The Case for Enhanced Surveillance in Europe Annex 4 … · The Case for Enhanced Surveillance in...

EUROPEAN ORGANISATION FOR THE SAFETY OFAIR NAVIGATION

EUROCONTROL

EUROPEAN AIR TRAFFIC MANAGEMENT PROGRAMME

The Case for EnhancedSurveillance in Europe

Annex 4

The Revised CostBenefit Analysis

Edition : 1.0Edition Date : 9 February 2001Status : Proposed IssueClass : General Public

Edition:1.0 Proposed Issue

DOCUMENT IDENTIFICATION SHEET

DOCUMENT DESCRIPTION

Document TitleThe Case for Enhanced Surveillance in Europe

The Revised Cost Benefit Analysis

EWP DELIVERABLE REFERENCE NUMBER: 010209

PROGRAMME REFERENCE INDEX: EDITION: 1.0

EDITION DATE: 9 February 2001

AbstractThis report presents the revised Cost Benefit Analysis for Enhanced Surveillance in Europe.The benefits are based on reductions in delays derived from controller productivity,improvements estimated using Fast Time Simulations for Karlsruhe airspace. Short tomedium capacity enhancements expected from rationalisation and restructuring have beenincluded in the reference case. The avionics costs are based on information from airlines,engineering companies and aircraft manufacturers and reflect the cost of carrying out retrofitby the Service Bulletin or Supplemental Type Certificate route. A detailed analysis ofaircraft operating in Europe and flights carried out has been performed. The case producesa rate of return of 22% and is very resilient to substantial adverse changes in conditions.

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The Case for Enhanced Surveillance in EuropeThe Revised Cost Benefit Analysis

Edition: 1.0 Proposed Issue Page iii

DOCUMENT APPROVAL

The following table identifies all management authorities who have successively approvedthe present issue of this document.

AUTHORITY NAME AND SIGNATURE DATE

Economics SkillsCentre Manager

J. HULET

Head of ProgrammePortofolio

Management R. H. STEWART

DirectorInfrastructure ATC

Systems andSupport

J. Van DOORN

Senior DirectorEATMP

W. PHILIPP


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TABLE OF CONTENTS

DOCUMENT IDENTIFICATION SHEET..................................................................... ii

DOCUMENT APPROVAL ......................................................................................... iii

EXECUTIVE SUMMARY ............................................................................................ 1

1. BASIS OF THE EVALUATION ............................................................................ 11.1 Background to this Study.......................................................................................................... 1

1.2 The Evaluation Process............................................................................................................ 2

1.3 Area of Implementation ............................................................................................................ 3

1.4 Period of Evaluation ................................................................................................................. 4

1.5 Enhanced Surveillance in Context............................................................................................ 4

1.6 STCA False Alarms.................................................................................................................. 5

2. ANALYSING THE FLEET.................................................................................... 62.1 Aircraft Operating in Europe ..................................................................................................... 6

2.2 Definition of Aircraft Capability ................................................................................................. 6

2.3 Flights in the Core Area............................................................................................................ 7

2.4 Development of the Fleet ......................................................................................................... 7

3. GROUND COST ESTIMATES ............................................................................. 93.1 Basis of Ground Cost Estimates............................................................................................... 9

3.2 Radar Sensors.......................................................................................................................... 9

3.3 Radar Data Networks ............................................................................................................... 9

3.4 Air Traffic Control Centres ...................................................................................................... 10

3.5 Total Ground Costs ................................................................................................................ 10

4. AVIONICS COST ESTIMATES.......................................................................... 114.1 The Basis of Avionics Cost Estimates.................................................................................... 11

4.2 Summary of Retrofit Cost Estimates ...................................................................................... 12

4.3 Costs for New Aircraft............................................................................................................. 12

4.4 Avionics Implementation Options ........................................................................................... 13

4.5 Exemptions ............................................................................................................................. 13

4.6 Summary of Costs .................................................................................................................. 14


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5. EVALUATING THE BENEFITS ......................................................................... 155.1 Benefits to Equipage Relationship.......................................................................................... 15

5.2 The Relationship between Delay and Demand...................................................................... 15

5.3 Collection of the Data ............................................................................................................. 17

5.4 Projecting Future Delays ........................................................................................................ 17

5.5 Evaluating Increased Capacity ............................................................................................... 19

6. RESULTS OF THE ANALYSIS.......................................................................... 206.1 Definition of Basecase............................................................................................................ 20

6.2 Summary of Basecase Costs and Benefits ............................................................................ 20

6.3 Basecase Return on Investment ............................................................................................ 22

6.4 The Consequences of Redundancy....................................................................................... 23

6.5 The Effect on Aircraft Delay.................................................................................................... 23

6.6 The Location of Benefits......................................................................................................... 24

6.7 Variant Cases Considered...................................................................................................... 25

6.8 Inclusion of Benefits from Other Centres ............................................................................... 26

6.9 The Avionics Implementation Option...................................................................................... 26

6.10 Exclusion of Partly Digital Commercial Aircraft ...................................................................... 26

6.11 Variations in Avionics Costs ................................................................................................... 26

6.12 Variations in the Capacity Increase Provided by the DAPs ................................................... 27

6.13 Variations in the Capacity Increase Provided by Other Measures......................................... 27

6.14 The Inclusion of STCA Benefits.............................................................................................. 28

6.15 Variation in the Traffic Growth Forecast................................................................................. 28

6.16 The Inclusion of Reactionary Delays ...................................................................................... 28

6.17 Overall Results ....................................................................................................................... 29


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Tables

Table 1.1 - Centres Included in the Analysis ..........................................................................3Table 1.2 - Expected capacity increases 2001-2005 ..............................................................5Table 2.1 - Analysis of Aircraft Numbers ................................................................................6Table 2.2 - Analysis of Flights ................................................................................................7Table 2.3 - Fleet Development Assumptions..........................................................................7Table 2.4 - Pattern of Future Flights.......................................................................................8Table 3.1 - Comparative Operating Costs for Radar Data Networks ......................................9Table 3.2 - Summary of Ground Costs.................................................................................10Table 4.1 - Avionics Retrofit Cost Estimates ........................................................................12Table 4.2 - Avionics Spend Profiles......................................................................................13Table 4.3 - Flights and Aircraft Types...................................................................................13Table 4.4 - Total Avionics Costs...........................................................................................14Table 6.1 - Summary of Costs and Benefits .........................................................................22Table 6.2 - Summary of Results ...........................................................................................22Table 6.3 - Rates of Return..................................................................................................23Table 6.4 - Cumulative Benefits ...........................................................................................25Table 6.5 - Sensitivity Analysis.............................................................................................30

Figures

Figure 5.1 - Capacity to Equipage Relationship....................................................................15Figure 5.2 - Delay/Demand Curves - Best Fits .....................................................................16Figure 5.3 - Delay/Demand Curves - Other Fits ...................................................................16Figure 5.4 - The Relationship between Capacity, Demand and Delay..................................18Figure 6.1 - Annual Costs and Benefits ................................................................................21Figure 6.2 - Average Delay per Flight...................................................................................24Figure 6.3 - Benefits by Location..........................................................................................25Figure 6.4 - Delays and Capacity Increase...........................................................................27Figure 6.5 - Analysis of Delay ..............................................................................................29

Appendices

Appendix A Top 25 Aircraft Types in the Core Area of Europe...........................................31Appendix B Schedule of Avionics Costs - Basecase ..........................................................32Appendix C Costs and Benefits - Basecase .......................................................................33


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EXECUTIVE SUMMARY

This report presents the revised Cost Benefit Analysis for Enhanced Surveillance inEurope.

The benefits of Enhanced Surveillance are based on the estimated reductions indelays derived from improved controller productivity. The productivity improvementshave been estimated using the Fast Time Simulations done for Karlsruhe airspace.

The Mode S avionics costs are based on information from airlines, engineeringcompanies and aircraft manufacturers. They have been totally revised and reflectthe split between airlines carrying out retrofit by either the Service Bulletin orSupplemental Type Certificate route. A detailed analysis of the aircraft operating inEurope and the flights carried out has been performed.

The latest information about short to medium term capacity enhancements expectedto be produced by rationalisation and restructuring has been included in thereference case.

The case produces an acceptable rate of return of 22% for the period to 2017 and isvery resilient to quite substantial adverse changes in conditions.


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1. BASIS OF THE EVALUATION

1.1 Background to this Study

1.1.1 The original Mode S CBA1 was completed in July 1998 (the 1998 Study) and showeda substantial return on investment for both Elementary Surveillance and EnhancedSurveillance. However, whilst the case for Elementary Surveillance was generallyaccepted by the aviation community, it was felt that the case for EnhancedSurveillance required further work to substantiate the value of the operational benefitsproduced by downlinked aircraft parameters (DAPs).

1.1.2 This work was carried out, under the guidance of an 'Enhanced Surveillance -Downlinked Aircraft Parameters (ESDAP) Steering Group' with a membershipcomprising representatives of Eurocontrol, ATS providers and airlines and theirrepresentative organisations and a report was produced in March 20002 (the ESDAPReport). Eight DAPs were identified as being likely to achieve major benefits. Threeof these were capable of being evaluated by simulation and, accordingly, a fast timesimulation (FTS) was undertaken by Eurocontrol, in conjunction with DFS, to estimatethe capacity increases which they may enable.

1.1.3 The results of the FTS and a detailed study by British Airways3 of the implications foravionics costs were the principal inputs to a new cost benefit appraisal whichestimated that the implementation of Enhanced Surveillance by means of Mode Swould give a return of 10% by 2010 or 23% by 2017. However, the results of theCBA continued to be challenged, largely on the grounds that the British Airwaysavionics costs were not fully representative of the costs to airlines with smaller andolder fleets.

1.1.4 This, and other issues, have been addressed in a further revision of the cost benefitanalysis of Enhanced Surveillance and the results are presented in this report. ThisCBA contains a number of new elements, particularly a comprehensive analysis ofaircraft operating in Europe and flights in the Core Area, additional avionics cost datafrom a variety of sources, the latest delay data from the CFMU and information onother capacity enhancement programmes included in the European Convergenceand Implementation Plan (ECIP).

1.1.5 The analysis continues to use the results of the fast time simulation (FTS) ofKarlsruhe airspace which was the basis for benefit estimation in the ESDAP report.

1.1.6 The analysis should be read in conjunction with the 'Surveillance Development RoadMap' which is being produced to describe the contribution of the various surveillancetechniques and datalink technologies to the surveillance systems that will be requiredin the future to meet the objectives of the ATM 2000+ Strategy.

1 Phase 2 of a Mode S Enhanced Surveillance Cost Benefit Analysis. Final Report, Booz Allen &

Hamilton, EUROCONTROL Reference C/1.168/HQ/MM/97, 13 July 19982 ref to The Case for Enhanced Surveillance in Europe report, Annex 4 Cost Benefit Analysis,

Reference SUR.ET2.ST03.2200, 15 March 20003 The Airborne Impact of Mode S Enhanced Surveillance and Downlinked Aircraft Parameters, British

Airways, ESA.209.AJR, EUROCONTROL Reference SUR3.82.ST03.2150, 19 November 1999


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1.2 The Evaluation Process

1.2.1 The basis of the evaluation is to assess the additional costs of providing EnhancedSurveillance relative to the costs of providing Elementary Surveillance and comparethese with the benefits produced by Enhanced Surveillance. It adopts a similarmethodology to that used in the ESDAP Study.

1.2.2 Enhanced Surveillance may be implemented with Elementary Surveillance as asingle process or implemented later, as a second step. Although costs are likely tobe lower for a single step process, implementing the two together may jeopardise thetarget implementation date of Elementary Surveillance leading to a preference for atwo step process. For a single step process, the additional costs of EnhancedSurveillance relative to Elementary Surveillance are the costs of directly moving toEnhanced Surveillance from the current situation less the costs of moving toElementary Surveillance from the current situation. For a two step process, theywould simply be the costs of the second step. The analysis considers bothapproaches.

1.2.3 The study takes account of the costs of progressively equipping aircraft flying inEurope to be capable of transmitting DAPs and the costs of initially implementingEnhanced Surveillance by Mode S in the Core Area of Europe. These costs arecompared with the benefits expected to be produced in the Core Area.

1.2.4 The principal steps in the evaluation were to:

Ø analyse the aircraft population operating in Europe to assess the numbers ofaircraft with the potential to be modified to be capable of transmitting DAPs ineach of the years in the evaluation period. These aircraft are referred to in thisreport as being ‘DAP capable’. The analysis of Enhanced Surveillance assumesthat, if an aircraft has this potential, it will be modified and the costs and benefitswill reflect this. Aircraft without this potential will not incur the costs ofmodification but will detract from the total possible benefits of the system

Ø estimate the additional cost of implementing Enhanced Surveillance over andabove the cost of Elementary Surveillance on the basis of the estimates of thenumbers of DAP capable aircraft and the cost of equipage

Ø analyse the flights in the Core Area of Europe, now and with the assumed growthin traffic to assess the proportions of future flights which will be carried out byDAP capable aircraft

Ø derive a relationship between the potential capacity increase and the proportionof aircraft which are DAP capable using the results of the FTS

Ø estimate the annual capacity increase for each year in the evaluation period, foreach ACC (air traffic control centre) considered, using the FTS estimate ofcapacity increase, the proportion of aircraft which are DAP capable and thebenefits to equipage relationship

Ø evaluate the capacity increases in terms of reduced delays using delay/demandrelationships for each ACC considered

Ø evaluate reduced delays using recommended IATA delay cost data

Ø compare the value of reduced delays with the cost of implementing and operatingEnhanced Surveillance to estimate the return on investment.



1.3 Area of Implementation

1.3.1 Table 1.1 below indicates the centres which were taken to comprise the Core Area ofEurope and used as the basis for benefit estimates. The CIP complexity rating for theen-route and TMA sectors operated by each centre are shown. These are thecentres used in the ESDAP Study which were the same as those used in the 1998Study with the addition of Geneva and Zurich and the omission of Aix. There havebeen a number of changes in sectorisation throughout Europe but, although theremay have been increases in the number of sectors for some centres since the tablewas compiled, it still provides an indication of the complexity and level of activity ofthe centres.

Country Centre En-route TMANumber of

sectorsComplexity Number of

sectorsComplexity

Belgium Brussels 6 H 3 HEUROCONTROL Maastricht 14 HFrance Paris 19 H 4 H

Reims 11 HGermany Berlin 12 ML 8 H

Bremen 11 ML 7Düsseldorf 11 H 2 HFrankfurt 19 H 8 HKarlsruhe 17 HMunich 12 H 4 H

Italy Milan 13 H 3 HRome 22 ML 5 H

Netherlands Amsterdam 6 H 4 HSwitzerland Geneva 11 H 4 M

Zurich 8 H 2 HUK London 29 H 15 H

Table 1.1 - Centres Included in the Analysis

H High complexityML Medium or low complexity

1.3.2 All of the above centres have a high complexity rating apart from Berlin, Bremen andRome. Thus Karlsruhe, the subject of the FTS, is reasonably representative ofgeneral complexity but, unlike most of the other centres, does not have TMA sectorsand thus is not fully representative in character. However, since the traffic patternswithin TMA sectors tend to be more complex than en-route sectors, it is believed thatEnhanced Surveillance benefits will be greater in TMA sectors. Thus the applicationof Karlsruhe capacity increases to the other centres is likely to under-estimate totalbenefits.

1.3.3 Benefit estimates have been produced for the above centres but no benefits havebeen attributed to other less complex centres. Of the 69 en-route centres covered bythe CIP, 16 are classified as high complexity (13 of which were included in this study),46 as medium or low complexity and 7 as very low complexity. However, there are22 approach control centres, all but 4 associated with an en-route centre, all of whichare classified as high complexity. Thus the approach used in the study captured thebenefits from most of the high complexity en-route centres but omits possible benefitsat approach centres.



1.4 Period of Evaluation

1.4.1 It has been assumed that investment in Mode S ground infrastructure will begin in2001 and be fully operational for Elementary Surveillance from early 2003. Anestimated working life of 15 years has been assumed and, consequently, an analysisperiod from the present to the end of 2017 has been taken. No replacement costsafter 2017 have been included.

1.4.2 At this stage there is no specific centre by centre implementation plan for EnhancedSurveillance and so, to allow for differences in the timing of implementationthroughout the Core Area, the assumption has been made that, in 2005, only 30% ofthe benefits that would be generated if all centres were operating EnhancedSurveillance will actually be produced. The values for 2006 and 2007 are 60% and90% respectively and thereafter 100% of potential full benefits are assumed.

1.5 Enhanced Surveillance in Context

1.5.1 To carry out the analysis, Enhanced Surveillance has been set in the context of thedemand for air transport and other ATC programmes currently in progress or beingplanned.

1.5.2 Over the period from 1999 to 2017, traffic has been assumed to grow at the followingrates:

Ø Commercial 4.5%

Ø Business GA 3.0%

Ø Other GA 3.0%

Ø Military 0%

Ø Helicopters 3.0%

These rates have been provided by the EUROCONTROL STATFOR forecasting section.

1.5.3 The States' target capacity increases are presented in the European Convergenceand Implementation Plan for 2001-20054. Their expected levels of increase arepresented in an ACG paper5 and have been used to set the baseline in this analysis.These increases are principally due to flexible use of airspace, en-route structureoptimisation, RVSM, collaborative flight planning and tactical flow management andare very high and demanding annual increases by historical standards

1.5.4 The table below shows the States' estimates of expected capacity increases in theperiod 2001-2005. No values are currently available for Italy and so, for the purposesof this analysis, the capacity increases for Milan and Rome have been assumed to bethe average of the increases in the other centres considered.

4 European Convergence and Implementation Plan - Years 2001-2005, PPM.M.ECIP-PLN.01,

October 20005 ATM/CNS Consultancy Group, Information Paper - Capacity Enhancement Work Programme,

IP/ACG/10/14, 17 October 2000



Amsterdam 21.0% London 31.9%Berlin 35.0% Maastricht 50.0%Bremen 46.1% Milan n/aBrussels 13.0% Munich 47.2%Düsseldorf 31.8% Paris 52.9%Frankfurt 33.1% Reims 61.2%Geneva 71.2% Rome n/aKarlsruhe 60.0% Zurich 62.0%

Table 1.2 - Expected capacity increases 2001-2005

1.5.5 After 2005, although measures such as free routes may provide some capacityincreases, it is unlikely that further substantial capacity increases will be provided byairspace optimisation and reorganisation. Thereafter, capacity gains are likely to beproduced by increased automation using measures such as Enhanced Surveillancewhich require significant investment. Since there is no reliable information on whichto base an estimate of the capacity gains from airspace optimisation and productivityimprovements after 2005, a range of annual percentage increases have beenassumed and the consequences of these for the average level of delay estimated.

1.5.6 These capacity increases are included in the baseline and are assumed to havetaken place before the effect of Enhanced Surveillance is computed.

1.6 STCA False Alarms

1.6.1 In the 1998 Study, Enhanced Surveillance was presumed to lead to capacity benefitsfrom both the increased controller productivity analysed in the FTS and also from areduced level of STCA false alarms. No further work has been carried out to validatethe assumption on STCA false alarms and therefore the main results of this study arepresented without STCA benefits. However, for comparison purposes, benefit valuesincluding the STCA benefit assumed in the 1998 Study are presented in a sensitivityanalysis.

1.6.2 The 1998 Study assumed that the reduction of STCA false alarms could improvecontroller productivity and lead to an increase in capacity. The increase wasassumed to be 1/3% in the case of Elementary Surveillance and 1% for EnhancedSurveillance.



2. ANALYSING THE FLEET

2.1 Aircraft Operating in Europe

2.1.1 Each year, airlines make declarations to the CFMU of all aircraft likely to be operatingin Europe over the next 12 months, in order that they may be charged at the correctweight. These declarations provide a comprehensive database of all aircraftoperating in controlled airspace in Europe.

2.1.2 The values in Table 2.1 below are taken from the May 2000 declarations and havebeen analysed by type, ie into commercial aircraft , business jets, other GA, militaryand helicopters and also analysed by capability ie into digital, partly digital oranalogue aircraft.

Digital Partlydigital

Analogue Un-classified

Total

Commercial 4740 1468 4683 0 10891 61%GA - Business 663 1020 1452 73 3208 18%GA - Other 0 0 1217 727 1944 11%Military 202 34 327 0 563 3%Helicopters 0 0 1227 0 1227 7%Total 5605 2522 8906 800 17833

31% 14% 50% 4%

Table 2.1 - Analysis of Aircraft Numbers

2.1.3 The unclassified aircraft comprise a large number of different types of aircraft but withvery small numbers of each. They have been treated as analogue in the analysis.

2.2 Definition of Aircraft Capability

2.2.1 The classification of aircraft into analogue, partly digital and digital is made on thefollowing basis:

Ø Analogue aircraftAircraft with no digital avionics systems. They may be unable to support thedownlink of any parameters other than identity and flight level, i.e. DAPs will notbe available. These aircraft are assumed to be exempt from the DAPrequirement. They include DC-9, B737-200, B747-100/-200, A300-B4.

Ø Partly digital aircraftMinimum fits of air data computer (ADC) and attitude and heading referencesystem (AHRS) will allow access to information such as airspeed, roll angle,altitude rate, etc. It is assumed that where these parameters are available theywill be used but that exemptions will be granted for parameters that are notavailable. This category includes aircraft with digital systems capable ofproviding most Mode S CONOPS parameters but not Flight Identity, such as MD-80.



Ø Digital aircraftAircraft with digital flight management systems (FMS), flight control anddatabuses, such as ARINC 429, which allow access to both current status andintent information, i.e. DAPs to support enhanced surveillance based on aircraftselected parameters will be readily available. They include B747-400, A340,A319/320/321.

2.3 Flights in the Core Area

2.3.1 CRCO data for the 12 month period to the end of September 2000 has beenanalysed to show all flights with at least part of their journey in Core Area. The datahas also been analysed by type and capability, as above.

Inside CoreArea

Digital Partlydigital

Analogue Un-classified

OutsideCore Area

Commercial 5,504,101 87% 3,337,886 1,156,109 1,010,106 0 1,642,264GA - Business 445,422 7% 59,200 155,652 203,029 27,541 81,414GA - Other 224,720 4% 0 0 187,671 37,049 33,007Military 75,277 1% 11,867 9,806 53,604 0 15,812Helicopters 96,503 2% 0 0 96,503 0 13,134Total 6,346,023 3,408,953 1,321,567 1,550,913 64,590 1,785,631

54% 21% 24% 1%

Table 2.2 - Analysis of Flights

Thus 61% of the fleet are commercial aircraft but they make 87% of the flights andalthough digital aircraft comprise only 31% of the fleet, they make 54% of the flights.The unclassified aircraft have been treated as analogue in the analysis.

2.4 Development of the Fleet

2.4.1 The capability mix will evolve with time. The assumptions made in predicting thisevolution are shown in Table 2.3 below. In addition, it was assumed that analogueaircraft are removed from service first followed by basic digital aircraft.

Commercial Business Other GA Military Helicopters

Growth in flights 4.5% 3.0% 3.0% 0.0% 3.0%

Aircraft retirement rate 2.0% 2.0% 2.0% 2.0% 2.0%

New aircraft All digital All digital Proportionsconstant

Proportionsconstant

Allanalogue

Flights per aircraft Remain constant for each class

Table 2.3 - Fleet Development Assumptions



2.4.2 Based on these assumptions, the pattern of future flights is expected to be as inTable 2.4 below.

2000 2005 2010 2015

Analogue 25% 17% 11% 7%Partly digital 21% 17% 13% 11%Digital 54% 66% 76% 82%

Commercial:- digital 53% 64% 72% 78%- digital + partly digital 71% 78% 84% 88%

Table 2.4 - Pattern of Future Flights

Thus, during the period of operation of Enhanced Surveillance considered,commercial digital and partly digital aircraft alone make up a large majority of flights.



3. GROUND COST ESTIMATES

3.1 Basis of Ground Cost Estimates

3.1.1 The ground cost estimates are based on those used in the ESDAP Study butamended to allow for revised timescales now envisaged for the introduction ofElementary Surveillance and Enhanced Surveillance. Thus they are derived from the1998 Study, with the addition of the two Swiss centres, Geneva and Zurich.

3.1.2 Costs have been estimated for:

Ø radar sensors - the cost of installing, replacing and operating surveillance groundstations

Ø networks - the costs of data transmission from ground stations to the air trafficcontrol centres

Ø centres - costs associated with radar data processing, flight data processing,controller workstations and tools, radar remote control and monitoring systemsand peripherals, such as radar data recorders.

3.2 Radar Sensors

3.2.1 Sensors will be deployed and maintained for Elementary Surveillance, based on thePOEMS design. No additional cost will be generated by Enhanced Surveillance. Inthe absence of Elementary or Enhanced Surveillance, a replacement programme forcurrent MSSR sensors has been assumed.

3.3 Radar Data Networks

1.1.1 To support Mode S data transfer in the enhanced surveillance environment, it is likelyto be necessary to upgrade the existing 64kbps networks to 2Mbps. This upgrade willincrease the costs associated with the leased lines supporting the networks. Theseleasing costs will vary according to the locations and conditions of the leases.However, an indicative cost figure for the lease of a 64kpbs line in Western Europe is€1400 whereas an indicative cost for the lease of a 2Mbps line is €5000.

1.1.2 Assuming that it is only necessary to upgrade the backbone lines for enhancedsurveillance, Table 3.1 below provides an estimate of relative costs of operating eachof the radar data networks.

Network Number of Annual cost (€k)

backbone lines MSSR & ElementarySurveillance

Enhanced surveillance

RADNET 68 95.2 490.0RENAR 28 39.2 140.0UK RADNET 22 30.8 110.0

Table 3.1 - Comparative Operating Costs for Radar Data Networks



1.2 Air Traffic Control Centres

1.2.1 The costs associated with the ATC centres will be:

Ø the upgrade costs associated with implementation of Mode S functionality in RDP,FDP, human machine interface (HMI) and radar remote control and monitoringsystems, including R&D, acquisition, installation, integration, test and validation

Ø operations and maintenance costs, which are expected to be identical for MSSR,Elementary Surveillance and Enhanced Surveillance scenarios.

Ø the training costs associated with the use by controllers of Enhanced Surveillancefunctionality (this cost will not occur for Elementary Surveillance), also coveringthe use of Mode S and Mode A/C in a mixed environment.

1.2.2 Radar data processing at each centre is assumed either to be based on ARTAS,where the costs of the upgrade to Mode S are partly borne in common, or on a non-ARTAS, locally developed system, for which the complexity and costs of upgrade arehigher.

1.2.3 The following assumptions have been made regarding centre upgrades:

Ø Netherlands - AAA will probably be a straightforward upgrade centred aroundARTAS

Ø Belgium - the CANAC upgrade will be slightly more complex than the AAAupgrade but will also be centred around ARTAS

Ø France - CAUTRA will be a common development covering all five of the FrenchATC centres and will also be centred around ARTAS

Ø Maastricht - MADAP will be a straightforward development, similar to AAA, againbased around ARTAS

Ø UK - NERC will be a complex upgrade and will not be centred on ARTAS

Ø Germany - the German centres will be upgraded following a single R&Dprogramme to support P1 which will not be centred on ARTAS

Ø Italy - Milan will also be the subject of a single upgrade programme again utilisingARTAS.

1.3 Total Ground Costs

1.3.1 The total of the cost estimates for the period 2001 to 2017 are presented in Table 3.2below, in millions of Euro at 2000 price levels.

MSSR ElementarySurveillance

EnhancedSurveillance

Increment ofEnhanced

overElementary

Sensors 83 101 101 -Networks 3 3 10 7Centres - 30 75 45Total 86 134 186 52

Table 3.2 - Summary of Ground Costs



2. AVIONICS COST ESTIMATES

2.1 The Basis of Avionics Cost Estimates

2.1.1 The 1998 Study made cost assumptions, based on data then available, for avionicsupgrades. In the ESDAP Study these estimates were replaced by new valuesderived from the British Airways report. In addition to the British Airways costestimates, we have now received new data from engineering company Europe AeroDesign (EAD), comments from various airlines and views on the likely level of ServiceBulletin (SB) costs. There has been a considerable variation in the level of theestimates but finally a ‘compromise’ set has been chosen for the base analysis, with a'most likely' average level being derived assuming a 50:50 split of airlines incurringthe Supplemental Type Certificate (STC) cost from a large engineering house andthose choosing the SB route.

2.1.2 Three sets of costs have been developed:

Ø the cost of implementing Elementary Surveillance

Ø the cost of implementing Enhanced Surveillance, assuming ElementarySurveillance has already been implemented

Ø the cost of implementing Elementary and Enhanced Surveillance as oneoperation

Thus the incremental costs of implementing Enhanced Surveillance from a base ofeither the current situation or one in which Elementary Surveillance has already beenimplemented can be derived.

2.1.3 It is assumed that the work required to retrofit an aircraft for Elementary and/orEnhanced Surveillance can be carried out during routine C or D checks and that theimplementation schedules will allow this to be done. Therefore no allowance hasbeen included for the cost of downtime.

2.1.4 The costs of military equipment are generally higher than those for similar civilequipment, principally due to additional military requirements and complexity ofinstallation. For this reason, military equipment and installation costs are assumed tobe higher than the corresponding civil costs by a factor of 3. This factor may be agross underestimate, but further analysis has not been undertaken because of theassumptions relating to exemptions (see Section 2.5).



2.2 Summary of Retrofit Cost Estimates

2.2.1 The cost estimates are shown in Table 2.1 below.

Values in US$ Elementary Upgrade toEnhanced

Enhanced inone step

Service Bulletin routeService Bulletin 25,000 25,000 25,000Transponder (retrofit of 2 units/aircraft) 4,000 12,500 12,500Installation 3,000 8,000 9,000FMS change or control panel * 7,000 7,000Test equipment 500 500

39,000 46,000 54,000

STC routeCertification and engineering 2,500 2,500 2,500Transponder (retrofit of 2 units/aircraft) 4,000 12,500 12,500Installation 3,000 8,000 9,000FMS change or control panel * 7,000 7,000Test equipment 500 500Documentation 1,000 1,500 1,500

17,500 25,000 33,000

Most likely 28,250 35,500 43,500

* Where required. This value has no impact on the case for Enhanced Surveillance

Table 2.1 - Avionics Retrofit Cost Estimates

2.3 Costs for New Aircraft

2.3.1 It has been assumed that the costs associated with new aircraft are limited tohardware and that costs associated with design, certification and modifications areperformed by the manufacturer and absorbed into the overall cost of the aircraft:

2.3.2 It is the general view that a transponder will be developed to provide Elementary andEnhanced Surveillance functionality and that there will be no such thing as an'elementary only' transponder. Thus there will be no difference in cost betweenElementary and Enhanced Surveillance in this respect.

2.3.3 An average of various estimates suggests that the cost of an Elementary/EnhancedSurveillance transponder will be about $23,550, giving a cost per aircraft with twotransponders of $47,100. If an ACAS compliant transponder costs about $20,000,the additional cost for Elementary/Enhanced Surveillance over the current situationwill be about $7,000 for each new aircraft.

2.3.4 It has been assumed that aircraft currently on order and due for delivery in 2003 and2004 will be subject to a Master Change charge, which has been taken to be$10,000. From 2005, it is assumed that new aircraft will be delivered equipped forEnhanced Surveillance as standard.



2.4 Avionics Implementation Options

2.4.1 The assumed schedule for avionics implementation is as shown in Table 2.2 below.

2001 2002 2003 2004 2005 2006 2007

ElementaryRetrofit % 0% 70% 30% 0% 0% 0% 0%New fit % 0% 100% 100% 100% 100% 100% 100%

EnhancedRetrofit % 0% 0% 5% 15% 30% 30% 20%New fit % 0% 0% 100% 100% 100% 100% 100%

Table 2.2 - Avionics Spend Profiles

2.4.2 Two implementation options have been considered:

Ø a 'Two Step Option' in which Elementary and Enhanced Surveillance areimplemented as indicated in Table 2.2 above

Ø a 'Combined Option' in which Elementary and Enhanced Surveillance areimplemented together following the Enhanced Surveillance profile indicated inTable 2.2

Although the Combined Option would minimise costs, it would impose a significantdelay on the implementation of Elementary Surveillance.

2.5 Exemptions

2.5.1 The analysis of the fleet and the flights makes it possible to consider the effects ofincluding or excluding specific elements of the aircraft population in the requirementto provide DAPs. 423 different types of aircraft have been identified as operatingwithin ECAC. Of these, three aircraft types (B737, A320 and MD80) carry out 49% ofall flights in the Core Area of Europe. Appendix A shows the top 25 types of aircraftoperating in the Core Area and Table 2.3, below, shows the number of aircraft typesrequired to capture various proportions of the flights within the Core Area.

% of flights Number of aircraft types

50% 475% 1280% 1685% 2090% 2695% 44100% 423

Table 2.3 - Flights and Aircraft Types



2.5.2 Relatively few, largely commercial, aircraft carry out a disproportionate amount of theflights. Thus it would be possible to exempt other categories of aircraft and therebysignificantly reduce the overall cost without loosing a corresponding proportion of thebenefits of Enhanced Surveillance. In particular, military aircraft, for whom the costsare higher and benefits minimal, and many classes of general aviation could beexempted without significantly reducing the benefits but the overall costs would besubstantially reduced. The analysis has therefore been carried out using differentassumptions for exemptions.

2.6 Summary of Costs

2.6.1 The costs derived for the various options are indicated in Table 2.4 below. Thesecosts cover all types and classes of aircraft which, it is considered, could be upgradedto provide Enhanced Surveillance and take no account of possible exemptions. Onthis basis, analogue aircraft have been excluded. [Note that the costs for ElementarySurveillance do not include the costs of implementing Elementary Surveillance inaircraft which cannot be further upgraded to provide Enhanced Surveillance.] Thevalues are the sum of retrofit and new aircraft costs and are expressed in millions ofEuro at 2000 price levels.

ElementarySurveillance

EnhancedSurveillance

Increment

Two Step OptionCommercial 598 864 265Business 180 253 73General aviation - - -Military 24 46 22Helicopters - - -Total 802 1163 360

Combined OptionCommercial 586 705 120Business 176 209 33General aviation - - -Military 22 32 10Helicopters - - -Total 784 947 162

Table 2.4 - Total Avionics Costs

2.6.2 The values show the substantial extra cost of the Two Step Option (€198 m).

2.6.3 The above figures cover all classes of aircraft for which upgrade to EnhancedSurveillance is practical. However, as indicated in Section 4.5, the majority of thebenefits may be achieved by equipping only a proportion of the aircraft operating inEurope and, therefore, in the basecase used in the analysis, only commercial aircrafthave been included. Thus the avionics costs in the basecase are those shownagainst commercial aircraft in the above table.



3. EVALUATING THE BENEFITS

3.1 Benefits to Equipage Relationship

3.1.1 As indicated in Section 2.4, the proportion of flights made by DAP capable aircraft isprojected to increase from year to year. It is, therefore, necessary to establish arelationship between the proportion of aircraft equipped to transmit DAPs and theproportion of the potential capacity increase which may be obtained.

3.1.2 The FTS results indicate:

Ø a capacity increase with 75% equipage for 2 or 3 DAPs

Ø a relationship between the resolution of radar conflicts and equipage

3.1.3 It was concluded that the relationship between the resolution of radar conflicts andequipage adequately described the relationship between capacity increase andequipage since the resolution of radar conflicts represents one of the largestconstraints on controllers traffic management capability at times of the greatest trafficload. Accordingly, a relationship was derived with the appropriate capacity increaseat 75% equipage and the shape of the radar conflict curve, as indicated in Figure 3.1below.

Figure 3.1 - Capacity to Equipage Relationship

3.2 The Relationship between Delay and Demand

3.2.1 A currently popular hypothesis is that delays increase as traffic levels increase and,as the traffic level approaches the capacity of a piece of airspace, the delays increasemore rapidly. This would seem to be intuitively reasonable since, as traffic levelsincrease, aircraft are closer in time and space and there will be more interplay and'knock-on' effects leading to accelerating delays. This relationship between delay anddemand could be represented mathematically by an exponential curve.

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3.2.2 We tested this hypothesis using delay and demand data provided by the CFMU forthe sixteen centres in the Core Area for the 12 month period to the end of September2000. Figure 3.2 below shows that reasonable fits were obtained for four centres,Geneva Karlsruhe, Maastricht and London, and Figure 3.3 indicates that moderatefits were obtained for four other centres, Düsseldorf, Zurich, Milan and Munich.

Figure 3.2 - Delay/Demand Curves - Best Fits

Figure 3.3 - Delay/Demand Curves - Other Fits

Delay-Demand Relationships

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3.2.3 For the centres at Paris and Reims, no recognisable pattern was deduced for the full12 month period. However, it was known that changes had been made in operationalprocedures during the period and step changes could be seen in the data for Paris inJanuary 2000 and at Easter (April) 2000 for Reims. On the assumption that thesesteps in the data were due to the operational changes, the data after the changeswas taken to be representative of the current situation. A similar situation applied toFrankfurt and Rome, where steps in the data could be seen in March 2000 and June2000 respectively.

3.2.4 Mathematical relationships were developed for these twelve centres and these werethen used for benefit estimation. In the cases of Berlin and Bremen, although thecorrelation between delay and demand was not very close, since delays in theseareas were relatively low and, consequently, their contribution to the total benefits ofEnhanced Surveillance also relatively low, the best relationship that could bededuced from the data was used.

3.2.5 However, in the cases of Amsterdam and Brussels, no means of determining arecognisable pattern could be deduced for the full 12 month period or a shorter oneand, therefore, no estimate could be made of potential benefits at these centres. Thusthe benefit estimates will be under-estimated in this respect.

3.3 Collection of the Data

3.3.1 Delay and demand data was collected for each ACC under consideration in thefollowing manner:

Ø Each ACC was considered individually in order to allow for the different systemsand procedures employed and for the different airspace design and complexity.

Ø The average number of flights per day and the average number of minutes ofdelay per day for each week in the 12 months to the end of September 2000 forthe ACC under investigation were derived from CFMU statistics.

Ø The value of flights used is the number of movements within the area controlledby an ACC, including flights starting, ending or overflying.

Ø The value of delay used is ‘ATFM delay’ which is defined as ‘the duration betweenthe last take-off time requested by the aircraft operator and the take-off slot givenby the CFMU’.

Ø A delay was attributed to an ACC if this was the most penalising constraint on theroute of an aircraft. Less penalising constraints en route are not included in thedata.

3.4 Projecting Future Delays

3.4.1 When there is an increase in capacity, this is taken to mean that an increasingvolume of traffic can be accommodated without increasing delay. This is equivalent,on the above charts, to moving the delay/demand curve to the right. Therefore, for agiven capacity increase, a new delay demand relationship can be created. This isillustrated in Figure 3.4 below.



3.4.2 It is then possible, for an expected future level of traffic, to calculate the averagedelay per flight if no capacity increase were made (using the original delay/demandcurve) and to compare this with the average delay per flight if the capacity increasewere made (using the new delay/demand curve). The reduction in the average delayper flight can then be applied to the total number of flights to give a total number ofminutes of delay which can be evaluated at, say, the IATA recommended cost ofdelay of €22 per minute.

Figure 3.4 - The Relationship between Capacity, Demand and Delay

3.4.3 As the volume of traffic approaches the capacity of an area, however, this approachwould predict very large increases in delays. In practise, if the length of delays wereto increase beyond an acceptable level, then the growth in flights would be reducedand the delay itself would create an effective capacity limit, which was lower than thatwhich might be expected from workload or physical constraints.

3.4.4 A fundamental assumption in this form of analysis is that the profile of flightsthroughout the day, typically with early morning and late afternoon peaks, will remainthe same. Thus, if the total volume of traffic increases, it is assumed that thevolumes at the peak and non-peak periods each increase at the same rate and,therefore, the greater part of the additional traffic will still be carried at peak periods.Clearly, if there were a shift of traffic from peak to non-peak times, then more aircraftcould be accommodated without any change to the infrastructure and without anyincrease in delay. In this situation, the delay/demand relationships would no longerbe valid.

3.4.5 In this study, the recorded delays are ATFM delays, i.e. capacity induced delaysoccurring when the volume of traffic at some section along a route has reached themaximum level which controllers can handle. The FTS provided estimates of theadditional volume of traffic which controllers would be able to handle if the ControllerAccess Parameters (CAPs) were available to them and is, therefore, an estimate ofthe degree to which these capacity induced delays could be reduced.

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3.4.6 Although the FTS was based on a simulation of peak hour traffic, it provides ageneral estimate of the additional traffic which controllers can handle. This increase incapacity could be utilised at any time at which the volume of traffic exceeded thecontroller limit. Although delays tend to be more prevalent at peak hours and on thebusier days, given the variability in the nature of the traffic flows, bunching of trafficand short term overloads can occur at any time and thus so can delays. The practiceof combining sectors at less busy times in order to make the most effective use of theworkforce means that that controllers may be working close to their limits eventhough the overall system is operating below capacity. The capacity benefits of CAPsmay be realised at any time during the day when a capacity limit is reached and notjust at peak hours.

3.5 Evaluating Increased Capacity

3.5.1 The benefits of increased capacity were evaluated as follows:

Ø The 2000 traffic volumes for each ACC were grown for the period to 2017 usingthe STATFOR recommended growth rates. These were then used to estimatethe average level of delay in future years for each ACC if there were no changesto operational procedures.

Ø The projected future level of equipage for each year was used with the results ofthe FTS to estimate a capacity increase for each future year. New delay/demandrelationships were then derived for each year and the average levels of delay infuture years for each ACC with the increase in capacity were estimated.

Ø The reduction in projected delay achieved through the capacity increase wascalculated and valued using the recommended IATA cost value for ground delayof €22 per minute.

Ø The overall benefit per ACC is the value of the annual benefits summed over theyears 2005 to 2017, and the total benefit is the sum over all ACCs.



4. RESULTS OF THE ANALYSIS

4.1 Definition of Basecase

4.1.1 A basecase has been defined to form the core of the analysis and variations from thishave been analysed subsequently. The basecase has been chosen to simplify thepresentation of the analysis and may not necessarily be the most likely case.

4.1.2 The basecase is formed as follows:

Ø Two step implementation assumed

Ø digital and partly digital commercial aircraft only

Ø benefits calculated only for the 14 centres with statistically derived delay/demandrelationships

Ø costs and benefits taken in full for the period to 2017

Ø other capacity increases after 2005 set at 3% per year

Ø three DAPs included

Ø no STCA benefits included

4.1.3 The assumption that capacity increases of 3% per year for each year after 2005 canbe derived from improved planning and rationalisation measures is not based on anyspecific plans and cannot be substantiated. This level of capacity increase will resultin the average delay per flight within the Core Area being kept below 5 minutesthroughout the analysis period without any contribution from increased automationmeasures such as Enhanced Surveillance. It therefore represents a target ratherthan an anticipated result. Clearly, if this target is not reached, the value of EnhancedSurveillance will be higher and conversely, if it is exceeded, the value of EnhancedSurveillance will be lower. The consequences of changing this assumption areshown in Section 4.13.

4.2 Summary of Basecase Costs and Benefits

4.2.1 Figure 4.1 below indicates graphically the cost and benefits of Enhanced Surveillanceover time for the basecase. Values are at constant 2000 price levels.



Figure 4.1 - Annual Costs and Benefits

4.2.2 The figure indicates that the costs are incurred in the early years when aircraft retrofitis being carried out and new data processing systems are being installed in centres.Relative to Elementary Surveillance, incremental operating costs are extremely lowand there is no additional cost for new fit avionics.

4.2.3 The benefits rise in later years. This is a function of the exponential delay/demandcurves which predict that the effect of a specific increase in capacity on delay will bemuch greater for a system which is operating close to capacity than for a systemoperating well below capacity. Thus the delay savings from an increase in capacitywill rise as the load on the system rises. As indicated later, in Section 4.5, EnhancedSurveillance reduces average delays by just over ½ minute per flight in 2008 and byalmost 1 minute per flight in 2017, but on a volume of traffic which is 45% higher,leading to a level of benefits over 2.7 times higher.

4.2.4 Table 4.1 below presents a summary of the costs and benefits of EnhancedSurveillance for the basecase at 2000 price levels. Net present values are calculatedusing a discount rate of 8%.

Annual Costs and Benefits

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Elementary EnhancedSurveillance SurveillanceCash NPV Cash NPV

CostsSensors 101 68 101 68Networks 3 2 10 5Centres 30 25 75 61Avionics 598 348 864 524

732 441 1049 656

BenefitsRF congestion 1585 613 1585 613Mode A code - capacity 203 74 203 74 - delays 1332 627 1332 627STCA false alarms 376 163 376 163R/T workload/radar tasks - - 1269 487

3495 1476 4765 1963

Incremental (Enhancedrelative to Elementary)Costs - - 317 215Benefits - - 1269 487Net benefits - - 952 271

Table 4.1 - Summary of Costs and Benefits

4.2.5 Thus the incremental costs of Enhanced Surveillance are €317m. It may be notedthat 84% of these incremental costs are avionics costs. Benefits amount to €1,269m,giving a net benefit of €952m.

4.3 Basecase Return on Investment

4.3.1 The following table, Table 4.2, summarises the results of the analysis for 2 or 3DAPs, in terms of net present values. The net present values have been calculatedusing an 8% discount rate and are quoted in millions of Euro at 2000 price levels.

Number of DAPs 2 3

NPV (€m) Incremental costs 215 215 Productivity benefits 437 487 STCA benefits 0 0 Total benefits 437 487 Net benefit 222 271

B/C ratio 2.0 2.3

Return on investment 20% 22%

Table 4.2 - Summary of Results

4.3.2 The benefits of Enhanced Surveillance are significantly higher than the incrementalcosts of provision and, as a consequence, there are substantial returns on investmentin each of the cases considered.



4.4 The Consequences of Redundancy

4.4.1 It has been suggested that the use of CAPs could become redundant by a date whichcould be as early as 2012 and certainly before the end of the strategy period.

4.4.2 However, it is foreseen in the Surveillance Development Road Map that controller useof CAPs will span the duration of the EUROCONTROL ATM2000+ Strategy. It isconsidered that, beyond 2012, controllers will still need to apply both strategic andtactical control and that an alternative ATM system could not be in place within thattimescale, particularly in congested and complex airspace configurations such asTMAs.

4.4.3 Enhanced Surveillance is regarded as an essential first step towards future air/groundco-operative air traffic services but, whatever the technology and possibilities forairborne separation assurance that may eventually emerge, the need for a fallbackposition will remain. Thus the CAPs have a crucial role for the foreseeable future.

4.4.4 Nevertheless, an assessment of the case assuming that CAPs cease to deliverbenefits from a particular date has been carried out and the results are shown inTable 4.3 below.

2012 2013 2014 2015 2016 2017

12% 16% 18% 20% 21% 22%

Table 4.3 - Rates of Return

4.4.5 This table shows the return on investment which would be achieved if the equipmentbecame totally redundant in the year indicated. Thus, if the equipment were to givefull operational service to at least 2012, then an acceptable return would begenerated.

4.4.6 These results indicate that, despite possible future changes in the methods of airtraffic control, it remains economically prudent to invest in Mode S since theinvestment will yield an acceptable return within the likely operating life of the system.

4.5 The Effect on Aircraft Delay

4.5.1 The average delay per movement throughout Europe in 1998 due to ATC was 3.6minutes per movement6. Delays in 1999 were substantially higher but this was due tothe distorting effect of the Kosovo crisis and in 2000 delays are expected to be closerto the 1998 level.

4.5.2 These values of average delay are for a complete journey. In this analysis, the delayattributed to a centre has been averaged over all flights through the area covered bythe centre to give the average delay per flight in that area (possibly better referred toas the delay per flight segment). The actual average delay per flight segment for the12 months to September 2000, for the centres considered in this analysis, was 1.26minutes. Analysis by the PRU indicates that, on average, a complete flight passesthrough the area covered by 3.1 centres. Applying this factor would give an overallaverage delay per movement of 3.9 minutes in the Core Area. Delays in the CoreArea would be expected to be higher than the average figure for the whole of Europe.

6 First Performance Review Report PRR1, Performance Review Commission, June 1999



4.5.3 Figure 4.2 below projects the delays over the analysis period, with and withoutEnhanced Surveillance. Over the period there are conflicting influences on delays,with the growth in traffic tending to increase delays whilst capacity increases tend toreduce delays. The planned ECIP capacity increases reduce the delays to about 2½minutes per flight but, thereafter, the 3% pa capacity increase assumed is insufficientto keep pace with the growth in traffic and the level of delays rises to almost 5minutes by the end of the analysis period. The introduction of Enhanced Surveillancereduces delays and ensures that they do not again rise to the current level before theend of the analysis period.

Figure 4.2 - Average Delay per Flight

4.6 The Location of Benefits

4.6.1 Figure 4.3 below shows the total benefits for the period to 2017 associated with eachof the locations for which delay/demand relationships were derived. As can be seen,traffic in the London, Maastricht and Milan areas are the largest beneficiaries, withsignificant benefits also being computed for Swiss and French centres and forFrankfurt and Karlsruhe. Benefits for the two French centres, Paris and Reims, havefallen since the ESDAP study as the new procedures introduced in 2000 appear tohave increased capacity.

4.6.2 The capacity benefits attributed to each centre represent an estimate of the value ofthe reduction of overall delays which, it is anticipated, will be experienced because ofgrowing congestion in the area managed by the centre. Because of the activity of theCFMU in holding aircraft on the ground at the point of departure, a delay itself maynot actually be incurred within the area in which it is caused. Thus these values maynot relate directly to any specific delay reduction targets which may be included inState plans.

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Figure 4.3 - Benefits by Location

4.6.3 Table 4.4 below shows estimates of cumulative benefits which would be achieved byaircraft flying in areas controlled by the centres illustrated in Figure 4.3. Values arequoted in €m.

Year France Germany Italy Maastricht Switzerland UK Total

2005 1 2 1 1 2 4 112006 5 8 3 4 6 15 412007 11 18 8 9 14 35 952008 19 31 13 16 23 61 1632009 27 45 19 24 34 90 2392010 36 61 27 33 45 122 3232011 45 78 35 43 57 159 4172012 56 97 44 54 71 201 5232013 67 119 55 67 85 248 6402014 80 142 67 81 101 301 7722015 93 169 81 97 119 361 9192016 108 198 97 116 138 428 10842017 124 230 115 137 158 505 1269

Table 4.4 - Cumulative Benefits

4.6.4 The values in Table 4.4 also represent the additional delay costs which would beincurred if Enhanced Surveillance were to be implemented later than planned. Thus,for instance, if the start of implementation of Mode S were delayed by two years, thenthe cumulative costs in terms of additional delays in central Europe would be €41m.

4.7 Variant Cases Considered

1.1.1 Analyses have been carried out to assess the effect on the rate of return of changingthe assumptions and inputs to the basecase. Cases considered are:

Ø inclusion of benefits from other centres

Ø the avionics implementation option

Benefits by Location

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Ø exclusion of partly digital commercial aircraft

Ø variations in avionics costs

Ø variations in the capacity increase provided by DAPs

Ø variation in the capacity increase provided by other measures

Ø the inclusion of STCA benefits

Ø variation in the traffic growth forecast

Ø the inclusion of reactionary delays

1.1.2 Table 4.5 below indicates the results of the analysis. Returns on investment areshown assuming that Enhanced Surveillance by Mode S is in operation for the fullworking life of the ground equipment to 2017 in one case, whilst, in the other, only theperiod to 2012 is considered.

1.2 Inclusion of Benefits from Other Centres

1.2.1 For the centres at Amsterdam and Brussels, for which delay/demand relationshipscould not be derived using 2000 data, the relationships for 1998 have been used.This means that, for these centres, the analysis will not take account of any increasesin capacity which have been brought about by changes in working practices,sectorisation, etc. implemented since 1998.

1.2.2 The inclusion of these two extra centres increases the basecase return from 22% to24%, with most of the increase being produced at Amsterdam.

1.3 The Avionics Implementation Option

1.3.1 The Combined Option turns implementation into a single step process and,accordingly, reduces the costs substantially. With the additional benefit of delayedexpenditure, the return rises to 34%.

1.3.2 The Combined Option would mean delaying the implementation of ElementarySurveillance and although the possible effects of this on capacity have been takeninto account in the analysis, such a course of action may not be acceptable on safetygrounds.

1.4 Exclusion of Partly Digital Commercial Aircraft

1.4.1 The exclusion of partly digital commercial aircraft leads to a small rise in the rate ofreturn. They are assumed to be withdrawn from service before the digital aircraft andthus give lower value for the retrofit expenditure.

1.5 Variations in Avionics Costs

1.5.1 Variant cases of plus and minus 20% in avionics costs have been considered andlead to movements of between three and four percentage points down and uprespectively in the rate of return relative to the basecase. Because of the uncertaintyrelating to the cost of a Service Bulletin, a case has been considered in which thecost is increased from $25,000 to $50,000. This reduces the rate of return to 18%and has a similar effect to the +20% cost case.



1.6 Variations in the Capacity Increase Provided by the DAPs

1.6.1 The FTS concluded that capacity increases of 5.1 and 5.8% could be achieved with 2and 3 DAPs respectively at 75% equipage. The analysis examines the effect ofcutting these values to three quarters and a half of the estimated value. There aresignificant falls in the return on investment, although even at half the anticipatedcapacity increase, the investment still produces returns in excess of interest costs forthe period to 2017. However, costs cannot be recovered over the period to 2012.

1.7 Variations in the Capacity Increase Provided by Other Measures

1.7.1 The basecase assumes a level of capacity increase after 2005 of 3% pa but thisvalue cannot be substantiated. The case has, therefore, been re-examined withcapacity increases after 2005 ranging from 1% pa to 5% pa. The charts in Figure 4.4below show how changes in this assumption can have a major effect on the projectedlevel of future delays.

Figure 4.4 - Delays and Capacity Increase

1.7.2 The average delay per flight in 2017 without Enhanced Surveillance ranges from 2minutes, at a capacity increase of 5% pa, to an obviously untenable 17 minutes, at acapacity increase of 1% pa, whilst the return on investment in Enhanced Surveillancerises from 12% to 37%. Clearly, the level of other capacity increases has a very largeeffect on the level of delay and the rate of return.

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1.7.3 If relatively low cost 'planning' measures could be used to ensure that capacity keepspace with the growth in traffic, then investment in Enhanced Surveillance would notbe necessary. However, following the large increases in capacity envisaged in theECIP over the next five years, there is no guarantee that this would be the case and,if planning measures cannot keep pace with the growth in traffic, the return onEnhanced Surveillance becomes particularly high. In this light, the 'insurance value'of Enhanced Surveillance is very high.

1.8 The Inclusion of STCA Benefits

1.8.1 In the 1998 Study, it was assumed that Enhanced Surveillance could reduce the levelof STCA false alarms, thus improving controller productivity and leading to anincrease in capacity. The increase in capacity was assumed to be 1% for EnhancedSurveillance. Since no further work has been carried out to validate this assumption,the main results of this study are presented without STCA benefits. However, if thisadditional capacity increase is included in the analysis, the return on investmentshows a substantial increase, rising from 22% to 29% for the basecase.

1.9 Variation in the Traffic Growth Forecast

1.9.1 The rate of return is very sensitive to the rate of growth of traffic. Growth 10% higherthan forecast leads to a 6 percentage point rise in the rate of return. A correspondingfall reduces the return by 5 percentage points.

1.9.2 The analysis took, as its base assumption for traffic growth, the STATFOR trafficgrowth predictions. However, it should be noted that, over the past 50 years, the rateof growth of air transport has consistently outstripped general economic growth andthe increases predicted for traffic growth.

1.10 The Inclusion of Reactionary Delays

1.10.1 Analysis by the PRC6 for 1998 classified delays as in Figure 4.5 below, indicating thatATFM delays represented 27.8% of total delay. A further 37.7% of total delay wasclassified as ‘reactionary delay’. The primary cause of some of this reactionary delaywould have been ATFM delay and thus the values used in this appraisal of EnhancedSurveillance will under-estimate the full consequences of ATFM delay. However, thePRC analysis did not segment the reactionary delay by primary cause.

6 First Performance Review Report PRR1, Performance Review Commission, June 1999



Figure 4.5 - Analysis of Delay

1.10.2 Analysis by the PRC for the first six months of 19997 indicates a split of reactionarydelay by primary cause in the ratio of ATM to non-ATM of 20:21. This would suggestthat primary and reactionary ATFM delays are responsible for 46% of the total.

1.10.3 If ATFM delays are reduced, it follows that reactionary delays due to ATFM delayswill also be reduced. Taking the reactionary element of delays into account in theanalysis leads to a very large increase in the rate of return in the basecase from 22%to 34%.

1.11 Overall Results

1.11.1 Taken over the period to 2017, the project is generally resilient to quite substantialadverse changes in conditions, producing reasonable rates of return in all cases. Inthe cases where benefits are only considered for the period to 2012, only if thecapacity increase provided by DAPs reaches only half of the predicted value, or othercapacity increases after 2005 achieve 5% pa, does the project fail to recover theinvestment.

1.11.2 The case is very susceptible to the capacity increases produced by other measures,an indeterminate factor. The other key external factor is the growth in traffic. Clearlyimportant are the level of extra capacity delivered by DAPs and the level of avionicscosts, but the avoidance of a two step implementation process, if possible, wouldhave a substantial effect on the project.

7 Special Performance Review Report on Delays, PRR2, Performance Review Commission,

November 1999



Return onInvestment

Period to 2017

Return onInvestment

Period to 2012

3 DAPs 2 DAPs 3 DAPs 2 DAPs

Basecase

Basecase 22% 20% 12% 10%

Benefits from other centres

Including other centres 24% 22% 15% 12%

Avionics implementation option

Combined 34% 32% 28% 24%

Commercial partly digital aircraft

Excluded 24% 22% 15% 12%

Avionics costs

Costs 20% higher 19% 17% 8% 6%

Costs 20% lower 26% 24% 17% 14%

Service Bulletin @ $50,000 18% 16% 6% 4%

Capacity increase through DAPs

75 % of base assumption 17% 15% 5% 3%

50 % of base assumption 10% 8% -4% -6%

Other capacity measures

1% pa increase 37% 34% 24% 22%

2% pa increase 29% 27% 18% 15%

4% pa increase 17% 15% 7% 4%

5% pa increase 12% 9% 2% 0%

STCA benefits

Included 29% 27% 21% 19%

Traffic growth forecast

Growth 10% higher 28% 26% 19% 16%

Growth 10% lower 17% 15% 7% 4%

Reactionary delays

Included 34% 31% 27% 24%

Table 4.5 - Sensitivity Analysis


Edition:1.0 Proposed Issue Page 31

Appendix A Top 25 Aircraft Types in the Core Area of Europe

Basic Type Manufacturer Aircraft Flights in Core Area

B737 Boeing 737-300/400/500/700/800, BBJ (C-40) 1109143A320 Airbus A-320 815396MD80 Boeing MD-81/82/83/87/88 395805BA46 British Aerospace RJ Avroliner 330459B757 Boeing 757-300 252293B737 Boeing 737-200 221006CRJ1 Canadair RJ-100 Regional Jet 195687B767 Boeing 767-300 179689F100 Fokker 100 110869F50 Fokker 50, Maritime Enforcer 103866B747 Boeing 747-400 (International, winglets) (AL-1) 101583SB20 Saab 2000 99569AT43 Aeritalia ATR-42-200/300/320 92616B747 Boeing 747-100/200/300/SP/SR 92249E145 Embraer EMB-145, ERJ-145 92155AT72 Aeritalia ATR-72 83008DH8C De Havilland Canada DHC-8-300 Dash 8 80004D328 Dornier 328 74659AT43 Aeritalia ATR-42-200/300/320 72352F70 Fokker 70 65707A310 Airbus A-310 (CC-150 Polaris) 61637SF34 Saab 340 (S100 Argus, Tp100) 53571B727 Boeing 727-100 (C-22) 49581MD11 Boeing MD-11 49059A340 Airbus A-340 48335

The number of flights are for the 12 month period ending 30 September 2000.Flights which have at least some part of their journey in the Core Area are included.



Appendix B Schedule of Avionics Costs - Basecase

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 T otalE lementaryRetrofit Commerc ial - - 106.7 45.7 - - - - - - - - - - - - - - 152.4 Bus iness - - - - - - - - - - - - - - - - - - - O ther G A - - - - - - - - - - - - - - - - - - - M ilitary - - - - - - - - - - - - - - - - - - - Helicopters - - - - - - - - - - - - - - - - - - -

- - 106.7 45.7 - - - - - - - - - - - - - - 152.4

New Commerc ial - - 23.2 23.7 24.3 24.9 25.5 26.1 26.7 27.4 28.0 28.7 29.4 30.1 30.8 31.6 32.4 33.1 446.0 Bus iness - - - - - - - - - - - - - - - - - - - O ther G A - - - - - - - - - - - - - - - - - - - M ilitary - - - - - - - - - - - - - - - - - - - Helicopters - - - - - - - - - - - - - - - - - - -

- - 23.2 23.7 24.3 24.9 25.5 26.1 26.7 27.4 28.0 28.7 29.4 30.1 30.8 31.6 32.4 33.1 446.0

- - 129.9 69.5 24.3 24.9 25.5 26.1 26.7 27.4 28.0 28.7 29.4 30.1 30.8 31.6 32.4 33.1 598.5

E lementary + EnhancedRetrofit Commerc ial - - 106.7 58.5 38.2 76.5 76.5 51.0 - - - - - - - - - - 407.3 Bus iness - - - - - - - - - - - - - - - - - - - O ther G A - - - - - - - - - - - - - - - - - - - M ilitary - - - - - - - - - - - - - - - - - - - Helicopters - - - - - - - - - - - - - - - - - - -

- - 106.7 58.5 38.2 76.5 76.5 51.0 - - - - - - - - - - 407.3

New Commerc ial - - 23.2 28.8 29.5 24.9 25.5 26.1 26.7 27.4 28.0 28.7 29.4 30.1 30.8 31.6 32.4 33.1 456.2 Bus iness - - - - - - - - - - - - - - - - - - - O ther G A - - - - - - - - - - - - - - - - - - - M ilitary - - - - - - - - - - - - - - - - - - - Helicopters - - - - - - - - - - - - - - - - - - -

- - 23.2 28.8 29.5 24.9 25.5 26.1 26.7 27.4 28.0 28.7 29.4 30.1 30.8 31.6 32.4 33.1 456.2

- - 129.9 87.2 67.7 101.4 102.0 77.1 26.7 27.4 28.0 28.7 29.4 30.1 30.8 31.6 32.4 33.1 863.6


Edition:1.0 Proposed Issue Page 33

Appendix C Costs and Benefits - Basecase

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 NPV TotalCostsElementarySensors 0 4 6 1 20 41 16 3 1 1 1 1 1 1 1 1 1 1 68 101Networks 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 3Centres 0 6 8 8 5 3 0 0 0 0 0 0 0 0 0 0 0 0 25 30Avionics 0 0 130 69 24 25 25 26 27 27 28 29 29 30 31 32 32 33 348 598

0 10 144 79 50 69 41 30 28 29 29 30 31 31 32 33 34 34 441 732

EnhancedSensors 0 4 6 1 20 41 16 3 1 1 1 1 1 1 1 1 1 1 68 101Networks 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 5 10Centres 0 6 26 26 14 5 0 0 0 0 0 0 0 0 0 0 0 0 61 75Avionics 0 0 130 87 68 101 102 77 27 27 28 29 29 30 31 32 32 33 524 864

0 10 161 114 102 147 119 81 28 29 30 30 31 32 33 33 34 35 656 1049

BenefitsElementaryRF congestion 0 0 0 0 14 27 41 55 70 86 102 119 136 155 174 193 202 210 613 1585Mode A code - capacity 0 0 0 0 0 1 2 3 6 9 12 16 19 22 25 28 29 30 74 203 - delays 0 0 31 37 64 74 81 87 91 93 92 91 92 93 96 99 103 107 627 1332STCA false alarms 0 0 0 13 14 15 17 18 20 22 24 26 28 31 34 37 38 40 163 376

0 0 31 49 92 118 141 164 187 209 230 253 276 301 328 356 372 387 1476 3495

EnhancedRF congestion 0 0 0 0 14 27 41 55 70 86 102 119 136 155 174 193 202 210 613 1585Mode A code - capacity 0 0 0 0 0 1 2 3 6 9 12 16 19 22 25 28 29 30 74 203 - delays 0 0 31 37 64 74 81 87 91 93 92 91 92 93 96 99 103 107 627 1332STCA false alarms 0 0 0 13 14 15 17 18 20 22 24 26 28 31 34 37 38 40 163 376R/T workload 0 0 0 0 0 11 30 55 68 76 84 94 105 118 132 147 165 185 487 1269

0 0 31 49 92 128 171 219 255 285 315 347 381 419 460 504 537 573 1963 4765

Enhanced relative to elementaryIncremental costs 0 0 18 35 52 78 77 52 1 1 1 1 1 1 1 1 1 1 215 317Incremental benefits 0 0 0 0 0 11 30 55 68 76 84 94 105 118 132 147 165 185 487 1269Net benefits 0 0 -18 -35 -52 -67 -47 3 67 75 84 94 105 117 131 147 165 185 271 952

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