Circular 257. Edition 1
Last modified:1/1/1995
Economics of Satellite-based Air Navigation Services
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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
Published in separate English, Arabic, French, Russian and Spanish editions by the lntemutional Civil Aviation Organization. All correspondence, except orders and subscriptions, should be addressed to the Secretary General. Orders for this publication should be sent to one of the following addresses, together with the appropriate remittance by bank draft, cheque or money order in U.S. dollars or the currency of the country in which the order is placed. Document Sales Unit International Civil Aviation Organization 1000 Sherbrooke Street West, Suite 400 Montreal, Quebec Canada H3A 2R2 Tel. 5 14 285-8022 Telex 05-24513 Fax 5 14 285-6769 Sitatex YULCAYA Credit card orders Visa or American Express only are accepted at the above address. Egypt. ICAO Representative, Middle East Office, 9 Shagaret El Dorr Street, Zamalek I 121 1, Cairo. France. Reprbsentant de I'OACI, Bureau Europe et Atlantique Nord, 3 bis, villa mile-ererat, 92522 Neuilly-sur-Seine Cedex. India. Oxford Book and Stationery Co., Scindia House, New.Delhi 110001 or 17 Park Street, Calcutta 700016. The English Book Store, 17-L Connaught Circus, New Delhi 110001. Japan. Japan Civil Aviation Promotion Foundation, 15-12, 1-chome, Toranomon, Minato-Ku, Tokyo. Kenya. ICAO Representative, Eastern and Southern African Office, United Nations Accommodation, P.O. Box 46294, Nairobi. Mexico. Representante de la OACI, Oficina Norteamtrica, CentroamCrica y Caribe, Apartado postal 5-377, C.P. 06500, Mexico, D.F. Peru. Representante de la OACI, Oficina SudamCrica, Apartado 4127, Lima 100. Senegal. Representant de I'OACI, Bureau Afrique occidentale et centrale, Boite postale 2356, Dakar. Spain. A.E.N.A. - Aeropuertos Espaiioles y Navegacidn Abrea, Calle Juan Ignacio Luca de Tena, 14, Planta Tercera, Despacho 3. 11, 28027 Madrid. Thailand. ICAO Representative, Asia and Pacific Office, P.O. Box 11, Samyaek Ladprao, Bangkok 10901. United Kingdom. Civil Aviation Authority, Printing and Publications Services, Greville House, 37 Gratton Road, Cheltenham, Glos., GL50 2BN. The Catalogue of ICAO Publications and Audio Visual Training Aids Issued annually, the Catalogue lists all publications and audio visual training aids currently available. Monthly supplements announce new publications and audio visual training aids, amendments, supplements, reprints, etc. Available free from the Dcument Sales Unit, ICAO
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.
Table of Contents Page Glossary .......................................................... v ........................................... Chapter 1 -- Introduction 1 ..................................... 1 . CNSIATM and its advantages 1 2 . Reasons for costhenefit analysis ................................... 5 3 . Measures of economic viability .................................... 6 4 . Global economic evaluation of CNSIATM ............................ 8 5 . Evaluation of CNSIATM at State and regional levels ................... 9 Chapter 2 -- Configurations of alternative systems ...................... 10 1 . Introduction .................................................. 10 2 . Airspace types and system evolution ................................ 10 3 . Examples of CNSIATM equipment configurations ...................... 12 4 . Concept of incremental costs ...................................... 15 Chapter 3 -- Policy and institutional assumptions ...................... 17 1 . Introduction .................................................. 17 2 . National and regional policies ..................................... 17 3 . Assumptions about the rate of transition ............................ 18 4 . Economic links between States, service providers and airlines ............ 19 ............................... Chapter 4 -- Net present value analysis 21 Outline of the approach ......................................... 21 Trafic demand and aircraft numbers ............................... 23 Expenditures on CNSIATM equipment .............................. 25 Purchase of services from third-party suppliers ....................... 31 Expenditures on present-technology equipment ....................... 33 Efficiency benefits for aircraft operators .............................. 38 Time savings for passengers ...................................... 41 Other costs and benefits ......................................... 42 Summary of costs and benefits for the present value approach ............ 43 Net present values ............................................. 46
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Annex 9. Edition 16. FacilitationAnnex 10. Vol 5. Edition 3. Aeronautical Telecommunications. Aeronautical Radio Frequency Spectrum UtilizationDoc 9750. Edition 2. Global Air Navigation Plan for CNS/ATM SystemsDoc 9750. Edition 3. Global Air Navigation PlanDoc 9842. Programme Budget of the Organization 2005-2006-2007Circular 278. Edition 1. National Plan for CNS/ATM SystemsВСЕ ДОКУМЕНТЫALL DOCUMENTSICAO CIRCULASЦИРКУЛЯРЫCircular 257
Table Of Contents
COVER PAGE
Foreword
Table of Contents
Glossary
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Appendix 1
Appendix 2