Cebu Pacific Essay

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A. Economic Forces

Generating billions in revenues and creating hundreds of thousands of jobs. In recent years, the global aviation industry has been through many ups and downs. From skyrocketing fuel prices to pandemics to recent financial crisis, aviation industry has confronted a very rough weather in last ten years or so. Consolidation in mature markets, higher ticket prices, modernization of airports, policies to reduce emissions and tremendous growth prospects in emerging economies have been some of the trends during the decade. According to recent industry reports, the global aviation industry is on the path of recovery and future looks optimistic and would present ample opportunities for the stakeholders.

The airline industry is inextricably tied to the overall economy – even minor recessions result in reduced demand and increased sensitivity to prices for leisure as well as business travellers. Changes in the economy have a big affect on the airline industry. The elasticity of demand, externalities, wage inequality, and monetary, fiscal, and federal policies all have an impact on this industry. The airline industry is constantly changing due to today’s market and today we will be looking at the reasons behind it.

By successfully managing opportunity cost, and adapting to an ever changing economic environment, airline industries can have economic success.However, the well-being of the nation’s economy will have a direct impact on the level of success experienced in the airline industry. During economic shortfalls in the nation’s economy, travellers will have fewer resources available to travel for pleasure. Contributing to the negative economic influences in the airline industry, future and existing policies targeting the airline industry will continue to hinder the industry’s ability to recover losses in periods of economic hardships.

The launch of low cost airlines in Philippines has provided a boost for the industry. Airlines that have been part of this trend are Asian Spirit and Southeast Asian Air, offering affordable fares to local and even international destinations. The public seems to have embraced this, as the rate of flying passengers has increased. This increased not only accounts for new fliers but also regular flying passengers who were on a budget and now have a choice to choosing budget over luxury.

There are quite a few negative externalities in the airline industry. Another thing that the economy is affecting the airline industry is the competing airlines. The bigger airlines can afford lower fares which make it hard for the smaller airlines to compete. Different airlines have plans to expand but will not be able to until the cost of fuel is under control. For the low fare carriers who allow advanced booking, they will need to work on a plan to avoid bankruptcy. This will make the airline industry continue to boost prices due to the fact that oil prices are expected to continue rising due to the supply.

B. Political Forces

In 1973, from the Letters of Instruction (151 and 151A) the airline industry in the Philippines was monopolized by Philippine Airlines (PAL). The monopoly lasted for more than twenty years until the Executive Order 19 in 1995 which liberalized the airline industry establishing the domestic and international civil aviation liberalization policy in the country. The E.O 219 stipulates the removal of restrictions on routes and flight frequencies, as well as government control on fares and charges. Following the liberalization, the industry attracted new entrants such as Cebu Pacific, Air Philippines, Grand Air, and Mindanao Express. Unfortunately, Grand Air and Mindanao Express were unsuccessful, and then SEAir and Asian Spirit come to birth.

Today, airline industry in the Philippines is under the regulations of Department of Transportation and Communication (DOTC) under the civil aviation sector. The Civil Aviation sector is composed of the Manila International Airport Authority (MIAA), Mactan Cebu International Airport Authority (MCIAA), Philippine Aerospace Development Corporation (PADC), Civil Aeronautics Board (CAB) and the Civil Aviation Authority of the Philippines (CAAP) (formerly known as ATO). The Department continuously upgrades and improves the international and domestic airport facilities to meet international standards and to provide better service to the commuters. On the other hand, our airline regulatory boards also recognize the International Civil Aviation Organization (ICAO). The ICAO has several regulations that the local boards are following.

Last March 19, 2009, the ISO 9001:2000 Certificate for NAIA terminal 1 was awarded by Anglo Japanese American (AJA) Registrars, Inc. after passing the Phase 1 Audit of the Passenger Facilitation Processes. On May 21, 2009 MIAA was given the upgraded ISO 1991:2008 Certification making the Authority and the NAIA Terminal 1 one of the very few institutions in the country that have passed this upgraded level of certification.

Today, airline industry in the Philippines is facing a big issue in international safety standard. Early this year, the European Union banned airlines from Angola and vowed to block carriers from Sudan and the Philippines from starting flights to the 27-country bloc. The European Transport Commissioner SiimKallas said that they cannot accept airlines fly into EU if they do not fully comply with international safety standards. The Philippine authorities and airlines mad efforts to resolve this issue but still Philippines would be banned from the EU precaution.

C. Socio-Cultural Forces

Obesity – One controversy surrounds the issue of airline companies tightening their seat restrictions for obese passengers. Some companies have gone as far as to charge an overweight individual the cost of two seats because of their size. This has created a stir, as it brings up the question of discrimination. As indelicate as this issue is, airline companies contend that it simply costs more to fly those more portly passengers. According to Newsweek, “A study concluded that the 10 pounds Americans gained on average during the 1990s required an additional 350 million gallons of fuel a year.” So it would seem that this issue has less to do with discrimination and more to do with simple arithmetic.

Security – Airline companies have undergone a dramatic shift in the safety precautions they take, upping the ante in security measures due to recent terrorist attacks. And while the increase in security may, on some level, ease the mind of the pilots, passengers and their families, it also increases the anxiety and frustration with the amount of time and effort it takes to get from the airport ticket counter to the terminal gate. Because of the few successful breaches in security that have occurred over the past decade, airlines will never again have the luxury of being so lax in terms of their security.

Ethnicity – Perception is a major factor in how we view the world. It is also one of the oldest studies in psychology. How we perceive ethnicity, as it relates to air travel, has much to do with September 11, 2001. Since then the eyes of the world have grown increasingly sensitive to the ethnicity of passengers travelling on airplanes. It has created something of a negative perception for particular races and religions. Bloomberg Business week reports, “Airline experts and executives say it’s important not to exaggerate the effects of terrorism fears.” However, because airline companies have had to exercise increased security measures because of terrorism, and because passengers have grown increasingly aware of possible threats, those perceptions are not easily dismissed.

D. Technological Forces

Internet as a way to book flights, check in, and check flight status – Before, ticketing offices were often jam-packed by people who wants to book flights, and most of the time, they are becoming irritated of the situation. Now, with the dawn of the Internet and Cebu Pacific Air’s entry to the world wide web, customers can now book flights without going to a ticketing office, pay their billings securely using Credit/Debit card, they can even change their flight details without bothering to go personally to CEB office, and check flight status that will be a much-used during storm seasons and other obstacles that might hinder the the flight.

Always new and improved software for airlines – Acquiring and continuously upgrading its software is a very big positive impact for the company. It is a way of telling your customers and prospective customers that your airline will not cause them any hassles and troubles in the near future. Aside from having it as an impression of promising greatness, generally, all will follow to the good lead.

New technology for airline employees – Airline employees should be introduced with new technologies to avoid having problems in the future. The airline had purchased new equipments, machines to shorten the queue, but if they have no idea of how it operates, you will not obtain your objective. So every employee must be knowledgeable of technologies for we are now in the 21st century.

New pilot training courses – Finishing a course to become a pilot is not enough. Even if you have become one of the airline’s pilot, you still have to go through series of training courses and seminars to keep on track. Learning does not stop. Therefore as Cebu Pacific Air’s vow to excellence and safety, they are launching several training courses to avoid a doubt, if there is, for a customer to think whether the pilot is competent enough. By this, passengers can seat safe and sound.

New security technology – Website hacking is like an infectious virus that was troubling many people nowadays. But with the new security technology, customers will not have any bad thinking about paying securely using their Credit/Debit card. Cebu Pacific Air’s paying system was verified by Visa, MasterCard and VeriSign. It is a big sign that the airline has a very strong security technology that no hackers can destroy.

E. Environmental Forces

Contrails – short for “condensation trails” or vapour trails are artificial clouds that are the visible trails of condensed water vapour made by the exhaust of aircraft engines. As the hot exhaust gases cool in the surrounding air they may precipitate a cloud of microscopic water droplets. If the air is cold enough, this trail will comprise tiny ice crystals. The wingtip vortices which trail from the wingtips and wing flaps of aircraft are sometimes partly visible due to condensation in the cores of the vortices. Each vortex is a mass of spinning air and the air pressure at the centre of the vortex is very low. These wingtip vortices are not the same as contrails. Depending on atmospheric conditions, contrails may be visible for only a few seconds or minutes, or may persist for many hours which may affect climate.

The main by-products of hydrocarbon fuel combustion are carbon dioxide and water vapour. At high altitudes this water vapour emerges into a cold environment, and the local increase in water vapour can push the water content of the air past saturation point. The vapour then condenses into tiny water droplets and/or deposits into ice. These millions of tiny water droplets and/or ice crystals form the vapour trail or contrails. The vapour’s need to condense accounts for the contrail forming some way behind the aircraft’s engines. At high altitudes, super cooled water vapor requires a trigger to encourage deposition or condensation. The exhaust particles in the aircraft’s exhaust act as this trigger, causing the trapped vapour to rapidly turn to ice crystals. Exhaust vapour trails or contrails usually occur above 8000 metres (26,000 feet) and only if the temperature there is below −40 °C (−40 °F).

Engine Emissions – Over the years, increasing attention has been paid to the sustainable development of the aviation sector. It is now widely recognised that the costs of these externalities must be internalised and paid for by the aviation industry and its users. Of all the externalities generated from commercial flights, aircraft engine emissions have extensive impacts on human health, vegetation, materials, ecosystem and the climate. Currently, only around 10 airports have applied engine emissions surcharges, which are in Switzerland, Sweden and the United Kingdom. However, the impacts of aircraft engine emissions are a world-wide issue and have drawn significant attention in the global community.

This research aims to evaluate the impacts of aircraft engine emissions charges, based on the estimation of social costs, on airlines operating costs. The paper firstly presents the methods of assessing the social costs of aircraft engine emissions. The environmental impacts of aircraft engine emissions include both aircraft landing and take-off and the cruise stage.

The social costs of aircraft emissions vary by engine type and aircraft category, depending on the damages caused by different engine pollutants on the human health, vegetation, materials, aquatic ecosystem and climate. Nine Asian airlines, covering both network full service carriers and low cost airlines, are selected for empirical analysis. The implications of aircraft engine emissions charges on the selected airlines and the corresponding effects on operating costs were measured, involving five existing intra-Asian flight routes. It was found that the aircraft engine emission charges would range from 3-12% of the airlines¡¦ operating costs, depending on the route distance, aircraft types and the nature of airline operating characteristics.

Airport noise – Aircraft noise is noise pollution produced by any aircraft or its components, during various phases of a flight: on the ground while parked such as auxiliary power units, while taxiing, on run-up from propeller and jet exhaust, during takeoff, underneath and lateral to departure and arrival paths, over-flying while en route, or during landing.Aerodynamic noise arises from the airflow around the aircraft fuselage and control surfaces. This type of noise increases with aircraft speed and also at low altitudes due to the density of the air. Jet-powered aircraft create intense noise from aerodynamics. Low-flying, high-speed military aircraft produce especially loud aerodynamic noise.

The shape of the nose, windshield or canopy of an aircraft affects the sound produced. Much of the noise of a propeller aircraft is of aerodynamic origin due to the flow of air around the blades. The helicopter main and tail rotors also give rise to aerodynamic noise. This type of aerodynamic noise is mostly low frequency determined by the rotor speed. Much of the noise in propeller aircraft comes equally from the propellers and aerodynamics. Helicopter noise is aerodynamically induced noise from the main and tail rotors and mechanically induced noise from the main gearbox and various transmission chains. The mechanical sources produce narrow band high intensity peaks relating to the rotational speed and movement of the moving parts. In computer modelling terms noise from a moving aircraft can be treated as a line source.

Aircraft Gas Turbine engines (Jet Engines) are responsible for much of the aircraft noise during takeoff and climb. However, with advances in noise reduction technologies – the airframe is typically noisier during landing.

The majority of engine noise is due to Jet Noise – although high bypass-ratio turbofans do have considerable Fan Noise. The high velocity jet leaving the back of the engine has inherent shear layer instability (if not thick enough) and rolls up into ring vortices. This of course later breaks down into turbulence. The SPL associated with engine noise is proportional to the jet speed (to a high power) therefore; even modest reductions in exhaust velocity will see a large reduction in Jet Noise.

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