Economic Performance and NGATS

NEXTOR 2nd National Airspace System Infrastructure Management Conference

13 June 2006

Dr. Sherry S. BorenerDirectorEvaluation and Analysis DivisionJoint Planning and Development Office

Acknowledgement

This presentation includes work performed by a number of organizations and persons supporting

the JPDO Evaluation and Analysis Division.

GRA, Incorporated

Outline

• 2025 Aeronautics Activities and Worldwide Demand

• NAS Capacity Constraints Analysis – What if we can’t satisfy 3X demand?– Estimating the loss in feasible throughput– Estimating the economic loss

• JPDO Cost Workshops

• Supplement – Alternative Funding Schemes

2025 Global Aeronautics Activities

• 2/3 of world aeronautics industry will take place outside of North America by 2025.

• U.S.-International trade in aeronautics goods and services will grow in importance with respect to U.S. domestic trade in goods and services.

• American airlines and aeronautics companies will form more partnerships with foreign partners.

JPDO Process for Achieving the NGATS

R2 = 0.67

R2 = 0.62

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5,000

6,000

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Weather Score

Del

ays

(>1

Hou

r) 20032004

R2 = 0.67

R2 = 0.62

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1,000

2,000

3,000

4,000

5,000

6,000

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Weather Score

Del

ays

(>1

Hou

r) 20032004

$0

$1

$2

$3

$4

$5

FY04 FY05 FY06 FY07 FY08 FY09

ATO Capital Budget Shortfall

$ B

illio

ns

FY04 Capital Investment Plan

Projected Funding

Cumulative $3.2B

$0

$1

$2

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$1

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$5

FY04 FY05 FY06 FY07 FY08 FY09FY04 FY05 FY06 FY07 FY08 FY09

ATO Capital Budget Shortfall

$ B

illio

ns

FY04 Capital Investment Plan

Projected Funding

Cumulative $3.2B

NAS Security Boundary

Core Enclave(s)

SupportEnclave(s)

I BM

Enclave Comm. Control (ECC)

DMZ

Security Management& ReportingIB M

Non-NAS Entities

NAS Security Boundary

Core Enclave(s)

SupportEnclave(s)

I BM

Enclave Comm. Control (ECC)

DMZ

Security Management& ReportingIB M

Non-NAS Entities

0

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400,000

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2006

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FY

FY05

$K

397 GBT + Backup F&E397 GBT + Backup O&MTotal Radar Centric F&E + O&M

0

50,000

100,000

150,000

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300,000

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400,000

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2006

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2008

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FY05

$K

397 GBT + Backup F&E397 GBT + Backup O&MTotal Radar Centric F&E + O&M

10,000

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13,000

14,000

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

Staf

f

Define and ImplementIncremental Solutions

via Segments

Measure Post-Implementation

Performance, Service,and Cost of Segment

Vision

•Aircraft can self separate with or without pilots and when necessary control can be assumed from the ground

•Customers and operators are fully informed with increased options to self-manage their ability to meet their needs

•All communities are connected into the global air transportation network

Airs

pace Decouple from

Ground Based CNS

Veh

icle

s New Airframes, Materials and Propulsion

Refuse to Crash Avionics

2006 2008 2015 2025

Risk Based Screening

Self Separation

Integrated Aviation and Border Security Functions

Two Aircraft on Same Runway

Market Based Flow Management (NASDAQ)

Secu

rity

&

Safe

ty

Market for Environmental Credits

Environmental Ground Equipment & Operations

Noise Reducing Operations

Airp

orts

Revise AIP including Regional Capacity

PlanningAutomated Aircraft Taxi & Surface Management

Comprehensive Airport Program Model Airport of the FutureWith Transparent Screening

Proa

ctiv

e Sa

fety

Man

agem

ent C

ultu

re w

ith

Non

-Pun

itive

Dat

a Sh

arin

g &

C

ompr

ehen

sive

FA

R R

evie

w

Network EnabledCoordinated

Response

Fuzzy logic to manage Weather uncertainty

Routine Use ofRemote Pilots

Performance Based Services

Automated Maneuvering to avoid Mid-air collisions

Formation Takeoff & Landings

Exception Handling Services

Near all weathertakeoff & landing

Vision

•Aircraft can self separate with or without pilots and when necessary control can be assumed from the ground

•Customers and operators are fully informed with increased options to self-manage their ability to meet their needs

•All communities are connected into the global air transportation network

Vision

•Aircraft can self separate with or without pilots and when necessary control can be assumed from the ground

•Customers and operators are fully informed with increased options to self-manage their ability to meet their needs

•All communities are connected into the global air transportation network

Airs

pace Decouple from

Ground Based CNS

Veh

icle

s New Airframes, Materials and Propulsion

Refuse to Crash Avionics

2006 2008 2015 2025

Risk Based Screening

Self Separation

Integrated Aviation and Border Security Functions

Two Aircraft on Same Runway

Market Based Flow Management (NASDAQ)

Secu

rity

&

Safe

ty

Market for Environmental Credits

Environmental Ground Equipment & Operations

Noise Reducing Operations

Airp

orts

Revise AIP including Regional Capacity

PlanningAutomated Aircraft Taxi & Surface Management

Comprehensive Airport Program Model Airport of the FutureWith Transparent Screening

Proa

ctiv

e Sa

fety

Man

agem

ent C

ultu

re w

ith

Non

-Pun

itive

Dat

a Sh

arin

g &

C

ompr

ehen

sive

FA

R R

evie

w

Network EnabledCoordinated

Response

Fuzzy logic to manage Weather uncertainty

Routine Use ofRemote Pilots

Performance Based Services

Automated Maneuvering to avoid Mid-air collisions

Formation Takeoff & Landings

Exception Handling Services

Near all weathertakeoff & landing

Baseline andAssess Today’s

Performance

FY06 FY08 FY10 FY12 FY14 FY16 FY18 FY20 FY22 FY 24

DEVELOP

DEVELOP

DEVELOP

DEVELOP

DEVELOP

DEVELOP

DEVELOP

IMPLEMENT

IMPLEMENT

IMPLEMENT

IMPLEMENT

IMPLEMENT

IMPLEMENT

IMPLEMENT

Research , Analysis, and Demonstrations(Research $)

Enhanced System Operations to Meet NGATS Goals(Operations $)

Note: Segments are defined by their operational dateSpecific start dates and implementation timelines vary by IPT and solution element

Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Segment 6

Segment 7

Spec

Spec

Spec

Spec

Spec

Spec

Spec

FY06 FY08 FY10 FY12 FY14 FY16 FY18 FY20 FY22 FY 24

DEVELOP

DEVELOP

DEVELOP

DEVELOP

DEVELOP

DEVELOP

DEVELOP

IMPLEMENT

IMPLEMENT

IMPLEMENT

IMPLEMENT

IMPLEMENT

IMPLEMENT

IMPLEMENT

Research , Analysis, and Demonstrations(Research $)

Enhanced System Operations to Meet NGATS Goals(Operations $)

Note: Segments are defined by their operational dateSpecific start dates and implementation timelines vary by IPT and solution element

Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Segment 6

Segment 7

Spec

Spec

Spec

Spec

Spec

Spec

Spec

• Define the “What”• Architect & Analyze• Define Solutions• Execute & Measure

Define Concept of Operations;

Identify Future

Capabilities and Outcomes

Develop EA; Identify Gaps and Overlaps; Determine Research and Program Needs

Analyze AlternativeSolutions and Assess

TradeoffsPolicy, Portfolio, Roadmaps,and Business Cases

2025 – International Harmonization

• Successful NGATS implementation will require significant coordination between the U.S. government and industry and foreign governments and industry.

• We must develop truly ‘international’ standards for aircraft, required equipage, and operational paradigms.– Because of residual value concerns, this is an issue even for

non-international carriers.

• Aeronautics companies must bear this in mind, paying more attention to other parts of the world.

• This will require placing increased emphasis on the needs of other countries and coordinating with key regions for the continued competitiveness of U.S. industry.

Notional NGATS Funding Profiles

Profile “C”:Major program phases and funding required

2006 2011 2016 2021 2026 2031

Budget Runout @ 3%NGATS BudgetCommitted Budget

$

Profile “B”:Moderate constant resource increase required

2006 2011 2016 2021 2026 2031

Budget Runout @ 3%NGATS BudgetCommitted Budget

$

Profile “A”: No new funds; Live within budget runouts

2006 2011 2016 2021 2026 2031

Budget Runout @ 3%NGATS BudgetCommitted Budget

$

2025 Fleet Predictions • Overseas demand for aircraft will by far outpace U.S. domestic

demand over the next 20 years– Airbus predicts that 72 percent of the demand for new aircraft though

2025 will be outside of the United States– Boeing forecasts that 66 percent of the demand will be outside of the

United States

• Of new aircraft needed, the United States will need 28 percent, Europe will need 32 percent, and Asia-Pacific countries will need 27 percent.

• Boeing predicts that the world passenger fleet will double in the next 20 years to almost 35,000 airplanes.

• The world freighter fleet will double over the next 20 years, from 1,766 to 3,456.

• By 2025, there will be more RPKs to/from the U.S. than within the U.S.

Aligning Incentives Between Providers and Users

Productive Efficiency

Allocative Efficiency

Users ATMProviders

ATM Costs

User Charges

Transparency Budgets

Analysis of NAS Capacity Constraints

• We know that there are many facets of National Airspace System (NAS) capacity– Terminals, Runways, Taxiways, En Route sectors

• At a macro level, for this analysis, we have lumped capacity into only two categories: en route and airport

• What we’d like to see is which of these two categories constrains NAS performance first and to what degree

• We also want to investigate characteristics of the traffic when the NAS performance is constrained

Capacity Analysis Approach

ASMs(available seat miles)

RPMs(revenue passenger miles)

Enplanements(revenue passengers boarding an aircraft)

Flights

Load Factor Load Factor

Average Aircraft Seats

Average Stage Length

Avg. Stage Length, Avg. Aircraft Seats

Average Stage Length, Average Aircraft Seats

Load Factor

One single-stage flight consists of two airport operations(takeoff and landing) plus a number of en route operations(ATC communications). The total time required for takeoff, travel through the NAS and landing is calculated for every flight (commercial and general aviation).

Capacity Analysis Metrics

• “Unconstrained demand” represents the public’s desire for air transportation

– The FAA’s Terminal Area Forecast, based on socio-economic data, does not consider whether future NAS capacity will be sufficient to accommodate all the demand

– Capacity constraints will force some of the demand to be left unsatisfied

• Our composite capacity metric is “feasible throughput” which is measured in terms of number of flights

– Flights are eliminated from the future flight schedule after a specified airport delay tolerance or sector capacity is reached

Fred’s Visualization

3X Scenario Results

100%

65% 66%

82%

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Unconstrained Demand Both Constraints Airport Constraints Only Sector Constraints Only

Feas

ible

Thr

ough

put (

fligh

ts)

0%

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Dem

and Satisfied (% of U

nconstrained)

Feasible Throughput % Demand Satisfied

Summary of Capacity Constraints Analysis3X Demand

Category3X Baseline

Demand

3X Feasible Throughput (Airspace

Constrained)

3X FeasibleThroughput

(Airports Constrained)

3X FeasibleThroughput

(Airports and Airspace

Constrained)

Flights in NAS 173,980 142,782

31,198

18%

114,156 112,595Number of

Flights Trimmed N/A 59,824 61,385

% of Flights Trimmed N/A 34% 35%

•Assuming only FAA airport capacity benchmark report airport capacity improvements and no airspace capacity improvements, the portion of demand that cannot be satisfied ranges from 18% to 35%.

•Note that the unsatisfied demand for the Airport Constrained and the Airport/Airspace Constrained cases are almost identical.

Impact on U.S./International Traffic3X Demand – Airports/Airspace Constrained

Category International Outbound

Flights

International Inbound Flights

International Overflights

3X Unconstrained

Demand

8,100 7,400 20,106

3X Feasible Throughput

6,012 5,550 20,044

Number of Flights Trimmed

2,088 1,850 62

% of Flights Trimmed

26% 25% 0%

• Approximately ¼ of both International Inbound and International Outbound flights to/from the U.S. could not be satisfied under the 3X scenario.

• The impact on International Overflights is negligible.

Reduction in INTL flights at OEP Airports3X Demand – Airports/Airspace Constrained

- 200 400 600 800 1,000 1,200 1,400

SANMD

STLDCA

PITTPAPDXLGASLCCLEBWIDENPHXME

LASHNLCVGCLT

DFWBOSSFOMC

SEAMSPDTWATLPHLORDFLLEW

LAXIADIAHJFKMIA

OEP

Airp

orts

Airport Operations (Departures + Arrivals)

3X Baseline Demand

3X Airport and Airspace Trimmed Demand

Average number of INTL flights trimmed at OEP Airports: 89Average % of INTL flights trimmed at OEP Airports: 25% Average number of INTL flights are trimmed at Top 10 OEP Airports with most INTL Ops:223Average % of INTL flights are trimmed at Top 10 OEP Airports with most INTL Ops:29%

600 800 1000 1200 1400 1600 18009

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3X RPMs

1625

9.92025

1220

10.6

Enroute-Constrained

1332

12.1

Terminal-Constrained

1072

15.1

Emissions Constrained

946

17.1

Noise Constrained

881

18.3

Constrained by All

836

19.3

RPMs (billions/fiscal year)

yiel

d (2

005 c

ents

)

demand curve at 3X RPM

APO Forecast Extrapolated from APO

3X Constraints AnalysisYield and Consumer Surplus

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19

RPMs (billions/fiscal year)

yiel

d (2

005 c

ents

)

FAA Forecast (Mainline+Regional)

Extrapolated from APO

2004

2017

2025

2032Elasticity = -1

NXTE

NTE

XTE

TET

E

Constrained by:N - noiseX - emissionsT - terminalE - enroute

As demand grows while constraints limit supply, prices will rise

$0

$20

$40

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$180

Noise,emissions,terminal,enroute

noise, term,enr

emiss, term,enr

term, enr term enr

2016 2018 2019 2022 2022 2028Constraint (year of emergence)

NPV of Constraints Reduction (3X)

NPV

0 200 400 600 800 1000 1200 1400 1600 18009

10

11

12

13

14

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19

20

$8.6B

$11.0B

$18.0B

$2.1B

$36.1B

$32.5BAll solved+$108.3B

Noise, emissions, terminal solved;+$75.8B

Noise, emissions, enroute solved; +$39.7B

Noise, emissions solved; +$37.6B

Noise solved; +$19.5B total

Emissions solved; +$8.6B consumer surplus (const 2005$)

Nothing solved

RPMs (billions/fiscal year)

yiel

d (2

005 c

ents

)

demand curve at 3X RPM

3X Constraints AnalysisYield and Consumer Surplus

JPDO Cost Workshops

• A detailed “bottom-up” design cost for a program of this complexity, duration, and number of “known unknowns” is not yet practicable

• Objective of Cost Workshops are to make first order engineering estimates of:

– required total funding– contingency reserves– funding profile shape, magnitude, and duration with

acceptable performance outcomes and risks

• Continually justify requirements through political and technical reviews

Cost Workshop 1 – Key Policy Issues• Who (NASA or FAA) will do the research?

– Distribution of funding and people?– Are the combined resources available?

• Research should account for international harmonization issues and requirements

• Industry wants to work collaboratively to develop specifics of the architecture

• Successful execution to the NGATS schedule requires strong linkage & leadership from fundamental research through decision points to certification and implementation

• FAA must gain commitment from other agencies

Cost Workshop 1 – Key Policy Issues• FAA commitment must be demonstrated

– Exploit existing aircraft capabilities, e.g., RNP1 procedures– Develop integrated process representing all FAA players and

necessary steps for implementation (including certification)– Harmonize international standards to preclude extra

equipage (impacts residual aircraft values)

• NAS users have short ROI horizons– Less than one year for existing equipment– Approximately 1 – 3 years for new equipment– Implication: early adopters will need hard incentives

• Subsidies, tax breaks, financing options, targeted deployments for early adopters

• An NGATS service roadmap is needed that– Specifies required equipage in specific time increments and airspace

accessibility– Bundles capabilities with clearly defined anticipated benefits and

needed investments– Uses a 4 – 5 year equipage cycle to synch

with maintenance schedules

Questions?