Economics of Air Transport - Coursework Example

Economics of Air Transport Introduction: Air transport not only provides a means for countries to travel from one country to another, but it also greatly contributes to the country’s businesses and tourism. The economy of a country has great affects from the aviation industry as it creates jobs, influences investment and trade, and generates profits. More than 50% of the tourists and businessmen around the world travel by air and it is the most commonly used mode of transportation than road and rail transport. The industry covers its infrastructure costs by contributing to the national treasuries through heavy taxation. In the same way, the aviation industry has always made and continues to make a substantial affect on the UAE economy. The commercial air logistics companies in the UAE for both passenger and cargo have greatly benefitted the economy of UAE. UAE is a major contributor in the growth of the aviation industry in the Middle East. The Dubai International terminal is a busy airport where there are a number of international flights landing and taking off daily. The economy has been benefitted through several channels including jobs, tourism, taxes, and business trading. The UAE’s aviation sector is highly in success which has impacted the global economy as well in terms of better competition, promoting global tourism, and providing high quality services in low prices. However, the UAE Air Force and Air Defense has been reequipped and re-modernized in the recent times to use the Air Logistics wisely and more efficiently. The UAE Air Force has been spending tremendously on the defense articles but in order to create a more effective air defense network, they must enhance the logistics and management support such as in commercial air transport. Summary: This research paper will explain how the UAE aviation industry has impacted on its economy. The aviation industry along with other key factors has driven the economic growth in UAE over the past decade. The benefits have been direct, indirect, and others are induced. There have been jobs created directly and indirectly by the success of the aviation industry such as on airports as well as due to increased tourism. This has resulted in the raise of GDP up to US$ 6.2 billion. The spending of those employed directly and indirectly in the aviation sector increases consumerism and further enhances productivity and GDP. The aviation sector alone contributes to more than US$11 billion to the GDP (Conventz, 2014, p. 64). The research paper further explains the economies of the commercial Air Logistics companies including passenger and cargo. There are advantages and disadvantages discussed about the ownership and lease considering the strategic airlift, tactical airlift, and VIP transport. The UAE air logistics companies offer ownership and leases and have made investments in infrastructure facilities and promoted new services for the betterment. However, the paper also gives recommendation to the UAE Air Force to use these profitable Air Logistics companies in order to raise funds and buy modern tools and equipment. Research The aviation sector has supported the economy of the UAE in more than imagined ways. It has created its own economic footprint which boosts the travel and tourism, logistics, financial and professional services, and international trade and investment. Without the aviation sector, it is hard to imagine UAE with all the tall buildings, infrastructural facilities, foreign visitors, international labor, and foreign businesses. These Air Logistics companies create connectivity and flow of communication from UAE to the other parts of the world. It creates a network of information. This success of the Air Logistics companies is mainly due to the economic decisions taken by the government of UAE in the past. It was held that the aviation sector holds an important economic position in the government of UAE, there was openness, the approach to investment was consensus based, the focus was mutually laid on the economic growth of the underserved markets, and this eventually resulted in efficient operations. The success was also due to the location of the UAE on the map which provides links and networks to Asia, Africa, and Europe (Abeyratne, 2013, p. 53). The government and the Air Logistics companies have a mutually agreed position on the economies of air transport. This partnership has allowed important decisions to be taken quickly and more efficiently. There is a shared vision of the strategic planning of economic importance to the government. The government has also supported openness which is open competition for the Air Logistics companies. This benefits the infrastructure investments and competitive prices. There are no restrictions on operations for the commercial Air Logistics companies which enable trade, investments, tourism, and logistics management. The consensus based approach on investment has led the government and the commercial Air Logistics companies to work together and expand development. The Emirates which is backed by the government but funded indirectly by private ownership has supported the growth of the infrastructural facilities in partnership. The government’s strategic plan of investing in transport infrastructure has been successful through the consensus based approach with Emirates and Dubai Airport. This has lead to the economic development of innovating launching initiatives, accuracy and speed in the project execution, and a partnership with the private sector. The success of the aviation sector resulted in the number of airport passenger handling from 12 to 47 million (Budd, 2014, p. 44). The Dubai Airports are directly owned by the government, but what makes the operations efficient is that Emirates is run on a commercial basis and all the finances are made by private owners. Emirates, as compared to other international airlines, have been operating efficiently with a modern fleet of aircraft and lower maintenance costs. Emirates have higher profits and have been able to pay off all the loans in past decade. Air transport services for passengers and cargo has been highly functional and active in the UAE due to the location. The location is a principle attraction with additional demand for trade, tourism, and commerce (Duval, 2014. P. 132). Air Logistics companies own and lease aircrafts in UAE for passenger and cargo transportation. The ownership and lease financing of aircraft is common in UAE. Private airlines or operators tend to hire aircraft on lease which includes the financial structure of a long term loan along with an aircraft mortgage registered with General Civil Aviation Authority (GCAA). In UAE, leasing may create legal issues as there is no law which governs the lease finance. The GCAA then issues a certificate for registration that confirms the owner and financing bank’s details. The banks also require the GCAA registration certificate along with a registration of the security interest on the aircraft (Truxal, 2013, p. 40). The UAE Air Force and largest Air Logistics Company, Emirates have been buying a fleet of aircraft with modern equipment and technology. They are spending more than $700 million on aircraft and private royal jet planes. The locals in UAE are in the position to own aircraft which is why ownership of aircrafts in UAE has been a good investment. In addition, due to the increasing success of the UAE aviation industry, rich locals are spending in owning aircrafts (Sales, 2013, p. 121). The increase in the aircrafts ownership by Emirates and other private companies has lead to more competition and reduced prices of fares. UAE has led an international shopping festival due to the easiness in air transport and the low air fares. With the newest fleet of aircraft, Emirates is on its way to become the world’s leading airlines. Conclusion: Thus, in conclusion of the research, it is found that the success of the UAE aviation sector has benefitted the global economy as it improved the connections between countries and promoted international tourism and generated benefit for business and commerce. The economies of the air transport are managed by many Air Logistics companies that operate in strategic airlift, tactical airlift, and VIP transport. They make profits due to the increased passengers and cargo services, and also create jobs to increase productivity. The Air Logistics companies make their finances without any government funding; they are funded by private owners who are individuals or can be companies. The lease and ownership of modern aircrafts leads to reduced costs for maintenance and increased fuel efficiency, eventually leading to higher profits. The openness of the market and more competition in the airlines also results in lower costs of transport and an increased number of passengers. The future of the air transport in UAE is concerned that whether it would continue to play an important part in the economy of the country or not. Based on the above research about the air transport and aviation sector, it can be concluded that the industry has several strengths which lead to the belief that the success will continue in the coming years. The UAE economy will be beneficial due to the direct and indirect benefits by the aviation sector in the future and it will continue to increase the country’s GDP. The economies of the commercial air logistics companies have been very strong and they can be helpful for the Air Force (Baluch, 2005, p. 42). The UAE Air Force is also buying aircrafts and modernized equipment to strengthen the UAE Defense Force and they can benefit from the infrastructure and facilities given by the commercial companies. Recommendations: The UAE Defense Force must use the commercial air logistics companies as they earn higher profits and have more resources. The commercial air logistics companies are not backed by the government financing and hence they are more commercialized and make more profits. They have higher funds by private owners by which they buy aircrafts and technologically advanced equipment. The air force can use the air logistics companies by utilizing their infrastructural facilities, their highly skilled labors, their funds for technologically advanced equipment and more aircrafts, and for increasing communication and connection with other countries. The infrastructure development by the air logistics companies have been enabled due to the highly profitable operations. The large commercial air logistics companies in UAE have lead to infrastructural development. The Air Force can use these infrastructure facilities by coordinating with the commercial companies. These companies make their own financial investments for logistics infrastructure and state of the art facilities for their passengers and VIP transport. These facilities can also be used by the Air Force in order to reduce the costs for investing in infrastructure. As most of the air logistics companies are not backed by government financial support, the Air Force can also use the infrastructure by these companies to save on the economies. Commercial air logistics companies make huge amounts of profits and Emirates is operating under the government support. The UAE Defense Force can also use these infrastructure facilities. These are high quality and highly equipped used for air transportation. It takes millions for these infrastructural developments which would be expensive for the government. If they can be used by the UAE Defense Force, it would save a lot of funds for buying aircrafts and other expenses. Thus, it is economically recommended that the Defense Force should use the infrastructural facilities of the commercial companies to save on the finances (Cordesman, 2004, p. 350). Secondly, it is economically recommended to the Defense Force to use the skilled labor of the commercial air logistics companies as they are more profitable and they hire expert engineers and workers for the maintenance of the aircrafts. The experts and skilled laborers are hired in order to maintain the quality and life of the aircrafts making them more strong and sustainable. They charge high wages as they are experts and mostly these engineers are foreigners. Skilled labor can be insufficient in UAE, thus it is recommended for the Defense Force to use the commercial companies for these laborers in order to save the costs and difficulty to hire experts. The highly technical and modernized aircrafts need to be maintained and repaired using highly technical equipment which is purchased by the commercial air logistics companies. The engineers who use these equipments are specialists that are trained for these modernized aircrafts. Many of the air logistics companies use these modern aircrafts and hire such engineers. It would be economically suggestible for the Defense Force to use these engineers for the maintenance and repairs of their aircrafts. It would be cheaper than the whole process of hiring and training. In UAE, the government has been in partnership with the commercial air logistics companies and given them openness for competition and no restrictions for their air transport. This partnership has been proved very beneficial for the government and the commercial air logistics companies. The partnership can be further used by the Defense Force to utilize the profits and equipments purchased by these companies. The equipment which is used by the engineers is highly expensive, thus a partnership with the commercial companies can lead to the usage of the equipments and tools that are necessary for the maintenance and repairs of the aircrafts (Williams, 2012, p. 409). Moreover, a partnership can raise more funds which can further be used to buy more aircrafts. The UAE Defense Force has been currently spending billions on new aircrafts and jet planes. However, it is economically recommended that the Defense Force form a partnership with the commercial air logistics companies and buy aircrafts. In UAE, the private ownership and the commercial companies have been increased so much and they are profiting in billions which is why it would be feasible and economically beneficial for the Defense Force to form a partnership with the commercial companies. Lastly, it is economically recommended for the Defense Force to combine with the commercial air logistics to use its networks and connections across the globe. The commercial companies have increased capacity, lower air fares, more trade, tourism, and commerce opportunities, and it forms more connections globally. This can be helpful for the Defense Force to stay connected and updated with the activities of the governments and to enhance the social relations. This is important to strategically plan the defense and policies (Peck, 2010, p. 28). The openness in the UAE leads to the private sector to dominate the aviation industry. In order to successfully and economically strategize the spending, the Defense Force must consider and collaborate with the commercial air logistics companies. The ownership and lease of aircrafts can help the Defense Force economically and the skilled labor can be beneficial. The economies of the commercial air logistics companies are very strong since they focus on the profit maximization and they have no restrictions to operate. Their profits and strategies can be helpful for the Air Force as well. Thus, the aviation industry has greatly expanded and grown in the UAE in the past decade and it has lead to a number of air logistics companies that are commercially operating and boosting the economy of the country. The government understands the importance of this industry in the economic well being of the country and thus provides them collaboration with full support. The Defense Force is also recommended to use the commercial air logistics companies and their facilities in partnership to increase the well being and growth of the sector. References Conventz S. 2014. Airports, Cities, and Regions. NY: Routledge Abeyratne R. 2013. Regulation of Air Transport: The Slumbering Sentinels. USA: Springer Budd L. 2014. The Geographies of Air Transport. UK: Ashgate Publishing Truxal S. 2013. Competition and Regulation in the Airline Industry. USA: Routledge Duval D. 2014. Air Transport in Asia Pacific. UK: Ashgate Publishing Sales M. 2013. The Air Logistics Handbook: Air Freight and the Global Supply Chain. USA: Routledge Baluch I. 2005. Transport Logistics: Past, Present, and Predictions. USA: Winning Books Cordesman A. 2004. The Military Balance in the Middle East. USA: Greenwood Publishing Group Williams G. 2012. Air Transport in the 21st Century: Key Strategic Developments. USA: Ashgate Publishing Peck M. 2010. The A to Z of the Gulf Arab States. UK: Rowman & Littlefield Read More