benefit cost analyses for integration of unmanned aircraft … · 2014-07-11 · gra, incorporated...

GRA, Incorporated

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Benefit‐Cost Analyses for Integration of Unmanned Aircraft Systems into Civilian Aviation Applications

GRA, Incorporated

Background

The Joint Planning and Development Office (JPDO) investigated the costs and benefits associated with allowing UAS to perform certain missions in U.S. airspace through 2035, given that UAS implementation is approved by the Federal Aviation Administration in 2015. GRA, Incorporated, in cooperation with Booz Allen Hamilton, conducted the analyses over the past two years

The JPDO has been disestablished, with some work folded into NASA’s Aeronautics Research Mission Directorate (ARMD). Benefit-Cost analyses are continuing, with an emphasis on the effects of autonomy / automation

Introduction

GRA, Incorporated

Key Insights

The biggest potential for UAS adoption—where the largest cost disparity exists—is where a small UAS equipped with camera/sensors can replace a human crew to perform low-cost surveillance missions

Agricultural use of UAS comprises a major potential market and a large opportunity for cost savings, both for aerial application of crop treatments and for monitoring of planted fields

Law enforcement applications represent another major market

Benefits come not only in the form of reduced operating costs, but also improved safety

Proof-of-concept demonstrations for various civilian applications have been executed. They reveal demand and a level of technological readiness

Introduction, continued

GRA, Incorporated

JPDO has investigated several applications identified for potential UAS adoption

Agriculture

Aerial Advertising

Real Estate Photography

Analyses conducted during fiscal years 2012 and 2013. The following cases are presented here:

European Economic Impact AnalysisEuropean Economic Impact Analysis

UAS Benefit-Cost Analysis

Purpose: Analyze the net benefits of using UAS for a variety of missions

4

Applications

Agriculture

Aerial Advertising


GRA, Incorporated

The team took a structured approach to evaluate the economic viability of UAS in agricultural missions

Integrate UAS intofleet

Estimate Baseline Demand

Define Mission and Determine Mission Attributes

Determine Overall Market Size

Sensitivity Analysis

Evaluate Cost Savings

Aerial Application

Replacement

AerialApplication

UAS Crop Scouting

Treatment/Scouting

SafetyConsiderations

Benefit-Cost Analysis Methodology

Agriculture

GRA, Incorporated

Conventional (manned) aircraft are currently used to treat 20% of commercial U.S. cropland1

Acreage: over 71 million acres treated by conventional aircraft

Key crops: corn, rice, soy, and cotton

Applicant: pesticides, seed, water, and specialized treatments

UAS adoption can provide a number of benefits

Operating cost savings under certain conditions

Reduction of pilot safety hazards

Improved access to aerial application for certain demographics and topographies

Spraying (aerial application) is widely utilized and UAS may be equipped to offer cost savings to users of conventional aircraft

UAS Aerial Application: Yamaha R-MAX II3

Illustrative Substitution from Conventional Aircraft to UAS

(1) National Agriculture Aviation Association: http://www.agaviation.org, access 03/12/2013(2) Greg Doll Photography: http://images.rcuniverse.com/forum/upfiles/180864/Rp42932.jpg, access 03/10/2013(3) Yamaha Motor Company promotional material, obtained 03/16/2013

Agriculture Crop ScoutingAerial Application

Conventional Aerial Application: Piper Pawnee2

Unmanned Aircraft are substituted for conventional aircraft

UAS Aerial Application: Yamaha R-MAX II3

GRA, Incorporated

Aerial application is a riskier-than-average general aviation mission

Aerial application aircraft fly at low altitude at a relatively high rate of speed

Accident rates obtained from AOPA Safety Institute illustrate the high level of risk and NTSB Database

7.4 accidents per 100,000 hours; 7.2 fatal accidents per year (of 1.28 million total hours)

When evaluated using FAA’s value of injury and value of statistical life ($200 thousand for injury, $9.1 million for fatality), we found a total safety

consideration of $170.2 million in 2013

Note: These costs are only calculated for the for the pilot on board the aircraft; ground injuries or fatalities are not included in this analysis

(1) Aircraft Owners’ and Pilots’ Association Safety Institute: Preliminary Summary of General Aviation Accidents, 2012

(2) Federal Aviation Administration: Economic Values for Benefit-Cost Analysis, 2012

Agriculture

Ground proximity and power linespresent serious issues to pilots

Crop ScoutingAerial Application

GRA, Incorporated

We forecasted flight hours for conventional aerial application versus UAS application

m

2 m

4 m

6 m

8 m

10 m

12 m

14 m

Conventional Aircraft Unmanned Aircraft

Since R-MAX has 1/12th the Productivity of Manned Aircraft, Flight Hours Demanded is Much Higher in the Test Case UAS Case, Annual Domestic Projections of Flight Hours

Agriculture

We utilize the Yamaha R-MAX and Unmanned Thrush to act as replacement UAS aircraft in our test case

The Yamaha R-MAXoperates on a Lease-

only basis at $22 per operating hour

$783 Million

$1,730 Million

2015 2035

Total Operating Costs Are Expected to Grow to Nearly $2B in 2035Total Operating Cost, UAS Test Case, $Millions

Crop ScoutingAerial Application

GRA, Incorporated

Precision agriculture technologies have significant cost-saving potential; integrating these with UAS could yield even greater value

Crop scouting is vital to identify and address site-specific crop growth variances

– Majority of missions are currently performed on foot by a farmer or contractor; larger farms may employ satellite imagery or conventional aircraft

– Visual imagery can be complimented with spectral sensing to assess cropland performance

UAS monitoring in a precision agriculture capacity may hold significant value

– Provide cost savings and higher-resolution imagery versus satellite or foot missions

– Enable cost-efficient field mapping for smaller farms

– Reduce farmers’ annual fertilizer and chemical expenses through more targeted treatment

(1) Advanced Ag Solutions, LLC: www.advancedagsolutions, access 04/02/2013(2) AEROmetrix Pty Ltd: www.aerotetrix.au, access 04/02/2013(3) Interview with CEO of Volt Aerial Robotics on 03/22/2013

Potential Enhancement to Site-Specific Crop Management

Agriculture Aerial Application Crop Scouting

Conventional Field Map:Ground Scout Field

Report1

Aerial Field Map: Enhanced Aerial Crop

Photograph2

Advanced crop scouting yieldssignificant improvements

GRA, Incorporated

Conclusion: We found UAS to hold potential for achieving cost savings in future agriculture missions

We estimated that UAS can save approximately 8% in operating costs for aerial application, which represents a savings

to farmers of over $159m in 2035

A 1.6% cost savings rate for treatment chemicals and fertilizers

represents a $186m savings in 2035

We noted that the treatment cost savings is offset by the cost of UAS for crop scouting during the tenor of the analysis

$14,175 m$13,912 m

$0 B

$5 B

$10 B

$15 B

Baseline Case UAS Case

Safety Cost

UAS Operating Cost

Conventional AircraftOperating CostAdded Cost forTreatmentCost of TreatmentChemicals

Comparison of Costs Estimated in Two ScenariosNominal $, 2035

Net Present Value of Total Cost Savings2013 – 2035 discounted at 8.8%, projected distribution

$355m

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-$200 m $200 m $600 m $1,000 m

Through 2035, we estimated the net present value of cost

savings due to UAS adoption to exceed $355.5m

-$25 m

$50 m

$125 m

$200 m

$275 m

$6 B

$8 B

$10 B

$12 B

$14 B

2015 2020 2025 2030 2035

Net Savings Baseline Case UAS Case

Comparison of Costs Estimated in Two ScenariosNominal $, Annual

Annual Cost Net Savings After an initial investment period, we projected more than

$200m in net savings per year

We estimated that benefit-cost breakeven will occur near 2019

In both cases, we anticipated costs to rise through increases in demand as well as inflation

Summary

Total Cost Components

Net Present Value

Agriculture

GRA, Incorporated

We examined a case in which synchronized, autonomous UAS perform agriculture missions beginning in year 2025

We estimated a substantial cost savings in aircraft operations as many more UAS are projected to be employed (72% decrease)

The NPV estimation through 2035 increased from $355m to $1,938m

The adoption of synchronized, autonomous UAS could drive even greater benefits through missions such as pest control or livestock management though those are not modeled here

Annual aggregate savings in excess of $1.5B could be possible in this case—up from 0.25B in the basic UAS case

$14,175 m

$12,509 m

$0 B

$5 B

$10 B

$15 B

Baseline Case Auto. UAS Case

Safety Cost

UAS Operating Cost

Conventional AircraftOperating Cost

Added Cost forTreatment

Cost of TreatmentChemicals

Comparison of Costs Estimated in Two ScenariosNominal $, 2035

$0 m

$500 m

$1,000 m

$1,500 m

$2,000 m

$7 B

$9 B

$11 B

$13 B

$15 B

2015 2020 2025 2030 2035

Net Savings Baseline Case Auto. UAS Case

Comparison of Costs Estimated in Two ScenariosNominal $, Annual

Annual Cost Net Savings

Six UAS may be programmed to fly in synchronous, pre-determined flight path

The UAS pilot discount—which was originally 40% less than the conventional pilots’ salary—has been increased to 60%

We increased the UAS adoption rates from “Low” and “Medium” to “High” for Mega and Large croplands, respectively

Assumptions made in synchronized, autonomous case

Summary of Findings

Net Present Value of Total Cost Savings2013 – 2035 discounted at 8.8%, projected distribution

$1,938m

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100%

$0 m $1,000 m $2,000 m $3,000 m

Agriculture

12

Applications

Agriculture

Aerial Advertising


GRA, Incorporated

The team took a structured approach to evaluate the economic viability of UAS in aerial advertising missions


Build Conventional Fleet

Gather GA Survey Flight Data

Determine Total Hours Demanded

Sensitivity Analysis


Banner Towing


Isolate Aerial Advertising Missions

Lighter-Than-Air

Banner Towing

Lighter-Than-Air

Aerial Advertising

GRA, Incorporated

Advertising banners are typically towed by small, piston, fixed-wing aircraft under Federal Aviation Regulations (FAR) Part 91

Aerial advertising missions typically take place at relatively low altitude (approximately 500 feet), and over populated or tourist-oriented areas (such as beaches, festivals, sporting events, etc.)

The aircraft typically stays aloft for 4-6 hours, completing multiple passes of the target advertising area

UAS adoption can provide a number of benefits:

Operating cost savings under certain conditions

Reduction of pilot safety hazards

Conventional banner towing missions involve a small, piston aircraft towing a banner for advertising purposes

Piper PA-18 Super Cub

(1) 2010 FAA General Aviation Survey(2) Conklin and DeDecker, Aircraft Cost Evaluator, 2012 ed. (3) Photos: www.air-and-space.com; aircraft.wikia.com; http://www.w54.biz/

Lighter than AirBanner Towing

Cessna C172 AAI Shadow 200 UAS

Representative Aircraft

GRA, Incorporated

Large commercial blimps typically rely on a flight crew of 3 and an 8-person ground crew for takeoff and landing

The annual cost of lighter-than-air ground crews often surpasses the flight staff’s salaries. As the ground crew would remain in use for unmanned aircraft, there is a lower potential for labor cost savings

Accidents—and therefore safety cost savings potential—are considerably less prevalent with lighter-than-air advertising missions than banner towing flights

Unmanned lighter-than-air missions do hold potential for cost savings, mostly in the form of pilot salary reduction

Radically new lighter-than-air UAS designed specifically for advertising may be developed but are not considered in this analysis as future production and adoption scenarios are highly speculative

Conventional lighter-than-air aerial advertising missions involve balloon and blimp operations

(1) Dexter, Jim ; "Airship Operations in Uttaranchal - Feasibility Study" Director of Flight Operations, The Lightship Group, 2001(2) Photos:: http://www.flickriver.com; John Hamilton/DVIDS

Airship Industries Skyship 600B Unmanned WLD1-B

Lighter than AirBanner Towing

Representative Aircraft

GRA, Incorporated

The 2010 GA Survey identified historical advertising flight hours, which we estimated using FAA-published growth rates

Historical flight data and number of aircraft come from 2010 General Aviation and Air Taxi Table 3.2: Total Hours Flown by Actual Use

Small single engine fixed wing aircraft perform the vast majority of advertising missions

FAA provides forecasted growth rates for advertising missions from 2013-2037; we used these rates to project total flight hours in the baseline case

(1) 2010 FAA General Aviation Survey(2) FAA Aerospace Forecast 2012-2037

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FAA Forecasts a Dip and Recovery in Advertising Flight HoursNumber of Flight Hours, Thousands

Single Engine (Seats 1-3),

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Single Engine (Seats 4+), 44

Lighter Than Air, 28

Small Single Engine Airframes Comprise the Bulk of the FleetNumber of Aircraft

Aerial Advertising

GRA, Incorporated

We combined our flight hour forecasts with cost data for the representative fleet to project future costs for the baseline case

Hourly operating costs will grow over time with inflation

Total operating and safety costs are a direct function of forecasted flight hours

– Operating costs include fixed costs (insurance payments, hangar space), variable costs (fuel, oil, maintenance), labor costs (pilot salaries, ground crew), and depreciation costs

– Safety costs are estimated as the number incidents per 1,000 hours of flight time (see slide 14)

We projected a constant mix among the fleet in the baseline case over time

86% 86%

10% 10%

2% 2%

2015 2035

The Baseline Fleet Mix Will Remain Relatively ConstantFlight Hours, % of Total

LighterThan Air

1 Eng 4+Seat

1 Eng 1-3 Seat

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Operational and Safety Costs Increase Throughout the Integration PeriodBaseline Case, $Millions

Operating Cost

Safety Cost

Aerial Advertising

GRA, Incorporated

We posited 3 scenarios for UAS adoption to bound growth assumptions for the industry

Low-Growth Case: Adoption results in a UAS fleet size growth of 2.5% annually

Med-Growth Case: Adoption results in a UAS fleet size growth of 5.0% annually

High-Growth Case: Adoption results in a UAS fleet size growth of 10.0% annually

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We Project Three Different Rates of Growth in the Aerial Advertising FleetNumber of Aircraft in Fleet

Low-Growth Case Med-Growth Case High-Growth Case

Aerial Advertising

GRA, Incorporated

Under the 3 growth scenarios, we projected UAS to grow to a substantial portion of the advertising fleet

Scan Eagle48%Shado

w 20048%

WLD1B4%

3 UAS Perform Replacement MissionsUAS Flight Hours, % of Total, 2035

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We Project UAS Market Share of Total Fleet Between 44-89% in 2035UAS Share of Total Advertising Hours Flown

High-Growth Med-Growth Low-Growth

We used the flight hours projected in the baseline case as the total flight hours (conventional airframe plus UAS hours)

Starting from zero, UAS integration grows between 2.5% (Low-Growth Case) and 10% (High-Growth Case) per year

In the most conservative case, we projected that UAS will comprise over 40% of the advertising fleet in 2035

Aerial Advertising

GRA, Incorporated

Integrating UAS aircraft into the aerial advertising fleet resulted in significant safety benefits

The cost of accidents is significant throughout the majority of general aviation missions; banner towing for advertising is especially hazardous

Utilizing data from the Civil Air Patrol (CAP) and the Aircraft Owners and Pilots Association (AOPA) Safety Institute, we projected accident rates for general aviation

Value of statistical life, accident, and injury provided by FAA guidance (adjusted for inflation)

100%

62%

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75%

100%

Baseline Case UAS Med-Growth Case

UAS Technology Yields 38% Safety Savings in Test CaseTotal Accident Cost 2015-2035, as Percentage of Baseline

(1) Aircraft Owner and Pilots Association Air Safety Institute Accident Report, 2011(2) GRA, Incorporated. Economic Values for FAA Investment and Regulatory Decisions, a Guide. Prepared for FAA Office of Aviation Policy and Plans. December, 2011

Incident, General Aviation Incidents per 100,000 Flight Hours

Accident, Fixed-Wing Single Engine 7.11

Injury, Fixed-Wing Single Engine 4.69

Fatality, Fixed-Wing Single Engine 1.55

Accident, Lighter-Than-Air 0.83

Injury, Lighter-Than-Air 0.45

Fatality, Lighter-Than-Air 0.21

Aerial Advertising

GRA, Incorporated

UAS hold significant potential for achieving cost savings in future aerial advertising missions

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Integrating UAS Into Aerial Advertising Missions Could Potentially Save Over $16m per YearTotal Cost Savings, UAS Med-Growth Case – Baseline Case, $Millions

Banner Towing

Operating Costs34%

Lighter-Than-Air Operating

Costs2%

Safety64%

Safety Dominates Total Cost SavingsComponents of Total Cost Savings, 2015-2035

We found that UAS technology can provide significant cost savings when compared to conventional aircraft

We estimated cost savings from the time of initial integration (2015) and throughout the integration period (2035)

– For 2035, we projected a total savings of $16.6m due to UAS integration

Peak savings occur in years 2030-2035, at the time of full UAS adoption

Pilot safety benefits as a result of UAS integration are the greatest component of the cost savings throughout the analysis

Aerial Advertising

22

Applications

Agriculture

Aerial Advertising


GRA, Incorporated

Methodology: The team took a structured approach to evaluate the economic viability of UAS in real estate photography missions


Build Conventional Fleet

Isolate Real Estate Use Cases

Determine Total Hours Demanded

Economic Benefit of Re-Investment


Fixed Wing


Identify Applicability & Frequency

Rotor Craft

Fixed Wing Rotor CraftShort-Range

UAS


GRA, Incorporated

We built a bottom-up market sizing to estimate total domestic demand for real estate photography

Including all relevant real estate types, we took random samples to estimate the percentage of that real estate type which is an aerial candidate and to identify the frequency of the subject photos

Existing businesses use both fixed wing and light rotor aircraft to perform missions within a 50 mile radius of home field

We employed the general FAA Aerospace Forecast to project the base case growth in real estate photography flight time

(1) http://www.capecodaerials.com/(2) 2010 FAA General Aviation Survey

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We Project a Modest Rise in Hours for Real Estate MissionsNumber of Flight Hours, Thousands

Residential Real Estate, for saleGolf Courses

FarmsFour-Year Colleges

MarinasPrivate Schools

Strip MallsFarms and Ranches, for sale

Ski ResortsTowns

Arenas & StadiumsCities

Corporate CampusesHotel Resorts, for sale

- 500 1,000 1,500 2,000 2,500 3,000

Various Types of Real Estate Require Aerial PhotographyFlight Hours Performed, 2013


GRA, Incorporated

We combined our flight hour forecasts with cost data for the representative fleet to project future costs for the baseline case

Hourly operating costs will grow over time with inflation

Total operating and safety costs are a direct function of forecasted flight hours

– Operating costs include fixed costs (insurance payments, hangar space), variable costs (fuel, oil, maintenance), labor costs (pilot salaries, ground crew), and depreciation costs

– Safety costs are estimated as the number incidents per 1,000 hours of flight time

We built a representative fleet based on GA survey data and projected a constant mix among the fleet in the baseline case over time in the baseline case

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Operational and Safety Costs Increase Throughout the Integration PeriodBaseline Case, $Millions Operating Cost Safety Cost

(1) Conklin and DeDecker, Aircraft Cost Evaluator, 2012 ed.(2) GRA, Incorporated. Economic Values for FAA Investment and Regulatory Decisions, a Guide; December, 2011

Cessna 172 Skyhawk

66%

Eurocopter AS-350 A

11%

Robinson R4423%

The Representative Fleet is a Combination of Rotor and Fixed Wing AircraftPercentage of Flight Hours, 2013


GRA, Incorporated

Using a standard adoption curve, we projected UAS to grow to a substantial portion of the real estate photography fleet

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We Project UAS Share of Total Fleet to be 50% in 2035UAS Share of Total Hours Flown

Adoption Curve

We used the flight hours projected in the baseline case as the total flight hours (conventional airframe plus UAS hours)

UAS integration grows from 1.5%* to comprise 50% of the total fleet in year 2035

We integrated the DraganFlyerX4 into the fleet as a stable, flexible photography platform for photography missions

DraganFlyer X4

* Several conventional and non-conventional realestate photography firms are alreadyemploying small, low-range UAS,demonstrating proof-of-concept

(1) http://www.skycamusa.com/realestate.shtml


GRA, Incorporated

UAS hold potential for achieving cost savings in future real estate photography missions

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2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035

Integrating UAS Into Real Estate Photography Missions Could Potentially Save Over $1m per YearTotal Cost Savings, UAS Case – Baseline Case, $Thousands

We discovered that UAS technology can provide significant cost savings when compared to conventional aircraft

We estimated cost savings from the time of initial integration (2015) and throughout the integration period (2035)

– For 2035, we projected a total savings of $787k due to UAS integration

Peak savings occur in years 2021-2013, before UAS fleet replacement must begin

Safety cost savings are a significant portion of the total cost savings


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Total CostSavings

OperatingCost Savings

UASReplacement

Cost

Safety CostSavings

Safety Cost Savings Drive the Value for UAS AdoptionSum of Cost Savings, 2015-2035, Nominal $ Millions

GRA, Incorporated

Photos can increase real estate sale values by $100,000; greater availability of aerial photography has huge economic benefits

An additional 18,000 flight hours between 2015-2035 (paid for with cost savings) could have significant annual benefits to photography and real estate firms

(1) Cape Cod Aerials – Typical price paid by consumer today for one aerial print of $1m property(2) Redfin Research Center – Average premium gained by $1M+ homes that use professional photography

Metric Value

Extra Flight Hours Gained, 2015-2035 18,322

Average Mission Duration (hours) 3.0

Number of Extra Missions (photos), 2015-2035 6,107

Number of Years 2015-2035 20

Number of Extra Missions (photos), 2015 305

Value of a Photo1 (low estimate) $ 1,500

Value of a Photo2 (high estimate) $ 116,076

Annual Value of Extra Missions (low estimate) $ 458,058

Annual Value of Extra Missions (high estimate) $ 35,446,388


GRA, Incorporated

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benefit cost analyses for integration of unmanned aircraft … · 2014-07-11 · gra, incorporated...

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