Colloquium on Environmental Aspects of Aviation

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Colloquium onEnvironmental Aspects of Aviation

• Montreal
• 9 - 11 April 2001

Presented by Dr. Upali Wickrama Rapporteur FESG
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Economic Analysis of Noise Policy Options
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Description of Noise Policy Options
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Topics

• FESG Traffic and Fleet Forecast
• Review of Current Fleet
• Effect of Noise Stringency Levels on In-Service
  Fleet
• Economic Assessment Approach
• Objectives
• Key Assumptions
• Re-certification methodology
• Cost Impact
• Cost / Benefit Analysis
• Cost / Benefit Ratios

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ICAO FESGPassenger Fleet Forecast
A consensus product
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Key Forecast Assumptions

• General assumptions
• Two separate forecasts
• one for passenger traffic
• one specific for freight activity

• General assumptions
• Two separate forecasts
• one for passenger traffic
• one specific for freight activity
• Base Year 1998 - Horizon 2020
• Forecast for intermediate years provided
• 24 route groups for the forecast
• 18 international routes
• 6 domestic routes
• routes to and from the Former Soviet Union are
  excluded
• Generic aircraft with seat categories
• 50-99, 100-150, 151-210, 211-300, 301-400,
  401-500, 501-600, 601-650

• General assumptions
• Generic aircraft with seat categories
• 50-99, 100-150, 151-210, 211-300, 301-400,
  401-500, 501-600, 601-650

• General assumptions
• Base Year 1998 - Horizon 2020
• Forecast for intermediate years provided
• 24 route groups for the forecast
• 18 international routes
• 6 domestic routes
• routes to and from the Former Soviet Union are
  excluded

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Retirement Forecast Methodology

• Passenger Aircraft
• Retirement profile (survivor curve) agreed by
  FESG
• Freighter Aircraft
• 35 years for general freight
• 45 years for express freight

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FESG Passenger Aircraft Retirement Survivor
Curve
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Retained 1998 In-Service Passenger Fleet
5732 Aircraft Retired from Passenger Service
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Nearly 14000 New Aircraft
18878
Number of aircraft
Growth
15006
13836
10774
Replacement
Retained in service
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FESG Passenger Fleet Forecast

• The world passenger fleet is expected to increase
  to almost 19000 aircraft by the year 2020
• 5732 aircraft from the 1998 in-service fleet will
  be removed from passenger service
• A potential for nearly 14000 new aircraft

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Global Freighter Fleet Forecast
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Topics

• FESG Traffic and Fleet Forecast
• Review of Current Fleet
• Effect of Noise Stringency Levels on In- Service
  Fleet
• Economic Assessment Approach
• Objectives
• Key Assumptions
• Re-certification methodology
• Cost Impact
• Cost / Benefit Analysis
• Cost / Benefit Ratios

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Distribution of Base Year Fleetby ICAO Region of
Domicile
Freighter Aircraft
Total Freighter Aircraft 1539
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1999 Year-End In-Service Fleet
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Aircraft In 1999 Year-End Fleet Passing Noise
Stringency Options
Percentage of total passenger aircraft passing
noise stringency level 91
78 63 47
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Passenger Fleet
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Aircraft In 1999 Year-End Fleet Passing Noise
Stringency Options
Percentage of total freighter aircraft passing
noise stringency level 86
36 31 26
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Freighter Fleet
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Topics

• FESG Traffic and Fleet Forecast
• Review of Current Fleet
• Effect of Noise Stringency Levels on In- Service
  Fleet
• Economic Assessment Approach
• Objectives
• Key Assumptions
• Re-certification methodology
• Cost Impact
• Cost / Benefit Analysis
• Cost / Benefit Ratios

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Description of Noise Policy Options
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Objectives

• Develop model to estimate airline costs
  associated with noise policy options
• NPVs estimated for each policy option
• Incremental costs derived by comparing policy
  options to base case No ICAO Action scenario
• Compare costs against benefits

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Key Assumptions

• Detailed Fleet Database for Base Year
• Region, Weights, Noise Certification Data, Seats
  for each aircraft
• Fleet Forecast (route groups and generic seat
  categories)
• Retirement Forecast
• Aircraft Operating Costs
• New Aircraft Prices based on list price range
  provided by Airbus and Boeing

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Key Assumptions (cont.)

• Used aircraft prices obtained from published
  market sources
• Discount rates 7 and 13 (before tax, constant
  dollars)
• Technology Costs for New Compliant Aircraft
• Recertification
• Screening Analysis to determine types,
  quantities, and costs

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Key Assumptions (cont.)

• Phase out regions U.S., Canada, ECAC (as of
  December 1998), Japan, Australia and New Zealand
• Flights between exempt and non-exempt countries
  must use compliant aircraft
• Market driven non-production assumption

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Key Assumptions (cont.)

• Phase Out Period
• Non-compliant aircraft are removed on a linear
  basis
• Aircraft retired progressively over the phase out
  period with oldest aircraft retired first
• All non-compliant aircraft are removed by the end
  of the phase out regardless of age
• Sensitivity tests for guaranteed minimum economic
  life assumptions

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Key Assumptions (cont.)

• Aircraft transfer / redeployment based upon
  airlines historical acquisition behavior (new
  vs. used) as demonstrated in BACK / Lundkvist
  database
• Resale values Non compliant aircraft lose 50
  per cent of their market value at phase out
• Non compliant fleet made available to exempt
  region

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Re-certification - Screening Analysis

• Remove aircraft naturally retired before the
  start of the phase-out period
• Remove aircraft that comply with the proposed
  noise level
• Remove non-compliant aircraft in the internal
  fleets of exempt countries (aircraft used on
  routes between points in exempt countries)

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Re-certification - Screening Analysis (cont.)

• Remove non-compliant aircraft that have less than
  the required minimum remaining life before
  natural retirement
• 5 years for passenger aircraft with a minimum
  cost for re-certification
• 10 years for passenger aircraft with higher
  re-certification costs
• 15 years for all freighter aircraft

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Re-certification - Screening Analysis (cont.)

• Remove non-compliant aircraft that do not
  contribute to a minimum pool of 100 engines
• set as a minimum for a viable engine modification
  program
• Remove non-compliant aircraft that show a
  re-certification DOC penalty (from ANDES) greater
  than 3 per cent

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Eligible Re-certification Aircraft
Number of aircraft
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Topics

• FESG Traffic and Fleet Forecast
• Review of Current Fleet
• Effect of Noise Stringency Levels on In- Service
  Fleet
• Economic Assessment Approach
• Objectives
• Key Assumptions
• Re-certification methodology
• Cost Impact
• Cost / Benefit Analysis
• Cost / Benefit Ratios

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Cost Impact To The World AirlinesNPV at 13 per
cent
Option 2.1
Option 2.2
Option 2.3
-8dB Cert. 2002
-11dB Cert. 2002
-14dB Cert. 2002
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Cash Flow Model
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Aircraft Retired Early Due to Phase-Out
With Re-certification
Option 6.1
Option 4.1
Option 5.3
Option 5.1
Option 5.2
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Cost Impact To The World AirlinesNPV at 13 per
cent, Re-certification
Cost ( Billions)
Benefit ( Billions)
Option 5.2
Option 5.3
Option 5.1
Option 6.1
Option 4.1
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Cost of TransitionNon-exempt fleet - Discount
rate 13 per cent
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Global Cost ImpactPassenger / Freighter
NPV at 13 per cent, Recertification
Option 6.1
Option 5.1
Option 5.2
Option 4.1
Option 5.3
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Cost Impact - Non-Exempt Region
NPV at 13 per cent
Option 2.3
Option 2.1
Option 2.2
-8dB Cert. 2002
-14dB Cert. 2002
-11dB Cert. 2002
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Cost Impact - Non-Exempt Region
NPV at 13 per cent, Re-certification
Option 6.1
Option 4.1
Option 5.3
Option 5.1
Option 5.2
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Sensitivity Tests

• States implementing phase out
• Fleet protection
• Guaranteed aircraft life
• Age / Cycles

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Sensitivity Tests
Option 5.1 - Discount rate 13
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Sensitivity Tests Fleet Protection
Option 5.1 - Discount rate 13 - Non exempt
Cost in billion 1999 US
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Topics

• FESG Traffic and Fleet Forecast
• Review of Current Fleet
• Effect of Noise Stringency Levels on In- Service
  Fleet
• Economic Assessment Approach
• Objectives
• Key Assumptions
• Re-certification methodology
• Cost Impact
• Cost / Benefit Analysis
• Cost / Benefit Ratios

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Cost / Benefit Comparison
Total Non-Exempt Discount rate 13 per
cent Benefits in Person-Years 65 DNL
Contour
Cost per Person-Year (Thousands of 1998 U.S.
Dollars)
Recertification
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Cost / Benefit Comparison
Total Non-Exempt Discount rate 13 per
cent Benefits in Person 65 DNL Contour
Cost per Person (Thousands of 1998 U.S. Dollars)
Recertification
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Cost / Benefit Comparison
Total Non-Exempt Discount rate 13 per
cent Benefits in Person-Years 65 DNL
Contour
Cost per Person (Thousands of 1998 U.S. Dollars)
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The Four Quadrants
Quadrant 1 Positive Benefits Positive Costs
Quadrant 4 Negative Benefits Positive Costs
Quadrant 2 Positive Benefits Negative Costs
Quadrant 3 Negative Benefits Negative Costs
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The Four Quadrants
Quadrant 1 Positive Benefits Positive Costs
Quadrant 4 Negative Benefits Positive Costs
Quadrant 2 Positive Benefits Negative Costs
Quadrant 3 Negative Benefits Negative Costs
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Noise Stringency Cost-BenefitNon-Exempt Region
Total
Recertification with no design margin 13 DNL65
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The Four Quadrants
Quadrant 1 Positive Benefits Positive Costs
Quadrant 4 Negative Benefits Positive Costs
Quadrant 2 Positive Benefits Negative Costs
Quadrant 3 Negative Benefits Negative Costs
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The Four Quadrants
Quadrant 1 Positive Benefits Positive Costs
Quadrant 4 Negative Benefits Positive Costs
Quadrant 3 Negative Benefits Negative Costs
Quadrant 2 Positive Benefits Negative Costs
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Noise Stringency Cost-BenefitTotal Exempt Region
Total
Recertification with no design margin 13 DNL65
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The Four Quadrants
Quadrant 4 Negative Benefits Positive Costs
Quadrant 1 Positive Benefits Positive Costs
Quadrant 2 Positive Benefits Negative Costs
Quadrant 3 Negative Benefits Negative Costs
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Noise Stringency OptionsGlobal
Recertification with no design margin 13 DNL65
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Thank you