The Aerospace Industry

The Aerospace Industry

Abstract

The modern business organization has undoubtedly been prompted by continual social, political and economic growth. Drastic changes in technology and global communications have created the need for managers to develop beyond simply understanding the business environment. Now, they must also invest their resources into researching the climate which they wish to create within their organization as they realize the effects which this climate can have on both: their internal and external customers, as well.

As a result, business has evolved from a meager place of work into the business environment. This is a place in which ethically responsible managers make conscientious decisions knowing that they will impact the potential economic, political, and social threats that face them. However, these decisions must first be studied. The derived data must come from practices that can be used reliably. And, the most effective means of gathering this knowledge is by conducting a systematic inquiry into these areas known as business research. Good business research generates dependable data as is described in this report.

The Aerospace Industry

Economists use the Gross National Product (GNP) as a way to measure our nation's income and the overall health of the economy. GDP is the market value of all final goods and services produced in the economy in a single year. One way to figure GDP is to add up the income received by American businesses and households. Another way is to look at expenditures made by the decision-makers in the economy: expenditures by households, business investment, and government expenditures. Another way is to look at the success (or failure) of leading industries, such as the airline market.

In the airline business, Over the past 30 years, world Gross Domestic Product has tripled.(Bisignani, 2005, p.82) In the same period, passenger traffic has increased seven-fold. With 6% annual growth, air transport is expanding at more than twice GDP. The problem is that the more the industry sells, the more they lose. In 2004, 1.8 billion people flew (p.82). Shocks such as SARS, terrorism and war have interrupted the normal business cycle.

The shock for 2005 started last year. With rising fuel costs to add onto the industry's problems, the predicted shortage of employees will have a major impact in the industry and eventually the GNP. Competition and markets should define the future of the industry. There is intense competition and consumers are complicated. The airline industry must make a change to keep up with the global demand of the next 30 years. Both the U.S. and Europe must take the lead in making these changes. There seem to be a change in the equilibrium and government must let the airline business conduct themselves as a business.

Other economic factors contribute to predicting the success of the airline industry during the coming year. Personal income as an indicator is a projection of consumer spending. As income increases, more importantly disposable income, more free cash is used for leisure travel. Market indices such as the S&P 500 and Dow Jones Industrial average, are barometers of consumer wealth. As these indices rise, so does personal net worth. This perception of wealth whether real or on paper creates a positive sentiment towards spending on luxuries. This again creates more leisure travel boosting travel and aiding the airline industry with an increase in business.

According to market center.com (2006), the consumer confidence index saw signs of recovery since last summer. This would indicate the population's faith in their future economic prospects is on the rise. In the case of the airline industry, a rise in consumer confidence would produce freer spending on luxury travel as worries about future economic prospects subside.

Other economic indicators contribute as a negative force to future growth in the airline industry. Increases in lending rates as they elate to mortgages reduce disposable income. Pulling equity out one's residence becomes more expensive. Equity lines used to make purchases other than home improvement will see a downtrend as using the house to make frivolous purchases declines. As the prime rate increases, those with adjustable rates will see their mortgage payment increase further stifling disposable income. Less disposable income would mean that nonessential airline travel is cut out as consumers look to cheaper methods of transit when vacationing.

The Aerospace Industry is predicting a shortage of employees over the next 20 years. The 64 million baby boomers that make up 40 percent of today's labor force will begin retiring by the end of the decade. However, the number of employees who have the education and experience to fill these vacant positions will fall by 10 percent. Employment in the aerospace industry is not as popular amongst high school students as some others with higher recognition. Paul Rodrian, 47, a Lockheed Martin aerospace engineer, sees a desperate need for more scientists. He "regularly visits Colorado schools, encouraging students to consider technical careers." (McGhee, 2005).

The shortage of aerospace workers not only affects the commercial sector but the military and defense organizations as well. This shortage of personnel has led Congress to introduce H.R. 758 in an effort to address the fact that the United States economy and defense is in jeopardy if the shortage of aerospace industry personnel is not addressed. The bill is necessary due to the fact that many of the aerospace workforce is nearing retirement age and the impact of those who left the industry after the massive layoffs of post 9/11. Employment indicators project that possibly 27% of the aerospace workforce could retire by 2008 or sooner (Defense Industry [DI], 2005).

Today

Recent news headlines read: "Boeing Projects $770 Billion Market for New Airplanes in Asia-Pacific" (Boeing). However, this information could not be widely celebrated without coming to a harsh reality. Boeing would have to seek to rehire the personnel that were previously laid off. The downsizing of Boeing left many positions unable to be refilled with qualified personnel. The qualified personnel had been laid off and the vacant positions were now being filled with personnel with no experience. Some have said that being a production worker is like being a professional athlete; the body does not last very long. "The average age of the production workers left after layoffs was 48 years old" (Boeing).

SWOTT

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