FAB Central Europe Costbenefit analysis

1
FAB Central EuropeCost-benefit analysis

• Presentation to Stakeholder Forum
• 5 March 2008

2
Why undertake a cost-benefit analysis?

• SES legislation requires that FAB is supported by
  cost-benefit analysis
• Important for all stakeholders to see
• that FAB is a beneficial step forward
• what benefits a FAB could bring
• Helps future progress on FAB
• identifies most promising directions
• shows where attention is needed
• helps rule out some options

3
What is a cost-benefit analysis?

• Examines a project from a global perspective
• Balances costs and benefits to all parties
• Quantifies costs and benefits
• Expresses them in monetary terms
• Recognises trade-offs between current and future
  costs and benefits through Discounted Cash Flow

Different from a Business Case which looks at
costs and benefits to a single party
4
Components of a FAB cost-benefit analysis

• Reference case
• What would happen without the project
• Collection of initiatives
• Sub-projects that are possible through FAB
  cooperation
• Cost-benefit evaluation
• discounted cash flow for sub-projects
  individually and collectively
• key indicator monetary Net Present Value (NPV)
• Performance evaluation
• How does FAB project affect performance
  indicators?
• Sensitivity evaluation
• How are the benefits affected by uncertain
  factors?

5
Reference case key elements

• Trends improving performance
• increasing traffic
• improved technology and procedures

• Trends worsening performance
• continuing convergence of salaries between
  Austria and the rest
• ATCO productivity growth rate cannot keep pace
  with traffic growth
• constraints on how fast controllers can be
  recruited and qualified

• Overall picture
• general improvement in unit costs
• deterioration in quality (delays) as constraints
  on controllers bite

6
Reference case performance

• Economic cost-effectiveness first improves, then
  declines because of increasing delay

7
Potential costs and benefits

• Benefits
• Improved controller productivity, leading to
• increased capacity
• lower costs
• Other cost savings
• Reduced delays
• Improved flight efficiency

• Costs
• Set-up and coordination
• Investment in systems
• Training
• Continuing operating costs?
• Social costs?

8
FAB initiatives

• Operational cooperation
• Initial leading to static (resectorisation,
  improved flow capacity management)
• Optional extension to dynamic (flexible
  reassignment of responsibility)
• Each step requires transition costs
• Investment in systems
• Training
• Set-up
• Other initiatives
• Technical opportunities
• joint procurement of new systems
• cooperative planning of CNS infrastructure
• Coordination and cooperation on maintenance
• Single unit rate brings improved flight
  efficiency
• Common training

9
Timing of operational initiatives

• Move to static cooperation 2015 is earliest
  feasible
• Move to dynamic cooperation
• Major investments required to enable this with
  current systems
• Much lower costs with SESAR-compliant systems
• Most beneficial to wait until new systems
  installed (2016-2020)
• ANSPs could move together or gradually
• Some advantages in moving together (most have
  more than one neighbour in the FAB)

10
Findings of the cost-benefit analysis

• Move to static in 2015 is beneficial
• Move to dynamic in 2021 is beneficial
• Benefits from other initiatives are substantial
• No significant social costs for projects examined
• Changes in staffing fit within natural attrition

11
Who gains these net benefits?

• Most of the benefits come from delay savings
• Smaller contributions from cost savings and
  flight efficiency

12
Impact on performance

• FAB shows substantial improvement in economic
  cost-effectiveness
• Improvement is greater with dynamic option

13
Sensitivity analysis

• Many uncertain factors in this analysis
• Salary convergence will it be faster?
• Improvements will they be on the scale
  envisaged?
• Costs will they be higher or lower?
• SESAR what will its impact really be?
• Can constraints on numbers of new controllers be
  relaxed?

While these factors could have an adverse impact
on the project, none are large enough to destroy
its value