GRA, Incorporated

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2nd Annual NEXTOR GMU FAA Workshop Innovations
in NAS-Wide Simulation In Support of NextGen
Benefits Analysis
Advances in Monetization of Benefits January
28, 2010
GRA, Incorporated David Ballard, Senior
Economist 115 West Avenue Jenkintown, PA 19046
USA bdballard_at_gra-inc.com 215 884 7500
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Overview

• Acknowledgement of IPSA Team Members and Team
  Environment
• NextGen Performance Improvements
• ATM Improvements and Changes in Use of System
• ATM as One of Many Inputs for System Users and
  Decision-Making
• Benefits as User Harvesting of Performance
  Improvements under Specific Scenarios
• Advances in Benefits Monetization
• Environmental Implications of Aviation Growth and
  NextGen Capabilities
• Benefits for High Performance GA Users
• Assessing Benefits for Travelers and the Broader
  Economy
• Airlines and NextGen Beneficiaries or
  Intermediaries?
• Partners in either case
• Whats Next?

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IPSA Team Leadership and Members
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NextGen provides numerous NAS performance
improvements
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Through High Density Operations, new runways, and
other operational improvements, airport
capacities increased 40 to 60, allowing
increased throughput while maintaining reasonable
Demand/Capacity ratios
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Through Trajectory Based Operations, satellite
navigation, data communications, and other
operational improvements, en route capacities
increased 70 to 95
Future individual aircraft (airframes, engines)
and ATC exhibit 32 dB noise reduction
(cumulative) 33 reduction in fuel burn 60
reduction in emissions
X
NextGen
Baseline
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Delays attributable to Weather reduced by over
40 through improved airport capacity in Weather,
improved aircraft capability in Weather, and
advances in probabilistic decision making
Noise Exposure NextGen
Noise Exposure Baseline
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Primary benefit opportunities for NextGen
performance are increased throughput and reduced
average delay
BaselineCapacity
NextGen Capacity
Average Delay
Capacity Increase Due to NextGen
Baseline Projected Delay/Throughput
Accommodate Growth
A
C
Reduce Delay
Increased Throughput Possible with Same Average
Delay as Baseline
D
B
Reduced Delay Possible with Unchanged Throughput
Number of Flights
Feasible Projected Throughput with NextGen
Feasible Projected Throughput, Baseline Future
without NextGen

• This analysis is predicated on the fundamental
  capacity tradeoff between throughput (quantity of
  service) and delay (quality of service) in the NAS

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What Must Operators Take into Account?

• Operator Costs and Inputs
• Fuel
• Labor
• Airport costs
• Ownership/overhead
• ATC Infrastructure and Operations
• Delay costs

• Market Features
• Demand
• Competitive environment
• Environmental constraints
• ANSP policies and rules of the road

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Depending on circumstances affecting other inputs
and parameters, NAS users will harvest the
NextGen capabilities in different ways
BaselineCapacity
NextGen Capacity
Average Delay
Capacity Increase Due to NextGen
Baseline Projected Delay/Throughput
Accommodate Growth
A
C
Reduce Delay
Increased Throughput Possible with Same Average
Delay as Baseline
B
Reduced Delay Possible with Unchanged Throughput
Number of Flights
Feasible Projected Throughput with NextGen
Feasible Projected Throughput, Baseline Future
without NextGen

• The response by airlines and other system users
  to NextGen capabilities (opportunities for delay
  savings and increased throughput) will determine
  the ultimate levels of improved performance

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Valuing NextGen requires, in part, valuing
possible scenarios individually
BaselineCapacity
NextGen Capacity
Average Delay
Capacity Increase Due to NextGen
Baseline Projected Delay/Throughput
Accommodate Growth
A
C
Reduce Delay
Increased Throughput Possible with Same Average
Delay as Baseline
D
B
Operating Point Analyzed
Reduced Delay Possible with Unchanged Throughput
Number of Flights
Feasible Projected Throughput with NextGen
Feasible Projected Throughput, Baseline Future
without NextGen

• D, the operating point analyzed, arises from
  modeling choices about parameter settings for the
  simulation tools D is not directly chosen
• Points shown (A through D) are simulation results
  but the curves are notional actually tracing a
  curve requires repeated simulation runs

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Note that some scenarios may rely on different
combinations or uses of NextGen components or
alternatives, giving rise to different capacities
BaselineCapacity
NextGen(s) Capacities
Average Delay
Capacity Increase(s) Due to NextGen(s)
Baseline Projected Delay/Throughput
Accommodate Growth
A
C
Reduce Delay
Increased Throughput Possible with Same Average
Delay as Baseline
B
Reduced Delay Possible with Unchanged Throughput
Number of Flights
Feasible Projected Throughput with NextGen
Feasible Projected Throughput, Baseline Future
without NextGen

• Examples of factors that might lead to different
  capacity curves include greater use of secondary
  airports, differing levels of avionics equipage
  or capability, or differences in policy
  environments or rules of the road

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Advances Environmental Implications

• Environmental implications of NextGen
  improvements are complex, controversial, of
  interest to many parties and depend on the future
  policy treatment of environmental mitigation
  across all sources
• IPSA is treating aviation environmental impacts
  through increasing collaboration and coordination
  (through the JPDO Environmental Working Group)
  with FAA AEE and its Aviation Environmental
  Portfolio Management Tool (APMT), which is under
  development by several universities and
  contractors.
• This coordination will involve use of a common
  set of methodologies and parameters for measuring
  and valuing the relevant inventories

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Advances HPGA Users

• Focus has been on
• Delay savings for these users based on simulated
  flight trajectories with and without NextGen
• Analysis of user activity at the airport level
  has increased understanding of where HPGA
  aircraft customarily operate, which affects where
  and how NextGen equipage issues arise for these
  users

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Advances Passenger Benefits
BaselineCapacity
NextGen Capacity
Average Delay
Capacity Increase Due to NextGen
Baseline Projected Delay/Throughput
Accommodate Growth
A
C
Reduce Delay
Increased Throughput Possible with Same Average
Delay as Baseline
D
B
Operating Point Analyzed
Reduced Delay Possible with Unchanged Throughput
Annual RPMs
Number of Flights
Feasible Projected Throughput with NextGen
Feasible Projected Throughput, Baseline Future
without NextGen

• Depending on operator choices about harvesting
  NextGen capabilities, passengers may benefit from
  an increased availability of flights with
  unchanged average delay (service quality), at
  point C, improved service quality (reduced delay)
  on an unchanged level of seat availability at
  point B, or from additional flights and improved
  average delays, at an intermediate point like D,
  the operating point analyzed shown above.
• There are relatively straightforward ways to
  value (from the passenger perspective) an outcome
  at point C (increased consumer surplus due to
  fares lower than they would be otherwise) or an
  outcome at point B (reduced average delay valued
  using the average value of passenger time), but
  how can intermediate points be assessed?

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Advances Passenger Benefits
BaselineCapacity
NextGen Capacity
Average Delay
Capacity Increase Due to NextGen
Baseline Projected Delay/Throughput
Accommodate Growth
A
C
Reduce Delay
Increased Throughput Possible with Same Average
Delay as Baseline
D
B
Operating Point Analyzed
Reduced Delay Possible with Unchanged Throughput
Annual RPMs
Number of Flights
Feasible Projected Throughput with NextGen
Feasible Projected Throughput, Baseline Future
without NextGen

• Depending on operator choices about harvesting
  NextGen capabilities, passengers may benefit from
  an increased availability of flights with
  unchanged average delay (service quality), at
  point C, improved service quality (reduced delay)
  on an unchanged level of seat availability at
  point B, or from additional flights and improved
  average delays, at an intermediate point like D,
  the operating point analyzed shown above.
• There are relatively straightforward ways to
  value (from the passenger perspective) an outcome
  at point C (increased consumer surplus due to
  fares lower than they would be otherwise) or an
  outcome at point B (reduced average delay valued
  using the average value of passenger time), but
  how can intermediate points be assessed?

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• Key
• a annual throughput, baseline feasible (Point
  A)
• a average delay, baseline infrastructure with
  feasible throughput (Point A)
• b average delay, NextGen infrastructure with
  baseline throughput (Point B)
• G annual throughput, NextGen infrastructure at
  approximate level of average delay a (Point C)
• x average delay associated with Point D
• Y annual throughput associated with Point D

• Valuation
• Using the reduction in average delay associated
  with operating unchanged throughput through a
  more capable NextGen system, using on the
  passenger value of time (PVT), the value of time
  savings at Point D is denoted VT Value(B)
• Using the reduction in average real yield
  associated with bringing increased throughput to
  market, the value to passengers at Point C is the
  aggregation of savings on RPMs sold at reduced
  average real yield (the consumer surplus method),
  denoted CS Value(C)
• The value of capabilities and operational
  outcomes leading to Point D is calculated as a
  weighted sum of these two corner valuations
• Value at interior points can also be calculated.

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Advances Benefits to the Broader Economy

• Not currently a part of IPSA approach
• Other researchers (Harback, et.al. from
  Mitre-CAASD, Jeffrey Cohen from University of
  Hartford) have looked at Computable General
  Equilibrium (CGE) approaches to estimating the
  impact on GDP of aviation or transportation
  infrastructure investment.
• This is not the same thing as economic impact
• Work is still preliminary for aviation concern
  is that aviation is such a small sector within
  entire economy

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Advances Implications/Benefits for Airlines

• NextGen enables operational improvements to
  airline NAS users across a variety of metrics
• Increased flight opportunities
• Reduced flight delays
• Reduced fuel requirements (more direct and
  precise flight trajectories)
• Lowers cost per flight
• Reduces environmental impacts
• Are airlines beneficiaries or just intermediaries
  that transfer the capabilities (harvest)
  enabled by NextGen investments to final users of
  the NAS (passengers, shippers, broader
  population)?
• Given current and anticipated institutional
  arrangements, the incentives of airlines and
  other users to make necessary NextGen investments
  their NextGen business case must be
  understood and taken account of by policymakers
  (e.g., RTCA TF5)

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Whats in Operators Big Picture?

• Operator Costs and Inputs
• Fuel
• Labor
• Airport costs
• Ownership/overhead
• ATC Infrastructure and Operations
• Delay costs

• Market Features
• Demand
• Competitive environment
• Environmental constraints
• ANSP policies and rules of the road

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Next Steps

• Stakeholder business cases
• Rationale and pace of equipage for specific users
• Active and ongoing engagement of stakeholders as
  NextGen is designed and deployed
• Scenarios within which NextGen is deployed
• Economic growth/input costs
• Environmental constraints
• Alternative far term formulations for NextGen
• Equipage requirements
• Variations in infrastructure deployment or use

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Thank You
NEXTOR Asilomar -- April 15, 2009
GRA, Incorporated