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Federal AviationAdministrationFinancial
Incentives for NextGen Avionics
ADS-B Case Study
2011 USA-Europe ATM Seminar
Joseph Post, Office of Systems Analysis
16 June 2011
Federal AviationAdministration
2Financial Incentives for NextGen Avionics16 June 2011
Outline
Policy Framework
Simulation Experiment
Business Case Results
Federal AviationAdministration
3Financial Incentives for NextGen Avionics16 June 2011
Introduction
• Proposal: Public funds may be used to subsidize equipage in the event of "market failure"
• Externalities: A type of market failure
– "Free riders" - benefits also accrue to those who do not equip
• Capacity
• Safety
– Environmental benefits/costs - may not be considered in operator's business case
– Passenger time savings - may not be considered in operator's business case
Market Failure occurs when the allocation of goods or services by a free market is not efficient. An outcome other than that arrived at by the market may lead to a net societal gain.
Federal AviationAdministration
4Financial Incentives for NextGen Avionics16 June 2011
The "Benefits Gap"
Avera
ge C
ost
an
d B
en
efi
t (P
resen
t V
alu
e)
TotalBenefits
Cost to the Government and the Operator
Discounted Costs and Benefits per Equipped Aircraft
Federal AviationAdministration
5Financial Incentives for NextGen Avionics16 June 2011
The "Benefits Gap"
Avera
ge C
ost
an
d B
en
efi
t (P
resen
t V
alu
e)
TotalBenefits
Cost to the Government and the Operator
Discounted Costs and Benefits per Equipped Aircraft
Cost to the Operator
Federal AviationAdministration
6Financial Incentives for NextGen Avionics16 June 2011
The "Benefits Gap"
Avera
ge C
ost
an
d B
en
efi
t (P
resen
t V
alu
e)
TotalBenefits
Cost to the Government and the Operator
Other societal benefits
Spillover benefits to other users
Benefits to the equipped user
Cost to the Operator
Discounted Costs and Benefits per Equipped Aircraft
Federal AviationAdministration
7Financial Incentives for NextGen Avionics16 June 2011
The "Benefits Gap"
Avera
ge C
ost
an
d B
en
efi
t (P
resen
t V
alu
e)
TotalBenefits
Cost to the Government and the Operator
Cost to the Operator
Other societal benefits
Spillover benefits to other users
Benefits to the equipped user
Discounted Costs and Benefits per Equipped Aircraft
Benefitsto User
Benefits Gap
Federal AviationAdministration
8Financial Incentives for NextGen Avionics16 June 2011
Possible Cost/Benefit Relationships
$
Cost to Equip
Other societal benefits
$
Cost to Equip
$ Cost to Equip
Case 1:
Benefit to Equipped User >Cost to Equip
Case 2:
Total Societal Benefit >Cost to Equip >Benefit to Equipped User
Case 3:
Cost to Equip >Total Societal Benefit
No justification for
financial incentives
No justification for
program
Benefits to the equipped user Spillover benefits to other users
Financial incentives
justified
Potential
Financial
Incentive
Federal AviationAdministration
9Financial Incentives for NextGen Avionics16 June 2011
Case Study Objective
• Estimate the costs and benefits of ADS-B Out equipage in Gulf of Mexico (GoMex) high altitude, non-radar airspace– Costs to equip– Benefits
• For those who equip• For those who don’t equip• For society at large
• Determine if there is a case for public investment in ADS-B Out avionics for aircraft that use GoMexairspace
This is a "high level" analysis. More detailed
work is required for airspace and route design.
Federal AviationAdministration
10Financial Incentives for NextGen Avionics16 June 2011
Gulf of Mexico Surveillance Coverage
Radar Only Radar Plus ADS-B
Federal AviationAdministration
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Relevant Airspace
Federal AviationAdministration
12Financial Incentives for NextGen Avionics16 June 2011
2009 GoMex Traffic Summary
Based on CY 2009 ETMS traffic sample
Excludes operators with less than one flight per day
COA, DAL, and AAL account for 57% of traffic
No other domestic carrier accounts for more than 2%
Carrier Code Carrier Avg. Operations/Day Share (%) Cumulative Share (%)
COA CONTINENTAL AIRLINES 94.4 28.3 28.3
AAL AMERICAN AIRLINES 61.3 18.4 46.6
DAL DELTA/NORTHWEST AIRLINES 34.6 10.4 57.0
GA General Aviation 22.8 6.8 63.8
AMX AEROMEXICO 15.5 4.6 68.5
MXA MEXICANA 13.5 4.0 72.5
MILITARY 7.8 2.3 74.8
JBU JETBLUE AIRWAYS 7.8 2.3 77.2
AWE AMERICA WEST AIRLINES 7.3 2.2 79.4
UAL UNITED AIRLINES 6.9 2.1 81.4
GWY USA 3000 AIRLINES 6.8 2.0 83.5
TAI TACA INTERNATIONAL AIRLINES 6.6 2.0 85.4
ACA AIR CANADA 5.6 1.7 87.1
FFT FRONTIER AIRLINES 4.9 1.5 88.6
SWA SOUTHWEST AIRLINES 4.7 1.4 90.0
TSC AIR TRANSAT A T INC 4.5 1.4 91.3
SSV SKYSERVICE AIRLINES 4.2 1.3 92.6
SWG SUNWING AIRLINES INC 3.8 1.1 93.7
ATE AEROMEXICO TRAVEL 2.5 0.8 94.5
SCX SUN COUNTRY AIRLINES 2.5 0.7 95.2
WJA WESTJET 2.3 0.7 95.9
AFR AIR FRANCE 1.9 0.6 96.5
CJA CANJET AIRLINES 1.8 0.5 97.0
NKS SPIRIT AIRLINES 1.8 0.5 97.6
IBE IBERIA 1.5 0.4 98.0
DLH LUFTHANSA 1.2 0.4 98.4
KLM KLM ROYAL DUTCH AIRLINES 1.2 0.3 98.7
DHL ASTAR AIR CARGO 1.1 0.3 99.1
FDX FEDERAL EXPRESS 1.1 0.3 99.4
ASA ALASKA AIRLINES 1.0 0.3 99.7
TOM 1.0 0.3 100.0
Total 333.9
Federal AviationAdministration
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Fleet Forecast, Continental AirlinesCONTINENTAL - Number of Aircraft - (Including Continental Micronesia)
Year End
Fleet Projected Total Fleet as of Year End
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Domestic Service _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
737-300 27 16 16 0
737-500 44 24 0
737-700 36 36 42 53 63 63 63 63 63 63 63 63 63 63 63 63
737-800 117 118 125 127 128 128 128 130 132 134 138 140 140 135 135 130
New Single Aisle 800 8 16 25 30
737-900 29 42 42 44 45 45 45 45 45 45 45 45 45 45 45 45
757-300 17 17 17 17 17 17 17 17 17 17 17 17 14 10 5 0
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Domestic Total 270 253 242 241 253 253 253 255 257 259 263 265 270 269 273 268
International Service
767- 200 10 10 10 10 5 0
767- 400 16 16 16 16 16 16 16 8 2 0
777-200/ 300 20 20 22 22 22 25 26 26 26 26 26 26 26 26 26 26
New Single Aisle 900 5 15 25 35 45
757-200 41 41 41 41 41 41 41 41 41 41 41 35 22 12 0
787-8 2 7 10 11 12 14 18 20 22 24 26 28 30
787-9 2 10 14 22 23 24 25 26 27 28
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
International Total 87 87 89 91 91 92 96 97 97 107 110 112 112 115 116 129
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total Fleet 357 340 331 332 344 345 349 352 354 366 373 377 382 384 389 397
Aircraft assumed to be equippedExcerpt from Jan. 2010 FAA Fleet Forecast
Federal AviationAdministration
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Fleet Forecast, DAL/NWA AirlinesDELTA (WITH NORTHWEST) - DOMESTIC SERVICE - Number of Aircraft
Year End
Fleet Projected Total Fleet as of Year End
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Domestic Service _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
737-700 5 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10
A-319 57 57 57 60 62 62 62 62 62 62 62 62 62 62 62 62
New Single Aisle 700 / 319 5 15 20 20 25
737-800 71 71 71 71 71 80 95 105 115 125 135 145 145 145 145 145
A-320 69 71 71 71 71 80 95 105 115 125 135 145 145 145 145 145
New Single Aisle 800 / 320 15 20 30 40
757-200 182 166 166 166 166 166 166 166 166 166 166 155 135 100 80 30
757-300 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16
New Single Aisle 900 / 321 10 35 60 80 110
DC-9-10-50H 77 65 45 25 0
MD-80 114 110 110 100 100 90 60 55 40 30 25 15 0
MD-90 16 17 17 17 17 17 17 17 17 17 17 17 5 0
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Domestic Total 607 583 563 536 513 521 521 536 541 551 566 580 583 578 588 583
International Service
747-200 1 0
747-200F 11 3 0
747-400 16 16 16 16 16 16 16 14 12 10 8 6 4 2 0
767-300 79 79 79 79 75 75 71 71 60 45 35 25 10 0
767-400 21 21 21 21 21 21 21 21 21 21 21 21 21 15 10 5
777-200 10 16 17 18 18 19 20 20 22 24 26 28 28 28 32 34
787- 8 (or A-350) 1 7 10 13 20 30 40 50 60 70 85 100 110
787- 9 (or A-350) 2 5 10 15 20 25 30 35 40
A-330-200 / 300 32 32 32 32 32 32 32 32 32 32 32 32 32 32 32 32
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
International Total 170 167 165 167 169 173 173 180 182 182 187 192 190 192 209 221
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total Fleet 777 750 728 703 682 694 694 716 723 733 753 772 773 770 797 804
Excerpt from Jan. 2010 FAA Fleet Forecast Aircraft assumed to be equipped
Federal AviationAdministration
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Fleet Forecast, American AirlinesAMERICAN - Number of Aircraft
Year End
Fleet Projected Total Fleet as of Year End
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Domestic Service _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
757-200 124 124 124 124 124 124 124 124 124 124 124 100 70 40 10 0
New Single Aisle 900 15 25 40 55 60
737-800 77 108 152 172 185 200 230 260 300 340 350 350 350 350 350 340
New Single Aisle 800 20 35 50 65 80
MD-80 282 244 190 165 140 130 100 70 30 10 10 0
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Domestic Total 483 476 466 461 449 454 454 454 454 474 484 485 480 480 480 480
International Service
767-200 15 15 15 15 15 15 15 12 2 0
767-300 58 58 58 58 58 58 58 58 50 36 22 0
777-200/300 47 49 50 51 54 56 56 56 56 56 56 56 56 58 60 62
787-9 12 22 36 48 60 75 90 97 107 111 116
A-300 25 0
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
International Total 145 122 123 124 127 141 151 162 156 152 153 146 153 165 171 178
Total Fleet 628 598 589 585 576 595 605 616 610 626 637 631 633 645 651 658
Excerpt from Jan. 2010 FAA Fleet Forecast Aircraft assumed to be equipped
Federal AviationAdministration
16Financial Incentives for NextGen Avionics16 June 2011
Aircraft Equipped with ADS-B
7401,058Total
1010B787-8
1616B757-300
30166B757-200
8080B737-800
1010B737-700
8080A320Delta/Northwest
1010B787-8
017B757-300
041B757-200
4545B737-900
128128B737-800
6363B737-700Continental
1212B787-9
5656B777-200/300
0124B757-200
200200B737-800American
20232014TypeCarrier
Federal AviationAdministration
17Financial Incentives for NextGen Avionics16 June 2011
Treatment Case
Base Case
Airspace Procedures
• Current Procedures– 7110.65, Section 8 - Caribbean ICAO Region, Longitudinal Separation– Turbojets at or above FL 200
• Mach Number Technique, or• 15 min.
– Turbojets below FL 200• 20 min.
– Nonturbojet Operations• 20 min.
• Proposed Procedures– ADS-B Performance-Based Route Strategy, June 2010 Draft, Longitudinal Separation– Low Equipage (0-30%), "Better Access to Airspace"
• No new routes, dedicated altitudes, or special sequencing• 5 nmi for coincidental DO-260B a/c pairs, all altitudes• Current separation for all other a/c pairs
– Medium Equipage (30-70%), "Dedicated Altitudes"• Dedicated altitudes for DO-260B equipped aircraft (e.g., FL 370 and 390)• 5 nmi on dedicated altitudes• Current separation elsewhere
– High Equipage (>70%), "Dedicated Routes"• Dedicated performance-based routes, FL 290 to 410• 5 nmi on dedicated routes• Current separation elsewhere
Federal AviationAdministration
18Financial Incentives for NextGen Avionics16 June 2011
NASPAC Modeling
• NASPAC system-wide model used to estimate delay savings of increased ADS-B Out equipage and 5 nmilongitudinal separation
• Two cases examined:– Baseline Case (No Financial Incentives)
• No aircraft equipped with ADS-B DO-260B• 15 min. separation for all a/c
– Treatment Case (Financial Incentives)• Non-retiring COA, DAL, and AAL a/c at end of FY13 are equipped
with ADS-B DO-260B• 10 year service life• "Dedicated altitudes" (medium equipage) airspace rules
– Equipped aircraft use dedicated routes or altitudes– Longitudinal separation minima
» 5 nmi for all DO-260B a/c» 15 min. for all other a/c at or above FL 200
Federal AviationAdministration
19Financial Incentives for NextGen Avionics16 June 2011
Simulated Flight Trajectories
August 13 2014
• FY14 and FY23 traffic scenarios
• Eight days modeled for each year
• Current route structure• "Gate Finder" algorithm used
to identify major traffic flows and create in trail restrictions
• GoMex airborne delay valued using taxi factors
– i.e., we assume all GoMexairborne delay will be absorbed on the surface (conservative)
• Propagated delay included
Federal AviationAdministration
20Financial Incentives for NextGen Avionics16 June 2011
Simulation Delay Summary
0
2
4
6
8
10
12
14
Base Treatment Base Treatment Base Treatment Base Treatment
Equipped
Carriers
Other
Operators
Equipped
Carriers
Other
Operators
Gulf Airspace Other Airspace
Avg
era
ge
Dela
y (
min
/flig
ht)
Airborne Delay
Departure Delay
Pushback Delay
0
2
4
6
8
10
12
14
Base Treatment Base Treatment Base Treatment Base Treatment
Equipped
Carriers
Other
Operators
Equipped
Carriers
Other
Operators
Gulf Airspace Other Airspace
Avg
era
ge
Dela
y (
min
/flig
ht)
Airborne Delay
Departure Delay
Pushback Delay
2014 2023
Federal AviationAdministration
21Financial Incentives for NextGen Avionics16 June 2011
Business Case Cash Flows (FY10$M)
$0
$100
$200
$300
$400
$500
$600
Benefits
To
tal C
os
t a
nd
Be
ne
fit
PV
(m
illi
on
s)
Other societal benefits
Spillover benefits to other users
Benefits to the equipped user
Cost to Equipped Operators
Present
Value FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Benefits to Equipped Carriers $120.2 $0.0 $14.5 $15.5 $16.5 $17.4 $18.4 $19.3 $20.3 $21.2 $22.2 $23.1
Benefits to Other Carriers $42.7 $0.0 $13.2 $11.5 $9.8 $8.1 $6.4 $4.7 $3.0 $1.3 -$0.3 -$2.0
Benefits to Public
Passenger Time Savings $0.0 $56.7 $56.9 $57.2 $57.4 $57.6 $57.9 $58.1 $58.3 $58.6 $58.8
CO2 $0.0 $2.7 $2.7 $2.7 $2.7 $2.7 $2.7 $2.7 $2.7 $2.7 $2.7
Total Public Benefits $395.9 $0.0 $59.4 $59.6 $59.9 $60.1 $60.3 $60.5 $60.8 $61.0 $61.2 $61.5
Total Benefit $558.8 $0.0 $87.1 $86.6 $86.1 $85.6 $85.1 $84.6 $84.1 $83.6 $83.1 $82.6
Total Equipage Cost $112.1
Federal AviationAdministration
22Financial Incentives for NextGen Avionics16 June 2011
Conclusions• A theoretical framework has been developed for analyzing financial
incentive proposals
• The amount that may be subsidized equals
Avionics Cost - Direct Benefit to Equipped Operator
in cases where:
(1) The overall societal benefit >= Total Project Cost and(2) Avionics Cost > Direct Benefit to Equipped Operator
• Analysis suggests significant potential user benefit from reduced separation in the Gulf of Mexico enabled by ADS-B Out
• Magnitude of direct benefit suggests financial incentives may not be warranted in this case
– Issue: Long pay-back period– Issue: Allocation of passenger time savings
• Changes to assumptions could lead to a different conclusion
Questions?