Federal Aviation Administration Valuation of NextGen Capacity Benefits A Consumer Surplus Approach to the Monetization of NASPAC Results For: INNOVATIONS IN NAS-WIDE SIMULATION Conference By: Michael Wells, NextGen Business Case Integration Date: January 28, 2010

2 Federal Aviation Administration One Goal of NextGen is Increased Throughput

3 Federal Aviation Administration Defining the Benefits of Increased Throughput NextGen Current Throughput Delay per Flt Flights Current System Current Operating Point Future Delay, with NextGen Future Throughput, without NextGen Future Delay, without NextGen Future Throughput, with NextGen Current Delay Future Operating Point, with NextGen Future Operating Point without NextGen Avoided Delay Additional Flights

4 Federal Aviation Administration Designing the Experiment in NASPAC Three scenarios are modeled 1."Do Nothing“ Case –2007 airport capacities, technologies, and procedures 2.“Runways Only“ Case –New runways, runway extensions, and airport configurations included as they are projected to occur 3.“NextGen” Case ( = Runways + ATM Improvements ) –New runways, runway extensions, and airport configurations included as they are projected to occur –NextGen technologies and procedures also included

5 Federal Aviation Administration Modeling… Weather Capacities Demand FAA’s NASPAC is used to produce metrics for each scenario

6 Federal Aviation Administration Less Delay in 2019 compared to the Baseline v5d 21% delay reduction in 2019 compared with the baseline Total Delay = Push-Back Delay + Taxi-Out Delay + Airborne Delay

7 Federal Aviation Administration More Flights in 2019 compared to the Baseline v5d 66,000 more flights in 2019 compared with the baseline

8 Federal Aviation Administration D We Consider Delay as a Cost to the Passenger Flights $ per Flight Baseline Delay Cost

9 Federal Aviation Administration Generalized Cost includes both Fare and Delay Cost of Delay (ADOC + PVT) Flights LRMC Note: We define “Long Run Marginal Cost” (LRMC) as the equilibrium cost of providing a flight in the absence of delay Consumer Surplus $ per Flight LRMC + Delay Cost $$ Direct Cost of Unimpeded Flight D

10 Federal Aviation Administration Reducing Delay Increases Consumer Surplus $ Flights LRMC + Delay Cost Note: We define “Long Run Marginal Cost” (LRMC) as the equilibrium cost of providing a flight in the absence of delay $ per Flight LRMC + NextGen Delay $$ Increased Consumer Surplus LRMC D

11 Federal Aviation Administration Change in Consumer Surplus Can be Calculated $ Flights Note: We define “Long Run Marginal Cost” (LRMC) as the equilibrium cost of providing a flight in the absence of delay $ per Flight LRMC + NextGen Delay $$ LRMC D Increased Consumer Surplus LRMC + Delay Cost

12 Federal Aviation Administration Our Formula Assumes a Linear Demand Curve $ Flights Note: We define “Long Run Marginal Cost” (LRMC) as the equilibrium cost of providing a flight in the absence of delay $ per Flight $$ LRMC D Benefits = ( ∆ Delay Cost x Flights Base ) + ½ ( ∆ Delay Cost x ∆ Flights )

13 Federal Aviation Administration Applying this Formula to NASPAC Results Value of Avoided Delay from NASPAC (2019) = $ 4 Billion

14 Federal Aviation Administration We Also Included Supplemental Estimates of Programs Not Modeled in NASPAC $ 2 Billion from other studies $ 4 Billion from NASPAC

15 Federal Aviation Administration Summary of our Assumptions Long Run Marginal Cost is constant over time (i.e. – the airlines’ supply curve is flat) There is no “producer surplus” Cost-per-minute of delay is the same for all flights Our demand function is not explicit, but implied –Flights are trimmed (or added) based on capacity constraints –Assume a linear demand curve for calculating consumer surplus

16 Federal Aviation Administration Thank you !

17 Federal Aviation Administration NextGen Improvements Modeled in NASPAC Solution SetCapability/Activity Trajectory Based Operations Delegated Responsibility for Horizontal Separation Initial Conflict Resolution Advisories Increase Capacity & Efficiency Using RNAV/RNP: RNAV Routes Increase Capacity & Efficiency Using RNAV/RNP: Arrival/Departure Procedures ADS-B Separation: Gulf High Altitude DataComm Segment 1: Increased En Route Capacity High Density Improved Parallel Runway Operations: PRM-A Improved Parallel Runway Operations: Closely-Spaced Parallel Operations Time-Based Metering Using RNAV/RNP Route Assignments Airspace Redesign: NY Airspace Redesign: Chicago Airspace Redesign: Houston Flexible Terminal AreasWake Turbulence Mitigation for Departures

18 Federal Aviation Administration Program Office Studies Used ADS-B DataComm Segments 1 and 2 Oceanic In-Trail Climb and Descent Integrated Arrival/Departure Airspace Surface Traffic Management CATM - Work Package 2 AIM Modernization NextGen Network-Enabled Weather (NNEW) SWIM Segment 1 AJP CDA Fuel Savings