In this issue:
- Deloitte’s business case for ATC transformation
- Should the DOT block business-jet tracking?
- Coordination and decision-making in ATC reform
- Remote towers going live in three countries
- Why not ADS-B/In?
- News Notes
- Quotable Quotes
Deloitte’s Business Case for ATC Transformation
In the ongoing debates over NextGen and its counterparts in Europe and the rest of the world, one of the recurring questions (especially in this country) has been: where is the business case? In other words, assuming that the entire shift to a new paradigm for air traffic management gets implemented by, say, 2025, would the benefits be worth the cost?
Last month Deloitte LLP issued a major study designed to answer that question in both quantitative and qualitative terms. “Transforming the Air Transportation System: A Business Case for Program Acceleration,” was released on May 10th and can be downloaded from www.deloitte.com.
Its headline message is that if this transformation were in place worldwide by 2025, the net benefits would be $897 billion through 2035, of which $281 billion would be realized in the United States. This was the result from the study’s base case, one of four scenarios based on varying assumptions about the price of fuel, the state of the economy, the demand for air travel, the stringency of environmental regulations, etc. The study also examined an accelerated timetable (completed by 2020, which is so unrealistic that I will ignore it here) and a delayed-implementation scenario (2030) in which the global net benefit would be reduced by $148 billion and the rate of return would be 22.9% (compared with the base case’s 39.6%).
That sounds very positive, but we need to look a bit deeper to see what assumptions are built into the study and what it includes and excludes. First, all the costs and benefits are based on impacts on commercial airlines (passenger and cargo) only; general aviation and the military are excluded. Second, Deloitte assumed that all the new technology would be delivered on time, on budget (allowing only a 10% contingency), and would work as planned and that there would be full airline equipage. Moreover, they assumed that solutions are found by 2025 to surface delays caused by insufficient gate and runway capacity, airline over-scheduling, etc. Those are all pretty big assumptions. On the other hand, its quantified benefits do not include savings due to ATC facility consolidation, airspace consolidation, or a delayed need for runway capacity additions.
To quantify the benefits, Deloitte grouped them into three separate tiers. Tier 1 consists of hard cost savings to airlines and air navigation service providers. Tier 2 benefits are environmental, such as reduced emissions and noise impacts. Tier 3 benefits are what you might call soft cost savings: passenger time (“opportunity cost”) savings, increased airline profits from being able to operate more flights, and reduced airline soft costs due to delays. But when you look at how the benefits break down quantitatively, for the United States only 19.7% are Tier 1 benefits to airlines and the FAA, and only 0.8% are Tier 2 environmental benefits. A full 79.5% of U.S. benefits are in Tier 3, with passenger opportunity cost savings accounting for 58.5% of the total $281 billion benefits (all three tiers). By contrast, in Europe and the rest of the world, the Tier 1 benefits are 34-35% of the total.
While I agree that all three tiers of benefits are important, the relatively small fraction of Tier 1 (hard airline and ANSP cost savings) benefits in the U.S. case is going to increase the difficulty of closing the business case with aviation stakeholders. In the Appendix, Deloitte presents detailed information unpacking the various scenarios. Figure 24 shows the U.S. base case and 5-year delayed case, giving the net present value (NPV), internal rate of return (IRR), and payback period for each of the three tiers. For base-case Tier 1 only, the NPV is $58.4 billion, with an IRR of 14.9% and a payback period of 12 years. With a five-year delay, the NPV shrinks to $45.5 billion, the IRR to 11.1%, and the payback period increases to 14 years. It’s only when you add in the tiny Tier 2 and huge Tier 3 benefits that the $281 billion NPV shows up, with a 44.8% IRR and a 7-year payback period.
At last week’s RTCA “Accelerating NextGen” conference, Delta’s Director of Fleet Strategy, Ed Lohr, told attendees that these days airlines need a payback period of three years or less to justify capital expenditures—not 7 or 12 or 14. And various comments by presenters and members of the audience suggested that the “delayed” scenario is more likely than the base case Deloitte emphasizes. In electronic voting on various questions posed to the audience, when asked about the biggest obstacle to NextGen implementation, the two answers generating the most votes were “budget” and “FAA ability to deliver.” On the more specific question of “How is the FAA doing on delivering NextGen capabilities?” only 18% said “good,” while 51% said “fair” and another 21% said “poor.”
I departed this excellent conference more convinced than ever that drastic changes will be necessary to actually deliver anything like what NextGen envisions.
Should the DOT Block Business-Jet Tracking?
The U.S. DOT has announced that it plans to terminate, within 60 days, a program enacted by Congress in 2000, under which companies can ask the FAA to block the release of the tail number on business aircraft, so they cannot be tracked by entities such as FlightAware.com. Called Block Aircraft Registration Request (BARR), it is currently used by operators of about 2,000 aircraft.
A pair of investigative articles in the Wall Street Journal last week illustrate why journalists favor getting rid of BARR. Reporters Mark Maremont and Tom McGinty filed a Freedom of Information Act request to obtain detailed flight records from the FAA. The first article, “Corporate Jet Set: Leisure vs. Business,” tracked the use of three companies’ business jets, noting the frequency of trips to what they termed “resort destinations” compared with “business destinations.” Their conclusion was that “dozens of jets operated by publicly traded companies made 30% or more of their trips to or from resort destinations, sometimes more than 50%.” The second article, “Ready for Departure: M&A Airlines,” used the same database of flight records to claim that “analysis of flight records found trips by Caterpillar, Inc. and Qwest Communications International Inc. that could have tipped off investors to coming mergers if the records had been public in real time.”
So here we have two examples in which disclosure of flight records—whether in real time or after the fact—could have unpleasant consequences for companies operating business aircraft. To be sure, some companies may abuse rules about executives compensating their companies for personal use of business jets, but that should be a matter for shareholders to deal with, not tattle-tale media. And in the case of flights done in pursuit of specific business deals, it’s completely understandable that companies would not want to tip off competitors or rival bidders to possible merger discussions.
And that’s not to mention security concerns. It isn’t only terrorists who might target a captain of industry by tracking his or her whereabouts when traveling; various nut-cases or those obsessed with a particular cause should not have their nefarious plans assisted by disclosure of such flight activity. DOT’s proposed new regulation would permit aircraft tail numbers to be withheld only if the aircraft operator could demonstrate that a verifiable security threat exists.
DOT’s new regulation is unwarranted and should not be permitted to go into effect. The House version of the FAA reauthorization bill includes language that would prohibit DOT’s changes to BARR. When the House and Senate conferees work out a final version of the bill, this is one provision that should be retained.
Coordination and Decision-Making in ATC Reform
One of the major problems with attempting to transform 20th-century air traffic control into 21st-century air traffic management is agreeing on coordinated implementation efforts between the air navigation service provider (in this country, the FAA’s Air Traffic Organization) and airspace users (its aviation customers). Aircraft operators are correctly concerned, based on past experience, that if they make a major investment in equipping their planes, the ATO may either delay implementation of the capability they’ve equipped for or may change course in a way that makes their equipment obsolete or needing modifications. There are whole fleets of airliners retired to various bone-yards with onboard flight management systems that received little or no use in domestic airspace. And recall American Airlines’ sorry experience of equipping planes for controller-pilot data-link communications (CPDLC) last decade, only to have the ATO pull the plug on that program (eventually to be reborn as DataComm).
Moreover, neither the ATO nor its parent FAA knows from one year to the next how much they will have available to invest in NextGen technology, since they are at the mercy of Congress’s annual appropriations process and general federal budget cutbacks. That leaves the ATO unable to commit to a firm, believable implementation schedule that its customers can count on.
In a valiant effort to cope with these problems, RTCA has followed up its 2009 Task Force 5 (which brought together airspace users and equipment providers to offer detailed suggestions to the FAA on NextGen implementation) with an ongoing NextGen Advisory Committee (NAC). It involves key aviation stakeholders in an organized effort to develop a “consensus-based set of recommendations on issues that are critical to the successful implementation of NextGen.” And it also hopes to serve as “a forum to obtain a commitment of resources and/or synchronized planning between government and industry” to that same end. The NAC’s focus is near-term through mid-term (2018).
In order to give everyone a seat at the table, the NAC has 30 members, allocated as follows:
- 5 aircraft operators (business aviation, GA, airline, regional airline, cargo airline)
- 5 FAA
- 2 international (SESAR and Eurocontrol)
- 2 airports
- 3 labor unions (pilots, controllers, technicians)
- 3 aircraft manufacturers
- 2 ATC automation providers
- 1 avionics provider
- 1 environment person
- 1 finance person
- 1 federal research center
- 1 Defense Dept.
- 1 Homeland Security Dept.
- 1 RTCA head
- 1 FAA Deputy Administrator
The full NAC meets three times a year in a public session. Much of its work is carried out by a Working Subcommittee, serving in effect as staff. And the Working Subcommittee, in turn, has standing Work Groups on specific topics as well as ad-hoc Task Groups.
Despite what looks like considerable complexity, the NAC has thus far produced some sensible recommendations. It has called on the ATO to prioritize ADS-B, RNP, and DataComm as it rolls out NextGen. It has also called for requiring nearly all aircraft (both commercial and GA) to attain a minimum NextGen capability level, based on financial and/or operational incentives (such as Best-Equipped/Best-Served). And it has also called for the ATO to deploy NextGen infrastructure and procedures regionally, where benefits can be realized in the near term.
At the RTCA conference in Washington, DC last week, I heard presentations by NAC members and talked with some of them individually. These are serious people, working diligently to move NextGen forward despite the funding and governance obstacles facing the Air Traffic Organization. Those obstacles include the ATO having to report to a 535-person “board of directors,” having little control over its budget and no access to the capital markets, and not being able to make basic business decisions without fear of Congress overturning them (e.g., consolidating facilities or retiring ground-based navigation aids).
By contrast, I observe well-run, self-supporting ANSPs such as Nav Canada and Airservices Australia. In such an organization, the board and CEO can make all the basic business decisions without fear of political vetoes. In the case of Nav Canada, the board of directors itself is composed of stakeholders, making that organization something of a user co-op. A stakeholder board is a way to internalize the process of coordinating ANSP infrastructure decisions and aircraft operator equipage decisions. And having a secure customer-based revenue stream means a self-supporting ANSP can readily tap the bond market for large-scale investment capital for modernization.
So while I wish the NAC well and will cheer its accomplishments, I also lament that a scaled-down version (no more than half the size) could do so much more were it to be the ATO’s board of directors, with the power to make the key NextGen decisions, finance them, and direct its management to implement them, rather than simply playing an advisory role. This system has worked very well for 15 years now in Canada. We should be figuring out how to apply it here.
Remote Towers Going Live in Three Countries
One of the key principles of NextGen and its overseas counterparts is that air traffic can be managed anywhere, from anywhere. A near-term application of this is the remote (or virtual) tower. This means that in certain situations, instead of creating a physical staffed tower at an airport, video and other surveillance equipment will be installed there, to be monitored in a remote location. One obvious application for this is low-activity airports. Instead of building and staffing a tower at each one, several such airports can be controlled from a single remote facility, with shared staff handling the combined workload. Another application applies when a large airport, such as O’Hare, Frankfurt, or Munich adds a runway that cannot easily be viewed from the existing tower. Instead of building a whole new tower (as the FAA is doing at O’Hare), the new runway can be equipped with video and other sensors and monitored from the existing tower.
The International Civil Aviation Organization (ICAO) currently does not recognize any alternative to visual observation except information provided by a surface management system. But that is likely to change in the next few years, as ANSPs in a number of countries demonstrate the safe operation of remote towers under their national air safety regulations. Air Traffic Management featured several detailed articles on remote towers in its second-quarter 2011 issue, and I’m drawing largely on those articles here.
One of the pioneers of remote towers is the Swedish ANSP, LFV. Together with Saab, it has been operating a demonstration project by which Angelholm Airport is being controlled from a remote facility located at Malmo Airport. The facility features 360-degree video surveillance of Angelholm. This year, a second phase is getting under way, in which a former control center in Sundsvall will remotely control the airport at Ornskoldsvik, 100 km away. Saab and LFV are also working with Airservices Australia to outfit the airport at Alice Springs, in the middle of the Outback, with surveillance equipment to be monitored from Adelaide, 1,500 km to the south. Airservices is also considering a remote arrangement for Karratha, a mining town in the northwest where hot near-desert conditions make it very difficult to attract controllers to live and work.
DFS, the German ANSP, has started implementation work on what it calls Distant Aerodrome Control Service, to be based at Munich and Erfurt. Munich’s application will be to control the airport’s third runway, rather than building an additional physical tower. DFS is also planning to develop a remote tower control room capable of handling three smaller airports.
At the European level, the SESAR program aims to get regulatory approval for remote Single Tower Operations by 2013, with Multiple Tower Operations approval a year or two later. It sees EU-wide equipment and procedural standards as steps toward ICAO approval for world-wide implementation. Michael Stander of the SESAR Joint Undertaking told Air Traffic Management that there are up to 300 European airports that have no towers but may well need them within 10 years. Remote towers are expected to play a key role in filling that need.
Why Not ADS-B/In?
I had an interesting email exchange last month with Richard Eastman, a former airline executive, licensed commercial pilot and flight instructor, and aviation software consultant (www.eastmangroup.com). Like many in aviation, Eastman is troubled by the slow uptake of ADS-B, which is a key element in the NextGen transformation of air traffic control. His bold suggestion is that the FAA mandate equipage for ADS-B/In by the same 2020 deadline it has already set for ADS-B/Out—at least for commercial air carriers, jets, and turboprops. For piston planes, the “In” requirement could be waived or extended to several years later, except for operation in Class B airspace surrounding the busiest airports.
There would be a number of benefits to doing this. First, ADS-B/Out gives aircraft operators only costs, no benefits. It makes all planes show up more precisely on controllers’ screens, but does nothing to directly benefit the plane so equipped. It is ADS-B/In that provides operator benefits—notably in-cockpit display of nearby air traffic as well as display of weather information. Requiring both capabilities at once would give equipment suppliers a strong incentive to build integrated units that would likely cost less than a two-step implementation of first the “Out” box and later the software and display(s) for “In.” The current 2020 deadline is far enough out that vendors could gear up to produce integrated products in large volumes, which is what drives unit costs down and makes the product more affordable.
There would be significant safety benefits from the shared situational awareness provided by cockpit display of traffic information. Pilots could see what controllers see, and in many cases see it first (since controllers are usually monitoring many planes at the same time, and must also convey the information to the appropriate pilot via voice radio).
The general aviation media have been of two minds about ADS-B. On the one hand, they were ecstatic over FAA’s pioneering Capstone project in Alaska, which equipped a number of GA planes with ADS-B, both Out and In. But of course it’s easy to like cool technology that somebody else gives you. Still, despite a lot of griping about the 2020 deadline to equip their planes with the Out capability, there remains a lot of GA enthusiasm for cockpit displays of traffic and weather—if only the price can be made affordable. A 2020 mandate for ADS-B/In for all but piston GA would jump-start production of integrated ADS-B systems, especially if the NextGen Equipage Fund makes possible affordable lease/purchase deals. That would pave the way for lower-cost systems for smaller planes in the years after 2020.
The FAA’s Aviation Rulemaking Committee on ADS-B/In is supposed to submit its recommendations by Sept. 30, 2011. Let’s hope they are prepared to think boldly.
Nav Canada Wins Third Eagle Award
Earlier this month, the International Air Transport Association (IATA) announced its 2011 Eagle Awards. Commercialized air navigation service provider Nav Canada won the award as Best ANSP. The chairman of the Eagle Awards Panel, former ICAO Secretary General Dr. Assad Kotaite, explained that “Eagle Awards are highly-prized recognitions of airports and ANSPs which strive for excellent service, better cost efficiency, and continuous improvement.” Nav Canada has won the Eagle twice before, in 2001 and 2010. Winning as best airport was Prague Airport.
Mega-FAB Emerging in Europe?
Nine ANSPs in northern Europe—including the five Scandinavian companies and the ANSPs of Estonia, Latvia, Ireland, and the UK—have formed an alliance called Borealis to coordinate their plans for the Single European Sky. Last year the ANSPs of Denmark and Sweden broke off from the Scandinavian NEFAB functional airspace block (FAB), forming a joint company that plans to link up with the UK/Ireland FAB. That combination hopes to subsequently integrate NEFAB into a “mega-FAB” encompassing the airspace of all nine Borealis member companies.
Lower-Cost NextGen Equipage?
Numerous cost estimates are floating around for equipping the U.S. airline and general aviation fleets with NextGen capabilities—some ranging to $20 billion or more. But the principals of Nexa Capital’s NextGen Equipage Fund think those estimates are grossly exaggerated. In an interview with Air Traffic Management (Issue 2, 2011), managing partner Michael Dyment said they estimate the cost of retrofitting an aircraft with ADS-B In and Out, plus Data Communications, would range from $150,000 to $1 million, under the kind of large-scale procurement planned by the Fund. “We have produced estimates that we think are very accurate for the U.S. fleet,” he said. “The retrofit of all commercial aircraft is just over $2 billion. And then for general aviation, Part 135 jets and piston aircraft, that’s likely to be closer to [another] $2.5 billion.”
Feedback on Controller Trainee Washout Rate
A recently retired FAA air traffic manager has provided some perspective on the relatively high washout rate among controller trainees that I discussed in the April issue of this newsletter. A principal reason for the high rate, he tells me, is that the Human Resources office at FAA headquarters routinely sends new hires to the busiest facilities because that’s where the openings are. HR also insisted that field facilities terminate new hires if they failed the program within their first year. He suggests that many of those trainees “could have become very good controllers if they had started out in a low- to medium-activity facility.”
Sri Lanka’s ANSP Joins CANSO
Airport & Aviation Services Limited (AASL), a commercialized state-owned company, has become the 62nd full member of CANSO (Civil Air Navigation Services Organization). AASL operates all the airports in Sri Lanka and is responsible for ATC services in the Colombo Flight Information Region of the Indian Ocean.
“I really like [Canada’s] air traffic control system. If we could have a Nav Canada type of arrangement in the U.S., we wouldn’t be talking about NextGen; it would already be running. The users of the system are willing to pay for something that is cost-based and service-driven, instead of politics-driven. I don’t think the politicians want to lose control.”
--Memphis Airport Director Larry Cox, quoted in John Infanger, “The MEM Perspective, Airport Business, May 2011.
“The policy of not allowing controllers to sleep on their breaks makes no sense. Secretary LaHood’s statement that he will not pay controllers to sleep is simply political grandstanding and demonstrates a complete lack of understanding of human factors. . . . The 2-2-1 [shift schedule] is the most dangerous work week ever devised, yet remains in widespread use. . . . The UK regulated this issue 20 years ago and has a much more comprehensive approach to tackling the problem of fatigue. In its Scheme for Regulation of Air Traffic Controllers Hours, it stipulates that there shall be an interval of not less than 12 hours between the conclusion of one period of duty and the start of the next.”
--Editorial, “FAA Caught Napping,” Air Traffic Management, Issue 2, 2011.
“As a concept, remote towers represent the crown jewels when it comes to changing the operating environment and really trying to integrate airports in an efficient way. They also represent the jewel in the crown because they bring something new to Community airports in Europe: a way to reduce investment costs for new tower services or contingency solutions at busy airports.”
--Michael Standar, Chief of Air Traffic Management, SESAR Joint Undertaking, “Jewel in the Crown,” Air Traffic Management, Issue 2, 2011.
“[A]re currently planned FABs helping reduce fragmentation [of European airspace]? It seems that the answer to this is an unequivocal ‘no.’ As far as this author is aware, no FAB includes plans for the replacement of two or more national ACCs [Area Control Centers] by a multinational center. The large number of ACCs in Europe was highlighted in a 2005 study as the largest single cost of the fragmentation in the European ATM system. Of course, in large countries, consolidation of two or more national ACCs can be a less costly way of reducing the costs of fragmentation, and in two of the largest FABs, the FAB initiative followed closely on substantial national consolidation of centers in its larger members.”
John Raftery, “Absolutely FABulous?” Air Traffic Management, Issue 2, 2011.