I’m at Valencia Airport, but I am not finding myself in a stressed security queue or at an overpriced fast food restaurant. I am in a hangar. A huge building, bright and shiny – not a trace of dust anywhere. This spotless hall is the maintenance place of real airplanes. I see one small airplane used to carry water to put out forest fires. Next to it are two vehicles carrying everyday travellers like you and me from one city to the next. At the end of the line comes two military aircrafts. The scale of it all amazes me. I have only seen a location like this in TV series and action movies. This however, is not a film set. This is real life aviation business, and I am here to learn about cost structures.
Learning from a local company
Let us roll back an hour. Professor Felipe Sànchez is teaching finance and economics (Financial Mathematics and Financial accounting) at EDEM Escuela de Empresarios, and he has planned this site visit for his second grade students in the business and administration track. He is happy to introduce the speaker of the day, Vicente Soler Pérez. Vicente and Felipe met at the stock exchange 22 years ago, and have been friends ever since. Vicente is chief of analyses, planning and control in the management group of Air Nostrum. Today, he will share his insight into the cost structure of aviation business, using Air Nostrum as the example.
Vicente Soler Pérez holding the lecture about aviation cost structure.
-This is one of the best companies in Valencia, Felipe states. Air Nostrums strategic management and leadership impresses him. It seems to impress the students as well. During the thirty-minute bus ride to get here, the students were singing, laughing and joking. Now they focus on the lecture. Phones are stored away (in flight mode?) and the notebooks are open.
From fancy to ordinary
Vicente start his lecture with a brief introduction to the history of aviation, which began with the Wright brothers in 1903. 91 years later, Air Nostrum was founded. Their core business is domestic and international connection flights to and from Madrid. Vicente explains how the aviation business has experienced a tremendous growth the past decades:
-Forty years ago, only one or two in this room would have experienced a flight, and they dressed up to go to the airport. Today, I have to ask how many who has never travelled by plane? Vicente looks at the audience, but no one raises their hand.
– As flying has become commonplace, the business models in aviation has changed. Low-cost airline companies have created changes that has gained the whole industry, by stripping the chain of costs to produce a flight ticket. Charging the customer for food and drinks, seating and luggage, may be an irritant to travellers, but in reality, they avoid paying for stuff they don’t want or need, says Vicente. Anyway, what is unquestionable is that the low-cost companies have created the need of flying.
Aviation business models
Vicente further explains the strategic choice of routes. Some actors typically have a “hub-and-spoke” business model, where every flight connects to an airline hub. This is often common for regional airlines, connecting cities in close proximity of the hub. Air Nostrum have two hubs, one in Valencia and one in Madrid. Airline companies can also chose a point-to-point business model, often serving travellers in all parts of the world.
There are plenty of costs when owning a fleet. Maintenance of airplanes requires personnel that is specialized in each vessel. While Air Nostrum have two different types of vessels, Ryanair as an example, runs their entire business on only one model. This has its limitations, but it is a huge advantage that all pilots can operate all vessels, and that every mechanic can do maintenance on the entire fleet. When buying parts, these companies also get the best prices, ordering huge volumes of the same components.
Learning on site
What professor Felipe does by hosting this trip is to facilitate an energetic learning environment for his students. He is turning an ordinary finance lecture into what will become a vivid memory. I can tell, because I have been there myself. Five years ago, I enrolled in the NTNU School of Entrepreneurship, and during this master’s program, we experienced several site visits. I remember each of these lectures as days filled with joy, curiosity, amazement, and engagement. As an example, one of our assignments in “Industrial Marketing and International Business” was to analyse the international structure and innovation activities of Marine Harvest, one of the largest seafood companies in the world. This Norwegian company has 13 233 employees in 25 countries, and is the largest producer of Atlantic salmon globally. Visiting the salmon farms of Marine Harvest at beautiful Frøya was a trip to remember. We saw salmon fed in fish cages, and tasted its cousin’s afterwards, as we had lunch with the administration of the company. The field trip consisted of images, sounds, smells and flavours that fuelled my motivation, my interest and drive to understand the industry.
Learning that sticks.
A lecture without a site visit would also be educational, learning from a real company. However, being there, sensing the waves carrying the boat next to a fish cage, or gazing up at the huge wings of an airplane in maintenance – this fuels learning. Site visits like these are entrepreneurship education based on real life experiences. My experiences. As well as the business students’ experiences. They see themselves in the greater picture by being in this maintenance hangar. They study the airplanes and ask detailed questions about what they see. They relate to the mechanics working on top of the wings, and wonder what it is like to be a pilot. They are using all senses to examine their curriculum, thus the learning experiences stick. Just ask them in the future! I am positive these entrepreneurs-to-be will remember the day they learned about cost structure under the wings of an airplane. At least, so will I.
Do you want to learn more about the schools mentioned in this blogpost? Here are their web sites:
EDEM Escuela de Empresarios: https://www.edem.es/
NTNU School of Entrepreneurship: https://entreprenorskolen.no/