1. Colloquium on Environmental Aspects of Aviation
Montreal
April 2001
Presented by
Dr. Upali Wickrama
Rapporteur FESG

2. Economic Analysis of
Noise Policy Options

3. Description of Noise Policy Options

4. 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

5. ICAO FESG Passenger Fleet Forecast
A consensus product

6. 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 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, , , , , , ,
General assumptions
Generic aircraft with seat categories
50-99, , , , , , ,
General assumptions
Base Year 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

7. Retirement Forecast Methodology
Passenger Aircraft
Retirement profile (survivor curve) agreed by FESG
Freighter Aircraft
35 years for general freight
45 years for express freight

8. FESG Passenger Aircraft Retirement “Survivor” Curve

9. Retained 1998 In-Service Passenger Fleet
5732 Aircraft Retired from Passenger Service

10. Nearly 14000 New Aircraft Number of aircraft 18878 Growth 15006 13836
10774
13836
Replacement
Retained in service

11. FESG Passenger Fleet Forecast
Generic
1998
2020
50-99
998
1589
4899
6469
2483
5162
1451
2972
557
1101
378
754 8
360
471
Total
10774
18878
The world passenger fleet is expected to increase to almost aircraft by the year 2020
5732 aircraft from the 1998 in-service fleet will be removed from passenger service
A potential for nearly new aircraft

12. Global Freighter Fleet Forecast

13. Topics Review of Current Fleet
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

14. Distribution of Base Year Fleet by ICAO Region of Domicile
Total Passenger Aircraft = 11680
Passenger Aircraft
Freighter Aircraft
Total Freighter Aircraft = 1539

15. 1999 Year-End In-Service Fleet

16. Aircraft In 1999 Year-End Fleet Passing Noise Stringency Options
Percentage of total passenger aircraft passing noise stringency level
91% % % % %
Passenger Fleet

17. Aircraft In 1999 Year-End Fleet Passing Noise Stringency Options
Percentage of total freighter aircraft passing noise stringency level
86% % % % %
Freighter Fleet

18. Topics Economic Assessment Approach Objectives Key Assumptions
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

19. Description of Noise Policy Options

20. 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

21. 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

22. 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

23. 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

24. 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

25. Key Assumptions (cont.)
Aircraft transfer / redeployment based upon airline’s 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

26. 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)

27. 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

28. 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

29. Eligible Re-certification Aircraft
Number of aircraft
% of eligible non-compliant aircraft
(Non-Exempt)
Option
4.1 32
5.1 26
5.2
5.3 37
6.1

30. Topics Cost Impact 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

31. Cost Impact To The World Airlines NPV at 13 per cent
Option 2.1
Option 2.2
Option 2.3
-8dB Cert. 2002
-11dB Cert. 2002
-14dB Cert. 2002

32. Cash Flow Model + - + - Cash Flow Natural Retirement / Investment Case
New Aircraft Purchase
Operating Cost Savings
Proceeds from Sale of Old Aircraft
Natural Retirement / Investment Case
Timeline (Years)
Cash Flow + -
New Aircraft Purchase
Operating Cost Savings
Proceeds from Sale of Old Aircraft
Investment Case Under Phase Out Policy
Cash Flow
Timeline (Years) + -

33. Aircraft Retired Early Due to Phase-Out
With Re-certification
Option 4.1
Option 5.1
Option 5.2
Option 5.3
Option 6.1

34. Cost Impact To The World Airlines NPV at 13 per cent, Re-certification
($ Billions)
Benefit
($ Billions)
Option 4.1
Option 5.1
Option 5.2
Option 5.3
Option 6.1

35. Cost of Transition Non-exempt fleet - Discount rate 13 per cent

36. Global Cost Impact Passenger / Freighter
NPV at 13 per cent, Recertification
Option 4.1
Option 5.1
Option 5.2
Option 5.3
Option 6.1

37. Cost Impact - Non-Exempt Region
NPV at 13 per cent
Option 2.1
Option 2.2
Option 2.3
-8dB Cert. 2002
-11dB Cert. 2002
-14dB Cert. 2002

38. Cost Impact - Non-Exempt Region
NPV at 13 per cent, Re-certification
Option 4.1
Option 5.1
Option 5.2
Option 5.3
Option 6.1

39. Sensitivity Tests States implementing phase out Fleet protection
Guaranteed aircraft life
Age / Cycles

40. Sensitivity Tests
Option Discount rate 13 %

41. Sensitivity Tests: Fleet Protection
Option Discount rate 13 % - Non exempt
Cost in billion 1999 US $

42. Topics Cost / Benefit Analysis Cost / Benefit Ratios
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

43. Cost / Benefit Comparison
Total Non-Exempt Discount rate 13 per cent
Benefits in Person-Years DNL Contour
Cost per Person-Year
(Thousands of 1998 U.S. Dollars)
Recertification

44. Cost / Benefit Comparison
Total Non-Exempt Discount rate 13 per cent
Benefits in Person DNL Contour
Cost per Person
(Thousands of 1998 U.S. Dollars)
Recertification

45. Cost / Benefit Comparison
Total Non-Exempt Discount rate 13 per cent
Benefits in Person-Years DNL Contour
Cost per Person
(Thousands of 1998 U.S. Dollars)

46. The Four Quadrants Quadrant 4 Negative Benefits Positive Costs
Positive Benefits
Positive Costs
Quadrant 3
Negative Benefits
Negative Costs
Quadrant 2
Positive Benefits
Negative Costs

47. Quadrant 1 The Four Quadrants Positive Benefits Positive Costs
Negative Benefits
Positive Costs
Quadrant 3
Negative Benefits
Negative Costs
Quadrant 2
Positive Benefits
Negative Costs

48. Noise Stringency Cost-Benefit Non-Exempt Region Total
Recertification with no design margin
13% DNL65

49. The Four Quadrants Quadrant 2 Positive Benefits Negative Costs
Negative Benefits
Positive Costs
Quadrant 1
Positive Benefits
Positive Costs
Quadrant 2
Positive Benefits
Negative Costs
Quadrant 3
Negative Benefits
Negative Costs

50. The Four Quadrants Quadrant 3 Negative Benefits Negative Costs
Positive Costs
Quadrant 1
Positive Benefits
Positive Costs
Quadrant 3
Negative Benefits
Negative Costs
Quadrant 2
Positive Benefits
Negative Costs

51. Noise Stringency Cost-Benefit Total Exempt Region Total
Recertification with no design margin
13% DNL65

52. The Four Quadrants Quadrant 4 Negative Benefits Positive Costs
Positive Benefits
Positive Costs
Quadrant 2
Positive Benefits
Negative Costs
Quadrant 3
Negative Benefits
Negative Costs

53. Noise Stringency Options Global
Recertification with no design margin
13% DNL65

54. Thank you