ABSTRACT
This chapter addresses investment appraisal in a subset of the aeronautics sector, including the manufacturing of civilian aeroplanes and helicopters. It organises around two broad project examples. First, the development of a new aircraft model to replace an older aircraft on a tried and tested segment of the aircraft market. The second is the development of a highly innovative component, the market prospects for which are surrounded by a high degree of uncertainty. The chapter illustrates the difference is important because price changes in the primary market have additional welfare implications for the project. It also illustrates where the aeronautics project takes place in an imperfectly competitive market, the economic analysis should incorporate the standard adjustments for the effects of increased competition Aeronautics is a high-tech manufacturing sector, as opposed to the other sectors, which are all in the service sectors. Traditionally, a distinction in investment appraisal between manufacturing and service sectors involves the presence of inventories of finished products.
