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Abstract
In forming a decision on whether to make an investment it is crucial to assess possible factors that may affect the outcome of the decision. In line with this some of the possible considerations to be made may include establishing whether a need exists for the investment. In addition to that it may be wise to consider the decision behind the need to invest. In this report a discussion is presented on the decision to invest in a flight simulator training center in the Emirate of Ras Al Khaimah. The report begins by establishing why a need for investment exists. In addition to that the report highlights potential factors that point to the success of that investment. After careful consideration of the information it was found that such an investment may indeed beneficial and therefore worth undertaking.
Introduction
The name Ras Al Khaimah (RAK) can be translated to refer to the top of the tent. The emirate is located between the base of the Hajjar Mountains and the azure waters of the Persian Gulf. The region has a diverse landscape that is uncharacteristic of the Gulf region, consisting of desert plains near the Hajjar Mountains, a fertile green belt in the south and a silvery coastline to the west (OBG 9). In recent years there has been a strong push for greater economic development within the emirate. The region has its sight set on becoming a premier investment destination in the region in the near future. The most recent population estimates report that the population of the region is within the range of 240,000 (OBG 9).
The government has predicted that by the year 2020 the population will have reached about 750,000. Generally reports in the UAE region indicate that over 80% of the population is in the 15-59 year old age group (OBG 9). The government announced a policy of liberalization in 2005 and held elections in 2006. Though the region does have some oil deposits, it is reported that these are not as sizeable as those in other emirates (OBG 10).
Though it is reported the UAE has as much as 8% of global oil reserves, Abu Dhabi has as much a 95% of the portion. This suggests that RAK has limited amount of these resources as is indicated in the report that states the region holds only 0.4% of the natural oil and gas resources in the UAE region (OBG 10).
Discussion on Regional Trends in Support of the Establishment
In order to achieve the goal of diversification and economic improvement the government has taken steps to improve the quality of the local workforce. This is mainly through the implementation of new higher education initiatives in the region which is a major government priority (OBG 13). To help in making this plan a reality the government in collaboration with local government has managed to launch a number of new universities in the recent past. An example of this is the launch of the RAK Medical and Health Sciences University and the American University of RAK (OBG 13).
The above position with regard to education has been observed to be useful and due to the fact that a positive relationship exists between education and economic growth (Al Abed and Hellyer 255). This is because it has been observed that education and training are major contributors when it comes to increasing productivity and diffusing economic growth. Through education it becomes possible for the citizens to develop necessary skills for growth and modernization (Al Abed and Hellyer 255).
In this regard the entire UAE region offers free education to all UAE citizens. In addition to increased emphasis on education the government has also taken steps to encourage continued education among employed individuals. It has been observed that as a financial incentive people employed are required to attend at least one seminar annually as a condition for promotion (Al Abed and Hellyer 256).
This position with regard to education is supported by influential personalities such as Schultz. In Shultzs influential article, he stresses the important role of education in relation to development (Al Abed and Hellyer 256). In the article the author maintains that education can be considered as a process of accumulating capital. This human capital he reports that this can significantly increase worker productivity and income. He, therefore, states that an investment in education is an investment in human capital. Human capital here refers to productive investment in human resources. Based on this expenditure the economy can greatly benefit from the improved skills associated with the workforce. This is indicated by the fact that the skill level of the workforce in any economy is factor that has a major influence on economic performance (Al Abed and Hellyer 256).
This relationship between education and income levels has been reported to be highly correlated. It is reported that it is due to the intuitive recognition of this fact that people make efforts to become as educated as possible (Al Abed and Hellyer 256). This is seen in the fact that the more certificates one can accumulate the better their chances of obtaining better paid and more secure jobs in the market. The desire for the better paying and more secure jobs also works to create a demand for education. However, the countrys political institutions determine the quantity of institutions, admission and type of education thus playing a major role in guiding the direction education takes within a country (Al Abed and Hellyer 256).
In addition to the fact that education plays a major role with regard to economic growth there is the fact that a large percentage of the workers in the UAE are expatriates. This fact was mainly brought about by the rapid economic growth that increased the demand for labor in the emirates thus causing an influx of foreign labor (Rostin 5). Estimates from 2004 indicated that less than 20% of the population and 10% of the countrys labor force is made up of emirate nationals (Rostin 5). This fact suggests that there is a serious need to train locals to allow them to take up positions within the country.
This position has been influenced by the fact that majority of nationals prefer to work in the public sector in skilled jobs with relatively high wages (Rostin 5). In recent years growth in the population has caused the number of jobs available in the public sector to be inadequate to meet the national need. Due to this therefore a need has arisen to look for alternative ways to guarantee employment for the locals of the country. This fact is made even more complex by the fact that almost 80% of the population falls in the 15-59 year old age group (OBG 9).
In recent years the UAE has undertaken measures aimed at bringing about reform within the country (Figure 2). The country has invested heavily in approaches that are aimed at bringing about rapid economic growth and in approaches to increase the diversification of industry within the country (Gonzalez 120).
This approach it is hoped will bring about the additional jobs that are required to reduce the reliance on foreign nationals for labor within the region. Following these measures there has been major rapid expansion especially within the private sector. However, this still poses a problem given the fact that the private sector relies heavily on non nationals for labor owing to lack of skill among nationals and preference for public sector employment (Gonzalez 120).
Despite the successes that have been made in terms of creating an environment that will foster rapid economic growth, one challenge yet to be overcome lies in the preparation of the local workforce to take up positions created (Gonzalez 121). This comes in light of the fact that a knowledge based economy such as the one the government is striving to create is driven by a skilled workforce. This factor has made the reliance on foreign labor even more difficult and suggests that there is a need to give consideration to establishment of suitable training facilities within the region.
Based on this position reports indicate that the UAE is still facing a reality of a citizenry that is ill prepared for productive work in a knowledge driven economy (Gonzalez 121). This position suggests that there is a need to consider the establishment of various higher education facilities in the region to address that need. Among the sectors that have experienced rapid growth include service based sectors such as finance and information technology. However, there has been some progress in terms of increasing the number locals in the national workforce especially in the case of females. Unfortunately the same increase has not been observed among male nationals.
The main issue causing the trend has been reported as the lack of competitiveness in skills between nationals and non nationals (Gonzalez 121). This problem is further worsened by the fact that the UAE has a large working age population that demands increased opportunities.
Based on data collected from interviews it has been suggested that the reason behind this trend is the decisions made by policy makers in the region. It has been observed that whereas policy makers have taken steps to improve diversification and economic growth, little incentive has been offered to encourage the pursuit of education (Gonzalez 121). This short coming is currently being addressed by the government in efforts that have seen major labor market reforms and investment in education and training across the region.
This has been observed in efforts within the UAE to reform both primary and secondary education. In addition to this efforts have been made to improve the quality of education offered in government institutions (Gonzalez 122) (Figure 3). This was the reason behind the establishment of the Abu Dhabi and Dubai education councils in 2005. These councils were formed with the goal of targeting reform in primary and secondary education in their territories (Gonzalez 122). This position suggests that RAK should consider formation of similar initiatives to assist in building the correct culture with regard to education.
In addition to the councils it has been observed that various measures are useful in improving standards of education within a country. Such measures include the establishment of authorities to track progress of various educational approaches within the country (Gonzalez 122). As a result there has been an increase in numbers enrolled in institutions across the country (Figure 4).
In addition to that it has been observed in Dubai that an authority charged with the responsibility of listing goals and targets that are linked to global best practices can be useful in improvement of education within a country. In addition to that the introduction of bilingual curriculum within education institutions is likely to be useful in improving the education standards and global inter connectivity within the country.
Another approach that has been considered with regard to bridging the skill gap is the use of initiatives to raise academic standards in existing higher education institutions (Gonzalez 124). In addition to that it has been suggested that there is a need to broaden the opportunities available for post secondary education and training for both nationals and non national.
In line with this is the establishment of initiatives that will promote development of research and knowledge capital for the region (Gonzalez 124). To achieve the goal of bridging the skill gap some institutions have taken to undertaking job specific training that is aimed at meeting the market needs within the region. This kind of approach is similar to the effort proposed in this report that seeks to provide training for pilots locally.
In relation to the above approach another means of bridging the skill gap has been through the upgrading of existing educational programs. To achieve this some institutions have sought accreditation and partnerships with established institutions in the West (Gonzalez 125). This approach has seen some entire institutions undergo accreditation processes that will ensure that they produce graduates who are both highly skilled and able to compete in the job market.
These relationships provide students with an opportunity to learn and acquire practical experience. This results in production of graduates who have hands on experience that is both relevant and up to date for the market needs (Gonzalez 125). Among the approaches used to achieve this is the inclusion of internships as part of the requirement for completion for a course. This internship can be completed either within or outside of the UAE.
This approach based on internship has been used at the UAE University where students of the College of Engineering are placed to work in companies both in and outside the UAE. In addition to external internships the University has also established relationships with various technology parks and international companies (Gonzalez 126).
The approach has also been considered by two other institutions in the UAE namely HCT and Zayed University. HCT was established to train students in the skills required in the oil sector. In relation to market needs the institution offers instruction in English to prepare students for an international environment. Zayed University offers liberal arts course with a focus on research and outreach programs. The institution also uses English as the language of instruction for both business and engineering disciplines (Gonzalez 127).
In addition to the issue caused by a high number of expatriates employed locally in the UAE there is the issue of the finite nature of natural resources. Traditional fiscal sustainability is assessed using a countrys level of public debt. In the case of UAE the figure that represents gross national debt stands at only 4.5% of the GDP (Rostin 6). Though this figure appears to suggest safety the depletion of the natural resources also plays a major role in assessing fiscal sustainability. After considering the current extraction rate it has been suggested that the countrys natural resources are expected to last another 120 years (Rostin 6).
However, this is often affected by the discovery of new oil resources and the fact that the regions GDP is fairly favorable in the region and even in comparison to Western European nations such as Spain (Rostin 6). One major issue that should turn attention away from oil reserves is the fact that extraction rates change based on market demand. It has been reported that the federal government made a decision to double extraction rates by 2010.
This suggests that current reserves are likely to last only 65 years (Rostin 6). This is further complicated by the fact that the population is rising at a rate of 8% annually suggesting even a larger number of citizens relying on limited resources. With the lions share of these resources allocated to Abu Dhabi it would appear that emirates such as Dubai and RAK may exhaust their resources in as little as 20 years (Rostin 6).
In response to the dwindling resources RAK may benefit from a strategic development approach such as that used in developing Dubai, a neighboring emirate. The development of this emirate can be traced to the dredging of the creek that saw the establishment of the Jebel Ali port in the late 70s (Matly and Dillon 1). This came following the foresight by the rulers of the emirate who considered an alternative source of income for the state following exhaustion of existing oil resources.
Following this observation the Sheikh decided to establish the state as a hub of trade by sea and as a center for tourism. By 1979 much of the construction of the Jebel Ali port had been completed making it among the worlds largest harbors and the biggest port in the Middle East (Matly and Dillon 2). Following this continued development, by 2004 Dubai had become the third most important re export center in the world trailing after Hong Kong and Singapore. The quantity of imports that were handled by the port more than doubled in the period between 1988 and 2004 (Matly and Dillon 2).
In addition to the expansion and the focus on the port, the Sheikh also placed air travel as a top priority for the development of the region. Following this decision an airport was established in the country in 1959 and to complement it an airline was established in 1985 (Matly and Dillon 2). To ensure the success of the airline the government put in a sum of $ 10 million to assist in its establishment and as a result it is today among the most successful global carriers.
This success can be seen in the fact that in 2004 the airline paid a dividend of $ 100 million to the government. In the first six months of 2007 the airline had reported a net profit of $ 323 million which indicates a 29% increase when compared with the previous financial year (Matly and Dillon 2). The government is still the sole owner of the airline despite not putting any additional funds into the project after the initial $ 10 million.
In addition to the airline the region also established the Dubai World Trade Center in 1979 and various business parks from 1999 up to the current period. As a result of the rapid growth there has been a major real estate boom in Dubai with many construction projects coming up in various parts of the country. In addition to real estate the major demand caused by air travel passengers has seen the tourism sector experience dramatic changes. It is hoped that through the establishment of a training center in RAK similar changes can be witnessed and major economic growth may be experienced.
Objectives
The objective of this report is to establish a basis for the development of a flight simulator training center in RAK. This is an essential consideration given the fact that the oil reserves in the region are limited. This is due to the fact that despite UAE richness in oil reserves the vast majority of these reserves lie outside of RAK.
It has been reported that as much as 94% of the total oil and gas reserves in the UAE region are located in Abu Dhabi (Al Abed, Vine, Hellyer and Vine 125). This position suggests that it remains unsuitable for RAK to continue to rely on the presence of this natural resource given its limited availability in comparison to its neighbors in the region. In response to this need therefore it is crucial that an alternative source of income is developed to ensure that the country can maintain growth and development in the event that the oil reserves become scarce in the future.
In addition to the scarceness of the existing reserves another reason that supports this study is due to the fact that oil reserves are dwindling globally. It has been reported that despite the large amount of reserves in Abu Dhabi these resources may be available for probably another 100 years (Al Abed, Vine, Hellyer and Vine 126). This figure is estimated based on the approximately 92 billion barrels of oil reserves that are available in Abu Dhabi (Al Abed, Vine, Hellyer and Vine 126).
On the other hand, the oil and gas reserves available in RAK have been estimated to be in the region of 100 barrels of crude oil (Al Abed, Vine, Hellyer and Vine 132). Based on this data it is possible to understand that it is likely that the resources in RAK will be exhausted much sooner than those in Abu Dhabi. This suggests that the government of RAK should take urgent measures to begin alternative economic development approaches that are aimed at ensuring the country does not suffer from the loss of oil revenue.
Another objective of this report is to identify regions that have resorted to similar development tactics and point out specific factors that assisted them in achieving success. It is believed that if this is done it may be easier for the RAK region to copy the strategy and implement a successful approach to the regions economic issues. This is a priority based on the fact that the majority of the oil reserves discovered in the UAE region were within neighboring territories. This point led the government of RAK to the realization that it was very likely that production and revenue from oil would decline significantly in the near future (World Bank 62).
Following this observation, it became apparent that for Dubai to continue to prosper economically diversification was necessary. This realization was supported by successive leaders who implemented various strategies to push Dubai towards becoming a knowledge based economy (World Bank 62). The first strategy was to transform the region into a transportation and logistics hub that would link South Asia, the Middle East and Africa. This saw the construction of the worlds largest dredged port, an international airport and an airline (World Bank 62). This strategy has been a major success and has led to the construction of a second airport, the largest in the world.
In addition to the first phase the rulers of the region have also undertaken a second phase which saw development of core competencies in technology, media, telecommunications, e-commerce and other specialized domains (World Bank 62). These plans are backed with both financial and economic incentives aimed at luring firms into the media free zone. In addition to that there is expected construction to prepare additional technology zones that are aimed to benefit would be investors.
The third phase of the development strategy saw the establishment of an international financial hub located in the emirate. As a result of these efforts the economy has grown stronger and less reliant on oil revenue. It is reported that as recently as 2001, oil revenue accounted for 20% of the GDP while in 2006 oil revenue accounted for less than 10% of the GDP (Figure 5) (World Bank 63). These statistics suggest that with careful planning RAK can achieve similar if not better results in the future and provide a solution to the looming crisis.
The final objective of this report is the presentation of a solution that can address the demands placed on the RAK government by the population trends. It has been reported that the majority of the population in UAE is in the group of between 25 and 40 years old. In addition to that it is expected that with current growth trends being sustained the population is expected to continue to grow even further.
This position suggests that if RAK does not develop appropriate mechanisms to sustain economic growth it may well be faced with a serious employment crisis in the near future (Al Abed, Vine, Hellyer and Vine 220). It is reported that the population growth rate in the region is 6.9% which is among the highest in the world (Al Abed, Vine, Hellyer and Vine 219).This additional population suggests an increased demand for infrastructure.
Rationale
The rationale in support of this report can be traced to the population trends in the UAE region and what this suggests for the future of RAK. Already it has been observed that the population growth rate in the region is very high. This has been attributed to the large influx of migrant workers into the region based on work opportunities available (Al Abed, Vine, Hellyer and Vine 219). If the current trend persists and the economic growth problems facing the region are left unaddressed it is clear that the future may be dotted with problems of unemployment.
In addition to the above factor relating to population another argument in support of this report can be attributed to the finite nature of natural resources in the region. Already it has been established that the bulk of the petroleum based resources in the region are in the hands of RAKs neighbors. It has been indicated in other reports that only 0.4% of the oil and gas resources in the region belong to RAK (OBG 10). Based on this fact it is possible to suggest that if current extraction rates persist RAK is bound to run out of revenue from these resources much sooner than its neighbors. In light of this therefore it is clear that RAK needs to develop alternative economic approaches to avoid such an outcome. These two factors form the basis behind the need for this report.
Research Question
This report will focus on two main questions. The first is whether there is a pressing need to make an investment. The second question is whether an investment in the airline training center is worth undertaking.
Literature Review
It has been reported that the global airline industry provides some form of service to virtually every country in the world and has played an integral role in the creation of a global economy (Belobaba, Odoni and Bart 1). Due to this fact the airline industry is a major economic force both in terms of its own operations and its impact on related industries around the world. Some of the industries affected by growth in the airline industry include aircraft maintenance and tourism (Belobaba, Odoni and Bart 1). It should be noted that tourism is one of the main areas that bring foreign exchange to RAK and therefore this position with regard to the airline industry makes it a favorable investment.
Based on historical data it has been indicated that the annual growth of the air travel has been about twice the annual growth in GDP (Belobaba, Odoni and Bart 2). However, it has been noted that even under conservative assumptions with regard to economic growth a 4-5% growth in global air travel is likely to be maintained.
This fact suggests that investment in airlines and airline related industry is cost effective given that the growth is constant. It has been pointed out that the main driver for the airline industry is economic growth. This is indicated by the fact that the 5% annual growth is fed by a 2-3% annual growth in the GDP worldwide (Belobaba, Odoni and Bart 2).
As a result of this it was noted that in 2007, the total passenger air traffic in Asia Pacific reached almost the same level as that in Europe (Belobaba, Odoni and Bart 2) (Figure 8). For this reason it can be assumed that these statistics suggest a good starting position for an investment in the airline industry (Figure 9).
In addition to growth in the airline industry the review of literature also touched on the subject of tourism. It is due to the fact that for the airline training center to succeed there need to be industries that can support it existing within RAK and the UAE region. In this regard tourism becomes a relevant factor as the more tourism booms the greater the need for airline staff. It has been observed that tourism is among the fastest growing industries around the world (Brebbia and Pineda 345). Due t this position it has been promoted as means of economic development in many regions around the world and governments in many locations are endorsing tourism development plans.
It is reported that the RAK region has an immense potential for the growth of the tourism industry (OBG 60). This can be attributed to the government approach towards development of the tourism industry in the country. In 2008, the region attracted about 235,000 visitors based on the number of room nights (OBG 60). This indicated an increase of 10% from the statistics of the previous year. The occupancy during the same period in 2009 was in the range of 90-95%. This indicates a further 8% increase from the previous period according to the regional body that regulates tourism.
According to future government plans it is hoped that the number of tourist arrivals can be increased to 2.5 million by 2012 (OBG 60). To achieve this target the emirate has plans to increase some 3,700 rooms over the coming years to meet the demand. The tourism regulation body has maintained momentum with its plans in 2008 and 2009 and it is believed that achieving the goal will be possible come 2012 (OBG 60). This ability to stay on course stems from political stability which also affects tourism (Laws, Richins, Agrusa and Scott 95).
Based on this information it can be seen that the government is earnest in its efforts to improve the tourism sector within the country. As earlier mentioned growth in the airline industry has a direct impact on several related industries one of which is tourism (Belobaba, Odoni and Bart 1). Due to this fact it can thus be suggested that the establishment of the airline training facility in RAK is likely to help support the projected growth within the regional tourism industry.
In addition to the role of tourism in the region it has been reported that RAK airlines the regions flagship carrier is set to resume operation in 2010 (OBG 67). The airline had suspended it activities in 2008 citing financial difficulties as the reason behind the decision. It is hoped that the airline will build a regional network that seeks to serve the large demand in the Northern Emirates region as well draw in tourists as was the case in the past (OBG 67).
It will focus on short flights of three hours or less providing middle to high level service. It is hoped that the airline will eventually develop as a travel hub for the rest of the Middle East as it seeks markets further afield in Eastern European regions. The airline has also invested heavily in infrastructure development with investment in the range of $ 27 million (OBG 67). In this regard there appears to be a need growing for the development of a training facility to help keep the airline staff up to date.
In relation to the need for establishing a flight simulation training center in RAK it is important to review literature on the role of simulation in the aviation industry. The use of simulation for both civil and military aviation training is commonplace and is widely accepted (Allerton 9). This is mainly due to the fact that the simulators allow flight crews undertake potentially life threatening maneuvers from a relatively comfortable and safe position. This same factor allows military pilots to practice piloting skills that may be unacceptable during peace times or prohibitively expensive (Allerton 9).
Through the use of simulators training centers can focus on the safety aspect that is an important consideration of the aviation industry. It is the primary role of aviation authorities to ensure safety of all aircraft operations, including flight training (Allerton 9). It has been reported that as recently as the 70s airlines were forced to offer training using actual aircraft. This includes practicing circuits, taking off and landing with the result that there was significant number of accidents that used to occur during training exercises (Allerton 9). It goes without saying that these accidents were costly to the airlines and the arrival of simulators signified a major breakthrough in training.
Flight Simulator Training Center
In a flight simulation training center aspiring pilots can be exposed to a variety of approaches to help in learning how to operate an airplane. One of the most common approaches used to achieve this is through the use of visual cues. This refers to a simulation of the visual scene that presents itself through an aircraft window (Lee 1). This has been a major challenge in the development of flight simulation technology and major advances were only experienced around the 80s. This was mainly as a result of advances made in the computing industry and improvements that resulted in significant increases in processing power (Lee 1).
In the decades that followed the explosive growth of computer hardware the ability to display real time imagery became a reality. In training through the use of visual cues flight control can be divided into three basic dimensions namely flight control, navigation and collision avoidance (Lee 1). In addition to that positive flight control can further be divided into attitude, speed and altitude control. Using the example of attitude control, the aircraft attitude can be categorized in three basic dimensions namely pitch, roll and yaw. The use of these three dimensions can be plotted on a graph and control can be simplified by understanding how the aircraft behaves in relation to these axes (Lee 1).
In addition to assisting with the control of the aircraft such simulation training is useful in providing a visual perspective of object as seen from the cockpit of an aircraft (Lee 4). It is reported that in the real world phenomena such as water and particles in the air can alter what can be observed at various distances. Through the use of texturing the simulator can be used to train the pilot based on what is visible. This visual approach is also widely used in training pilots on how to land the aircraft based on the final approach to the runway (Lee 5).
In addition to the use of visual cues for training the simulation equipment is also useful in that it can be used to train the pilots based on audio. The use of audio can be used to give the pilots a real feeling of what happens in the aircraft and the sounds associated with flight (Lee 28). The sound stimuli can be used for training purposes in that it can allow the pilot to identify changes in engine sounds before observing the change on the instruments panel. Due to this the pilots can get amore heightened feeling of what aircraft control entails (Lee 24).
Sound effects used in the simulation environment play an important role of allowing the trainee to feel the same sensations associated with actual flight. In addition to that the use of sound can be very useful in teaching students to respond to various system alerts (Lee 28). In a normal aircraft there is a wide range of sound alerts that are used to keep the pilot up to date on aircraft parameters. These can be imitated in the simulation environment to further assist in pilot training.
In addition to training based on audio and visual cues a flight simulator can be used to provide training based on motion. In advanced simulators the pilot can be trained using an aircraft model fitted with hydraulics that assists in providing a realistic feeling of the aircraft environment (Lee 76). This mode of training will allow the pilot feel how the aircraft would behave in a real life situation in various circumstances. Based on this the pilot can get to experience what it feels like to fly through turbulence and other phenomena experienced in flight (Lee 76).
In addition to the additional approaches that can be used in training a simulation training center can significantly reduce the number of hours spent on training pilots. In studies that assessed the role of simulators in pilot training it was found that the use of simulators in training can significantly reduce the number of aircraft hours spent (Lee 76). This was reported after a study that measured to groups of student pilots. One group was first trained in landing to proficiency using a simulator while the other group was trained using aircraft. The results indicated that the use of a simulator saved 9.8 landings per student for those trained using the simulator.
In addition to that, it was indicated that the amount of aircraft time saved was 1.5 hours for every 2 hours of aircraft time for those trained in the simulator (Lee 76). This suggests that the use of the simulator training facility is very essential in the training process for pilots.
Competitors in the Current Market (ECFT- Emirates CAE Flight Training in Dubai / GAA Gulf Air Aviation Academy in Bahrain)
In response to the need to diversify the economy the emirate of Dubai launched an aggressive campaign to expand its revenue base. In light of this the emirate developed the Emirates airline which is currently among the leading airlines in the world. Owing to the need created by the airline and the demand for skilled labor in Dubai and the Middle East, the airline opened a training institution to offer courses for commercial and business carriers in the region (CAE). This institution is mainly aimed at training of the flight deck crews and maintenance personnel employed by carriers in the region.
To meet the requirements for training internationally approved staff Emirates partnered with a major player within the airline industry with a reputation built on flight simulators, CAE Inc. The Canadian firm established a training institution located in Dubai at the Emirates Aviation College campus located close to the Dubai international airport (CAE). This institution was a joint venture and is the first facility of this nature to be established in the Middle Eastern region. The institution has been approved by the Joint Aviation Authorities (JAA), Federal Aviation Administration (FAA), and UAE standards (CAE). In addition to the above mentioned approvals the institution collaborates closely with about 20 different national aviation authorities with the goal of ensuring the requirements of these authorities are fulfilled in the training of staff (CAE).
The center with 14 bays houses 12 full flight simulators including two Airbus A320/ACJs, an Airbus 330.340, a Boeing 777, two Boeing 737 NG/BBJs, a Gulfstream IV and a Gulfstream V/55, a Hawker 800XPi and a Hawker 800/800XP, a Global Express and a Bell helicopter 412. It is reported that in early 2011, the institution was expected to add a Falcon 900EX/2000EX to its range of training products (CAE). It is reported that most of the simulators in use at the institution are certified by the JAA and FAA.
CAE the partner of Emirates in the venture offers the airline industrys most complete and comprehensive portfolio of fully integrated simulation products and services (CAE). For this reason it can be assumed that the facility offers training to the highest standard in relation to the airline industry. The company products are designed to be safe and improve operational efficiency. The use of this companys products helps the institution guarantee quality, reliability and fidelity of the training curriculum offered.
Another competing institution in the region offering similar training facilities and services is the Gulf Aviation Academy located in Bahrain. The GAAs mission is to become a future provider of high quality training in Bahrain, the Middle East and North Africa region (GAA). The institution focuses on the provision of a comprehensive range of structured training programs and courses for all aviation personnel in the industry. The institution aims to achieve this goal through the use of state of the art modern simulators and training devices, experienced instructors, flexibility and strong customer focus (GAA). The institution also works closely with airlines and authorities to ensure students are provided with relevant experience.
According to the institution it has been indicated that the airline industry is expected to have a massive demand for staff in the near future. Based on these reports it has been established that over the next 20 years starting from 2011, the airline industry will require over 400,000 new pilots and over 600,000 new fight technicians (GAA). This data was released by Boeing in a survey carried out in June 2011 and suggests that this growth will be due to the growth within the airline industry and the need to fill in gaps left by retirees. This information is very positive given that the RAK region is interested in the establishment of an institution to train airline staff. The report goes further to state that based on the growth of the airline industry in the Middle East alone, the region is set to require over 20,000 pilots over the next 20 years (GAA).
The institution offers course aimed at training airline staff from the beginning and students who pass the selection criteria are admitted into such programs. In addition to pilot training programs the institution also provides training for in flight staff such as cabin crew and aircraft mechanics (GAA). This is in light of the data that indicates there will be a demand for over 600,000 aircraft mechanics over the next 20 years (GAA). In addition to that the institution also offers pilot training using a wide variety of simulation equipment that conforms to airline industry requirements.
Emirate of Ras Al Khaimah
The country has been an important city for several eras and its name can be 6ranslated in Arabic to mean the top of the tent (OBG 9). This is probably due to the fact that it lies at the northernmost part of the UAE. The emirate is located near the base of the Hajjar Mountains and the blue waters of the Persian Gulf. The landscape within the region is fairly diverse and consists of both desert plains, an arable greenbelt in the south and a long stretch of beach to the West (OBG 9).
The construction of modern highways has ensured that this emirate has strong connections to the rest of UAE. In recent years the region has pushed ahead with a drive for economic development. These attempts at development are mainly focused on its main areas of competence namely tourism, real estate and industry (OBG 9). The region has been a settlement area for a long time dating back to as early as 5500 B.C. Throughout history there has been continued activity in the region until the establishment of the Sheikdoms and eventually the UAE (OBG 9).
RAK is reported to be the fourth largest emirate and covers an area of 2,478 sq. km (OBG 9). It is located 70 km away from Dubai, 250 km away from the border with Man and 65 km away from the coast of Iran. The country has a coastline that stretches for some 65 km and the climate is similar to that in most other parts of the UAE.
Based on statistics from 2010 the total population of the UAE ranges at about 8.19 million (OBG 9). The populations rate of growth is estimated to be 5.6% and it is reported that 81.9% of this population is within the 15-59 year old age group (OBG 9). Based on this data it is possible to suggest that the country is relatively young. Estimates from 2009 indicated that the population in RAK was in the range of 241, 000 and it was predicted that by the year 2020 the figure would reach 750,000 (OBG 9). In the region (RAK) UAE nationals are reported to make up as much as 50% f the total population.
Taking an economic perspective, it has been reported that the GDP of the entire UAE region was expected to reach $ 229 billion in 2010 (OBG 10). The UAE region has a liberal economy with high per capita income levels and significant annual trade surplus in addition to the substantial energy imports (OBG 10). Though RAK does produce some petroleum based products it has been noted that it does not have the same amount of deposits held by some of its neighbors. Due to this the economy of the RAK region is widely diversified and stands on a number of established pillars namely trade, industry, commerce, tourism and real estate.
A number of local companies have managed to develop an international reputation, including firms active in the pharmaceutical industry, ceramic, dates and cement segments (OBG 10). The UAEs first cement company was opened in RAK in the 1970s and is currently dominant in the field. In addition to that RAK is the worlds largest producer of ceramics with production in the range of 115m sq. meters in the year 2009 (OBG 10). The regions first pharmaceutical and medical supplies firm currently markets its products globally and meets standards set by the US Food and Drug Administration (OBG 10).
In 2009, the GDP within RAK grew by 9% to reach a figure of $ 4.3 billion. Among the approaches that have been used to establish economic growth include the setting up of an investment authority RAK Investment Authority (RAKIA) in 2005 (OBG 10). Following this move the authority has managed to lure over 6,000 businesses to set up shop locally generating investments in the range of $3 billion from around the world. The companies operating in RAKIAs industrial parks around the country are involved in diverse activities.
Owing to the efforts made by RAKIA it has been reported that more than 3,000 on shore companies have been registered in addition to almost 3,500 companies registered the organizations off shore facility (OBG 10). RAKIA reported a growth rate of 90% in the first quarter of 2010 when compared against a similar period the previous year. This can be taken to suggest that the RAK region is well underway in steps to diversify and create economic growth from non petroleum based resources. As earlier mentioned the main reason for this effort comes from the fact that the vast majority of UAE oil and gas resources lie outside RAK (OBG 11).
Methodology
In undertaking a study the methodology used determines the areas that the study will cover. In use of qualitative research methodologies the researcher focuses on why and not how in relation to a topic (QSR International). On the contrary, quantitative techniques will require the researcher to focus on the question how in relation to a topic. For this reason quantitative techniques will require the use of various tools and constructs to provide data in support of the how question (QSR International).
Through the use of qualitative research the study can gain insight into peoples attitudes, behaviors, value systems, culture or lifestyles. An analysis of this data can thus be used in forming meaningful assumptions with regard to the study (QSR International). This type of research is very useful in providing information on business decisions. This is due to the fact this information on trends can be useful in forming a decision with regard to business. It is also due to the fact that such information is also difficult to assess in numerical terms.
For the above reasons this study was undertaken using a qualitative approach. The study was carried out by undertaking a review of relevant current literature on the topic. Despite the relative paucity of information on the subject it was possible to collect various ideas that could be useful in forming a string of thought with regard to the problem. The review of literature was carried out with due consideration to the tenets of a literature review and as such the selected content was kept as up to date as possible (Daymon and Holloway 48). In addition to that attempts were made to ensure literature presented was purposeful and relevant.
Market Research
In considering whether to make the decision to invest in the center it was crucial to perform some research on the market to establish whether there was indeed a need for this investment. In carrying out this task two essential points were identified. First is the fact that the airline industry is growing fairly rapidly and second is the fact that a demand for trained personnel does in fact exist. It has been reported that the airline industry is set to grow at a rate of 5% annually for the next 30 years (Belobaba, Odoni and Bart 2). In relation to this it was also noted that this growth is most likely to be sustained if the GDP also maintains positive growth.
In this report it has been identified that the GDP of the RAK region has indeed been growing positively owing to major initiatives aimed at boosting economic growth (OBG 10) (Figure 11). Based on this fact it becomes clear to see that the investment decision should be pursued based on the growth in the country and the greater UAE region. It should be noted that this is supported by the fact that air travel has risen dramatically in Asia Pacific region where the airline is targeting some of its operations (Belobaba, Odoni and Bart 2).
In line with the second point it was noted in the course of review of literature that the airline industry is bound to require additional staff due to growth and retirement within the industry. It is projected that over 400,000 new pilots and over 600,000 new aircraft mechanics will be required over the next 20 years starting 2011 (GAA). Based on these figures it is possible to see that a need exists that cannot be satisfied by the institutions available in the market. A decision to join in the field appears to guarantee a share of this huge market.
Case Study RAK Aviation Academy
Based on the information acquired in the course of this review of literature on the topic some points have been identified that may be of use in the establishment of this institution. First is the role of partnerships. In the case of the relationship between CAE and Emirates airlines it is clear to see that the main reason for the success of the initiative lies in the experience brought into the institution by CAE. It is reported that CAE has an international reputation with regard to flight simulation equipment and services (CAE). For this reason the airline can benefit from this expertise and rapidly build credibility that is essential for institutional success.
The second point of importance in establishment of the institution is traced to the role of collaboration. It has been reported that both the ECFT and GAA collaborate with a large number of international regulation authorities to ensure the training they offer is relevant and up to date (CAE). For this reason it is essential that in the establishment of a similar undertaking in RAK adequate steps are taken to ensure that proper collaboration with authorities is given due consideration. In addition to that it has been noted that the institution will require highly trained instructors as is the case in the competing institutions (GAA).
Though this is not a conclusive set of requirements it is believed that these can ensure success of the institution. It is believed that when these considerations are linked with the establishment of the education park in RAK the venture will most likely be successful (OBG 40).
Flight Simulator Selection
The selection of an appropriate simulator will depend on the resources available as well as the purposes of the organization. It has already been noted that upon re-launch of the regional air carrier the focal point shifted to short flights offering middle to high level service (OBG 67). In addition to that it is noted that the government has already spent $27 million on infrastructure development (OBG 67). For this reason the selection of an appropriate simulator may be difficult owing to the fact there is no accurate estimate of the resources available.
However, given that the airline seeks to undertake middle to short distance flights it is possible to suggest that a simulator for aircraft such as the Gulfstream and the smaller Boeing jets would be appropriate. However, based on popularity it may also be wise to invest in a simulator for the Airbus (CAE).
Human Resource
It has already been mentioned that the institution will require employing highly trained staff to manage the institution. The presence of competing institutions in the region provides a likely source of staff for the institution. In addition to that the government can form a partnership with an established firm which will provide training for the staff of the institution.
Conclusion
In this report the discussion presented provided information to aid in forming a decision on whether to establish a flight simulator training center in RAK. In the report it was established that RAK is the fourth largest Emirate in UAE. The region has a diverse landscape consisting of desert plains, a large arable region and a long stretch of beach (OBG 61). The economy of the country has been growing wing to the need to diversify and reduce dependence on oil revenue. This comes in light of the fact that though 90% of global oil reserves are located in the UAE, over 90% of these reserves are located in Abu Dhabi (OBG 10).
Of the remaining portion of oil and gas resources only 0.04% is located within RAK (OBG 10). For this reason as these scarce resources continue to dwindle the government has initiated a drive to diversify the economy and push for greater economic growth (OBG 10). Following this move the RAK government has established initiatives that have drawn major investments into the region in the recent past. Owing to this it has noted that a large number of companies setting up shop within RAK with the result that the GDP has continued to rise. One sector that has been particularly vibrant in the country is the tourism sector. Numerous hotels have been set up in the country and plans are underway to open even more.
In relation to this continued economic growth plans the country reopened the local airline to once more tap into the local and regional markets (OBG 67). With this move already in motion it is possible to assume that the country would best invest in local training facilities for the airline staff. It should also be noted that this move can be very effective for generation of revenue given reports that suggest the airline industry is set to continue growing for some time to come.
Based on these reports it has been indicated that the airline industry has experienced a steady growth rate of 5% over the past 30 years. It has further been suggested that the growth of the GDP is a major factor in supporting this growth (Belobaba, Odoni and Bart 2). Given the fact that the GDP has been growing at a relatively constant rate across the UAE region one can assume that the growth in the airline industry is likely to be sustained.
In addition to that it has been observed in reports from 2010 that there is likely to be a major boom in terms of employment in the airline industry. This comes to light based on reports indicating that there will be a demand for over 400,000 pilots and over 600,000 aircraft mechanics over the next 20 years (GAA). This demand it has been mentioned has arisen due to the continuous growth within the airline industry and the replacement of retiring staff. Given these statistics and the regional economic position it is clear to see that the investment in establishing a flight simulator training center in RAK appears to be a very wise decision.
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