As you all know, the most elite movable and valuable asset of any airline, lessor, or bank is an aircraft. Most countries depend on the air travel industry for their fast-growing GDPs. It is a $3.5 trillion industry and is expected to reach $7.6 trillion within the next two decades. Its competitiveness has increased globally, and the figures for the lessor and banking-sector participation in this industry have tripled in the last five years. This sudden uptick might be due to the manufacturers making the purchase, management, and maintenance of aircraft more accessible than they used to be.
Why the aviation industry? I will go over the three crucial factors that provide an overview for job seekers, graduates, and people who are undecided about choosing a career option.
1. The Rise of Lessors and Banks in the Aviation Industry.
Let me give you a brief introduction to the financial aspects of this industry. You might wonder how airlines are capable of ordering and managing fleets of more than 100 aircraft, even when the travel and tourism market exhibits fluctuating demand in the market. One of the explanations is the assistance of lessors and banks, which involves operational and financial lease contracts.
To summarise briefly, operational leases consist of short- and long-term contracts with minimal financial risks, as if you are renting a plane to an airline for a specified period. For a financial lease, it is similar to buying a car on loan for a period, which you own at the end of the contract. In this case, it’s an aircraft. By providing these suitable options to an airline, lessors and banks enable the airlines to meet and conquer the higher demand in the market. Sometimes airlines make use of these financial aides and lease their aircraft to other airlines due to the market fluctuation.
This chart illustrates the cumulative bookings of the top two manufacturers. As you can notice, 2013-2014 was the year with the highest orders to date. This significant demand has created a considerable backlog for the manufacturers. As it is an intricate process, it has been a challenge for the manufacturers to increase their produced aircraft and to deliver them on time, as scheduled, to an airline or a lessor. Besides this, capital growth in the global aviation business has shown a significant increase in prior years. The maturity in developing countries has presented a rise in air travel, which initiated a way for low-cost airlines by implying a compelling business model to attract more people towards travel.
These financial aids have given way to a significant rise in orders for the manufacturers. According to a recent study, manufacturers are developing an adequate approach to maximize deliveries by enhancing their production cycles by up to 30% for upcoming years.
2. High Demand for Skillful Profiles.
Now you know that the potential increase in the aviation industry is due to the availability of financial aid and maturity in developing countries, which created an increase in orders and caused new entries into the market with a disruptive business model by targeting a broader market. All this leads to a rise in higher demand for pilots and technicians who can manage, maintain, and fly the planes to enable an airline to seize the market demand.
According to the 2015-2034 forecast posted by Joe Del Balzo, President of JDA Aviation, there is an increase in demand for pilots and technicians in each region, which is minimal compared to the rise in the global fleet market forecast for 2034. Growth in this industry has reached higher than anticipated levels.
Potential development in new training institutes is quite high and is essential, as growth in the market is inevitable, but existing training institutes are inadequate in producing skilled employees. The below graph suggests an increase in demand for specialized people in different industries; Aerospace is one of the top two sectors suffering from these barriers.
To address this market, Joe Del Balzo provides some interesting suggestions in his article(1), and the problems to tackle now before it’s too late. This lack of available resources can give way to new innovative products/tools when addressing this existing problem; however, because it is new and takes a while to implement it in an organization, the cost of operations increases and gradually creates difficulties in managing the cash-flow, thus causing them to end up closer to bankruptcy.
3. The potential rise in the global market.
It is the right time for students, airlines, and other organizations to invest in adequate and certified training programs alongside technology advancement, which can accommodate the demands of travel and tourism for the coming years. The expected economy of the global aviation industry is expected to reach 7.6 trillion dollars in the next 20 years, which has the possibility of creating over 2 million jobs directly and 25 million jobs indirectly.
Currently, this industry is highly active and high in revenue. If designed for the country’s economic growth, with the help of the government, we will be able to tackle the existing problems of high costs for training and inadequacy of producing qualified people by making training sessions easily accessible and knowledgeable. As we have seen, the aviation industry is a formidable driver of global growth. Faced with a generalized skills shortage (particularly in developing states), countries wanting to benefit from this industry’s changing trends should invest heavily in the training and skills development of their local workforce to be able to address the requirements of this industry.
Moreover, to be able to attract more people into the aviation industry, training institutes/schools with the help of present leaders in the aviation industry should focus on the volume of training, which will generate sufficient capital and fame in the long run. Doing so would create quality services in the travel and tourism industry and would potentially double the expected increase in world GDP.
“Aircraft are the perfect assets for the capital markets. They are long-term, physical assets, they have immeasurable utility, and they are mobile.” – Peter Barrett CEO, SMBC Aviation Capital