Various Counties MINUTE ORDER Page 1 of I

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1 TEXAS TRANSPORTATION COMMISSION Various Counties MINUTE ORDER Page 1 of I Various Districts Texas Government Code, Chapter 2056, requires that each state agency prepare a five-year strategic plan every biennium. The strategic plan represents the commitment by the Texas Department of Transportation (department) to fulfill its mission to, through collaboration and leadership, deliver a safe, reliable, and integrated transportation system that enables the movement of people and goods. The Texas Transportation Commission (commission) adopted the document entitled Agency Strategic Plan for the Fiscal Years Period on May 26, 2016, in Minute Order 11458$. Texas Government Code, , provides that the department shall develop a long-range plan for its pooi of aircraft as part of the agency s strategic plan. The long-range plan must include estimates of future aircraft replacement needs and other fleet management needs, including any projected need to increase or decrease the number of aircraft in the poo1. The department has developed the proposed Long-Range State Aircraft Fleet Replacement Plan considering, for each aircraft in the pooi, how much the aircraft is used and the purposes for which it is used, the cost of operating the aircraft and the revenue generated by the aircraft, and the demand for the aircraft or for that type of aircraft. IT IS THEREFORE ORDERED by the commission that the document entitled Long-Range State Aircraft Fleet Replacement Plan, as shown in Exhibit A, is adopted as an update to the Strategic Plan and approved for submission to the Governor s Office, the Legislative Budget Board, and other required officials. Director, Aviation Division Executive Director Minute Number 4iM.t1 Date Passed

2 Strategic Plan - Update Long-Range State Aircraft Fleet Replacement Plan January 26, 2017

3 Introduction The Texas Department of Transportation s (TxDOT) Flight Services Section (FSS) provides air transportation and pilot and co-pilot services to state officials, employees, and sponsored contractors traveling on official state business. FSS provides maintenance services for aircraft owned by other state agencies including the Department of Public Safety, Parks and Wildlife Department, Department of Criminal Justice, Texas A&M University, and University of Texas at Austin. It also sells fuel to those agencies and higher education institutions for their flights. Chapter 2056 of the Texas Government Code requires all state agencies to develop strategic plans. Texas Government Code further directs TxDOT to develop a long-range plan for its fleet of aircraft. The long-range plan is to include at a minimum: How much the aircraft is used; Purpose for which it is used; Cost of operating the aircraft; Revenue generated by aircraft; Demand for aircraft; and Estimates of future aircraft replacement needs and other fleet management needs. Fleet Composition TxDOT s FSS operates and maintains a fleet of six aircraft which include four King Air 8-passenger planes (transport), and two Cessna 2- to 3-passenger planes (utility operations). Table 1: Aircraft Age, Hours of Use, and Estimated Value Aircraft (Age, Type, #) Age of Plane Total Flight Hours Est. Trade-In Value* 1981 King Air 200 / 1TX 35 7,656 $ 1,600, King Air B200 / 173TX 34 7,162 $ 1,650, King Air B200 / 184TX 31 4,759 $ 1,700, King Air B200 / 116TX 16 2,850 $ 2,000, Cessna 206 / 147TX 37 5,958 TBD 1980 Cessna 182 / 148TX 36 8,947 TBD *Estimated value subject to change based on appraisal. Fleet Use An analysis of the use of all flights on all planes during the previous 5 fiscal years (FYs), FY 2012 through FY 2016, shows that FSS provided a total of 3,938 flights. In FY 2016 alone, FSS flew 599 flights transporting a total of 2,848 passengers, resulting in an average of 4.75 passengers per flight. 2

4 Table 2: Aircraft Use FY 2012 thru 2016 Aircraft (Age, Type, #) # Flights # Passengers # Hours Flown Total Mileage 1981 King Air 200 / 1TX 811 3,286 1, , King Air B200 / 173TX 884 3,628 1, , King Air B200 / 184TX 934 3,701 1, , King Air B200 / 116TX 902 2,974 1, , Cessna 206 / 147TX 286 N/A Utility , Cessna 182 / 148TX 121 N/A Utility ,505 TOTAL 3,938 13,589 5, ,636 Purpose for Fleet Use Pursuant to Texas Government Code , TxDOT FSS maintains a travel log for gathering information on the use of state-operated aircraft. The travel log requests the following information from each passenger: Mission statement (selected from general categories); Passenger s name; State agency represented; Destination; Passenger s signature; Date of flight; and Detailed/specific description of official business purpose. Fleet Maintenance Costs Proper and continuous maintenance is vital to the safety of the state s aircraft fleet. As illustrated in Table 3, maintenance expenditures can vary widely from year-to-year and are difficult to assess in the long-term. Unanticipated costs, such as major engine and navigation/communication systems repair, can greatly increase annual expenditures. Table 3: Aircraft Maintenance FY 2012 thru 2016 Aircraft (Age, Type, #) Maintenance Hours Maintenance Costs 1981 King Air 200 / 1TX 3,258 $ 562, King Air B200 / 173TX 2,747 $ 587, King Air B200 / 184TX 2,956 $ 602, King Air B200 / 116TX 3,039 $ 621, Cessna 206 / 147TX 909 $ 57, Cessna 182 / 148TX 653 $ 35,452 TOTAL 13,560 $ 2,467,233 3

5 Revenue Generated from Use of Fleet In FY 2016, FSS billed other state agencies and higher education institutions $1.01 million for passenger transport services, and an additional $7.3 million for maintenance services. Pursuant to Texas Government Code , the billing rate is based on direct cost of services provided in the aggregate, including the user s pro rata share of major maintenance, overhauls of equipment and facilities, and pilots salaries. The billing rate does not include indirect or capital replacement costs. Aircraft Comparisons In assessing aircraft replacement needs, TxDOT FSS also reviewed what options were available for replacement of the existing passenger planes. The current King Air aircraft are known by industry as turbo prop planes. FSS compared operating costs of the existing fleet, with a comparable new turbo prop plane and new turbo fan planes. Table 4 provides a comparison of a number of technological, safety, and performance features on the planes reviewed. Table 5 provides historical accident and fatality rates for both turbo prop and turbo fan planes. Table 4: Aircraft Comparison Technology/Safety Features Current King Air Turbo Prop Plane New Turbo Prop New Turbo Fan Synthetic Vision No Yes Yes Engine Indication/Crew Alert System No No Yes Electronic Checklist No Yes Yes Electronic Charts and Maps Yes Yes Yes Terminal Collision Avoidance Yes Yes Yes Terrain Awareness and Avoidance No Yes Yes Oral Warning Messages No Yes Yes Performance Comparison Singe Engine Service Ceiling 21,000 ft. 19,000 ft ,000 ft. Acquisition Cost n/a $3.8M $4.2 - $6.2M Fuel Cost per Nautical Mile $ 3.36 $3.00 $ $ Year Operating Cost $1.9M $1.2M $700K - $1.0M 4

6 Table 5: Accident Rate Comparison *International Business Aviation Council, Business Aviation Safety Brief, Issue No. 14, September 1, Aging Aircraft Issues There is no best method for determining or defining when an aircraft is too old; however, an aircraft s age is important to consider when analyzing fleet replacement needs. The age of an aircraft depends on a number of factors including flight hours, and flight cycles. The analysis is further complicated by the wear of individual aircraft components. As aircraft age they require more frequent and complex maintenance. They also require more frequent and specialized inspections. Issues facing the state aircraft fleet in the near-term include the following: Metal Fatigue - Even with the best of maintenance, metal fatigue will become an issue with age and use of aircraft. Outdated Avionics - The current fleet s avionics are analog and must use work arounds to be compatible with present-day digital technology. Specialized Inspections - The Federal Aviation Administration (FAA) requires all aircraft with more than 5,000 flight hours to undergo more extensive specialized inspections (Aging Airplane Safety Rule). NexGen Compliance - In January, 2020, FAA s NexGen regulations will take effect requiring all aircraft to have Automatic Dependent Surveillance Broadcast (ADSB) equipment. This equipment is based on digital technology. Future Aircraft Need Recommendations While currently in satisfactory condition, it is impossible to know what issues may arise in the future, or when. The longer an aircraft is in service, the greater the chance an age-related issue may arise that will become a safety concern or involve a prohibitively expensive repair. Based on the existing fleet s average age, technological requirements, and performance concerns, TxDOT staff has determined retirement and standardized rationalization of the passenger fleet will be necessary in the near future, with the utility operations fleet to follow thereafter. 5

7 To help ensure the long-term aircraft needs of the state are met in a cost effective and efficient manner, TxDOT proposes to employ recommendations provided in the Sunset Commission Staff Report. Specifically, TxDOT will further analyze and provide information on the following: Current fleet use, including customer base and documented rationale for use; Status of maintenance time and costs, with projected future trends; Documented high-risk mechanical issues with the current fleet; Projections for remaining useful life for each of the current aircraft; Proposed schedule for replacing aircraft; Range of alternatives and scenarios for fleet size and composition; and Costs and benefits of different approaches to meeting air travel currently provided by the fleet, including: Potential use of statewide contracts for private charter services; More reliance on commercial carriers for routine travel; Maintaining a smaller fleet in combination with contracted flight services; and Any other feasible options. Along with the above recommended items, TxDOT recommends performing annual customer satisfaction and service need reviews to better determine if there are actions TxDOT FSS can take to better meet its customers needs; and assess what those needs may be in the future. As previously noted, current statute provides for the recapture of direct cost of service, but is unclear on the recovery of indirect costs or more importantly capital replacement. To better ensure the interests of the state are being met in the most cost-effective manner possible, instead of seeking a biennial appropriation, TxDOT recommends a more long-term business based approach to funding aircraft fleet replacement. This recommendation is consistent with the findings of the Sunset Commission staff report that cited the need for statutory changes to clarify TxDOT s ability to recover and bill for costs needed to replace capital aviation assets. In summary, our future aircraft need recommendations include the following: Current statute is unclear relative to the ability of TxDOT to recover the capital cost of fleet replacement. Consideration should be given to potentially amend existing statute to explicitly allow TxDOT to adopt rates for interagency aircraft services that are sufficient to recover both direct costs for services provided and a pro rata amount sufficient to cover the incremental cost of fleet replacement. Should statutory changes be made to allow for capital renewal, provide a comprehensive analysis of various fleet replacement options that consider purchase price, financing options, maintenance costs, safety, fuel efficiency, technological standards, and standardized rationalization of the fleet. Establish a capital renewal fund for the purpose of funding state aircraft fleet replacement. Clarify and consider the option to lease-purchase aircraft if analysis deems this method of purchase to be more cost-effective and efficient for the state. TxDOT s FSS s mission calls for the provision of safe, cost-effective, and efficient aerial transportation of state employees This plan provides the basis for further analysis and deliberation of how best to meet this mission in both the near- and long-term. 6

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