Apa style research paper effect of us national economy on us flight school economy
Effect of US National Economy EFFECT OF US NATIONAL ECONOMY ON US FLIGHT SCHOOL ECONOMY Name: Grade Course: Tutor’s Name: (11, March, 2011)
Effect of US National Economy 2 Effect of US national economy on US flight school economy Abstract The U.S based flight school s are part of the world’s most advanced aviation traininginstitutions due to the better training facilities and schedules that they posses, The part 141 flightschool is amongst these institutions. Therefore, the economy of part 141 flight school needs ahigh level of stability to maintain the world standards. This study adopts a survey to explore the effects of US national economy on the aviationtraining with the US based part 141 training school economies as the main case. Content analysisof various US economy related literature has been explored to establish the effects. The resultsof the paper shows that the economy of the aviation training schools is cyclical with the USnational economy since the Aviation school economy is a subset of the National economy. Theeffects are due to the role of government in the US economy which is crucial when it comes todecision-making in regard to the monetary and the fiscal policies. The government takes thenecessary initiatives which ensure the growth and stability of the United State’s economy andhence the economy of the aviation schools. (Soekkha, 1997, Wood, 1947, Sheehan, 2003, Rima,2000, Wald, Fay, 2011, Forsyth, 2005 & Gleich, 2011). In the analysis, the US national economy affects the aviation training economy throughthe use of the economic tools such as the money supply, the tax rates, and the credit control,amongst other strategies; it adjusts the rate of economic growth. For the most part, the nationaleconomy also balances the private business concerns in order to enhance its general growth andprevents monopolies.
Effect of US National Economy 3 The US government renders a number of direct financial assistance services in the formof providing support for the aviation training, aid for research and the development programs,and funds for the students’ study loans as well as the general aviation infrastructure in general.Therefore the aviation training school economy is cyclical with the national economy. However,the aviation industry in general is countercyclical with the US national economy. (Aud, Et al,2010) Introduction Statement of Null Hypothesis: The National Economy has no effect on the aviationeducation industry. Overview of how the National Economy is defined. The national economic Performance Measures are the tools that are used to define thenational economy. The performance of national economy can be analyzed by considering thethree areas of production, employment, and national purchasing power, this can be achievedthrough the examining the selected time series with data covering a period of time which ispertinent to each of these areas. The time series forms the principal indicators of the economy’sperformance. Production The Gross Domestic Product (GDP) is the measure of economic performance, inreference to the overall production. Nominal Gross Domestic Product (GDPN): The measure of production with respect tothe current prices. Real Gross Domestic Product (GDPR): A measure of production in respect to the pricesof a base year. Real GDP is used in the determination of the performance of the economy on the
Effect of US National Economy 4production front, because GDPN is not a reliable indicator of production. For instance, WhileGDPN is measured in current currency thus it is indicating what is happening to the productionand the prices over that particular time, GDPR is measured in dollars of a base year thusindicating the variation in production alone because the output is measured in the currency of agiven year, or constant currency. The Percent Change in the Real Gross Domestic Product (GDPC): it is the measure ofthe rate of growth in terms real production for a given year. GDPC the provides the rate ofgrowth in real production from year to year. Unemployment The rate of unemployment is used to measure the economic performance with respect tothe overall employment. The information on Unemployment is used to measure the economicstability. Unemployment Civilian Labor Force (CVLF) is the pool of labor, which is comprisedof civilians who are either working or seeking work, in the nation’s labor markets.Unemployment (UNEM) is the subset of the Civilian Labor Force, and it represents people whoare unemployed and still search of work. (Colbert, 2004). Purchasing Power The economy is defined in terms of its performance by the rate of change in the ConsumerPrice Index with respect to the purchasing power. The Percent Change in the Consumer Price Index: it is the measure of price stability andthe stability of the purchasing power of a given economy. The Purchasing power is inverselyrelated to the prices. As overall prices tend to increase, the purchasing power of income tends todecreases. The CPIC is the year-to year percentage change in the Consumer Price Index.
Effect of US National Economy 5 The qualification used to qualify a school for use in this report. According to Kudimi, (2008). Choosing a flight training school for use in this reportinvolves careful research under the consideration of several factors;a) Level of the aviation school. The level of the aviation school varies from the state-to-state or country depending on theeconomic strength. Therefore it was practical to obtain the levels of multiple schools. There aretwo training levels, the Federal Aviation Administrators (FAA) and the CAA. (Bowles, 2000)The school requirements. School requirements were Compared, the coursework and training, the entrancerequirement and the certification with various regulations.b) The school’s reputation The period that the school has been in business, the rate of enrollment and thecompletion. Does the school offer financing, on-campus housing, and so forth? In connection tofinancing there is a wide range of financing options, there is a loan scheme which is designed forthe each student in most aviation training schools. Generally, Meeting the expense in the flighttraining can be through the bank loans, the student’s loans, the government grants and thescholarships. Therefore, the students may have to arrange the financing from the multiplesources. This ensures a student’s ability to complete the training. (Price & Forrest, 2008)c)The Staff
Effect of US National Economy 6 The training schools to be considered must have enough and qualified staffs, someaviation training schools have a high instructor to the student ratio and therefore did not qualify.Qualifying schools had Experienced Heads of Sections, who were backed by teams of competentlecturers with vast experience in their respective fields. This was necessary in order to keep intandem with the global aviation standards as set out by the International Civil AviationOrganization, the staff must continually evaluate and upgrade the courses’ content material andthe training facilities for the benefits of the aviation industry in general and the students inparticular. (Wensveen, 2007).d) Training equipment The training equipment must include ATC Simulators for both radar and the proceduralcourses in Aerodrome, the approach and area Control. The Communications Operations Sectionmust be well equipped with the AMS and the AFS laboratories. Engineering courses in the aviation training school must be conducted using the mostmodern equipment available from the digital techniques and microprocessors to new ILS, VOR,DME, the Primary/ Secondary Radar and the Computer equipment. (Mark, 2007) National Economy Review 6. National Unemployment rates GDP Table 1 Table 1Table 1Production, Unemployment, in the United States Economy, 1990-2010
Effect of US National Economy 11 Outside factors Student loan/grant availability During the period most of the years in the 1980s and the 1990s, the United StatesGovernment was faced with a large deficit. The issue of how to reduce this deficit was acenterpiece of the discussions amongst the economists and the policymakers for more almost 20years. In the nominal terms, this deficit grew from approximately $53.7 billion in 1980 to $173.0billion by 1990 it peaked at $297.5 billion by the year 1992. For the period 1993-1997, thedeficit grew steadily smaller. After almost 28 years of deficit, in 1998, for the first time, theUnited States budget recorded a substantial surplus of approximately $43.8 billions. For theconsecutive 2 years that succeeded this surplus, the United States budget surplus increasedfurther, to a high of approximately $119.2 in1999 and consequently to $218.6 in 2000. This risein the surplus accounted for the 1.3 percent of nominal GDP in 1999 and the 2.2 percent in 2000,its largest share of GDP. These dramatic changes are attributable to an increase in tax receipts from the U.Sexpanding economy, however a decline in the expenditures which might be partly due to theBalanced Budget Act of 1996.The U.S Government budget surplus remained throughout theprojection period, which accounted for 1.4 percent of GDP by the end of the Year 2011. Thereare numerous shifts in the composition of the economy over the 2000–10 periods. Transferpayments are rose to a 51.4-percent share of U.S expenditures up to 2010, this continuinghistorical trend also accounted for the 37.1 percent of U.S Government expenditures in 1990 and42.6% witnessed in 2000. The primary contributor underlying the growth of transfers is thecombined effect of the sectors such as the aviation industry.
Effect of US National Economy 12Outside FactorsStudent loan/grant availability The figure below shows the distribution of the resources in the U.S and the variation ofthe grants (in terms of students tuition and fees) given to the colleges in relation to the Federalgovernment and the states’ share. Source: U.S. Government Accountability Office (2010)
Effect of US National Economy 13 The public community college system including the flight schools in the country receivessome level of state support. The survey results as reported by the Education Commission of theStates in showed that majority of the states used funding formulas in the determination of theamount to be appropriated for the community colleges as a whole, the amount that should bedistributed to the colleges, or both. The states uses the primary elements used in its formulas,these include; enrollment, space utilization, and the comparison with the peer institutions. TheCommunity colleges receive less funding for the noncredit academic and occupational trainingprograms than for the credit programs due to two main reasons. First, is that less than half of allthe states, according to the national surveys conducted under the Education Commission of theStates and National Council for the Continuing Education and Training, have their funding forthe non-credit programs at the community colleges. Secondly, most of the states which providethe funding for the non-credit programs are based on the numbers of the full-time equivalentstudents that provide the funding at the lower rates. Which is generally 50 -75 percent of the ratethat is provided for the credit programs. The survey responses showed that the states can oftenprovide the lower levels of funding for the courses offered without the college credit in threeareas; the basic skills; noncredit occupational, the professional, and the technical training; andcontract training. States contribute the largest share of funding for public colleges and student loanscompared with other public and the private funding sources. The State funding policies generallydiffer according to the programs. However, the states provide less funding to support the collegesoffering non-credit education and training programs. The overall share of the federal funding tothe aviation training schools has been stable, but comparatively small. The level of the federal
Effect of US National Economy 14funding that each aviation training school receives depends on its participation in a number ofthe grant programs and it may flow directly to schools or indirectly through grants to the states orthrough other entities. The State funding is a major source of revenue for the flight colleges foryears. Data collected from the National Center for Education Statistics shows that the share ofrevenue from the state governments tended to remain relatively stable for a range between 40and 45 percent of all revenue from the period 1992-93 through 2000-01. The states provide aboutdouble the amounts received from the student tuition and fees and the local governments, whichforms the other largest revenue sources for the public colleges. All the public college system in the country receives some level of states’ support.Survey results reported from the Education Commission of the States in 2000 shows that nearly29 states make use of the funding formulas in determining the amount that should beappropriated for colleges involved in training and the amount to be distributed to each college.The primary elements that are used in the states’ calculation formulas were; enrollment, thespace utilization, and the comparison within the peer institutions. The training colleges receiveless funding for the noncredit academic and the occupational training programs when comparedwith those offering the credit programs because of the following reasons; First, less than half ofall states and the major funding sources for the noncredit programs at the community colleges,this according to the data from the National Council for Continuing Education and Training,Secondly, the states that provide funding for noncredit programs bases on the numbers of full-time equivalent students, these states provide funding at a very lower rate–generally rangingfrom 50 to 75 percent of the rates that are provided for the credit programs.
Effect of US National Economy 15The states often provided the lower levels of funding for those courses that are offered withoutthe college credit in three areas; the basic skills, the noncredit occupational, professional, and thetechnical training; and contract training. The federal share of public college funding was fairly stable over the time, but relativelysmall as compared with other funding sources. Excluding the federal student financial aid, thefederal funding provided nearly 5% of the total public college revenue for the period between1992-93 and 2000-01. The revenue is provided through a number of the federal programs whichare operated by various agencies, including the Departments of Education and Labor. However,the information pertaining to the extent to which the public colleges receive the federal fundingfor each of the programs offered is limited at the federal level. Other sources of funds areprovided directly from the federal agencies to training schools. States determine whether thetraining colleges or other entities can receive funding. In such like cases, there are no clearfederal requirements to enable monitoring and reporting of the information back to the federalagency. The Department of Labor is sometimes charged with distribution of the state-basedgrants. The Government regulations Part 141 Flight Schools The government has a lot of regulations governing the Part 141 flight schools, theseinclude; the requirements which are given a great deal of direction from the FAA. It involves arigid structure and a clear outline of what the trainees do in each session. These training collegeshave very structured lessons and several checks rides that a trainee has to go through beforecompleting the flight training.
Effect of US National Economy 16 The general government regulations for an aviation training school include thefollowing;(a) A pilot training school must meet the following prerequisites, for it to receive initial approvalfor examining authority: • The school should complete the application to the examining authority on a form and in a manner as prescribed by the Administrator. • The school must be a holder of the pilot school certificate and conform to the rating issued under this part. • The school must have conformed to the rating in which the examining authority is sought for at least 24 consecutive months on the calendar that proceeds the month of application for the examining authority. • The training course for which the examining authority is requested may not be a course that is approved if it does not meet the minimum ground and the flight training time requirements. • Within the 24 months before the date of application to the examining authority, the school must meet the following requirements;(i) The school must have completed the training for at least 10 students in the training course inwhich the examining authority is sought and the trainees must have been recommended at a pilot,the flight instructor, or ground instructor certificate or rating.(ii) The greater percentage of the students must have passed the required practical or knowledgetest, or any combination thereof as pertains to; the pilot, flight instructor, or ground instructorcertificate or rating, with the test given by; An FAA inspector, An examiner who is not anemployee of the school.
Effect of US National Economy 17(b) The pilot school must conform to the following to retain the approval of its examiningauthority; • It must complete the application for the renewal of its examining authority on a form and in a manner as prescribed by the Administrator. • It must maintain the pilot school certificate and ratings issued. • The school must hold the rating for the period over which the continued examining authority for at least 24 months period in precedence to the month of application for renewal of the examining authority. • The training course for which the continued examining authority is requested for must meet the minimum ground and the flight training time requirements. Definitions of the cycles that have occurred in this time frame Overview of how the data was collected, analyzed and compiled In conducting my work, I administered the Web-based survey to several, regionallyaccredited aviation, training institutions including both part 141 and 61flight training institutionsthroughout the country; conducted the telephone interviews to college experts and relevantaviation associations. I also obtained data from the Departments of Education and aviationServices, and Labor, and reviewed existing data and literature in order to gather information onaviation training economy, the aviation colleges and flight training schools particularly the USaviation training academy, their policies and the funding sources that support both the students’academic preparation through students loans and the workforce development at these institutions.I relied a lot on the findings of studies which are regarded to be the most authoritative by theresearchers and the experts in the field of aviation. The knowledge from the social science
Effect of US National Economy 18analysis was applied in examining each of the studies to assess the validity and the reliability ofthe selected results which have been used as evidence in this research paper. I examined theexamined the descriptive information obtained from the National Center for Education Statistics;the letters of permission for the survey were issued by the American Association of CommunityColleges and the Association for Career and Technical Education according to the generallyaccepted government auditing standards. In order to document the academic preparations and workforce training programs offeredby the aviation training colleges and the part 141 flight training schools, the students they serve,the effects of the aviation training economy on the U.S National economy, as well as to obtaininformation on the state policies and federal funds the institutions involved in the aviationtraining, I conducted a Web-based survey of several accredited aviation training institutions inthe country, this survey received a 71 percent response rate. I sent the survey questions to thekey holders of the Aviation training schools’ Data System, and requested for their coordinationof the responses the training officials who are most knowledgeable on the particular issues thatas raised in the survey. I did not independently verify the accuracy in the self-reportedinformation that was provided by these responses, I therefore took a series of steps, from thesurvey design, through the data analysis and the interpretation process, to minimize some of thepotential errors. Analyzed the survey data in the descriptive statistics of the Aviation trainingschools and the part 141 Flight school. To identify the potential questions, I chose to conduct numerous researchers and also theofficials at organizations relevant to the aviation training colleges and the flight schools,including; the Association for Career and Aviation training, the Community College ResearchCenter, the National Association of Manufacturers, and lastly the US Chamber of Commerce. In
Effect of US National Economy 19the discussions that ensured, I focused on (1) the general categories of the programs offered bythe Aviation training colleges and the flight schools (2) various measurements of the effects ofthe Aviation training economy on the national economy; and (3) limitations of governmentagencies on the aviation training programs . I took several steps in maximizing the response rates by sending the follow -up emailmessages to the respondents I various aviation training colleges. The email messages containedthe basic instructions for completing the survey and the contact information to which thequestions were to be submitted. To establish the funding schemes in aviation training I surveyedthe colleges to determine the level of the federal support through each of the institutionscategories. My results, however, are not comprehensive because only 71 percent of collegesresponded to my survey, and of those colleges, between 22 and 41 percent of respondents werenot able to provide the data for the individual students’ loans/ funding sources. I supplemented my survey data with the information from state officials and aviationcolleges and flight training schools in various US states. I chose the states basing on therecommendations that considered several factors such as funding sources, outcome tracking,contribution to the national economy, and the geographic location. I interviewed a variety of theofficials from state on the aviation industry the government agencies in order to understand theunique interplay between the aviation training school economy and the US national economy, theNational development programs and policies at the state and local levels geared towardseconomical growth.
Effect of US National Economy 20 Effect of US national economy on US flight school economy The national economy affects the enrolment of the students in the flight schools programs.The figure below shows the enrolment in different programs in different flight schools across thecountry. Source: ERAU DATA Fact Book. (2010) Effects of national economy on aviation education industry It has been seen that, this industry has been experiencing a trend under which weakereconomies, security fears as well as other matters. The industry’s profitability is closely tied totrade as well as economic growth. In 1990s, the industry suffered much [not only due to world
Effect of US National Economy 21recession, but the intake was further depressed by the Gulf war. In addition, the number oftravelers dropped. This problem was accelerated by airlines over ordering aircrafts in the boomyears of late 1980s. This rendered most of aviation education graduates jobless. Since then, theaviation education industry had reorganized the need for gradual change to ensure their survivalas well as prosperity. It has tried to cut costs aggressively, for the reduction of capacity growth aswell as increasing load factors. For the industry to meet its increasingly discerning customers, it has invested more in theservice quality, both on the ground as well as in the air. This is based on a number of factors thathave led the industry to become more efficient. Some of such forces are based on the ruling thatwas made that; governments need not to subsidize their loss making industries. On the other hand, it has been noticed that, civilian aviation is the main part oftransportation system of the United States, and contributes much to the national economicprosperity. The American public has vested much interest in the aviation strength. Aviationeducation industry differs much from other industries; however, it has been extensively over seenand regulated by public agencies. Even though the times of tight federal economic controlsended with the implementation of the implementation of airline deregulation act, federalagencies have continued to have oversight responsibilities for aviation safety, in addition, thepublic still expects the government to pay special attention to faring on of the aviation educationindustry. It has been shown that, the education as well as training of civilian aviation careers hasbeen seen as one activity in recent years that carries the government legacy. The developments inthe transportation regulations in 1930s were due to economic scenes that were far muchcatastrophic. In addition, the great depression influenced the American philosophy that the very
Effect of US National Economy 22basis of the U.S, economic systems, which lead to the attack of the concept of competition. Onthe other hand, it is true that, the economic fortune reversal resulted to airlines tumultuousperiods of recession. National Economy VS Aviation Flight Training Economy Analysis of How the National Economy Affects the Aviation Flight Training Economy National economy has much effects on the on the aviation straining economy. Thegrowth in national economy has lead to the great deal for pilots all over the world in the currenttimes. This is among the reason that is making students from foreign countries to come to theU.S, for their training completion. There has been a very big surprise to see established flightschools that have been training large number of students, may it be foreign or domestic or evenboth. The flight training market has slowed down; this does not require a genius to observethat. Individuals are not yet ready to travel, this is based on the fact that, individuals are held upwith economic responsibilities to their homes as well as their families. This in one way or theother has slowed down the market for air transport companies. On the other hand, the pilots ofregional airlines are struggling much with low paid jobs, as they continue to struggle to stay withthe company through lay-offs along with furloughs. The need for new pilots across the UnitedStates of America has dwindled to something that does not exist. Nevertheless, there has been alight of hope to the training economy. Foreign airlines have started hiring pilots from the UnitedStates, and put them to work in their mother countries. It is true that, the aviation market is muchglobal, as an effect, American individuals working abroad get a lot of benefits, that even workingdomestically are not available, for instance, taxes. They do not have to pay taxes anymore. Thisis a very great incentive by itself, however, that is not all at all at all. It has been proved that,
Effect of US National Economy 23foreign airlines pay much better as compared to their American counterparts. It has been shownthat, some of them either gives house allowance or provide pilots with places they can live. Thisis not the bad idea as longer as their families does not need them at home as per that time. On the other hand, the baby boomer generation are all preparing to go home forretirement in the next ten years or so, this will pose an environment that posses the great needfor pilots, air traffic controllers, F.A.A personnel, as well as the NTSB investigators and businessmanagers, all across the United States. It has been proved that, many foreign pilots are coming to the United States due to thepresence of recruiters in their home countries. They are just shipped to the United States in ahurry so that they might spend their money on flight training, and in that case, that are reallyassisting the economy of the United States currently. They are brining money to the shores of theUnited States, and spend it in Americas business. Just as by looking at the hotels in which theyare staying in, restaurants in which they are eating from. On top of all these, the flight schools inwhich they are trained in are all doing decently well. This in one way or the other has helped inthe creation of jobs for the Americans, as well as maintaining Americans in jobs. Though to this,there exist draw backs. At the moment the foreign pilots’ ends up completing their trai9ning,they are free to go back to their countries as well as families. After returning to their countries,they will be put on entry-level positions in the airlines in their home countries, and as an effect,they usually start building the valuable experience, that one fine day, they will make themvaluable assets to any company that will be ready. (McDavid& Echaore-McDavid, 2009). At this point, is the juncture at which the American airlines come back into play? Asstated earlier most of their airline workforce is ready to retire, and once they have to retire, theywill be then looking for pilots who are much experienced to fill their ranks, as an effect, they will
Effect of US National Economy 24be looking overseas for the pilots having higher levels of experience as well as skills required.This is based on the fact that, t6he local flight training has all but stopped. The United State thenin one way or the other will need pilots, and the American will be having such well paying jobs.This is based on the fact that, there will be now other cultures sharing the country. So forAmerica to stay competitive, they need to start encouraging training their own pilots for thefuture generation. Cycles of the Aviation Flight Training Economy In most fighting’s having started raising their prices or charging additional fees for theseservices from each individual student. This will then make them loose credibility from themarket. This tends leads to fewer students. This in one way or the other needs fewer students,and as an effect, continue with cycle till the time that the businesses will close again. The trendhas been showing that, North America heads the league concerning the number of pilots that willbe needed in the next two decades. As a matter of fact, though the economy might not be good atthe moment, aviation employment is always cyclic and tomorrow’s prospects are stilloutstanding. Just as it takes time to be trained as a pilot and gain adequate experience, now is thebest to be trained as a pilot during low times. This ensures that by the time economy recovers,and airlines start employing individuals, one will be ready to take advantage of the next boom. Itwill not be only that one is entering the new carrier with all benefits of prestige as well as greatjob satisfaction, but also have the opportunity of earning great money. At the same time, therewill be more than enough jobs to choose from. It has been shown that, aviation industry is highly cyclical, as it much sensitive to theeconomic cycle. During economic hardships, very few individuals engage in travelling ascompared to good economic times. NewMyer (2010) acknowledges that this has been proved to
Effect of US National Economy 25be true in both leisure as well as business sections. Such like characteristic is exempted by thefortunes of the fortunes of the industry in 2007, 2008 as well as 2009. 2007 is described as thebest year by those in the aviation business. Both the civil and military sectors benefited frombudging order books. This year was the first year that at the same time, upturn in both militaryand civil sectors occurred. This booming business was attributed to the booming global growth,which ended up supporting demand for both passengers as well as cargo services. At the sametime, there was a buoyant corporate profit which leads to higher demands for business jets andbusiness travel in general. There was also a higher demand of military equipments due toconflicts in countries like Afghanistan along with Iraq. Concerning the buoyant of the 2007,Boeing enjoyed a record year for new orders, which surpassed the records in previous years. Atthe same time, Airbus range of airliners also had a bumper year in terms of new orders. It hasbeen described that that the soaring fuel prices as an opportunity which would speed up theorders of aircrafts that consumes lesser fuel. On the other hand, analysts describe the situation as being the worst in the past decades.Analysts believe that, by after 2010, there will be a sharp drop that will be seen in deliveries.This is based on the fact that, after every regular recession. Cycles of National Economy It is somehow surprising that the housing component of GDP tends to be a very solidcontributor to GDP growth during recovery process. From time immemorial, residentialinvestments has been controlling only about 5% of GDP, which is very smaller share, putting inmind the consumption component which is about 70%. In addition, a smaller component likeresidential investments at times punch their weight, which is much evident at the time, ismeasured by the use of growth rates other than levels. This means that, though residential
Effect of US National Economy 26investments are a small component of GDP levels, it has the capability of contributingsubstantially to the growth rates of GDP at a very shortest time possible. Figure 1 illustrates thelink between residential investment and the business cycle for the past 35 years. By excluding the recent recession, residential investments has been contributing to atleast 50 basis points to the growth of GDP within two years. This indicates that, thoughresidential investment is not a major element of GDP growth, its growth is of much help duringeconomic recovery. However, after the official end of recession, one and a half years down theline, residential investment has yet to make sensible contribution to the growth of GDP. And infact, in the present times, it is making negative contribution to GDP growth. To some extent, thishas to be expected. This is based on the reasons like dramatic fall in housing prices duringrecession which creates a glut of existing home, either already on or waiting to be put on themarket after an increase in price stabilization. This inventory of existing homes substantiallydampens the urge for the construction of new homes. These in one way or the other imply that, the year after recession, there is no continuousrecovery. However, it gives a suggestion that, the residential investment contribution, is likely tobe much smaller than normal, or, it might be delayed substantially. Under any circumstance, itholds water remembering that, residential investment is not the only expenditure element ofGDP. As earlier noted, consumption is the largest component of GDP, and as such, it has higherprobability of contributing significantly to the growth of GDP. On the other hand, such growththat is driven by consumption can also be hindered by residential investment indirectly, throughits effect on the employment of construction workers. This forms a group having currentunemployment rate of over 20%, hence unlikely to be in a mood of spending.
Effect of US National Economy 27 Aviation impact on national economy Measures of Economic Impacts It is possible to make use of the direct and the indirect expenditures to estimate theinduced effects of those expenditures on the U.S. economy. Using those identified expenditures,the impacts can be analyzed in terms of the induced or the secondary expenditures and both thedirect and the induced earnings and jobs creation.Output: This is the total value of the goods and services produced.Earnings: This forms the wages and the salaries, other labor income and the proprietors’ incomepaid to all employed persons who deliver the final demand output and the services.Jobs: The aviation schools trainees and releases a number of people to provide the civil aviationservices, manufacture the aircrafts and the aircraft engines or work in other industries that areindirectly affected by the activities in the aviation industry. The table 1 below provides asummary of impacts of aviation. spending Earnings/Jobs Primary Expenditures of the airlines The Earnings /the jobs of the aviation Direct and other aviation firms industry and firms employees with the payments over $ 1500. Primary Expenditures of the hotel that The Earnings /the jobs of the aviation Indirect are involved in the aviation related hotels/the restaurants industries which are over $ employees and the owners in ranges 1500. over $ 1500. Secondary Expenditures of the industries Earning/the jobs of the employees and intermediate supporting the airlines or the the owners of the supporting industries hotels resulting from the that results from the primary primary expenditures. expenditures.
Effect of US National Economy 28 Secondary Increased household The personal earnings/jobs throughout Induced consumption of the persons the economy as a result of the gaining income from the household consumption of those primary and the secondary gaining the income from the primary economic impacts. and the secondary impacts.• The Primary Direct Impacts: the activities of the firms which provide the aviation services, such as the airlines, FBO’s, aircraft manufacturers, the flight schools, and the ATC.• The Primary Indirect Impacts: the activities of firms serving aviation visitors• The Secondary Impacts• The Intermediate: the activities of the suppliers to firms providing the aviation services or serving aviation visitors.• Activity generated by households who derive income from the primary and secondary impactsThese activities include;Spending (Economic Activity) • The total expenditures by all the economic units • Same counted multiple times: for example pax airline manufacturerAviation increases the individual Earnings; this can be achieved through; • Personal income generated • Not subject to double counting • Comparable to GDPAviation school economy influences the economy by improving the labor quality as well as theprovision of the Jobs.
Effect of US National Economy 29Aviation and the growth of the potential GDP can be analyzed in terms of the followingperspectives; • Aviation as the input to Production • Aviation as the stimulus to innovation Aviation as the input to Production • Aviation Infrastructure as social overhead (public) capital • Studies examine relationship between GDP (output) and inputs including a) The Aviation schools economy which enhances the labor to the aviation industry. b) The Private capital c) The Public capital. This study placed great emphasis on the aviation production function which comprises theaviation activity variables (e.g. the passengers and the freight enplaned) at the National-levelproduction functions. (Wells & Chadbourne, 1987). • The national economy with more aviation activity has higher output. • Freight effect is stronger and more statistically significant than the passenger effect. Aviation as the stimulus to innovation • Aviation through the flight schools initiates the impacts of improvement which helps to do things in a better way. • The ultimate value rests on the combining the improved transport with other things. • Innovation helps to do old things in a new way. • Do new things. • The “companion innovations” by the users of transportation systems drives the growth and economic benefit.
Effect of US National Economy 30 Aviation Contribution to GDP in the United States Source: Federal Aviation Administration. (2010). Emerging Trends from the data analysis aboveDemand for the aviation services is a consequence of the vibrant and the growing economy. TheFigure 2 above illustrates the closeness in the Relationship between the overall economic growth(in real GDP) and the ensuing demand for air travel services (in revenue Passenger miles). The
Effect of US National Economy 31national economic growth is counter cyclic with aviation economy and hence the Training schooleconomy in terms of the demand and provision of the services, so does the demand for airtransportation. However, the economic uncertainties cause the contractions and slowdownswhich have the pronounced effect on the level of the activities and the financial Performance ofthe civil aviation industry. The civil aviation’s industrial growth, as measured by the real airtransportation GDP, tends to be much more volatile than that of the overall economy, as shownin Figure 2. By 2007, on average, the civil aviation industry had experienced a real growth rateof over 7 percent with a standard deviation of 7.1 percent, while the U.S. economy has beengrowing around 3 percent with a standard deviation of 1.8 percent. This industry hasdemonstrated both the exuberant growth and the precipitous drops. For example, in 1983, afterthe recession that occurred in the period 1981-1982, the industry expanded by over 22 percent,this was followed by three years of nearly zero growth in the real terms (Figure 2).These aresome of the highly volatile trends that can occur in future, although the magnitude of growth anddecline has lessened. The Civil aviation is one of the integral parts of the U.S. economy. It is the key catalystfor the United States economic growth and has profound influence on the quality of life of manyother populations around the globe. It integrates the world economy and helps in the promotionof the international exchange of people, the products,Investment and the general ideas. To a very large extent, the civil aviation has enabled smallcommunity and the rural populations to enter the mainstream of global commerce through thelinkages such as the communities with worldwide population, the manufacturing, and some ofthe cultural centers. The Civil aviation products and the services generates the most significant
Effect of US National Economy 32economic surplus for the U.S. trade accounts and are in the forefront in the development and theuse of advanced technologies. Fundamentally, the civil aviation influences nearly every aspect of the population’s lives,and its success to a great degree, shapes the American society and the U.S. economy in thecoming decades. The ability of aviation school training to foster economic growth and engenderthe social mobility is not, however, guaranteed. The economic and the personal cost of the delayscaused by constrained airport and airway capacity and the reduced the aviation system efficiencyreached unacceptable levels due to inefficiency manpower. The latest economic downturn andthe decline in the aviation activities following the tragic events of September 11, 2001, theaviation economy provides a temporary relief from the growing problems of congestion anddelay. It has by no means eliminated the problems. The training in aviation is expected toprovide thorough intervention in the problems facing the aviation industry; the costs of thedelays when not checked will continue to rise, thereby causing harm to the U.S economy, thecompetitiveness of the related industries’ economy, and all who rely on the aviation in theconduct of their business and the personal affairs. The additional investment in the nation’saviation training infrastructure will facilitate the National economic growth. This study provides insight into the contribution of civil aviation to the U.S. economy, aswell as the economic and employment costs of congestion and delay to the nation and itscitizens. Analyzing the Federal Aviation Administration’s (FAA) Operational Evolution Plan(OEP), which consists of air traffic initiatives aimed at slowing the growth in congestion anddelay, as well as a variety of potential runway investments, this study reveals the essential rolethat increased airport capacity and modernization of the air traffic system play in managing thegrowth of these problems and points to the need for additional efforts to reduce them.
Effect of US National Economy 33 The study’s findings are based on the econometric models which captures the detailedworkings of the U.S. economy. The framework of the study ensured that the consistency betweenits results and those of the U.S. national system of economic accounts.Taking the base year of 2000, the study estimates (in year 2000 constant dollars) the total cost ofthe flight delays to the passengers and airline operators of scheduled commercial passengerairline services in the United States for 2000, 2007, and 2010, and the benefits of the increasedcapacity for the two forecast years. This study considers the national benefits of making theadditional capacity-enhancing the investments in the aviation infrastructure. It involves theexamination of the positive economic impacts of reducing the delays by training the flight staffon the means of increasing the capacity, thereby concluding that the early investments are moreeffective in resolving the capacity and the delay problems, this result into the significant gainsfor the United States and its population. Impacts of the Aviation economy on the National economyFor the purposes of this study, the aviation school training economy impacts include: • The scheduled and unscheduled commercial passenger and cargo operations (including cargo-only transportation) • The General aviation (including business aviation and air taxi) • The related manufacturers, servicing, and support (including the pilot and maintenance technician training) • The supply chains this have indirect impacts) • The effects of the income generated (induced impacts) directly and indirectly by civil Aviation.
Effect of US National Economy 34 • The direct, indirect, and induced impacts of the related industries, such as the travel and the tourism, for which the air transportation provides an enabling function. (Jay, 2011) In the United States, the population and the businesses have become reliant on theadvantages and the cost effectiveness of the air transportation. Similar to the Internet and newlabor saving technologies, the growth and maturation in the aviation industry, and particularlythe civil air transport, is truly a modern economic advancement. During the turbulent economictimes, the aviation activities remain a unique link for commercial activities which contributes tothe revitalization of the economy. According the data results of the Figure. 3 above, theeconomic impacts of the U.S. civil aviation on the overall U.S. economy is evident, Almost allthe states in the United States depends on the aviation economy, this is in line with the currenttrends in the civil aviation industry. The most current official economic data available is forcalendar year 2010. Reports on this year should update with 2010 data. The success of the civilaviation industry may be more closely related to the overall U.S. business cycle than many otherindustries since aviation is the major contributor to the National economic growth. During theworst national economic crisis, the aviation industry shows the responsiveness and the flexibilitydue to its ability to adopt the most innovative resource-saving techniques and the adjustment ofits business models to the changing economic circumstances of the businesses and the consumersfrom the United States and abroad. This research paper also reviewed some of these trends andthe emerging techniques of the U.S. civil aviation industry.
Effect of US National Economy 35 Conclusion The counter cyclic nature of the aviation industry provides a leveling ground for both theFlight schools and the national economy, during the challenging times, the civil air transportindustry provides the economic benefits for the U.S. and the global economy. In an environmentof the decreasing barriers to the trade, the U.S. civil aviation industry remains one of the mostunique engines for the innovations and the effective technological progress, it provides theinfrastructure which keeps the nation at a competitive level. This research report found that, onceall the impacts are fully accounted for, the civil aviation represents the 5.6 percent of the UnitedStates economy. United States aviation training and flight school economy in general contributesto the economic growth and strengthens the ties to the local and the global markets for all theregions in the nation. In the aviation industry, the total output of the civil-aviation-related goodsand the services amounted to $1.3 trillion in 2007 and this generated nearly 12 million jobs, withaccumulated earnings of approximately $401 billion. For the specific areas of civil aviation, suchas air cargo, they have contributed to very effective networking and the collaboration betweenthe companies far and wide. (Bednarek& Bednarek, 2003.) Following the economic trends, the recovery in the wake of the recession period of2008-2009 presented a lot of challenges for the aviation industry, aviation related training andthe U.S. economy as a whole. There is evidence which shows that the capacity reductions thatare made by the airlines and the airports in the wake of the high fuel prices can allow theindustry to better the situation, but the continued fall in the revenues and the demand will forcethe aviation industry to continue with the process of innovation and become leaner and moreresponsive to the market and the accumulating cost conditions. For instance the cost of fuel willremain a continuing concern for the airlines and the activities that are affected by air
Effect of US National Economy 36transportation, such as the aviation training and the tourism sector; this influence is propagated toinfluence the prospects for all other sectors of the economy. As in the past century, the role of theair transportation continues to grow for the U.S. and the global economies. The economic impacts of the civil aviation have been quantified in this reportsummarizes all the benefits that are accrued from the aviation activities which forms the mostvital and rapidly changing industry. This industry through its activities contributes positively tothe U.S. trade balance, thereby creating very high-paying jobs, which keeps the nationaleconomy viable and connects to all other economic subdivisions by creating the commercialopportunities. Since the role of air transportation is crucial, there is continued evolution andbecomes even more intertwined with the way of life, thereby creating a stable and an efficienteconomic system that continues to be vital, even more essential, component in a very strong andhealthy American national economy in the 21st century.(Colton & Bruchey,1987)
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