CIRCULAR ECONOMICS OF SATELLITE-BASED AIR NAVIGATION SERVICES Guidelines for costbenefit analysis of communications, navigation and surveillancelair traffic management CNSIATM systems Approved by the Secretary General and published under his authority INTERNATIONAL clvli AVIATION ORGANIZATION MONTREAL CANADA
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Foreword 1 , The introduction of satellite-based air navigation services to replace many of the existing linelof-sight systems represents a quantum step forward for civil aviation. Following , comprehensive studies over several years, the global "communications, navigation and surveillancelair traf'fic management CNSIATM systems" concept was endorsed by the ICAO Tenth Air Navigation Conference in 1991 and by the 29th Session of the ICAO Assembly in 1992. 2. Apart from the evident technological benefits of the new systems, support for this endorsement had been supplied by a broad economic study which indicated that, at the global level, the benefits from the ne'w systems greatly exceeded the costs of implementing them. The Air Navigation Conference recommended that States perform their own individual cost- effectiveness andlor costhenefit analyses to determine how they would be affected by the new systems Recommendation 611 and requested that ICAO provide assistance to States in carrying out these analyses Recommendation 612, to which the Assembly subsequently attached high priority. These studies were to give consideration to such factors as the costs of transition to the new systems, including retraining, which had not been included in the global study. 3. The guidance material presented in this circular is an important element of the envisaged assistance to States. It describes how to identify, measure and aggregate the incremental costs and benefits associated with the replacement of the existing communi- cations, navigation and surveillance systems with the new CNSIATM systems, and how to use this information to draw conclusions about the expected economic viability of the new systems and their economic impact on service providers States and users air carriers. Guidance is also provided to assist in the choice of the most cost-effective approach to implementation. It will become clear that there is a large element of uncertainty in this process because of the difficulty of quantifying the impact of a number of relevant factors which will affect the actual economic outcome. Planning decisions will therefore require the exercise of judgement as well as economic analysis based on the techniques described in this document. 4. The guidance material presented in this circular is consistent with and complementary to the comprehensive explanatory circular "The ICAO CNSIATM Systems Coping with Air Traf'fic Demand" and to the "Global Co-ordinated Plan for the Transition to the ICAO CNSIATM Systems", both of which were adopted iri 1993 by the committee charged with developing the framework for introducing the new systems known as the "FANS Phase I1 Committee", were subsequently endorsed by the ICAO Council and are being published as ICAO Circular 251 and ICAO Doc 9629, respectively. The purpose of the circular is to present economic evaluation methodologies using illustrative configurations of CNSIATM
systems and existing technology systems. It does not contain advice on technical specifications of systems. The guidance material draws on reports supplied by States on the subject of costhenefit methodology and on the application of costhenefit techniques to CNSIATM investments. Of particular value was a CNSIATM costlbenefit analysis guide prepared by the Cmadian Government and its consultant THA-MONENCO and subsequently adapted for the FANS Phase I1 Committee and referred to in this circular as the "FANS Guide". 5. The costhenefit guidance material in this circular focuses on the methodological approach of Net Present Value, which takes into account transition costs and which is widely recognized and used by financial institutions such as those potentially involved in funding CNSIATM. The methodology is presented using a step-by-step tabular approach which may be applied manually or through a computer spreadsheet formatted spreadsheets using Quattro Pro or Lotus software to apply the approach used in this circular are available on diskette from the ICAO Secretariat on request. Some of the tables include calculations based on hypothetical assumptions about various cost and benefit elements. Analysts undertaking costhenefit studies for particular airspaces must develop assumptions appropriate for those airspaces, using inputs from interested parties such aa service providers, aircraft operators and equipment manufacturers. 6. The circular includes a glossary which provides brief explanations of the more common technical terms and acronyms. These explanations should be viewed as an aid to the general understanding of the reader and are not necessarily officially endorsed by ICAO. 7. Unless indisated otherwise, all references in this circular to "cents" mean U.S. cents, and all references to "dollars" mean U.S. dollars.