Preliminary Description of the Future Aerospace Business Environment
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This document is classified as VIVACE Public PRELIMINARY DESCRIPTION OF THE FUTURE AEROSPACE BUSINESS ENVIRONMENT By Johanna Bramham, Wathi Er, Richard Farr, Bart MacCarthy (University of Nottingham) Ole-Jakob Dannemark (Volvo Aero Corporation) Abstract: This document presents a preliminary description of approaches to model factors, themes, scenarios and value chains in the aerospace sector. Three key activities are described: (1) development of a detailed map of the factors that impact on the aerospace business environment and their inter-relationships; (2) an initial set of business scenarios and a preliminary tool for investigating future scenarios of most relevance - VIBES (VIVACE Interactive Business Environment Simulator); (3) a review of the System Dynamics scenario modelling approach and its application in the aerospace market. The report also outlines the next phase of the Business Environment research and the expected research outputs. Dissemination: PU Deliverable/Output n°: VIVACE 2.1/Unott/T/04002-0.1 Issue n°: 2 Keywords: Business environment, business factors, value chain, scenarios, modelling, systems dynamics VIVACE 2.1/UNott/T/04002-0.1 Page: 1/ 128 © 2004 VIVACE Consortium Members. All rights reserved. VIVACE Preliminary Description of the Future Aerospace Business Environment This document is classified as VIVACE Public TABLE OF CONTENTS 0. EXECUTIVE SUMMARY ...................................................................................8 1. CHAPTER 1: INTRODUCTION TO THE RESEARCH....................................10 1.1. Introduction ..............................................................................................................10 1.2. Aims of the Research...............................................................................................10 1.3. Approach Selected...................................................................................................10 1.4. Report structure .......................................................................................................11 2. CHAPTER 2: INTRODUCTION TO BUSINESS ENVIRONMENT DEFINITION 12 2.1. Introduction ..............................................................................................................12 2.2. Existing business forecasting methods....................................................................12 2.2.1. Long-term Forecasting methods employed at Rolls-Royce ..............................12 2.3. Introduction to Scenario Analysis.............................................................................17 2.3.1. Initial Scenario Formulation ..............................................................................18 2.3.2. Scenario Construction Methodology.................................................................19 2.4. Use of Scenario Analysis within VIVACE.................................................................22 2.5. Conclusions .............................................................................................................22 3. CHAPTER 3: BUSINESS DRIVERS AND FACTORS ....................................24 3.1. Introduction ..............................................................................................................24 3.2. The Literature Survey Conducted ............................................................................24 3.3. Factors mapping of the future business environment ..............................................25 3.4. Detailed description of factors..................................................................................27 3.4.1. Passenger Traffic..............................................................................................27 3.4.2. Cargo (freight) traffic.........................................................................................29 3.4.3. Gross domestic product....................................................................................30 3.4.4. Global trade ......................................................................................................31 3.4.5. The business cycle ...........................................................................................32 3.4.6. Exchange rates.................................................................................................33 3.4.7. Taxation ............................................................................................................34 3.4.8. Politics ..............................................................................................................35 3.4.9. Government subsidy.........................................................................................36 3.4.10. Safety ............................................................................................................37 3.4.11. Security .........................................................................................................38 VIVACE 2.1/UNott/T/04002-0.1 Page: 2/ 128 © 2004 VIVACE Consortium Members. All rights reserved. VIVACE Preliminary Description of the Future Aerospace Business Environment This document is classified as VIVACE Public 3.4.12. Airport capacity..............................................................................................39 3.4.13. Environment ..................................................................................................40 3.4.14. Regulation .....................................................................................................42 3.4.15. Passenger attitudes ......................................................................................43 3.4.16. Demographics ...............................................................................................44 3.4.17. Green technology..........................................................................................45 3.4.18. Certification ...................................................................................................46 3.4.19. Operating costs .............................................................................................47 3.4.20. Cost of financial services ..............................................................................48 3.4.21. Cost of fuel ....................................................................................................49 3.4.22. Ticket price....................................................................................................50 3.4.23. Yield ..............................................................................................................51 3.4.24. Operator revenue ..........................................................................................52 3.4.25. Product and service offering..........................................................................53 3.4.26. Aircraft fleet ...................................................................................................53 3.4.27. Aircraft retirement..........................................................................................54 3.4.28. Demand for new aircraft................................................................................55 3.4.29. Demand for maintenance..............................................................................56 3.4.30. Cost of maintenance .....................................................................................57 3.4.31. Air traffic management ..................................................................................58 3.5. Review Process for the Factors Maps .....................................................................59 3.5.1. Initial Feedback on the Factors Maps...............................................................60 3.5.2. Invitation for Further Feedback.........................................................................61 3.6. Conclusions .............................................................................................................61 4. CHAPTER 4: INITIAL FUTURE BUSINESS SCENARIOS.............................62 4.1. Introduction ..............................................................................................................62 4.2. Selection of Scenario Modelling Methodology .........................................................62 4.3. Initial Business Scenario Dimensions ......................................................................63 4.3.1. Hub Airports vs. Direct Flights ..........................................................................64 4.3.2. Aircraft age .......................................................................................................65 4.3.3. Operator Partnerships.......................................................................................66 4.3.4. Airport Availability .............................................................................................67 4.3.5. Quality of service ..............................................................................................68 4.3.6. Journey Length .................................................................................................69 4.3.7. War and Peace .................................................................................................70 4.3.8. Fuel Availability.................................................................................................71 VIVACE 2.1/UNott/T/04002-0.1 Page: 3/ 128 © 2004 VIVACE Consortium Members. All rights reserved. VIVACE Preliminary Description of the Future Aerospace Business