In about 2004 Europe and the USA started programmes to develop the next generation of ATM systems – SESAR and NextGen. Substantial amounts of money have been spent. The costs over the next two decades are projected to be tens of millions of euros/ dollars. Industry stakeholders, particularly the airlines that will pick up much of the costs, obviously want continued reassurances. They will ask: “Is it all worthwhile?” Recent cost/benefit analyses and business-case reports on NextGen (Deloitte) and SESAR (SESAR JU, with support from McKinsey & Company) aim to show that these programmes will deliver benefits much greater than the costs involved. These are not the first such analyses; indeed they make considerable use of previous studies.
These studies carefully explain where their numbers have come from – what assumptions are made and models used. But the authors recognise the intrinsic problems with demand scenarios, cost estimates, benefit types and estimates. Traffic demand depends critically on future GDP and oil price estimates. Costs for IT-based projects are hard to estimate. A programme integrating many IT projects across multiple stakeholder systems is an even more difficult proposition (e.g. Flyvbjerg & Budzier).
Deloitte notes that many NextGen benefits are ‘soft’, i.e. typically do not result in accounting cash flows. A major contributor is ‘passenger opportunity cost savings’, the monetised value of reduced delays to passengers. The SESAR JU study stresses large benefits to employment – good reason for government support to these developments? – and reduced CO2 emissions. Historically the airline industry has been a tough business to be in. Hence airlines normally tend to focus on hard cash cost reductions and short-term – less than three-year payback – operational gains.
SESAR and NextGen are actually portfolios of connected projects. These range from deployment of best practices and replacement/enhancement of existing technology through modernisation, to the infrastructure, kit and procedure changes needed for 4D trajectory-based operations. Suppose the airlines’ assessment were that 50 percent of their hard cash gains could be achieved by spending 25 percent of the total programme costs, by concentrating on the early phases of best practices and modernisation components. Would airline decision makers think that this would be a better deal than full 4D TBO? Would system implementation then focus on short- and medium-term operational improvements rather than strategic 4D TBO improvements?
This raises the question of killer apps – jargon for innovations so valuable that they prove convincingly the core value of some larger technology. This persuades the bulk of firms to implement these systems, and the prospect of killer apps produces stakeholder technical and financial cooperation. Ironically – see Mozdzanowska & Hansman – safety considerations have been the primary ATM transition driver. ATM is now supported by highly effective collision avoidance systems on the ground and in the air. Once TCAS was credible it became must-have kit for international airlines. First, 4D TBO killer apps obviously have to offer enormous benefits to stakeholders in the context of potential costs. Second, the bulk of these benefits must not be obtainable through markedly cut-down versions of 4D TBO. So what are these killer apps?
Dr Peter Brooker
Aviation consultant
Peter Brooker’s articles can be found starting on page 25 and (with Peter Havelock) on page 34 of this issue.
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