Aircraft Valuation In Dynamic Air Transport Industry

Aircraft valuation and the projection of its future price is an intricate process. This paper provides a comprehensive review of aircraft valuation. It presents a methodology that will more accurately measure return on investment, improve the efficiency of managing operating costs, and more effectively determine yield analysis.  The value of an aircraft depends on internal factors that are directly related to the aircraft’s documentation and specifications.  Some examples of these are age, aircraft size, seat capacity, fuel efficiency, and technical status.  In addition, the aircraft price depends on the external factors, such as market demand and its elasticity, fuel cost, and environmental regulations. The external factors are extremely important because they indicate where in the aviation industry cycle the aircraft is and this, in turn, has the greatest impact on aircraft value. The theoretical value calculated in this paper is highly responsive to the assumptions underlying the valuation model

The Maquiladora Industry: Recent Downturn And Future Prospects

The Maquiladora industry was created in the mid-1960 as the United States terminated the Bracero program. The main objective of the Bracero program was to bring in Mexican workers to fulfill U.S. agricultural labor demand. The end of the Bracero program left thousands of unemployed farm workers in Mexican cities bordering the U.S. The Maquiladora program’s intent was to subsidize foreign manufacturers that set up plants on the Mexico side of the border to create jobs for the Mexican workers. Mexico allowed plants to temporarily import supplies, parts, machinery, and equipment necessary to produce goods and services in Mexico duty-free as long as the output was exported back to the United States. U.S. firms, as well as other multinational companies, responded enthusiastically to the lure of cheap labor.  Mexico experienced high economic growth and become a major player in exporting intra-industry products to the U.S. The NAFTA and other free trade agreements signed by Mexico helped the economic growth of the Maquiladora region. Maquiladora employment increased significantly since the inception of the Maquiladora industry and Maquiladora exports now account for half of Mexico’s total exports. The Maquiladora industry is U.S.-demand driven since most of Mexico’s Maquiladora production is destined for the U.S. market. The recent recession in the U.S. took a heavy toll on Mexico’s Maquiladora industry. Another challenge to the Maquiladora industry is raising global competition, particularly from China. Therefore, the magnitude of the industry’s contraction during the most recent recession suggests that there are more factors influencing the industry than just the business cycle. This paper presents the creation of the Maquiladora industry, its success following the NAFTA agreement, and its recent downturn. It also explores the answers to the following questions: How much of the Maquiladora downturn was due to the business cycle? How much was due to structural change? Is the Maquiladora industry ready to face rising global competition

Productivity Analysis of Public and Private Airports: A Causal Investigation

Around the world, airports are being viewed as enterprises, rather than public services, which are expected to be managed efficiently and provide passengers with courteous customer services. Governments are, increasingly, turning to the private sectors for their efficiency in managing the operation, financing, and development, as well as providing security for airports. Operational and financial performance evaluation has become increasingly important to airport operators due to recent trends in airport privatization. Assessing performance allows the airport operators to plan for human resources and capital investment as efficiently as possible. Productivity measurements may be used as comparisons and guidelines in strategic planning, in the internal analysis of operational efficiency and effectiveness, and in assessing the competitive position of an airport in transportation industry. The primary purpose of this paper is to investigate the operational and financial efficiencies of 22 major airports in the United States and Europe. These airports are divided into three groups based on private ownership (7 British Airport Authority airports), public ownership (8 major United States airports), and a mix of private and public ownership (7 major European Union airports. The detail ownership structures of these airports are presented in Appendix A. Total factor productivity (TFP) model was utilized to measure airport performance in terms of financial and operational efficiencies and to develop a benchmarking tool to identify the areas of strength and weakness. A regression model was then employed to measure the relationship between TFP and ownership structure. Finally a Granger causality test was performed to determine whether ownership structure is a Granger cause of TFP. The results of the analysis presented in this paper demonstrate that there is not a significant relationship between airport TFP and ownership structure. Airport productivity and efficiency is, however dependent upon the level of competition, choice of the market, and regulatory control

A Total Factor Productivity Based Structure for Tactical Cluster Assessment: Empirical Investigation in the Airline Industry

In this paper we analyze and assess the efficiency of the United States (U.S.) airline industry through the total factor productivity (TFP) method. While airlines use various resources to produce a heterogeneous group of outputs, this article focuses on certain fundamental outputs as final products of selected airlines. The results from this analysis indicate that the national airlines (US. domestic carriers) have higher TFP as compared to the major airlines. While major airlines have drastically cut costs in the past few years, they also need to improve efficiency or risk going out of business. In this paper, we investigate the efficiency and productivity of a selection of U.S. airlines for the years 1996 through 2001. These years have been chosen as a good example of years in which the industry experienced normal growth and generally positively returns. Subsequent to 2001 the industry experienced two severe external shocks, namely, the September 11, 2001. terrorist attacks and the Iraq war. These anomalous shocks make the years after 2001 inconsistent with respect to the type of index developed in this article

A Basic Analysis Of Aging Aircraft, Region Of The World, And Accidents

Differences in aviation safety records around the world should be minimal or nonexistent considering the global nature of aviation. However, significant differences exist and the reasons for those require the attention of governments, regulatory agencies, aircraft manufacturers, airlines and the flying public. One concern is that aircraft are increasingly used beyond their designed economic life. This study focuses on the relationship between aging aircraft and the country where the aircraft was registered. Findings support the idea that in general, the frequency of accidents increases with the age of an aircraft. The study also revealed that there is a correlation between the number of accidents, their severity and aircraft manufacturers. The aircraft’s phase of flight was also related to the number of accidents, with the Approach/Landing phase having the greatest number of accidents. The FAA and JAA have been influential in the development and dissemination of safety programs around the world. However, their efforts have not yet resulted in a world-wide standardization of safety and maintenance programs. This may be an indication that while an aircraft may be a global product, the aviation industry lags behind in becoming a global industry

Methodologies and Techniques for Determining the Value of an Aircraft

Aircraft valuation and the estimation of an accurate aircraft price is undoubtedly a challenging task that has significant consequences for airlines. This paper presents an asset valuation model to show how a series of endogenous as well as exogenous factors can influence the value of an aircraft. Specifically, a discounted cash flow methodology is used to forecast the valuation of an old or new generation aircraft. Both total operating revenue and aircraft operating costs are taken into account to devise a reliable pre-tax profit measurement that is used as the basis of the discounted cash flow analysis. A sensitivity analysis based on Monte Carlo simulation is utilized to identify which factors have a more significant influence on the suggested aircraft value. Therefore, it addresses how value fluctuates in response to economic fluctuations. Indeed, the calculated value of an aircraft highly depends on the underlying assumptions used. The calculated value is compared with available data in a case study for verification

Airport Performance and Ownership Structure: Evidence from the United Kingdom, United States, and Latin America

This study investigates the operational and financial efficiency of airports in selected countries using a cross-regional analysis. A total factor productivity (TFP) approach is used to examine the operational and financial efficiencies of selected airports in the United States, the United Kingdom, and several Latin American countries. The empirical results indicate mixed implications and suggest that the privatized airports in the United Kingdom outperform the partially privatized, government-owned airports in Latin America; however, the evidence also suggests that the selected United States airports outperform the other two groups for each year of this investigation (2000– 2010). The ambivalence of these results suggests that airport efficiency and productivity may be better evaluated in terms of market structure and competition rather than on the basis of ownership