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The Business Case for Digital Data Link

The Business Case for Digital Data Link. U.S. Domestic Analysis ATN ‘99 September 22, 1999 www.boeing.com/caft. The CNS/ATM Focused Team “C/AFT”. An Informal Industry Group Airlines Airframe Manufacturers (Boeing, Airbus) Air Traffic Service Providers (FAA, Eurocontrol)

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The Business Case for Digital Data Link

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  1. The Business Case forDigital Data Link U.S. Domestic Analysis ATN ‘99 September 22, 1999 www.boeing.com/caft

  2. The CNS/ATM Focused Team“C/AFT” • An Informal Industry Group • Airlines • Airframe Manufacturers (Boeing, Airbus) • Air Traffic Service Providers (FAA, Eurocontrol) • Associations (ATA, IATA) • Research Organizations (MITRE/CAASD, NASA, LMI) • Focus is Business Case Development • Establish Problem -- Why do we need to change? • Quantify Solutions -- What to do, and when? • Develop Consensus -- How do we move forward?

  3. Airline Data Link CommitmentKey Questions • Is there a valid economic basis for airlines to commit to investment into ATC data link? • What short and long term airline benefits are there for investment in ATC data link? • Is there a “Window of Opportunity” for maximizing the return on this investment? • How does ACARS fit in to this issue? • What is the value of ATC data link as an enabling technology for future applications? • Does this define a “Benefits Driven” approach?

  4. Overview • Introduction & Assumptions • AOC Situation • ATC Situation • C/AFT Modeling Process • Model Inputs • Investment Analysis Results • Potential Future Data Link Benefits • Conclusions

  5. Introduction • C/AFT airlines agree that future system capacity is a primary driver for global airspace changes. • C/AFT proposes incremental operational enhancements that can be enabled by CNS technologies. • C/AFT analyzed Digital Data Link as a primary enabler for ATC delay reduction. • Business case development was based on analysis of costs and benefits from the U.S. airlines’ perspective.

  6. Scope of This Analysis • This is not an alternatives analysis, as data link is the only enabler considered. • Analysis is for Cruise/Terminal Transition area capacity improvements in U.S. NAS. • Value is based on airline point of view (airlines as an industry, not a single airline). • Both AOC and ATC benefits considered. • Analysis includes value of transitioning from Plain Old ACARS (POA) to VDL Mode 2 for AOC.

  7. Airline Operations Control Why the Need for Change? • ACARS Demand is Increasing • New aircraft being delivered • New airline users entering service • New applications and non-airline users • ACARS is a Shared-Access System • Based on non-discriminatory system of FCC frequencies • Spectrum Availability and Congestion • Limited number of VHF frequencies • Interim ACARS expansion is short-lived and expensive

  8. Airline Operations Control Increasing U.S. Demand for Service • Growing number of ACARS aircraft in U.S. • Today: Approx. 5600 U.S. + 1500 Non-U.S. = 7100 • Future: Up to 1200 more over next 3 to 5 years • Potential new demand from new participants • Civil: Large Scheduled (Regional), Cargo, & Business • Military: Non-Tactical Aircraft, Air National Guard • Estimated potential at more than 4500 additional a/c • Increasing number of data link applications • Aircraft Performance • Crew Management • In-flight Operations

  9. Spectrum IssuesCongestion and Availability • New applications are the primary reason for increasing demand for ACARS. • New data link users entering service is the secondary reason for increasing demand. • Many areas of US already already experiencing congestion on en route frequencies. • Other industries are looking and petitioning for available spectrum. Managing spectrum congestion and availability will be a growing and continuing concern for the airline industry.

  10. ACARS Demand Will Exceed Capacity ARINC, Inc

  11. The Digital Solution (VDL-2) • Migration of ACARS traffic to VDL-2 will effectively address projected frequency congestion • Significant costs related to expanding interim ACARS capacity may be avoided • ATC Data Link is a common element in most new applications related to ATC modernization and airspace management

  12. ATC Data Link Situation • American Airlines study of impact of delay on airline schedule • Without capacity improvements airline flight schedule critically impacted by year 2005. • By reducing separation, airline schedules can be maintained. • Results from FAA study of Cruise/Terminal Transition area data link shows significant delay reduction potential • Reduce voice frequency congestion. • Off-loads routine comm from radar controller, allowing improved ATC services for increased sector productivity and efficiency. • FAA has funding baseline for Builds 1 and 1a CPDLC • Based on ATN over VDL Mode 2. • PETAL-II trials in Europe underway to evaluate data link operational implementation issues.

  13. C/AFT Modeling ProcessTransition Logic Diagrams • C/AFT is proponent of incremental operational enhancements • Transition Logic Diagrams • separate diagram for each phase of operation • developed for both capacity and efficiency • operational enhancements “enabled” by technology or procedural improvements • C/AFT analysis focuses on capacity-related improvements • Reduced separations • Additional routes

  14. Aircraft Separation Rings Resource-Constrained Effective Theoretical Effective Resource-Constrained Prevention Detection Intervention RNP, RMP, RCP RMP RMP, RCP Display Weather Medium-Term Intent Data Controller Comm: g/g Pilot Flow Rates Airspace Complexity Sensor Display Short-Term Intent Controller Comm: a/g Pilot Closure Rate Sensor Display Controller Pilot Required Element Performance RxP = f (sensors, decision support, human) Required System Performance sets Separation Standard RSP =g ( RCP, RMP, RNP )

  15. The First Step:Controller Communications Workload 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Strip Mgmt Ext Coord Int Coord Conf Srch R/T Rdr Coord Rdr Super Rdr Interv "SYSCO" Approximate Controller Workload Distribution

  16. FAA Atlanta Study Cruise/Terminal Transition Sector handles arrival sequencing, overflight traffic, and departures Restrictions are enforced due to communication volume saturation Problem: During peak periods 20 Miles in Trail (MIT) for departures entering sector, resulting in ground delays Result: Using data link for routine voice communications allowed reduction from 20 MIT to 5 MIT (62% delay reduction) More Published SIDs and STARs Reduced Prevention Buffer Redistributed Controller Comm Workload Reduced Prevention Buffer State Vector Prediction Reduced Intervention Buffer Reduced Separation Minima 5. Cruise/Terminal Transition Area Transitions Airplane-Level Capacity Effects System-Level Capacity Effects Atlanta study baseline. Data Link used for Clearances and Transfer of Comm More Vertical Profiles 14

  17. C/AFT Modeling ProcessProbabilistic Economic Model • Determines • Costs • Benefits (converted to dollars) • Risk • Rules • Builds Deterministic Sensitivity Analysis • Identifies influence of each uncertainty on NPV • Used to calculate overall risk and return

  18. Data Link Investment ModelFull Influence Diagram

  19. Equipage Model Infrastructure Timing Infrastructure Model Forward Fit and Retrofit Equipage Rates Infra Effectiveness AOC Readiness New Deliveries Total Planes FF Planes Retrofit Planes Delay Growth Curr Delay/Flight Net Benefits Model Upfront Investment Model (+) Delay Reduction AOC Savings FF POA Penalties Non-AOC Availability Airplanes Retired (-) Equipage Costs S/W Upgrade Costs Airline Host Costs (-) ATC S/W Maint Annual Message Costs Cash Flows Data Link Investment ModelStructured Influence Diagram

  20. Model InputsConstants • Start Year of Model 2000 • Final Year for Equipage 2015 • Final Year for Benefit 2020 • Discount Rate 12% • Inflation Rate 3.5% • Direct Operating Cost (DOC) $25 per minute (Not including ownership costs) • Fuel % of DOC 30% • Fuel inflation rate 5%

  21. Model InputsDelay Growth • Derived from Free Flight, Preserving Airline Opportunity, by American Airlines, Fig. 4 • Large range of this variable due to: • AA study was using conservative good weather day estimate • This represents delay over optimum (not schedule) • This accounts for value of unmet traffic growth due to capacity constraints

  22. Model InputsTraffic Growth • Number of planes at start of model: • 5194 (Source: ATA) • Number of planes in 2015: • Low Estimate: 8054 • Medium Estimate: 8943 • High Estimate: 9289

  23. Model InputsInfrastructure • Model includes both AOC and ATC Infrastructure • CPDLC Builds have an associated “Delay Reduction Effectiveness” which represents the percentage of data link-related delay that is affected with each build.

  24. Model InputsInfrastructure

  25. Model InputsThree Stages of Equipage • Stage 0 • Tied to AOC infrastructure readiness • AOC benefits biggest driver (message cost reduction and penalty avoidance) • No ATC delay reduction benefits • High forward fit of VDL-2 equipment, low retrofit • Stage 1 • Tied to ATC infrastructure readiness • Both ATC delay reduction and AOC benefits • Increased forward fit, med retrofit • Ends when airlines equip more aggressively due to infrastructure maturity and realized benefits • Stage 2 • Tied to ATC infrastructure maturity • Both ATC delay delay reduction and AOC benefits • Increased forward fit, high retrofit

  26. Equipage Stages ATC Bld 1 Start (2002,2003,2004) Stage 0 ATC Bld 1/ATC Bld 1A/ATC Bld 2 End Stage 1 2015 Stage 2 Infrastructure Builds Bld 1 Bld 1A Bld 2 Note: All graphics reflect base case values 2000 2005 2010 2015 Model InputsEquipage Relationship to FAA Program

  27. Model InputsEquipage Percentages

  28. Model InputsCosts • ATM Infrastructure costs not included • Equipment costs assumes minimal avionics and flight deck impact • CMU, VDR, wiring • Equipment Costs • Aircraft Forward Fit and Retrofit for AOC • CMU Software upgrade for ATC • Airline host or router upgrade for AOC • ATC Message Costs • Who will pay? FAA, airlines, or both? • Multiplying Factor takes into account this uncertainty

  29. Model InputsCosts

  30. Model InputsCosts • Maintenance costs • 10% per year of ATC software upgrade cost • Message costs • $.18 per Kbit for 0 - 1 million Kbits/year • $.14 per Kbit for 1 - 4 million Kbits/year • $.10 per Kbit for 4 - 8 million Kbits/year • $.06 per Kbit for 8 - 15 million Kbits/year • $.05 per Kbit for > 15 million Kbits/year

  31. Model InputsAOC Benefits • AOC Non-Availability • Cost to an airline of not having full ACARS capability($16, $32, $48 per flight) • AOC message cost reduction • Cost-per-Kilobit savings and message length reduction (discount factor 0.67, 0.8, 0.86) • AOC Penalty Avoidance for VDL-2 equipage • Cost-per-Kilobit penalty (3%, 5%, 10% increase per year) • Monthly Surcharge ($900, $1000, $1100 per month)

  32. Model InputsATC Benefits • Delay reduction benefits applied to all airplanes, not just those equipped • ATC Delay Reduction Benefit • Based on Atlanta study; scaled study benefits • Assigned delay reduction % to each FAA Build • Uses the following formula: • Atlanta NAS-wide benefits * discount factor * annual delay growth • Atlanta NAS-wide benefits = 11,491,387 minutes saved in Cruise/Terminal Transition phase of flight • Discount Factor = 30%, 50%, or 80% of Atlanta-study benefits • Annual Delay Growth = 2.5%, 7%, 11% per year

  33. Model InputsDelay vs. Equipage Curve

  34. Data Link Scenario ComparisonReturn on Investment CNS/ATM Focused Team Data Link Analysis (April 1999)

  35. Full Data Link ScenarioCost Drivers by Category ($000’s) CNS/ATM Focused Team Data Link Analysis (April 1999)

  36. Full Data Link ScenarioBenefit Drivers By Category ($000’s) CNS/ATM Focused Team Data Link Analysis (April 1999)

  37. Full Data Link ScenarioDeterministic Sensitivity

  38. Full Data Link ScenarioCumulative Probability of Return (NPV) CNS/ATM Focused Team Data Link Analysis (April 1999)

  39. $9.0 Billion Full Data Link ScenarioCash Flow Summary

  40. $3.6 Billion Full Data Link ScenarioForward Fit - Cash Flow Summary

  41. $3.8 Billion Full Data Link ScenarioRetrofit - Cash Flow Summary

  42. Full Data Link ScenarioValue of Perfect Information and Control Selected Chance VariablesVOPI VOPC Equipage Scenario 0.0 $520M Delay Incr % per Yr 0.0 512 ATC Build 1A Eff % 0.0 25 Atlanta Discount Factor 0.0 452 AOC NA Strt Yr 0.0 242 ATC SW Upgrade $K 0.0 177 AOC NA ($ per Flt) 0.0 575 Value of Perfect Information: The value of knowing the outcome of an uncertainty before you make the investment decision. Value of Perfect Control: The value you of ensuring that the outcome of an uncertainty comes out to the most favorable outcome for your decision. Note: These calculations assume a 25% chance of the 10th percentile event occurring, a 50% chance of the 50th percentile event occurring, and a 25% chance of the 90th percentile event occurring.

  43. Model OutputsAOC Only • AOC-only scenario uses Stage 0 equipage rates • Forward Fit per Year 25%, 60%, 75% • Retrofit per Year 2%, 3%, 4%

  44. AOC Only ScenarioCost Drivers by Category ($000’s) CNS/ATM Focused Team Data Link Analysis (April 1999)

  45. AOC Only ScenarioBenefit Drivers by Category ($000’s) CNS/ATM Focused Team Data Link Analysis (April 1999)

  46. AOC Only ScenarioDeterministic Sensitivity CNS/ATM Focused Team Data Link Analysis (April 1999)

  47. AOC Only Scenario Cumulative Probability Distribution CNS/ATM Focused Team Data Link Analysis (April 1999)

  48. $3.5 Billion AOC Only ScenarioCash Flow Summary

  49. $2.1 Billion AOC Only ScenarioForward Fit - Cash Flow Summary

  50. $1.5 Billion AOC Only ScenarioRetrofit - Cash Flow Summary

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