Aug 5, 2022 – Çağla KALKAN
Aviation industry is unique in comparison to other industries. The distinguishing feature I’d like to discuss today is that purchasing motives are more akin to the business-to-government (B2G) model than the business-to-business (B2B) model. In market conditions, the B2B model is faster and has higher profits, whereas the B2G procurement process is very complex and moves much slower. Purchases in the civil aviation sector, with so many actors, can be even more complicated.
Civil aviation is a sector that has been influenced and is still influenced by military structures. The fact that the sector was military before becoming civilian is significant here. Military authorities are generally cautious about making purchases, so the military sector’s purchasing motivations affected the civil aviation sector. This situation may be linked to a more conservative and slower supply process. Although many developed countries have overcome this, the effect can still be seen in the rest of the world. Military tradition may be more effective in cases such as the secret execution of tenders and the failure to share the results with the public.
Another issue is that government officials are used to making regular purchases and are resistant to making new or changing purchases. Government officials may take a different attitude on purchases, causing their habits to change. This is supported by the fact that digitalization in the civil aviation sector is still low. In such cases, the private sector loses interest in innovating, and only technologies that support the maintenance of the existing order emerge. That can be detrimental to the sector’s efficiency.
Furthermore, the processes in B2G purchases are very detailed and difficult to follow. With a minor error, you could be disqualified from the tender. Being present in the sector needs significantly longer and larger investments than in other industries. These risks undermine the sector’s competitive structure, and the sector does not readily accept new players. This could be one of the reasons why monopolization is so common in the industry.
Another consideration is that local regulations are critical, and companies must be adaptable and practical in order to comply. Despite the efforts of international organizations such as ICAO and EASA to establish international standards, the primary authority rests with local civil aviation authorities. Unfortunately, the authorities’ expectations can vary greatly. To do business in a country, far more licenses and certificates are required than in other industries. As a result, the sector becomes more cumbersome, and competition becomes more difficult.
We discussed the specifics of the B2G model for civil aviation. As a sales specialist, I will make a few suggestions to make the civil aviation sector more competitive and efficient. First and foremost, the state can motivate government officials to make innovative investments. Processes can be made more transparent, and communication with the private sector can be increased. Local regulations are as close to international standards as possible, and international certificates can be provided as part of a larger framework. Moreover, subsidies for small and medium-sized businesses can be provided to prevent monopolization. I am confident that these will eventually be placed in the sector. I’m hoping it finds a place sooner than I expected.