Efficiency, aircraft, especially commercial flights. This huge

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                        Efficiency, Elegance,
Durability. These are but a few words associated with BMW as a brand.  Indeed, the internationally acclaimed
franchise has succeeded in creating a niche as one of the most sought after
automobiles in the world. As a company that started primarily making aircraft
engines, its diversification into cars and motorcycles has been phenomenon to
say the least. Having conquered the world of automobiles, Perhaps, it is time
to venture into other areas; aircraft production?

According to the company’s official
website, at year ending 2016, BMW posted a profit of over nine (9) billion
euros. It has presence in over fifty countries worldwide across five
continents. If it indeed doing so well, why diversify? One might ask. An answer
would be, why not? According to The Economist, “The four biggest Gulf carriers
alone; Emirates, Etihad, Fly Dubai and Qatar Airlines, bought planes worth more
than $170 billion, at list prices, from Boeing and Airbus, the world’s two
biggest plane makers, in one day.” This clearly indicates the huge potential
associated with airplane production. The aim of this paper thus will be to
effectively look at the viability of undertaking such a move, that is the
benefits and costs that will come along with such a move and whether ultimately
BMW will be successful in the sky as it is on the ground. Boeing, the leading
producer of airplanes will be used as a reference point.


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The world today is becoming more and
more global. People have come to realize that flying is the most efficient mode
of transport and this has boosted the commercial airline business. There is
therefore a huge demand for aircraft, especially commercial flights. This huge
demand can be attributed to two reasons and BMW as a world franchise can take a
huge advantage of.                                                                                             The first reason for
this huge demand is the increase number of flights. . Boeing, the leading
manufacturer of airplanes predicts that a total of 41,039 new airplanes will be
needed over the next 20 years. This figure represents a jump of almost 4% from
the previous prediction a year ago. The worth of the orders is calculated at
$6.1 trillion. Profit is also the obvious biggest motivation for such an
ambitious venture. As earlier on indicated, more and more people are taking to
flights as the safest and most convenient mode of transport. The demand for
aircraft by airlines thus is also increasing. This situation has been reechoed
by John Plueger, President
and CEO of Air Lease Corporation. He noted that “There are more people,
especially in Asia, who now have the means and the desire to fly,”.

Over the next twenty years, Boeing
expects Asia, including the China market to need more than 16,000 new
airplanes, or 39 percent to the global demand.

BMW may already have an advantage in
this sector as its subsidiary (Rolls Royce) has some connections with aerospace
production. It is important to note however that the German carmaker has the
rights of the brand only for making cars, and not the rest of the products,
which still produce today plane jet engines. A deal can however be struck
(between BMW and Rolls Royce) to ensure a stronger presence in Asia (especially
in China) as a form of investment for BMW in airplane production.

The second reason for such a high
demand is the growing pressure on airline to change airplanes not only to suit
environmental requirements but meet consumer taste as well. Today, airlines, in
a bid to appeal to the average customer are either swapping older planes for
newer ones or purchasing new ones out rightly. The airlines are also swapping
old jets for new ones because the plane makers have brought out more fuel-efficient
versions of planes such as the Boeing 737 and Airbus A320. As well as adding
jobs, skills and investments, the new aircrafts will also boost cleaner
production methods. Environmental criteria are important elements when
selecting suppliers and environmental requirements are introduced in
contractual agreements. This means advanced materials are accounting for 53% of
the aircraft. For example, new paint with fewer solvents and more
energy-efficient manufacturing processes. Alternate energy is also gradually
being introduced and used in this sector. For example, 22,000m2 of solar panels
will produce the equivalent of 55% of the total energy need to power the production
processes. These rising phenomena critics argue, however, are more of a
marketing strategy to appeal to customers than a desire to protect the
environment. Nonetheless, more and more environmentally friendly planes are
gradually being introduced.

                          The second reason for
entering into such a fierce market is the potential profit and its impact on
the German economy. The German government has been a huge ally for German
automobile companies and it is safe to say, this support will continue to be
offered if BMW should veer into this market. This impact alone on the German
economy will be a huge motivating factor. Germany together with France and the
UK are the countries most impacted by the business aviation industry in Europe.
Total impact of business aviation in these three countries is €12.6bn. Currently
BMW employs a little over a hundred thousand (100,000) people worldwide. The
above figure is likely to increase as it represents the same number of figure
Boeing currently has. More people are likely to be employed and this will
significantly aid the German economy. Germany again, is a prime environment for
BMW in terms of setting up an airplane production. The country is home to the
largest fleet of business aviation aircraft in Europe, with almost 400 aircraft
having a registered base there alone. In terms of business aviation aircraft
movements, nine German airports appear in the list of the top 50 busiest
European airports in terms of business aviation traffic in 2007. That was more
than ten years ago.



This is probably the biggest
hindrance associated with this venture. It is key to take into consideration
the various costs associated with it that is, Production costs, capital,
infrastructure etc.

If for example BMW wants to produce a
Boeing 373. Average cost ranges between fifty and eighty million dollars. Even
if BMW should outsource majority of component parts (as done by Boeing), that
is still a significant amount. This is a huge challenge in terms of production
cost of a typical BMW car or motorcycle. Apart from the above costs, BMW would
have to invest significantly if it intends to make any impact in this sector.
In November 2016 for example, Boeing announced intentions to build a new
factory in India to augment worldwide productions. While this is expected to
create almost sixty thousand jobs in India alone, Boeing will be investing
several billions of dollars. Will BMW be willing to push in so much financially
in this proposed diversification? Will BMW be willing to accept losses in the
short to medium term if it should enter the market? All of the above questions
must be analyzed b BMW.


                   Global warming is a big
issue today, especially in Europe and frankly, this issue cannot be left out.
This is a huge concern, especially for airlines that burn fuel to use their
aircraft. Although, the industry (not just airlines but the whole value chain)
has pledged to certain goals, it is still a far cry from curbing this worrying
situation. The European Union has put in place certain laws in an effort to minimize
the situation. According to the Engines Emissions Measurement Handbook, “The
E.U assumed legislation responsibilities and existing EEC directives for
exhaust gas emissions. Emission standards are now established or amended by the
European Commission (EC), E.U Directives, or Regulations. A directive orders rearrangement
and/or revision of domestic legislation by the E.U member state, whereas
regulations have a direct effect on individuals, organizations or manufacturers
in E.U member states”. Stake holders have pledged to minimize emissions and
focus more on environmentally friendly fuels. The goal is to cut out emissions
back to half the level that was emitted in 2005.           Here, technology will be crucial. It
is hopeful that technology will go a long way in the development of sustainable
biofuels. Over 1,500 commercial flights have been fueled by sustainable
biofuels. The unfortunate part is that biofuels are in short supply and quite
expensive. The high cost is being driven by the small quantities being demanded.
Again, under this scenario, a key driver will be technology. New aircraft entering
into airline fleets now bring with them fuel efficiency gains of more than 25%
over the previous ones. Several billions of dollars are being spent on this
each year and it is hopeful that the situation will improve.

Indeed, despite all the efficiency
innovations to airframes, engines, aerodynamics and flight operations, there is
still no end in sight, even many decades out, to rapid growth in CO2 emissions
from air travel and air freight due to continual growth in air travel. Critics
argue that the reason for this is because international aviation emissions have
escaped international regulation. This is mainly down to the lack of taxes on
aviation fuel worldwide. Lower fares become more frequent than otherwise, which
gives a competitive advantage over other transportation modes. If checks are
not put on the market, this growth in aviation’s emissions will result in the
sector’s emissions amounting to all or nearly the entire annual global CO2
emissions budget by mid-century, if climate change is to be held to a
temperature increase of 2 °C or less. There is an ongoing debate about possible
taxation of air travel and the inclusion of aviation in an emissions trading
scheme, with a view to ensuring that the total external costs of aviation are
taken into account.


                  BMW will need to stave off
fierce competitors in this sector. Currently the top five companies in this
regard include Airbus, Boeing, Bombardier, Embraer and Tupoloev. In 2016 alone
the Boeing for example produced 748 planes, 60 more than the Air. Obviously,
BMW cannot and will not be producing numbers like that in the early stages.

Strategic and effective Planning
would have to be put in place to ensure a smooth initiation of new operations.
Another angle worth noting is the possibility of buying small stakes in other
airlines to more or less “test the market” and also have some form of access to
the sector. Personnel could over a period learn the ropes associated with
airline production for a period to be able to effectively handle the new BMW
plane operations.


                       In order to achieve even
half of the successes it has attained in the automobile industry, it will be
important for BMW to bring its years of experience to bear in this
diversification process. Thus for BMW, long-term strategic planning of products
and production must be a fundamental task. It must put in place a well-elaborated
strategic-planning. In allocating a new product (plane parts) to a certain
plant, BMW must make product-specific investments, mainly in the body-assembly
department. It may also have to make structural investments for additional
space, for buildings, and for expanding equipment that the new product shares
with existing products.

Typically  such 
expansions  are  possible 
only in  minute  steps, that is, doing things in a gradual
process. Engineers must work out the technical configuration of the machines,
such as the degree of automation and the pace, considering BMW’s high quality
requirements, and provide such data for load planning. The configuration may depend
on the manufacturing location. For instance, high levels of automation are
profitable only in countries with high labor costs; in countries with low labor
costs, production will be less automated.

Within this period as well, it should
be able to create its own unique brand of airplane. It must be innovative,
embrace technology (as it has often done with cars), to be able to stand out in
the fierce market. It is also of the utmost importance that is creates planes
that are environmentally friendly whilst at the same time, meets customer satisfaction.
This grand scheme will not be cheap. Indeed, profits may only trickle in, in
the initial stages, but with the right planning and desire to succeed, BMW may
conquer the sky, as it has on the ground.


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