket sales. In conclusion, the aviation industry has high operating costs, a lot of competition, and fluctuating demand, all of which make it hard to make a profit. It is a tough business to be in, especially in South Africa, where currency volatility and a lack of international buying power add more complexity. There is an old joke: “How do you make a million bucks in aviation? You start with five million!” You can see now how this is not that far off the mark. Activity Research operational aviation IT solutions (such as schedules, rosters, or maintenance planners). List three examples and note their pricing plans. Are they USD or ZAR-based? Now use a currency website to note the monthly spot price for the USD-ZAR for the last year. Can you see how difficult it becomes for a South African aviation company to budget something as simple, yet important as IT for just one single year, never mind a longer period? Prescribed Reading Read pages 18–34 of your prescribed book before continuing. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 25 1.6 THE ROLES OF INTERNATIONAL AND LOCAL AVIATION AUTHORITIES IN A HIGHLY REGULATED INDUSTRY 1.6.1 International aviation authorities Under the auspices of the United Nations, the International Civil Aviation Organisation (ICAO) serves as the global aviation regulatory body. Following the drafting of The Chicago Convention in 1944, ICAO was founded in 1947and is headquartered in Montreal, Canada. The core responsibilities of the ICAO are to create global standards for aviation safety, security, efficiency, and environmental protection. The ICAO, therefore, is the key to international aviation diplomacy and rulemaking because it gives its 193 member states a place to work together. The Chicago Convention on International Civil Aviation is the main legal document according to which the ICAO operates, but its Annexes are where the actual rules are found. These Annexes cover a wide range of topics, including safety rules (Annex 1), air traffic services (Annex 11), and protecting the environment (Annex 16). These Annexes are constantly being changed and updated to deal with new problems and changes in aviation technology. Even though the ICAO provides a unified framework, it does not take away from the sovereignty of each state. Each country has the right to run its own airspace, but it is expected to ensure that its laws and rules are in line with ICAO standards. Compliance is checked by the Universal Safety Oversight Audit Programme (USOAP) and the Universal Security Audit Programme (USAP), which are rigorous auditing systems that hold member states accountable. 1.6.2 National aviation authorities Each nation has its own authority to, under the auspices of ICAO, regulate aviation within its borders. The most important national authorities in a South African context are: Federal Aviation Administration (FAA): The FAA is in charge of a wide range of aviation activities in the US and is the main government agency in charge of setting rules. In addition to certifying aircraft and issuing licences to pilots, the FAA is also in charge of the Next Generation Air Transportation System, which is an ambitious initiative to update the US’ air traffic control systems. Their standards are often used as a model by © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 26 other countries, and their rules, such as FAR Part 117 on duty and rest for flight crews, are often cited around the world. European Union Aviation Safety Agency (EASA): EASA is in charge of not only countries in the European Union but also other countries that follow its rules. Its job goes beyond safety and includes rules about the environment and managing air traffic through the Single European Sky initiative. One of EASA's most important contributions is the EASA type certificate, which can sometimes speed up the process of getting an aeroplane approved in other countries. South African Civil Aviation Authority (SACAA): In South Africa, the SACAA is the main regulatory body. It is based on organisations like the FAA and EASA in many ways. SACAA issues pilots’ licences, certifies aircraft, and runs airlines. It is also a very important part of making sure that ICAO standards are implemented in South Africa. It does this by acting as a bridge between global standards and local implementation. Air Traffic and Navigation Services (ATNS): ATNS is in charge of managing air traffic not just in South Africa but also over a large part of the Indian Ocean. It is a key player in the creation and use of satellitebased navigation systems and other high-tech solutions for air traffic. ATNS works with international groups like ICAO and Civil Air Navigation Services Organisation (CANSO) to ensure that its practices are in line with the best ones around the world. Airports Company South Africa (ACSA): Although not a regulator in the strict sense of the word, as the company that runs South Africa's biggest airports, ACSA is a key part of making sure that infrastructure and services are up to international standards. This includes everything from the facilities in the terminal to the safety and maintenance of the runway. ACSA is also very involved in planning South Africa's aviation infrastructure in a way that balances commercial interests with following national and international rules. Understanding the different layers of aviation regulation, from ICAO's global framework to country-specific bodies like the FAA, EASA, and SACAA, all the way down to specialised South African bodies like ATNS and ACSA, is important for anyone who wants to be a manager in the aviation industry. Each organisation plays a different role, faces different challenges, and makes a different contribution to the complex web that is global aviation governance. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 27 Activity South African Air Law is contained in SACAA Civil Aviation Technical Standards (CATS) and Civil Aviation Regulations (CARs). Name the FAA and EASA equivalents. 1.7 GLOBAL AIR TRANSPORT AGREEMENTS 1.7.1 Air transport agreements (ATAs) Air transport agreements (ATAs) are the legal basis for air travel between countries. They are agreements between countries that tell airlines where they can and cannot fly. These contracts say who can land where and under what rules. For example, a South African airline could have a bilateral ATA with the US, which would let it fly to certain American airports and vice versa. The Chicago Convention details the rules for how these ATAs work. This Convention sets rules for how ATAs should be set up, what they should include, and what freedoms countries can give each other. The terms "restrictive" and "liberal" agreements should be understood. Everything is spelled out in a restrictive ATA. For example, between Johannesburg and New York, only two airlines from each state can fly, and they can only do so three times a week. In a liberal ATA, there are fewer rules, so airlines can make decisions based on how the market works. A restrictive agreement protects the national carriers, while a liberal agreement encourages competition in the market. ATAs are interesting because they do not exist for business or economic reasons only. They can also help with diplomacy. For example, countries might agree to an ATA as a way to show that they respect and value each other. ATAs that are in place but not being used are sometimes called "sleeping" ATAs. These can be turned on by new airlines, giving them new ways to do business. In a bilateral ATA, two nations negotiate the conditions of air services between them. Take a hypothetical bilateral agreement between South Africa and the US as an example. This agreement would spell out the rules for air travel between the two countries. It would say, for example, how many airlines from each country can fly, which cities can be destinations, and maybe even how often flights can take place. It involves negotiation and agreement between two countries that is made to fit their needs and interests. If SAA wants to add a new © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 28 route from Johannesburg to New York, for example, this bilateral ATA would say whether or not they can do that. Multilateral ATAs are made up of more than one country and are usually more complicated because they try to make aviation rules the same across a larger geographical or economic area. South Africa, for example, is part of the Yamoussoukro Decision, which aims to open up air travel between 44 African countries. In this multilateral agreement, the countries that are involved agree on a set of rules that everyone must follow. For example, all countries must have open access to international routes within the continent, and all safety measures must be the same. This gives South African airlines a lot of options for making strategic decisions because they may be able to fly to more than one country without having to negotiate each route separately. 1.7.2 Freedoms of the air Freedoms of the air are standardised, numbered permissions that states can give each other. The First Freedom lets an aeroplane fly through the airspace of another country without having to land. Even though this might seem easy, it is a big deal. Both countries are responsible for making sure that safety rules and air traffic control (ATC) rules are followed. It is a system based on trust, and it is very important for the safety of international air travel. The Second Freedom is an extension of the First Freedom. It lets an aeroplane land for technical reasons, like refuelling. This is less important now because jets can fly farther than they used to. Still, it does exist, especially for moving cargo. The Third and Fourth Freedoms are about how business is done. The Third Freedom lets an airline fly from its home country to another, drop off passengers and cargo who bought their tickets in the home country, and then fly back home. The Fourth Freedom is the same, but it also lets tickets be sold in the country where the traveller is going. The Fifth Freedom says that an airline can take off from its home country, land for business reasons in a second country, and then fly to a third country. Between the second and third countries, the airline can sell tickets for that part of the trip. The Sixth Freedom is the right for a national carrier to fly from its home airport to another country and back, to fly to a third country and back, and to sell tickets for travel between these two foreign countries with a transfer at the home airport. This sixth freedom is the foundation of modern airline hubs. Many airlines © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 29 have networks in which all flights connect at the hub, which is the home base of the airline. The Seventh Freedom is the right for a national carrier to fly between two states that are not in the same state as where the carrier is based. This privilege is rarely used. The Eighth Freedom is the right of a national carrier to run commercially from its home country to a place in another country and then to another place in the same country. The second part of the plan is just a flight within the other state. The Ninth Freedom is the right of an airline to fly between or to airports in another state so that it can run a completely domestic operation in that other state. This Ninth Freedom is also called Cabotage, which comes from the Sea Law. Both the ATAs and the Freedoms of the Air have an important effect on how routes are planned, how airlines compete, and how countries treat each other. To make informed, strategic decisions as a future aviation manager, you must therefore have a thorough understanding of these. Activity Watch the following video before continuing: SCAN TO WATCH https://youtu.be/VNwSNE5CcEc?si=66gXFPNR-upV-t1k (The video should take 5 minutes of your time) Now write down a South African-based example (fictitious or real) that illustrates each of the nine Freedoms of the Air. Prescribed Reading Read pages 49–54 of your prescribed book before continuing. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 30 1.8 CHALLENGES TO AVIATION SUSTAINABILITY Sustainability is quickly becoming more than just a buzzword in the aviation business. The future of aviation is unquestionably tied to how well the industry adapts to eco-friendly practices and technology. This is especially true when you consider how much pressure both governments and consumers are putting on people to travel in a more responsible way (Ansell, 2023). The most pressing issue is probably emissions, thus we must start there. About 2% to 4% of the world's carbon dioxide emissions come from the aviation industry (Kim & Teter, 2023). That may not seem like much, but when you think about how much air travel is expected to grow by 2037, it becomes a big problem. As a stopgap measure, carbon offset programmes have had airlines invest in environmental projects to "offset" the carbon they put into the air. But these are not a long-term solutions. For a longer-lasting effect, the industry is looking at new ideas like aircraft that run on electricity or hydrogen. Even though these technologies are still in their early stages, they have the potential to cut down on or even get rid of emissions from air travel. In South Africa, where power is often generated from natural resources that are not replaceable, like coal, this is a greater problem. Not only do airlines need to think about making their aircraft greener, but they also need to think about where the 'green' electricity or hydrogen comes from. Partnerships with companies that provide renewable energy could become more common, creating an ecosystem that can keep going without harming the planet. Waste management is another part of sustainability. From food packaging to one-time-use earphones, airlines create a huge amount of trash. Airlines that are thinking about the future are already thinking about using biodegradable or recyclable materials for everything from cutlery to uniforms. Not only is it good for the environment, but it is also becoming a bigger reason why people choose one airline over another. Operational efficiency is another important part of making aviation more sustainable. The airline's carbon footprint can be affected by everything from how routes are planned to how long an aircraft remains on a runway with its engines running. Using advanced algorithms and artificial intelligence, these factors can be optimised to use less fuel while producing less pollution. In South Africa, where fuel costs are high and can change due to geopolitical tensions like the war in Ukraine, these efficiencies are not only good for the environment, but also for the economy. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 31 Sustainability is not just an outside issue; it is also becoming a part of how businesses are run. As a student of aviation management, you will probably have to make decisions that strike a balance between making money and being good for the environment. For example, "green" technologies usually have higher costs up front, even if they promise lower costs in the long run and the possibility of government subsidies. To make these kinds of decisions, you will need to know a lot about both business and environmental science, as well as maybe a little bit about public relations, as people's opinions become more and more valuable. When planning for sustainable operations in South Africa, the aviation industry has to think about things like the lack of water. Even small changes can make a big difference, like water recycling systems in airports or better ways to handle waste water in aeroplanes. All of the efforts to cut down on CO2 emissions will make it more expensive to run an airline, which is likely to lead to higher prices for consumers. This is important for the aviation industry because, in the past, the industry has grown a lot when the cost of flying went down. Cheaper flights have made flying possible for a lot more people, which has led to a rise in demand. If sustainability initiatives like carbon taxes, the use of greener technologies or the purchase of carbon offsets cause ticket prices to go up, this could make fewer people want to fly. People might however be willing to cut back on other costs just to be able to fly, just because the world has become so connected. This makes things very hard for South African airlines like FlySafair and even the downsized SAA. They work in a place where fuel costs are a big problem, in part because of the volatility of the rand-dollar exchange rate. When you add the rising costs of operating in a sustainable way to this mix, ticket prices may go up a lot. This could make it harder for these airlines to compete with driving or taking the bus, especially on shorter routes in South Africa or to nearby countries. The uncomfortable truth is that the current business model for aviation will not work in the long run if airfares go up a lot. At the moment, airlines often have slim profit margins and make money by flying a lot of people. If efforts to be more sustainable raise costs, this high-volume, low-margin business model might not work anymore. This is important because it is expected that the size of the aviation industry will double in the next 15 years. This kind of growth might be less likely if there are not big changes in aviation technology that can help keep costs down. In conclusion, the future of aviation will be determined by the industry's ability to reduce emissions, waste, and resource consumption. Even though the road © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 32 ahead is full of challenges, it also has chances for growth and innovation. If you want to work in aviation management, understanding these complexities will help you be a leader in a field that is both exciting and difficult. And in South Africa, with its unique economic and environmental conditions, your role in guiding the industry towards a sustainable future could be very important. Activity Can you think of an example where a more sustainable alternative to an airline practice already exists, but is not widely adopted? Why do you think that is? © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 33 Summary As we come to the end of this topic, we have learned a lot about how complicated and dynamic the aviation industry is and what makes it so innovative. We have gone beyond the usual things like aircraft and airports to look at how important people are, from pilots to air traffic controllers and policymakers. We have also broken down the aviation ecosystem's delicate balance of supply and demand. We did not just focus on selling tickets; instead, we also thought about how to plan routes and schedules, and manage fleets. This is especially important because the industry has slim profit margins, which require highly effective management strategies for both operational efficiency and financial sustainability. On the regulatory side, we have looked at the strict rules that govern the industry, from international rules set by the ICAO to local rules. Not only is it important to follow these rules, but it is also a key part of building a strong and competitive aviation business. We have also looked at the importance of global air transport agreements, whether they are bilateral or multilateral, and how they affect different parts of international air travel, such as route rights and pricing systems. Lastly, we talked about the challenges the industry faces when it comes to being sustainable. From fuel efficiency to noise pollution to waste management, we have thought about how the industry affects the environment, especially since carbon emissions and climate change are becoming a bigger worry. In conclusion, this topic has provided you with the foundational knowledge and strategic insights necessary for effective decision-making and management in the dynamic aviation industry. The next topic focuses on you as an aviation professional and delves into what is required to flourish in this exciting yet demanding career that is aviation. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 34 Self-Assessment Questions The purpose of these self-evaluation questions is to see how well you understand and can use key ideas from the topic. They do not just test your memory; they also test your ability to think critically, gain insight, and use what you have learned in different situations. Keep it brief, the idea is not to take up too much of your time! 1. How would you change the way an airline plans its routes in response to a sudden geopolitical event that restricts airspace? 2. How do humans, such as air traffic controllers and pilots, contribute to the efficiency and safety of aviation despite technological advancements? 3. Give an example of a situation where it would be important to understand the dynamics of supply and demand in aviation to make a good decision. 4. What are some of the most important things a new manager should think about when planning for long-term financial stability in a low-margin industry like aviation? 5. How do international rules and agreements about air travel affect your ability to plan routes and manage your fleet strategically? When you are done with these questions, revise your answers and compare them to the answers provided in the back of the study guide. If you find differences, it might help to go back and look at the relevant parts of the study guide. Keep in mind that these questions are meant to help you prepare for the exam and ensure you understand the material. Note: AI assistance has been used in the creation of this topic content to ensure completeness, as well as assist in explanation and contextualisation. © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 35 Topic 2 The Aviation Professional 2.1 INTRODUCTION This topic relates to the following module outcome: 2. Identify the requirements of an aviation professional and the challenges inherent to their daily work activities to be able to oversee and develop teams of professionals at entry-level management in the aviation industry. In the fast-paced and highly regulated world of aviation, professionals face a unique set of requirements and challenges that are not present in any other industry. These people are not only responsible for the safety and well-being of passengers and cargo, but they are also the key to complex systems of technology, rules, and interactions between people. Understanding what it takes to be an aviation professional is essential, especially for entry-level managers responsible for supervising and cultivating teams of aviation professionals. Specialised skills and attitudes, such as strong technical acumen, an unwavering commitment to safety, and the ability to work under pressure while making quick, sound decisions, are frequently required. The demanding nature of the work frequently entails irregular work schedules, physical and mental strain, and the requirement for ongoing technological and regulatory adaptation. Pilots, air traffic controllers, maintenance engineers, and airline executives are just a few of the many career options available. These options allow people to choose the niche that most closely matches their skills and interests because they offer different levels of responsibility and required expertise. Opportunities and paths to move up are often complicated, but rewarding. They may require getting more certifications, getting specialised training, or taking on management roles. The International Civil Aviation Organisation (ICAO) and national aviation authorities have set very high standards that must be met. There are educational requirements, medical requirements, and periodic assessments to ensure that the person continues to be qualified. The landscape is changing because of new © STADIO (Pty) Ltd Fundamentals of Aviation Management AVM152 36 technologies like artificial intelligence, drone technology, and sustainable aviation fuels. Here, the difficulty and opportunity lies in keeping up with these changes to stay relevant in the market. This topic focuses on the challenging but rewarding career path in aviation management and aims to provide a thorough introduction for anyone in entrylevel management. In this topic, you will gain knowledge in the following areas: Unique attributes of the aviation professional: Aviation professionals have specialised skills and qualities that set them apart, such as a keen attention to detail and an unwavering commitment to safety. Aviation as a demanding career choice: Aviation careers are rigorous and often stressful, characterised by irregular work hours and high stakes in ensuring passenger and cargo safety. Various career options in aviation: The aviation industry offers a wide range of roles to pursue, from piloting and air traffic control to management, engineering, IT and almost anything else you can think of. Career development and advancement in the aviation sector: Professionals in aviation have various pathways for career growth, including promotions, lateral moves, and specialised training opportunities. Certification, qualification, medical and recency requirements: Professionals in the aviation industry must meet various requirements, such as technical qualifications, medical fitness tests and periodic recertifications. Emerging technologies and the future of the aviation professional: Technological advancements like drones, artificial intelligence, and sustainable fuels are shaping the future of aviation careers and the skills needed to a