Economic Performance and NGATS

Economic Performance and NGATS NEXTOR 2 nd National Airspace System Infrastructure Management Conference 13 June 2006 Dr. Sherry S. Borener Director Evaluation and Analysis Division Joint 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.

DEVELOP IMPLEMENT DEVELOP IMPLEMENT DEVELOP IMPLEMENT DEVELOP IMPLEMENT DEVELOP IMPLEMENT DEVELOP IMPLEMENT DEVELOP IMPLEMENT IBM IBM JPDO Process for Achieving the NGATS Delays (>1 Hour) 6,000 5,000 4,000 3,000 2,000 1,000 - R 2 = 0.62 R 2 = 0.67 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Weather Score and Cost of Segment - 1,000 2,000 Define and Implement Incremental Solutions via Segments 2003 2004 Measure Post- Implementation Performance, Service, FY06 FY08 FY10 FY12 FY14 FY16 FY18 FY20 FY22 FY 24 Spec Spec Segment 1 Segment 2 Spec Spec Research, Analysis, and Demonstrations (Research $) Segment 3 Segment 4 Spec Segment 5 Note: Segments are defined by their operational date Specific start dates and implementation timelines vary by IPT and solution element Enhanced System Operations to Meet NGATS Goals (Operations $) Segment 6 Segment 7 Policy, Portfolio, Roadmaps, and Business Cases Spec Spec Baseline and Assess Today s Performance Define the What Architect & Analyze Define Solutions Execute & Measure Analyze Alternative Solutions and Assess Tradeoffs 400,000 350,000 300,000 397 GBT + Backup F&E 397 GBT + Backup O&M Total Radar Centric F&E + O&M $ Billions 18,000 $5 $4 $3 $2 $1 $0 ATO Capital Budget Shortfall FY04 Capital Investment Plan Cumulative $3.2B Projected Funding FY04 FY05 FY06 FY07 FY08 FY09 Define Concept of Operations; Identify Future Capabilities and Outcomes Develop EA; Identify Gaps and Overlaps; Determine Research and Program Needs Airspace Airports Security & Safety Vehicles Core Enclave(s) Enclave Comm. Control (ECC) Support Enclave(s) DMZ 2006 2008 2015 2025 Vision Fuzzy logic to manage Market Based Flow Weather uncertainty Management (NASDAQ) Decouple from Performance Self Automated Maneuvering to Aircraft can self Ground Based CNS Based Services Separation avoid Mid-air collisions separate with or without pilots and Exception Handling when necessary Services control can be Two Aircraft on Same Formation Takeoff & assumed from the Runway Landings ground Proactive Safety Management Culture with Non-Punitive Data Sharing & Comprehensive FAR Review Noise Reducing Environmental Ground Market for Operations Equipment & Operations Environmental Credits Revise AIP including Regional Capacity Automated Aircraft Taxi Planning & Surface Management Comprehensive Airport Program Model Airport of the Future Risk Based With Transparent Screening Screening Integrated Aviation and Border Security Functions Network Enabled Coordinated Response Routine Use of New Airframes, Materials Remote Pilots and Propulsion Near all weather takeoff & landing Refuse to Crash Avionics Security Management & Reporting NAS Security Boundary Customers and operators are fully informed with increased options to selfmanage their ability to meet their needs All communities are connected into the global air transportation network FY05 $K 250,000 200,000 150,000 17,000 16,000 15,000 Non-NAS Entities 100,000 50,000 Staff 14,000 13,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 12,000 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 FY 11,000 10,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year

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 A : No new funds; Live within budget runouts $ 2006 2011 2016 2021 2026 2031 Budget Runout @ 3% NGATS Budget Committed Budget Profile B : Moderate constant resource increase required $ 2006 2011 2016 2021 2026 2031 Budget Runout @ 3% NGATS Budget Committed Budget Profile C : Major program phases and funding required $ 2006 2011 2016 2021 2026 2031 Budget Runout @ 3% NGATS Budget Committed 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 ATM Costs Users Transparency Budgets ATM Providers User Charges Allocative Efficiency

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 Avg. Stage Length, Avg. Aircraft Seats ASMs (available seat miles) Load Factor Load Factor Average Stage Length, Average Aircraft Seats Flights 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). RPMs (revenue passenger miles) Average Aircraft Seats Average Stage Length Enplanements (revenue passengers boarding an aircraft)

Capacity Analysis Metrics Unconstrained demand represents the public s desire for air transportation The FAA s Terminal Area Forecast, based on socioeconomic 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 180000 100% Feasible Throughput % Demand Satisfied 100% Feasible Throughput (flights) 160000 140000 120000 100000 80000 60000 40000 20000 65% 66% 82% 90% 80% 70% 60% 50% 40% 30% 20% 10% Demand Satisfied (% of Unconstrained) 0 Unconstrained Demand Both Constraints Airport Constraints Only Sector Constraints Only 0%

Summary of Capacity Constraints Analysis 3X Demand Category 3X Baseline Demand 3X Feasible Throughput (Airspace Constrained) Flights in NAS 173,980 142,782 Number of Flights Trimmed % of Flights Trimmed 3X Feasible Throughput (Airports Constrained) 3X Feasible Throughput (Airports and Airspace Constrained) 114,156 112,595 N/A 31,198 59,824 61,385 N/A 18% 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 Traffic 3X Demand Airports/Airspace Constrained Category 3X Unconstrained Demand 3X Feasible Throughput Number of Flights Trimmed % of Flights Trimmed International Outbound Flights International Inbound Flights International Overflights 8,100 7,400 20,106 6,012 5,550 20,044 2,088 1,850 62 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.

OEP Airports Reduction in INTL flights at OEP Airports 3X Demand Airports/Airspace Constrained MIA JFK IAH IAD LAX EW FLL ORD PHL ATL DTW MSP SEA MC SFO BOS DFW CLT CVG HNL LAS ME PHX DEN BWI CLE SLC LGA PDX TPA PIT DCA STL MD SAN Average number of INTL flights trimmed at OEP Airports: 89 Average % of INTL flights trimmed at OEP Airports: 25% Average number of INTL flights are trimmed at Top 10 OEP Airports with most INTL Ops:223 Average % of INTL flights are trimmed at Top 10 OEP Airports with most INTL Ops:29% 3X Baseline Demand - 200 400 600 800 1,000 1,200 1,400 Airport Operations (Departures + Arrivals) 3X Airport and Airspace Trimmed Demand

3X Constraints Analysis Yield and Consumer Surplus 20 836881 946 1072 1220 1332 1625 19 Constrained by All 19.3 18 Noise Constrained 18.3 17 Emissions Constrained 17.1 yield (2005 cents) 16 15 14 13 Terminal-Constrained demand curve at 3X RPM 15.1 12 Enroute-Constrained 12.1 11 10 9 2025 APO Forecast Extrapolated from APO 3X RPMs 600 800 1000 1200 1400 1600 1800 RPMs (billions/fiscal year) 10.6 9.9

yield (2005 cents) 19 18 17 16 15 14 13 2004 As demand grows while constraints limit supply, prices will rise NXTE NTE XTE TE T FAA Forecast (Mainline+Regional) Extrapolated from APO Constrained by: N - noise X - emissions T - terminal E - enroute 12 11 2017 2025 E 10 Elasticity = -1 2032 600 800 1000 1200 1400 1600 1800 RPMs (billions/fiscal year)

NPV of Constraints Reduction (3X) $180 $160 $140 $120 $100 $80 $60 NPV $40 $20 $0 Noise, emissions, terminal, enroute noise, term, enr emiss, term, enr term, enr term enr 2016 2018 2019 2022 2022 2028 Constraint (year of emergence)

yield (2005 cents) 20 19 18 17 16 15 14 13 12 11 10 3X Constraints Analysis Yield and Consumer Surplus $8.6B $11.0B $18.0B $2.1B $36.1B $32.5B Nothing solved Emissions solved; +$8.6B consumer surplus (const 2005$) Noise solved; +$19.5B total Noise, emissions solved; +$37.6B Noise, emissions, enroute solved; +$39.7B demand curve at 3X RPM Noise, emissions, terminal solved;+$75.8b All solved +$108.3B 9 0 200 400 600 800 1000 1200 1400 1600 1800 RPMs (billions/fiscal year)

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?