AIRCRAFT RESCUE & FIRE FIGHTING (ARFF)

REVENUE MODELS

Talk by

Gp Capt ER Rajappan (Retd)

Ex ARFF Chief Indian Air Force

AVIATION INDUSTRY

MAJOR DRIVER OF ECONOMY

Supporting 65.5 million jobs and $2.7 trillion in globalGDP, the air transport industry is a driver of the globaleconomy.

Over a third of all global trade by value is sent by airand aviation is a key component of global business.

Not only is the aviation industry a major industry in its ownright, but also is employing large numbers of highly skilledworkers, but more importantly it is an essential input intothe rapidly growing global economy.

ACI STUDY ON AIRPORT COST AND

REVENUE

Airport Council International (ACI ) estimated average

of 6.5% growth in global passenger traffic.

Airport revenue in 2016 $ 161 billion

Cost and investment The airport cost structure continues

to be characterized by predominantly high fixed costs,

necessary for maintaining and operating infrastructure.

In 2018 operating expenses made up 64.7% of total

costs, the remaining proportion allocated to capital

costs.

TOP BUSY AIRPORTS IN THE WORLD

1. Hartsfield Jackson Atlanta IA - 109 million

2. Beijing IA - 96 million

3. Dubai IA - 88 million

4. Beach Bumming LA IA - 85.6 million

5. Tokyo IA - 85 million

6. Chicago O Hare IA - 80 million

7. London Heathrow IA - 78 million

8. Hong Kong IA - 73 million

9. Shanghai IA - 70 million

10. Charles de Gaulle Paris IA - 61 million

11. Delhi IA - 65.7 million

12 Mumbai IA - 49.8 million

ATLANTA HARTSFIED JACKSON IA

BEIJING IA

DUBAI IA

MUMBAI CHATRAPATI SHIVAJI AIRPORT

DELHI IA

Boeing 747-400

Airbus 340-600

Airbus 380-800

Boeing 747-8

Airbus 330-300

Airbus 340-300

IL 96-400

Boeing 777-300

Aircraft accidents occur all over the world

Some recent worst aircraft accidents

Alegria Military plane crash

257 people were killed after an Algerian military

plane crashed soon after takeoff in a farm field in

northern Algeria

Kathmandu plane crash (March 12, 2018)

A Bangladesh aircraft carrying 67 passengers and four crew members

crashed at Nepal’s Kathmandu airport

Russian passenger plane crash (February

11, 2018)

All 71 passengers onboard the Russian

passenger plane crashed near Moscow

GARUDA FLT INDONESIA 29/10/2018

189 DEAD

September 9, 2018

Southern Sudan 23 Fatalities

August 04, 2018 Switzerland

Fatalities: 20

Flying is fraught with danger, yet we

need to fly

AIRCRAFT ACCIDENTS CONTINUE TO OCCUR

ARFF

SOLE SAVIOUR IN AC ACCIDENTS

RAPID INTERVENTION VEHICLE

ARFF COMMAND POST

WELL TRAINED & ALERT FIRE FIGHTERS

EVER INCREASING CHALLENGES TO ARFF

Exponential increase in aircraft movements (Atlanta Georgia USA -879,560 annually/2364 daily)

Long wide-bodied aircraft with multiple passenger decks and multiple aisles

Eg. Airbus A380 (853)/340-600(475)/330-300(440)/340-500 (375)

Boeing 747-400(524)/757-300(295)/747-8(467)

IL 96-400 (436)

(ii) Long narrow-bodied aircraft with single aisle, high passenger density. Eg. Airbus A 320 (187) Boeing 737 ( 162 ) ,etc.

Parallel and cross runways

Airport in the close proximity of sea, large water body, swamp, desert and mountain

ARFF DEMAND IN FUTURE

Larger (15000ltr water, 2000ltr foam, 10,000 ltrper min pump capacity) fire fighting vehicles

Increase in number of fire fighting vehicles

Increased discharge rate of extinguishing agents

More in fire crews to deal with accident/incidentinvolving wide-bodied aircraft with multiplepassenger decks and multiple aisles ( Airbus A380(853)/340-600(475)/330-300(440)/340-500(375) Boeing 747-400(524)/757-300(295)/747-8(467) IL 96-400 (436)

DEMAND Vs SUPPLY

ARFF INFRASTRUCTURE GLOBALLY

Growing demand for modernisation of ARFFinfrastructure.

Smart fire stations

Induction of state-of the art sundry equipment

Better personal clothing

More number of fire entry and proximity suits

Personal communication systems

Training infrastructure (on job, computer based &simulator)

COST OF ARFF SERVICES

AIRPORT CAT 1 – 5 : US $ 2-4 MILLION

AIRPORT CAT 6 - 7 : US $ 5- 8 MILLION

AIRPORT CAT 8-10 : US & 9-15 MILLION

COST OF

VEHICLES, FOAM, COMPLEMENTARY AGENTS,

SUNDRY EQUIPMENT, AIR STAIRS, PERSONAL

CLOTHING, COMMUNICATION SETS, WATER

STORAGE, ACCESS ROADS & FIRE STATION(S)

FUND FOR MODERNISATION &

ENHANCING ARFF FACILTIES

The cost of modern big passenger aircraft has gone upfrom 25 million US $ to 375 million

Safety of the modern aircraft can only be ensured byenhancing the ARFF challenge.

Finding additional fund for enhancing ARFF capabilityin view of the emerging ARFF challenges.

It is possible to find funding for ARFF infrastructureenhancement.

Funding - Airlines contribution, Govt aid, Debt, equity,monetising the ARFF; niche skills, knowledge andservices, Ploughing back profit by airport operators

TALK OVER VIEW

Exponential growth in air passenger traffic

Challenges to ARFF - Handling of accidents and incidents involving wide-bodied aircraft with multiple passenger decks and multiple aisles

Aircraft accidents continue unabated and need for enhancing ARFF capacity at small, medium and large airports

ARFF mandate ICAO standards and capacity gap for ensuring safety of passengers travelling by wide-bodied passenger aircraft

TALK OVERVIEW

ARFF capacity shortage, a universal phenomenon

ARFF capacity enhancement – inescapable need

Budgetary constraints for ARFF capacity enhancement – A universal issue

Funding options for ARFF capacity enhancement

Alternative Revenue Models for ARFF capacity enhancement

Safety of air passengers – Sacrosanct role of Govt and airport operators

Flexibility and innovation in ARFF funding and ARFF Revenue Models – the way forward

Q&A

29th june 2018 202,157 FLIGHTS AROUND THE GLOBE

AVIATION’S BUSIEST DAYS IN HISTORY.

GLOBAL AI PASSENGER TRAFFICAir Passengers Will Nearly Double to 7.8 Billion IN 2036

BURGEONING AIR TRAFFIC IN FUTURE

MAJOR COUNTRIES

FUNDING : A BIG CONSTRAINT FOR ARFF

Airport Operator

Government

Private

Public Private Partnership

INVESTMENT IN ARFF DOES NOT EHNANCE REVENUE OF

AIRPORT OPERATOR

THEREFORE, THE NORM IS MINIMUM PROTECTION LEVEL

FUNDING OPTIONS FOR ARFF

CAPACITY ENHANCEMENT

ARFF fee as part of the air ticket

Levy ARFF fee from airliner

Debt financing

Equity injection

Govt grants

Regulated Revenue & Tariffs (ploughing back airport revenue)

ARFF consultancy to new airports

Bottom line – FINDING OPTIMUM BALANCE BETWEEN PUBLIC AND PRIVATE FUNDING

RFF OBJECTIVES & FNCTIONS

ICAO DOC 9137-AN/898 PART 1

Ch 1 : General Considerations

Ch 2 : Level of protection to be provided

Ch 3 : Airport facilities affecting RFF

Ch 4 : Communication & Adm requirements

Ch 5 : Specs for RFF vehicles and rescue equipment carried

Ch 6 :Protective clothing & respiratory equipment

Ch 7 : Ambulance & medical services

Ch 8 : Extinguishing agents

RFF OBJECTIVES & FNCTIONS

ICAO DOC 9137-AN/898 PART 1

Ch 9 : Fire Station

Ch 10: Personnel

Ch 11: Emergency Organisation

Ch 12: Aircraft Fire & Rescue

Ch 13: Rescue in different environment (sea/large water body/swamp/mountain/desert)

Ch 14: Training

Ch 15 : Foaming of RW

Ch 16 : Aircraft fuelling practice

Ch 17 : Info regarding protection level at airports

ICAO DOC 9137-AN/898 PART 1

PRINCIPAL OBJECTIVES OF RRF

To save lives in the event of an aircraft accident or incident

occurring at, or in the immediate vicinity of, an airport.

To create and maintain survivable conditions, to provide egress

routes for occupants and to initiate the rescue of those

occupants unable to make their escape without direct aid.

RFF service must assume at all times the possibility of and

need for extinguishing a fire which may:

a) Exist at the time an aircraft is; landing, taking off, taxiing,

parked, etc.; or

b) Occur immediately following an aircraft accident or

incident; or

c) Occur at any time during rescue operations

ARFF MANDATE

ARFF must be able to respond to an incident at

either end of the runway in not more than three

minutes from the initial call and be able to apply

50% of the maximum discharge for that category;

the remaining capacity (i.e. vehicle/s) must arrive

within 1 minute of the first vehicle.

Additionally, it must be able to respond to any part

of the movement area within three minutes as well.

MINIMUM AMOUNT OF FIRE VEHICLES

& EXTINGUISHING AGENTS

The minimum amounts have been determined by addingthe quantity of extinguishing agents

which are required to obtain a one-minute control timein the practical critical area and the quantity of

extinguishing agents which are required for continuedcontrol of the fire thereafter and/or for possible

complete extinguishment of the fire. Control time is thetime required to reduce the initial intensity of the

fire by 90 per cent. Information on the critical areaconcept

ARFF INFRASTURCTURE

Fire Fighting Vehicles

Rapid Intervention vehicle

Command Post

Ambulance

Foam (Protein/AFFF)

Complementary Agents (DCP/CO2)

Sundry Equipment

Personal clothing

Communication Equipment

Breathing Apparatus

Water Storage

Access Road

Fire Fighting Crews

ARFF INFRASTRUCTURE

REQUIREMENTS & COST

This has obvious impacts on truck type, size andperformance and ultimately cost. Trucks, apart from thefire station, are the most expensive infrastructure and mustbe purpose built to be able to deliver the requiredamounts:-

FOAM

WATER

FIRE FIGHTERS

to the scene of an incident within the response times

ICAO GUIDELINES: DOC 9082

ICAO’s policies on charges for airports are contained in

Doc 9082. As per a recommendation adopted by the

Conference on the Economics of Airports and Air

Navigation Services (CEANS) and endorsed by the

ICAO Council, States are encouraged to

INCORPORATE FOUR KEY CHARGING PRINCIPLES OF

PRICING BASED ON NONDISCRIMINATION, COST-

RELATEDNESS, TRANSPARENCY AND CONSULTATION

WITH USERS INTO THEIR NATIONAL LEGISLATION,

REGULATION OR POLICIES..

ICAO GUIDELINES

However, allowance should be made for the use of

a fixed charge per aircraft, or a combination of a

fixed charge with a weight-related element, in

certain circumstances, such as at congested airports

during peak periods.

The landing charge scale should be based on a

constant rate per 1 000 kilograms or pounds in

weight, but the rate may be varied at a certain

level or levels of weight if considered necessary

ICAO GUIDELINES

As a general principle it is desirable, where an airport is provided for

international use, that the users shall ultimately bear their full and fair share

of the cost of providing the airport. It is therefore important that airports

maintain accounts that provide information adequate for the needs of both

airports and users, and that the facilities and services related to airport

charges be identified as precisely as possible.

In determining and allocating the total cost to be met by charges on

international air services, the list in Appendix 1 of Doc 9082 may serve as

a general guide to the facilities and services to be taken into account.

Airports should maintain accounts that provide a satisfactory basis for

determining and allocating the costs to be recovered, should publish their

financial statements on a regular basis, and should provide appropriate

financial information to users in consultations. Moreover, it is recommended

that States consider the application by airports, where appropriate, of

internationally accepted accounting standards (Doc 9082, Section II, para.

1 refers).

ICAO GUIDELINES

In determining the cost basis for airport charges, the

cost to be allocated is the full cost of providing the

airport and its essential ancillary services, including

appropriate amounts for cost of capital and

depreciation of assets, as well as the costs of

maintenance, operation, management and

administration.

Consistent with the form of economic oversight adopted,

these costs may be offset by non-aeronautical revenues

(Doc 9082, Section II, para. 2 i)

ICAO GUIDELINES

In general (Doc 9562, Chapter 4, Part F, para 4.121refers), three approaches are used to describe how anairport recovers the full cost associated with the airportand its essential non-aeronautical services.

These approaches are commonly referred to as:

a) the single-till (sometimes referred to as the “residual”method);

b) dual-till (sometimes referred to as the“compensatory” method); and

c) hybridtill.

ICAO GUIDELINES

Under the dual-till approach, the full costs associated withthe airport and its essential ancillary services are allocatedbetween the airport owner/operator and the airport users.

The costs allocated to air traffic include only those costsassociated with the facilities that are actually used by theaircraft operators and the end-users. No adjustment is madeto this cost basis to reflect non-aeronautical revenuesaccruing to the airport.

The airport owner/operator is free to direct the use of anyrevenues generated from its concessions, parking facilities,and any other non-aeronautical activities for use at theairport, as it deems necessary and appropriate.

ICAO GUIDELINES

The International Civil Aviation Organisation (ICAO)provides guidance on the charging of ARFF services inits Policies on Charges for Airports and Air NavigationServices.

Where ARFF is provided by an airport, the policy statesthat the costs should be included under the category of“approach, landing and take-off facilities andservices.”

It also states that landing charges: should be based onthe weight formula, using the maximum certificatedtake-off weight … as the basis for assessment

How airport

operating cost is

recovered?

AERONAUTICAL CHARGES

Ground Service including safety (Landing, parking

housing etc).

Fuel Supply (to all Aircrafts).

Air traffic management (Using navigation,

surveillance & communication).

Baggage Handling (Passengers, Cargo etc).

Cargo Facility (Store management etc).

NON AERONAUTICAL REVENUE

Airport shopping,

Dining, car parking,

Car rentals,

Advertising,

Property and real estate

ARFF REVENUE MODELS : FEW

DEVELOPED COUNTRIES

United States

Canada

United Kingdom

New Zealand

Australia.

USA

ARFF is provided through various State Fire

Municipalities, private airport owners and some

contracts.

Federal Airport Authority funds a portion of

training, research and development and vehicle

costs.

Some airports recover costs through an airfield

landing fee that includes ARFF.

CANDA & UK

In Canada, individual airports are required to establishand maintain the ARFF service, or to obtain it bycontract.

Airports usually include ARFF as a cost centre of theairside operation and can choose how to recover those

costs. For instance, the airport charge for ARFF asa component of its landing or parking fees.

At regional airports the airport owner funds only

15% of fire vehicle purchase, the remainder is fundedby the Government.

NEW ZEALAND

Airports provide and charge for the ARFF service.

Airports recovers ARFF costs through a “rescue firecomponent of aircraft landing charges”

landing charges are levied as either a fixed chargeper aircraft or a per tonne charge (which increaseswith the MTOW of the aircraft).

In addition, international and domestic aircraft above40 tonnes pay different per tonne charges

AUSTRALIA

Three drivers tonnes (using the maximum take-off

weight of an aircraft); passenger numbers; and

aircraft category.

Tonnes of an aircraft (based on maximum take off

weight) Tonnes (MTOW) is a proven, generally

accepted, accurate and easily validated basis of

Charging.

AUSTRALIA

The correlation between persons-on-board and anaircrafts landed weight, with 92.5% MTOW figuresindicating approximately 90% persons-on-board.

Accordingly, a per tonne charge is, in effect, a proxyfor a per passenger charge and, consequently, tends tocharge a higher price per landing for aircraft thatcarry more passengers.

This is likely to be consistent with efficient recovery ofnon-incremental/non-avoidable costs – as compared toa flat landing charge as it is less likely to distortlandings by small aircraft visà-vis large aircraft

AUSTRALIA

BUILDING BLOCK FORMULA

Building Block formula, be applied to determine the

level of revenue that Airport operator is entitled to

recoup.

Building Block methodology essentially allows

Airport operator to recoup its running costs plus an

element of profit based on a weighted average

cost of capital associated with its infrastructure, with

minor adjustments made for gearing and taxation

imputation purposes.

ARFF BUILDING BLOCK FORMULA

Allowable Revenue = A x B + C + ((A x B - A x D x E) x (F+F^2+F^3+F^4+ F^5))

Where:

A = Average Written Down Value of Assets, based on a depreciated optimised

replacement value

B = Weighted Average Cost of Capital

C = Costs

D = Gearing %

E = Interest

F = Tax Rate (Including Imputation)

In essence, a price is derived by dividing a locations activity (tonnes) into the locations’ allowable revenue.

NON AERONAUTICAL REVENUE

NON AERONAUTICAL REVENUE

HOW TO FIND ADDITIONAL FUND FOR

ENHANCING AND IMPROVING ARFF SERVICES

ARFF REVENUE MODELS & MEANS

ARFF fee as part of Passenger Service Fee (PSF)

Equity injection

Debt financing

Govt grants

By airport operator from airport profit

ARFF consultancy for setting up ARFF infrastructure at new airports

Provision of Fire audit and Training of external FireService agencies by ARFF staff without compromisingARFF services.

Monetising for Fire Services (Refuelling, Hot activities)

PASSENGER SERVICE FEE (PSF)STATEMENT INDICATING EXPENDITURE INCURRED ON PASSENGER Rs. In Crores

2012-13 2013-14 2014-15

2015-16( upto Sep. 2015

prov)

731003000 R & M:-Civil TERMINAL & OTHER BLDGS IN Op AREA 41.89 32.21 47.29 17.82

731006000 R & MCivil OTHER BUILDINGS 4.24 6.67 6.05 3.62

731009000 R & M: CiVIL:GENERAL 30.97 26.85 39.79 68.01,

731101000 R & MElect A/C EQUIPMENT 14.31 18.02 17.62 8

731102000 R & MElect: POWER SUPPLY & GEN SETS 13.19 15.24 11.72 4.82

731103000 R & MElect. GROUND LIGHTING 3.87 5.31 5.98 5.89

731104000 R & M: ELEC. INSTALLATIONS 44.28 52.23 71.00 27.65

731105000 R & M: ELEC.:OTHERS 25.64 29.96 33.76 13.35

731301000 R & M: FURNITURE & FIXTURESOffice 50.22 54.15 14.19 1.19

722005000 Cons. Of Toiletry & Conservancy Stores 1.78 2.1 1.30 2.25

722006000 CONSUMPTION OF PAPER GLASS CONSUMPTION 1.45 1.65 0.51 0.25

722013000 Cons. Of Other Consumables 3.93 5.63 2.89 3.01

726001000 Electricity Expenses 238.5 322.97 346.96 174.95

726003000 Water Charges 245.4 250.68 10.38 24.74

760002000 Upkeep Expenses (MESS Exp.) 17.35 16.44 33.25 15.79

860403401 Depn. Building- Free-hold 385.14 492.5 552.11 225.2

860405401 Depn.-Plant & Equipment-Freehold/INSTALLATION 387.81 413.52 504.88 330.25

860406401 Depn.-Furniture & Fixtures-Freehold 5.55 6.1 13.96 6.2

TOTAL 1515.52 1752.28 1713.63 932.99

EQUITY FINANCING

Equity financing involves increasing the airport owner's

equity or increasing the airport stockholders' equity of

airport corporation to acquire ARFF assets.

DEBT FINANCING

Debt financing, borrowing money from financial

markets in order to acquire/create ARFF assets.

Using debt financing allows the existing stockholders

to maintain their percentage of ownership, since no

new stock needs to be issued

GOVT GRANTS

U.S. Federal Aviation Administration (FAA) awarded$616.9 million in airport infrastructure grants, as partof the total $3.18 billion in Airport ImprovementProgram (AIP) funding for airports across the UnitedStates during 2018.

This grant is for projects covering runways, taxiways,aprons, terminals, aircraft rescue and firefightingvehicles, snow removal equipment, and two firefightingtraining facilities.

Airport Improvement Programme - $ 3.5 billionannually from Airport and Airway Trust Fund to FAA.

OTHER COUNTRIES CAN FOLLOW THE US MODEL

REVENUE GENERATION

FIRE AUDIT AND TRAINING OF EXTERNAL FIRE SERVICE

AGENCIES

ARFF is a niche skill and has abundant opportunities for monetising.

ARFF staff is highly is skilled and possess excellent expertise in conduct auditing and providing fire fighting training to:-

Refuelling

Fire cover for hot activities

Civil Fire Departments

Fire crews of malls and high rise buildings

ARFF staff can support Disaster Management Group

SUSTAINABILITY & EFFICIENCY

ARFF FUNDING

Funding Component Sustainability Efficiency

Debt financing Medium Medium/High

Equity Injection Low / Medium Medium

Govt Grants Low Low / Medium

Airport Profit Sharing Medium/High High

Monetising ARFF

expertise

High High

ARFF

WAYFORWARD

Level of ARFF protection should be harmonised

throughout the world, as the cost of safety can be

justified based on the value of human life.

Finding optimum balance between public and

private funding for adequate and efficient ARFF

infrastructure at all airports is the need of the hour

The priority for safety should be placed ahead of

the budget for airport landscaping, irrigation, art

displays and entertainment in the terminals.

LIFE & SAFETY OF AIR PASSENGERS

NEED TO BE PROTECTED AT ALL COSTS

ADEQUATE FINANCE FOR ENSURING

SAFETY OF AIR PASSENGERS

MUST BE MET BY ALL AIRPORT OPERATORS

THANK YOU