**FINAL REGULATORY EVALUATION, REGULATORY FLEXIBILITY ANALYSIS,
INTERNATIONAL TRADE IMPACT ASSESSMENT, AND UNFUNDED MANDATES ACT
ASSESSMENT**

**FOR**

**FINAL RULE:**

**FUEL TANK FLAMMABILITY REDUCTION AIRBUS AND BOEING AIRPLANE FLEETS**

**CFR PARTS 25, 121, 125, AND 129**

OFFICE OF AVIATION POLICY AND PLANS

AIRCRAFT REGULATORY ANALYSIS BRANCH, APO-320

Allen A. Mattes

APO-320

July, 2008

TABLE OF CONTENTS

Executive Summary i

I. Introduction 1

II\. Industry Profile 4

III\. Costs and Benefits Overview 21

IV\. Benefits 24

V. Air Carrier Passenger Airplane Compliance Costs 68

VI\. Air Carrier Production Cargo Airplane Compliance Costs 142

VII\. Cost Benefit Analysis of the Rule and Alternatives 161

VIII\. Regulatory Flexibility Analysis 168

IX\. International Trade Impact Assessment 177

X. Unfunded Mandates Assessment 178

APPENDIX A: Benefit/Cost Analysis Incorporating Losses from

Mistaking a HCWT Explosion for a Terrorist Attack 179

APPENDIX B: Sensitivity Analysis of Benefits 190

APPENDIX C: Costs of Alternative Cargo Rules 227

APPENDIX D: Statistical Variation of FRM Benefits and Benefit-Cost Ratio
263

APPENDIX E: Costs and Benefits of Including Part 91 Airplanes 270

APPENDIX F: Revised Aviation fuel Price Forecast 284

APPENDICES II: Appendices to Section II 289

APPENDICES IV: Appendices to Section IV 296

APPENDICES V: Appendices to Section V 302

APPENDICES VI: Appendices to Section VI 317

APPENDICES VII: Appendices to Section VII 321

APPENDICES A: Appendices to APPENDIX A 323\`

APPENDICES B: Appendices to APPENDIX B 328

EXECUTIVE SUMMARY

### 

### [Introduction]{.underline}

On July 17, 1996, scheduled international passenger flight TWA 800
exploded in mid-air and crashed in the Atlantic Ocean off the coast of
New York, killing all 230 people aboard. The cause of the accident was
an explosion in the center wing tank (CWT). This accident was not an
isolated incident because there have been two similar center wing tank
explosion accidents (one in the Philippines and one in Thailand).

[Cause of the Explosions]{.underline}

The explosions were caused by ignition of flammable fuel vapors in the
center wing tank. Transport airplane fuel tanks have many potential
ignition sources including sparks from wiring to electrical equipment
(pumps, fuel quantity indicators, etc.), friction sparks from fuel
pumps, heating of pump surfaces, lightning and electrostatics, and
external heating of tank surfaces, which have the capability to fail and
create an ignition source. In order to minimize the potential for an
ignition source, the FAA established Special Federal Aviation Regulation
(SFAR) 88 that required an engineering analysis and a physical
examination of all fuel tank systems. This has resulted in approximately
60 Airworthiness Directives (ADs) to correct potential system failures.

Due to the design in most Boeing and nearly all Airbus airplanes that
locates the air conditioning units adjacent to the CWT, these tanks may
become heated on hot days when the air conditioning units are operating
and exhausting heat. These tanks are "heated" CWTs (HCWT). Airplanes
that do not have HCWT do not have such explosive potential. Reducing the
oxygen level in the HCWT can prevent a HCWT from exploding and recent
technological advances have developed a mechanical air separation module
that filters nitrogen from the ambient air and directs it into the fuel
tank to displace oxygen, thereby reducing the fuel tank oxygen level
below the threshold necessary to support an explosion. This technology
is called fuel tank inerting (FTI). This rule mandates the use of either
FTI or some future technology or operational procedures that will make
the fuel tank non-flammable.

[Risk of an Explosion]{.underline}

As three fuel tank explosions have occurred, the probability of a future
event is low, but predictable and even probable in the aggregate. Based
on engineering analyses, the risk of an explosion would be one explosion
every 100 million flight hours for the at-risk Boeing and Airbus fleet
in the absence of SFAR 88 and this rule. There is an 80 percent
probability that this explosion will occur in-flight and a 20 percent
probability that it will occur on the ground. As we forecast that the
fleet being analyzed will accumulate about 360 million flight hours
between 2008 and 2042, we calculate that, in the absence of SFAR 88 and
this final rule, there would be 3.6 accidents. Obviously, fractions of
accidents do not occur. For analytic purposes we describe cumulative
probabilities as fractions of accidents.

[Number of Prevented Accidents]{.underline}

We cannot predict all of the potential sequences of events or sources
that may cause an ignition. These events can be inherent in an
airplane's operation and may develop between fuel tank inspections. Our
statistical analysis indicates that SFAR 88 is 50 percent effective in
preventing these accidents. Based on a 50 percent effectiveness rate,
SFAR 88 would prevent 1.8 of these accidents.

As it will take time to install FTI on existing airplanes, some
airplanes will be flown before it can be installed. Therefore, the final
rule will not cannot eliminate all fuel tank explosion risks. Of the 1.8
accidents not prevented by SFAR 88, we estimate that the final rule
would prevent 1.5 of them and airplanes flying without fuel tank
inerting would account for 0.3 of the accidents.

[Quantitative Benefits from Preventing an Explosion]{.underline}

Of great concern to the FAA is that a practical design solution now
exists for this real threat of an aviation catastrophe. An in-flight
explosion results in the total destruction of the airplane and all of
its occupants. Using a \$5.5 million value for a prevented fatality, the
benefits from preventing an in-flight explosion range of \$625 million
to \$750 million for a B-737 or an A-320 family airplane to \$1.0
billion to \$2.15 billion for all other affected airplanes. The mean of
the estimated benefits from preventing an in-flight explosion (weighted
by the number of flight hours for each type of affected airplane model)
are \$840 million.

In addition, the inevitable consequence of an in-flight explosion is a
reduction in the public perception of airplane travel safety and a
resultant decline in air travel. The estimated economic impact from this
reduced demand is \$290 million.

Thus, the undiscounted total weighted average benefit from preventing an
in-flight explosion is \$1.130 billion. Adjusting this value for the 20
percent of the accidents that will occur on the ground produces an
undiscounted average benefit of about \$1 billion.

There is also the possibility that an in-flight fuel tank explosion
could be mistaken for a terrorist bomb (the explosions are initially
indistinguishable from each other until an accident investigation is
undertaken), which could result in costly governmental or industry
responses to a perceived terrorist attempt. However, we did not quantify
any benefits from these potential actions because this quantification
would involve too many uncertainties.

We calculated that the present value of the weighted average benefits
from preventing the 1.5 accidents would be \$657 million.

[Per Airplane Costs of Fuel Tank Inerting]{.underline}

The costs of installing fuel tank inerting systems are the initial costs
of the equipment and its installation and the annual operating costs
from the increased fuel burn due to its equipment weight as well as
inspections, maintenance, and parts replacements.

To install the equipment during production, the inerting system costs
from \$100,000 to \$210,000. The average annual operating costs are
between \$15,000 and \$38,000.

To retrofit the equipment on an airplane in the fleet costs between
\$110,000 to \$250,000. The average annual operating costs are between
\$13,000 and \$34,000.

We calculated the present value of the compliance costs to be \$1.014
billion.

[Cost Benefit Analysis of the Final Rule]{.underline}

Although these are low probability accidents, they are high consequence
events. For example, if a single in-flight catastrophic accident with
190 occupants (235 seats) is prevented by 2012, the present value of the
benefits will be greater than the present value of the costs. There is a
25 percent probability that the present value of the benefits will be
greater than \$1 billion, making the rule cost-beneficial. The present
value of the \$657 million in weighted-average benefits are about two
thirds of the \$1.014 billion in costs.

### [Costs and Benefits of Alternatives to the Final Rule]{.underline}

As shown in Table 1, we evaluated the baseline costs and weighted
average benefits for the following 8 alternatives to the final rule
using a value of \$5.5 million for a prevented fatality, a 7 percent
discount rate, and a 50 percent SFAR 88 effectiveness rate:

ALTERNATIVE 1. cover only air carrier passenger airplanes

ALTERNATIVE 2. exclude auxiliary fuel tanks

ALTERNATIVE 3. cover only air carrier retrofitted passenger airplanes

ALTERNATIVE 4. cover only air carrier production passenger airplanes

ALTERNATIVE 5. cover only air carrier production passenger and cargo
airplanes

ALTERNATIVE 6. final rule plus part 91 airplanes

ALTERNATIVE 7. final rule plus conversion cargo airplanes

ALTERNATIVE 8. final rule plus conversion and retrofitted cargo
airplanes

TABLE 1

BENEFITS AND COST SUMMARIES FOR 8 ALTERNATIVES TO THE FINAL RULE USING A
\$5.5 MILLION VALUE FOR A PREVENTED FATALITY, A 7 PERCENT DISCOUNT RATE,
AND A 50 PERCENT SFAR 88 EFFECTIVENESS RATE

(in Millions of 2007 Dollars)

  ---------------------------------------- ----------- ------------- -------------
                                           PRESENT                   NET BENEFITS
                                           VALUE (7%)                

  OPTION                                   BENEFITS    COSTS         

                                                                     

  **FINAL RULE**                           **\$657**   **\$1,012**   **(\$355)**

                                                                     

  **ALTERNATIVES**                                                   

  1\. Cover Only Part 121 Passenger        \$657       \$ 975        (\$318)
  Airplanes (excludes Part 121 cargo and                             
  Part 91)                                                           

  2\. Cover Only Part 121 Passenger        \$657       \$ 975        (\$318)
  Airplanes but No Auxiliary Tanks                                   

  3\. Cover Only Part 121 Retrofitted      \$271       \$ 438        (\$159)
  Passenger Airplanes (excludes All                                  
  Production Passenger, all Cargo, and                               
  Part 91 Airplanes)                                                 

  4\. Cover Only Part 121 Production       \$386       \$ 537        (\$151)
  Passenger Airplanes                                                

  5\. Cover Only Part 121 Production       \$386       \$ 574        (\$188)
  Passenger and Cargo Airplanes                                      

  6\. Final Rule Plus Part 91 Airplanes    \$657       \$1,026       (\$369)

  7\. Final Rule Plus Conversion Cargo     \$657       \$1,109       (\$452)
  Airplanes                                                          

  8\. Final Rule Plus Conversion and       \$657       \$1,229       (\$572)
  Retrofitted Cargo Airplanes                                        
  ---------------------------------------- ----------- ------------- -------------

[The FAA cautions decision makers from choosing an alternative based on
minimizing losses. The total benefits estimate is based on the mean
probability of a rare event. One high consequence accident that would
occur during the time period can result in a cost beneficial
rule.]{.underline}

[Conclusion]{.underline}

Based on the weighted average estimated benefits, the present value of
the \$657 million in benefits are about two thirds of the \$1.012
million in present value costs. When modeling discrete, rare events such
as fuel tank explosions, it is important to understand and evaluate the
distribution around the mean value rather than to rely only on a single
point estimated value. This variability analysis indicates that there is
a 26 percent probability that the quantified benefits will be greater
than the costs.

The Federal Aviation Administration believes that the correct public
policy choice is to eliminate the substantial probability of a high
consequence fuel tank explosion accident by proceeding with the final
rule.

# I. INTRODUCTION

## 

## I.A. ACCIDENT HISTORY

There have been 17 worldwide airplane fuel tank explosions since 1960.
Of these 17 explosions, the following 3 involved the center wing fuel
tank for which no ignition source could be determined:

1.  5/11/90; Philippines Airlines; a B-737-300 that was almost new
    exploded on the ground in Manila; 8 fatalities, 30 injuries, and 82
    escaped unharmed;

2.  7/16/96; TWA Flight 800, a B-747-100 that was 25 years old exploded
    in flight over the Atlantic Ocean; 230 fatalities with no survivors;

3.  3/3/01; Thai airlines; a B-737 that was 10 years old exploded on the
    ground in Bangkok; 1 fatality (a flight attendant) and no injuries
    because boarding had not begun.[^1]

## 

## I.B. SOURCE OF PROBLEM

### I.B.1. [Introduction]{.underline} 

The 3 factors (frequently referred to as the "Explosion Triangle")
necessary to have a fuel tank explosion are: (1) an explosive substance;
(2) sufficient oxygen; and (3) an ignition source.

### I.B.2. [Explosive Substance]{.underline} 

Aviation fuel (Jet A) is kerosene, which is less volatile than gasoline
but more volatile than diesel fuel.

### I.B.3. [Sufficient Oxygen]{.underline}

Aviation fuel vapor is explosive only when sufficient oxygen is present
and under the appropriate combination of temperature and atmospheric
pressure. For example, sea-level air is 19 percent oxygen and will
support an explosion when the ambient temperature is 100 degrees
Fahrenheit. At 40,000 feet, aviation fuel is explosive at 45 degrees
Fahrenheit if sufficient oxygen is present. In general, hotter fuel
vaporizes more readily than colder fuel and produces a more explosive
atmosphere. Finally, a completely full fuel tank cannot explode and an
ignition source occurring beneath the fuel level cannot trigger an
explosion.

### I.B.4. [Potential Ignition Sources]{.underline}

The 2 potential fuel tank ignition sources are electrical arcs and
friction sparks. Most airplanes have insulated electric wire bundles
running through their fuel tanks. However, this insulation can wear
through after years of operation and maintenance resulting in an exposed
wire that may not be visually discernable. Electrical arcing can then
occur if the exposed wire contacts a metal surface. Submersible
electrical fuel pumps can present the same problem. They are not an
ignition source so long as they are fully submerged but, as fuel is
consumed, their wiring can become exposed to air and be an ignition
source. In addition, airplanes have electrical Fuel Quantity Indication
Systems (FQIS) that may become ignition sources due to wire bundle
insulation chafing.

Friction sparks can be caused by contact between rotating components
(such as a steel fuel pump impeller) rubbing on the pump inlet check
valve.

## 

## I.C. TYPES OF AIRPLANE FUEL TANKS 

The two primary types of fuel tanks are center wing tanks (CWT) and wing
tanks.

The CWT is the tank directly beneath the passenger compartment between
the wings. In discussing the explosive potential of a CWT, the critical
factor is whether the tank is a "heated" CWT (HCWT) or a "non-heated"
CWT. A HCWT is one where the air conditioning units are located adjacent
to the tank and the fuel tank system is not designed to offset the heat
emitted by the air conditioning units and absorbed by the fuel tank.
Most Boeing and Airbus airplanes have HCWTs. All other transport
category airplanes have "non-heated" CWTs.

Wing tanks are the largest tanks and are located in both wings.
Traditionally, these tanks have not posed a significant safety risk
because they are exposed to the air and cool more rapidly than a center
wing tank that is enclosed within the fuselage and is being heated by
air conditioning exhaust.

## 

## I.D. POTENTIAL RISK OF A FUEL TANK EXPLOSION 

Although there is some disagreement about the exact percentages, a HCWT
is explosive an average of 12 to 30 percent of the time, a "non-heated"
CWT is explosive 5 to 7 percent of the time, and a wing tank is
explosive 3 to 5 percent of the time.

## I.E. CHARACTERISTICS OF THE THREE fuel tank EXPLOSIONS

The common characteristics of the 3 explosions is that they occurred on
Boeing HCWT airplanes that had been delayed on the ground on hot days
with the air conditioning running for at least 40 minutes prior to the
explosion. However, these airplanes were of substantially different
ages, so that the explosion appears to be largely independent of the
airplane's age.

## 

## I.F. FAA ACTIONS TO PREVENT FUEL TANK EXPLOSIONS

The two possible methods to prevent a fuel tank explosion are to prevent
the ignition or to prevent an explosive atmosphere. The FAA developed
Special Federal Aviation Rule 88 (SFAR 88) to prevent ignition from
occurring. However, the SFAR 88 fuel tank safety inspections are
continuing to find unexpected ignition sources. As a result, we have
determined that the SFAR 88 engineering analysis by itself cannot
predict every potential ignition source that may develop during the
operational life of an airplane. This flammability reduction method
(FRM) rule is designed to minimize the amount of time a fuel tank is in
an explosive state so that if an ignition does occur, the fuel tank will
not explode.

# II. INDUSTRY PROFILE 

## II.A. background 

As noted in the Introduction section, the only HCWTs[^2] are found on
Boeing and Airbus airplanes. All Boeing airplane models have HCWT with
the exceptions of the B-717, B-727, a few B-767-200s, a few B-777s, and
future B-787 models. All Airbus airplane models have HCWTs with the
exception of a few A-319 and the A-330-300. In order to determine the
impact of this rule on the aviation industry, we determined the current
and future numbers of the affected Boeing and Airbus airplanes and their
flight hours.

The following are the three aviation operations that use airplanes with
HCWTs:

1.  Air carrier passenger operations (Part 121 operators);

2.  Air carrier cargo operations (Part 121 operators); and

3.  General aviation operations (Part 91 operators).

## II.B. FLEET FORECASTS 

### II.B.1. [Time Frame of Analysis]{.underline} 

We used a 10-year period of analysis (2008 through 2017) in order to
allow the entire fleet sufficient time to comply with the final rule. We
then extend the analysis period through 2042, which is the year that all
of the fleet will be retired, to incorporate the lifetime costs and
benefits.

We assume manufacturers will complete their FRM engineering assessments,
obtain the amended Type Certificates (TCs), and begin production cut-in
on January 1, 2009. This analysis, therefore, includes 9 years of
production airplanes (2009-2017) that will have an installed FRM system.
We also assume it will take two years for manufacturers to complete the
assessments for their affected out-of-production airplane models.
Finally, we assume that retrofitting kits will not be available until
2010, which is one year after the kits will be available for production
airplanes.

We realize that two years have passed since the Regulatory Evaluation
was initially completed and that the projected dates may be a year later
than used in this analysis. We did not update the entire analysis to
reflect the likely one year delay when these dates will actually occur
because the overall cost --benefit analysis would not be significantly
changed.

Boeing and the ATA commented that the standard air carrier passenger
airplane service life was 25 years. The FAA,[^3] however, forecasts
specific numbers of retired airplanes for each year through 2017, which
we use for that time period. After 2017, we assign a 25-year life span
for all passenger airplanes. No comments were made about the lifespan of
air carrier cargo airplanes or Part 91 business jets and for the
purposes of this analysis we determined that they have a lifespan of 25
years.

For production airplanes that will be manufactured between 2009 and
2017, we calculated the total flight hours for 2010 through 2042. For
airplanes manufactured between 1992 and 2008, we calculated the total
flight hours for 2009 through 2033, when all of these airplanes will be
retired.

Finally, we determined that the average number of flight hours per
airplane model will not change significantly over the time frame of this
analysis. Thus, we use current average annual flight hours per airplane
model for all future years.

## II.C. AFFECTED AIRPLANE MODELS 

The final rule affects the following U.S.-registered Airbus and Boeing
airplane models operating under FAR parts 91, 121, 125, and 129:

1.  B-737-100/200;

2.  B-737-300/400/500 (referred to as the B-737 "Classic");

3.  B-737-600/700/800/900 (referred to as the B-737 Next Generation
    ("NG"));

4.  B-757;

5.  B-747-100/200/300;

6.  B-747-400;

7.  B-747-800;

8.  B-767;[^4]

9.  B-777;[^5]

10. B-787;[^6]

11. A-300 (includes A-300 and A-300-600);

12. A-310;

13. A-318, A-319, A-320, and A-321 (referred to as A-320 "Family");

14. A-330-200;[^7]

15. A-340;

16. A-350; and

17. A-380.

## 

## II.D. NUMBERS OF AIR CARRIER HCWT AIRPLANES[^8] 

### II.D.1. [Data Sources]{.underline}

We used two primary data sources. The first data source is the Jet
Information Services (JTI) [World Jet Inventory Year-End
2005]{.underline} (WJI), which provides the basis for the total number
of airplanes at the start of the time period. It supplies the total
number of US airplanes on January 1, 2006, for all air carriers, non-air
carrier operators, airplanes not currently flying but available for
lease, and government-owned airplanes. We used their reported number of
air carrier airplanes as the basis for our forecast.

The second data source is an ESG Aviation Services (ESG) forecast of the
future numbers of airplanes. This source also reports an initial number
of airplanes on January 1, 2006, for all air carriers that file the
Department of Transportation (DOT) Quarterly Form 41.[^9] The ESG
forecast is then based on this initial number of airplanes.[^10]

### II.D.2. [Adjusted Numbers of Air Carrier Airplanes]{.underline}[^11]

As shown in Table II-1, which summarizes Appendix II-1, ESG reported
3,448 air carrier airplanes at the start of 2006, which are 110
airplanes (3 percent) fewer than the 3,558 airplanes reported in the WJI
data. For air carrier passenger airplanes, ESG reported 3,018 airplanes
in 2007, which are 84 airplanes (3 percent) fewer than the 3,102
airplanes in the WJI data. For air carrier cargo airplanes, ESG reported
394 airplanes, which is 26 airplanes (7 percent) fewer than the 420
airplanes in the WJI data. In order to include all of the air carrier
airplanes, we calculated the ratios between the ESG-reported airplanes
and the WJI-reported airplanes for each model and applied those ratios
to the ESG forecasts.

TABLE II-1

ESG AND WJI NUMBERS OF AIR CARRIER AIRPLANES

(JANUARY 1, 2006)

  ----------------------- ---------------- -------------- ----------------
  **AIRPLANE OPERATION**  **ESG NUMBER**   **WJI NUMBER** **WJI/ESG
                                                          RATIO**

                                                          

  ALL AIRPLANES           3,448            3,558          1.03

  PASSENGER AIRPLANES     3,018            3,102          1.03

  CARGO AIRPLANES         394              420            1.07
  ----------------------- ---------------- -------------- ----------------

As shown in Table II-2, which summarizes Appendix II-2, we applied the
adjusted ESG forecast for the years 2006, 2007, and 2008 to obtain the
2009 air carrier passenger fleet of 3,971 airplanes, of which 2,717 will
be Boeing airplanes and 1,254 will be Airbus airplanes. Of these
airplanes, 3,467 will be passenger airplanes, of which 2,457 will be
Boeing airplanes and 1,010 will be Airbus airplanes. Of the 504 cargo
airplanes, 260 will be Boeing airplanes and 244 will be Airbus
airplanes. Thus, even though we forecast the numbers of airplanes that
will be manufactured in 2006, 2007, and 2008, for the purposes of this
forecast they are considered to be 'existing' airplanes that will be
built without FRM.

TABLE II-2

NUMBERS OF AIR CARRIER PASSENGER AND CARGO AIRPLANES

(JANUARY 1, 2009)

  ------------------- ----------------- ----------------- -----------------
                      **TOTAL NUMBER OF                   
                      AIR CARRIER                         
                      AIRPLANES**                         

  **MODEL**           **ALL AIRPLANES** **PASSENGER       **CARGO
                                        AIRPLANES**       AIRPLANES**

                                                          

  B-737-200           28                28                0

  B-737-Classic       596               585               11

  B-737-NG            847               847               0

  B-747-100/200/300   92                13                79

  B-747-400           73                51                22

  B-747-800           0                 0                 0

  B-757               615               539               76

  B-767               336               225               71

  B-777               130               130               0

  B-787               0                 0                 0

  A-300               174               0                 174

  A-310               70                0                 70

  A-320 Family        960               960               0

  A-330               50                50                0

  A-340               0                 0                 0

  A-350               0                 0                 0

  A-380               0                 0                 0

                                                          

  **TOTAL**           **3,971**         **3,467**         **504**

                                                          

  BOEING TOTAL        2,717             2,457             260

  AIRBUS TOTAL        1,254             1,010             244
  ------------------- ----------------- ----------------- -----------------

### II.D.3. [Future Air Carrier Fleet]{.underline} 

As shown in Table II-3, which summarizes Appendix II-2, the total air
carrier fleet will increase from 3,970 in 2009 to 5,555 (a gain of
1,585) airplanes by 2018. The air carrier passenger fleet will increase
from 3,467 in 2009 to 4,851 airplanes (a gain of 1,384) and the air
carrier cargo fleet will increase from 503 to 705 airplanes (a gain of
202). It needs to be emphasized that we forecast that Boeing will
produce 398 passenger B-787s, but that these airplanes are not
incorporated into the Tables because they will be required to have FRM
even in the absence of this rule. After 2018, the fleet in this analysis
begins to decline as airplanes are retired until there are no airplanes
from the 2017 fleet remaining in air carrier service by 2043.

TABLE II-3

AIR CARRIER AIRPLANES BY TYPE OF ACTIVITY IN THIS ANALYSIS

  ----------- ------------------- --------------------- ------------------
              NUMBER OF AIR                             
              CARRIER AIRPLANES                         

  YEAR        TOTAL               PASSENGER             CARGO

                                                        

  2009        3,971               3,467                 504

  2010        4,180               3,654                 525

  2011        4,368               3,816                 551

  2012        4,526               3,949                 577

  2013        4,699               4,083                 616

  2014        4,857               4,202                 655

  2015        5,053               4,364                 689

  2016        5,322               4,600                 721

  2017        5,574               4,806                 768

  2018        5,555               4,851                 705

  2019        5,356               4,680                 676

  2020        5,156               4,509                 647

  2021        4,957               4,339                 618

  2022        4,757               4,168                 589

  2023        4,558               3,997                 561

  2024        4,358               3,826                 532

  2025        4,159               3,656                 503

  2026        3,959               3,485                 474

  2027        3,760               3,314                 445

  2028        3,560               3,144                 416

  2029        3,360               2,973                 388

  2030        3,161               2,802                 359

  2031        2,961               2,632                 330

  2032        2,762               2,461                 301

  2033        2,562               2,290                 272

  2034        2,559               2,290                 268

  2035        2,298               2,046                 252

  2036        2,066               1,847                 219

  2037        1,839               1,655                 184

  2038        1,605               1,450                 155

  2039        1,349               1,225                 124

  2040        1,026               934                   92

  2041        661                 601                   60

  2042        342                 312                   30
  ----------- ------------------- --------------------- ------------------

### II.D.4. [Air Carrier Production Airplanes]{.underline} 

### II.D.4.a. [Passenger Airplanes]{.underline}

As shown in Table II-4, which summarizes Appendix II-3, 2,290 air
carrier production passenger airplanes will be built between 2009 and
2017[^12], of which Boeing will produce 1,268 and Airbus will produce
1,022.

TABLE II-4

NUMBER OF AIR CARRIER PRODUCTION PASSENGER AIRPLANES BY MANUFACTURER

  ------------ -------------------- ------------------ --------------------
               NUMBER OF AIR                           
               CARRIER PRODUCTION                      
               PASSENGER AIRPLANES                     

  YEAR         TOTAL                BOEING             AIRBUS

                                                       

  2009         244                  104                140

  2010         199                  90                 109

  2011         192                  79                 114

  2012         205                  107                98

  2013         225                  141                84

  2014         291                  175                116

  2015         333                  190                143

  2016         289                  194                95

  2017         312                  189                123

                                                       

  **TOTAL**    **2,290**            **1,268**          **1,022**
  ------------ -------------------- ------------------ --------------------

### II.D.4.b. [Cargo Airplanes]{.underline}

There are two distinct types of [new]{.underline} air carrier cargo
airplanes. The first type is new cargo airplanes manufactured by Airbus
and Boeing specifically to be cargo airplanes ("production" cargo
airplanes). The second type is former passenger airplanes converted into
cargo airplanes ("conversion" cargo airplanes). Typically, conversion
airplanes are relatively old (at least 15 to 20 years old) and are
converted because the maintenance and operational costs make them
uneconomical for passenger service.

The ESG forecast for [new]{.underline} cargo airplanes does not
distinguish between production and conversion cargo airplanes either by
individual model or in the aggregate. Boeing forecasts that 25 percent
of the new cargo fleet will be production cargo airplanes and 75 percent
will be conversion cargo airplanes. We accordingly applied the Boeing
forecast to forecast the numbers of future production and conversion
cargo airplanes.

As shown in Table II-5, which summarizes Appendix II-3, there will be
352 new cargo airplanes of which 264 will be conversion airplanes (CON)
and 88 will be production airplanes (PROD). Of the 88 production
airplanes, we expect that 66 will be Boeing production airplanes and 22
will be Airbus production airplanes.

TABLE II-5

NUMBERS OF AIR CARRIER CONVERSION AND PRODUCTION CARGO AIPLANES BY
MANUFACTURER AND BY YEAR

  ----------- ----------- --------- -------- --------- --------- -------- -------- -------- --------
  YEAR        ALL                            BOEING                       AIRBUS            
              AIRPLANES                                                                     

              TOTAL       CON       PROD     TOTAL     CON       PROD     TOTAL    CON      PROD

                                                                                            

  2009        22          17        5        12        9         3        10       8        2

  2010        41          30        11       30        22        8        11       8        3

  2011        38          28        10       28        21        7        10       7        3

  2012        40          30        10       28        21        7        12       9        3

  2013        42          32        10       32        25        7        10       7        3

  2014        37          28        9        32        24        8        5        4        1

  2015        35          26        9        31        23        8        4        3        1

  2016        47          35        12       34        25        9        13       10       3

  2017        50          38        12       39        30        9        11       8        3

                                                                                            

  **TOTAL**   **352**     **264**   **88**   **266**   **200**   **66**   **86**   **64**   **22**
  ----------- ----------- --------- -------- --------- --------- -------- -------- -------- --------

### II.D.5. Potential [Air Carrier Retrofitted Airplanes]{.underline} 

### II.D.5.1. [Passenger Airplanes]{.underline}

Using a January 1, 2008, publication date, the rule does not require
existing airplanes to be in compliance until January 1, 2018 (a 10-year
compliance time period (2008-2017). We determined that no operator will
retrofit an airplane if that airplane will be retired before January 1,
2018. Therefore, the fleet that will be retrofitted is the fleet
manufactured before 2009 that is forecasted to be in service in 2018

The forecast does not include any potential impact of the final rule FRM
requirement on accelerating airplane retirements. If some air carriers
accelerate their airplane retirements rather than incur FRM retrofitting
cost, then we have overestimated the number of retrofitted airplanes.
However, we do not believe that the FRM retrofitting requirement will
materially affect an airplane's retirement date.

As shown in Table II-6, which summarizes Appendix II-4, 2,732 air
carrier passenger airplanes were manufactured before 2009 and will be
retrofitted, of which 1,780 will be Boeing airplanes and 952 will be
Airbus airplanes.

## 

## table ii-6

NUMBER OF AIR CARRIER RETROFITTED PASSENGER AIRPLANES

  ---------------------- ------------------------------------------------
  MODEL                  NUMBER OF AIR CARRIER RETROFITTED PASSENGER
                         AIRPLANES

                         

  B-737-200              0

  B-737-Classic          112

  B-737-NG               847

  B-747-100/200/300      11

  B-747-400              51

  B-747-800              0

  B-757                  476

  B-767                  153

  B-777                  130

  B-787                  0

  A-300                  0

  A-310                  0

  A-320 Family           902

  A-330                  50

  A-340                  0

  A-350                  0

  A-380                  0

                         

  **TOTAL**              **2,732**

                         

  BOEING TOTAL           1,780

  AIRBUS TOTAL           952
  ---------------------- ------------------------------------------------

II.D.5.2. [Cargo Airplanes]{.underline}

Although the final rule does not require that cargo airplanes be
retrofitted, in response to comments from the Airline Pilots Association
(ALPA) and the Allied Pilots Association (APA), we evaluated the
alternative of requiring FRM on existing cargo airplanes.

As shown in Table II-7, which summarizes Appendix II-4, if the final
rule had included FRM on existing cargo airplanes, 401 air carrier cargo
airplanes would have needed to be retrofitted, of which 231 would have
been Boeing airplanes and 170 would have been Airbus airplanes.

## 

## table ii-7

NUMBER OF AIR CARRIER CARGO AIRPLANES THAT WOULD NEED TO BE RETROFITTED
IF THE RULE APPLIED TO THEM

  ---------------------- ------------------------------------------------
  MODEL                  NUMBER OF AIR CARRIER RETROFITTED CARGO
                         AIRPLANES

                         

  B-737-200              0

  B-737-Classic          6

  B-737-NG               0

  B-747-100/200/300      79

  B-747-400              14

  B-747-800              0

  B-757                  76

  B-767                  56

  B-777                  0

  B-787                  0

  A-300                  109

  A-310                  61

  A-320 Family           0

  A-330                  0

  A-340                  0

  A-350                  0

  A-380                  0

                         

  **TOTAL**              **401**

                         

  BOEING TOTAL           231

  AIRBUS TOTAL           170
  ---------------------- ------------------------------------------------

## II.E. NUMBERS OF part 91 hcwt airplanes

### II.E1. [Number of Current Airplanes]{.underline} 

As shown in Table II-5, the WJI reports that in 2006, 53 U.S. private
operator fleet contained 79 Boeing HCWT airplanes.[^13] It does not
report how many are passenger airplanes and how many are cargo
airplanes, but the large majority are owned by corporations and used to
ferry executives and other employees to various destinations.
Consequently, we assume that they are all passenger airplanes.

TABLE II-8

NUMBERS OF PART 91 PASSENGER AIRPLANES[^14]

(JANUARY 1, 2006)

  ------------------------- ---------------------------------------------
  **MODEL**                 **TOTAL NUMBER OF PART 91 AIRPLANES**

                            

  B-737-200                 18

  B-737-Classic             7

  B-737-NG                  36

  B-747-100/200/300         9

  B-747-400                 2

  B-747-800                 0

  B-757                     6

  B-767                     1

  B-777                     0

  B-787                     0

  A-300                     0

  A-310                     0

  A-320 Family              0

  A-330                     0

  A-340                     0

  A-350                     0

  A-380                     0

                            

  **GRAND TOTAL**           **79**

                            

  BOEING TOTAL              79

  AIRBUS TOTAL              0
  ------------------------- ---------------------------------------------

### 

### II.E.2. [Part 91 Airplane Production]{.underline}

The Transportation Research Board (TRB) Light Commercial and General
Aviation Committee -- Subcommittee on Business Aviation collects a
general business aviation consensus forecast for large business
jets[^15] from the individual forecasts of 12 industry representatives.
Their aggregated forecast projects that there will be 26 large
production business jets per year for the next 10 years. This forecast
does not disaggregate that number by individual production business jet
model. Based on our review of the TRB forecast,[^16] we determined that
2 of these 26 airplanes will be new B-737-800s added to the Part 91
fleet from 2006 through 2017, for a total of 24 production Part 91
airplanes affected by the rule.

## ii.F. flight hours for AIR CARRIER airplanes

II.F.1. [Passenger Airplanes]{.underline}

### II.F.1.a. [Annual Passenger Airplane Model Flight Hours]{.underline} 

In the IRE, we used average air carrier passenger airplane model annual
flight hours data from Back Aviation Solutions, Inc. In its comments,
Boeing reported the following air carrier passenger airplane annual
flight hours, which we accepted and applied to their Airbus model
counterparts. As shown in Table II-9, annual flight hours range from
3,000 hours for the older, smaller airplanes to 4,250 for the largest
(but, not necessarily the newest (see the B-747-100/200/300) airplanes).

TABLE II-9

ANNUAL NUMBER OF FLIGHT HOURS BY AIR CARRIER PASSENGER AIRPLANE MODEL

  ------------------------- ---------------------------------------------
  **MODEL**                 **ANNUAL AIR CARRIER PASSENGER AIRPLANE
                            FLIGHT HOURS**

                            

  B-737-200                 3,000

  B-737-Classic             3,000

  B-737-NG                  3,250

  B-747-100/200/300         3,000

  B-747-400                 4,000

  B-747-800                 4,250

  B-757                     4,250

  B-767                     4,250

  B-777                     4,000

  B-787                     4,000

  A-300                     4,000

  A-310                     4,000

  A-320 Family              3,250

  A-330                     4,000

  A-340                     4,250

  A-350                     4,000

  A-380                     4,250
  ------------------------- ---------------------------------------------

### 

### II.F.1.b. [Total Passenger Airplane Flight Hours]{.underline} 

In Table II-10, which summarizes the tables in Appendix II-7, we provide
the projected numbers of flight hours for air carrier passenger
airplanes by manufacturer and by whether the hours are flown by
production airplanes (PRODUCT), retrofitted airplanes (RETRO), or by
airplanes without FRM (NO FRM). The airplanes that fly without FRM are
either airplanes that will be retired by 2017 or airplanes that will
accumulate flight hours until they are retrofitted with FRM. In summary,
the 2008-2017 air carrier passenger fleet will fly about 364 million
hours between 2008 and 2042[^17]. Of these 364 million flight hours, 199
million will be flown by production passenger airplanes, 104 million
will be flown by retrofitted passenger airplanes, and 61 million will be
flown by passenger airplanes without FRM.

TABLE II-10

ANNUAL FLIGHT HOURS FOR AIR CARRIER PASSENGER AIRPLANES

(2008-2017 for All Airplanes and 2018-2043 for the 2017 Fleet)

(in Millions of Hours)

  ----------- ----------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
                          BOEING                                        AIRBUS                            

  YEAR        TOTAL       TOTAL       PRODUCT     RETROFIT   NO FRM     TOTAL       PRODUCT    RETROFIT   NO FRM

                                                                                                          

  2008        10.9        7.8         0.0         0.0        7.8        3.1         0.0        0.0        3.1

  2009        11.3        8.0         0.3         0.0        7.7        3.3         0.5        0.0        2.8

  2010        11.9        8.1         0.6         0.6        6.9        3.8         0.8        0.3        2.7

  2011        12.4        8.3         0.9         1.3        6.1        4.1         1.2        0.7        2.2

  2012        12.9        8.4         1.3         1.9        5.2        4.5         1.5        1.0        2.0

  2013        13.2        8.5         1.7         2.5        4.3        4.7         1.8        1.3        1.6

  2014        13.7        8.6         2.3         3.1        3.2        5.1         2.2        1.7        1.2

  2015        14.1        8.7         2.9         3.8        2.0        5.4         2.6        2.0        0.8

  2016        14.9        9.1         3.5         4.8        0.8        5.8         3.0        2.6        0.2

  2017        16.2        9.8         4.2         5.6        0.0        6.4         3.2        3.2        0.0

  2018        16.2        9.7         4.2         5.5        0.0        6.5         3.4        2.9        0.0

  2019        15.5        9.4         4.2         5.2        0.0        6.1         3.4        2.7        0.0

  2020        14.8        9.0         4.2         4.8        0.0        5.8         3.4        2.5        0.0

  2021        14.3        8.6         4.2         4.4        0.0        5.7         3.4        2.3        0.0

  2022        13.8        8.3         4.2         4.1        0.0        5.5         3.4        2.2        0.0

  2023        13.2        7.9         4.2         3.7        0.0        5.3         3.4        2.0        0.0

  2024        12.6        7.5         4.2         3.3        0.0        5.1         3.4        1.8        0.0

  2025        12.1        7.2         4.2         3.0        0.0        4.9         3.4        1.6        0.0

  2026        11.6        6.8         4.2         2.6        0.0        4.8         3.4        1.4        0.0

  2027        10.9        6.4         4.2         2.2        0.0        4.5         3.4        1.2        0.0

  2028        10.3        6.0         4.2         1.8        0.0        4.3         3.4        1.0        0.0

  2029        9.9         5.7         4.2         1.5        0.0        4.2         3.4        0.8        0.0

  2030        9.2         5.3         4.2         1.1        0.0        3.9         3.4        0.6        0.0

  2031        8.7         4.9         4.2         0.7        0.0        3.8         3.4        0.4        0.0

  2032        8.2         4.6         4.2         0.4        0.0        3.6         3.4        0.2        0.0

  2033        7.5         4.2         4.2         0.0        0.0        3.3         3.3        0.0        0.0

  2034        7.5         4.2         4.2         0.0        0.0        3.3         3.3        0.0        0.0

  2035        7.1         3.8         3.8         0.0        0.0        3.3         3.3        0.0        0.0

  2036        6.4         3.5         3.5         0.0        0.0        2.9         2.9        0.0        0.0

  2037        5.8         3.3         3.3         0.0        0.0        2.5         2.5        0.0        0.0

  2038        5.1         2.9         2.9         0.0        0.0        2.2         2.2        0.0        0.0

  2039        4.4         2.5         2.5         0.0        0.0        1.9         1.9        0.0        0.0

  2040        3.5         1.9         1.9         0.0        0.0        1.6         1.6        0.0        0.0

  2041        2.4         1.3         1.3         0.0        0.0        1.1         1.1        0.0        0.0

  2042        1.3         0.6         0.6         0.0        0.0        0.7         0.7        0.0        0.0

  **TOTAL**   **363.8**   **220.8**   **108.3**   **67.9**   **44.0**   **144.0**   **91.0**   **36.4**   **16.6**
  ----------- ----------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------

II.F.2. [Cargo Airplane Flight Hours]{.underline}

### II.F.2.a. [Annual Cargo Airplane Model Flight Hours]{.underline} 

In the IRE, we used average air carrier cargo airplane model annual
flight hours data from Back Aviation Solutions, Inc. In its comments,
Boeing reported the following air carrier cargo airplane flight hours,
which we accepted and applied to their Airbus model counterparts. As
shown in Table II-11, annual flight hours range from 1,000 and 1,500
hours for the older, smaller airplanes to 4,250 for the largest
airplanes.

TABLE II-11

ANNUAL NUMBER OF FLIGHT HOURS BY AIR CARRIER CARGO AIRPLANE MODEL

  ------------------------- ---------------------------------------------
  **MODEL**                 **ANNUAL AIR CARRIER CARGO AIRPLANE FLIGHT
                            HOURS**

                            

  B-737-200                 1,500

  B-737-Classic             1,500

  B-737-NG                  1,000

  B-747-100/200/300         1,500

  B-747-400                 2,600

  B-747-800                 4,250

  B-757                     4,250

  B-767                     4,250

  B-777                     4,000

  B-787                     2,600

  A-300                     2,600

  A-310                     2,600

  A-320 Family              1,000

  A-330                     4,000

  A-340                     4,250

  A-350                     2,600

  A-380                     1,500
  ------------------------- ---------------------------------------------

### II.F.2.b. [Total Cargo HCWT Airplane Flight Hours]{.underline} 

In Table II-12 we provide the projected numbers of flight hours for air
carrier cargo airplanes by manufacturer and by whether the hours are
flown by production cargo airplanes (PRODUCT), by conversion cargo
airplanes (CONVER), and by existing airplanes (EXIST). The air carrier
cargo fleet through 2017 will fly about 46 million hours between 2008
and 2042. Of these 49 million flight hours, 20.1 million will be flown
by existing cargo airplanes, 21.2 million will be flown by conversion
cargo airplanes, and 7.7 million will be flown by production cargo
airplanes. Of the 7.7 million flight hours for production cargo
airplanes, Boeing airplanes will fly 5.7 million and Airbus airplanes
will fly 2 million.

TABLE II-12

ANNUAL NUMBER OF FLIGHT HOURS FOR AIR CARRIER CARGO AIRPLANES

(in Millions of Hours)

  ----------- ---------- ---------- ---------- ---------- --------- ---------- --------- --------- ---------
                         BOEING                                     AIRBUS                         

                                               NEW                                       NEW       

  YEAR        TOTAL      TOTAL      EXIST      CONVERT    PRODUCT   TOTAL      EXIST     CONVERT   PRODUCT

                                                                                                   

  2008        1.2        0.7        0.7        0.0        0.0       0.5        0.5       0.0       0.0

  2009        1.4        0.7        0.7        0.1        0.0       0.7        0.7       0.0       0.0

  2010        1.5        1.0        0.7        0.2        0.1       0.7        0.6       0.0       0.0

  2011        1.5        1.0        0.7        0.3        0.1       0.7        0.6       0.1       0.0

  2012        1.6        1.1        0.6        0.3        0.1       0.7        0.6       0.1       0.0

  2013        1.7        1.2        0.6        0.4        0.1       0.7        0.6       0.1       0.0

  2014        1.8        1.3        0.6        0.5        0.2       0.7        0.5       0.1       0.0

  2015        1.9        1.4        0.6        0.6        0.2       0.7        0.5       0.1       0.0

  2016        2.0        1.5        0.6        0.7        0.2       0.7        0.5       0.1       0.0

  2017        2.1        1.7        0.6        0.8        0.3       0.7        0.4       0.2       0.1

  2018        2.3        1.7        0.6        0.8        0.3       0.6        0.4       0.2       0.1

  2019        2.0        1.4        0.6        0.6        0.2       0.6        0.4       0.2       0.1

  2020        1.9        1.3        0.5        0.6        0.2       0.6        0.4       0.2       0.1

  2021        1.8        1.3        0.5        0.6        0.2       0.6        0.3       0.2       0.1

  2022        1.7        1.2        0.5        0.6        0.2       0.5        0.3       0.2       0.1

  2023        1.7        1.2        0.4        0.6        0.2       0.5        0.3       0.2       0.1

  2024        1.6        1.1        0.4        0.6        0.2       0.5        0.2       0.2       0.1

  2025        1.5        1.1        0.3        0.6        0.2       0.4        0.2       0.2       0.1

  2026        1.4        1.0        0.3        0.6        0.2       0.4        0.2       0.2       0.1

  2027        1.4        1.0        0.2        0.5        0.2       0.4        0.2       0.2       0.1

  2028        1.3        0.9        0.2        0.5        0.2       0.4        0.1       0.2       0.1

  2029        1.2        0.9        0.2        0.5        0.2       0.3        0.1       0.2       0.1

  2030        1.1        0.8        0.1        0.5        0.2       0.3        0.1       0.2       0.1

  2031        1.1        0.8        0.1        0.5        0.2       0.3        0.1       0.2       0.1

  2032        1.0        0.7        0.0        0.5        0.2       0.3        0.0       0.2       0.1

  2033        0.9        0.7        0.0        0.5        0.2       0.2        0.0       0.2       0.1

  2034        0.9        0.7        0.0        0.5        0.2       0.2        0.0       0.2       0.1

  2035        0.9        0.7        0.0        0.5        0.2       0.2        0.0       0.2       0.1

  2036        0.9        0.7        0.0        0.5        0.2       0.2        0.0       0.2       0.1

  2037        0.7        0.6        0.0        0.4        0.1       0.2        0.0       0.1       0.0

  2038        0.6        0.5        0.0        0.4        0.1       0.2        0.0       0.1       0.0

  2039        0.5        0.4        0.0        0.3        0.1       0.1        0.0       0.1       0.0

  2040        0.4        0.3        0.0        0.2        0.1       0.1        0.0       0.1       0.0

  2041        0.3        0.2        0.0        0.2        0.1       0.1        0.0       0.1       0.0

  2042        0.2        0.2        0.0        0.1        0.0       0.0        0.0       0.0       0.0

                                                                                                   

  **TOTAL**   **49.0**   **33.0**   **11.3**   **16.1**   **5.7**   **15.0**   **8.8**   **5.1**   **2.0**
  ----------- ---------- ---------- ---------- ---------- --------- ---------- --------- --------- ---------

## ii.G. flight hours for PART 91 airplanes

A GRA, Inc. study reports that the average general aviation turbofan
airplane weighing more than 60,000 pounds flies about 350 hours a
year,[^18] which we use in this Regulatory Evaluation. As shown in Table
II-13 Part 91 airplanes will fly 763,000 flight hours, of which 163,800
will be flown by production airplanes and 599,900 will be flown by
existing airplanes. There will be 451,950 hours flown by part 91
airplanes with FRM and 211,750 hours flown by Part 91 airplanes without
FRM.

TABLE II-13

ANNUAL NUMBER OF FLIGHT HOURS FOR PART 91 AIRPLANES

(2008-2017 for All Airplanes and 2018-2042 for the 2017 Fleet)

  ----------- ------------- ------------- ------------- ------------- -------------
              NUMBER OF                                               
              FLIGHT HOURS                                            

                            EXISTING                                  PRODUCTION

  YEAR        TOTAL         TOTAL         NO FTI        RETROFIT      

                                                                      

  2008        33,250        33,250        33,250        0             0

  2009        33,250        32,550        32,550        0             700

  2010        33,250        31,850        30,100        1,750         1,400

  2011        33,250        31,150        27,300        3,850         2,100

  2012        33,250        30,450        23,800        6,650         2,800

  2013        33,250        29,750        20,300        9,450         3,500

  2014        33,250        29,050        16,800        12,250        4,200

  2015        33,250        28,350        12,950        15,400        4,900

  2016        33,250        27,650        9,100         18,550        5,600

  2017        33,250        26,950        4,900         22,050        6,300

  2018        33,250        26,950        700           26,250        6,300

  2019        31,850        25,550        0             25,550        6,300

  2020        31,150        24,850        0             24,850        6,300

  2021        30,450        24,150        0             24,150        6,300

  2022        29,750        23,450        0             23,450        6,300

  2023        28,350        22,050        0             22,050        6,300

  2024        26,250        19,950        0             19,950        6,300

  2025        24,150        17,850        0             17,850        6,300

  2026        22,050        15,750        0             15,750        6,300

  2027        20,300        14,000        0             14,000        6,300

  2028        19,250        12,950        0             12,950        6,300

  2029        18,200        11,900        0             11,900        6,300

  2030        16,800        10,500        0             10,500        6,300

  2031        15,750        9,450         0             9,450         6,300

  2032        14,700        8,400         0             8,400         6,300

  2033        13,650        7,350         0             7,350         6,300

  2034        12,600        6,300         0             6,300         6,300

  2035        10,850        5,250         0             5,250         5,600

  2036        9,100         4,200         0             4,200         4,900

  2037        7,000         2,800         0             2,800         4,200

  2038        5,250         1,750         0             1,750         3,500

  2039        4,200         1,400         0             1,400         2,800

  2040        3,150         1,050         0             1,050         2,100

  2041        2,100         700           0             700           1,400

  2042        1,050         350           0             350           700

                                                                      

  **TOTAL**   **763,700**   **599,900**   **211,750**   **388,150**   **163,800**
  ----------- ------------- ------------- ------------- ------------- -------------

**III. COSTS AND BENEFITS OVERVIEW**

## III.A. INTRODUCTION

This section provides an overview of the costs and benefits that will be
developed in Sections IV, V, and VI. The purpose of this rule is to
prevent fuel tank ignitions like the two that have happened outside the
United States and the 1996 TWA 800 explosion. The industry has not made
the investment to eliminate this threat because these accidents
infrequently occur. In this Regulatory Evaluation, unlike in the IRE, we
provide aviation demand losses subsequent to a TWA 800-like explosion.
Further we use \$5.5 million for the value of an averted fatality,
instead of \$3 million. In the IRE we had assumed that Boeing would
voluntarily install FRM systems and that the air carriers purchasing
Boeing airplanes would use them. Thus, we excluded Boeing production
airplanes from the NPRM cost and benefit analyses. We have since learned
that Boeing does not intend to voluntarily install FRM in its production
airplanes with the exception of the B-787. Consequently, with the
exception of the B-787, we now include Boeing production airplanes in
the final rule cost and benefits estimates. In addition, the projected
fuel tank inerting (FTI) equipment costs and aviation fuel costs have
increased. The net effect of these changes is higher benefits and costs
estimates.

## iii.b. number of potential fuel tank explosions

We estimate the risk of a fuel tank explosion as one explosion every 100
million HCWT airplane flight hours. Of this risk, we expect 80 percent
of the explosions will occur in flight and 20 percent of the explosions
will occur on the ground. If there were no SFAR 88 or FRM final rule,
3.64 air carrier passenger airplane and 0.035 air carrier cargo airplane
fuel tank explosions would occur to the 2008-2017 fleet affected by this
final rule. With an SFAR 88 effectiveness rate of 50 percent, 1.82
accidents could be prevented by the final rule. However, airplanes
flying without FRM before the airplanes are retired or before the
airplanes are retrofitted with FRM will accumulate 61 million flight
hours. Thus, the final rule is expected to prevent 1.52 air carrier
passenger airplane explosions with 0.30 of these explosions are expected
to occur to air carrier passenger airplanes flying without FRM. For air
carrier production cargo airplanes, the final rule is expected to
prevent 0.0075 accidents.

## iii.C. MARKET FAILURE

United States scheduled airplane operators have very low accident rates
and understandably have not indicated a willingness to incur substantial
retrofit and operating costs to avoid a rare accident. The cost-benefit
decision criterion for an individual firm differs from that for society.
An individual firm bears a full share of the equipage and operational
costs and will never know if its investment avoided a catastrophic
accident. The American public expects air travel to be safe and fully
expects that the necessary investment has been made to keep travel safe.
Under these circumstances, firms see substantial costs with certainty
and accurately realize little probability of benefits. For the society
the accident risk is small, but with potentially catastrophic outcomes.

## 

## iii.D. FINAL RULE benefits AND COSTS 

The baseline analysis of the final rule quantified benefits and costs
uses the values of \$5.5 million for a prevented fatality, a 7 percent
discount rate, and an SFAR 88 effectiveness rate of 50 percent.

As shown in Table III-1, the rule's total quantified benefits have a
present value of \$657 million, \$271 million is attributable to air
carrier retrofitted passenger airplanes and \$386 million is
attributable to air carrier production passenger airplanes. The rule's
present value of the total cost is \$1.012 billion, of which \$975
million will be incurred by air carrier passenger airplane operators and
\$37 million will be incurred by air carrier cargo operators. Of the
\$975 million incurred by air carrier passenger airplane operators,
\$438 million will be incurred by operators of air carrier retrofitted
passenger airplanes and \$537 million will be incurred by operators of
air carrier production passenger airplanes.

The overall benefit-cost ratio for the final rule is 65 percent. For air
carrier passenger airplanes it is 0.67. It is 0.62 for air carrier
retrofitted passenger airplanes and 0.72 for air carrier production
airplanes. The cost-benefit ratio is lower for retrofitted airplanes
because it is more expensive to retrofit FTI on an airplane than it is
to install it on a production airplane. Further, all production
airplanes will fly 25 years whereas retrofitted airplanes will fly less
than 25 years after being retrofitted.

TABLE III-1

TOTAL PRESENT VALUE BENEFITS AND COSTS

(in Millions of 2007 Dollars)

  --------------------- ------------- ------------- ------------- --------------
                                      PRESENT VALUE               
                                      (7%)                        

  TYPE OF OPERATION     NUMBER OF     BENEFITS      COSTS         BENEFIT/COST
                        PREVENTED                                 RATIO
                        ACCIDENTS                                 

                                                                  

  **AIR CARRIER                                                   
  PASSENGER**                                                     

  RETROFITTED           0.52          \$271         \$ 438        0.62

  PRODUCTION            1.00          \$386         \$ 537        0.72

  **TOTAL**             **1.52**      **\$657**     **\$ 975**    **0.67**

                                                                  

  **AIR CARRIER CARGO** **0.03**      **\<\$0.1**   **\$ 37**     **\<0.01**

                                                                  

  **GRAND TOTAL**       **1.55**      **\$657**     **\$1,012**   **0.65**
  --------------------- ------------- ------------- ------------- --------------

As shown in Table III-2, the prevented loss of aviation demand is \$251
million and the direct benefits from the prevented deaths and property
losses are \$406 million. Thus, 38.2 percent from the resulting loss in
overall demand for air travel, and 61.8 percent due to the direct loss
of life and property from the prevented accidents.

TABLE III-2

PRESENT VALUE OF TOTAL BENEFITS BY SOURCE OF BENEFITS

(in Millions of 2007 Dollars)

  ------------------------ --------------- --------------- ---------------
                           BENEFITS                        

                           TOTAL           DEMAND          DIRECT

  AIR CARRIER                                              

  RETROFITTED              \$271           \$100           \$171

  PRODUCTION               \$386           \$151           \$235

                                                           

  **TOTAL**                **\$657**       **\$251**       **\$406**

  **PERCENT OF TOTAL**                     **38.2%**       **61.8%**
  ------------------------ --------------- --------------- ---------------

#  IV. BENEFITS

##  IV.A. INTRODUCTION 

In this section we estimate the risk of an air carrier passenger
airplane explosion and the statistically expected numbers of accidents.
We establish the proportion of these accidents that occur in flight and
on the ground. We project the statistically expected years of these
accidents. We calculate the potential economic losses from such an
accident and then quantify the total benefits of the final rule. We then
estimate the final rule's potential benefits for air carrier cargo
airplanes and Part 91 airplanes.

## iv.b. SUMMARY OF THE ASSUMPTIONS TO qUANTIFY THE BENEFITS 

### IV.B.1. [Number of Accidents]{.underline}

-   Accident Rate: 1 in 100 million flight hours

-   Total Number of Flight Hours: 364 Million

Includes all Boeing and Airbus production and existing airplanes except
the B-787, B-717, B-727, certain B-767s, certain B-777, B-878, and the
A-321-300.

-   Number of Flight Hours By Airplanes with FRM: 303 Million

-   Number of Flight Hours By Airplanes without FRM: 61 Million

(Flown by airplanes before they are retired or before they are
retrofitted)

-   Number of Retrofitted Airplanes: 2,732

BOEING 1,780

AIRBUS 952

-   Number of Production Airplanes: 2,290

BOEING 1,268

##  AIRBUS 1,022

-   Number of Affected Airplanes: 5,022

BOEING 3,048

AIRBUS 1,974

-   SFAR 88 Effectiveness Rate: 50%

-   Percentage of In-Flight Accidents: 80%

-   Percentage of On-the-Ground Accidents: 20%

Thus, as shown in the following table, we project that there will be
3.64 fuel tank explosions, of which SFAR 88 will prevent 1.82, the final
rule will prevent 1.52, and 0.32 will not be prevented because SFAR 88
would not have protected the airplane and it will fly without FTI.

TABLE IV-1

NUMBER OF ACCIDENTS AFFECTED BY THE FINAL RULE

  ------------- ----------- ----------- --------------- ----------- ---------------
                NUMBER OF                                           
                ACCIDENTS                                           
                AFFECTED BY                                         
                THE FINAL                                           
                RULE                                                

  CATEGORY      TOTAL       IN-FLIGHT   ON-THE-GROUND   AIRPLANES   AIRPLANES
                                                        WITH FRM    WITHOUT FRM

                                                                    

  RETROFITTED   0.82        0.66        0.16            0.52        0.30

  PRODUCTION    1.00        0.80        0.20            1.00        0.00

                                                                    

  **TOTAL**     **1.82**    **1.46**    **0.36**        **1.52**    **0.30**
  ------------- ----------- ----------- --------------- ----------- ---------------

### IV.B.2. [Summary of Quantified Benefits]{.underline}

Overall Aviation Demand Decline Per Accident: \$292 Million

Value of a Prevented Fatality: \$5.5 Million

Direct Accident Benefits: \$696 Million

(80 Percent of the Explosions Occur In-Flight; 20 Percent of the
Explosions Occur On-the-Ground)

As shown in the Table IV-2, we calculate that there is a possible \$845
million in potential present value benefits from the final rule of which
\$657 million (77.8 percent) will be realized from the final rule while
\$188 million (22.2 percent ) will not be realized due to the number of
hours flown by airplanes that will not have FRM. Of the realized
benefits of \$657 million, \$250 million will be due to avoiding the
losses due to the reduced demand for aviation demand (37.9 percent of
the total realized benefits) and \$407 million will be the direct
benefits (62.1 percent of the total realized benefits).

TABLE IV-2

PRESENT VALUE USING A 7 PERCENT DISCOUNT RATE OF THE POTENTIAL BENEFITS
BY SOURCE OF BENEFITS

(in Millions of 2007 Dollars)

  --------------------------- ------------ -------------- -----------------
                              PRESENT                     
                              VALUES OF                   
                              POTENTIAL                   
                              BENEFITS                    
                              USING A 7                   
                              PERCENT                     
                              DISCOUNT                    
                              RATE (\$                    
                              Millions)                   

  SOURCE OF BENEFITS          TOTAL        WITH FRM       NO FRM

                                                          

  DEMAND                      \$311        \$250          \$ 61

  DIRECT                      \$536        \$407          \$127

                                                          

  **TOTAL**                   **\$845**    **\$657**      **\$188**

  **PERCENT OF TOTAL**                     **77.8%**      **22.2%**
  --------------------------- ------------ -------------- -----------------

As shown in Table IV-3, the following table, the present value of the
benefits to retrofitted airplanes will be \$271 million (41.2 percent of
the total benefits) while the present value of the benefits to
production airplanes will be \$386 million (58.8 percent of the total
benefits).

TABLE IV-3

PRESENT VALUE USING A 7 PERCENT DISCOUNT RATE OF THE TOTAL BENEFITS BY
TYPE OF FTI INSTALLATION AND BY MANUFACTURER

(in Millions of 2007 Dollars)

  --------------------- ----------------- ----------------- ---------------
  MANUFACTURER          RETROFITTED       PRODUCTION        TOTAL

                                                            

  BOEING                \$177             \$208             \$385

  AIRBUS                \$ 94             \$178             \$272

                                                            

  **TOTAL**             **\$271**         **\$386**         **\$657**

                                                            

  **PERCENT OF TOTAL**  **41.2%**         **58.8%**         
  --------------------- ----------------- ----------------- ---------------

## IV.c. RISK ANALYSIS

IV.C.1. [Model of the HCWT Accident Rate and SFAR 88
Effectiveness]{.underline}

This benefit analysis depends on the expected HCWT accident rate. The
estimation problem begins with the fact that these accidents are rare
events. In its evaluation of the risk of an HCWT explosion, the first
Aviation Rulemaking Advisory Committee (ARAC 1) determined that the risk
of an explosion was linearly related to the number of flight hours and
that this rate was one fuel tank explosion every 60 million HCWT
airplane flight hours. This rate was the rate we used in the NPRM.

However, complicating the problem of determining the risk rate, we have
been issuing airworthiness directives (ADs) since 1994 addressing HCWT
safety problems. In 2001, SFAR 88 became effective and more ADs were
subsequently issued. To the extent these ADs and SFAR 88 have been
effective, they have reduced the observed accident rate.

After publishing the NPRM the FAA asked Sandia National Laboratories to
assess the evidence. [^19] Their independent assessment validates that
ADs have improved center wing tank safety and that SFAR 88 while
effective does not guarantee there will be no future accidents. However,
they did not provide a specific accident rate or SFAR 88 effectiveness
rate, except to note that SFAR 88 was less than 90 percent effective.

In their comments on the NPRM, industry provided two different accident
rates. Boeing commented that the accident rate is 1 in a 100 million
flight hours. ATA and Airbus commented that the accident rate is 1 in a
150 million flight hours.

They also commented on the SFAR 88 effectiveness rate. The ATA suggested
a 90 percent SFAR 88 effectiveness rate and Airbus suggested an 80
percent SFAR 88 effectiveness rate. They noted that SFAR 88 AD
2001-08-24 improved center wing tank safety for B-737s by a factor of
10. In their comments ATA and Airbus erroneously attributed this
reported improvement to the entire fleet when the AD applied only to
B-737s

Still the question remains: What is the HCWT accident rate given SFAR
88? We developed an interactive model of the accident rate and SFAR 88
effectiveness. The model provides reasoned range estimates of the future
accident rate incorporating a sensitivity analysis around the accident
rate and SFAR 88 effectiveness.

To create a model of HCWT accident rate and SFAR 88 effectiveness, the
inputs must relate measures of risk and mitigation. The commonly
accepted measure of HCWT risk is the number of accidents per cumulative
flight hours. We have mitigated the risk of HCWT accidents by issuing
ADs which have provided an accumulated safety improvement. Even though
SFAR 88 was codified in 2001, we include ADs issued prior to 2001 that
were designed to reduce HCWT accidents. AD 99-11-05 was the first such
AD issued in 1994 for the B-767. As the model results depend on the
number and the effectiveness of the ADs, we begin by discussing the ADs
as an input.

Very simply, we accumulate ADs on at-risk airplanes from 1994 through
2006. Under the assumption operators do not want to incur the liability
of not addressing a safety risk, we assume all (worldwide) affected
airplanes will comply with the AD requirement. An AD in effect on an
airplane for one year is referred to as an AD "application". Total AD
applications increase with the number of ADs and with the number of
airplanes. From 1994 through 2006, 58 ADs have been issued, 10 of which
are excluded because their compliance dates have not been reached.

Table IV-4 displays the method to calculate SFAR 88 AD applications.
Lines 1 and 2 show the number of ADs issued and those effective by
compliance year. Lines 3, 4, and 5 contain a count of ADs multiplied by
the number of applicable airplanes. As a reference, the total Airbus and
Boeing HCWT at-risk airplanes are listed on lines 6 and 7. By 2006 there
are 2.71 ADs per Airbus HCWT airplane, and 5.32 ADs per Boeing HCWT
airplane. Just the count of AD applications by Airbus and Boeing
airplanes indicates a risk of HCWT accidents exists. Furthermore the
cumulative number of ADs has increased every year since SFAR 88 was
codified providing evidence new safety risks are being addressed every
year. In this vein, SFAR 88 effectiveness must be measured at a point in
time. The measure used here is based on the percentage of total 2006 AD
applications. Line 12 shows the proportion of applications per airplane
relative to the total number in 2006.

Table IV-4.

Cumulative Effect of HCWT ADs: 1994-2006

  ----------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- -------
  ** **                   1994        1995        1996        1997        1998        1999        2000        2001        2002        2003        2004        2005        2006       Total

  1\. No. of ADs          1                                   3           8           6           5           8           4           1           6           8           8          58
  (Effective Year)                                                                                                                                                                   

  2\. No. of ADs          1                                   2           7           3           9           2           7           4           3           6           4          48
  (Compliance Yr)                                                                                                                                                                    

  3\. No. of Airbus HCWT                                                                          203         262         1184        1927        3706        5276        11653       
  AD Applications                                                                                                                                                                    

  4\. No. of Boeing HCWT  279         591         633         1980        5789        11734       16476       24008       28085       34920       37394       38114       42725       
  AD Applications                                                                                                                                                                    

  5\. Total HCWT AD       279         591         633         1980        5789        11734       16679       24270       29269       36847       41100       43389       54378       
  Applications                                                                                                                                                                       

  6\. World Total Airbus  1168        1293        1407        1570        1755        2048        2365        2555        2871        3125        3518        3882        4300        
  HCWT APs                                                                                                                                                                           

  7\. World Total Boeing  4688        4897        5102        5381        5763        6211        6627        6717        7018        7215        7494        7663        8031        
  HCWT APs                                                                                                                                                                           

  8\. World Total HCWT    5856        6190        6509        6951        7518        8259        8992        9272        9889        10340       11012       11545       12331       
  Fleet APs                                                                                                                                                                          

  9\. Airbus AD                                                                                   0.09        0.10        0.41        0.62        1.05        1.36        2.71        
  Applications/Airplane                                                                                                                                                              
  (Line 3/ line 6)                                                                                                                                                                   

  10\. Boeing AD          0.06        0.12        0.12        0.37        1.00        1.89        2.49        3.57        4.00        4.84        4.99        4.97        5.32        
  APPS/Airplane (Line                                                                                                                                                                
  4/Line 7)                                                                                                                                                                          

  11\. HCWT Fleet AD      0.05        0.10        0.10        0.28        0.77        1.42        1.85        2.62        2.96        3.56        3.73        3.76        4.41        
  Applications/Airplane                                                                                                                                                              
  (Line5/Line8)                                                                                                                                                                      

  **12. HCWT Fleet AD     **0.011**   **0.022**   **0.022**   **0.065**   **0.175**   **0.322**   **0.421**   **0.594**   **0.671**   **0.808**   **0.846**   **0.852**   **1.00**    
  Apps/AP as proportion                                                                                                                                                              
  of 2006 Apps/AP**                                                                                                                                                                  
  ----------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- -------

Source: Numbers of airplanes are from Back Aviation, Inc., Fleet i-NET
database, March 5, 2007.

With the historical accident rate, the proportion of 2006 SFAR 88 AD
applications completed, and a 2006 SFAR 88 effectiveness rate, the
future HCWT accident rate can be predicted. We need to either constrain
the expected number of accidents to the historical number of 3, which
generates an estimate of the pre-SFAR 88 accident rate, or use an
unconstrained estimate of the pre-SFAR 88 accident rate. The future
accident rate then incorporates the assigned SFAR 88 effectiveness and
the past accident rate experience. Table IV-5 presents the results for
an SFAR 88 effectiveness rate of 50 percent and 3 accidents by the end
of 2006. Under these conditions the pre-SFAR 88 accident rate is 0.0081
or 1 in approximately 125 million flight hours and the post-SFAR 88 rate
is .00405 or 1 in approximately 250 million flight hours. As the model
constrains the outcome to 3 accidents at the end of the analysis period,
this outcome is our lower bound estimate of the accident rate. We should
note, however, that this lower bound (and our other accident rate
estimates) are overestimated to some extent because we have not taken
into account the effect of the 10 ADs whose compliance dates have not
yet been reached.

Table IV-5

SFAR 88 Accident Rates and 2006 SFAR 88 Effectiveness

  ------ ---------- ------------ ------------ --------------- --------------- ------------ ------------
         Accident   0.0081       1 accident                   2006 SFAR 88    0.50          
         rate per                in 125                       effectiveness →              
         million                 million                                                   
         flight                  flight hours                                              
         hours                                                                             

  Year   World HCWT Cumulative   Proportion   SFAR 88         Post-SFAR 88     = Expected Cumulative
         Flt Hours\ World HCWT   of 2006      Effectiveness   Acc. Rate       no. of       Expected no.
         (1)        Flt Hours\   SFAR88       (3)\*0.50\      \[(C1)\*(1 -\   Accidents\   of
                    (2)          Completed\   (4)             SFAR88 Eff.)\]\ (6)          Accidents\
                                 (3)                          (5)                          (7)

  1968   0.2        0.2          0.0          0.000           .0081           0.001        0.001

  1969   0.8        1.0          0.0          0.000           .0081           0.007        0.008

  1970   1.0        2.0          0.0          0.000           .0081           0.008        0.016

  1971   1.3        3.3          0.0          0.000           .0081           0.011        0.027

  1972   1.5        4.8          0.0          0.000           .0081           0.013        0.039

  1973   1.8        6.6          0.0          0.000           .0081           0.014        0.054

  1974   1.9        8.5          0.0          0.000           .0081           0.015        0.069

  1975   2.1        10.6         0.0          0.000           .0081           0.017        0.086

  1976   2.3        12.9         0.0          0.000           .0081           0.019        0.105

  1977   2.5        15.4         0.0          0.000           .0081           0.020        0.125

  1978   2.8        18.2         0.0          0.000           .0081           0.022        0.147

  1979   3.1        21.2         0.0          0.000           .0081           0.025        0.172

  1980   3.6        24.8         0.0          0.000           .0081           0.029        0.201

  1981   3.8        28.6         0.0          0.000           .0081           0.031        0.232

  1982   4.2        32.9         0.0          0.000           .0081           0.034        0.266

  1983   4.6        37.5         0.0          0.000           .0081           0.037        0.304

  1984   5.2        42.7         0.0          0.000           .0081           0.043        0.346

  1985   5.8        48.5         0.0          0.000           .0081           0.047        0.393

  1986   6.6        55.1         0.0          0.000           .0081           0.054        0.446

  1987   7.4        62.5         0.0          0.000           .0081           0.060        0.506

  1988   8.0        70.5         0.0          0.000           .0081           0.065        0.571

  1989   8.5        79.0         0.0          0.000           .0081           0.069        0.640

  1990   10.2       89.2         0.0          0.000           .0081           0.083        0.723

  1991   11.3       100.5        0.0          0.000           .0081           0.092        0.814

  1992   13.2       113.7        0.0          0.000           .0081           0.107        0.921

  1993   14.4       128.2        0.0          0.000           .0081           0.117        1.038

  1994   15.8       144.0        0.011        0.005           0.00806         0.127        1.165

  1995   17.2       161.2        0.022        0.011           0.00801         0.138        1.303

  1996   18.7       179.9        0.022        0.011           0.00801         0.150        1.454

  1997   21.3       201.3        0.065        0.032           0.00784         0.167        1.621

  1998   22.9       224.1        0.175        0.087           0.00739         0.169        1.790

  1999   24.9       249.1        0.322        0.161           0.00680         0.169        1.959

  2000   27.1       276.2        0.421        0.210           0.00640         0.174        2.133

  2001   27.2       303.4        0.594        0.297           0.00570         0.155        2.288

  2002   26.6       330.0        0.671        0.336           0.00538         0.143        2.431

  2003   29.0       359.0        0.808        0.404           0.00483         0.140        2.571

  2004   32.8       391.7        0.846        0.423           0.00467         0.153        2.724

  2005   31.5       423.2        0.852        0.426           0.00465         0.146        2.870

  2006   31.5       454.7        1.000        0.500           0.00405         0.128        2.998

                                                              Total           2.998        
  ------ ---------- ------------ ------------ --------------- --------------- ------------ ------------

Sources: 1. Flight hours for 1968-2004 from a dataset created by Ivor
Thomas for the FAA, Transport AP Directorate,

Transport Standards Staff, Safety Management Branch.

2\. Cumulative Flight hours for 2006 from Back Aviation, Inc., Fleet
i-NET database, March 5, 2007.

3\. Flight hours for 2005 estimated by average of flight hours for 2004
and 2006.

4\. "Proportion of 2006 SFAR 88 completed" from IV-A, row 12.

Setting a lower bound is an easier task than setting an upper bound.
Even though we decided to use the actual historical rate as of 1996
given the rare-event nature of these accidents, the rate could be set
higher. For the upper bound we use the pre-SFAR 88 accident rate of 1
accident per 90 million flight hours, the same rate as existed in 1996
when the TWA accident occurred. With this accident rate and 50 percent
SFAR 88 effectiveness the modeled 3 accidents occur in the same years as
the historical experience. The disturbing result is these model
parameters predict another accident by 2006 (see Table IV-6). Because of
the nature of rare events, these results are also consistent with
statistical theory. In fact when we ran 1,000 Monte Carlo simulation
trials, 3 accidents occurred 233 times in the historical period. For
those 3- accident cases, two accidents happened in the same year 25
times. With flight hours accumulating quickly, the risk of such
rare-event accidents now increases faster annually than in the past.

Table IV-6.

SFAR 88 Accident Rates and SFAR 88 Effectiveness

  ------ ---------- ------------ ------------ --------------- --------------- ------------ ------------
         Accident   0.0111       1 Accident                   2006 SFAR 88    0.50          
         rate per                in 90                        Effectiveness →              
         million                 million                                                   
         flight                  flight hours                                              
         hours →                                                                           

  Year   World HCWT Cumulative   Proportion   SFAR 88         Post-SFAR 88     = Expected Cumulative
         Flt Hours\ World HCWT   of 2006      Effectiveness   Acc. Rate       no. of       Expected no.
         (1)        Flt Hours\   SFAR88       (3)\*0.50\      \[(C1)\*(1 -\   Accidents\   of
                    (2)          Completed\   (4)             SFAR88 Eff.)\]\ (6)          Accidents\
                                 (3)                          (5)                          (7)

  1968   0.2        0.2          0.0          0.000           .0111           0.002        0.002

  1969   0.8        1.0          0.0          0.000           .0111           0.009        0.011

  1970   1.0        2.0          0.0          0.000           .0111           0.011        0.022

  1971   1.3        3.3          0.0          0.000           .0111           0.014        0.037

  1972   1.5        4.8          0.0          0.000           .0111           0.017        0.054

  1973   1.8        6.6          0.0          0.000           .0111           0.020        0.073

  1974   1.9        8.5          0.0          0.000           .0111           0.021        0.095

  1975   2.1        10.6         0.0          0.000           .0111           0.023        0.118

  1976   2.3        12.9         0.0          0.000           .0111           0.026        0.144

  1977   2.5        15.4         0.0          0.000           .0111           0.027        0.171

  1978   2.8        18.2         0.0          0.000           .0111           0.031        0.202

  1979   3.1        21.2         0.0          0.000           .0111           0.034        0.236

  1980   3.6        24.8         0.0          0.000           .0111           0.040        0.276

  1981   3.8        28.6         0.0          0.000           .0111           0.043        0.318

  1982   4.2        32.9         0.0          0.000           .0111           0.047        0.365

  1983   4.6        37.5         0.0          0.000           .0111           0.051        0.416

  1984   5.2        42.7         0.0          0.000           .0111           0.058        0.475

  1985   5.8        48.5         0.0          0.000           .0111           0.064        0.539

  1986   6.6        55.1         0.0          0.000           .0111           0.074        0.612

  1987   7.4        62.5         0.0          0.000           .0111           0.082        0.694

  1988   8.0        70.5         0.0          0.000           .0111           0.089        0.783

  1989   8.5        79.0         0.0          0.000           .0111           0.095        0.878

  1990   10.2       89.2         0.0          0.000           .0111           0.113        0.991

  1991   11.3       100.5        0.0          0.000           .0111           0.126        1.117

  1992   13.2       113.7        0.0          0.000           .0111           0.147        1.264

  1993   14.4       128.2        0.0          0.000           .0111           0.160        1.424

  1994   15.8       144.0        0.011        0.005           0.01105         0.175        1.599

  1995   17.2       161.2        0.022        0.011           0.01099         0.189        1.788

  1996   18.7       179.9        0.022        0.011           0.01099         0.206        1.994

  1997   21.3       201.3        0.065        0.032           0.01075         0.229        2.223

  1998   22.9       224.1        0.175        0.087           0.01014         0.232        2.455

  1999   24.9       249.1        0.322        0.161           0.00932         0.232        2.688

  2000   27.1       276.2        0.421        0.210           0.00877         0.238        2.926

  2001   27.2       303.4        0.594        0.297           0.00781         0.212        3.138

  2002   26.6       330.0        0.671        0.336           0.00738         0.197        3.335

  2003   29.0       359.0        0.808        0.404           0.00662         0.192        3.526

  2004   32.8       391.7        0.846        0.423           0.00641         0.210        3.737

  2005   31.5       423.2        0.852        0.426           0.00638         0.201        3.937

  2006   31.5       454.7        1.000        0.500           0.00556         0.175        4.112

                                                              **Total**       4.112        
  ------ ---------- ------------ ------------ --------------- --------------- ------------ ------------

Finally, we ran the model under the null hypothesis of one accident in
100 million flight hours with a 50 percent SFAR 88 effectiveness rate.
Table IV-7 presents these results. Again, under these conditions the
model indicates an increased probability of another accident by the end
of 2006. We find one accident per 100 million flight hours and a 50
percent SFAR 88 effectiveness rate to be reasonable, as it is consistent
with statistical theory of rare events and falls between the modeled
risk ranges. Thus we cannot reject this combination as the null
hypothesis. As a result of accepting the 1 accident in a 100 million
flight hours and with SFAR 88 being 50 percent effective, we expect this
rule to prevent 1 accident in 200 million flight hours.

The alternative of 1 accident per 150 million flight hours is not
consistent with SFAR 88 being effective. At this rate to obtain 3
accidents in the historical period we had to lower the SFAR 88
effectiveness rate from 50 percent to 1 percent. The reduction in
accidents after 1996 and the Sandia report all point to an effectiveness
rate substantially greater than 1 percent. Some may argue SFAR 88 is 100
percent effective. This extreme value is not consistent with the
increasing number of ADs being written, nor consistent with the Sandia
assessment.

Table IV-7.

One Accident in 100 Million Flight Hour Accident Rates and 50% SFAR 88
Effectiveness

  ---------- ---------- -------------- -------------- --------------- ------------- --------------
  ** **      **One      0.01                          **SFAR 88       **0.50**      ** **
             Accident                                 Effectiveness                 
             in 100                                   at 50% →**                    
             Million                                                                
             Flight                                                                 
             Hours→**                                                               

  **Year**   **World    **Cumulative   **Proportion   **Pre-SFAR 88   **λ =         **Cumulative
             HCWT Flt   World HCWT Flt of 2006 SFAR88 Acc. Rate       Expected no.  Expected no.
             hours\     hours\         completed\     (C3)\*\[1 -     of accidents\ of accidents\
             (1)**      (2)**          (3)**          (3\*\           (5)**         (6)**
                                                      SFAR88 Eff.)\]\               
                                                      (4)**                         

  **1968**   0.2        0.2            0.0            .0100           0.002         0.002

  **1969**   0.8        1.0            0.0            .0100           0.008         0.010

  **1970**   1.0        2.0            0.0            .0100           0.010         0.020

  **1971**   1.3        3.3            0.0            .0100           0.013         0.033

  **1972**   1.5        4.8            0.0            .0100           0.015         0.048

  **1973**   1.8        6.6            0.0            .0100           0.018         0.066

  **1974**   1.9        8.5            0.0            .0100           0.019         0.085

  **1975**   2.1        10.6           0.0            .0100           0.021         0.106

  **1976**   2.3        12.9           0.0            .0100           0.023         0.129

  **1977**   2.5        15.4           0.0            .0100           0.025         0.154

  **1978**   2.8        18.2           0.0            .0100           0.028         0.182

  **1979**   3.1        21.2           0.0            .0100           0.031         0.212

  **1980**   3.6        24.8           0.0            .0100           0.036         0.248

  **1981**   3.8        28.6           0.0            .0100           0.038         0.286

  **1982**   4.2        32.9           0.0            .0100           0.042         0.329

  **1983**   4.6        37.5           0.0            .0100           0.046         0.375

  **1984**   5.2        42.7           0.0            .0100           0.052         0.427

  **1985**   5.8        48.5           0.0            .0100           0.058         0.485

  **1986**   6.6        55.1           0.0            .0100           0.066         0.551

  **1987**   7.4        62.5           0.0            .0100           0.074         0.625

  **1988**   8.0        70.5           0.0            .0100           0.080         0.705

  **1989**   8.5        79.0           0.0            .0100           0.085         0.790

  **1990**   10.2       89.2           0.0            .0100           0.102         0.892

  **1991**   11.3       100.5          0.0            .0100           0.113         1.005

  **1992**   13.2       113.7          0.0            .0100           0.132         1.137

  **1993**   14.4       128.2          0.0            .0100           0.144         1.282

  **1994**   15.8       144.0          0.011          .0099           0.157         1.439

  **1995**   17.2       161.2          0.022          .0099           0.170         1.609

  **1996**   18.7       179.9          0.022          .0099           0.185         1.795

  **1997**   21.3       201.3          0.065          .00968          0.206         2.001

  **1998**   22.9       224.1          0.175          .00913          0.209         2.210

  **1999**   24.9       249.1          0.322          .00839          0.209         2.419

  **2000**   27.1       276.2          0.421          .00790          0.214         2.633

  **2001**   27.2       303.4          0.594          .00703          0.191         2.824

  **2002**   26.6       330.0          0.671          .00664          0.177         3.001

  **2003**   29.0       359.0          0.808          .00596          0.173         3.174

  **2004**   32.8       391.7          0.846          .00577          0.189         3.363

  **2005**   31.5       423.2          0.852          .00574          0.181         3.544

  **2006**   31.5       454.7          1.000          .00500          0.157         3.701

                                                      **Total**       3.701         
  ---------- ---------- -------------- -------------- --------------- ------------- --------------

These model results provide a reasonable expectation of the future HCWT
accident rate. For the lower bound we set the model to a 50 percent SFAR
88 effectiveness rate and constrained the outcome to 3 accidents to
occur by the end of the historical period, the resulting pre-SFAR 88
accident rate was 1 accident in 125 million flight hours. For the upper
bound estimate we constrained the model by the historical accident rate
of 1 accident per 90 million flight hours again with a 50 percent SFAR
88 effectiveness rate. Both of these results are consistent with the
facts and consistent with statistical analysis. We accepted the accident
rate of 1 accident per 100 million flight hours with a 50 percent
effectiveness rate as it falls within the range of outcomes. Our
modeling results indicate the future accident rate (including SFAR88
effectiveness) of 1 accident in 200 million flight hours provides a good
measure of the expected risk.

Lastly we ran the null hypothesis of one accident in a 100 million
flight hours with a 50 percent SFAR 88 effectiveness rate. Boeing
recommended one accident in a 100 million flight hours. Table IV-7
presents these results. Again under these conditions the model predicts
another accident could well have occurred. We find the Boeing
recommendation of one accident per 100 million flight hours and a 50
percent SFAR 88 effectiveness rate to be reasonable and we cannot reject
this combination as the null hypothesis. One accident in 100 million
flight hours does not factor in SFAR 88 effectiveness. With SFAR 88
being 50 percent effective, we expect this rule to prevent 1 accident in
200 million flight hours.

These model results provide a reasonable expectation of the future HCWT
accident rate. When we first constrained the model to a 50 percent SFAR
88 effectiveness rate and 3 accidents to occur in the historical period,
the pre-SFAR 88 accident rate was 1 accident in 125 million flight
hours. Next we constrained the model by the historical accident rate of
1 accident per 90 million flight hours and a 50 percent SFAR 88
effectiveness rate. Here the accidents occur in the same year as the
historical period, but the model predicts an additional accident by 2006
even with an effectiveness rate of 80 percent. Lastly we applied the
Boeing recommended accident rate of 1 accident per 100 million flight
hours and with a 50 percent effectiveness rate, the model estimates 3.7
total accidents by 2006. All of these results are internally consistent
and consistent with statistical analysis. Further, the evidence from the
Sandia Report and the continuing increase in SFAR 88-related ADs
strongly suggests SFAR 88 is nowhere near 100 percent effective. Most
disturbing was that using the rate of 1 accident in 90 million flight
hours, results in a predicted accident by 2006 across a high range of
SFAR 88 effectiveness. Our modeling results indicate the future
(post-SFAR 88) accident rate of 1 accident in 200 million flight hours
reasonably models the expected risk.

### IV.C.2. [Airplane Operational Cycle When an Explosion Will Occur]{.underline} 

Two of the three fuel tank explosions occurred when the airplane was on
the ground, resulting in relatively few fatalities (8 in one accident
and 1 in the other) while one occurred in-flight. In the IRE, our
engineering analysis indicated that (regardless of the actual events up
to that point) there was a 92 percent probability that an explosion
would occur in-flight and an 8 percent probability that it would occur
on the ground. Since then, manufacturers have completed additional
engineering assessments of fuel tank flammability and we have
re-analyzed their data. The ATA and Airbus commented that the
probability of an in-flight explosion and an on-the-ground explosion is
the simple extrapolation of the three events; that is, there is a 33.33
percent probability of an in-flight explosion and a 66.67 percent
probability of an on-the-ground explosion. Boeing commented that its
engineering analysis indicated an 80 percent probability of an in-flight
explosion and a 20 percent probability of an on-the-ground explosion.

We believe that the appropriate method to evaluate the future risk is
through an engineering analysis rather than on observations of an
infrequently occurring event. As a result, we agree with the Boeing
analysis and disagree with the ATA and Airbus analyses, we have revised
our risk analysis so that there is an 80 percent probability that an
explosion will occur in flight and a 20 percent probability that it will
occur on the ground.

### IV.C.3. [Airplane Models At Risk]{.underline}

As all 3 explosions have occurred on Boeing airplanes, Airbus commented
that the final rule should not include their airplanes because their
fuel tanks differ from Boeing fuel tanks and different risk evaluations
need to be made for each manufacturer. However, both ARAC working groups
concluded that the fuel tank architectures for HCWT Boeing and Airbus
airplanes are sufficiently similar that the risks for these airplanes
are comparable. Further, Boeing HCWT airplanes have logged 7 to 8 times
more cumulative flight hours than have Airbus airplanes, which indicates
that if both models had the same probability of an explosion, there is a
7 to 8 times greater likelihood that it would have happened to a Boeing
airplane.[^20] In addition, we continue to issue ADs to Airbus airplanes
as a result of SFAR 88 and fuel tank inspections.

## IV.D. NUMBER OF AIR CARRIER PASSENGER AIRPLANE EXPLOSIONS

### IV.D.1. [Air Carrier Passenger Airplane Flight Hours]{.underline} 

The previous section described how the forecasted number of airplane
explosions depends on the number of flight hours. As shown in Tables
IV-8 and IV-9, the affected air carrier passenger fleet will fly 364
million hours during the time period (2008 -- 2042) of this analysis. Of
these 364 million flight hours, 104 million will be flown by retrofitted
passenger airplanes (68 million by Boeing airplanes and 36 million by
Airbus airplanes), 199 million will be flown by production passenger
airplanes, (108 million by Boeing airplanes and 91 million by Airbus
airplanes), and 61 million will be flown by passenger airplanes that
will not have FRM (44 million by Boeing airplanes and 17 by Airbus
airplanes). Thus, 83.2 percent of the 364 million flight hours (303
million) will be flown by airplanes with FRM and 16.8 percent (61
million) will be flown by airplanes without FRM.[^21] Further, of the
303 million flight hours by airplanes with FRM, 34.1 percent (104
million) will be flown by retrofitted airplanes and 65.9 percent (199
million) will be flown by production airplanes.

TABLE IV-8

ANNUAL NUMBER OF FLIGHT HOURS FOR AIR CARRIER PRODUCTION AND RETROFITTED
PASSENGER AIRPLANES

(in Millions of Hours)

  ----------- ----------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
                          BOEING                                        AIRBUS                            

  YEAR        TOTAL       TOTAL       PRODUCT     RETROFIT   NO FRM     TOTAL       PRODUCT    RETROFIT   NO FRM

                                                                                                          

  2008        10.9        7.8         0.0         0.0        7.8        3.1         0.0        0.0        3.1

  2009        11.3        8.0         0.3         0.0        7.7        3.3         0.5        0.0        2.8

  2010        11.9        8.1         0.6         0.6        6.9        3.8         0.8        0.3        2.7

  2011        12.4        8.3         0.9         1.3        6.1        4.1         1.2        0.7        2.2

  2012        12.9        8.4         1.3         1.9        5.2        4.5         1.5        1.0        2.0

  2013        13.2        8.5         1.7         2.5        4.3        4.7         1.8        1.3        1.6

  2014        13.7        8.6         2.3         3.1        3.2        5.1         2.2        1.7        1.2

  2015        14.1        8.7         2.9         3.8        2.0        5.4         2.6        2.0        0.8

  2016        14.9        9.1         3.5         4.8        0.8        5.8         3.0        2.6        0.2

  2017        16.2        9.8         4.2         5.6        0.0        6.4         3.2        3.2        0.0

  2018        16.2        9.7         4.2         5.5        0.0        6.5         3.4        2.9        0.0

  2019        15.5        9.4         4.2         5.2        0.0        6.1         3.4        2.7        0.0

  2020        14.8        9.0         4.2         4.8        0.0        5.8         3.4        2.5        0.0

  2021        14.3        8.6         4.2         4.4        0.0        5.7         3.4        2.3        0.0

  2022        13.8        8.3         4.2         4.1        0.0        5.5         3.4        2.2        0.0

  2023        13.2        7.9         4.2         3.7        0.0        5.3         3.4        2.0        0.0

  2024        12.6        7.5         4.2         3.3        0.0        5.1         3.4        1.8        0.0

  2025        12.1        7.2         4.2         3.0        0.0        4.9         3.4        1.6        0.0

  2026        11.6        6.8         4.2         2.6        0.0        4.8         3.4        1.4        0.0

  2027        10.9        6.4         4.2         2.2        0.0        4.5         3.4        1.2        0.0

  2028        10.3        6.0         4.2         1.8        0.0        4.3         3.4        1.0        0.0

  2029        9.9         5.7         4.2         1.5        0.0        4.2         3.4        0.8        0.0

  2030        9.2         5.3         4.2         1.1        0.0        3.9         3.4        0.6        0.0

  2031        8.7         4.9         4.2         0.7        0.0        3.8         3.4        0.4        0.0

  2032        8.2         4.6         4.2         0.4        0.0        3.6         3.4        0.2        0.0

  2033        7.5         4.2         4.2         0.0        0.0        3.3         3.3        0.0        0.0

  2034        7.5         4.2         4.2         0.0        0.0        3.3         3.3        0.0        0.0

  2035        7.1         3.8         3.8         0.0        0.0        3.3         3.3        0.0        0.0

  2036        6.4         3.5         3.5         0.0        0.0        2.9         2.9        0.0        0.0

  2037        5.8         3.3         3.3         0.0        0.0        2.5         2.5        0.0        0.0

  2038        5.1         2.9         2.9         0.0        0.0        2.2         2.2        0.0        0.0

  2039        4.4         2.5         2.5         0.0        0.0        1.9         1.9        0.0        0.0

  2040        3.5         1.9         1.9         0.0        0.0        1.6         1.6        0.0        0.0

  2041        2.4         1.3         1.3         0.0        0.0        1.1         1.1        0.0        0.0

  2042        1.3         0.6         0.6         0.0        0.0        0.7         0.7        0.0        0.0

                                                                                                          

  **TOTAL**   **363.8**   **220.8**   **108.3**   **67.9**   **44.0**   **144.0**   **91.0**   **36.4**   **16.6**
  ----------- ----------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------

Table IV-9 provides a summary of the flight hours by the various
airplane categories.

TABLE IV-9

SUMMARY OF AIR CARRIER PASSENGER AIRPLANE FLIGHT HOURS

(in Millions of Flight Hours)

  ----------------------------------- -----------------------------------
  AIRPLANE CATEGORY                   FLIGHT HOURS

                                      

  **TOTAL**                           **364**

                                      

  **PRODUCTION AIRPLANES**            **199**

  BOEING                              108

  AIRBUS                              91

                                      

  **EXISTING AIRPLANES**              **165**

  RETROFITTED WITH FRM                104

  NO FRM                              61
  ----------------------------------- -----------------------------------

### IV.D.2. [Projected Numbers of Air Carrier Passenger Airplane Explosions]{.underline} 

We project that there will be 3.64 air carrier passenger airplane fuel
tank explosions based on the one accident every 100 million flight hours
rate and 364 million flight hours. If the final rule were effective on
January 1, 2008, of these 3.64 potential explosions, 83.2 percent of
them (3.03 accidents) would occur to airplanes with FRM, 16.8 percent
(0.60 accidents) would occur to airplanes without FRM,[^22] while 2.91
accidents will occur in-flight and 0.73 will occur on the ground.
However, there [is]{.underline} an SFAR 88 that will reduce the number
of future air carrier explosions. In the IRE, we estimated that SFAR 88
would prevent 50 percent (the SFAR 88 "effectiveness rate") of the fuel
tank explosions, but also analyzed the potential impact if this
effectiveness rate were 75 percent or 25 percent.

As previously discussed, we cannot reject the hypothesis that SFAR 88
and its associated and future Airworthiness Directives (ADs) have an
effectiveness rate of 50 percent. Using a 50 percent SFAR 88
effectiveness rate, we calculated that SFAR 88 will prevent 1.82 air
carrier passenger airplane explosions in the 2018 fleet while the
remaining 1.82 accidents will be addressed by FRM. Of the 1.82 accidents
addressed by the final rule, we expect it to prevent 1.51 but 0.31 may
occur to airplanes flying without FRM and not be prevented by SFAR
88.[^23] Based on the number of flight hours, of these 1.51 prevented
air carrier passenger airplane explosions, 34.1 percent (0.51 accidents)
will occur to retrofitted passenger airplanes and 65.9 percent (1
accident) will occur to production passenger airplanes.

However, as we did in the IRE, we performed a sensitivity analysis using
SFAR 88 effectiveness rates of 75 percent and 25 percent.[^24]

### IV.D.3. [Expected Years of an Air Carrier Passenger Airplane Explosion]{.underline} 

In the IRE, we estimated the individual years when a potential accident
is statistically expected to occur by assuming that each accident will
occur when its cumulative probability of occurring equals 50 percent of
the mean, which would be at 50 million flight hours. Although we
received comments about the accident rate, we received no comments about
our methodology of estimating the accident dates and we use the same
methodology in this Regulatory Evaluation. Thus, the first statistical
accident will occur at the 50 million flight hour point, the second
accident will occur at the 150 million flight hour point, and the third
accident will occur at the 250 million flight hour point. Finally, 0.64
of an accident will occur at the 332 million flight hour point.[^25] As
shown in Table IV-10, a statistical accident is expected to occur in
2012, 2019, 2026, and 0.64 of an accident in 2035.[^26] [^27]

TABLE IV-10

ANNUAL NUMBER OF FLIGHT HOURS FOR AIR CARRIER PASSENGER AIRPLANES

(in Millions of Hours)

  ----------- ------------ -------- ------------ ----------- ------------ ----------
              TOTAL                 WITH FRM                 NO FRM       

  YEAR        CUMULATIVE   ANNUAL   CUMULATIVE   ANNUAL      CUMULATIVE   ANNUAL

                                                                          

  2008        10.9         10.9     0.0          0.0         10.9         10.9

  2009        22.5         11.6     1.1          1.1         21.4         10.5

  2010        34.8         12.3     3.8          2.7         31.0         9.6

  2011        47.5         12.7     8.2          4.4         39.3         8.3

  2012        60.7         13.2     14.2         6.0         46.5         7.2

  2013        74.3         13.6     21.9         7.7         52.4         5.9

  2014        88.3         14.0     31.5         9.6         56.8         4.4

  2015        103.0        14.7     43.4         11.9        59.6         2.8

  2016        118.5        15.5     57.9         14.5        60.6         1.0

  2017        134.4        15.9     73.8         15.9        60.6         0.0

  2018        150.2        15.8     89.6         15.8        60.6         0.0

  2019        165.5        15.3     104.9        15.3        60.6         0.0

  2020        180.2        14.7     119.6        14.7        60.6         0.0

  2021        194.4        14.2     133.8        14.2        60.6         0.0

  2022        208.1        13.7     147.5        13.7        60.6         0.0

  2023        221.2        13.1     160.6        13.1        60.6         0.0

  2024        233.7        12.5     173.1        12.5        60.6         0.0

  2025        245.7        12.0     185.1        12.0        60.6         0.0

  2026        257.1        11.4     196.5        11.4        60.6         0.0

  2027        267.9        10.8     207.3        10.8        60.6         0.0

  2028        278.1        10.2     217.5        10.2        60.6         0.0

  2029        287.8        9.7      227.2        9.7         60.6         0.0

  2030        296.9        9.1      236.3        9.1         60.6         0.0

  2031        305.4        8.5      244.8        8.5         60.6         0.0

  2032        313.4        8.0      252.8        8.0         60.6         0.0

  2033        320.9        7.5      260.3        7.5         60.6         0.0

  2034        328.4        7.5      267.8        7.5         60.6         0.0

  2035        335.5        7.1      274.9        7.1         60.6         0.0

  2036        341.9        6.4      281.3        6.4         60.6         0.0

  2037        347.7        5.8      287.1        5.8         60.6         0.0

  2038        352.8        5.1      292.2        5.1         60.6         0.0

  2039        357.2        4.4      296.6        4.4         60.6         0.0

  2040        360.7        3.5      300.1        3.5         60.6         0.0

  2041        363.1        2.4      302.5        2.4         60.6         0.0

  2042        364.4        1.3      303.8        1.3         60.6         0.0

                                                                          

  **TOTAL**   **364.4**                          **303.8**                **60.6**
  ----------- ------------ -------- ------------ ----------- ------------ ----------

IV.E. ANCILLARY BENEFITS FROM PREVENTING AN IN-FLIGHT EXPLOSION

### IV.E.1. [Introduction]{.underline}

There are two possible adverse ancillary economic effects that could
result from an in-flight explosion. The first possible ancillary effect
would arise if a HCWT explosion, which is initially indistinguishable
from a terrorist bomb explosion, is mistaken for a terrorist bomb
explosion. As it will take investigatory time to determine whether the
explosion was caused by a HCWT ignition or by a terrorist bomb,
(particularly if a terrorist organization were to claim credit for the
disaster) there could be economic losses if the aviation authorities or
the airlines were to impose security or other measures in mistaken
response to this threat.

A second ancillary effect is that a mid-air explosion, regardless of its
cause, will have a negative effect on overall demand for air travel
because it will frighten some people who will believe that airplane
travel is too risky or unsafe.

### IV.E.2. [Economic Losses from Precautionary Response to a Potential Terrorist Attack]{.underline}

It is very speculative to predict whether the authorities and the
airlines would interpret an in-flight explosion as a potential terrorist
act that may be a harbinger of other terrorist acts. Thus, we did not
include a quantitative estimate of the potential economic effect in the
main text of this analysis.[^28]

### IV.E.3. [Economic Losses from Perception that Air Travel is Unsafe (Demand Effect)]{.underline} 

The fact that a passenger airplane exploded in mid-air will negatively
affect the public perception of air travel safety. Measuring the
economic impact of reduced air travel demand following previous
catastrophic airplane accidents has proven to be difficult due to the
other impacts of seasonal, political, weather, state of the economy,
etc. on air travel demand.

Historically, not all airplane accidents have had the same impact on
overall public perception. For example, the 2003 catastrophic crash of a
19-seat Beech 1900-D in North Carolina in which all on board died
appeared to have little effect on overall air travel demand. However,
international air travel declined by about 30 percent in the three
months in the wake of the Pan American Lockerbie Scotland
explosion.[^29] In summary, there is no "average" public reaction to an
"average" airplane accident because there is no "average"
[catastrophic]{.underline} airplane accident. Each such accident has a
unique effect on the overall public perception of air travel safety.

Where would a HCWT in-flight catastrophic explosion fit into the public
consciousness and what would its potential impact be on the public
perception of air travel safety? Clearly, a mid-air explosion of an air
carrier passenger airplane carrying hundreds of people is as severe as
it can be. The televised and photographed images of hundreds of bereaved
family members have a powerful impression in the minds of the traveling
public. The image of an airplane exploding in mid-air, like TWA 800, is
one of the most graphic, easily comprehended, and horrific visions
possible to a potential air traveler.

History shows that people largely associate such an accident not only
with an individual air carrier but with the entire air travel
industry.[^30] The air carrier suffering such an accident would incur
the largest decline in passenger demand because some of its potential
passengers would switch to other air carriers. Wong and Yeh[^31] studied
the decline in passenger demand on Taiwanese air carrier after each of
26 Taiwanese air carrier accidents (from 1981 through 1999, 2 of the
accidents involved more than 200 fatalities) estimated that, on
average,[^32] every Taiwanese air carrier suffered a decline in the
number of passengers after an accident with a significant loss of life.
The number of people who did not fly on these air carriers due to the
accident was greater than the number of passengers these air carriers
gained from the airline that had the accident. Wong and Yeh estimated
that the overall effect on Taiwanese air carriers was a 4.56 percent
loss in demand during the first month, a 1.94 percent loss in demand
during the second month, and a 0.34 percent loss in demand in the
following few months. Although their overall study includes the effects
of several less catastrophic accidents than TWA 800, we use their
percentage demand reductions to quantify the air travel demand losses.

Over time, the effect of the accident largely fades from the traveling
public's mind and no longer affects air travel demand. Wong and Yeh
estimated that the average effect on air travel demand lasted about two
and a half months.

It is difficult to translate that air carrier passenger loss into a cost
to the economy. Some of these potential passengers will travel by an
alternative means of transportation, although at either greater
inconvenience or at a greater cost to them. Some will use
teleconferencing or e-Mail. Some will not travel, will stay home, and
will spend on items other than on what they would have spent had they
traveled. All of these alternatives involve some loss of consumer
surplus in comparison to the pre-explosion decision to fly. However, we
are aware of no studies that directly address this issue. As a result,
we estimated only the effect on air travel.

We did not use air carrier net operating revenue to monetize the demand
loss because several line items subsumed in operating revenues and in
operating costs will not be measurably affected by a decline in
passengers. Airlines must report revenue and expenses to the Department
of Transportation using Form 41. There are about 40 categories of
revenues and costs reported under this form -- most of which are not
directly tied to operations. We summed the revenue categories of
"passenger revenues", "excess passenger baggage" revenues, and "charter
revenues" as a measure of passenger revenue. From this revenue measure
we subtract the operating costs savings of "flying operations"[^33] as
the category most directly affected by whether or not a passenger boards
an airplane.

The calendar year 2005 revenue directly affected by passenger demand
totaled \$107.6 billion and the calendar year 2005 cost directly
affected by passenger demand totaled \$48.2 billion. We divided this by
12 to obtain monthly averages of \$8.968 billion for revenue and \$4.013
billion for operating costs. We then applied the monthly percentage
losses from Wong and Yeh to this net value.[^34] As shown in Table
IV-11, the total loss in passenger revenue will be \$613 million and the
total cost reduction will be \$339 million. Thus, the ancillary air
travel demand loss from a HCWT explosion is \$274 million.

TABLE IV-11

LOSSES FROM DECLINE IN AIR TRAVEL DEMAND FROM AN IN-FLIGHT AIR CARRIER
PASSENGER AIRPLANE EXPLOSION

(in Millions of 2007 Dollars)

  ---------------- ------------- ------------ ----------- ----------- -----------
                                 PASSENGER                            
                                 REVENUE                              
                                 LOSSES                               

  CATEGORY         MONTHLY       TOTAL        IST MONTH   2^ND^ MONTH 3^RD^ MONTH
                   REVENUE                    (4.56%)     (1.94%)     (0.34%)

                                                                      

  **REVENUE**                                                         

  PASSENGER        \$8,440       \$577        \$385       \$164       \$ 29

  BAGGAGE          \$ 37         \$ 3         \$ 2        \$ 1        \$ 0

  CHARTER          \$ 491        \$ 34        \$ 22       \$ 10       \$ 2

                                                                      

  **TOTAL**        **\$8,968**   **\$613**    **\$409**   **\$174**   **\$30**

                                                                      

                                 PASSENGER                            
                                 COST                                 
                                 REDUCTIONS                           

                   MONTHLY COSTS TOTAL        IST MONTH   2^ND^ MONTH 3^RD^ MONTH
                                              (4.56%)     (1.94%)     (0.34%)

  **COSTS**                                                           

  FLYING           \$4,955       \$339        \$226       \$96        \$17.
  OPERATIONS                                                          

  **TOTAL**        **\$4,955**   **\$339**    **\$226**   **\$96**    **\$17**

                                                                      

  **REVENUE --     **\$4,013**   **\$274**    **\$183**   **\$78**    **\$13**
  COST**                                                              
  ---------------- ------------- ------------ ----------- ----------- -----------

This demand impact is a percentage impact and, as the economy and the
aviation industry grow, the absolute demand loss in real terms will
similarly grow. As shown in Table IV-12, based on the economy and the
aviation industry having annual real growth rates of 3 percent, we
increased the 2006 value of \$274 million by 3 percent (to \$293
million) for 2007 and then modified that \$293 million by the annual 3
percent growth rate and discount rates of 7 percent and 3 percent[^35]
to obtain the present values of the aviation industry loss from the
demand reduction.

TABLE IV-12

PRESENT VALUE OF THE BENEFITS FROM PREVENTING THE AIR TRAVEL DEMAND
REDUCTION FOLLOWING AN AIR CARRIER PASSENGER AIRPLANE EXPLOSION

(in Millions of 2007 Dollars)

  ---------- --------------------------- --------------------------------
  YEAR       UNDISCOUNTED                PRESENT VALUE

                                         7 % DISCOUNT RATE

                                         

  2007       \$292                       \$293

  2008       \$300                       \$282

  2009       \$310                       \$271

  2010       \$319                       \$260

  2011       \$328                       \$250

  2012       \$338                       \$241

  2013       \$348                       \$232

  2014       \$359                       \$223

  2015       \$370                       \$214

  2016       \$381                       \$206

  2017       \$392                       \$198

  2018       \$404                       \$190

  2019       \$416                       \$183

  2020       \$428                       \$176

  2021       \$441                       \$169

  2022       \$455                       \$163

  2023       \$468                       \$156

  2024       \$482                       \$150

  2025       \$497                       \$145

  2026       \$512                       \$139

  2027       \$527                       \$134

  2028       \$543                       \$129

  2029       \$559                       \$124

  2030       \$576                       \$119

  2031       \$593                       \$114

  2032       \$611                       \$110

  2033       \$629                       \$106

  2034       \$648                       \$102

  2035       \$667                       \$ 98

  2036       \$688                       \$ 94

  2037       \$708                       \$ 90

  2038       \$729                       \$ 87

  2039       \$751                       \$ 84

  2040       \$774                       \$ 80

  2041       \$797                       \$ 77

  2042       \$821                       \$ 74
  ---------- --------------------------- --------------------------------

## IV.F. DIRECT BENEFITS FROM PREVENTING AN AIR CARRIER IN-FLIGHT EXPLOSION 

### IV.F.1. [Assumptions and Parameters]{.underline}

The direct benefits from preventing an air carrier in-flight explosion
are the fatalities prevented and the property saved. We made the
following assumptions and calculations to quantify these direct
benefits:

1.  An in-flight explosion is a catastrophic accident in which all die
    and the airplane is completely destroyed.

2.  An explosion that occurs on the ground results in the death of 10
    percent of the average number of passengers and crew on that
    airplane and the airplane is completely destroyed.

3.  The value for preventing a fatality is \$5.5 million in year 2007
    dollars.

4.  As shown in Table IV-13, the 2006 average airplane seating
    capacities multiplied by the load factors[^36] plus the number of
    flight crew members for an in-flight air carrier passenger explosion
    produces 110 to 372 potential fatalities.[^37]

5.  The average airplane replacement values are based on a FAA economic
    values.[^38] As shown in Table IV-13, these \"average\" airplane
    values range from \$15 million to \$115 million[^39] in 2007
    dollars.

6.  Real passenger airplane replacement values will remain constant.

7.  The average value of the luggage and cargo and the ground damage are
    not included in these calculations because they will be less than
    \$1 million per accident.

8.  Based on the FAA report,[^40] the average cost to the U.S.
    government, the airline, and the manufacturer to investigate an
    in-flight passenger airplane accident will be \$8 million.

9.  The average cost to investigate an on-the-ground passenger airplane
    explosion will be \$1 million.

10. We used a 7 percent discount rate to calculate the present values of
    these quantified benefits.

### IV.F.2. [Benefits from Preventing an In-Flight Air Carrier Passenger Airplane Explosion]{.underline}

As shown in Table IV-13, which summarizes Appendix IV-2, the "average"
direct benefits from preventing an air carrier passenger airplane
in-flight explosion range from \$628 million to \$2.169 billion.[^41]

TABLE IV-13

DIRECT BENEFITS FROM PREVENTING AN AIR CARRIER PASSENGER AIRPLANE
IN-FLIGHT EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ ------------ ---------- --------------- ------------
  Model               Avg. Num.    Value of     Value of   Cost of         Total Cost
                      Fatalities   Prevented    Airplane   Investigation   of Accident
                                   Fatalities                              

                                                                           

  B-737-200           99           \$ 545       \$ 1       \$8             \$ 554

  B-737-Classic       110          \$ 605       \$ 15      \$8             \$ 628

  B-737-NG            123          \$ 677       \$ 30      \$8             \$ 715

  B-757               176          \$ 968       \$ 34      \$8             \$1,010

  B-767               224          \$1,232      \$ 50      \$8             \$1,290

  B-747-100/200/300   332          \$1,826      \$ 15      \$8             \$1,849

  B-747-400           372          \$2,046      \$ 85      \$8             \$2,139

  B-747-800           372          \$2,046      \$115      \$8             \$2,169

  B-777               290          \$1,595      \$100      \$8             \$1,703

  B-787               224          \$1,232      \$ 75      \$8             \$1,315

  A-300               224          \$1,232      \$ 34      \$8             \$1,274

  A-310               204          \$1,122      \$ 25      \$8             \$1,155

  A-320 Family        123          \$ 677       \$ 30      \$8             \$ 715

  A-330               290          \$1,595      \$ 85      \$8             \$1,688

  A-340               332          \$1,826      \$100      \$8             \$1,934

  A-350               224          \$1,232      \$ 75      \$8             \$1,315

  A-380               502          \$2,761      \$150      \$8             \$2,919
  ------------------- ------------ ------------ ---------- --------------- ------------

We multiplied each passenger airplane model expected accident loss by
its projected total flight hours for 2008-2043 divided by the total
flight hours for all airplanes in order to calculate a weighted average
of the quantified benefits per model. We used flight hours rather than
numbers of airplanes or operations because the accident risk is
proportional to flight hours. An airplane flying twice as many hours as
another airplane has approximately twice the probability of an
explosion.

As shown in Table IV-14, air carrier passenger airplanes affected by the
rule[^42] will fly 364 million hours.[^43] The percentage of all flight
hours operated by a model is obtained by dividing its individual flight
hours by the total number of flight hours. We then multiplied those
percentages by the accident costs for each model (from Table IV-13),
which were summed to obtain the weighted average of direct benefits from
preventing an in-flight air carrier passenger airplane explosion of
\$841 million.[^44] [^45]

TABLE IV-14

WEIGHTED AVERAGE DIRECT BENEFITS FROM PREVENTING AN IN-FLIGHT AIR
CARRIER PASSENGER AIRPLANE EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ ------------------ ------------- ---------------
  Airplane Model      Total        Total Num. Flight  Percent of    Weighted
                      Accident     Hours (2008-2043)  All Flight    Accident Cost
                      Cost                            Hours         

                                                                    

  B-737-200           \$ 554       0.643              0.18%         \$ 0.979

  B-737-Classic       \$ 628       14.782             4.08%         \$ 25.712

  B-737-NG            \$ 715       146.563            40.49%        \$289.293

  B-757               \$1,010      26.430             7.30%         \$ 73.654

  B-767               \$1,290      14.350             3.96%         \$ 51.110

  B-747-100/200/300   \$1,849      0.798              0.22%         \$ 4.078

  B-747-400           \$2,139      4.940              1.36%         \$ 29.191

  B-747-800           \$2,169      0.000              0.00%         \$ 0.000

  B-777               \$1,703      13.317             3.68%         \$ 62.649

  B-787               \$1,315      0.000              0.00%         \$ 0.000

  A-300               \$1,274      0.149              0.04%         \$ 0.525

  A-310               \$1,155      0.000              0.00%         \$ 0.000

  A-320 Family        \$ 715       131.611            36.36%        \$259.780

  A-330               \$1,688      4.377              1.21%         \$ 20.408

  A-340               \$1,934      0.000              0.00%         \$ 0.000

  A-350               \$1,315      1.900              0.52%         \$ 6.899

  A-380               \$2,919      2.125              0.59%         \$ 17.136

                                                                    

  **TOTAL**                        **361.984**[^46]                 **\$841.414**
  ------------------- ------------ ------------------ ------------- ---------------

### IV.E.3. [Benefits from Preventing an On-The-Ground Air Carrier Passenger Airplane Explosion]{.underline}

The average number of fatalities for an on-the-ground explosion will be
10 percent of the number of fatalities for an in-flight explosion.[^47]
As shown in Table IV-15, which summarizes Appendix IV-3, the direct
benefits from preventing an on-the-ground air carrier passenger airplane
explosion range from \$77 million to \$320 million.[^48] In addition to
fewer fatalities, we expect the investigation costs of an on-the-ground
accident to be less (\$1 million versus \$8 million) than the
investigation costs of an in-flight accident.

TABLE IV-15

DIRECT BENEFITS FROM PREVENTING AN ON-THE-GROUND AIR CARRIER PASSENGER
AIRPLANE EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ ------------ ---------- --------------- ------------
  Model               Avg. Num.    Value of     Value of   Cost of         Total Cost
                      Fatalities   Fatalities   Airplane   Investigation   of Accident

                                                                           

  B-737-200           10           \$ 55        \$ 1       \$1             \$ 57

  B-737-Classic       11           \$ 61        \$ 15      \$1             \$ 77

  B-737-NG            12           \$ 66        \$ 30      \$1             \$ 97

  B-757               18           \$ 99        \$ 34      \$1             \$134

  B-767               22           \$121        \$ 50      \$1             \$172

  B-747-100/200/300   33           \$182        \$ 15      \$1             \$198

  B-747-400           37           \$204        \$ 85      \$1             \$290

  B-747-800           37           \$204        \$115      \$1             \$320

  B-777               29           \$160        \$100      \$1             \$261

  B-787               22           \$121        \$ 75      \$1             \$197

  A-300               22           \$121        \$ 34      \$1             \$156

  A-310               20           \$110        \$ 25      \$1             \$136

  A-320 Family        12           \$ 66        \$ 30      \$1             \$ 97

  A-330               29           \$160        \$ 85      \$1             \$246

  A-340               33           \$182        \$100      \$1             \$283

  A-350               22           \$121        \$ 75      \$1             \$197

  A-380               50           \$275        \$150      \$1             \$426
  ------------------- ------------ ------------ ---------- --------------- ------------

Although time spent on the ground prior to flight is the appropriate
measure to proxy the relative weights for individual models to have an
on-the-ground explosion, we do not have those data. Rather, we assumed
that total flight hours are proportional to on-the-ground hours.
Following the same methodology used in Section IV.F.2., as shown in
Table IV-16, which summarizes Appendix IV-3, the weighted average of the
direct benefits from preventing an on-the-ground air carrier passenger
airplane explosion will be \$115 million.

TABLE IV-16

WEIGHTED AVERAGE DIRECT BENEFITS FROM PREVENTING AN ON-THE-GROUND AIR
CARRIER PASSENGER AIRPLANE EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ----------- ------------------ -------------- ---------------
  Model               Total       Total Num. Flight  Percent of All Weighted
                      Accident    Hours (2008-2043)  Flight Hours   Accident Cost
                      Cost                                          

                                                                    

  B-737-200           \$ 57       0.643              0.18%          \$ 0.101

  B-737-Classic       \$ 77       14.782             4.08%          \$ 3.144

  B-737-NG            \$ 97       146.563            40.49%         \$ 39.274

  B-757               \$134       26.430             7.30%          \$ 9.784

  B-767               \$172       14.350             3.96%          \$ 6.818

  B-747-100/200/300   \$198       0.798              0.22%          \$ 0.437

  B-747-400           \$290       4.940              1.36%          \$ 3.958

  B-747-800           \$320       0.000              0.00%          \$ 0.000

  B-777               \$261       13.317             3.68%          \$ 9.602

  B-787               \$197       0.000              0.00%          \$ 0.000

  A-300               \$156       0.149              0.04%          \$ 0.064

  A-310               \$136       0.000              0.00%          \$ 0.000

  A-320 Family        \$ 97       131.611            36.36%         \$ 35.267

  A-330               \$246       4.377              1.21%          \$ 2.974

  A-340               \$283       0.000              0.00%          \$ 0.000

  A-350               \$197       1.900              0.52%          \$ 1.034

  A-380               \$426       2.125              0.59%          \$ 2.501

                                                                    

  **TOTAL**                       **361.984**[^49]                  **\$114.959**
  ------------------- ----------- ------------------ -------------- ---------------

### IV.F.4. [Present Value of the Average Benefits from Preventing an Air Carrier Passenger Airplane Explosion Weighted by the Probabilities of In-Flight and On-the-Ground Explosions]{.underline} 

We previously determined that there is an 80 percent probability that an
air carrier passenger airplane explosion will occur in the air and a 20
percent probability that it will occur on the ground. As shown in Table
IV-17, the weighted average value of the expected benefits from
preventing an air carrier passenger explosion is \$696 million in 2007
(80 percent times \$841.414 plus 20 percent times \$114.959 million).
Table IV-17 also contains the present values of these benefits for each
year through 2042 using a discount rate of 7 percent.

TABLE IV-17

PRESENT VALUE OF THE DIRECT BENEFITS FROM PREVENTING AN AIR CARRIER
PASSENGER AIRPLANE EXPLOSION

(in Millions of 2007 Dollars)

  ---------------- ------------------------------------------------------
  YEAR             PRESENT VALUE

                   

  2007             \$696

  2008             \$651

  2009             \$608

  2010             \$568

  2011             \$531

  2012             \$496

  2013             \$464

  2014             \$434

  2015             \$405

  2016             \$379

  2017             \$354

  2018             \$331

  2019             \$309

  2020             \$289

  2021             \$270

  2022             \$252

  2023             \$236

  2024             \$220

  2025             \$206

  2026             \$192

  2027             \$180

  2028             \$168

  2029             \$157

  2030             \$147

  2031             \$137

  2032             \$128

  2033             \$120

  2034             \$112

  2035             \$105

  2036             \$ 98

  2037             \$ 91

  2038             \$ 85

  2039             \$ 80

  2040             \$ 75

  2041             \$ 70

  2042             \$ 65
  ---------------- ------------------------------------------------------

## 

## iv.G. TOTAL POTENTIAL AND REALIZED benefits

### IV.G.1. [Potential Benefits from Preventing the Statistical 3.64 Air Carrier Passenger Airplane Explosions]{.underline}

As previously discussed, in the absence of SFAR 88, we expect that 3.64
accidents will occur.

We categorize the 3.64 accidents into:

1.  Accidents that will be prevented by SFAR 88;

2.  Accidents that will be prevented by the final rule; and

3.  Accidents that will not be prevented because they can happen to
    airplanes without FRM.

In Section IV.D.3., we established that the 3.64 accident years are
expected in 2012, 2019, 2026, and (0.64 of an accident) in 2035. In
Table IV-18, we sum the undiscounted and present values of preventing an
air carrier passenger airplane explosion in each of those three years
from Tables IV-5 (the reduction in air travel) and IV-12 (the direct
losses from the accident). Thus, if all of these accidents could be
prevented, the undiscounted potential benefits from would be \$4.228
billion, of which \$1.695 billion would be prevented aviation demand
losses, and \$2.533 billion would be direct benefits. The present value
of these potential benefits would be \$1.590 billion, of which \$626
million would be prevented aviation demand losses and \$964 billion
would be direct benefits. However, as more fully discussed in the next
section, the final rule will not prevent all of these 3.64 accidents.

TABLE IV-18

UNDISCOUNTED AND PRESENT VALUE OF THE POTENTIAL BENEFITS FROM PREVENTING
3.64 AIR CARRIER PASSENGER AIRPLANE EXPLOSIONS USING A 7 PERCENT
DISCOUNT RATE

(in Millions of 2007 Dollars)

  ----------- -------------- ------------- -------------- ----------- -------------- -----------
              TOTAL                        DEMAND                     DIRECT         

  YEAR        UNDISCOUNTED   PRESENT VALUE UNDISCOUNTED   PRESENT     UNDISCOUNTED   PRESENT
                                                          VALUE                      VALUE

                                                                                     

  2012        \$1,034        \$ 737        \$ 338         \$241       \$ 696         \$496

  2019        \$1,112        \$ 492        \$ 416         \$183       \$ 696         \$309

  2026        \$1,208        \$ 331        \$ 512         \$139       \$ 696         \$192

  2035        \$ 874         \$ 130        \$ 429         \$ 63       \$ 445         \$ 67

                                                                                     

  **TOTAL**   **\$4,228**    **\$1,590**   **\$1,695**    **\$626**   **\$2,533**    **\$964**
  ----------- -------------- ------------- -------------- ----------- -------------- -----------

### IV.G.2. [Number of Accidents Affected by the Final Rule]{.underline}

In order to determine the number of accidents that will be prevented by
the final rule after the SFAR 88 impact is included, we need to
determine the number of flight hours by airplanes with FRM and the
number of flight hours by airplanes without FRM. Further, when these
flight hours are accumulated is important because more recent flight
hours have a greater present value effect on benefits than later flight
hours do.

Table IV-19 contains the flight hours for passenger airplanes. The
majority of the earliest flight hours are accumulated by airplanes
without FRM (they accumulate no more flight hours after 2016).
Retrofitted airplane annual flight hours increase until 2017 after which
they gradually decline to zero by 2033 due to retirements. Production
airplanes accumulated all of the flight hours after 2032 until the last
production airplane is retired in 2043

TABLE IV-19

NUMBER OF FLIGHT HOURS FOR AIR CARRIER PASSENGER AIRPLANES

(in Millions of Hours)

  ----------- ------------ --------------- ----------- ------------ -----------
              CUMULATIVE                                            
              FLIGHT HOURS                                          

                           WITH FRM                                 

  YEAR        ALL          TOTAL WITH FRM  RETROFIT    PRODUCTION   NO FRM

                                                                    

  2008        10.9         0               0           0            10.9

  2009        22.5         1.1             0           1.1          21.4

  2010        34.8         3.8             1.6         2.2          31.0

  2011        47.5         8.2             3.9         4.3          39.3

  2012        60.7         14.2            7.1         7.1          46.5

  2013        74.3         21.9            11.3        10.6         52.4

  2014        88.3         31.5            16.4        15.1         56.8

  2015        103.0        43.4            22.8        20.6         59.6

  2016        118.5        57.9            30.8        27.1         60.6

  2017        134.4        73.8            39.3        34.5         60.6

  2018        150.2        89.6            47.5        42.1         60.6

  2019        165.5        104.9           55.2        49.7         60.6

  2020        180.2        119.6           62.3        57.3         60.6

  2021        194.4        133.8           68.9        64.9         60.6

  2022        208.1        147.5           75.0        72.5         60.6

  2023        221.2        160.6           80.5        80.1         60.6

  2024        233.5        172.9           85.2        87.7         60.6

  2025        245.7        185.1           89.8        95.3         60.6

  2026        257.1        196.5           93.6        102.9        60.6

  2027        267.9        207.3           96.8        110.5        60.6

  2028        278.1        217.5           99.4        118.1        60.6

  2029        287.8        227.2           101.5       125.7        60.6

  2030        296.9        236.3           103.0       133.3        60.6

  2031        305.4        244.8           103.9       140.9        60.6

  2032        313.4        252.8           104.3       148.5        60.6

  2033        320.9        260.3           104.3       156.0        60.6

  2034        328.4        267.8           104.3       163.5        60.6

  2035        335.5        274.9           104.3       170.6        60.6

  2036        341.9        281.3           104.3       177.0        60.6

  2037        347.7        287.1           104.3       182.8        60.6

  2038        352.8        292.2           104.3       187.9        60.6

  2039        357.2        296.6           104.3       192.3        60.6

  2040        360.7        300.1           104.3       195.8        60.6

  2041        363.1        302.5           104.3       198.2        60.6

  2042        364.4        303.8           104.3       199.5        60.6

                                                                    

  **TOTAL**   **364**      **304**         **104**     **200**      **60**
  ----------- ------------ --------------- ----------- ------------ -----------

As previously discussed, we determined that the statistical accident
will occur at the 50 millionth flight hour for each 100 million flight
hour period. The number of flight hours appropriate to calculate the
percentages that retrofitted, production, and no FRM airplanes fly
during that time depends on the entire time 100 million hour flight
period -- not the 50 million flight hour period. As shown in Table
IV-20, of the total 364 million flight hours, retrofitted airplanes will
fly 28.6 percent, production airplanes will fly 54.8 percent, and
airplanes without FRM will fly 16.6 percent.

TABLE IV-20

PERCENTAGE OF FLIGHT HOURS FLOWN BY AIR CARRIER PASSENGER AIRPLANES
DURING THE TIME PERIOD FOR EACH STATISTICAL ACCIDENT

(in Millions of 2007 Dollars)

  ---------------- --------------- ------------ ------------- ------------ ------------
                                   WITH FRM                                

  MID-POINT YEAR   PERIOD          TOTAL        RETROFITTED   PRODUCTION   NO FRM

                                                                           

  2012             2008-2016       48.86%       25.99%        22.87%       51.14%

  2019             2017-2022       100.00%      53.76%        46.24%       0.00%

  2026             2023-2031       100.00%      25.81%        74.19%       0.00%

  2035             2031-2042       100.00%      0.00%         100.00%      0.00%

                                                                           

  **PERCENT OF     **2008-2042**   **83.37%**   **28.62%**    **54.75%**   **16.63%**
  TOTAL**                                                                  
  ---------------- --------------- ------------ ------------- ------------ ------------

### IV.G.3. [Discounted Potential and Realized Quantified Total Benefits]{.underline}

As shown in Table IV-21, applying the SFAR 88 effectiveness rate of 50
percent and the percentages of flight hours for each category to the
values in Table IV-18 results in a present value of the potential
benefits (if all HCWT explosions were prevented) of \$845 million for
SFAR 88 and \$845 million for the final rule. Of this \$845 million
potential benefits for the final rule, airplanes with FRM will account
for (hence, prevent) \$657 million while airplanes without FRM will
account for (and not prevent) \$188 million.

TABLE IV-21

PRESENT VALUE OF THE POTENTIAL **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------- ------------- -------------- ----------- ----------- -----------
              PRESENT VALUE                                        
              POTENTIAL                                            
              TOTAL                                                
              BENEFITS                                             

                            ATTRIBUTABLE                           
                            TO                                     

                                           FINAL RULE              

  YEAR        TOTAL         SFAR 88        TOTAL       WITH FRM    NO FRM

                                                                   

  2012        \$ 737        \$368          \$369       \$181       \$188

  2019        \$ 492        \$246          \$246       \$246       \$ 0

  2026        \$ 331        \$166          \$165       \$165       \$ 0

  2035        \$ 130        \$ 65          \$ 65       \$ 65       \$ 0

                                                                   

  **TOTAL**   **\$1,690**   **\$845**      **\$845**   **\$657**   **\$188**
  ----------- ------------- -------------- ----------- ----------- -----------

As shown in Table IV-22, of the rule's total realized benefits of \$657
million, \$273 million (41.6 percent of the total realized benefits)
will be attributable to retrofitted airplanes and \$384 million (58.4
percent of the total realized benefits) will be attributable to
production airplanes.

TABLE IV-22

PRESENT VALUE OF THE **TOTAL BENEFITS** FOR AIR CARRIER PASSENGER
AIRPLANES BY FRM INSTALLATION TYPE

(in Millions of 2007 Dollars)

  -------------------- ---------------- ---------------- -----------------
  YEAR                 FRM TOTAL        RETROFIT         PRODUCTION

                                                         

  2012                 \$181            \$ 97            \$ 84

  2019                 \$246            \$133            \$113

  2026                 \$165            \$ 43            \$122

  2035                 \$ 65            \$ 0             \$ 65

                                                         

  **TOTAL**            **\$657**        **\$273**        **\$384**

  **PERCENT OF TOTAL**                  **41.6%**        **58.4%**
  -------------------- ---------------- ---------------- -----------------

### IV.G.4. [Discounted Potential and Realized Quantified Demand Benefits]{.underline}

Finally, as shown in Table IV-23, multiplying the demand losses in Table
IV-18 by the percentages in Table IV-20 produces potential demand
benefits of \$313 million, of which \$251 million (80.2 percent) will be
realized by airplanes with FRM and \$62 million (19.8 percent) will
occur to airplanes without FRM. Of the \$251 million in realized demand
benefits, \$100 million (39.8 percent) will be realized by retrofitted
airplanes and \$151 million (60.2 percent) will be realized by
production airplanes.

TABLE IV-23

PRESENT VALUE OF THE POTENTIAL AND REALIZED **DEMAND BENEFITS** FOR AIR
CARRIER PASSENGER AIRPLANES BY FRM INSTALLATION TYPE

(in Millions of 2007 Dollars)

  ------------------- ----------- ----------- ----------- ------------ -----------
                      PRESENT                                          
                      VALUE (7 %)                                      

                                  REALIZED                             
                                  WITH FRM                             

  YEAR                POTENTIAL   TOTAL       RETROFIT    PRODUCTION   NO FRM

                                                                       

  2012                \$121       \$ 59       \$ 32       \$ 27        \$62

  2019                \$ 91       \$ 91       \$ 49       \$ 42        \$ 0

  2026                \$ 70       \$ 70       \$ 19.      \$ 51        \$ 0

  2035                \$ 31       \$ 31       \$ 0        \$ 31        \$ 0

                                                                       

  **TOTAL**           **\$313**   **\$251**   **\$100**   **\$151**    **\$62**

  **PERCENT OF                    **80.2%**   **31.9%**   **48.2%**    **19.8%**
  POTENTIAL**                                                          

  **PERCENT OF                                **39.8%**   **60.2%**    
  REALIZED**                                                           
  ------------------- ----------- ----------- ----------- ------------ -----------

### 

### IV.G.5. [Discounted Potential and Realized Quantified Direct Benefits]{.underline}

Finally, as shown in Table IV-24, multiplying the direct losses in Table
IV-18 by the percentages in Table IV-20 produces potential direct
benefits of \$532 million, of which \$406 million (76.3 percent) will be
realized by airplanes with FRM and \$126 million (23.7 percent) will
occur to airplanes without FRM. Of the \$409 million in realized direct
benefits, \$173 million (42.6 percent) will be realized by retrofitted
airplanes and \$233 million (57.4 percent) will be realized by
production airplanes.

TABLE IV-24

PRESENT VALUE OF THE POTENTIAL AND REALIZED **DIRECT BENEFITS** FOR AIR
CARRIER PASSENGER AIRPLANES BY FRM INSTALLATION TYPE

(in Millions of 2007 Dollars)

  -------------------- ----------- ----------- ----------- ------------ -----------
                       PRESENT                                          
                       VALUE (7 %)                                      

                                   REALIZED                             
                                   WITH FRM                             

  YEAR                 POTENTIAL   TOTAL       RETROFIT    PRODUCTION   NO FRM

                                                                        

  2012                 \$248       \$122       \$ 65       \$ 57        \$126

  2019                 \$155       \$155       \$ 83       \$ 72        \$ 0

  2026                 \$ 96       \$ 96       \$ 25       \$ 71        \$ 0

  2035                 \$ 33       \$ 33       \$ 0        \$ 33        \$ 0

                                                                        

  **TOTAL**            **\$532**   **\$406**   **\$173**   **\$233**    **\$126**

  **PERCENT OF                     **76.3%**   **32.5%**   **43.8%**    **23.7%**
  POTENTIAL**                                                           

  **PERCENT OF                                 **42.6%**   **57.4%**    
  REALIZED**                                                            
  -------------------- ----------- ----------- ----------- ------------ -----------

### IV.G..5. [Total Benefits by Airplane Manufacturer]{.underline}

In calculating the quantified total benefits by manufacturer, we used
the same average benefits from the demand impact and the direct impact
for both Boeing and Airbus airplanes. Thus, the distribution of the
undiscounted and the present value of the benefits by manufacturer is a
function of only the flight hours for each manufacturer's airplanes.
Table IV-25 contains a summary of those flight hours based on Table IV-8
and the percentage of hours flown by each category of airplane. The
total benefits are found in Table IV-22. As shown in Table IV-25, Boeing
airplanes will accumulate present value benefits of \$387 million, of
which \$179 million will be attributable to retrofitted airplanes and
\$208 million will be attributable to production airplanes. Airbus
airplanes will accumulate present value benefits of \$271 million, of
which \$94 million will be attributable to retrofitted airplanes and
\$175 million will be attributable to production airplanes.

TABLE IV-25

TOTAL BENEFITS FOR AIR CARRIER PASSENGER AIRPLANES BY FRM INSTALLATION
TYPE AND BY MANUFACTURER

(Numbers in Millions)

  ----------------- ----------------- -------------------- ----------------
  CATEGORY          TOTAL FLIGHT      PERCENTAGE OF FLIGHT TOTAL BENEFITS
                    HOURS             HOURS                

                                                           

  **RETROFITTED**   **114.3**                              **\$271**

                                                            

  BOEING            67.9              65.44%               \$177

  AIRBUS            36.4              34.56%               \$ 94

                                                            

                                                            

  **PRODUCTION**    **199.3**                              **\$384**

                                                            

  BOEING            108.3             54.19%               \$207

  AIRBUS            91                45.81%               \$176

                                                            

                                                            

  **TOTAL**         **303.6**                              **\$656**

                                                            

  BOEING            176.2             58.88%               \$386

  AIRBUS            127.4             41.42%               \$270
  ----------------- ----------------- -------------------- ----------------

## IV.H. QUANTIFIED BENEFITS FROM PREVENTING AN AIR CARRIER CARGO AIRPLANE EXPLOSION 

### IV.H.1. [Risk of an Explosion]{.underline}

In the NPRM we had requested information concerning the accident risk
for cargo airplanes. The only comment we received was from Boeing that
stated they did not know of any difference in risk between passenger
airplanes and cargo airplanes. As a result, we use the passenger
airplane risk of one accident every 100 million flight hours for cargo
airplanes.

### IV.H.2. [Demand Benefits]{.underline}

The impact on passenger air travel demand after an air cargo airplane
explosion will be minimal because it will not generate the high number
of fatalities that would significantly attract the public's attention.

### IV.H.3. [Direct Benefits]{.underline}

### IV.H.3.a. [Assumptions]{.underline}

We made the following assumptions and calculations to quantify the
direct benefits from preventing an air carrier cargo airplane explosion.

1.  An in-flight explosion is a catastrophic accident occurs in which
    the crew dies and the airplane and its cargo is completely
    destroyed.

2.  An on-the-ground explosion results in no deaths, but the airplane
    and its cargo are completely destroyed.

3.  The value for preventing a fatality is \$5.5 million in year 2007
    dollars.

4.  There are 2 to 3 flight crew members.

5.  The average cargo airplane replacement values are based on a GRA
    Incorporated report.

6.  The real cargo airplane replacement values will remain constant.

7.  The 1999 Montreal Convention established an international insurance
    payment for destroyed of 17 Special Drawing Rights (SDRs) [^50] per
    kilogram of cargo, unless a special declaration of value is made and
    an extra sum is paid. We assume that relatively few special
    declarations of value are made and their impact is minimal.
    Currently, one SDR is worth \$1.49, which results in an average
    cargo value of \$25.33 per kilogram (about \$11.51 a pound).

8.  We determined that the average value of the ground damage will be
    less than \$1 million per accident. As a result, it is not included
    in the calculations.

9.  The average cost to the U.S. government, the airline, and the
    manufacturer to investigate an in-flight cargo airplane accident
    will be \$8 million.

10. The average cost to investigate an on-the-ground cargo airplane
    accident will be \$1 million.

11. We used a 7 percent discount rate to calculate the present values of
    these quantified benefits.

### IV.H.3.b. [Benefits from Preventing an In-Flight Air Carrier Cargo Airplane Explosion]{.underline}

As shown in Table IV-26, which summarizes Appendix IV-4, the "average"
direct benefits from preventing an in-flight air carrier cargo airplane
explosion ranges from \$29 million to \$126 million.

TABLE IV-26

DIRECT BENEFITS FROM PREVENTING AN IN-FLIGHT AIR CARRIER CARGO AIRPLANE
EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- -------------- -------------- ------------ --------- ----------------- ------------
  **Model**           **Avg. Num.    **Value of     **Value of   **Value   **Cost of         **Total Cost
                      Fatalities**   Fatalities**   Airplane**   of        Investigation**   of
                                                                 Cargo**                     Accident**

                                                                                             

  B-737-Classic       2              \$11           \$ 10        \$0.345   \$8               \$ 29

  B-757               2              \$11           \$ 25        \$0.485   \$8               \$ 44

  B-767               2              \$11           \$ 45        \$0.740   \$8               \$ 65

  B-747-100/200/300   3              \$16.5         \$ 35        \$1.679   \$8               \$ 61

  B-747-400           3              \$16.5         \$100        \$1.824   \$8               \$126

  B-747-800           2              \$11           \$100        \$1.976   \$8               \$121

  B-777               2              \$11           \$ 80        \$1.748   \$8               \$ 101

  A-300               2              \$11           \$ 45        \$0.740   \$8               \$ 65

  A-310               2              \$11           \$ 40        \$0.740   \$8               \$ 60
  ------------------- -------------- -------------- ------------ --------- ----------------- ------------

We multiplied each cargo airplane model potential direct benefits by its
total flight hours to calculate a weighted average of direct benefits.
As shown in Table IV-27, the weighted average of the direct benefits
from preventing an in-flight air carrier cargo airplane explosion will
be \$81 million.

TABLE IV-27

WEIGHTED AVERAGE DIRECT BENEFITS FROM PREVENTING AN IN-FLIGHT AIR
CARRIER CARGO AIRPLANE EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ---------- --------------- -------------- ---------------
  **Airplane Model**  **Total    **Total Num.    **Percent of   **Weighted
                      Accident   Flight Hours    All Flight     Accident Cost**
                      Cost**     (2008-2043)**   Hours**        

                                                                

  B-737-Classic       \$ 29      2.100           4.64%          \$ 1.3

  B-757               \$ 44      2.277           5.04%          \$ 2.2

  B-767               \$ 65      3.795           8.39%          \$ 4.9

  B-747-100/200/300   \$ 61      4.797           10.61%         \$ 6.4

  B-747-400           \$126      2.286           5.06%          \$ 4.6

  B-747-800           \$121      11.161          24.68%         \$29.1

  B-777               \$ 101     5.201           11.50%         \$11.2

  A-300               \$ 65      9.764           21.60%         \$15.8

  A-310               \$ 60      3.853           8.48%          \$ 5.5

                                                                

  **TOTAL**                      **45.234**                     **\$81.0**
  ------------------- ---------- --------------- -------------- ---------------

### IV.G.3.c. [Benefits from Preventing a Cargo Airplane On-the-Ground Explosion]{.underline}

As shown in Table IV-28, the "average" direct benefits from preventing
an on-the-ground air carrier cargo airplane explosion range from \$11
million to \$103 million. As previously noted, we assume that the flight
crew will be able to escape the airplane before it is totally destroyed.

TABLE IV-28

DIRECT BENEFITS FROM PREVENTING AN ON-THE-GROUND CARGO AIRPLANE
EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ ------------ ----------------- ---------------
  **Model**           **Value of   **Value of   **Cost of         **Total Cost of
                      Airplane**   Cargo**      Investigation**   Accident**

                                                                  

  B-737-Classic       \$ 10        \$0.345      \$1               \$ 11

  B-757               \$ 25        \$0.485      \$1               \$ 26

  B-767               \$ 45        \$0.740      \$1               \$ 47

  B-747-100/200/300   \$ 35        \$1.679      \$1               \$ 38

  B-747-400           \$100        \$1.824      \$1               \$103

  B-747-800           \$100        \$1.976      \$1               \$103

  B-777               \$ 80        \$1.748      \$1               \$ 83

  A-300               \$ 45        \$0.740      \$1               \$ 47

  A-310               \$ 40        \$0.740      \$1               \$ 42
  ------------------- ------------ ------------ ----------------- ---------------

As shown in Table IV-29, the weighted average of the direct benefits
from preventing an on-the-ground air carrier cargo airplane explosion
will be \$63 million.

TABLE IV-29

WEIGHTED AVERAGE DIRECT BENEFITS FROM PREVENTING AN ON-THE-GROUND AIR
CARRIER CARGO AIRPLANE EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ----------- --------------- -------------- --------------
  **Model**           **Total     **Total Num.    **Percent of   **Weighted
                      Accident    Flight Hours    All Flight     Accident
                      Cost**      (2008-2043)**   Hours**        Cost**

                                                                 

  B-737-Classic       \$ 11       2.100           4.64%          \$ 0.2

  B-757               \$ 26       2.277           5.04%          \$ 1.3

  B-767               \$ 47       3.795           8.39%          \$ 3.9

  B-747-100/200/300   \$ 38       4.797           10.61%         \$ 4.0

  B-747-400           \$103       2.286           5.06%          \$ 5.2

  B-747-800           \$103       11.161          24.68%         \$25.4

  B-777               \$ 83       5.201           11.50%         \$ 9.5

  A-300               \$ 47       9.764           21.60%         \$10.1

  A-310               \$ 42       3.853           8.48%          \$ 3.5

                                                                 

  **TOTAL**                       **46.234**                     **\$63.1**
  ------------------- ----------- --------------- -------------- --------------

### IV.H.3.d. [Present Value of the Benefits from Preventing an Air Carrier Cargo Airplane Explosion]{.underline} 

We use an 80 percent probability that an explosion will occur in flight
and a 20 percent probability that it will occur on the ground. As shown
in Table IV-30, the weighted average present value of the direct
benefits from preventing an air carrier cargo airplane explosion is \$77
million in 2007 (80 percent times \$81 million plus 20 percent times
\$63.1 million).

TABLE IV-30

PRESENT VALUE OF THE DIRECT BENEFITS FROM PREVENTING AN AIR CARRIER
CARGO AIRPLANE EXPLOSION

(in Millions of 2007 Dollars)

  ---------------- ------------------------------------------------------
  YEAR             PRESENT VALUE

                   7% DISCOUNT RATE

                   

  2007             \$77.400

  2008             \$72.336

  2009             \$67.604

  2010             \$63.181

  2011             \$59.048

  2012             \$55.185

  2013             \$51.575

  2014             \$48.201

  2015             \$45.048

  2016             \$42.100

  2017             \$39.346

  2018             \$36.772

  2019             \$34.367

  2020             \$32.118

  2021             \$30.017

  2022             \$28.053

  2023             \$26.218

  2024             \$24.503

  2025             \$22.900

  2026             \$21.402

  2027             \$20.002

  2028             \$18.693

  2029             \$17.470

  2030             \$16.327

  2031             \$15.259

  2032             \$14.261

  2033             \$13.328

  2034             \$12.456

  2035             \$11.641

  2036             \$10.880

  2037             \$10.168

  2038             \$ 9.503

  2039             \$ 8.881

  2040             \$ 8.300

  2041             \$ 7.757

  2042             \$ 7.250
  ---------------- ------------------------------------------------------

### IV.H.4. [Air Carrier Cargo Airplane Flight Hours]{.underline} 

As shown in Table IV-31, which summarizes Appendix IV-4, the air carrier
cargo fleet through 2042 will accumulate about 49 million flight hours.
Of these 49 million flight hours, 20.1 million will be flown by existing
cargo airplanes, 21.2 million will be flown by conversion cargo
airplanes, and 7.7 million will be flown by production cargo airplanes.
Of the 7.7 million flight hours by production cargo airplanes, Boeing
airplanes will fly 5.7 million and Airbus airplanes will fly 2 million
of them.

TABLE IV-31

SUMMARY OF THE AIR CARRIER CARGO AIRPLANE FLIGHT HOURS

(in Millions of Hours)

  ------------------------------ ----------------------------------------
  AIRPLANE CATEGORY              NUMBER OF FLIGHT HOURS

                                 

  **TOTAL**                      **49.0**

  BOEING                         33.1

  AIRBUS                         15.9

                                 

  **PRODUCTION AIRPLANES**       **7.7**

  BOEING                         5.7

  AIRBUS                         2.0

                                 

  **CONVERSION AIRPLANES**       **21.2**

  BOEING                         16.1

  AIRBUS                         5.1

                                 

  **EXISTING AIRPLANES**         **20.1**

  BOEING                         11.3

  AIRBUS                         8.8

                                 

  **TOTAL AFFECTED BY RULE**     **7.7**
  ------------------------------ ----------------------------------------

Based on the 7.7 million flight hours affected by the rule, there would
be 0.077 air carrier cargo airplane explosions. Using a 50 percent SFAR
88 effectiveness rate, the final rule will prevent 0.0385 explosions.
Based on an expected benefit of \$77 million for an air carrier cargo
airplane explosion, the undiscounted benefits of the rule for air
carrier cargo airplanes will be \$3 million. We did not calculate
present values for this small benefit.

IV.I. DIRECT BENEFITS PROBABILITY DISTRIBUTION BY AIRPLANE SIZE

In this section, we provide an analysis that focuses on a more concrete
discussion of the benefits probability distribution. Appendix D contains
a Monte Carlo analysis of the distribution of these benefits.

To simplify the calculations, we segmented the airplanes into three
groups: large, medium, and small. The large airplane group consists of
the A-330, A-340, A-380, B-747 and B-777. The medium airplane group
consists of the A-300/310, A-350, B-757, and B-767. The small airplane
group consists of the A-320 family and the B-737 family. As shown in
Appendix IV-5, the individual benefit (weighted by the number of flight
hours for the individual airplanes models in that group) in 2007 for an
in-flight explosion would be \$1.890 billion for a large airplane,
\$1.117 billion for a medium airplane, and \$710 million for a small
airplane. Incorporating the 20 percent probability that the explosion
would occur on-the-ground, the individual benefit in 2007 would be
\$1.588 billion for a large airplane, \$955 million for a medium
airplane, and \$610 million for a small airplane

We continue to assume that each accident is independent of airplane size
and that all HCWT airplanes have the same explosion risk per flight
hour. As shown in Appendix IV-6, based on the ratio of the expected
number of flight hours in each of the three groups divided by the total
fleet expected number of flight hours, the following are the
probabilities of an accident by airplane size:

-   Accident Probability for a Large Airplane = 7.1%

-   Accident Probability for a Medium Airplane = 11.8%

-   Accident Probability for a Small Airplane = 81.1%.

For 3 accidents and 3 different airplane sizes there exist 27 unique
independent outcomes (3\*3\*3 = 27). In Table IV-28, these outcomes are
represented by L for Large, M for Medium, and S for Small airplanes.
Thus, the outcome L,L,L represents the possibility that all three
accidents would happen to large airplanes, while L,L,M represents the
possibility that the first two accidents would happen to large airplanes
and the third accident would happen to a medium sized airplane, S,S,S
represents the possibility that all three accidents would happen to
small airplanes, etc. Given the probabilities for the individual
airplane groups, we calculated the probability that each of the 27
outcomes would occur. For instance, the probability that all 3 accidents
would happen to large airplanes (L,L,L) is 0.0352 (.071\*.071\*.071)
percent while the probability that all 3 accidents would occur on small
airplanes (S,S,S) is 53.357 (.811\*.811\*.811) percent.

In order to simplify the calculations, as discussed in Section IV.G.2.,
we determined that the expected years of these explosions would be 2012,
2019, and 2026.

The average benefits from preventing an accident by these three airplane
size categories are:

-   Large: \$1.588 billion

-   Medium: \$955 million

-   Small: \$610 million

There are two additional factors that need to be included in this
benefits analysis. The first factor is that there is an approximately 50
percent probability that the airplane involved in the first
accident[^51] would not have FRM. As a result, each of the 27 potential
outcomes needs to be doubled to account for the fact that half of the
potential first accidents would occur to airplanes without FRM.[^52]

The second factor is the impact of SFAR 88. Under a 50 percent SFAR 88
effectiveness rate, each accident has an equal probability of being
prevented by FRM or being prevented by SFAR 88. In calculating the
benefits of the final rule, each of the 3 accidents has 2 outcomes
associated with it. It is either prevented by the final rule or it is
prevented by SFAR 88. Thus, there are 8 possibilities associated with
each outcome.

Consequently, when coupled with the factor of 2 associated with the
first accident for the non-FRM equipped airplanes, there are 16
different permutations associated with each outcome, for a total of 432
permutations. All of these combinations are shown in Appendix IV-6.

Table IV-27 illustrates one of these combinations, using the outcome of
L,L,L (all three events occurring to a large airplane). The first column
lists the outcome. For example, the second line outcome L,L,L, (Y)
(1,1,0), (Y) indicates that the first accident occurred to a large
airplane that had FRM while an (N) would indicate that the first
accident happened to an airplane without FRM. The first (1) and second
(1) indicate that the first and second accidents were prevented by FRM.
The (0) indicates that the third accident was prevented by SFAR 88.
Thus, each of the 27 outcomes (for example, L, L, L,) has 16
permutations (2)\*(2\*2\*2), for a total number of 432 potential events
(27 outcomes times 16 permutations of each outcome).

The second column supplies the probabilities that any one of these
outcomes would occur. As shown, in Appendix IV-6, the probabilities that
one of these 432 potential events could occur range from .0022 percent
to 3.3348 percent.

The third column sums the present values of a large airplane prevented
accident (80 percent probability that it would have in flight and 20
percent probability that it would have occurred on the ground) by the
final rule. For example, the permutation (Y) (1,0,1) would add the
present values of a large airplane in-flight accident prevented by the
final rule in 2012 and in 2026.[^53] Similarly, the permutation (N)
(1,0,1) would add the present value of a large airplane in-flight
accident prevented in 2026 because the airplane in 2012 would not have
had FRM.

TABLE IV-28

PROBABILITIES OF AN IN-FLIGHT EXPLOSION OCCURRING TO A LARGE AIRPLANE
BEING PREVENTED BY FRM AND BY SFAR 88 AND THE PRESENT VALUE OF THE FINAL
RULE BENEFITS FOR EACH OF THE OUTCOMES

  ----------------------- ----------------------- -----------------------
  **OUTCOME**             **PROBABILITY**         **PRESENT VALUE FRM
                                                  BENEFITS**

                                                  

  **L,L,L**               **0.035%**              

  L,L,L (Y) (1,1,1)       0.002%                  \$3,412.905

  L,L,L (Y) (1,1,0)       0.002%                  \$2,752.199

  L,L,L (Y) (1,0,1)       0.002%                  \$2,391.553

  L,L,L (Y) (1,0,0)       0.002%                  \$1,730.847

  L,L,L (Y) (0,1,1)       0.002%                  \$1,825.090

  L,L,L (Y) (0,1,0)       0.002%                  \$1,164.384

  L,L,L (Y) (0,0,1)       0.002%                  \$ 803.738

  L,L,L (Y) (0,0,0)       0.002%                  \$ 143.032

  L,L,L (N) (1,1,1)       0.002%                  \$1,825.090

  L,L,L (N) (1,1,0)       0.002%                  \$1,164.384

  L,L,L (N) (1,0,1)       0.002%                  \$ 803.738

  L,L,L (N) (1,0,0)       0.002%                  \$ 143.032

  L,L,L (N) (0,1,1)       0.002%                  \$1,825.090

  L,L,L (N) (0,1,0)       0.002%                  \$1,164.384

  L,L,L (N) (0,0,1)       0.002%                  \$ 665.738

  L,L,L (N) (0,0,0)       0.002%                  \$ 143.032
  ----------------------- ----------------------- -----------------------

Finally, as shown in Appendix IV-6, we summed the probabilities of each
of the 432 outcomes that were larger than the \$1.012 billion present
value of the final rule cost. On that basis, we calculated that there is
a 26 percent probability that the final rule's direct plus demand
benefits would be greater than its costs. Finally, we calculated that
there is a 12 percent probability that the final rule's direct benefits
alone would be greater than its costs.

#  

# V. AIR CARRIER PASSENGER AIRPLANE COMPLIANCE COSTS

## v.a. INTRODUCTION 

In this Section we discuss and estimate the cost of compliance to
manufacturers and to air carrier passenger operators. We first summarize
the total compliance costs and then develop the individual costs. The
referenced Appendices provide the detailed spreadsheets used to
calculate these costs. We follow this same methodology for air carrier
cargo costs in section VI.

It should be noted that, in this section, we estimate the costs for a
specific FRM system -- the fuel tank inerting (FTI) system. When we use
the term FRM we are referring to the final rule requirement, which is
FRM. When we use the term FTI, we are referring to the costs of a
specific FRM system.

## v.b. SUMMARY OF AIR CARRIER PASSENGER AIRPLANE COMPLIANCE COST 

As shown in Table V-1, the undiscounted compliance costs for air carrier
passenger airplane operators are about \$2.076 billion, which has a
present value of \$975 million using a 7 percent discount rate and a
present value of \$1.448 billion using a 3 percent discount rate. The
undiscounted compliance costs for retrofitted airplanes are \$839
million, which has a present value of \$436 million using a 7 percent
discount rate and a present value of \$623 million using a 3 percent
discount rate. The undiscounted costs for production airplanes
(excluding the B-787) are \$1.237 billion, which has a present value of
\$539 million using a 7 percent discount rate and a present value of
\$825 million using a 3 percent discount rate. In present value terms
using a 7 percent discount rate and excluding the engineering costs,
retrofitted airplanes incur about 43 percent of the costs while
production airplanes incur about 57 percent of the costs.

TABLE V-1

COMPLIANCE COSTS FOR AIR CARRIER PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------------------- --------------- ---------------- ---------------
                          TOTAL COSTS                      

  COST CATEGORY           UNDISCOUNTED    PRESENT VALUE    PRESENT VALUE
                                          (7%)             (3%)

                                                           

  **RETROFITTED**                                          

  ENGINEERING             \$ 19           \$ 16            \$ 18

  INSTALLATION            \$ 346          \$220            \$ 283

  INVENTORY               \$ 9            \$ 6             \$ 7

  FUEL                    \$ 216          \$ 93            \$ 149

  OPERATIONAL             \$ 112          \$ 49            \$ 77

  ASM REPLACEMENT         \$ 137          \$ 52            \$ 89

                                                           

  **TOTAL**               **\$ 839**      **\$436**        **\$ 623**

                                                           

  **PRODUCTION**                                           

  ENGINEERING             \$ 107          \$100            \$ 103

  INSTALLATION            \$ 230          \$152            \$ 191

  INVENTORY               \$ 7            \$ 4             \$ 5

  FUEL                    \$ 459          \$149            \$ 272

  OPERATIONAL             \$ 197          \$ 63            \$ 116

  ASM REPLACEMENT         \$ 237          \$ 71            \$ 138

                                                           

  **TOTAL**               **\$1,237**     **\$539**        **\$ 825**

                                                           

  **GRAND TOTAL**         **\$2,076**     **\$975**        **\$1,448**
  ----------------------- --------------- ---------------- ---------------

As shown in Table V-2, the engineering and installation costs are a
little more than half of the present value compliance costs for all
airplanes. However, the installation costs are more than half (50.5
percent) of the costs for retrofitted airplanes while they are 28.2
percent of the costs for production airplanes. The engineering costs are
so much larger for production airplanes than for retrofitted airplanes
because, once the engineering and development of a production airplane
model fuel tank inerting kit is completed, there is minimal engineering
costs to apply that kit to the previously produced airplanes of that
model. The fuel costs are about a quarter (24.8 percent) of the total
costs, 21.3 percent of the costs for retrofitted airplanes and 28.2
percent of the costs for production airplanes. The operational costs are
11.5 percent of the total and the air supply module (ASM) replacement
costs are 12.6 percent of the total.

TABLE V-2

PERCENTAGE OF PRESENT VALUE (USING A 7 PERCENT DISCOUNT RATE) COMPLIANCE
COSTS BY COST CATEGORIES FOR AIR CARRIER PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------------------------- --------------------- --------------------
  COST CATEGORY                 PRESENT VALUE COSTS   PERCENTAGE OF TOTAL
                                (7%)                  

                                                      

  **RETROFITTED**                                     

  ENGINEERING                   \$ 16                 3.7%

  INSTALLATION                  \$220                 50.5%

  INVENTORY                     \$ 6                  1.4%

  FUEL                          \$ 93                 21.3%

  OPERATIONAL                   \$ 49                 11.2%

  ASM REPLACEMENT               \$ 52                 11.9%

                                                      

  **RETROFITTED TOTAL**         **\$436**             100.0%

                                                      

  **PRODUCTION**                                      

  ENGINEERING                   \$100                 18.6%

  INSTALLATION                  \$152                 28.2%

  INVENTORY                     \$ 4                  0.7%

  FUEL                          \$149                 27.6%

  OPERATIONAL                   \$ 63                 11.7%

  ASM REPLACEMENT               \$ 71                 13.2%

                                                      

  **PRODUCTION TOTAL**          **\$539**             100.0%

                                                      

  **ALL AIRPLANES**                                   

  ENGINEERING                   \$116                 11.9%

  INSTALLATION                  \$372                 38.2%

  INVENTORY                     \$ 10                 1.0%

  FUEL                          \$242                 24.8%

  OPERATIONAL                   \$112                 11.5%

  ASM REPLACEMENT               \$123                 12.6%

                                                      

  **ALL AIRPLANES TOTAL**       **\$975**             100.0%
  ----------------------------- --------------------- --------------------

As shown in Table V-3, the undiscounted compliance costs for air carrier
Boeing passenger airplane operators are \$1.187 billion, which has a
present value of \$568 million using a 7 percent discount rate and a
present value of \$836 million using a 3 percent discount rate. The
undiscounted compliance costs for air carrier Airbus passenger airplane
operators are \$890 million, which has a present value of \$407 million
using a 7 percent discount rate and a present value of \$612 million
using a 3 percent discount rate.

TABLE V-3

COMPLIANCE COSTS FOR AIR CARRIER PASSENGER AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  -------------------- ---------------- ----------------- -----------------
                       TOTAL COSTS                        

  COST CATEGORY        UNDISCOUNTED     PRESENT VALUE     PRESENT VALUE
                                        (7%)              (3%)

                                                          

  **BOEING**                                              

  ENGINEERING          \$ 76            \$ 69             \$ 73

  RETROFITTING         \$ 241           \$153             \$ 197

  PRODUCTION           \$ 127           \$ 83             \$ 104

  INVENTORY            \$ 9             \$ 6              \$ 8

  FUEL                 \$ 333           \$119             \$ 207

  OPERATIONAL          \$ 184           \$ 67             \$ 115

  ASM REPLACEMENT      \$ 217           \$ 71             \$ 132

                                                          

  **TOTAL**            **\$1,187**      **\$568**         **\$ 836**

                                                          

  **AIRBUS**                                              

  ENGINEERING          \$ 50            \$ 47             \$ 48

  RETROFITTING         \$ 105           \$ 67             \$ 86

  PRODUCTION           \$ 103           \$ 71             \$ 87

  INVENTORY            \$ 6             \$ 4              \$ 5

  FUEL                 \$ 344           \$123             \$ 213

  OPERATIONAL          \$ 125           \$ 44             \$ 78

  ASM REPLACEMENT      \$ 157           \$ 51             \$ 95

                                                          

  **TOTAL**            **\$ 890**       **\$407**         **\$ 612**

                                                          

  **GRAND TOTAL**      **\$2,076**      **\$975**         **\$1,448**
  -------------------- ---------------- ----------------- -----------------

## V.C. RESPONSIBILITY FOR AND METHODS OF COMPLIANCE 

Boeing and Airbus are responsible for compliance with the certification
requirements for future type certificated airplanes. Although operators
are responsible for ensuring that production airplanes under existing
type certificates are in compliance with the operating rules, Boeing and
Airbus will equip their production airplanes to be in compliance with
the requirements if they intend to sell them in the United States.
Finally, although operators are responsible for compliance with the
retrofitting requirements, Boeing and Airbus will likely develop and
sell most of the service bulletins and kits necessary for the retrofits.

## V.D. BASELINES, METHODOLOGY, AND DATA SOURCES 

### V.D.1. [Baselines]{.underline}

The baseline used to compute the incremental compliance costs is not the
minimum compliance with the current FAA regulations but, rather, the
current and expected future industry practices in the absence of the
rule.

In the IRE, we had noted that Boeing had informed us of their intention
to install FRM in their production airplanes by 2008. Consequently, we
had not included the cost of installing FRM in Boeing production
airplanes as an incremental compliance cost of the rule. However, recent
developments have indicated that, in the absence of the rule, US
airlines would not operate FRM unless the FAA required it. As a result,
we now include Boeing production costs as incremental costs of the rule
in this Regulatory Evaluation. However, the B-787 is required to have
FRM under its certification even if the FRM final rule is not
promulgated. Therefore, we exclude the B-787 from the cost and benefit
analyses.

### V.D.2. [Methodology]{.underline} 

Although the rule does not require fuel tank inerting (FTI), at this
time it is the only practical system available to implement FRM.
Consequently, the compliance costs of the rule are based on the cost to
install and operate FTI. Should a less-expensive FRM system be
developed, then we will have overestimated the compliance cost.

The incremental compliance costs can be expressed in one of two
analytically equivalent methods: (1) the discounted present value; and
(2) the annualized cost. The discounted present value is the sum of each
future year's costs over the time period discounted by the rate of
return back to the first year. The annualized cost is calculated by
transforming the discounted total present value into a yearly cost based
on the annual rate of return.

For this analysis, we used the discounted present value approach
because, as will be shown, about 75 percent of the present value costs
are incurred during the first 10 years. Using an annualized cost
presents a misleading picture because it implies that the compliance
costs could be evenly distributed over the entire time-period, when, in
fact, the costs are front-end loaded.

Finally, as was used to discount the quantified benefits, we used the
OMB-mandated discount rates of 7 percent and 3 percent,[^54] with 7
percent serving as the baseline value and 3 percent serving as part of
the sensitivity analysis.

### V.D.3. [Data Sources]{.underline} 

The data sources for the FTI unit casts are those reported in the IRE,
which were based on the ARAC groups, and the costs reported in the
Boeing, Airbus, and ATA comments.

## V.E. FINAL RULE COMPLIANCE DATES

In completing these cost calculations, we assumed that the final rule
will be published on January 1, 2008. The rule requires production
airplanes to be in compliance within 2 years (January 1, 2010) and all
airplanes to be in compliance within 7 years after retrofitting kits
become available (but no later than 9 years after the final rule
publication date (January 1, 2018)).

As it is more expensive to retrofit equipment than to install it as
original equipment, we anticipate that Boeing and Airbus customers will
pressure them to install FRM systems in their production airplanes as
soon as possible in order for the air carriers to avoid retrofitting
costs. Using that logic, we determined that all engineering and
prototype work will be completed and all associated parts and components
necessary for production airplane models will be available within 1
year, while it will take the manufacturers 2 years to perform these
tasks for airplane models no longer in production. We also determined
that the retrofitting kits will be available in 2 years. Thus, we
determined that production airplanes will be in compliance starting on
January 1, 2009, and that retrofitting will begin on January 1, 2010.

## V.F. SOURCES OF COMPLIANCE COSTS

In the IRE, we evaluated the following 8 potential general compliance
cost categories:

1.  One-time costs to reengineer, redesign, test, and recertificate FTI
    systems;

2.  One-time equipment and labor costs to retrofit airplanes;

3.  One-time losses from additional out-of-service time to complete the
    retrofits;

4.  Yearly costs to install FTI on production airplanes;

5.  Annual additional fuel consumption costs due to the FTI system
    weight;

6.  Annual additional fuel consumption costs due to the increased amount
    of bleed air and increased drag;

7.  Annual inspection, maintenance, and replacement costs of the FTI
    equipment; and

8.  Periodic air separation module (ASM) replacement.

No one reported any additional cost categories that we had overlooked in
the IRE. Finally, the several spreadsheets containing the data and
calculations for the compliance costs are provided in Appendices V-1
through V-16.

### V.G. [UNIT LABOR COSTS]{.underline}

For an engineer\'s compensation rate, we used an aerospace manufacturer
engineer's average hourly wage rate. This average wage rate was then
adjusted to include fringe benefits, which transforms it into an hourly
compensation rate. This hourly compensation rate was further adjusted to
include the supervisory, clerical, administrative, and legal time not
otherwise included necessary to complete an engineering analysis for an
amended type certificate (TC). As an engineering specialist in fuel
tanks is highly paid, we determined that the typical manufacturer
engineer is paid at the 90th percentile of the Department of Labor
category of Aviation Engineer. On that basis, we calculated an adjusted
engineer total compensation rate of \$110[^55] an hour. At an average
engineer work year of 2,000 hours, the engineer-year adjusted
compensation rate is \$220,000.[^56]

We used the same approach for airplane mechanics in the manufacturers,
major airlines, and large repair stations that will perform the
installations and retrofits. Fringe benefits are added to the hourly
airplane mechanic wage rate to obtain an hourly compensation rate. Then,
rather than estimating individual hours and costs of additional
supervisory, clerical, and administrative labor, we factored those costs
into the airplane mechanic hourly compensation rate. Finally, we
determined that the typical air carrier and large repair station
aviation mechanic is paid at the 90th percentile of the Department of
Labor category of Airplane Mechanic. Therefore, we calculated an
adjusted total compensation rate of \$80 an hour for an airplane
mechanic.[^57] At an average airplane mechanic work year of 2,000 hours,
the mechanic-year adjusted compensation rate is \$160,000.[^58]

V.H. ONE-TIME ENGINEERING COSTS TO DESIGN FTI SYSTEMS

### V.H.1. [Introduction]{.underline} 

The rule will require Boeing and Airbus to:

1.  engineer FTI systems for their airplane models;

2.  provide documents (specifications, ICDs, etc.)

3.  provide manuals (flight manuals, maintenance manuals, etc.)

4.  lab and flight/ground test these systems;

5.  submit the drawings, data, and test results for FAA approval of the
    FTI system amended TC.

With respect to future type certificated airplanes, the rule imposes
minimal incremental engineering costs on these future designs.

### V.H.2. [Types of Engineering Assessments]{.underline} 

In the IRE, we had developed a methodology for estimating the
engineering assessment costs that anticipated significant carryover of
the data and results from the first engineering assessment to later
engineering assessments, resulting in fewer labor hours and less testing
for these later assessments. We also anticipated that FTI system amended
TCs would be issued on an airplane \"model\" (e.g., a B-767) basis.
However, minor modifications of the amended TCs will need to be made for
each \"model series\" (e.g., a B-737-700, a B-737-800, etc. In the IRE,
we labeled the very first FTI assessment the \"initial\" assessment, the
airplane model FTI assessments as the "model" assessments, and the
airplane model series FTI assessments as the \"derivative\" assessments.

The Boeing and Airbus comments used this same approach and terminology
and we continue its use in this Regulatory Evaluation.

The Boeing production airplane models are the B-737-NG, the B-747, the
B-767, the B-777, and the B-787[^59] while their out-of-production
models are the B-737-Classic, the B-747-100/200/300, and the B-757. The
Airbus production airplane models are the A-320 family, the A-330, the
A-340, the A-350, and the A-380[^60] while their out-of-production
models are the A-300 and the A-310.

In the IRE, we had determined that the initial Airbus FTI system
assessment would be the prototype for all Airbus models. For Boeing, we
had determined that two different FTI system initial assessments would
be needed -- one for the B-747 and one for all their other models.

Airbus commented that we had underestimated the number of FTI
engineering assessments they needed to complete. We incorporate the
Airbus numbers into this analysis with the exception of lowering their
reported 3 models and 5 derivatives for the A-330 and A-340 models to 3
models (which includes the A-350) and 3 derivatives.

Boeing commented that the B-737-200 fuel system was such that the
B-737-Classic design could not be adapted for it and an entirely new FTI
assessment is necessary for the B-737-200. They similarly commented that
the B-747-100/200/300 fuel systems were such that the B-747-400 FTI
assessment could not be adapted for those earlier B-747 models. We agree
with the Boeing comments. However, in practice, as we determined that
B-737-200s and B-747-100/200/300s will no longer be in air carrier
scheduled passenger service by 2018, we calculated no engineering FTI
assessment costs for them.

In distributing the FTI engineering assessment costs between passenger
and cargo airplanes, we exclusively attributed the engineering costs to
the passenger operation when a model is used in both passenger and cargo
operations because the passenger operation nearly always provides the
bulk of the production.

As shown in Table V-4, which summarizes Appendix V-1, Boeing will
complete 2 initial, 3 model, and 6 derivative FTI engineering
assessments for their production passenger airplane models and 2 model
and 3 derivative FTI assessments for their out-of-production models.
Airbus will perform 1 initial, 4 model, and 6 derivative FTI engineering
assessments for their production passenger airplane models. The 3 model
and 1 derivative FTI assessments for the out-of-production
A-300/A-300-600 and the A-310 apply only to air carrier cargo airplanes
because these models will not be in US air carrier passenger service.

TABLE V-4

NUMBERS OF PASSENGER AIRPLANE ENGINEERING ASSESSMENTS FOR FTI AMENDED
TCs BY TYPE OF ASSESSMENT AND PRODUCTION STATUS

  ---------------------------- ----------- --------------- ---------------
  MODEL                        INITIAL     FIRST MODEL     DERIVATIVE

                                                           

  B-737-300/4/5                0           1               2

  B-737-NG                     1           1               2

  A-320 FAMILY                 1           1               3

  B-757-200/300                0           1               1

  B-767-200/3/4                0           1               2

  B-787                        0           0               0

  A-300/A-300-600              0           0               0

  A-310                        0           0               0

  A-350                        0           1               0

  A-330-200                    0           1               0

  A-330-300                    0           0               0

  A-340-200/3/5/6              0           1               3

  A-380                        0           0               0

  B-747-100/200/300            0           0               0

  B-747-400                    1           0               0

  B-747-800                    0           0               1

  B-777-200/3                  0           1               1

  **TOTAL**                    **3**       **9**           **15**

                                                           

  BOEING                       2           5               9

  AIRBUS                       1           4               6

  **TOTAL**                    **3**       **9**           **15**

                                                           

  BOEING OUT-OF-PRODUCTION     0           2               3

  AIRBUS OUT-OF-PRODUCTION     0           0               0

  **TOTAL OUT-OF-PRODUCTION**  **0**       **2**           **3**

                                                           

  BOEING PRODUCTION            2           3               6

  AIRBUS PRODUCTION            1           4               6

  **TOTAL PRODUCTION**         **3**       **7**           **12**
  ---------------------------- ----------- --------------- ---------------

V.H.3. [Engineering Costs per FTI Engineering Assessment]{.underline}

The breakdown for the number of hours to complete each engineering task
and their associated dollar costs plus the testing costs for each of the
3 FTI engineering assessments by airplane category is presented in
Appendix V-2.

In summary, 81,200 engineering and 25,000 lab and ground/flight test
hours will be needed for the initial engineering assessment (a cost of
\$11.732 million), 46,175 engineering and 3,200 lab and ground/flight
test hours will be needed for a first model engineering assessment (a
cost of \$5,456), and 23,250 engineering and 1,600 to 2,000 lab and
ground/flight test hours will be needed for a derivative engineering
assessment (at a cost of \$2.744 million to \$2.788 million).

### V.H.4. [Total FTI Passenger Airplane Engineering Assessment Costs]{.underline}

All of the Boeing FTI engineering assessment costs are incremental costs
of the final rule. Although the EASA has indicated it intends to require
FRM on production airplanes, it has not promulgated that rule.
Consequently, all of the Airbus FTI engineering assessment costs are
incremental compliance costs.

The FTI engineering assessments for production airplanes will be
completed in 2008 in order to start installation in 2009. It will take 2
years (2009 and 2010) to complete the FTI engineering assessments for
out-of-production airplane models because they will be lower priority
than the ones for production airplanes.[^61]

As shown in Table V-5, which summarizes Appendix V-1, the final rule
total FTI engineering assessment costs to develop and obtain the amended
TCs will be about \$126 million,[^62] which has a present value of \$116
million using a 7 percent discount rate and a present value of \$121
million using a 3 percent discount rate. The engineering assessment
costs for retrofitting airplanes will be about \$19 million, which has a
present value of \$16 million using a 7 percent discount rate and a
present value of \$18 million using a 3 percent discount rate. The
engineering assessment costs for production airplanes will be about
\$107 million, which has a present value of \$100 million using a 7
percent discount rate and a present value of \$103 million using a 3
percent discount rate.

TABLE V-5

UNDISCOUNTED AND PRESENT VALUE ENGINEERING ASSESSMENT COSTS FOR AIR
CARRIER PASSENGER AIRPLANE AMENDED TCs

(in Millions of 2007 Dollars)

  ------------------------ -------------- --------------- --------------- ---------------
                                          TOTAL                           
                                          ENGINEERING                     
                                          COSTS                           

  MODEL                    PRODUCTION (P) UNDISCOUNTED    PRESENT VALUE   PRESENT VALUE
                           RETROFIT (R)                   COST (7%)       COST (3%)

                                                                          

  **Small**                                                               

  B-737-300/4/5            R              \$ 10.943       \$ 9.246        \$ 10.165

  B-737-NG                 P              \$ 22.675       \$ 21.192       \$ 22.015

  A-320 FAMILY             P              \$ 25.419       \$ 23.756       \$ 24.678

  **Total**                               **\$ 59.037**   **\$ 54.193**   **\$ 56.858**

                                                                          

  **Medium**                                                              

  B-757-200/300            R              \$ 8.222        \$ 6.946        \$ 7.637

  B-767-200/3/4            P              \$ 10.987       \$ 10.268       \$ 10.667

  B-787                    P              \$ 0.000        \$ 0.000        \$ 0.000

  A-300/A-300-600          R              \$ 0.000        \$ 0.000        \$ 0.000

  A-310                    R              \$ 0.000        \$ 0.000        \$ 0.000

  A-350                    P              \$ 5.456        \$ 5.099        \$ 5.297

  **Total**                               **\$ 24.665**   **\$ 22.314**   **\$ 23.601**

                                                                          

  **Large**                                                               

  A-330-200                P              \$ 5.456        \$ 5.099        \$ 5.297

  A-330-300                P              \$ 0.000        \$ 0.000        \$ 0.000

  A-340-200/3/5/6          P              \$ 13.819       \$ 12.915       \$ 13.416

  A-380                    P              \$ 0.000        \$ 0.000        \$ 0.000

  B-747-100/200/300        R              \$ 0.000        \$ 0.000        \$ 0.000

  B-747-400                P              \$ 11.732       \$ 10.964       \$ 11.390

  B-747-800                P              \$ 2.788        \$ 2.605        \$ 2.706

  B-777-200/3              P              \$ 8.244        \$ 7.704        \$ 8.004

  **Total**                               **\$ 42.038**   **\$ 39.288**   **\$ 40.814**

                                                                          

  **GRAND TOTAL**                         **\$125.741**   **\$115.795**   **\$121.273**

                                                                          

  **BOEING**                              **\$ 75.591**   **\$ 68.926**   **\$ 72.584**

  **AIRBUS**                              **\$ 50.150**   **\$ 46.869**   **\$ 48.689**

                                                                          

  **BOEING                                **\$ 19.165**   **\$ 16.192**   **\$ 17.802**
  OUT-OF-PRODUCTION**                                                     

  **AIRBUS                                **\$ 0.000**    **\$ 0.000**    **\$ 0.000**
  OUT-OF-PRODUCTION**                                                     

  **TOTAL                                 **\$ 19.165**   **\$ 16.192**   **\$ 17.802**
  OUT-OF-PRODUCTION**                                                     

                                                                          

  **BOEING PRODUCTION**                   **\$ 56.426**   **\$ 52.734**   **\$ 54.782**

  **AIRBUS PRODUCTION**                   **\$ 50.150**   **\$ 46.869**   **\$ 48.689**

  **TOTAL PRODUCTION**                    **\$106.576**   **\$ 99.603**   **\$103.471**
  ------------------------ -------------- --------------- --------------- ---------------

## 

## V.I. UNIT COSTS TO RETROFIT FTI IN A PASSENGER AIRPLANE

### V.I.1. [Airplane Model Categories]{.underline}

In the IRE, we had estimated the unit FTI retrofitting costs using the
following 3 generic airplane model categories:

1.  Large (B-747, B-777, and A-330/340);

2.  Medium (B-767 and A-300/310); and

3.  Small (B-737, B-757, and A-320 "family").

Although the Appendices are based on a 17 model system, in accordance
with the docket comments, we revised our generic airplane model
categories into the following 9 categories:

1.  B-737-300/400/500 (B-737 Classic);

2.  B-737-600/700/800/900 (B-737 NG) until January 2006;

3.  B-737-600/700/800/900 (B-737 NG) from January 2006 through 2008;

4.  A-318/319/320/321 (A-320 Family);

5.  B-757;

6.  B-767, B-787; A-300, A-310, & A-350;

7.  B-777, A-330

8.  B-747-100/200/300; and

9.  B-747-400/800, A-340, & A-380.

### V.I.2. [Unit Retrofitting Costs]{.underline}

### [V.G.2.a. Retrofitting Kit Costs]{.underline} 

In the IRE, we relied primarily on Boeing and ARAC data for the unit
retrofitting kit costs. Boeing, the ATA, and Airbus commented on these
unit costs and we have revised our unit costs in this Final Regulatory
Evaluation as appropriate. While Boeing did not provide individual cost
components (as had been provided by ARAC 2) due to proprietary concerns,
they reported their aggregate kit costs and noted that most of their
individual component costs were similar to the ARAC costs.[^63] The ATA
reported the prices that some of their members had been quoted by
Boeing. Airbus did not provide individual kit component estimates or
specific kit costs, but made a general comment that we had
underestimated the retrofitting costs in the IRE by "a factor of 2 or
3".

However, United/Shaw Aero Devices/Air Liquide has recently developed an
FTI to retrofit in airplanes and they have reported kit costs of about
30 percent less than the Boeing kit costs. As they have a patent for the
system and operational prototypes, we have used the United/Shaw Aero
Devices/Air Liquide retrofitting kit costs in this analysis.

In the IRE, the kit costs were \$164,000 for a large airplane, \$123,000
for a medium-sized airplane, and \$105,000 for a small airplane. As
shown in Table V-6, we use the United/Shaw Aero Devices/Air Liquide
retrofitting kit costs of \$175,000 to \$192,500 for a large airplane,
\$164,500 for a medium-sized airplane, and \$77,000 for a small
airplane.

TABLE V-6[^64]

COMPARISON OF BOEING AND UNITED/SHAW AEROSPACE/AIR LIQUIDE RETROFITTING
KIT COSTS TO THE ESTIMATED ARAC RETROFITTING KIT COST

  --------------- ----------- ----------- ----------- ----------- -----------
  MODEL           ARAC        BOEING      BOEING KIT  UNITED      UNITED KIT
                  RETROFIT    RETROFIT    COST/ARAC   RETROFIT    COST/ARAC
                  KIT COST    KIT COST    KIT COST    KIT COST    KIT COST

                                                                  

  B-737-CLASSIC   \$105,398   \$110,000   1.044       \$ 77,000   0.731

  B-737-NG        \$105,398   \$110,000   1.044       \$ 77,000   0.731

  B-737-NG Late   \$105,398   \$110,000   1.044       \$ 77,000   0.731

  B-757           \$105,398   \$235,000   2.230       \$120,750   1.104

  B-767           \$123,356   \$235,000   1.905       \$164,500   1.334

  B-747-1/2/300   \$163,854   \$250,000   1.526       \$175,000   1.068

  B-747-400       \$163,854   \$250,000   1.526       \$175,000   1.068

  B-747-800       \$163,854   \$250,000   1.526       \$175,000   1.068

  B-777           \$163,854   \$275,000   1.678       \$192,500   1.175

  B-787           \$0         \$0         0.000       \$0         0.000

  A-300/300-600   \$123,356   \$235,000   1.905       \$120,750   0.979

  A-310           \$123,356   \$235,000   1.905       \$120,750   0.979

  A-320 FAMILY    \$105,398   \$110,000   1.044       \$ 77,000   0.731

  A-330           \$163,854   \$275,000   1.678       \$192,500   1.175

  A-340           \$163,854   \$250,000   1.526       \$175,000   1.068

  A-350           \$123,356   \$235,000   1.905       \$164,500   1.334

  A-380           \$163,854   \$250,000   1.526       \$175,000   1.068
  --------------- ----------- ----------- ----------- ----------- -----------

A major cause for these increases is the significantly increased unit
cost of the air separation modules (ASMs) for all models (except for
small airplanes) and the increased number of ASMs needed for a FTI
system. In the IRE, the estimated unit ASM costs were \$29,000 for a
large airplane, \$19,000 for a medium airplane, and \$5,275 for a small
airplane. Boeing reported that the ASM spares costs will be between
\$135,000 and \$150,000 for a large airplane, about \$150,000 for a
medium-sized airplane, and between \$30,000 and \$45,000 for a small
airplane.[^65]

### [V.I.2.b. Labor Costs]{.underline} 

As noted in the IRE, the labor hours to retrofit an airplane depend upon
whether the retrofit would be completed during a major check or during a
dedicated maintenance session. A significant amount of the labor (such
as opening the tank, venting the tank, closing the tank, etc) for a FTI
retrofit will have been done during a major check in order for the
mechanics to complete other mandatory maintenance tasks (such as tank
inspections). These activities to open up the airplane will need to be
re-done if the retrofit were performed during a dedicated maintenance
session.

In the IRE, we used the ARAC-reported labor hours to complete a retrofit
(see Appendix V-3). These labor hours had been provided by airlines'
representatives to the ARAC. In the IRE, a retrofit done during a major
check was estimated to take 416 hours for a large airplane, 409 hours
for a medium-sized airplane, and 356 hours for a small airplane. A
retrofit done during a dedicated maintenance session was estimated to
take 527 hours for a large airplane, 520 for a medium-sized airplane,
and 467 hours for a small airplane.

The ATA commented that their airlines had reported that their FTI
retrofitting labor hours for the FTI system were greater than the labor
hours that had been supplied to ARAC. They reported that it will take
694 labor hours to retrofit a large airplane during a major check, 674
labor hours to retrofit a medium-sized airplane during a major check,
and 594 hours to retrofit a small airplane during a major check. We
accept the ATA comment as the number of labor hours necessary to install
the FTI system that was in development.

Since the NPRM, Boeing has reported that it has begun manufacturing
B-737-NGs equipped with the in-take plumbing, some of the wiring, and
the bracketing to install FTI. They reported that these
pre-installations will have a minimal effect on the kit cost and a
minimal impact on the airplane's weight, but they will reduce the
retrofitting labor hours by half. They further anticipate equipping the
225 post-January 2006 B-737-NGs with this FTI pre-installation set. We
accept the Boeing statements and cut the retrofitting labor hours for
these 225 B-737-NGs by half.[^66]

United/Shaw Aero Devices/Air Liquide report that it will take 294 labor
hours to retrofit its system during a major maintenance check. We accept
their base estimate for their system. However, it is generally the case
that the supplier may not completely consider all of the installers
labor hours. Consequently, we adjust the United/Shaw Aero Devices/Air
Liquide labor estimate upward by the same percentage that the ATA
reported for the labor hours necessary to install FTI relative to those
reported by the supplier.

On that basis, we calculated that retrofitting an airplane during a
dedicated maintenance session will take 347 labor hours for a large
airplane, 337 labor hours for a medium-sized airplane, and 294 labor
hours for a small airplane. These results are detailed in Appendix V-4.

However, those labor hours are based on the labor time needed to
retrofit the first several airplanes. As far back as 1939[^67], T.P.
Wright recognized the repetition of the same operation results in
reduced efforts expended on that operation.[^68] Direct labor man-hours
necessary to complete a unit of production would decrease by a constant
percentage each time the production quantity is doubled. Learning or
cost improvement occurs due to worker increases in efficiency and the
implicit training in repetition. T.P. Wright found that an 80% learning
efficiency has been a common occurrence in airplane production. We
assume that this 80 percent learning efficiency also applies to
retrofitting operations.

We estimate the labor hour efficiencies for retrofitting FTI on the xth
set of airplanes (Y~x~) as follows:

Y~x~ = a \* x^b^

Where Y~x~ = cumulative average time to install a number of units,

a = time to install the first unit by equipment group,

x = the sequential period of installation time,

b = index of learning ( b = log (learning curve) / log (2)),

learning curve = 80.

In order to estimate the learning efficiency savings for installing
ADS-B Out on newly delivered and active aircraft, we used the initial
hours by model to retrofit FTI systems. The learning efficiencies begin
in 2010 and extend to the start of 2018, the time in which the retrofits
will be installed.

By way of example, assume that 10 airplanes are retrofitted every year
and it takes 100 hours for each retrofit. After the second year, when a
total of 20 airplanes have been retrofitted, the labor hours will
decrease by 20 percent starting in year 3 to 80 hours an airplane. After
the fourth year, when a total of 40 airplanes have been retrofitted, the
80 labor hours will decrease by 20 percent starting in year 5 to 64
hours an airplane. After year 8 when a total of 80 airplanes have been
retrofitted, the 64 labor hours will decrease by 20 percent starting in
year 9 to 51.2 hours an airplane, etc.[^69]

Using an airline mechanic burdened compensation rate of \$80 an hour,
the labor costs for the first FTI retrofits based on the United/Shaw
Aero Devices/Air Liquide estimates done during a major check range from
\$23,520 to \$27,760 an airplane. For a retrofit done during a dedicated
maintenance session, these labor costs range from \$30,853 to \$34,277
an airplane.[^70] For one of the 225 post-January 2006 B-737-NGs with
the pre-installation, the labor costs during a major check will be
\$11,760 and will be \$15,427 during a dedicated maintenance session.

###  V.I.2.c. [Equipment and Labor Costs]{.underline}

Thus, the equipment and labor costs to retrofit FTI during a major check
will be between \$100,520 and \$220,260. For a retrofit completed during
a dedicated maintenance session, these equipment and labor costs will be
between \$107,853 and \$227,667. For one of the 225 post-January 2006
B-737-NG retrofits, these equipment and labor costs will be \$88,760
during a major check and \$92,427 during a dedicated maintenance
session. However, the actual labor costs will decrease over time as the
learning curve reduces the number of labor hours to complete these
retrofits.

###  V.I.2.c. [Out of Service Losses]{.underline}

Even if the retrofit were completed during a major check, the airplane
will incur additional out-of-service time and economic loss. In the IRE,
we had estimated that the average increase in out-of-service time during
a major check would be 1 day while a dedicated maintenance visit would
keep the airplane out of service for 4 days. The ATA and Airbus
commented that a retrofit completed during a major check will add 2 days
of out-of-service time. We agree with their comments and incorporate
them into this analysis. However, for one of the 225 post-January 2006
B-737-NG retrofits, the additional out-of-service time will be 1 day.
The ATA did not comment on the number of out-of-service days for a
dedicated visit, while Airbus commented that a retrofit during a medium
check will add 5 out-of-service days and a retrofit during a dedicated
session will involve 7 days out-of-service. We determined that the
average number of out-of-service days from a dedicated visit will be 6
days for all airplanes, including the United/Shaw Aero Devices/Air
Liquide package.

However, as the labor hours to retrofit decline, so does the time
out-of-service. We determined that there is a direct correlation between
the percentage reduction in labor hours and the amount of time an
airplane will be out of service for the retrofit. Thus, we apply the
same 80 percent learning curve to the amount of out-of-service time.

In the IRE, we used a pro-rated monthly lease rate to estimate the
economic losses from an airplane being out of service. Both the ATA and
Airbus commented that we should have used net operating revenue loss. We
disagree. Our analysis of the economic losses from an out-of-service
airplane is based on the overall aviation system losses, which is not
the same as an airline's lost net operating revenue. For example, most
passengers who would have flown Airline A but for Airline A's airplane
being retrofitted would book passage on Airline B. Thus, one airline's
net operating revenue loss is largely offset by another airline's net
operating revenue gain. The losses to the aviation system from
out-of-service time are from the passengers who would have flown, but
did not fly due to the retrofitted airplane's unavailability or who
incurred losses from not traveling at their ideal price or time.

We use the average lease rates to proxy the aviation system losses from
out-of-service time.[^71] Lease rates reflect the average amount an
operator would pay to maintain its schedule. Based on the FAA economic
values,[^72] we calculated that the average daily lease rate ranges from
\$4,776 to \$13,915 an airplane.[^73] As shown in Table V-5, we
calculated that two days out-of-service losses will be between \$9,552
and \$27,829. Six days out-of-service losses will be between \$28,656
and \$83,448.

As shown in Table V-6, the costs plus out-of-service losses for a
retrofit performed during a major check will be between \$111000 and
\$249,000 an airplane and between \$121,000 and \$311,000 for an
airplane retrofitted during a dedicated session. For one of the 225
post-January 2006 B-737-NGs, the costs plus out-of-service losses will
be \$98,000 during a major check and \$121,000 during a dedicated
session.

TABLE V-6

COSTS TO INITIALLY RETROFIT FTI BY AIRPLANE MODEL

(in Thousands of 2007 Dollars)

  --------------- ------- -------- ------- ---------------- ----------- -------- ------- ----------------
                  HEAVY                                     DEDICATED                    
                  CHECK                                     VISIT                        

  MODEL           TOTAL   KIT      LABOR   OUT-OF-SERVICE   TOTAL       KIT      LABOR   OUT-OF-SERVICE

  B-737-CLASSIC   \$111   \$ 77    \$24    \$10             \$137       \$ 77    \$31    \$29

  B-737-NG        \$111   \$ 77    \$24    \$10             \$137       \$ 77    \$31    \$29

  B-737-NG Late   \$ 98   \$ 77    \$15    \$ 6             \$121       \$ 77    \$15    \$29

  B-757           \$167   \$121    \$27    \$19             \$211       \$121    \$34    \$56

  B-767           \$214   \$165    \$27    \$22             \$264       \$165    \$34    \$65

  B-747-1/2/300   \$219   \$175,   \$28    \$26             \$289       \$175,   \$35    \$79

  B-747-400       \$229   \$175    \$28    \$26             \$289       \$175    \$35    \$79

  B-747-800       \$229   \$175    \$28    \$26             \$289       \$175    \$35    \$79

  B-777           \$249   \$193    \$28    \$28             \$311       \$193    \$35    \$83

  B-787           \$0     \$0      \$0     \$0              \$0         \$0      \$0     \$0

  A-300/300-600   \$214   \$165    \$27    \$22             \$220       \$121    \$34    \$65

  A-310           \$214   \$165    \$27    \$22             \$220       \$121    \$34    \$65

  A-320 FAMILY    \$111   \$ 77    \$24    \$10             \$137       \$ 77    \$31    \$29

  A-330           \$249   \$193    \$28    \$28             \$311       \$193    \$35    \$83

  A-340           \$229   \$175    \$28    \$26             \$289       \$175    \$35    \$79

  A-350           \$214   \$165    \$27    \$22             \$264       \$165    \$34    \$65

  A-380           \$229   \$175    \$28    \$26             \$289       \$175    \$35    \$79
  --------------- ------- -------- ------- ---------------- ----------- -------- ------- ----------------

By way of illustration, as shown in Table V-7, we provide the
undiscounted cost of retrofitting an airplane in 2010 and the cost of
retrofitting an airplane in 2017, after applying the learning curve. If
the retrofit is done during a scheduled maintenance session, the
undiscounted costs fall by \$10,000 to \$28,000 an airplane from 2020 to
2017. If the retrofit is done during a dedicated visit, the undiscounted
costs fall by \$21,000 to \$56,000 an airplane from 2020 to 2017.[^74]

TABLE V-7

**UNDISCOUNTED** COSTS TO RETROFIT FTI BY AIRPLANE MODEL IN 2010 AND IN
2017

(in Thousands of 2007 Dollars)

  --------------- --------- -------- ------------ ----------- -------- ------------
                  HEAVY                           DEDICATED            
                  CHECK                           VISIT                

  MODEL           2010      2017     DIFFERENCE   2010        2017     DIFFERENCE

                                                                       

  B-737-CLASSIC   \$111     \$ 94    \$17         \$137       \$107    \$30

  B-737-NG        \$111     \$ 94    \$17         \$137       \$107    \$30

  B-737-NG Late   \$98      \$ 88    \$10         \$121       \$100    \$21

  B-757           \$167     \$144    \$23         \$211       \$152    \$59

  B-767           \$214     \$190    \$24         \$264       \$216    \$48

  B-747-1/2/300   \$219     \$203    \$16         \$289       \$233    \$56

  B-747-400       \$229     \$203    \$26         \$289       \$233    \$56

  B-747-800       \$229     \$203    \$26         \$289       \$233    \$56

  B-777           \$249     \$221    \$28         \$311       \$253    \$58

  B-787           \$0       \$0      \$0          \$0         \$0      \$0

  A-300/300-600   \$214     \$190    \$24         \$264       \$216    \$48

  A-310           \$214     \$190    \$24         \$264       \$216    \$48

  A-320 FAMILY    \$111     \$ 94    \$17         \$137       \$107    \$30

  A-330           \$249     \$221    \$28         \$311       \$253    \$58

  A-340           \$229     \$203    \$26         \$289       \$233    \$56

  A-350           \$214     \$190    \$24         \$264       \$216    \$48

  A-380           \$229     \$203    \$26         \$289       \$233    \$56
  --------------- --------- -------- ------------ ----------- -------- ------------

## V.J. TOTAL COSTS TO RETROFIT FTI 

### V.J.1. [Assumptions]{.underline} 

We made the following assumptions to calculate the total retrofitting
costs.

1.  The retrofitted airplanes will be those in service as of January 1,
    2018, and manufactured before January 1, 2009, the date at which FTI
    will be installed on all affected production airplanes.

2.  Airplanes from out-of-production models will be retired first
    because they are generally the oldest.

3.  Retrofitting will begin on January 1, 2010.

4.  Eighty five percent of the retrofits will be completed during a
    scheduled major maintenance check because the operator has 7 to 8
    years after the amended TCs have been issued to retrofit the
    airplane.

5.  Fifteen percent of the retrofits will be completed during a
    dedicated maintenance session. These will occur primarily because an
    operator or a lessor had planned to retire an airplane, but changed
    its plans and wants to continue the airplane in active service. The
    dedicated maintenance session retrofits will occur during the last 2
    years for compliance; i.e., during 2016 and 2017.

### V.J.2. [Numbers of Retrofitted Airplanes]{.underline} 

As shown in Table V-8, which summarizes Appendix V-5 that contains these
numbers by model, we determined that 2,732 air carrier passenger
airplanes will be retrofitted with FTI. Of the 2,732 airplanes, 2,322
will be retrofitted during a major check and 410 will be retrofitted
during a dedicated maintenance session, while 1,780 will be Boeing
airplanes and 952 will be Airbus airplanes

An average of 290 air carrier passenger airplanes will be retrofitted in
each year during a "D" check. Finally, an average of 205 airplanes will
be retrofitted during a special maintenance session in 2016 and in 2017.

TABLE V-8

NUMBER OF RETROFITTED AIR CARRIER PASSENGER AIRPLANES BY TYPE OF
MAINTENANCE SESSION

  ---------------- ---------------- ------------------ --------------------
                   NUMBER OF                           
                   RETROFITS                           
                   COMPLETED                           

  YEAR             TOTAL            "D" CHECK          SPECIAL SESSION

                                                       

  2010             290              290                0

  2011             290              290                0

  2012             290              290                0

  2013             290              290                0

  2014             290              290                0

  2015             290              290                0

  2016             496              291                205

  2017             496              291                205

                                                       

  **TOTAL**        **2,732**        **2,322**          **410**

                                                       

  **BOEING**       **1,780**        **1,513**          **267**

  **AIRBUS**       **952**          **809**            **143**
  ---------------- ---------------- ------------------ --------------------

V.J.3. [Total Retrofitting Costs]{.underline}

We multiplied the number of retrofitted airplanes by model for each year
(Table V-8) by the unit costs per model per type of retrofit (Tables V-6
and V-7) as modified by the learning curve. As shown in Table V-9, the
total costs to retrofit passenger airplanes will be \$346 million, which
has a present value of \$220 million using a 7 percent discount rate and
a present value of \$283 million using a 3 percent discount rate. As
presented in Appendix V-5, the costs for airplanes retrofitted between
2010-2017 during major checks will be \$291 million which has a present
value of \$191 million using a 7 percent discount rate and a present
value of \$242 million using a 3 percent discount rate. Further, as
presented in Appendix V-5, of the undiscounted \$125 million spent in
2016 and 2017 for retrofitting costs, \$70 million will be spent during
regularly scheduled maintenance sessions and \$55 million will be spent
during special maintenance sessions.

TABLE V-9

SUMMARY OF THE UNDISCOUNTED AND PRESENT VALUE ANNUAL COSTS TO RETROFIT
FTI ON AIR CARRIER PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  -------------- ------------------- ------------------- -----------------
                 TOTAL COSTS                             

  YEAR           UNDISCOUNTED        PRESENT VALUE (7%)  PRESENT VALUE
                                                         (3%)

                                                         

  2010           \$ 39.980           \$ 32.635           \$ 36.587

  2011           \$ 37.825           \$ 28.856           \$ 33.607

  2012           \$ 36.770           \$ 26.216           \$ 31.718

  2013           \$ 36.101           \$ 24.055           \$ 30.234

  2014           \$ 35.623           \$ 22.184           \$ 28.964

  2015           \$ 35.257           \$ 20.520           \$ 27.832

  2016           \$ 62.725           \$ 34.118           \$ 48.074

  2017           \$ 62.182           \$ 31.610           \$ 46.269

                                                         

  **TOTAL**      **\$346.462**       **\$220.196**       **\$283.285**
  -------------- ------------------- ------------------- -----------------

As shown in Table V-10, which summarizes Appendix V-5, of the
undiscounted costs of \$346 million, Boeing airplane operators will
incur \$241 million and Airbus airplane operators will incur \$105
million. Of the present value costs of \$220 million using a 7 percent
discount rate, Boeing airplane operators will incur \$153 million and
Airbus airplane operators will incur \$67 million. Of the present value
of \$283 million using a 3 percent discount rate, Boeing airplane
operators will incur \$197 million and Airbus airplane operators will
incur \$86 million.

TABLE V-10

TOTAL AND PRESENT VALUE OF THE COSTS TO RETROFIT FTI ON AIR CARRIER
PASSENGER AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$241             \$153             \$197

  AIRBUS            \$105             \$ 67             \$ 86

                                                        

  **TOTAL**         **\$346**         **\$220**         **\$283**
  ----------------- ----------------- ----------------- -----------------

## 

## V.K. COSTS TO INSTALL Fti ON a PRODUCTION PASSENGER AIRPLANE

### V.K.1. [Unit Cost to Install on a Production Airplane]{.underline}

In the IRE, we used the ARAC production FTI installation costs detailed
in Appendix V-6. Neither Boeing nor Airbus provided data on the cost to
install FTI on their production airplanes because they consider those
data to be proprietary. In this Regulatory Evaluation we used the
initial ARAC production kit cost estimate as the basis for the
production airplane equipment cost and assumed that the percentage
increases in the Boeing retrofitting kit costs over the initial ARAC
retrofitting kit costs will be the same percentage increases for the
Boeing production kit costs over the initial ARAC production kit costs.
We then applied these estimated kit costs for the Boeing models to the
similar Airbus models.

We use the same number of labor hours reported by ARAC and used in the
IRE (ranging from 80 to 94 labor hours (\$6,400 to \$7,520) per
airplane) for this Regulatory Evaluation because no comments were made
about them. We also applied the learning curve methodology to the labor
hours to install FTI.

Finally, as in the IRE, installing FTI does not increase the number of
days to manufacture an airplane.

Thus, as shown in Table V-11, which summarizes Appendix V-7, the costs
to install FTI on a production airplane range from about \$95,000 to
about \$213,000.

TABLE V-11

INITIAL COSTS TO INSTALL FTI ON A PRODUCTION PASSENGER AIRPLANE BY MODEL

  ----------------- ----------------- ----------------- -----------------
                    COST                                

  MODEL             TOTAL             KIT               LABOR

                                                        

  B-737-CLASSIC     \$0               \$0               \$0

  B-737-NG          \$ 98,333         \$ 91,933         \$6,400

  B-737-NG-NEW      \$ 94,533         \$ 91,933         \$3,200

  B-757             \$0               \$0               \$0

  B-767             \$0               \$0               \$0

  B-747-1/2/300     \$0               \$0               \$0

  B-747-400         \$193,951         \$186,431         \$7,520

  B-747-800         \$193,951         \$186,431         \$7,520

  B-777             \$212,594         \$205,074         \$7,520

  B-787             \$193,160         \$185,640         \$7,520

  A-300/300-600     \$0               \$0               \$0

  A-310             \$0               \$0               \$0

  A-320 FAMILY      \$ 98,333         \$ 91,933         \$6,400

  A-330             \$212,594         \$205,074         \$7,520

  A-340             \$193,951         \$186,431         \$7,520

  A-350             \$193,160         \$185,640         \$7,520

  A-380             \$193,951         \$186,431         \$7,520
  ----------------- ----------------- ----------------- -----------------

V.K.2. [Numbers of Production Airplanes]{.underline}

The final rule requires all affected Boeing and Airbus air carrier
airplanes manufactured as of January 1, 2009, to have FRM. However, as
previously noted, the B-787 is required to have FRM by the existing Part
25 certification requirements and its FRM costs are not an incremental
cost of this rule. The projected numbers of air carrier production
airplanes was described in Section II. As shown in Table V-12, which
summarizes Appendix II-5, 2,290 airplanes will be manufactured
(excluding the B-787) that will be affected by the final rule. Of these
2,290 airplanes, 1,268 will be Boeing production passenger airplanes and
1,022 will be Airbus production passenger airplanes.

TABLE V-12

NUMBERS OF AIR CARRIER PRODUCTION PASSENGER AIPLANES BY MANUFACTURER

  ----------- ---------------- -------------------- ----------------------
  YEAR        TOTAL            BOEING               AIRBUS

                                                    

  2009        244              104                  140

  2010        199              90                   109

  2011        192              79                   114

  2012        205              107                  98

  2013        225              141                  84

  2014        291              175                  116

  2015        333              190                  143

  2016        289              194                  95

  2017        312              189                  123

                                                    

  **TOTAL**   **2,290**        **1,268**            **1,022**
  ----------- ---------------- -------------------- ----------------------

### V.K.3. [Total Production Passenger Airplane Costs]{.underline} 

We multiplied the forecasted number of each production model (Table
V-12) by its unit costs (Table V-11 adjusted for the learning curve) to
install FTI as original factory equipment. As shown in Table V-13, which
summarizes Appendix V-8, the undiscounted cost for air carrier
production passenger airplanes will be \$230 million, which has a
present value of \$152 million using a 7 percent discount rate and a
present value of \$191 million using a 3 percent discount rate.

TABLE V-13

UNDISCOUNTED AND PRESENT VALUE OF THE ANNUAL COSTS TO INSTALL FTI ON AIR
CARRIER PRODUCTION PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ------------ -------------------- ------------------- -------------------
               TOTAL COSTS                              

  YEAR         UNDISCOUNTED         PRESENT VALUE (7%)  PRESENT VALUE (3%)

                                                        

  2009         \$ 25.216            \$ 22.024           \$ 23.768

  2010         \$ 19.899            \$ 16.243           \$ 18.210

  2011         \$ 19.561            \$ 14.923           \$ 17.379

  2012         \$ 20.510            \$ 14.623           \$ 17.692

  2013         \$ 22.823            \$ 15.208           \$ 19.114

  2014         \$ 29.155            \$ 18.157           \$ 23.706

  2015         \$ 33.186            \$ 19.315           \$ 26.197

  2016         \$ 28.620            \$ 15.567           \$ 21.935

  2017         \$ 30.744            \$ 15.628           \$ 22.876

                                                        

  **TOTAL**    **\$229.714**        **\$151.688**       **\$190.877**
  ------------ -------------------- ------------------- -------------------

As shown in Table V-14, which summarizes Appendix V-8, the undiscounted
costs for air carrier production passenger airplanes will be \$230
million, of which Boeing airplane operators will incur \$127 million and
Airbus airplane operators will incur \$103 million. Of the present value
of about \$154 million using a 7 percent discount rate, Boeing airplane
operators will incur \$83 million and Airbus airplane operators will
incur \$71 million. Of the present value of about \$191 million using a
3 percent discount rate, Boeing airplane operators will incur \$104
million and Airbus airplane operators will incur \$87 million.

TABLE V-14

TOTAL AND PRESENT VALUE COSTS TO INSTALL FTI ON AIR CARRIER PRODUCTION
PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$127             \$ 83             \$104

  AIRBUS            \$103             \$ 71             \$ 87

                                                        

  **TOTAL**         **\$230**         **\$154**         **\$191**
  ----------------- ----------------- ----------------- -----------------

## V.L. TOTAL COMPLIANCE COSTS TO INSTALL FTI ON AIR CARRIER PASSENGER AIRPLANES

As shown in Table V-15, which sums Tables V-8 and V-12, the undiscounted
cost for air carrier retrofitted and production passenger airplanes will
be \$576 million, which has a present value of \$372 million using a 7
percent discount rate and a present value of \$474 using a 3 percent
discount rate.

TABLE V-15

UNDISCOUNTED AND PRESENT VALUES OF THE AIR CARRIER RETROFITTED AND
PRODUCTION PASSENGER AIRPLANE FTI INSTALLATION COSTS

(in Millions of 2007 Dollars)

  ----------- -------------------- --------------- --------------- ---------------
                                   TOTAL COSTS                     

  YEAR        RETROFITTED AND      UNDISCOUNTED    PRESENT VALUE   PRESENT VALUE
              PRODUCTION AIRPLANES                 (7%)            (3%)

                                                                   

  2009        140                  \$ 25.216       \$ 22.024       \$ 23.768

  2010        399                  \$ 59.879       \$ 48.878       \$ 54.797

  2011        404                  \$ 57.386       \$ 43.779       \$ 50.986

  2012        388                  \$ 57.280       \$ 40.839       \$ 49.410

  2013        374                  \$ 58.924       \$ 39.263       \$ 49.348

  2014        406                  \$ 64.778       \$ 40.341       \$ 52.670

  2015        433                  \$ 68.443       \$ 39.835       \$ 54.029

  2016        592                  \$ 91.345       \$ 49.685       \$ 70.009

  2017        619                  \$ 92.926       \$ 47.238       \$ 69.145

                                                                   

  **TOTAL**   **3,755**            **\$576.176**   **\$371.884**   **\$474.162**
  ----------- -------------------- --------------- --------------- ---------------

As shown in Table V-16, which sums Tables V-10 and V-14, of the
undiscounted costs of about \$576 million, \$368 million will be
incurred by Boeing airplane operators and \$208 million will be incurred
by Airbus airplane operators. Of the present value costs of \$372
million using a 7 percent discount rate, \$235 million will be incurred
by Boeing airplane operators and \$137 million will be incurred by
Airbus airplane operators. Of the present value of \$474 million using a
3 percent discount rate, \$301 million will be incurred by Boeing
airplane operators and \$173 million will be incurred by Airbus airplane
operators.

TABLE V-16

UNDISCOUNTED AND PRESENT VALUES FOR RETROFITTED AND PRODUCTION AIR
CARRIER PASSENGER AIRPLANES FTI COSTS BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$368             \$235             \$301

  AIRBUS            \$208             \$137             \$173

                                                        

  **TOTAL**         **\$576**         **\$372**         **\$474**
  ----------------- ----------------- ----------------- -----------------

## V.M. INVENTORY COSTS 

### V.M.1. [Introduction]{.underline} 

Air carriers will need an inventory of replacement FTI system components
for unexpected component failures. In the IRE, we believed that this
inventory cost would consist of spare water separator/filters that could
be safely replaced while the FTI system was still on the airplane.
However, Boeing commented that the water separator/filters can only be
safely replaced outside of the airplane, which requires the removal of
the entire FTI water separator/filter assembly. The air carrier will
then install a complete spare assembly on the airplane while a new water
separator/filter is installed in the assembly that had been removed.
Thus, the inventory cost is the cost of the entire assembly rather than
just the cost of the water separator/filter.

### V.M.2. [Cost of a Water Separator/filter Assembly]{.underline} 

Boeing reported the inventory costs of water separator/filter assemblies
for several of its models. We accept the Boeing cost estimates. As
Airbus did not report any similar costs, we determined that the Boeing
estimates can be applied to similarly-sized Airbus airplanes. These unit
inventory costs are shown in Table V-17.

TABLE V-17

INVENTORY COST OF A WATER SEPARATOR/FILTER ASSEMBLY BY MODEL

  ------------------------------- ---------------------------------------
  MODEL                           COST

                                  

  B-737-CLASSIC                   \$18,433

  B-737-NG                        \$18,433

  B-757                           \$26,000

  B-767                           \$26,000

  B-747-1/2/300                   \$30,467

  B-747-400                       \$30,467

  B-747-800                       \$30,467

  B-777                           \$30,467

  B-787                           \$26,000

  A-300/300-600                   \$26,000

  A-310                           \$26,000

  A-320 FAMILY                    \$18,433

  A-330                           \$30,467

  A-340                           \$30,467

  A-350                           \$26,000

  A-380                           \$30,467
  ------------------------------- ---------------------------------------

### V.M.3. [Total Inventory Costs for Water Separator/filter Assemblies]{.underline} 

V.M.3.a. [Inventory Costs for Retrofitted Airplanes]{.underline}

In the IRE we assumed a water separator/filter assembly inventory rate
of 15 percent (the general industry standard for inventory) of the air
carrier passenger airplanes retrofitted in each year. There were no
comments and we use that assumption in this Regulatory Evaluation. In
the last two years (2016 and 2017) the total number of inventoried
assemblies will include those for airplanes retrofitted during a
dedicated maintenance visit. As shown in Table V-18, which summarizes
Appendix V-9, air carriers will add 410 assemblies to inventory by 2018,
of which 268 will be for Boeing airplanes and 142 will be for Airbus
airplanes.

TABLE V-18

ANNUAL NUMBERS OF WATER SEPARATOR/FILTER ASSEMBLY INVENTORY FOR AIR
CARRIER RETROFITTED PASSENGER AIPLANES BY MANUFACTURER

  ------------ ---------------- -------------------- ----------------------
               ASSEMBLIES ADDED                      

  YEAR         TOTAL            BOEING               AIRBUS

                                                     

  2010         43               28                   15

  2011         43               28                   15

  2012         43               28                   15

  2013         43               28                   15

  2014         43               28                   15

  2015         43               28                   15

  2016         76               50                   26

  2017         76               50                   26

                                                     

  **TOTAL**    **410**          **268**              **142**
  ------------ ---------------- -------------------- ----------------------

As shown in Table V-19, the undiscounted cost will be \$8.7 million,
which has a present value of \$5.5 million using a 7 percent discount
rate and a present value of \$7.1 million using a 3 percent discount
rate.

TABLE V-19

UNDISCOUNTED AND PRESENT VALUE OF THE WATER SEPARATOR/FILTER ASSEMBLY
INVENTORY COSTS FOR AIR CARRIER RETROFITTED PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------- ------------------ -------------- -------------- --------------
                                 TOTAL COSTS                   

  YEAR        NUMBER OF          UNDISCOUNTED   PRESENT VALUE  PRESENT VALUE
              ASSEMBLIES ADDED                  (7%)           (3%)

                                                               

  2010        43                 \$0.925        \$0.755        \$0.846

  2011        43                 \$0.925        \$0.705        \$0.821

  2012        43                 \$0.925        \$0.659        \$0.798

  2013        43                 \$0.925        \$0.616        \$0.774

  2014        43                 \$0.925        \$0.576        \$0.752

  2015        43                 \$0.925        \$0.538        \$0.730

  2016        76                 \$1.578        \$0.858        \$1.209

  2017        76                 \$1.578        \$0.802        \$1.174

                                                               

  **TOTAL**   **410**            **\$8.706**    **\$5.509**    **\$7.104**
  ----------- ------------------ -------------- -------------- --------------

As shown in Table V-20, which summarizes Appendix V-9, we calculated
that of the undiscounted costs of \$8.7 million, \$6 million will be
incurred by Boeing airplane operators and \$2.7 million will be incurred
by Airbus airplane operators. Of the present value costs of \$5.5
million using a 7 percent discount rate, \$3.8 million will be incurred
by Boeing airplane operators and \$1.7 million will be incurred by
Airbus airplane operators. Of the present value of \$7.1 million using a
3 percent discount rate, \$4.9 million will be incurred by Boeing
airplane operators and \$2.2 million will be incurred by Airbus airplane
operators.

TABLE V-20

UNDISCOUNTED AND PRESENT VALUE OF THE INVENTORY COSTS FOR AIR CARRIER
RETROFITTED PASSENGER AIRPLANE WATER SEPARATOR/FILTER ASSEMBLIES BY
MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$5.984           \$3.786           \$4.882

  AIRBUS            \$2.722           \$1.723           \$2.222

                                                        

  **TOTAL**         **\$8.706**       **\$5.509**       **\$7.104**
  ----------------- ----------------- ----------------- -----------------

V.M.3.b. [Inventory Costs for Production Airplanes]{.underline}

As shown in Table V-21, which summarizes Appendix V-10, air carriers
will add 404 water separator/filter assemblies for production airplanes,
of which 249 will be for Boeing airplanes and 155 will be for Airbus
airplanes.

TABLE V-21

ANNUAL NUMBERS OF INVENTORY WATER SEPARATOR/FILTER ASSEMBLIES FOR AIR
CARRIER PRODUCTION PASSENGER AIPLANES BY MANUFACTURER

  ------------ ---------------- -------------------- ----------------------
               NUMBER OF                             
               ASSEMBLIES                            

  YEAR         TOTAL            BOEING               AIRBUS

                                                     

  2009         39               18                   21

  2010         33               17                   16

  2011         35               18                   17

  2012         37               22                   15

  2013         42               29                   13

  2014         52               34                   18

  2015         59               37                   22

  2016         52               38                   14

  2017         55               36                   19

                                                     

  **TOTAL**    **404**          **249**              **155**
  ------------ ---------------- -------------------- ----------------------

As shown in Table V-22, which summarizes Appendix V-10, the undiscounted
water separator/filter assembly inventory cost for air carrier
production passenger airplanes will be \$6.5 million, which has a
present value of \$4.3 million using a 7 percent discount rate and a
present value of \$5.9 million using a 3 percent discount rate.

TABLE V-22

UNDISCOUNTED AND PRESENT VALUE OF THE ANNUAL WATER SEPARATOR/FILTER
ASSEMBLY INVENTORY COSTS FOR AIR CARRIER PRODUCTION PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------- -------------------- ------------------- -------------------
              TOTAL COSTS                              

  YEAR        UNDISCOUNTED         PRESENT VALUE (7%)  PRESENT VALUE (3%)

                                                       

  2009        \$0.700              \$0.611             \$0.660

  2010        \$0.563              \$0.460             \$0.515

  2011        \$0.551              \$0.420             \$0.490

  2012        \$0.583              \$0.415             \$0.503

  2013        \$0.643              \$0.428             \$0.539

  2014        \$0.826              \$0.515             \$0.672

  2015        \$0.944              \$0.549             \$0.745

  2016        \$0.818              \$0.445             \$0.627

  2017        \$0.880              \$0.447             \$0.655

                                                       

  **TOTAL**   **\$6.506**          **\$4.290**         **\$5.405**
  ----------- -------------------- ------------------- -------------------

As shown in Table V-23, which summarizes Appendix V-10, we calculated
that of the undiscounted costs of \$6.5 million, \$4.3 million will be
incurred by Boeing airplane operators and \$2.9 million will be incurred
by Airbus airplane operators. Of the present value costs of \$3.6
million using a 7 percent discount rate, \$2.3 million will be incurred
by Boeing airplane operators and \$2 million will be incurred by Airbus
airplane operators. Of the present value of \$5.4 million using a 3
percent discount rate, \$3 million will be incurred by Boeing airplane
operators and \$2.4 million will be incurred by Airbus airplane
operators.

TABLE V-23

UNDISCOUNTED AND PRESENT VALUE OF THE INVENTORY COSTS FOR AIR CARRIER
PRODUCTION PASSENGER AIRPLANE WATER SEPARATOR/FILTER ASSEMBLIES BY
MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$3.607           \$2.321           \$2.964

  AIRBUS            \$2.899           \$1.969           \$2.438

                                                        

  **TOTAL**         **\$6.506**       **\$4.290**       **\$5.403**
  ----------------- ----------------- ----------------- -----------------

V.M.3.c. [Inventory Costs for All Airplanes]{.underline}

As shown in Table V-24, which sums Tables V-18 and V-21, air carriers
will add 814 water separator/filter assemblies for production airplanes,
of which 517 will be for Boeing airplanes and 297 will be for Airbus
airplanes.

TABLE V-24

ANNUAL NUMBERS OF INVENTORY WATER SEPARATOR/FILTER ASSEMBLIES FOR ALL
AIR CARRIER PASSENGER AIPLANES BY MANUFACTURER AND BY YEAR

  ------------ ---------------- -------------------- ----------------------
               NUMBER OF                             
               ASSEMBLIES                            

  YEAR         TOTAL            BOEING               AIRBUS

                                                     

  2009         39               18                   21

  2010         76               45                   31

  2011         78               46                   32

  2012         80               50                   30

  2013         85               57                   28

  2014         95               62                   33

  2015         102              65                   37

  2016         128              88                   40

  2017         131              86                   45

                                                     

  **TOTAL**    **814**          **517**              **297**
  ------------ ---------------- -------------------- ----------------------

As shown in Table V-25, which summarizes Appendix V-10, the undiscounted
water separator/filter assembly inventory cost for all retrofitted and
production air carrier passenger airplanes will be \$15.2 million, which
has a present value of \$9.8 million using a 7 percent discount rate and
a present value of \$13.0 million using a 3 percent discount rate.

TABLE V-25

UNDISCOUNTED AND PRESENT VALUE OF THE ANNUAL WATER SEPARATOR/FILTER
ASSEMBLY INVENTORY COSTS FOR ALL AIR CARRIER PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------- ---------------------- ------------------ ------------------
              TOTAL COSTS                               

  YEAR        UNDISCOUNTED           PRESENT VALUE (7%) PRESENT VALUE (3%)

                                                        

  2009        \$ 0.700               \$0.611            \$ 0.659

  2010        \$ 1.488               \$1.215            \$ 1.505

  2011        \$ 1.476               \$1.125            \$ 1.480

  2012        \$ 1.508               \$1.074            \$ 1.457

  2013        \$ 1.568               \$1.044            \$ 1.433

  2014        \$ 1.751               \$1.091            \$ 1.411

  2015        \$ 1.869               \$1.087            \$ 1.389

  2016        \$ 2.396               \$1.303            \$ 1.868

  2017        \$ 2.458               \$1.249            \$ 1.833

                                                        

  **TOTAL**   **\$15.212**           **\$9.799**        **\$13.039**
  ----------- ---------------------- ------------------ ------------------

As shown in Table V-26, which summarizes Appendix V-10, we calculated
that of the undiscounted costs of \$15.2 million, \$9.6 million will be
incurred by Boeing airplane operators and \$5.6 million will be incurred
by Airbus airplane operators. Of the present value costs of \$9.8
million using a 7 percent discount rate, \$6.1 million will be incurred
by Boeing airplane operators and \$3.7 million will be incurred by
Airbus airplane operators. Of the present value of \$13 million using a
3 percent discount rate, \$8.1 million will be incurred by Boeing
airplane operators and \$4.9 million will be incurred by Airbus airplane
operators.

TABLE V-26

UNDISCOUNTED AND PRESENT VALUE OF THE INVENTORY COSTS OF WATER
SEPARATOR/FILTER ASSEMBLIES FOR AIR CARRIER PASSENGER AIRPLANES
OPERATORS BY AIRPLANE MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$ 9.591          \$6.107           \$ 8.146

  AIRBUS            \$ 5.621          \$3.692           \$ 4.893

                                                        

  **TOTAL**         **\$15.212**      **\$9.799**       **\$13.039**
  ----------------- ----------------- ----------------- -----------------

## V.N. ANNUAL OPERATIONAL COSTS FOR PASSENGER AIRPLANES WITH FTI

The remaining compliance cost sections are annual operating costs
associated with FTI. These general annual cost categories are increased
fuel consumption, increased maintenance, and ASM replacement. As such,
these annual costs depend upon the numbers of airplanes with FTI
incurring these costs. The total costs are the sum of the airplanes in
service over time multiplied by the annual cost elements.

Table V-27 provides the number of airplanes of the affected fleet with
FTI for each year until all the airplanes will be retired. In general,
we assumed an average 25-year life-span so that the older airplanes with
retrofitted FTIs will be retired before the production airplanes will be
retired. As shown in Table V-27, the affected air carrier passenger
airplane fleet will accumulate 90,484 flight years, of which retrofitted
airplanes will accumulate 30,941 flight years and production airplanes
will accumulate 59,543 flight years.

TABLE V-27

NUMBER OF AIR CARRIER PASSENGER AIRPLANES IN SERVICE BY TYPE OF FTI
INSTALLATION

  -------------- --------------- --------------------- -------------------
                 NUMBER OF                             
                 AIRPLANES IN                          
                 SERVICE                               

  YEAR           TOTAL           RETROFITTED           PRODUCTION

                                                       

  2009           244             0                     244

  2010           711             268                   443

  2011           1,172           537                   635

  2012           1,646           805                   840

  2013           2,139           1,074                 1,065

  2014           2,698           1,342                 1,356

  2015           3,300           1,611                 1,689

  2016           4,047           2,069                 1,978

  2017           5,041           2,751                 2,290

  2018           4,851           2,561                 2,290

  2019           4,680           2,390                 2,290

  2020           4,509           2,219                 2,290

  2021           4,339           2,048                 2,290

  2022           4,168           1,878                 2,290

  2023           3,997           1,707                 2,290

  2024           3,826           1,536                 2,290

  2025           3,656           1,366                 2,290

  2026           3,485           1,195                 2,290

  2027           3,314           1,024                 2,290

  2028           3,144           854                   2,290

  2029           2,973           683                   2,290

  2030           2,802           512                   2,290

  2031           2,632           341                   2,290

  2032           2,461           171                   2,290

  2033           2,290           0                     2,290

  2034           2,290           0                     2,290

  2035           2,046           0                     2,046

  2036           1,847           0                     1,847

  2037           1,655           0                     1,655

  2038           1,450           0                     1,450

  2039           1,225           0                     1,225

  2040           934             0                     934

  2041           601             0                     601

  2042           312             0                     312

                                                       

  **TOTAL**      **90,484**      **30,941**            **59,543**
  -------------- --------------- --------------------- -------------------

## 

## V.O. ADDITIONAL AIRPLANE FUEL CONSUMPTION COSTS 

### V.O.1. [Introduction]{.underline}

An FTI increases fuel consumption for the following three reasons:

1.  The FTI weight.

2.  The reduced aerodynamic efficiency from the additional bleed air
    drawn for the FTI.

3.  The increased aerodynamic drag (ram drag) due to the openings
    drilled into the hull to remove the oxygen-enriched air from the
    airplane after the ASM has extracted the nitrogen.

### V.O.2. [Additional Fuel Consumption from FTI Weight]{.underline}

###  Additional airplane weight results in increased fuel burn because, all other things being equal, a heavier airplane burns more fuel per mile than does a lighter airplane. The following details the bases for the additional fuel consumption estimates. 

### V.O.2.a. [Summary of Unit Fuel Burn Due to Weight Data]{.underline}

Table V-28 summarizes the underlying data, which are subsequently
discussed in the succeeding sections, used to calculate the additional
fuel consumption due to FTI weight.

TABLE V-28

DATA FOR THE INCREASED ANNUAL FUEL CONSUMPTION DUE TO THE FTI WEIGHT FOR
AN AIR CARRIER PASSENGER AIRPLANE BY MODEL

  --------------- ---------- ---------- ----------- ------------ ----------- -----------
                  FTI WEIGHT FTI WEIGHT FLIGHT      FUEL BURN    GAL/(Yr.)   GAL/(Yr.)
                  (UNITED)   (BOEING)   HOURS (Yr.) (MAC)        (UNITED)    (BOEING)
                                        (BOEING)                             

  MODEL           WEIGHT     WEIGHT     PASSENGER   GAL/LB/FL.   PASSENGER   PASSENGER
                  (lbs.)     (lbs.)                 HR.                      

                                                                             

  B-737-Classic   84         105        3,000       0.0045       1,134       1,418

  B-737-NG        84         105        3,250       0.0045       1,229       1,536

  B-757           117        280        3,000       0.0060       2,106       5,040

  B-767           150        280        4,000       0.0050       3,000       5,600

  B-747-1/2/300   182        257        4,250       0.0065       5,028       7,100

  B-747-400       182        257        4,250       0.0065       5,028       7,100

  B-747-800       182        257        4,250       0.0065       5,028       7,100

  B-777           215        300        4,000       0.0040       3,440       4,800

  B-787           0          0          4,000       0.0045       0           0

  A-300           117        280        4,000       0.0040       1,872       4,480

  A-310           117        280        4,000       0.0040       1,872       4,480

  A-320 Family    84         105        3,250       0.0095       2,594       3,242

  A-330           182        300        4,000       0.0040       2,912       4,800

  A-340           182        300        4,250       0.0040       3,094       5,100

  A-350           150        280        4,000       0.0050       3,000       5,600

  A-380           182        257        4,250       0.0065       5,028       7,100
  --------------- ---------- ---------- ----------- ------------ ----------- -----------

### V.O.2.b. [Fuel Tank Inerting System Weight]{.underline}

In the IRE, we had used the ARAC FTI weights of 218 pounds for a large
airplane, 148 pounds for a medium-sized airplane, and 95 pounds for a
small airplane. Boeing commented that their latest FTIs weighed more
than the ARAC had projected. Airbus did not specifically report an FTI
system weight although they commented that the IRE had substantially
underestimated the FTI weights and, if the airframes needed to be
reinforced to carry the additional weight, we had underestimated the
weight by several hundred pounds. We disagree with the Airbus comment
that the airframe will need to be reinforced because that has not been
necessary for the FTI system amended TCs that have been submitted to the
FAA.

We used the United/Shaw Aero Devices/Air Liquide FTI system for all
retrofitted airplanes. We accept the Boeing FTI weights for production
airplanes, and in the absence of Airbus FTI production airplane data,
applied the Boeing production airplane weights to similarly-sized Airbus
production airplanes.

As shown in Table V-28, the United/Shaw Aero Devices/Air Liquide FTI
system weights for retrofitted airplanes range from 84 pounds to 215
pounds while the Boeing FTI system weights for production airplanes
range from 105 pounds to 300 pounds.

### V.O.2.c. [Annual Flight Hours]{.underline}

In the IRE, we used the annual U.S. passenger fleet flight hours by
airplane model compiled by Back Aviation Solutions. In their comments,
Boeing provided alternative annual flight hours. Airbus and the ATA did
not comment. We accept the Boeing flight hours and apply them to
similarly-sized Airbus airplanes. Thus, as shown in Table V-28, the
number of annual flight hours range from 3,000 to 4,250.

### V.O.2.d. [Gallons of Additional Fuel Per Additional Pound Per Flight Hour]{.underline}

GRA, Incorporated, conducted a survey of the major US air carriers to
determine the average gallons of aviation fuel consumed per pound of
additional weight per flight hour. Their survey incorporated the variety
of missions flown by these air carriers, which allowed them to obtain
fleet-wide estimates by airplane model. An industry group under the
Aviation Rulemaking Cost Committee reviewed the GRA Findings. As seen in
Table V-28, the gallons of additional fuel consumed per pound of
additional weight per flight hour ranged from 0.0045 gallons to 0.0095
gallons.[^75]

In order to obtain the average fuel burn per retrofitted airplane model,
we multiplied the United/Shaw Aero Devices/Air Liquide FTI system
weights times the average fuel burn per pound per year times the number
of flight hours to obtain the average annual increased fuel burn. These
ranged from 1,134 gallons per year to 5,028 gallons per year for
retrofitted airplane models.

Similarly, in order to obtain the average fuel burn per production
airplane model, we multiplied the Boeing FTI system weights times the
average fuel burn per pound per year times the number of flight hours to
obtain the average annual increased fuel burn for each retrofitted
airplane model. These ranged from 1,418 gallons per year to 7,100
gallons per year for production airplane models.

### V.O.3. [Additional Fuel Consumption from Increased Bleed Air Intake and Ram Drag]{.underline}

Increasing the bleed air volume to supply air for the nitrogen to inert
the fuel tank increases wind resistance and, consequently, fuel
consumption in order for the airplane to attain the same performance.
Ram drag results from the holes bored into the hull for the outflow of
the oxygen-enriched air from the ASM filtering process, which reduces
the hull's aerodynamic efficiency and, similarly, increases fuel
consumption.

In the IRE, we used a preliminary estimate that the average fuel
consumption increase due to increased bleed air drag would be 0.2941
gallons per flight hour for all airplane models. We did not include a
fuel cost component for ram drag.

Based on their more recent analyses, Boeing estimated the increased
annual fuel consumption from the combination of increased bleed air and
ram drag for individual airplane models. Airbus did not provide specific
estimates. United/Shaw Aero Devices/Air Liquide did not provide us with
any corresponding values for its FTI system.

Consequently, we accept the Boeing estimates for both retrofitted and
production airplanes and applied them to similarly-sized Airbus
airplanes. Thus, as shown in Table V-29, the increased bleed air and ram
drag will increase fuel consumption by 854 gallons to 2,049
gallons.[^76]

TABLE V-29

INCREASED FUEL CONSUMPTION DUE TO INCREASED BLEED AIR AND RAM DRAG FOR
AN AIR CARRIER PASSENGER AIRPLANES BY MODEL

  -------------------------- --------------------------------------------
  MODEL                      GAL/(Yr.)

                             

  B-737-Classic              905

  B-737-NG                   1,379

  B-757                      854

  B-767                      1,123

  B-747-1/2/300              1,508

  B-747-400                  1,508

  B-747-800                  1,508

  B-777                      2,049

  B-787                      1,123

  A-300                      1,123

  A-310                      1,123

  A-320 Family               1,379

  A-330                      1,508

  A-340                      1,508

  A-350                      1,123

  A-380                      1,508
  -------------------------- --------------------------------------------

V.O.4. [Additional Fuel Consumption Due to FTI]{.underline}

The additional annual fuel consumption due to weight, bleed air, and ram
drag are presented in Tables V-30 and V-31 using the values in Tables
V-28 and V-29. As shown in Table V-30, the annual increased air carrier
passenger airplane fuel consumption due to FTI will be between 2,039
gallons and 6,536 gallons for retrofitted airplanes. As shown in Table
V-31, the annual increased air carrier passenger airplane fuel
consumption due to FTI will be between 2,323 gallons and 8,608
gallons.[^77]

### V.O.5. [Fuel Consumption Costs Due to FTI]{.underline} 

Aviation fuel prices fluctuate. In the last 10 years, price has varied
from \$0.60 to \$2.00 a gallon. ARAC and the IRE used a \$1 per gallon
price. The ATA and Airbus both commented that the \$1 per gallon price
was too low and although the current price of aviation fuel was about
\$2 a gallon, they felt that a price of \$1.75 a gallon was appropriate.
We agreed that the IRE price was too low and selected a price of \$1.65
a gallon and calculated the spreadsheets on that price.

However, after the economic analysis was largely completed and the rule
was being reviewed, aviation fuel prices have incurred an unforeseen
sudden and large increase. As is detailed in Appendix F, we now forecast
a ten-year average price of \$2.01 a gallon for aviation fuel. In light
of this new forecast, we re-calculated the final rule total fuel costs.
Given the time constraints, we have not re-calculated the detailed fuel
cost Appendix spreadsheets but, rather, applied a ratio of a \$1.65 a
gallon price with a fuel price of \$2.01 a gallon (an increase by a
factor of 1.218). Consequently, the Appendices, where the detailed
methodology is presented, use the \$1.65 value, while the compliance
costs presented in the Regulatory Evaluation are based on the \$2.01
value. Although this \$2.01 fuel price is based on the most recently
published FAA forecast, we recognize that, given the current record high
oil prices, this estimated may underestimate the long-term aviation fuel
cost.

Using our US aviation fuel prices forecast for the time period
2008-2018, [^78] we determined that the long-term average aviation fuel
price is \$2.01 per gallon.[^79][^80] Thus, as shown in Table V-30, FTI
will increase the annual air carrier passenger fuel cost for retrofitted
airplanes by \$4,098 to \$13,137. Finally, as shown in Table V-31, FTI
will increase the annual air carrier passenger fuel cost by \$4,669 for
a B-737 Classic to \$17,302 for a production A-380 airplane.

TABLE V-30

ANNUAL INCREASED RETROFITTED PASSENGER AIRPLANE MODEL FUEL CONSUMPTION
AND COSTS

  --------------- ---------------- ------------ ----------- ----------------
                                   INCREASED                
                                   GALLONS PER              
                                   YEAR                     

  MODEL           ANNUAL COST      TOTAL        WEIGHT      BLEED AIR AND
                                                            RAM DRAG

                                                            

  B-737-Classic   \$ 4,098         2,039        1,134       905

  B-737-NG        \$ 5,242         2,608        1,229       1,379

  B-757           \$ 5,950         2,960        2,106       854

  B-767           \$ 8,287         4,123        3,000       1,123

  B-747-1/2/300   \$13,137         6,536        5,028       1,508

  B-747-400       \$13,137         6,536        5,028       1,508

  B-747-800       \$13,137         6,536        5,028       1,508

  B-777           \$11,033         5,489        3,440       2,049

  B-787           \$0              0            0           0

  A-300           \$ 6,020         2,995        1,872       1,123

  A-310           \$ 6,020         2,995        1,872       1,123

  A-320 Family    \$ 7,986         3,973        2,594       1,379

  A-330           \$ 8,884         4,420        2,912       1,508

  A-340           \$ 9,250         4,602        3,094       1,508

  A-350           \$ 8,287         4,123        3,000       1,123

  A-380           \$13,137         6,536        5,028       1,508
  --------------- ---------------- ------------ ----------- ----------------

TABLE V-31

ANNUAL INCREASED PRODUCTION PASSENGER AIRPLANE MODEL FUEL CONSUMPTION
AND COSTS

  --------------- ---------------- ------------ ----------- ----------------
                                   INCREASED                
                                   GALLONS PER              
                                   YEAR                     

  MODEL           ANNUAL COST      TOTAL        WEIGHT      BLEED AIR AND
                                                            RAM DRAG

                                                            

  B-737-Classic   \$ 4,669         2,323        1,418       905

  B-737-NG        \$ 5,859         2,915        1,536       1,379

  B-757           \$11,847         5,894        5,040       854

  B-767           \$13,513         6,723        5,600       1,123

  B-747-1/2/300   \$17,302         8,608        7,100       1,508

  B-747-400       \$17,302         8,608        7,100       1,508

  B-747-800       \$17,302         8,608        7,100       1,508

  B-777           \$13,766         6,849        4,800       2,049

  B-787           \$12,388         6,163        5,040       1,123

  A-300           \$11,262         5,603        4,480       1,123

  A-310           \$11,262         5,603        4,480       1,123

  A-320 Family    \$ 9,288         4,621        3,242       1,379

  A-330           \$12,679         6,308        4,800       1,508

  A-340           \$13,282         6,608        5,100       1,508

  A-350           \$13,513         6,723        5,600       1,123

  A-380           \$17,302         8,608        7,100       1,508
  --------------- ---------------- ------------ ----------- ----------------

### 

### V.O.6. [Total Increased Fuel Consumption Costs]{.underline} 

### V.O.6.a. [Total Increased Fuel Consumption Costs for Retrofitted Airplanes]{.underline} 

As shown in Table V-32, which summarizes Appendix V-11, the total
increase in air carrier retrofitted passenger airplanes fuel consumption
will be 107 million gallons.[^81] At \$2.01 per gallon, the undiscounted
cost will be \$215 million, which has a present value of \$94 million
using a 7 percent discount rate and a present value of \$148 million
using a 3 percent discount rate.

TABLE V-32

TOTAL INCREASED FUEL COST AND CONSUMPTION FOR AIR CARRIER RETROFITTED
PASSENGER AIRPLANES BY YEAR

(All Numbers in Millions)

  ----------- --------------- --------------- --------------- --------------
              TOTAL COST                                      

  YEAR        UNDISCOUNTED    PRESENT VALUE   PRESENT VALUE   GALLONS
                              (7%)            (3%)            

                                                              

  2010        \$ 1.894        \$ 1.546        \$ 1.733        0.942

  2011        \$ 3.787        \$ 2.890        \$ 3.365        1.884

  2012        \$ 5.682        \$ 4.050        \$ 4.901        2.827

  2013        \$ 7.575        \$ 5.048        \$ 6.344        3.769

  2014        \$ 9.469        \$ 5.897        \$ 7.699        4.711

  2015        \$ 11.363       \$ 6.614        \$ 8.969        5.653

  2016        \$ 14.594       \$ 7.938        \$ 11.184       7.260

  2017        \$ 19.001       \$ 9.659        \$ 14.139       9.454

  2018        \$ 17.757       \$ 8.436        \$ 12.829       8.834

  2019        \$ 16.573       \$ 7.359        \$ 11.624       8.245

  2020        \$ 15.389       \$ 6.386        \$ 10.480       7.656

  2021        \$ 14.205       \$ 5.509        \$ 9.392        7.068

  2022        \$ 13.022       \$ 4.719        \$ 8.358        6.479

  2023        \$ 11.838       \$ 4.010        \$ 7.377        5.890

  2024        \$ 10.654       \$ 3.373        \$ 6.447        5.301

  2025        \$ 9.470        \$ 2.802        \$ 5.563        4.712

  2026        \$ 8.286        \$ 2.291        \$ 4.725        4.123

  2027        \$ 7.103        \$ 1.836        \$ 3.932        3.534

  2028        \$ 5.919        \$ 1.429        \$ 3.182        2.945

  2029        \$ 4.735        \$ 1.068        \$ 2.472        2.356

  2030        \$ 3.551        \$ 0.749        \$ 1.799        1.767

  2031        \$ 2.368        \$ 0.467        \$ 1.165        1.178

  2032        \$ 1.184        \$ 0.218        \$ 0.565        0.589

                                                              

  **TOTAL**   **\$215.422**   **\$94.295**    **\$148.244**   **107.175**
  ----------- --------------- --------------- --------------- --------------

Further, as shown in Table V-33, which summarizes Appendix V-11,
operators of Boeing airplanes will incur undiscounted costs of \$127
million which has a present value of \$55 million using a 7 percent
discount rate and a present value of \$86 using a 3 percent discount
rate. Operators of Airbus airplanes will incur undiscounted costs of
\$89 million which has a present value of \$39 million using a 7 percent
discount rate and a present value of \$62 using a 3 percent discount
rate.

TABLE V-33

UNDISCOUNTED AND PRESENT VALUE OF THE INCREASED FUEL COST FOR AIR
CARRIER RETROFITTED PASSENGER AIRPLANES BY MANUFACTURER

(All Values in Millions)

  --------------- -------------- ------------- ------------- -------------
                  TOTAL COSTS                                

  MANUFACTURER    UNDISCOUNTED   PRESENT VALUE PRESENT VALUE GALLONS
                                 (7%)          (3%)          

                                                             

  BOEING          \$127          \$55          \$ 86         63

  AIRBUS          \$ 89          \$39          \$ 62         44

                                                             

  **TOTAL**       **\$216**      **\$94**      **\$148**     **107**
  --------------- -------------- ------------- ------------- -------------

### V.O.6.b. [Total Increased Fuel Consumption Costs for Production Airplanes]{.underline} 

As shown in Table V-34, which summarizes Appendix V-12, the total
increased fuel consumption by air carrier production passenger airplanes
will be 229 million gallons. At an average price of \$2.01 per gallon,
the undiscounted cost will be \$460 million, which has a present value
of \$148 million using a 7 percent discount rate and a present value of
\$271 million using a 3 percent discount rate.

TABLE V-34

TOTAL INCREASED FUEL CONSUMPTION AND COSTS FOR AIR CARRIER PRODUCTION
PASSENGER AIRPLANES

(All Numbers in Millions)

  ----------- --------------- ---------------- ---------------- -------------
              TOTAL COSTS                                       

  YEAR        UNDISCOUNTED    PRESENT VALUE    PRESENT VALUE    GALLONS
                              (7%)             (3%)             

                                                                

  2009        \$ 1.994        \$ 1.741         \$ 1.880         0.992

  2010        \$ 3.596        \$ 2.936         \$ 3.292         1.789

  2011        \$ 5.202        \$ 3.968         \$ 4.622         2.588

  2012        \$ 6.813        \$ 4.857         \$ 5.877         3.389

  2013        \$ 8.513        \$ 5.672         \$ 7.129         4.235

  2014        \$ 10.713       \$ 6.671         \$ 8.710         5.329

  2015        \$ 13.256       \$ 7.715         \$ 10.464        6.595

  2016        \$ 15.359       \$ 8.354         \$ 11.771        7.641

  2017        \$ 17.687       \$ 8.991         \$ 13.161        8.799

  2018        \$ 17.687       \$ 8.403         \$ 12.778        8.799

  2019        \$ 17.687       \$ 7.854         \$ 12.405        8.799

  2020        \$ 17.687       \$ 7.340         \$ 12.044        8.799

  2021        \$ 17.687       \$ 6.860         \$ 11.693        8.799

  2022        \$ 17.687       \$ 6.410         \$ 11.352        8.799

  2023        \$ 17.687       \$ 5.991         \$ 11.022        8.799

  2024        \$ 17.687       \$ 5.599         \$ 10.701        8.799

  2025        \$ 17.687       \$ 5.233         \$ 10.389        8.799

  2026        \$ 17.687       \$ 4.891         \$ 10.087        8.799

  2027        \$ 17.687       \$ 4.571         \$ 9.793         8.799

  2028        \$ 17.687       \$ 4.272         \$ 9.508         8.799

  2029        \$ 17.687       \$ 3.992         \$ 9.230         8.799

  2030        \$ 17.687       \$ 3.731         \$ 8.962         8.799

  2031        \$ 17.687       \$ 3.486         \$ 8.700         8.799

  2032        \$ 17.687       \$ 3.259         \$ 8.447         8.799

  2033        \$ 17.687       \$ 3.045         \$ 8.201         8.799

  2034        \$ 17.687       \$ 2.847         \$ 7.962         8.799

  2035        \$ 15.694       \$ 2.361         \$ 6.860         7.808

  2036        \$ 14.091       \$ 1.981         \$ 5.979         7.010

  2037        \$ 12.486       \$ 1.640         \$ 5.144         6.212

  2038        \$ 10.875       \$ 1.335         \$ 4.350         5.410

  2039        \$ 9.175        \$ 1.053         \$ 3.563         4.565

  2040        \$ 6.975        \$ 0.748         \$ 2.630         3.470

  2041        \$ 4.432        \$ 0.445         \$ 1.623         2.205

  2042        \$ 2.328        \$ 0.218         \$ 0.827         1.158

                                                                

  **TOTAL**   **\$459.861**   **\$148.467**    **\$271.154**    **228.787**
  ----------- --------------- ---------------- ---------------- -------------

As shown in Table V-35, which summarizes Appendix V-12, we calculated
that of the additional 229 million gallons of fuel, Boeing production
airplanes will consume 102 million and Airbus production airplanes will
consume 127 million. Of the undiscounted costs of \$460 million, \$206
million will be incurred by Boeing airplane operators and \$255 million
will be incurred by Airbus airplane operators. Of the present value
costs of \$149 million using a 7 percent discount rate, \$65 million
will be incurred by Boeing airplane operators and \$84 million will be
incurred by Airbus airplane operators. Of the present value of \$272
million using a 3 percent discount rate, \$119 million will be incurred
by Boeing airplane operators and \$152 million will be incurred by
Airbus airplane operators.

\`

TABLE V-35

TOTAL INCREASED FUEL CONSUMPTION AND COSTS FOR AIR CARRIER PRODUCTION
PASSENGER AIRPLANE BY MANUFACTURER

(All Values in Millions)

  --------------- -------------- ------------- ------------- -------------
  MANUFACTURER    UNDISCOUNTED   PRESENT VALUE PRESENT VALUE GALLONS
                                 (7%)          (3%)          

                                                             

  BOEING          \$206          \$65          \$119         102

  AIRBUS          \$255          \$84          \$152         127

                                                             

  **TOTAL**       **\$460**      **\$149**     **\$272**     **229**
  --------------- -------------- ------------- ------------- -------------

### V.O.6.c. [Total Increased Fuel Consumption Costs for All Passenger Airplanes]{.underline} 

As shown in Table V-36, which sums Tables V-32 and V-34, total air
carrier retrofitted and production passenger airplane fuel consumption
will increase by 336 million gallons. At an average price of \$2.01 per
gallon, the undiscounted cost will be \$675 million, which has a present
value of \$243 million using a 7 percent discount rate and a present
value of \$419 million using a 3 percent discount rate.

TABLE V-36

TOTAL INCREASED FUEL COST AND CONSUMPTION FOR AIR CARRIER PASSENGER
AIRPLANES

(All Numbers in Millions)

  ----------- --------------- --------------- ---------------- -------------
              TOTAL COSTS                                      

  YEAR        UNDISCOUNTED    PRESENT VALUE   PRESENT VALUE    GALLONS
                              (7%)            (3%)             

                                                               

  2009        \$1.994         \$1.741         \$1.880          0.992

  2010        \$5.490         \$4.482         \$5.025          2.731

  2011        \$8.989         \$6.858         \$7.987          4.472

  2012        \$12.495        \$8.907         \$10.778         6.216

  2013        \$16.088        \$10.720        \$13.473         8.004

  2014        \$20.182        \$12.568        \$16.409         10.040

  2015        \$24.619        \$14.329        \$19.433         12.248

  2016        \$29.953        \$16.292        \$22.955         14.901

  2017        \$36.688        \$18.650        \$27.300         18.253

  2018        \$35.444        \$16.839        \$25.607         17.633

  2019        \$34.260        \$15.213        \$24.029         17.044

  2020        \$33.076        \$13.726        \$22.524         16.455

  2021        \$31.892        \$12.369        \$21.085         15.867

  2022        \$30.709        \$11.129        \$19.710         15.278

  2023        \$29.525        \$10.001        \$18.399         14.689

  2024        \$28.341        \$8.972         \$17.148         14.100

  2025        \$27.157        \$8.035         \$15.952         13.511

  2026        \$25.973        \$7.182         \$14.812         12.922

  2027        \$24.790        \$6.407         \$13.725         12.333

  2028        \$23.606        \$5.701         \$12.690         11.744

  2029        \$22.422        \$5.060         \$11.702         11.155

  2030        \$21.238        \$4.480         \$10.761         10.566

  2031        \$20.055        \$3.953         \$9.865          9.977

  2032        \$18.871        \$3.477         \$9.012          9.388

  2033        \$17.687        \$3.045         \$8.201          8.799

  2034        \$17.687        \$2.847         \$7.962          8.799

  2035        \$15.694        \$2.361         \$6.860          7.808

  2036        \$14.091        \$1.981         \$5.979          7.010

  2037        \$12.486        \$1.640         \$5.144          6.212

  2038        \$10.875        \$1.335         \$4.350          5.410

  2039        \$9.175         \$1.053         \$3.563          4.565

  2040        \$6.975         \$0.748         \$2.630          3.470

  2041        \$4.432         \$0.445         \$1.623          2.205

  2042        \$2.328         \$0.218         \$0.827          1.158

                                                               

  **TOTAL**   **\$675.287**   **\$242.764**   **\$419.400**    **335.955**
  ----------- --------------- --------------- ---------------- -------------

Further, as shown in Table V-37, which sums Tables V-33 and V-35,
operators of Boeing airplanes will incur undiscounted costs of \$333
million which has a present value of \$120 million using a 7 percent
discount rate and a present value of \$205 million using a 3 percent
discount rate. Operators of Airbus airplanes will incur undiscounted
costs of \$343 million which has a present value of \$123 million using
a 7 percent discount rate and a present value of \$214 million using a 3
percent discount rate.

TABLE V-37

UNDISCOUNTED AND PRESENT VALUE OF THE INCREASED FUEL COST FOR AIR
CARRIER PASSENGER AIRPLANES

(Monetary Numbers in Millions of 2007 Dollars)

  --------------- -------------- ------------- ------------- -------------
                  TOTAL COSTS                                

  MANUFACTURER    UNDISCOUNTED   PRESENT VALUE PRESENT VALUE GALLONS
                                 (7%)          (3%)          

                                                             

  BOEING          \$333          \$120         \$205         165

  AIRBUS          \$344          \$123         \$214         171

                                                             

  **TOTAL**       **\$676**      **\$243**     **\$420**     **336**
  --------------- -------------- ------------- ------------- -------------

## V.P. ANNUAL OPERATIONAL COSTS 

### V.P.1. [Unit Operational Costs]{.underline}

### V.P.1.a. [Additional Inspection and Scheduled Maintenance Time]{.underline} 

In the IRE, we had estimated that the scheduled inspection and
maintenance time would be 33 labor hours for a large passenger airplane,
27 labor hours for a medium-sized passenger airplane, and 26 labor hours
for a small passenger airplane. Boeing commented that 6 labor hours of
scheduled maintenance are needed for an airplane. Airbus did not provide
an estimate for this cost. United/Shaw Aero Devices/Air Liquide did not
provide an estimate for this cost. Thus, we accept the Boeing estimate
and apply it to all airplanes with FTI

V.P.1.b. [Additional Unscheduled Maintenance Time]{.underline}

In the IRE, we had estimated annual unscheduled maintenance time of 17
labor hours for a large passenger airplane and 11 labor hours for a
medium-sized and small passenger airplane. The Boeing comment subsumed
the unscheduled maintenance time within a category that included
scheduled maintenance costs and materials costs. Neither Airbus nor
United/Shaw Aero Devices/Air Liquide provided an estimate for this cost.
As we were unable to differentiate the unscheduled maintenance component
cost in the Boeing comment, we used the values in the IRE for all
airplanes with FTI.

V.P.1.c. [Costs of Unscheduled Delays Due to Fuel Tank Inerting System
Failure]{.underline}

In the IRE, we used 3,500 flight hours as the mean time between failure
(MTBF) for the FTI and coupled that with an ATA-provided cost of a
delayed flight. On that basis, we estimated that the annual delay cost
for FTI would be \$1,002 for a large airplane, \$1,173 for a
medium-sized airplane, and \$1,759 for a small airplane. Boeing
commented that unscheduled flight delays will occur only for system
failures that require locking the Nitrogen Gas System (NGS) shutoff
valve closed and that the majority of system failures do not require NGS
shutoff valve closure. They reported annual costs from \$116 to \$518 by
airplane model. Neither Airbus nor United/Shaw Aerospace/Air Liquide
provided an estimate for this cost. Thus, we accept the Boeing estimates
and apply it to all airplanes with FTI.

###  V.P.1.d. [Annual Materials Costs]{.underline} 

With the exception of the ASM replacement, which will be evaluated in
Section V.Q., replacing the water separator/filter is the only materials
cost. In the IRE, we had used the ARAC determination that the water
separator/filter would be replaced every 2 years at an annual cost of
\$2,273 for a large passenger airplane, \$1,603 for a medium-sized
passenger airplane, and \$1,042 for a small passenger airplane. Although
Boeing commented that "the expected filter maintenance interval is
greater than 1 year for average environmental conditions," the Boeing
cost estimate assumed an annual filter replacement and that the spares
cost of a water separator/filter will be \$5,480 for the B-747 and B-777
and \$3,511 for the B-737. We determined that the water separator/filter
be replaced every two years, but we use the Boeing replacement costs in
this Regulatory Evaluation.[^82] Neither Airbus nor United/Shaw Aero
Devices/Air Liquide provided an estimate for this cost.

V.P.1.e. [Summary of Total Unit Operational Costs]{.underline}

In summary, as shown in Table V-38, the unit annual maintenance, delays,
and materials costs will be between \$3,316 and \$5,263 for an air
carrier passenger airplane.

## 

## TABLE V-38

## 

## ANNUAL AIR CARRIER PASSENGER AIRPLANE FTI SYSTEM MAINTENANCE, DELAY, AND MATERIALS COSTS 

  --------------- ------------- ------------- -------- ------------------ ---------
  MODEL           SCHEDULED     UNSCHEDULED   DELAYS   WATER              TOTAL
                  MAINTENANCE   MAINTENANCE            SEPARATOR/FILTER   COST
                                                       REPLACEMENT        

                                                                          

  B-737-200       \$480         \$ 880        \$116    \$1,755            \$3,231

  B-737-Classic   \$480         \$ 880        \$116    \$1,755            \$3,231

  B-737-NG        \$480         \$ 880        \$116    \$1,755            \$3,231

  B-757           \$480         \$1,360       \$149    \$2,250            \$4,239

  B-767           \$480         \$1,360       \$237    \$2,250            \$4,327

  B-747-1/2/300   \$480         \$1,360       \$568    \$2,740            \$5,148

  B-747-400       \$480         \$1,360       \$568    \$2,740            \$5,148

  B-747-800       \$480         \$1,360       \$568    \$2,740            \$5,148

  B-777           \$480         \$1,360       \$366    \$2,740            \$4,946

  B-787           \$480         \$1,360       \$237    \$2,250            \$4,327

  A-300           \$480         \$1,360       \$237    \$2,250            \$4,327

  A-310           \$480         \$1,360       \$237    \$2,250            \$4,327

  A-320 Family    \$480         \$ 880        \$116    \$1,755            \$3,231

  A-330           \$480         \$1,360       \$366    \$2,740            \$4,946

  A-340           \$480         \$1,360       \$568    \$2,740            \$5,148

  A-350           \$480         \$1,360       \$237    \$2,250            \$4,327

  A-380           \$480         \$1,360       \$568    \$2,740            \$5,148
  --------------- ------------- ------------- -------- ------------------ ---------

V.P.2. [Total Operational Costs]{.underline}

### V.P.2.a. [Total Operational Costs for Retrofitted Passenger Airplanes]{.underline} 

The total operational costs are determined by multiplying each model's
annual average maintenance, delay, and material costs by the number of
these models and then summing the individual model costs to obtain the
total maintenance cost. As shown in Table V-39, which summarizes
Appendix V-13, the total operational costs for air carrier retrofitted
passenger airplanes will be \$112 million, which has a present value of
\$49 million using a 7 percent discount rate and a present value of \$77
million using a 3 percent discount rate.

TABLE V-39

ANNUAL OPERATIONAL COSTS FOR AIR CARRIER RETROFITTED PASSENGER AIRPLANES

(All Values in Millions of 2007 Dollars)

  ------------ -------------------- ------------------- -------------------
               TOTAL COSTS                              

  YEAR         UNDISCOUNTED         PRESENT VALUE (7%)  PRESENT VALUE (3%)

                                                        

  2010         \$ 0.986             \$ 0.805            \$ 0.902

  2011         \$ 1.971             \$ 1.504            \$ 1.751

  2012         \$ 2.957             \$ 2.108            \$ 2.550

  2013         \$ 3.942             \$ 2.627            \$ 3.302

  2014         \$ 4.928             \$ 3.069            \$ 4.007

  2015         \$ 5.913             \$ 3.442            \$ 4.668

  2016         \$ 7.595             \$ 4.131            \$ 5.821

  2017         \$ 9.899             \$ 5.032            \$ 7.366

  2018         \$ 9.280             \$ 4.409            \$ 6.704

  2019         \$ 8.662             \$ 3.846            \$ 6.075

  2020         \$ 8.043             \$ 3.337            \$ 5.477

  2021         \$ 7.424             \$ 2.879            \$ 4.908

  2022         \$ 6.805             \$ 2.467            \$ 4.368

  2023         \$ 6.187             \$ 2.096            \$ 3.855

  2024         \$ 5.568             \$ 1.763            \$ 3.369

  2025         \$ 4.949             \$ 1.464            \$ 2.907

  2026         \$ 4.331             \$ 1.197            \$ 2.470

  2027         \$ 3.712             \$ 0.959            \$ 2.055

  2028         \$ 3.093             \$ 0.747            \$ 1.663

  2029         \$ 2.475             \$ 0.559            \$ 1.292

  2030         \$ 1.856             \$ 0.392            \$ 0.940

  2031         \$ 1.237             \$ 0.244            \$ 0.609

  2032         \$ 0.619             \$ 0.114            \$ 0.295

                                                        

  **TOTAL**    **\$112.432**        **\$49.189**        **\$77.354**
  ------------ -------------------- ------------------- -------------------

Further, as shown in Table V-40, which summarizes Appendix V-13,
operators of Boeing retrofitted airplanes will incur undiscounted
operational costs of \$75 million which has a present value of \$33
million using a 7 percent discount rate and a present value of \$52
million using a 3 percent discount rate. Operators of Airbus retrofitted
airplanes will incur undiscounted operational costs of \$37 million
which has a present value of \$16 million using a 7 percent discount
rate and a present value of \$25 million using a 3 percent discount
rate.

TABLE V-40

UNDISCOUNTED AND PRESENT VALUE OF THE OPERATIONAL COSTS FOR AIR CARRIER
RETROFITTED PASSENGER AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$ 75             \$33              \$52

  AIRBUS            \$ 37             \$16              \$25

                                                        

  **TOTAL**         **\$112**         **\$49**          **\$77**
  ----------------- ----------------- ----------------- -----------------

### 

### V.O.2.b. [Total Operational Costs for Production Passenger Airplanes]{.underline} 

The annual production passenger airplane operating costs equals the unit
operating costs from Table V-39 multiplied by the production airplanes
in service that year from Table V-11 and summed across all models for
each year. As shown in Table V-41, which summarizes Appendix V-13, the
undiscounted operational costs for production passenger airplanes will
be \$197 million, which has a present value of \$63 million using a 7
percent discount rate and a present value of \$116 million using a 3
percent discount rate.

TABLE V-41

ANNUAL OPERATIONAL COSTS FOR AIR CARRIER PRODUCTION PASSENGER AIRPLANES

(All Values in Millions of 2007 Dollars)

  -------------- ------------------- ----------------- -------------------
                 TOTAL COSTS                           

  YEAR           UNDISCOUNTED        PRESENT VALUE     PRESENT VALUE (3%)
                                     (7%)              

                                                       

  2009           \$ 0.812            \$ 0.710          \$ 0.766

  2010           \$ 1.468            \$ 1.198          \$ 1.344

  2011           \$ 2.108            \$ 1.608          \$ 1.873

  2012           \$ 2.787            \$ 1.987          \$ 2.404

  2013           \$ 3.534            \$ 2.355          \$ 2.960

  2014           \$ 4.495            \$ 2.800          \$ 3.655

  2015           \$ 5.594            \$ 3.256          \$ 4.416

  2016           \$ 6.547            \$ 3.561          \$ 5.018

  2017           \$ 7.572            \$ 3.849          \$ 5.634

  2018           \$ 7.572            \$ 3.597          \$ 5.470

  2019           \$ 7.572            \$ 3.362          \$ 5.311

  2020           \$ 7.572            \$ 3.142          \$ 5.156

  2021           \$ 7.572            \$ 2.936          \$ 5.006

  2022           \$ 7.572            \$ 2.744          \$ 4.860

  2023           \$ 7.572            \$ 2.565          \$ 4.718

  2024           \$ 7.572            \$ 2.397          \$ 4.581

  2025           \$ 7.572            \$ 2.240          \$ 4.448

  2026           \$ 7.572            \$ 2.094          \$ 4.318

  2027           \$ 7.572            \$ 1.957          \$ 4.192

  2028           \$ 7.572            \$ 1.829          \$ 4.070

  2029           \$ 7.572            \$ 1.709          \$ 3.952

  2030           \$ 7.572            \$ 1.597          \$ 3.836

  2031           \$ 7.572            \$ 1.493          \$ 3.725

  2032           \$ 7,572            \$ 1.395          \$ 3.616

  2033           \$ 7.572            \$ 1.304          \$ 3.511

  2034           \$ 7.572            \$ 1.219          \$ 3.409

  2035           \$ 6.759            \$ 1.017          \$ 2.954

  2036           \$ 6.103            \$ 0.858          \$ 2.590

  2037           \$ 5.463            \$ 0.718          \$ 2.251

  2038           \$ 4.785            \$ 0.587          \$ 1.914

  2039           \$ 4.038            \$ 0.463          \$ 1.568

  2040           \$ 3.076            \$ 0.330          \$ 1.160

  2041           \$ 1.977            \$ 0.198          \$ 0.724

  2042           \$ 1.025            \$ 0.096          \$ 0.364

                                                       

  **TOTAL**      **\$196.862**       **\$63.170**      **\$115.771**
  -------------- ------------------- ----------------- -------------------

As shown in Table V-42, which summarizes Appendix V-13, of the
undiscounted costs of \$197 million, \$109 million will be incurred by
Boeing airplane operators and \$88 million will be incurred by Airbus
airplane operators. Of the present value costs of \$63 million using a 7
percent discount rate, \$34 million will be incurred by Boeing airplane
operators and \$29 million will be incurred by Airbus airplane
operators. Of the present value of \$116 million using a 3 percent
discount rate, \$64 million will be incurred by Boeing airplane
operators and \$52 million will be incurred by Airbus airplane
operators.

TABLE V-42

TOTAL OPERATIONAL COSTS FOR AIR CARRIER PRODUCTION PASSENGER AIRPLANE BY
MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$109             \$34              \$ 64

  AIRBUS            \$ 88             \$29              \$ 52

                                                        

  **TOTAL**         **\$197**         **\$63**          **\$116**
  ----------------- ----------------- ----------------- -----------------

### V.O.3. [Total Operational Costs for All Passenger Airplanes]{.underline} 

As shown in Table V-43 which sums Tables V-39 and V-41, the undiscounted
operational cost for all air carrier passenger airplanes will be \$309
million, which has a present value of \$112 million using a 7 percent
discount rate and a present value of \$193 million using a 3 percent
discount rate.

TABLE V-43

ANNUAL OPERATIONAL COSTS FOR AIR CARRIER PASSENGER AIRPLANES

(All Values in Millions of 2007 Dollars)

  -------------- ----------------- ----------------- ---------------------
                 TOTAL COSTS                         

  YEAR           UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE (3%)
                                   (7%)              

                                                     

  2009           \$ 0.812          \$ 0.710          \$ 0.766

  2010           \$ 2.454          \$ 2.003          \$ 2.246

  2011           \$ 4.080          \$ 3.112          \$ 3.625

  2012           \$ 5.743          \$ 4.095          \$ 4.954

  2013           \$ 7.476          \$ 4.982          \$ 6.261

  2014           \$ 9.423          \$ 5.868          \$ 7.662

  2015           \$ 11.508         \$ 6.698          \$ 9.084

  2016           \$ 14.141         \$ 7.692          \$ 10.838

  2017           \$ 17.470         \$ 8.881          \$ 13.000

  2018           \$ 16.852         \$ 8.006          \$ 12.174

  2019           \$ 16.233         \$ 7.208          \$ 11.386

  2020           \$ 15.614         \$ 6.479          \$ 10.633

  2021           \$ 14.996         \$ 5.816          \$ 9.914

  2022           \$ 14.377         \$ 5.211          \$ 9.228

  2023           \$ 13.758         \$ 4.660          \$ 8.574

  2024           \$ 13.140         \$ 4.160          \$ 7.950

  2025           \$ 12.521         \$ 3.705          \$ 7.355

  2026           \$ 11.902         \$ 3.291          \$ 6.788

  2027           \$ 11.284         \$ 2.916          \$ 6.248

  2028           \$ 10.665         \$ 2.576          \$ 5.733

  2029           \$ 10.046         \$ 2.268          \$ 5.243

  2030           \$ 9.428          \$ 1.989          \$ 4.777

  2031           \$ 8.809          \$ 1.737          \$ 4.333

  2032           \$ 8.190          \$ 1.509          \$ 3.912

  2033           \$ 7.572          \$ 1.304          \$ 3.511

  2034           \$ 7.572          \$ 1.219          \$ 3.409

  2035           \$ 6.759          \$ 1.017          \$ 2.954

  2036           \$ 6.103          \$ 0.858          \$ 2.590

  2037           \$ 5.463          \$ 0.718          \$ 2.251

  2038           \$ 4.785          \$ 0.587          \$ 1.914

  2039           \$ 4.038          \$ 0.463          \$ 1.568

  2040           \$ 3.076          \$ 0.330          \$ 1.160

  2041           \$ 1.977          \$ 0.198          \$ 0.724

  2042           \$ 1.025          \$ 0.096          \$ 0.364

                                                     

  **TOTAL**      **\$309.294**     **\$112.359**     **\$193.126**
  -------------- ----------------- ----------------- ---------------------

Further, as shown in Table V-44, which sums Tables V-40 and V-42, Boeing
passenger airplane operators will incur undiscounted operational costs
of \$184 million which has a present value of \$67 million using a 7
percent discount rate and a present value of \$115 million using a 3
percent discount rate. Airbus passenger airplane operators will incur
undiscounted operational costs of \$125 million which has a present
value of \$45 million using a 7 percent discount rate and a present
value of \$78 million using a 3 percent discount rate.

TABLE V-44

UNDISCOUNTED AND PRESENT VALUE OF THE OPERATIONAL COSTS FOR AIR CARRIER
PASSENGER AIRPLANES BY MANUFACTURER

(All Values in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COST                          

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$184             \$ 67             \$115

  AIRBUS            \$125             \$ 45             \$ 78

                                                        

  **TOTAL**         **\$309**         **\$112**         **\$193**
  ----------------- ----------------- ----------------- -----------------

## V.Q. AIR SEPARATION MODULE (asm) REPLACEMENT COSTS 

### V.Q.1. [Unit Costs to Replace ASMs]{.underline}

In the IRE, we had noted that the FTI design goal was to replace the
ASMs every 27,000 flight hours. Using an average of 3,000 annual flight
hours, we calculated that the average ASM would be replaced every 9
years. Boeing commented that, although the current service evaluations
of FTIs are based on replacing the ASM every 9,000 flight hours, they
believe the goal of 27,000 flight hours between replacements will be
attained. Neither Airbus nor United/Shaw Aero Devices/Air Liquide
provided an estimate for this cost.

We agree with Boeing that the goal of an ASM replacement every 27,000
flight hours will be reached and we use that interval for the ASM
replacement frequency in this Regulatory Evaluation. Consequently, for a
new B-737-NG and a new B-747-800 built in the same year, the B-737-NG
will have 2 ASM replacements during its lifetime while the B-747-800
will have 3 ASM replacements during its lifetime. As shown in Table
V-45, based on the average annual flight hours per model, ASMs will be
replaced in air carrier passenger service every 6 to 9 years.

## 

## TABLE V-45

## 

## ASM REPLACEMENT INTERVALS FOR AIR CARRIER PASSENGER AIRPLANES BY MODEL

  --------------------------- -------------------------------------------
  MODEL                       ASM REPLACEMENT (in Yrs.)

                              

  B-737-200                   9

  B-737-Classic               9

  B-737-NG                    8

  B-757                       9

  B-767                       7

  B-747-1/2/300               6

  B-747-400                   6

  B-747-800                   6

  B-777                       7

  B-787                       7

  A-300                       7

  A-310                       7

  A-320 Family                8

  A-330                       7

  A-340                       6

  A-350                       7

  A-380                       6
  --------------------------- -------------------------------------------

The ASM replacement cost depends upon the volume of bleed air it must
process to inert the HCWT. A larger fuel tank requires more nitrogen,
which requires a larger ASM to process the greater volume of bleed air.
In the IRE, the ARAC had been informed by ASM suppliers that a
replacement ASM would cost \$28,814 for a large airplane, \$18,761 for a
medium airplane, and \$5,275 for a small airplane. Since the ARAC
meetings, Boeing reported that the fuel tanks need a higher volume of
nitrogen for inerting than originally expected, which has increased the
ASM size. ASM suppliers have also increased the ASM cost and that
replacement ASMs cost between \$30,520 and \$152,600 per airplane.
Airbus also commented that the ASMs were much more expensive than
reported in the IRE, but did not provide quantitative estimates. We
agree with the Boeing comment and their reported ASM replacement costs
are provided in Table V-46.[^83]

## 

## TABLE V-46

## 

## ASM REPLACEMENT COSTS FOR AN AIR CARRIER PASSENGER AIRPLANE BY MODEL

  --------------- --------------- ----------------- -----------------------
  MODEL           COST PER ASM    NUMBER OF ASMs    ASM REPLACEMENT COST

                                                    

  B-737-200       \$30,520        1                 \$ 30,520

  B-737-Classic   \$30,520        1                 \$ 30,520

  B-737-NG        \$45,052        1                 \$ 45,052

  B-757           \$37,886        4                 \$151,144

  B-767           \$37,886        4                 \$151,144

  B-747-1/2/300   \$45,052        3                 \$135,156

  B-747-400       \$45,052        3                 \$135,156

  B-747-800       \$45,052        3                 \$135,156

  B-777           \$30,520        5                 \$152,600

  B-787           \$37,886        4                 \$151,144

  A-300           \$37,886        4                 \$151,144

  A-310           \$37,886        4                 \$151,144

  A-320 Family    \$45,052        1                 \$ 45,052

  A-330           \$30,520        5                 \$152,600

  A-340           \$45,052        3                 \$135,156

  A-350           \$37,886        4                 \$151,144

  A-380           \$45,052        3                 \$135,156
  --------------- --------------- ----------------- -----------------------

### V.Q.2. [ASM Replacement Costs for Retrofitted Airplanes]{.underline}

Given a 25-year lifespan in air carrier passenger service, many of the
retrofitted airplanes will have their ASMs replaced only once before
they are retired and many airplanes will be retired before their ASM
will need to be replaced. For example, the last B-737 Classic was
manufactured in 1998, which means that all will be retired by 2023. If a
B-737 Classic manufactured in 1998 were retrofitted in 2010, its first
ASM replacement would be in 2018. Before its second scheduled ASM
replacement in 2026, the airplane would have been retired. Similarly, if
it were manufactured in 1995 (scheduled for retirement in 2020) and
retrofitted in 2013, it would have been retired before its first ASM
replacement (scheduled for 2021) would have been made. We anticipate
that one of the factors affecting an air carrier's FTI retrofit schedule
will be to minimize the number of ASM replacements. The ASM replacements
will begin in 2016 for airplanes retrofitted in 2010 that need to have
their ASMs replaced every 6 years. Thus, as all of the retrofitted
airplanes will be retired by 2033, there will be no ASM replacements
after 2027 because the last ASM replacement will be scheduled to
maximize the number of years the ASM operates.

As shown in Table V-47, 2,731 retrofitted airplanes will have 2,138 ASM
replacements. This is an average of about 3 ASM replacements for every 4
air carrier retrofitted passenger airplanes. Of these 2,138 ASM
replacements, 1,171 will be on Boeing airplanes and 967 will be on
Airbus airplanes.

TABLE V-47

NUMBERS OF ASM REPLACEMENTS ON AIR CARRIER RETROFITTED PASSENGER
AIRPLANES BY MANUFACTURER AND BY YEAR

  --------------- ----------------- ------------------- -------------------
                                    MANUFACTURER        

  YEAR            TOTAL             BOEING              AIRBUS

                                                        

  2016            19                19                  0

  2017            41                36                  5

  2018            227               126                 101

  2019            227               126                 101

  2020            227               126                 101

  2021            210               109                 101

  2022            224               123                 101

  2023            228               123                 105

  2024            345               172                 173

  2025            341               172                 169

  2026            25                20                  5

  2027            25                20                  5

  2028            0                 0                   0

                                                        

  **TOTAL**       **2,138**         **1,171**           **967**
  --------------- ----------------- ------------------- -------------------

As shown in Table V-48, which summarizes Appendix V-15, the undiscounted
ASM replacement costs for air carrier retrofitted passenger airplanes
will be about \$137 million, which has a present value of \$52 million
using a 7 percent discount rate and a present value of \$89 million
using a 3 percent discount rate.

TABLE V-48

ASM REPLACEMENT COSTS FOR AIR CARRIER RETROFITTED PASSENGER AIRPLANES

(All Values in Millions of 2007 Dollars)

  ------------- --------------------- ------------------ ------------------
                TOTAL COSTS                              

  YEAR          UNDISCOUNTED          PRESENT VALUE (7%) PRESENT VALUE (3%)

                                                         

  2016          \$ 2.842              \$ 1.546           \$ 2.178

  2017          \$ 6.108              \$ 3.105           \$ 4.545

  2018          \$ 14.478             \$ 6.878           \$10.459

  2019          \$ 14.478             \$ 6.428           \$10.154

  2020          \$ 14.478             \$ 6.008           \$ 9.859

  2021          \$ 12.023             \$ 4.663           \$ 7.949

  2022          \$ 14.029             \$ 5.085           \$ 9.005

  2023          \$ 14.602             \$ 4.946           \$ 9.099

  2024          \$ 18.504             \$ 5.858           \$11.195

  2025          \$ 17.931             \$ 5.305           \$10.533

  2026          \$ 3.653              \$ 1.010           \$ 2.083

  2027          \$ 3.653              \$ 0.944           \$ 2.023

  2028          \$ 0.000              \$ 0.000           \$ 0.000

                                                         

  **TOTAL**     **\$136.779**         **\$51.776**       **\$89.082**
  ------------- --------------------- ------------------ ------------------

Further, as shown in Table V-49, which summarizes Appendix V-15, Boeing
retrofitted passenger airplane operators will incur undiscounted costs
of \$86 million which has a present value of \$33 million using a 7
percent discount rate and a present value of \$56 million using a 3
percent discount rate. Airbus retrofitted passenger airplane operators
will incur undiscounted costs of \$51 million which has a present value
of \$19 million using a 7 percent discount rate and a present value of
\$33 million using a 3 percent discount rate.

TABLE V-49

UNDISCOUNTED AND PRESENT VALUE OF ASM REPLACEMENT COSTS FOR AIR CARRIER
RETROFITTED PASSENGER AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$ 86             \$33              \$56

  AIRBUS            \$ 51             \$19              \$33

                                                        

  **TOTAL**         **\$137**         **\$52**          **\$89**
  ----------------- ----------------- ----------------- -----------------

### V.Q.3. [Total ASM Replacement Costs for Air Carrier Production Airplanes]{.underline} 

As shown in Table V-50, 4,647 ASM replacements will be made on
production passenger airplanes of which 2,570 will be on Boeing
airplanes and 2,078 will be on Airbus airplanes. In Table V-11, we
forecasted that 2,290 production passenger airplanes will be affected by
the final rule of which 1,268 will be Boeing airplanes and 1,022 will be
Airbus airplanes. With a 25 year lifespan in air carrier passenger
service, all production passenger airplanes will need at least 2 ASM
replacements before the airplane is retired. Dividing the totals in
Table V-49 by the totals in Table V-11, we calculate that 2,222
production passenger airplanes will have 2 ASM replacements and 68
production passenger airplanes will have 3 ASM replacements. Further,
1,234 Boeing airplanes will have 2 ASM replacements and 34 will have 3
ASM replacements while 988 Airbus airplanes will have 2 ASM replacements
and 34 Airbus will have 3 ASM replacements.

TABLE V-50

ASM REPLACEMENTS ON AIR CARRIER PRODUCTION PASSENGER AIRPLANES BY YEAR

  ----------- ----------------- ---------------------- ---------------------
  YEAR        TOTAL ASM         BOEING ASM             AIRBUS ASM
              REPLACEMENTS      REPLACEMENTS           REPLACEMENTS

                                                       

  2015        2                 2                      0

  2016        17                5                      12

  2017        238               104                    134

  2018        200               93                     108

  2019        190               78                     113

  2020        211               107                    104

  2021        228               143                    85

  2022        294               177                    118

  2023        346               194                    151

  2024        294               197                    96

  2025        312               190                    122

  2026        239               106                    133

  2027        204               92                     113

  2028        196               78                     119

  2029        213               108                    104

  2030        239               146                    93

  2031        294               179                    115

  2032        329               191                    138

  2033        288               194                    94

  2034        313               188                    126

  2035        0                 0                      0

                                                       

  **TOTAL**   **4,647**         **2,570**              **2,078**
  ----------- ----------------- ---------------------- ---------------------

As shown in Table V-51, which summarizes Appendix V-16, the undiscounted
ASM replacement costs for air carrier production passenger airplanes
will be \$237 million, which has a present value of \$71 million using a
7 percent discount rate and a present value of \$138 million using a 3
percent discount rate.

TABLE V-51

UNDISCOUNTED AND PRESENT VALUE ASM REPLACEMENT COSTS FOR AIR CARRIER
PRODUCTION PASSENGER AIRPLANES BY YEAR

(All Values in Millions of 2007 Dollars)

  ------------ --------------------- ----------------- -------------------
               TOTAL COSTS                             

  YEAR         UNDISCOUNTED          PRESENT VALUE     PRESENT VALUE (3%)
                                     (7%)              

                                                       

  2015         \$ 0.229              \$ 0.133          \$ 0.181

  2016         \$ 2.466              \$ 1.341          \$ 1.890

  2017         \$ 11.435             \$ 5.813          \$ 8.508

  2018         \$ 9.978              \$ 4.741          \$ 7.208

  2019         \$ 9.422              \$ 4.183          \$ 6.608

  2020         \$ 10.982             \$ 4.557          \$ 7.478

  2021         \$ 11.876             \$ 4.606          \$ 7.852

  2022         \$ 15.059             \$ 5.458          \$ 9.666

  2023         \$ 18.316             \$ 6.204          \$ 11.414

  2024         \$ 14.725             \$ 4.662          \$ 8.909

  2025         \$ 15.093             \$ 4.466          \$ 8.866

  2026         \$ 11.605             \$ 3.209          \$ 6.618

  2027         \$ 10.581             \$ 2.734          \$ 5.859

  2028         \$ 10.313             \$ 2.491          \$ 5.544

  2029         \$ 11.211             \$ 2.530          \$ 5.851

  2030         \$ 13.524             \$ 2.853          \$ 6.853

  2031         \$ 15.027             \$ 2.962          \$ 7.392

  2032         \$ 15.909             \$ 2.931          \$ 7.598

  2033         \$ 13.929             \$ 2.398          \$ 6.459

  2034         \$ 15.369             \$ 2.473          \$ 6.919

                                                       

  **TOTAL**    **\$237.049**         **\$70.747**      **\$137.672**
  ------------ --------------------- ----------------- -------------------

As shown in Table V-52, which summarizes Appendix V-16, of the
undiscounted costs of \$237 million, \$131 million will be incurred by
Boeing airplane operators and \$106 million will be incurred by Airbus
airplane operators. Of the present value costs of \$71 million using a 7
percent discount rate, \$38 million will be incurred by Boeing airplane
operators and \$33 million will be incurred by Airbus airplane
operators. Of the present value of \$138 million using a 3 percent
discount rate, \$75 million will be incurred by Boeing airplane
operators and \$63 million will be incurred by Airbus airplane
operators.

TABLE V-52

TOTAL ASM REPLACEMENT COSTS FOR AIR CARRIER PRODUCTION PASSENGER
AIRPLANE BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$131             \$38              \$ 75

  AIRBUS            \$106             \$33              \$ 63

                                                        

  **TOTAL**         **\$237**         **\$71**          **\$138**
  ----------------- ----------------- ----------------- -----------------

### V.Q.4. [Total ASM Replacement Costs for All Air Carrier Passenger Airplanes]{.underline} 

As shown in Table V-53, which sums Tables V-47 and V-50, 6,785 ASM
replacements will be made on air carrier passenger airplanes of which
2,138 will be on retrofitted airplanes and 4,647 will be on production
airplanes.

TABLE V-53

NUMBERS OF ASM REPLACEMENTS ON AIR CARRIER PASSENGER AIRPLANES BY
INSTALLATION AND BY YEAR

  ----------- --------------- ---------------------- ----------------------
  YEAR        TOTAL           RETROFITTED            PRODUCTION

                                                     

  2015        2               0                      2

  2016        36              19                     17

  2017        279             41                     238

  2018        427             227                    200

  2019        417             227                    190

  2020        438             227                    211

  2021        438             210                    228

  2022        518             224                    294

  2023        574             228                    346

  2024        639             345                    294

  2025        653             341                    312

  2026        264             25                     239

  2027        229             25                     204

  2028        196             0                      196

  2029        213             0                      213

  2030        239             0                      239

  2031        294             0                      294

  2032        329             0                      329

  2033        288             0                      288

  2034        313             0                      313

                                                     

  **TOTAL**   **6,785**       **2,138**              **4,647**
  ----------- --------------- ---------------------- ----------------------

As shown in Table V-54, which sums Tables V-48 and V-51, the
undiscounted ASM replacement cost for all air carrier retrofitted and
production passenger airplanes will be \$374 million, which has a
present value of \$123 million using a 7 percent discount rate and a
present value of \$227 million using a 3 percent discount rate.

TABLE V-54

UNDISCOUNTED AND PRESENT VALUE TOTAL ASM REPLACEMENT COSTS FOR AIR
CARRIER PASSENGER AIRPLANES BY YEAR

(in Millions of 2007 Dollars)

  ------------ --------------------- ------------------- -----------------
               TOTAL COSTS                               

  YEAR         UNDISCOUNTED          PRESENT VALUE (7%)  PRESENT VALUE
                                                         (3%)

                                                         

  2015         \$ 0.229              \$ 0.133            \$ 0.181

  2016         \$ 5.308              \$ 2.887            \$ 4.068

  2017         \$ 17.543             \$ 8.918            \$ 13.053

  2018         \$ 24.456             \$ 11.619           \$ 17.667

  2019         \$ 23.900             \$ 10.611           \$ 16.762

  2020         \$ 25.460             \$ 10.565           \$ 17.337

  2021         \$ 23.899             \$ 9.269            \$ 15.801

  2022         \$ 29.088             \$ 10.543           \$ 18.671

  2023         \$ 32.918             \$ 11.150           \$ 20.513

  2024         \$ 33.229             \$ 10.520           \$ 20.104

  2025         \$ 33.024             \$ 9.771            \$ 19.399

  2026         \$ 15.258             \$ 4.219            \$ 8.701

  2027         \$ 14.234             \$ 3.678            \$ 7.882

  2028         \$ 10.313             \$ 2.491            \$ 5.544

  2029         \$ 11.211             \$ 2.530            \$ 5.851

  2030         \$ 13.524             \$ 2.853            \$ 6.853

  2031         \$ 15.027             \$ 2.962            \$ 7.392

  2032         \$ 15.909             \$ 2.931            \$ 7.598

  2033         \$ 13.929             \$ 2.398            \$ 6.459

  2034         \$ 15.369             \$ 2.473            \$ 6.919

                                                         

  **TOTAL**    **\$373.828**         **\$122.521**       **\$226.755**
  ------------ --------------------- ------------------- -----------------

Further, as shown in Table V-55, which sums Tables V-49 and V-52 Boeing
passenger airplane operators will incur undiscounted ASM replacement
costs of \$217 million which has a present value of \$71 million using a
7 percent discount rate and a present value of \$132 million using a 3
percent discount rate. Airbus passenger airplane operators will incur
undiscounted ASM replacement costs of \$157 million which has a present
value of \$51 million using a 7 percent discount rate and a present
value of \$95 million using a 3 percent discount rate.

TABLE V-55

UNDISCOUNTED AND PRESENT VALUE ASM REPLACEMENT COSTS FOR AIR CARRIER
PASSENGER AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$217             \$ 71             \$132

  AIRBUS            \$157             \$ 51             \$ 95

                                                        

  **TOTAL**         **\$374**         **\$122**         **\$227**
  ----------------- ----------------- ----------------- -----------------

V.R. TOTAL AIR CARRIER PASSENGER AIRPLANE COMPLIANCE COSTS

V.R.1. [Total Costs for Retrofitted Airplanes]{.underline}

The total costs for retrofitted passenger airplane operators, as shown
in Table V-56, are the engineering assessment costs (Table V-5), the
retrofit costs (Table V-9), the water separator/filter assembly
inventory costs (Table V-19, the additional fuel consumption costs
(Table V-32), the operational costs (Table V-39), and the ASM
replacement costs (Table V-48). The undiscounted costs for air carrier
retrofitted passenger airplane operators will be \$839 million, which
has a present value of \$437 million using a 7 percent discount rate and
a present value of \$623 million using a discount rate of 3 percent.

TABLE V-56

UNDISCOUNTED AND PRESENT VALUE TOTAL COSTS FOR AIR CARRIER RETROFITTED
PASSENGER AIRPLANES BY YEAR

(in Millions of 2007 Dollars)

  ------------- -------------------- ----------------- -------------------
                TOTAL COSTS                            

  YEAR          UNDISCOUNTED         PRESENT VALUE     PRESENT VALUE (3%)
                                     (7%)              

                                                       

  2009          \$19.165             \$16.192          \$17.802

  2010          \$43.785             \$35.741          \$40.068

  2011          \$44.508             \$33.955          \$39.544

  2012          \$46.334             \$33.033          \$39.967

  2013          \$48.543             \$32.346          \$40.654

  2014          \$50.945             \$31.726          \$41.422

  2015          \$53.458             \$31.114          \$42.199

  2016          \$89.334             \$48.591          \$68.466

  2017          \$98.768             \$50.208          \$73.493

  2018          \$41.515             \$19.723          \$29.992

  2019          \$39.713             \$17.633          \$27.853

  2020          \$37.910             \$15.731          \$25.816

  2021          \$33.652             \$13.051          \$22.249

  2022          \$33.856             \$12.271          \$21.731

  2023          \$32.627             \$11.052          \$20.331

  2024          \$34.726             \$10.994          \$21.011

  2025          \$32.350             \$9.571           \$19.003

  2026          \$16.270             \$4.498           \$9.278

  2027          \$14.468             \$3.739           \$8.010

  2028          \$9.012              \$2.176           \$4.845

  2029          \$7.210              \$1.627           \$3.764

  2030          \$5.407              \$1.141           \$2.739

  2031          \$3.605              \$0.711           \$1.774

  2032          \$1.803              \$0.332           \$0.860

                                                       

  **TOTAL**     **\$838.964**        **\$437.156**     **\$622.871**
  ------------- -------------------- ----------------- -------------------

As shown in Table V-57, which sums Tables V-5, V-10, V-20, V-33, V-40,
and V-49, the undiscounted costs for all air carrier retrofitted Boeing
passenger airplane operators will be \$554 million, which has a present
value of \$294 million using a 7 percent discount rate and a present
value of \$414 million using a 3 percent discount rate. The undiscounted
costs for all air carrier retrofitted Airbus passenger airplane
operators will be \$285 million, which has a present value of \$143
million using a 7 percent discount rate and a present value of \$208
million using a 3 percent discount rate.

TABLE V-57

UNDISCOUNTED AND PRESENT VALUE COSTS FOR AIR CARRIER RETROFITTED
PASSENGER AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$554             \$294             \$414

  AIRBUS            \$285             \$143             \$208

                                                        

  **TOTAL**         **\$839**         **\$437**         **\$622**
  ----------------- ----------------- ----------------- -----------------

Finally, as shown in Table V-58, 52.4 percent of the compliance costs
(in present value times using a 7 percent discount rate) for retrofitted
airplanes are the \$220 million for installation costs. The engineering
costs (\$16 million) represent only 3.8 percent of the total costs. The
fuel costs (\$77 million) represent 18.3 percent of the total costs,
operational costs (\$49 million) represent 11.7 percent of the total
costs, and ASM replacement costs (\$52 million) represent 12.4 percent
of the total costs.

TABLE V-58

PERCENTAGE OF PRESENT VALUE (USING A 7 PERCENT DISCOUNT RATE) COMPLIANCE
COSTS BY COST CATEGORIES FOR AIR CARRIER RETROFITTED PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------------------------- --------------------- --------------------
  COST CATEGORY                 PRESENT VALUE COSTS   PERCENTAGE OF TOTAL
                                (7%)                  

                                                      

  **RETROFITTED**                                     

  ENGINEERING                   \$ 16                 3.7%

  INSTALLATION                  \$220                 50.3%

  INVENTORY                     \$ 6                  1.4%

  FUEL                          \$ 94                 21.5%

  OPERATIONAL                   \$ 49                 11.2%

  ASM REPLACEMENT               \$ 52                 11.9%

                                                      

  **RETROFITTED TOTAL**         **\$437**             100.0%
  ----------------------------- --------------------- --------------------

V.R.2. [Total Costs for Production Airplanes]{.underline}

The total costs for production passenger airplane operators, as shown in
Table V-59, are the costs the engineering assessment (Table V-5) the FTI
installation costs (Table V-13), the water separator/filter assembly
inventory costs (Table V-22), the additional fuel consumption costs
(Table V-34), the operational costs (Table V-41), and the ASM
replacement costs (Table V-51). The undiscounted costs for air carrier
production passenger airplane operators will be \$1.237 billion, which
has a present value of \$538 million using a 7 percent discount rate and
a present value of \$824 million using a 3 percent discount rate.

TABLE V-59

UNDISCOUNTED AND PRESENT VALUE TOTAL COSTS FOR AIR CARRIER PRODUCTION
PASSENGER AIRPLANES BY YEAR

(in Millions of 2007 Dollars)

  ------------ ------------------- ------------------- -------------------
               TOTAL COSTS                             

  YEAR         UNDISCOUNTED        PRESENT VALUE (7%)  PRESENT VALUE (3%)

                                                       

  2008         \$106.576           \$99.603            \$103.471

  2009         \$28.722            \$25.086            \$27.074

  2010         \$25.526            \$20.837            \$23.361

  2011         \$27.422            \$20.919            \$24.364

  2012         \$30.693            \$21.882            \$26.476

  2013         \$35.513            \$23.663            \$29.742

  2014         \$45.189            \$28.143            \$36.743

  2015         \$53.209            \$30.968            \$42.003

  2016         \$53.810            \$29.268            \$41.241

  2017         \$68.318            \$34.728            \$50.834

  2018         \$35.237            \$16.741            \$25.456

  2019         \$34.681            \$15.399            \$24.324

  2020         \$36.241            \$15.039            \$24.678

  2021         \$37.135            \$14.402            \$24.551

  2022         \$40.318            \$14.612            \$25.878

  2023         \$43.575            \$14.760            \$27.154

  2024         \$39.984            \$12.658            \$24.191

  2025         \$40.352            \$11.939            \$23.703

  2026         \$36.864            \$10.194            \$21.023

  2027         \$35.840            \$9.262             \$19.844

  2028         \$35.572            \$8.592             \$19.122

  2029         \$36.470            \$8.231             \$19.033

  2030         \$38.783            \$8.181             \$19.651

  2031         \$40.284            \$7.941             \$19.817

  2032         \$41.166            \$7.585             \$19.661

  2033         \$39.188            \$6.747             \$18.171

  2034         \$40.628            \$6.539             \$18.290

  2035         \$22.453            \$3.378             \$9.814

  2036         \$20.194            \$2.839             \$8.569

  2037         \$17.949            \$2.358             \$7.395

  2038         \$15.660            \$1.922             \$6.264

  2039         \$13.213            \$1.516             \$5.131

  2040         \$10.051            \$1.078             \$3.790

  2041         \$6.409             \$0.643             \$2.347

  2042         \$3.353             \$0.314             \$1.191

                                                       

  **TOTAL**    **\$1,236.578**     **\$537.967**       **\$824.357**
  ------------ ------------------- ------------------- -------------------

As shown in Table V-60, which sums Tables V-13, V-23, V-35, V-42, and
V-52, the undiscounted costs for all air carrier production Boeing
passenger airplane operators will be \$6336 million, which has a present
value of \$275 million using a 7 percent discount rate and a present
value of \$420 million using a 3 percent discount rate. The discounted
costs for all air carrier Airbus production passenger airplane operators
will be \$605 million, which has a present value of \$266 million using
a 7 percent discount rate and a present value of \$4056 million using a
3 percent discount rate.

TABLE V-60

UNDISCOUNTED AND PRESENT VALUE COSTS FOR AIR CARRIER PRODUCTION
PASSENGER AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$ 633            \$275             \$420

  AIRBUS            \$ 605            \$266             \$405

                                                        

  **TOTAL**         **\$1,237**       **\$541**         **\$826**
  ----------------- ----------------- ----------------- -----------------

Finally, as shown in Table V-61, 28.2 percent of the compliance costs
(in present value times using a 7 percent discount rate) for production
airplanes are the \$152 million for installation costs. In addition, the
engineering costs (\$100 million) represent 19.5 percent of the total
costs. The fuel costs (\$149 million) represent 27.6 percent of the
total costs, operational costs (\$63 million) represent 11.7 percent of
the total costs, and ASM replacement costs (\$71 million) represent 13.2
percent of the total costs.

TABLE V-61

PERCENTAGE OF PRESENT VALUE (USING A 7 PERCENT DISCOUNT RATE) COMPLIANCE
COSTS BY COST CATEGORIES FOR AIR CARRIER PRODUCTION PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------------------------- --------------------- --------------------
  COST CATEGORY                 PRESENT VALUE COSTS   PERCENTAGE OF TOTAL
                                (7%)                  

                                                      

  **PRODUCTION**                                      

  ENGINEERING                   \$100                 18.6%

  INSTALLATION                  \$152                 28.2%

  INVENTORY                     \$ 4                  0.7%

  FUEL                          \$149                 27.6%

  OPERATIONAL                   \$ 63                 11.7%

  ASM REPLACEMENT               \$ 71                 13.2%

                                                      

  **PRODUCTION TOTAL**          **\$539**             100.0%
  ----------------------------- --------------------- --------------------

### V.R.3. [Total Costs for All Affected Air Carrier Passenger Airplanes]{.underline} 

As shown in Table V-62, which sums Tables V-56 and V-59, the
undiscounted cost for all air carrier airplane operators will be \$2.076
billion, which has a present value of \$975 million using a 7 percent
discount rate and a present value of \$1.447 billion using a 3 percent
discount rate.

TABLE V-62

UNDISCOUNTED AND PRESENT VALUE TOTAL COSTS FOR AIR CARRIER PASSENGER
AIRPLANE OPERATORS BY YEAR

(All Values in Millions of 2007 Dollars)

  ------------- -------------------- ------------------ ------------------
                TOTAL COSTS                             

  YEAR          UNDISCOUNTED         PRESENT VALUE (7%) PRESENT VALUE (3%)

                                                        

  2008          \$106.576            \$99.603           \$103.471

  2009          \$47.887             \$41.278           \$44.876

  2010          \$69.311             \$56.578           \$63.429

  2011          \$71.930             \$54.874           \$63.908

  2012          \$77.027             \$54.915           \$66.443

  2013          \$84.056             \$56.009           \$70.396

  2014          \$96.134             \$59.869           \$78.165

  2015          \$106.667            \$62.082           \$84.202

  2016          \$143.144            \$77.859           \$109.707

  2017          \$167.086            \$84.936           \$124.327

  2018          \$76.752             \$36.464           \$55.448

  2019          \$74.394             \$33.032           \$52.177

  2020          \$74.151             \$30.770           \$50.494

  2021          \$70.787             \$27.453           \$46.800

  2022          \$74.174             \$26.883           \$47.609

  2023          \$76.202             \$25.812           \$47.485

  2024          \$74.710             \$23.652           \$45.202

  2025          \$72.702             \$21.510           \$42.706

  2026          \$53.134             \$14.692           \$30.301

  2027          \$50.308             \$13.001           \$27.854

  2028          \$44.584             \$10.768           \$23.967

  2029          \$43.680             \$9.858            \$22.797

  2030          \$44.190             \$9.322            \$22.390

  2031          \$43.889             \$8.652            \$21.591

  2032          \$42.969             \$7.917            \$20.521

  2033          \$39.188             \$6.747            \$18.171

  2034          \$40.628             \$6.539            \$18.290

  2035          \$22.453             \$3.378            \$9.814

  2036          \$20.194             \$2.839            \$8.569

  2037          \$17.949             \$2.358            \$7.395

  2038          \$15.660             \$1.922            \$6.264

  2039          \$13.213             \$1.516            \$5.131

  2040          \$10.051             \$1.078            \$3.790

  2041          \$6.409              \$0.643            \$2.347

  2042          \$3.353              \$0.314            \$1.191

                                                        

  **TOTAL**     **\$2,075.542**      **\$975.123**      **\$1,447.228**
  ------------- -------------------- ------------------ ------------------

Further, as shown in Table V-63, which sums Tables V-57 and V-60, air
carrier Boeing passenger airplanes will incur undiscounted costs of
\$1.187 billion which has a present value of \$569 million using a 7
percent discount rate and a present value of \$833 million using a 3
percent discount rate. Air carrier Airbus passenger airplanes will incur
undiscounted costs of \$890 million which has a present value of \$409
million using a 7 percent discount rate and a present value of \$613
million using a 3 percent discount rate.

TABLE V-63

UNDISCOUNTED AND PRESENT VALUE COSTS FOR AIR CARRIER PASSENGER AIRPLANES
BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$1,187           \$569             \$ 833

  AIRBUS            \$ 890            \$409             \$ 613

                                                        

  **TOTAL**         **\$2,076**       **\$978**         **\$1,448**
  ----------------- ----------------- ----------------- -----------------

Finally, as shown in Table V-64, which combines Tables V-57 and V-60,
the engineering and installation costs are a little less than half (49.2
percent) of the present value of the compliance costs for all airplanes.
The installation costs are more than half (50.3 percent) of the costs
for retrofitted airplanes while they are 28.2 percent of the costs for
production airplanes. The engineering costs are so much larger for
production airplanes (\$100 million) than for retrofitted airplanes
(\$16 million) because, after completing the engineering and development
of a production airplane model fuel tank inerting kit, there are minimal
engineering costs in applying that kit to previously produced airplanes
of that model. Thus, the incremental engineering costs for retrofitted
airplanes are minimal. The fuel costs are 24.8 percent of the total
costs, 121.5 percent of the costs for retrofitted airplanes and 27.6
percent of the costs for production airplanes. The operational costs are
11.5 percent of the total and the air supply module (ASM) replacement
costs are 12.6 percent of the total.

TABLE V-64

PERCENTAGE OF PRESENT VALUE (USING A 7 PERCENT DISCOUNT RATE) COMPLIANCE
COSTS BY COST CATEGORIES FOR AIR CARRIER RETROFITTED PASSENGER AIRPLANES

(in Millions of 2007 Dollars)

  ----------------------------- --------------------- --------------------
  COST CATEGORY                 PRESENT VALUE COSTS   PERCENTAGE OF TOTAL
                                (7%)                  

                                                      

  **RETROFITTED**                                     

  ENGINEERING                   \$ 16                 3.7%

  INSTALLATION                  \$220                 50.3%

  INVENTORY                     \$ 6                  1.4%

  FUEL                          \$ 94                 21.5%

  OPERATIONAL                   \$ 49                 11.2%

  ASM REPLACEMENT               \$ 52                 11.9%

                                                      

  **RETROFITTED TOTAL**         **\$437**             100.0%

                                                      

  **PRODUCTION**                                      

  ENGINEERING                   \$100                 18.6%

  INSTALLATION                  \$152                 28.2%

  INVENTORY                     \$ 4                  0.7%

  FUEL                          \$149                 27.6%

  OPERATIONAL                   \$ 63                 11.7%

  ASM REPLACEMENT               \$ 71                 13.2%

                                                      

  **PRODUCTION TOTAL**          **\$539**             100.0%

                                                      

  **ALL AIRPLANES**                                   

  ENGINEERING                   \$116                 11.9%

  INSTALLATION                  \$372                 38.2%

  INVENTORY                     \$ 10                 1.0%

  FUEL                          \$242                 24.8%

  OPERATIONAL                   \$112                 11.5%

  ASM REPLACEMENT               \$123                 12.6%

                                                      

  **ALL AIRPLANES TOTAL**       **\$975**             100.0%
  ----------------------------- --------------------- --------------------

# **V.S. Average cost per model**

### V.S.1. [Total Cost Per Retrofitted Air Carrier Passenger Airplane]{.underline} 

As shown in Table V-65, the average lifetime cost per air carrier
retrofitted passenger airplane is \$377,000 (ranging from \$234,000 to
\$744,000 depending upon the model), of which \$195,000 is for the
engineering and retrofitting costs and \$182,000 is the average annual
(fuel, operational, and ASM replacement) costs. The present value of
these costs using a 7 percent discount rate is \$217,000, of which
\$139,000 is for the engineering and retrofitting costs and \$78,000 is
for the annual costs.[^84]

TABLE V-65

AVERAGE UNDISCOUNTED AND PRESENT VALUE COSTS PER RETROFITTED AIRPLANE BY
MODEL

  ------------------- --------------- --------------- --------------- --------------- --------------- --------------
                      UNDISCOUNTED                                    PRESENT VALUE                   
                                                                      (7%)                            

  MODEL               TOTAL           INSTALLATION    OPERATIONAL     TOTAL           INSTALLATION    OPERATIONAL

                                                                                                      

  B-737-200           \$0             \$0             \$0             \$0             \$0             \$0

  B-737-Classic       \$233,903       \$149.559       \$ 84,344       \$144,545       \$106,376       \$ 38,169

  B-737-NG            \$289,505       \$149.559       \$139,946       \$166,113       \$106,376       \$ 59,737

  B-737-NG-NEW        \$273,563       \$133.617       \$139,946       \$95,037        \$95,037        

  B-757               \$451,041       \$285.856       \$165,185       \$277,508       \$203,319       \$ 74,189

  B-767               \$534,691       \$288.454       \$246,237       \$311,102       \$205,166       \$105,936

  B-747-100/200/300   \$536,299       \$308.230       \$228,069       \$321,415       \$219,232       \$102,183

  B-747-400           \$728,897       \$308.230       \$420,667       \$394,320       \$219,232       \$175,088

  B-747-800           \$0             \$0.            \$0             \$0             \$0             \$0

  B-777               \$744,092       \$334.416       \$409,676       \$406,511       \$237,857       \$168,654

  B-787               \$0             \$0             \$0             \$0             \$0             \$0

  A-300               \$0             \$0             \$0             \$0             \$0             \$0

  A-310               \$0             \$0             \$0             \$0             \$0             \$0

  A-320 Family        \$322,756       \$149.559       \$173,197       \$180,926       \$106,376       \$ 74,550

  A-330               \$682,357       \$288.895       \$393,462       \$367,997       \$205,480       \$162,517

  A-340               \$0             \$0             \$0             \$0             \$0             \$0

  A-350               \$0             \$0             \$0             \$0             \$0             \$0

  A-380               \$0             \$0             \$0             \$0             \$0             \$0

                                                                                      \$0             

  **AVERAGE**         **\$376,768**   **\$194.699**   **\$182,069**   **\$216,719**   **\$138,482**   **\$78,237**
  ------------------- --------------- --------------- --------------- --------------- --------------- --------------

### V.S.2. [Total Cost Per Production Air Carrier Passenger Airplane]{.underline} 

As shown in Table V-66, the average lifetime cost per air carrier
production passenger airplane is \$494,000 (ranging from \$397,000 to
\$1.1 million depending upon the model), of which \$100,000 is for the
installation costs and \$394,000 is for the annual (fuel, operational,
and ASM replacement) costs. The primary factor that radically increases
the average engineering and installation cost is that some of the models
have few production airplanes over which to average the cost. This was
specifically noted by Airbus and Boeing in their comments.

The present value of these costs using a 7 percent discount rate is
\$183,325, of which \$74,750 is for the retrofitting costs and \$108,500
is for the annual costs. As expected, the present values of the
retrofitted airplanes installation costs are higher than those for
production airplanes. As also expected, the annual fuel and operational
costs per airplane are approximately the same. Thus, the present values
of the operational costs are higher for production airplanes than for
retrofitted airplanes because all production airplanes will have a
25-year service life while the remaining service lives of retrofitted
airplanes range from 8 to 17 years.

TABLE V-66

AVERAGE UNDISCOUNTED AND PRESENT VALUE COSTS PER PRODUCTION AIRPLANE BY
MODEL

  ------------------- --------------- --------------- --------------- --------------- -------------- ---------------
                      UNDISCOUNTED                                    PRESENT VALUE                  
                                                                      (7%)                           

  MODEL               TOTAL           INSTALLATION    OPERATIONAL     TOTAL           INSTALLATION   OPERATIONAL

                                                                                                     

  B-737-200           \$0             \$0             \$0             \$0             \$0            \$0

  B-737-Classic       \$0             \$0             \$0             \$0             \$0            \$0

  B-737-NG            \$0             \$0                             \$0             \$0            

  B-737-NG-NEW        \$397,045       \$95,133        \$301,912       \$162,055       \$70,891       \$91,164

  B-757               \$0             \$0             \$0             \$0             \$0            \$0

  B-767               \$0             \$0             \$0             \$0             \$0            \$0

  B-747-100/200/300   \$0             \$0             \$0             \$0             \$0            \$0

  B-747-400           \$1,081,204     \$191,387       \$889,817       \$414,078       \$142,617      \$271,461

  B-747-800           \$0             \$0             \$0             \$0             \$0            \$0

  B-777               \$1,021,904     \$209,783       \$812,121       \$402,944       \$156,325      \$246,619

  B-787               \$0             \$0             \$0             \$0             \$0            \$0

  A-300               \$0             \$0             \$0             \$0             \$0            \$0

  A-310               \$0             \$0             \$0             \$0             \$0            \$0

  A-320 Family        \$471,242       \$96,132        \$375,110       \$186,431       \$71,635       \$114,796

  A-330               \$1,097,382     \$212,594       \$884,788       \$426,726       \$158,420      \$268,306

  A-340               \$0             \$0             \$0             \$0             \$0            \$0

  A-350               \$482,012       \$189,695       \$292,317       \$234,472       \$141,356      \$93,116

  A-380               \$564,884       \$191,047       \$373,837       \$261,583       \$142,364      \$119,219

                                                                                                     

  **AVERAGE**         **\$494,138**   **\$100,307**   **\$393,831**   **\$183,325**   **\$74,746**   **\$108,579**
  ------------------- --------------- --------------- --------------- --------------- -------------- ---------------

## v.T. auxiliary tank costs

The final rule will also impose both engineering and, potentially,
retrofitting costs on airplane operators who have airplanes with
auxiliary tanks. The final rule excludes auxiliary tanks installed by
STC from developing FRM. An auxiliary fuel tank has the potential to be
flammable by itself or it can create a fuel delivery system that can
make a CWT flammable.

The FAA surveyed 18 US air carriers[^85] and they reported a total of 46
airplanes[^86] (out of 3,130) with an auxiliary fuel tank. None of these
auxiliary fuel tanks are expected to require FTI because the airplane
will either be retired by 2017 or the auxiliary fuel tank is
pressurized, which makes it a low flammability tank.

The auxiliary fuel tank will need a standard engineering flammability
assessment of its impact on the air it discharges into the CWT.
Currently, we believe that 3 designs (the B-737 business jet, the
B-747-400, and the A-321) will each need 1,000 engineering hours at a
cost of \$110,000 each for this flammability assessment. Thus, the
undiscounted cost will be \$330,000 which has a present value of
\$308,000 using a 7 percent discount rate and a present value of
\$321,000 using a 3 percent discount rate.

#   

#  VI. AIR CARRIER PRODUCTION CARGO AIRPLANES COMPLIANCE COSTS

## VI.A. Introduction

In this Section we discuss and estimate the cost of compliance to
manufacturers and to air carrier cargo operators. We first summarize the
total compliance costs and then develop the individual costs in more
detail. The referenced Appendices provide the more detailed spreadsheets
used to calculate these costs.

In Appendix C, we discuss and estimate the potential compliance costs
for 3 alternative rules for cargo airplanes. Alternative A would require
conversion cargo airplanes to have FTI installed on all passenger
airplanes being converted to cargo airplanes, but not on installed on
existing cargo airplanes. Alternative B would require all existing cargo
airplanes to have FTI by 2017. Alternative C would require both
conversion cargo airplanes and existing cargo airplanes to have FTI by
2017.

Much of the background discussion and unit cost data in Section V for
air carrier passenger airplanes also applies for air carrier cargo
airplanes. We generally will not repeat these data unless they differ
for cargo airplanes.

## VI.B. summary of air carrier cargo airplane compliance cost 

As shown in Table VI-1, the undiscounted compliance costs for air
carrier production cargo airplanes are \$100 million, which has a
present value of \$38 million using a 7 percent discount rate and a
present value of \$63 million using a 3 percent discount rate.

TABLE VI-1

COMPLIANCE COSTS FOR AIR CARRIER PRODUCTION CARGO AIRPLANES

(in Millions of 2007 Dollars)

  --------------------- ---------------- ---------------- ----------------
                        TOTAL COST                        

  FTI COSTS             UNDISCOUNTED     PRESENT VALUE    PRESENT VALUE
                                         (7%)             (3%)

                                                          

  ENGINEERING           \$ 0             \$ 0             \$ 0

                                                          

  INSTALLATION          \$ 15            \$10             \$13

  INVENTORY             \<\$1            \<\$1            \<\$1

  FUEL                  \$ 22            \$ 8             \$13

  OPERATIONAL           \$ 39            \$13             \$23

  ASM REPLACEMENT       \$ 24            \$ 7             \$14

                                                          

  **TOTAL**             **\$100**        **\$38**         **\$63**
  --------------------- ---------------- ---------------- ----------------

As shown in Table VI-2, the undiscounted compliance costs for air
carrier Boeing cargo airplane operators are \$76 million, which has a
present value of \$29 million using a 7 percent discount rate and a
present value of \$48 million using a 3 percent discount rate. The
undiscounted compliance costs for air carrier Airbus cargo airplane
operators are \$24 million, which has a present value of \$9 million
using a 7 percent discount rate and a present value of \$15 million
using a 3 percent discount rate.

TABLE VI-2

COMPLIANCE COSTS FOR AIR CARRIER CARGO AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  -------------------- ---------------- ----------------- -----------------
                       TOTAL COSTS                        

  COST CATEGORY        UNDISCOUNTED     PRESENT VALUE     PRESENT VALUE
                                        (7%)              (3%)

                                                          

  **BOEING**                                              

  ENGINEERING          \$ 0             \$ 0              \$ 0

  PRODUCTION           \$ 11            \$ 7              \$ 9

  INVENTORY            \<\$1            \<\$1             \<\$1

  FUEL                 \$ 18            \$ 7              \$11

  OPERATIONAL          \$ 28            \$ 9              \$17

  ASM REPLACEMENT      \$ 19            \$ 6              \$11

                                                          

  TOTAL                **\$ 76**        **\$29**          **\$48**

                                                          

  **AIRBUS**                                              

  ENGINEERING          \$ 0             \$ 0              \$ 0

  PRODUCTION           \$ 4             \$ 3              \$ 4

  INVENTORY            \<\$1            \<\$1             \<\$1

  FUEL                 \$ 4             \$ 1              \$ 2

  OPERATIONAL          \$ 11            \$ 4              \$ 6

  ASM REPLACEMENT      \$ 5             \$ 1              \$ 3

                                                          

  TOTAL                **\$ 24**        **\$ 9**          **\$15**

                                                          

  **GRAND TOTAL**      **\$100**        **\$38**          **\$63**
  -------------------- ---------------- ----------------- -----------------

VI.C ONE-TIME ENGINEERING COSTS TO DESIGN CARGO AIRPLANE FTI SYSTEMS

There will be minimal engineering assessment costs to develop FTI
systems for production cargo airplanes because all of these assessments
will have been completed for the passenger airplane model variant.

## VI.D UNIT COSTS TO INSTALL FTI ON PRODUCTION CARGO AIRPLANES

From a construction perspective, the kit costs and the labor hours to
install FTI on a production passenger airplane are the same as they are
for a production cargo airplane.

## 

## VI.E. TOTAL COSTS TO INSTALL FTI ON AIR CARRIER PRODUCTION CARGO AIRPLANES

VI.E.1. [Numbers of Production Cargo Airplanes]{.underline}

As noted earlier, the ESG Aviation forecast (and, by extension, the FAA
forecast) for new cargo airplanes does not distinguish between
production and conversion cargo airplanes, either by individual model or
in the aggregate. This distinction is critical for a compliance cost
analysis because the rule does not require FRM on conversion cargo
airplanes[^87] while it does require production cargo airplanes to have
FRM.

Boeing forecasts that the new cargo fleet will be 75 percent conversion
cargo airplanes and 25 percent production cargo airplanes. We apply
these percentages to each airplane model to determine the numbers of
conversion and production cargo airplanes.

As shown in Table VI-3, which repeats Table II-10, we project there will
be 352 new cargo airplanes of which 262 will be conversion airplanes and
90 will be production airplanes. Of the 90 production airplanes, 68 will
be Boeing production airplanes and 22 will be Airbus production
airplanes.

TABLE VI-3

NUMBERS OF AIR CARRIER CONVERSION AND PRODUCTION CARGO AIPLANES BY
MANUFACTURER AND BY YEAR

  ----------- ----------- --------- -------- --------- --------- -------- -------- -------- --------
  YEAR        ALL                            BOEING                       AIRBUS            
              AIRPLANES                                                                     

              TOTAL       CON       PROD     TOTAL     CON       PROD     TOTAL    CON      PROD

                                                                                            

  2009        22          17        5        12        9         3        10       8        2

  2010        41          30        11       30        22        8        11       8        3

  2011        38          28        10       28        21        7        10       7        3

  2012        40          30        10       28        21        7        12       9        3

  2013        42          31        11       32        24        8        10       7        3

  2014        37          28        9        32        24        8        5        4        1

  2015        35          26        9        31        23        8        4        3        1

  2016        47          35        12       34        25        9        13       10       3

  2017        50          37        13       39        29        10       11       8        3

                                                                                            

  **TOTAL**   **352**     **262**   **90**   **266**   **198**   **68**   **86**   **64**   **22**
  ----------- ----------- --------- -------- --------- --------- -------- -------- -------- --------

### VI.E.2. [Total Production Cargo Airplane Operator Costs]{.underline} 

In order to obtain the production cargo airplane FTI installation costs,
we multiplied the numbers of new cargo airplanes by the installation
costs for each model and then summed those results to obtain a total new
cargo airplane installation cost. We then took 25 percent of that total
as the costs of production cargo airplane operators and 75 percent as
the costs of conversion cargo airplane operators. As shown in Table
VI-4, which summarizes Appendix VI-1, the undiscounted costs for air
carrier production cargo airplane operators will be \$15.5 million,
which has a present value of \$10.3 million using a 7 percent discount
rate and a present value of \$12.9 million using a 3 percent discount
rate.

TABLE VI-4

UNDISCOUNTED AND PRESENT VALUE COSTS TO INSTALL FTI ON AIR CARRIER
PRODUCTION CARGO AIRPLANE OPERATORS BY YEAR

(in Millions of 2007 Dollars)

  -------------- ------------------- ------------------- -----------------
                 TOTAL COSTS                             

  YEAR           UNDISCOUNTED        PRESENT VALUE (7%)  PRESENT VALUE
                                                         (3%)

                                                         

  2009           \$1.061             \$0.927             \$1.000

  2010           \$1.923             \$1.570             \$1.760

  2011           \$1.778             \$1.356             \$1.579

  2012           \$1.711             \$1.220             \$1.476

  2013           \$1.752             \$1.168             \$1.468

  2014           \$1.535             \$0.956             \$1.248

  2015           \$1.438             \$0.837             \$1.135

  2016           \$2.022             \$1.100             \$1.550

  2017           \$2.267             \$1.152             \$1.687

                                                         

  **TOTAL**      **\$15.486**        **\$10.285**        **\$12.902**
  -------------- ------------------- ------------------- -----------------

As shown in Table VI-5, of the undiscounted costs of \$15.5 million,
\$11.3 million will be incurred by Boeing airplane operators and \$4.1
million will be incurred by Airbus airplane operators. Of the present
value costs of \$10.3 million using a 7 percent discount rate, \$7.5
million will be incurred by Boeing airplane operators and \$2.9 million
will be incurred by Airbus airplane operators. Of the present value of
\$12.9 million using a 3 percent discount rate, \$9.4 million will be
incurred by Boeing airplane operators and \$3.5 million will be incurred
by Airbus airplane operators.

TABLE VI-5

UNDISCOUNTED AND PRESENT VALUE COSTS FOR OPERATORS TO INSTALL FTI ON AIR
CARRIER PRODUCTION CARGO AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$11.342          \$ 7.451          \$9.406

  AIRBUS            \$ 4.144          \$ 2.834          \$3.496

                                                        

  **TOTAL**         **\$15.486**      **\$10.285**      **\$12.902**
  ----------------- ----------------- ----------------- -----------------

### VI.E.3. [Inventory Costs for Airbus Production Cargo Airplane Operators]{.underline} 

As shown in Table VI-3, there will be only 90 production cargo airplanes
which, at a 15 percent inventory rate, results in a total inventory of
13-14 assemblies at a total undiscounted cost of less than \$500,000.
This is a relatively minimal cost and is not included in the analysis.

## VI.F. AIR CARRIER PRODUCTION CARGO AIRPLANE FUEL COSTS 

### VI.F.1. [Additional Fuel Consumption]{.underline} 

###  As was true for passenger airplanes, the additional weight of the FTI system will increase an airplane's average fuel consumption. Further, the additional bleed air and the ram drag will increase fuel consumption by increasing the airplane's wind resistance, thereby reducing engine efficiency. 

### VI.F.1.a. [Unit Fuel Burn Data]{.underline}

Table VI-6 provides the underlying data to develop the additional fuel
burn due the FTI system. These data are discussed in the sections
following the Table.

TABLE VI-6

DATA FOR THE INCREASED FUEL CONSUMPTION FOR AN AIR CARRIER PRODUCTION
CARGO AIRPLANE MODEL

  --------------- --------- ---------- ------------ ---------- ---------- ----------
                  FTI       FL. HRS.   FUEL BURN    GALLONS               
                  WEIGHT    (BOEING)   (MAC)        PER YEAR              
                                                    DUE TO                

  MODEL           WEIGHT    CARGO      GAL/LB/FL.   WEIGHT     BLEED AIR  TOTAL
                  (lbs.)               HR.                     & RAM DRAG 

                                                                          

  B-737-Classic   105       1,500      0.0045       709        453        1,162

  B-737-NG        105       1,500      0.0045       709        453        1,162

  B-757           280       1,000      0.0060       473        424        897

  B-767           280       1,500      0.0050       2,520      427        2,947

  B-747-1/2/300   257       2,600      0.0065       3,640      730        4,370

  B-747-400       257       4,250      0.0065       7,100      1,388      8,488

  B-747-800       257       4,250      0.0065       7,100      1,388      8,488

  B-777           300       4,250      0.0040       7,100      1,388      8,488

  B-787           280       4,000      0.0045       4,800      2,049      6,849

  A-300           280       2,600      0.0040       3,276      730        4,006

  A-310           280       2,600      0.0040       2,912      730        3,642

  A-320 Family    105       2,600      0.0095       2,912      730        3,642

  A-330           300       1,000      0.0040       998        424        1,422

  A-340           300       4,000      0.0040       4,800      2,049      6,849

  A-350           280       4,250      0.0050       5,100      2,049      7,149

  A-380           257       2,600      0.0065       3,640      730        4,370
  --------------- --------- ---------- ------------ ---------- ---------- ----------

### VI.F.1.b. [FTI Weight]{.underline}

FTI weighs the same in both cargo and passenger airplanes.

### VI.F.1.c. [Annual Flight Hours]{.underline}

In the IRE, we used the annual U.S. cargo fleet flight hours by airplane
model compiled by Back Aviation Services. In its comment, Boeing
provided a different set of annual cargo flight hours that we use in
this Regulatory Evaluation. As shown in Table VI-6, air carrier cargo
airplanes annually fly 1,000 to 4,250 hours per year.

### VI.F.1.d. [Gallons of Fuel Per Additional Pound Per Flight Hour]{.underline}

We used the GRA estimates of the average gallons of additional aviation
fuel consumed per pound of additional weight per flight hour for a
passenger airplane, which ranges from 0.0045 gallons to 0.0095 gallons.
As seen in Table VI-6, the average air carrier cargo airplane will
annually consume an additional 473 gallons to 7,100 gallons due to the
FTI system weight.

### VI.F.2. [Fuel Consumption from Increased Bleed Air Intake and Ram Drag]{.underline}

As they did for passenger airplanes, Boeing provided estimates for the
additional fuel burn from increased bleed air intake and ram drag for
air carrier cargo airplanes. We applied their estimates to
similarly-sized Airbus and Boeing airplanes. As shown in Table VI-6, the
increased bleed air and ram drag will increase annual fuel consumption
by 424 gallons to 2,049 gallons per airplane.

VI.F.3. [Additional Fuel Consumption Due to FTI]{.underline}

As shown in Table VI-6, the annual increased air carrier cargo airplane
fuel consumption due to FTI will be between 897 gallons and 8,488
gallons. This fuel consumption will be the same for a production cargo,
conversion cargo, or retrofitted cargo airplane.

### VI.F.4. [Fuel Consumption Costs]{.underline} 

As previously discussed, we used an aviation fuel cost of \$2.01 a
gallon.[^88] As shown in Table VI-7, we calculated that FTI will
increase the annual air carrier cargo airplane fuel cost by \$2,336 to
\$17,061.

TABLE VI-7

INCREASED AIR CARRIER PRODUCTION CARGO AIRPLANE FUEL CONSUMPTION DUE TO
FTI

  ------------------- ---------------------- -----------------------------
  MODEL               ANNUAL COST            ANNUAL GALLONS

                                             

  B-737-Classic       \$ 2,336               1,162

  B-737-NG            \$ 2,336               1,162

  B-757               \$ 1,803               897

  B-767               \$ 5,923               2,947

  B-747-1/2/300       \$ 8,784               4,370

  B-747-400           \$17,061               8,488

  B-747-800           \$17,061               8,488

  B-777               \$17,061               8,488

  B-787               \$13,766               6,849

  A-300               \$ 8,052               4,006

  A-310               \$ 7,320               3,642

  A-320 Family        \$ 7,320               3,642

  A-330               \$ 2,858               1,422

  A-340               \$13,766               6,849

  A-350               \$14,369               7,149

  A-380               \$ 8,784               4,370
  ------------------- ---------------------- -----------------------------

### VI.F.5. [Total Increased Fuel Consumption Costs for Production Cargo Airplanes]{.underline} 

As shown in Table VI-8, which summarizes Table II-12, air carrier
production cargo airplanes will fly 6.338 million flight hours, of which
Boeing airplanes will fly 4.826 million hours and Airbus airplanes will
fly 1.512 million hours.

TABLE VI-8

ANNUAL NUMBER OF PRODUCTION CARGO AIRPLANE FLIGHT HOURS BY MANUFACTURER

(in Millions of Flight Hours)

  ------------ ------------------- --------------------- -----------------
  YEAR         TOTAL               BOEING                AIRBUS

                                                         

  2009         0.018               0.011                 0.007

  2010         0.052               0.038                 0.014

  2011         0.083               0.063                 0.020

  2012         0.112               0.084                 0.028

  2013         0.144               0.109                 0.035

  2014         0.171               0.133                 0.038

  2015         0.198               0.157                 0.041

  2016         0.231               0.182                 0.049

  2017         0.268               0.212                 0.056

  2018         0.250               0.194                 0.056

  2019         0.249               0.193                 0.056

  2020         0.247               0.191                 0.056

  2021         0.246               0.190                 0.056

  2022         0.244               0.188                 0.056

  2023         0.243               0.187                 0.056

  2024         0.241               0.185                 0.056

  2025         0.240               0.184                 0.056

  2026         0.238               0.182                 0.056

  2027         0.237               0.181                 0.056

  2028         0.235               0.179                 0.056

  2029         0.234               0.178                 0.056

  2030         0.232               0.176                 0.056

  2031         0.231               0.175                 0.056

  2032         0.230               0.174                 0.056

  2033         0.228               0.172                 0.056

  2034         0.227               0.171                 0.056

  2035         0.220               0.164                 0.056

  2036         0.194               0.143                 0.051

  2037         0.163               0.119                 0.044

  2038         0.140               0.102                 0.038

  2039         0.113               0.082                 0.031

  2040         0.087               0.062                 0.025

  2041         0.059               0.041                 0.018

  2042         0.035               0.023                 0.012

                                                         

  **TOTAL**    **6.338**           **4.826**             **1.512**
  ------------ ------------------- --------------------- -----------------

As shown in Table VI-9, which summarizes Appendix VI-2, multiplying the
production cargo airplane flight hours in Table II-10 by the increased
fuel consumption per airplane results in an increased fuel consumption
of 10.721 million gallons. At an average price of \$2.01 per gallon, the
undiscounted cost will be \$21.550 million, which has a present value of
\$7.150 million using a 7 percent discount rate and a present value of
\$12.860 million using a 3 percent discount rate.

TABLE VI-9

TOTAL INCREASED FUEL COST AND CONSUMPTION FOR AIR CARRIER PRODUCTION
CARGO AIRPLANES

(All Numbers in Millions)

  ----------- --------------- --------------- --------------- ------------
              TOTAL COST                                      

  YEAR        UNDISCOUNTED    PRESENT VALUE   PRESENT VALUE   GALLONS
                              (7%)            (3%)            

                                                              

  2009        \$0.057         \$0.050         \$0.054         0.029

  2010        \$0.180         \$0.147         \$0.164         0.090

  2011        \$0.292         \$0.223         \$0.259         0.145

  2012        \$0.385         \$0.274         \$0.331         0.191

  2013        \$0.485         \$0.324         \$0.407         0.242

  2014        \$0.579         \$0.361         \$0.470         0.288

  2015        \$0.668         \$0.389         \$0.526         0.332

  2016        \$0.774         \$0.421         \$0.593         0.385

  2017        \$0.899         \$0.457         \$0.669         0.447

  2018        \$0.839         \$0.398         \$0.605         0.417

  2019        \$0.836         \$0.372         \$0.586         0.416

  2020        \$0.833         \$0.346         \$0.568         0.414

  2021        \$0.830         \$0.322         \$0.548         0.413

  2022        \$0.827         \$0.300         \$0.531         0.411

  2023        \$0.823         \$0.279         \$0.513         0.410

  2024        \$0.821         \$0.259         \$0.497         0.408

  2025        \$0.817         \$0.242         \$0.480         0.407

  2026        \$0.815         \$0.225         \$0.464         0.405

  2027        \$0.811         \$0.210         \$0.450         0.404

  2028        \$0.809         \$0.195         \$0.435         0.402

  2029        \$0.805         \$0.182         \$0.420         0.401

  2030        \$0.803         \$0.169         \$0.407         0.399

  2031        \$0.799         \$0.157         \$0.393         0.398

  2032        \$0.797         \$0.146         \$0.380         0.396

  2033        \$0.794         \$0.136         \$0.368         0.395

  2034        \$0.791         \$0.127         \$0.356         0.393

  2035        \$0.755         \$0.113         \$0.330         0.376

  2036        \$0.658         \$0.093         \$0.279         0.327

  2037        \$0.551         \$0.072         \$0.227         0.274

  2038        \$0.470         \$0.057         \$0.188         0.234

  2039        \$0.375         \$0.043         \$0.146         0.187

  2040        \$0.281         \$0.030         \$0.106         0.140

  2041        \$0.188         \$0.018         \$0.068         0.093

  2042        \$0.102         \$0.010         \$0.037         0.051

                                                              

  **TOTAL**   **\$21.550**    **\$7.150**     **\$12.860**    **10.721**
  ----------- --------------- --------------- --------------- ------------

As shown in Table VI-10, of the additional 10.7 million gallons of fuel,
Boeing production airplanes will consume 8.7 million and Airbus
production airplanes will consume 2 million. Of the undiscounted costs
of \$17.7 million, \$14.3 million will be incurred by Boeing airplane
operators and \$3.4 million will be incurred by Airbus airplane
operators. Of the present value costs of \$5.9 million using a 7 percent
discount rate, \$4.8 million will be incurred by Boeing airplane
operators and \$1.1 million will be incurred by Airbus airplane
operators. Of the present value of \$10.6 million using a 3 percent
discount rate, \$8.6 million will be incurred by Boeing airplane
operators and \$2 million will be incurred by Airbus airplane operators.

TABLE VI-10

TOTAL INCREASED FUEL CONSUMPTION AND COSTS FOR AIR CARRIER PRODUCTION
CARGO AIRPLANE OPERATORS BY MANUFACTURER

(All Values in Millions)

  --------------- -------------- --------------- --------------- ------------
                  TOTAL COSTS                                    

  MANUFACTURER    UNDISCOUNTED   PRESENT VALUE   PRESENT VALUE   GALLONS
                                 (7%)            (3%)            

                                                                 

  BOEING          \$17.437       \$5.785         \$10.406        8.675

  AIRBUS          \$ 4.113       \$1.364         \$ 2.455        2.046

                                                                 

  **TOTAL**       **\$21.550**   **\$7.150**     **\$12.860**    **10.721**
  --------------- -------------- --------------- --------------- ------------

## 

## VI.G. OPERATIONAL COSTS FOR AIR CARRIER PRODUCTION CARGO AIRPLANES 

### VI.G.1. [Operational Cost Components]{.underline}

We define the operational costs to consist of the following 4
components:

1.  Scheduled Maintenance;

2.  Unscheduled Maintenance;

3.  Unscheduled Flight Delays; and

4.  Annual Materials Costs

### VI.G.2[.]{.underline} [Additional Inspection and Scheduled Maintenance Time]{.underline} 

Boeing commented that the scheduled maintenance time for a passenger or
a cargo airplane will be 6 labor hours. We accept the Boeing comment and
use it in this Regulatory Evaluation

VI.G.3. [Additional Unscheduled Maintenance Time]{.underline}

We used the same values for cargo airplanes as we used for passenger
airplanes - 17 labor hours for a large airplane and 11 labor hours for a
medium-sized and small passenger airplane.

VI.G.4. [Costs of Unscheduled Delays Due to Fuel Tank Inerting System
Failure]{.underline}

In the IRE, we assumed that the annual delay cost due to a FTI system
failure would be minimal. Boeing reported annual costs from \$116 to
\$518 by cargo airplane model. We disagree with the Boeing comment
because air carrier cargo operations have more flexibility than air
carrier passenger operations. Thus, we have no unscheduled cargo
airplane delay costs in this Regulatory Evaluation

### VI.G.5. [Annual Materials Costs]{.underline} 

We determined that the average water separator/filter replacement is
based on the number of flight hours. On that basis, the B-747s, B-777,
A-330, A-340, and A-380 cargo airplanes will replace their filters every
two years because they fly similar hours to their passenger airplane
counterparts. As all other cargo airplanes fly about one half the hours
of their passenger model counterparts, we determined that their filters
will be replaced an average of every four years.

### VI.G.6. [Maintenance, Unscheduled Delays, and Materials Costs]{.underline} 

In summary, as shown in Table VI-11, the annual FTI maintenance and
materials costs will be \$1,806 to \$4,148 for an air carrier cargo
production airplane operators.

## 

## TABLE VI-11

## 

## MAINTENANCE, DELAY, AND MATERIALS COSTS FOR AIR CARRIER PRODUCTION CARGO AIRPLANE OPERATORS 

  --------------- ------------- ------------- -------- ------------------ ---------
  MODEL           SCHEDULED     UNSCHEDULED   DELAYS   WATER              TOTAL
                  MAINTENANCE   MAINTENANCE            SEPARATOR/FILTER   COST
                                                       REPLACEMENT        

                                                                          

  B-737-200       \$48          \$ 880        \$0      \$ 878             \$1,806

  B-737-Classic   \$48          \$ 880        \$0      \$ 878             \$1,806

  B-737-NG        \$48          \$ 880        \$0      \$ 878             \$1,806

  B-757           \$48          \$1,360       \$0      \$1,125            \$2,533

  B-767           \$48          \$1,360       \$0      \$1,125            \$2,533

  B-747-1/2/300   \$48          \$1,360       \$0      \$2,740            \$4,148

  B-747-400       \$48          \$1,360       \$0      \$2,740            \$4,148

  B-747-800       \$48          \$1,360       \$0      \$2,740            \$4,148

  B-777           \$48          \$1,360       \$0      \$2,740            \$4,148

  B-787           \$48          \$1,360       \$0      \$1,125            \$2,533

  A-300           \$48          \$1,360       \$0      \$1,125            \$2,533

  A-310           \$48          \$1,360       \$0      \$1,125            \$2,533

  A-320 Family    \$48          \$ 880        \$0      \$ 878             \$1,806

  A-330           \$48          \$1,360       \$0      \$2,740            \$4,148

  A-340           \$48          \$1,360       \$0      \$2,740            \$4,148

  A-350           \$48          \$1,360       \$0      \$1,125            \$2,533

  A-380           \$48          \$1,360       \$0      \$2,740            \$4,148
  --------------- ------------- ------------- -------- ------------------ ---------

VI.G.6. [Total Operational Costs for Air Carrier Production Cargo
Airplane Operators]{.underline}

As shown in Table VI-12, which summarizes Appendix VI-3, the
undiscounted operational costs for air carrier production cargo airplane
operators will be \$38.6 million, which has a present value of \$13
million using a 7 percent discount rate and a present value of \$23.2
million using a 3 percent discount rate.

TABLE VI-12

OPERATIONAL COSTS FOR AIR CARRIER PRODUCTION CARGO AIRPLANE OPERATORS

(in Millions of 2007 Dollars)

  ------------- -------------------- ----------------- -------------------
                TOTAL COST                             

  YEAR          UNDISCOUNTED         PRESENT VALUE     PRESENT VALUE (3%)
                                     (7%)              

                                                       

  2009          \$0.110              \$0.096           \$0.104

  2010          \$0.317              \$0.259           \$0.290

  2011          \$0.509              \$0.388           \$0.452

  2012          \$0.699              \$0.498           \$0.603

  2013          \$0.897              \$0.597           \$0.751

  2014          \$1.071              \$0.667           \$0.871

  2015          \$1.236              \$0.719           \$0.976

  2016          \$1.457              \$0.793           \$1.117

  2017          \$1.700              \$0.864           \$1.265

  2018          \$1.584              \$0.752           \$1.144

  2019          \$1.569              \$0.697           \$1.101

  2020          \$1.555              \$0.645           \$1.059

  2021          \$1.540              \$0.597           \$1.018

  2022          \$1.525              \$0.553           \$0.979

  2023          \$1.511              \$0.512           \$0.941

  2024          \$1.496              \$0.474           \$0.905

  2025          \$1.481              \$0.438           \$0.870

  2026          \$1.467              \$0.406           \$0.836

  2027          \$1.452              \$0.375           \$0.804

  2028          \$1.437              \$0.347           \$0.773

  2029          \$1.423              \$0.321           \$0.743

  2030          \$1.408              \$0.297           \$0.714

  2031          \$1.394              \$0.275           \$0.686

  2032          \$1.379              \$0.254           \$0.659

  2033          \$1.364              \$0.235           \$0.633

  2034          \$1.350              \$0.217           \$0.608

  2035          \$1.269              \$0.191           \$0.555

  2036          \$1.104              \$0.155           \$0.469

  2037          \$0.929              \$0.122           \$0.383

  2038          \$0.786              \$0.096           \$0.314

  2039          \$0.626              \$0.072           \$0.243

  2040          \$0.467              \$0.050           \$0.176

  2041          \$0.308              \$0.031           \$0.113

  2042          \$0.159              \$0.015           \$0.056

                                                       

  **TOTAL**     **\$38.578**         **\$13.009**      **\$23.207**
  ------------- -------------------- ----------------- -------------------

As shown in Table VI-13, of the undiscounted costs of \$38.6 million,
\$27.6 million will be incurred by Boeing airplane operators and \$11
million will be incurred by Airbus airplane operators. Of the present
value costs of \$13 million using a 7 percent discount rate, \$9.3
million will be incurred by Boeing airplane operators and \$3.7 million
will be incurred by Airbus airplane operators. Of the present value of
\$23.2 million using a 3 percent discount rate, \$16.6 million will be
incurred by Boeing airplane operators and \$6.6 million will be incurred
by Airbus airplane operators.

TABLE VI-13

TOTAL OPERATIONAL COSTS FOR AIR CARRIER PRODUCTION CARGO AIRPLANE
OPERATORS BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$27.542          \$ 9.349          \$16.624

  AIRBUS            \$11.036          \$ 3.661          \$ 6.583

                                                        

  **TOTAL**         **\$38.578**      **\$13.010**      **\$23.207**
  ----------------- ----------------- ----------------- -----------------

## VI.H. ASM REPLACEMENT COSTS 

### VI.H.1. [Unit Costs to Replace ASMs]{.underline}

The ASM replacement costs for cargo airplanes are the same as the ASM
replacement costs for passenger airplanes reported in Table V-35
(between \$30,520 and \$151,144 per replacement).

### VI.H.2. [Total Costs to Replace ASMs in Air Carrier Production Cargo Airplanes]{.underline}

As discussed in Section V, there will be an average of 27,000 flight
hours between ASM replacements. As shown in Table VI-14, using the
average number of annual flight hours per cargo airplane model, ASMs
will be replaced every 6 to 27 years.

## 

## TABLE Vi-14

## ASM REPLACEMENT INTERVALS FOR AIR CARRIER CARGO AIRPLANES BY MODEL

  ------------------ ----------------------------- -----------------------
  MODEL              ANNUAL FLIGHT HOURS           ASM REPLACEMENT (Yrs.)

                                                   

  B-737-200          1,500                         18

  B-737-Classic      1,500                         18

  B-737-NG           1,000                         27

  B-757              1,500                         18

  B-767              2,600                         10

  B-747-1/2/300      4,250                         6

  B-747-400          4,250                         6

  B-747-800          4,250                         6

  B-777              4,000                         7

  B-787              2,600                         10

  A-300              2,600                         10

  A-310              2,600                         10

  A-320 Family       1,000                         27

  A-330              4,000                         7

  A-340              4,250                         6

  A-350              2,600                         10

  A-380              1,500                         6
  ------------------ ----------------------------- -----------------------

We determined that, as was the case for passenger airplanes, air
carriers will arrange their ASM replacement schedules such that the
airplane's last ASM replacement will last the full 6 to 27 years before
the airplane is retired. That is, a B-747-100/200/300 scheduled to
retire in 2035 will receive its last ASM replacement in 2029 and no
B-747-100/200/300 will have an ASM replacement after 2029 because all of
them will be retired by 2035.

As shown in Table VI-15, which summarizes Appendix VI-4, the
undiscounted ASM replacement cost for air carrier production cargo
airplane operators will be \$24 million, which has a present value of
\$7.2 million using a 7 percent discount rate and a present value of
\$14 million using a 3 percent discount rate.

TABLE VI-15

ASM REPLACEMENT COSTS FOR AIR CARRIER AIRBUS PRODUCTION CARGO AIRPLANE
OPERATORS

(in Millions of 2007 Dollars)

  ------------ -------------------- -------------------- ------------------
               TOTAL COST                                

  YEAR         UNDISCOUNTED         PERSENT VALUE (7%)   PRESENT VALUE (3%)

                                                         

  2015         \$0.135              \$0.079              \$0.107

  2016         \$0.799              \$0.435              \$0.612

  2017         \$0.731              \$0.372              \$0.544

  2018         \$0.529              \$0.251              \$0.382

  2019         \$1.084              \$0.481              \$0.760

  2020         \$1.122              \$0.466              \$0.764

  2021         \$1.692              \$0.656              \$1.119

  2022         \$1.733              \$0.628              \$1.112

  2023         \$1.509              \$0.511              \$0.940

  2024         \$1.238              \$0.392              \$0.749

  2025         \$0.818              \$0.242              \$0.481

  2026         \$1.706              \$0.472              \$0.973

  2027         \$1.875              \$0.484              \$1.038

  2028         \$1.035              \$0.250              \$0.557

  2029         \$0.936              \$0.211              \$0.489

  2030         \$1.165              \$0.246              \$0.590

  2031         \$1.791              \$0.353              \$0.881

  2032         \$1.486              \$0.274              \$0.710

  2033         \$1.207              \$0.208              \$0.559

  2034         \$0.745              \$0.120              \$0.335

  2035         \$0.630              \$0.101              \$0.284

                                                         

  **TOTAL**    **\$23.966**         **\$7.232**          **\$13.986**
  ------------ -------------------- -------------------- ------------------

As shown in Table VI-16, of the undiscounted costs of \$24 million, \$19
million will be incurred by Boeing airplane operators and \$5 million
will be incurred by Airbus airplane operators. Of the present value
costs of \$7.2 million using a 7 percent discount rate, \$5.7 million
will be incurred by Boeing airplane operators and \$1.5 million will be
incurred by Airbus airplane operators. Of the present value of \$14
million using a 3 percent discount rate, \$11.1 million will be incurred
by Boeing airplane operators and \$2.9 million will be incurred by
Airbus airplane operators.

TABLE VI-16

TOTAL ASM REPLACEMENT COSTS FOR AIR CARRIER PRODUCTION CARGO AIRPLANE
OPERATORS BY MANUFACTURER

(All Values in Millions)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COST                          

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$18.959          \$5.760           \$11.087

  AIRBUS            \$ 5.006          \$1.472           \$ 2.899

                                                        

  **TOTAL**         **\$23.965**      **\$7.232**       **\$13.986**
  ----------------- ----------------- ----------------- -----------------

## VI.I. TOTAL AIR CARRIER PRODUCTION CARGO AIRPLANE COMPLIANCE COSTS

The total costs for production cargo airplane operators, as shown in
Table VI-17, are the costs for installing FTI (Table VI-4), the
additional fuel consumption (Table VI-9), the operational costs (Table
VI-11), and the ASM replacement costs (Table VI-15). The undiscounted
compliance costs for air carrier production cargo airplane operators
will be \$100 million, which has a present value of \$38 million using a
7 percent discount rate and a present value of \$63 million using a 3
percent discount rate.

TABLE VI-17

UNDISCOUNTED AND PRESENT VALUE TOTAL COSTS FOR AIR CARRIER PRODUCTION
CARGO AIRPLANE OPERATORS BY YEAR

(in Millions of 2007 Dollars)

  ------------ ------------------- ------------------- -------------------
               TOTAL COSTS                             

  YEAR         UNDISCOUNTED        PRESENT VALUE (7%)  PRESENT VALUE (3%)

                                                       

  2009         \$1.228             \$1.073             \$1.158

  2010         \$2.420             \$1.976             \$2.214

  2011         \$2.579             \$1.967             \$2.290

  2012         \$2.795             \$1.992             \$2.410

  2013         \$3.134             \$2.089             \$2.626

  2014         \$3.185             \$1.984             \$2.589

  2015         \$3.477             \$2.024             \$2.744

  2016         \$5.052             \$2.749             \$3.872

  2017         \$5.597             \$2.845             \$4.165

  2018         \$2.952             \$1.401             \$2.131

  2019         \$3.489             \$1.550             \$2.447

  2020         \$3.510             \$1.457             \$2.391

  2021         \$4.062             \$1.575             \$2.685

  2022         \$4.085             \$1.481             \$2.622

  2023         \$3.843             \$1.302             \$2.394

  2024         \$3.555             \$1.125             \$2.151

  2025         \$3.116             \$0.922             \$1.831

  2026         \$3.988             \$1.103             \$2.273

  2027         \$4.138             \$1.069             \$2.292

  2028         \$3.281             \$0.792             \$1.765

  2029         \$3.164             \$0.714             \$1.652

  2030         \$3.376             \$0.712             \$1.711

  2031         \$3.984             \$0.785             \$1.960

  2032         \$3.662             \$0.674             \$1.749

  2033         \$3.365             \$0.579             \$1.560

  2034         \$2.886             \$0.464             \$1.299

  2035         \$2.654             \$0.405             \$1.169

  2036         \$1.762             \$0.248             \$0.748

  2037         \$1.480             \$0.194             \$0.610

  2038         \$1.256             \$0.153             \$0.502

  2039         \$1.001             \$0.115             \$0.389

  2040         \$0.748             \$0.080             \$0.282

  2041         \$0.496             \$0.049             \$0.181

  2042         \$0.261             \$0.025             \$0.093

                                                       

  **TOTAL**    **\$99.581**        **\$37.673**        **\$62.955**
  ------------ ------------------- ------------------- -------------------

As shown in Table VI-18, which sums Tables VI-5, VI-10, VI-13, and
VI-15, the undiscounted costs for all air carrier production Boeing
cargo airplane operators will be \$76 million, which has a present value
of \$29 million using a 7 percent discount rate and a present value of
\$48 million using a 3 percent discount rate. The undiscounted costs for
all air carrier Airbus production cargo airplanes will be \$24 million,
which has a present value of \$9 million using a 7 percent discount rate
and a present value of \$15 million using a 3 percent discount rate.

TABLE VI-18

UNDISCOUNTED AND PRESENT VALUE COSTS FOR AIR CARRIER PRODUCTION CARGO
AIRPLANE OPERATORS BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$ 76             \$29              \$48

  AIRBUS            \$ 24             \$ 9              \$15

                                                        

  **TOTAL**         **\$100**         **\$38**          **\$63**
  ----------------- ----------------- ----------------- -----------------

Finally, as shown in Table VI-19, of the present value of \$38 million
using a 7 percent discount rate for the production cargo airplane
compliance costs, about 26 percent will be due to the installation and
about 74 percent will be due to the annual fuel, operational, and ASM
replacement costs.

TABLE VI-19

COMPLIANCE COSTS FOR AIR CARRIER PRODUCTION CARGO AIRPLANES

(in Millions of 2007 Dollars)

  --------------------- ---------------- ---------------- ----------------
                        TOTAL COST                        

  FTI COSTS             UNDISCOUNTED     PRESENT VALUE    PRESENT VALUE
                                         (7%)             (3%)

                                                          

  ENGINEERING           \$ 0             \$ 0             \$ 0

                                                          

  INSTALLATION          \$ 15            \$10             \$13

  INVENTORY             \<\$1            \<\$1            \<\$1

  FUEL                  \$ 22            \$ 6             \$11

  OPERATIONAL           \$ 39            \$13             \$23

  ASM REPLACEMENT       \$ 24            \$ 7             \$14

                                                          

  **TOTAL**             **\$100**        **\$38**         **\$63**
  --------------------- ---------------- ---------------- ----------------

# VII. COST-BENEFIT ANALYSIS OF THE RULE AND ALTERNATIVES

## INTRODUCTION

In this section, we analyze the costs and expected benefits of the final
rule and some alternatives. We provide a sensitivity analysis that
employs combinations of 3 values for a prevented fatality, 2 discount
rates, and 3 SFAR 88 effectiveness rates for the final rule. For the
analyses of the alternatives, we analyze only the baseline case using a
\$5.5 million value for a prevented fatality, a 7 percent discount rate,
and a 50 percent SFAR 88 effectiveness rate. All of the analyses are
performed in present value terms.

##### 

## FINAL RULE

It needs to be emphasized that the expected benefits are the mean of the
benefits probability distribution. For example, the final rule benefits
would be greater than its costs if, through 2012, it were to prevent
[one]{.underline} accident that would have involved 180 fatalities. The
airplanes that fall into this potential category are the size of a B-757
and larger. In addition, there is a 25.7 percent probability that the
final rule will have benefits that will be greater than its costs.

With that as background, as shown in Table VII-1, using the baseline of
a \$5.5 million value for a prevented fatality, a 7 percent discount
rate, and a 50 percent SFAR 88 effectiveness rate, the present value of
the rule's expected benefit cost ratio is 0.67. That is, the expected
benefits are \$327 million less than the costs. At a 3 percent discount
rate, the expected benefit-cost ratio is 0.82, which illustrates that
the costs tend to be front-end loaded while the benefits occur later in
time.

At a discount rate of 7 percent, the rule's expected benefit-cost ratios
are about equal or greater than 1.00 for SFAR 88 effectiveness rates of
25 percent and fatality values of \$5.5 million and \$8 million. The
rule's expected benefit-cost ratios are less than 1.00 for all other
combinations.

At a discount rate of 3 percent, the rule's expected benefit-cost ratios
are nearly one (0.95) or greater for a fatality value of \$8 million and
SFAR 88 effectiveness rates of 50 percent and 25 percent and for a
fatality value of \$5.5 million and an SFAR 88 effectiveness rate of 25
percent.

TABLE VII-1

PRESENT VALUES OF THE BENEFITS AND COSTS FOR ALL AFFECTED AIRPLANES BY
DISCOUNT RATE, VALUE OF A PREVENTED FATALITY, AND SFAR 88 EFFECTIVENESS
RATE

(in Millions of 2007 Dollars)

  ----------- ----------- --------------- ----------- ----------- --------------
                                          PRESENT                 
                                          VALUES                  

  DISCOUNT    VALUE OF    SFAR 88         BENEFITS    COSTS       BENEFIT/COST
  RATE        FATALITY    EFFECTIVENESS                           RATIO

                                                                  

  7%          \$5.5       50%             \$ 657      \$1,012     0.65

  7%          \$ 3        50%             \$ 469      \$1,012     0.46

  7%          \$ 8        50%             \$ 828      \$1,012     0.82

  7%          \$5.5       25%             \$ 989      \$1,012     0.98

  7%          \$ 3        25%             \$ 704      \$1,012     0.70

  7%          \$ 8        25%             \$1,242     \$1,012     1.23

  7%          \$5.5       75%             \$ 330      \$1,012     0.33

  7%          \$ 3        75%             \$ 235      \$1,012     0.23

  7%          \$ 8        75%             \$ 414      \$1,012     0.41

                                                                   

  3%          \$5.5       50%             \$1,141     \$1,509     0.76

  3%          \$ 3        50%             \$ 842      \$1,509     0.56

  3%          \$ 8        50%             \$1,434     \$1,509     0.95

  3%          \$5.5       25%             \$1,658     \$1,509     1.10

  3%          \$ 3        25%             \$1,263     \$1,509     0.84

  3%          \$ 8        25%             \$2,151     \$1,509     1.43

  3%          \$5.5       75%             \$ 517      \$1,509     0.34

  3%          \$ 3        75%             \$ 421      \$1,509     0.28

  7%          \$5.5       75%             \$ 717      \$1,509     0.48
  ----------- ----------- --------------- ----------- ----------- --------------

### ALTERNATIVES

As shown in Table VII-2, we evaluated the baseline costs and benefits
for the following 8 alternatives to the final rule using a value of
\$5.5 million for a prevented fatality, a 7 percent discount rate, and a
50 percent SFAR 88 effectiveness rate:

ALTERNATIVE 1. cover only air carrier passenger airplanes

ALTERNATIVE 2. exclude auxiliary fuel tanks

ALTERNATIVE 3. cover only air carrier retrofitted passenger airplanes

ALTERNATIVE 4. cover only air carrier production passenger airplanes

ALTERNATIVE 5. cover only air carrier production passenger and cargo
airplanes

ALTERNATIVE 6. final rule plus part 91 airplanes

ALTERNATIVE 7. final rule plus conversion cargo airplanes

ALTERNATIVE 8. final rule plus conversion and retrofitted cargo
airplanes

TABLE VII-2

BENEFITS AND COST SUMMARIES FOR 8 ALTERNATIVES TO THE FINAL RULE USING A
\$5.5 MILLION VALUE FOR A PREVENTED FATALITY, A 7 PERCENT DISCOUNT RATE,
AND A 50 PERCENT SFAR 88 EFFECTIVENESS RATE

(in Millions of 2007 Dollars)

  ---------------------------------------- ----------- ------------- --------------
                                           PRESENT                   BENEFIT/COST
                                           VALUE (7%)                RATIO

  OPTION                                   BENEFITS    COSTS         

                                                                     

  **FINAL RULE**                           **\$657**   **\$1,012**   **0.65**

                                                                     

  ALTERNATIVES                                                       

  1\. Cover Only Part 121 Passenger        \$657       \$ 975        0.67
  Airplanes (excludes Part 121 cargo and                             
  Part 91)                                                           

  2\. Cover Only Part 121 Passenger        \$657       \$ 975        0.67
  Airplanes but No Auxiliary Tanks                                   

  3\. Cover Only Part 121 Retrofitted      \$271       \$ 438        0.62
  Passenger Airplanes (excludes All                                  
  Production Passenger, all Cargo, and                               
  Part 91 Airplanes)                                                 

  4\. Cover Only Part 121 Production       \$386       \$ 537        0.72
  Passenger Airplanes                                                

  5\. Cover Only Part 121 Production       \$386       \$ 574        0.67
  Passenger and Cargo Airplanes                                      

  6\. Final Rule Plus Part 91 Airplanes    \$657       \$1,026       0.64

  7\. Final Rule Plus Conversion Cargo     \$657       \$1,109       0.59
  Airplanes                                                          

  8\. Final Rule Plus Conversion and       \$657       \$1,229       0.53
  Retrofitted Cargo Airplanes                                        
  ---------------------------------------- ----------- ------------- --------------

## ALTERNATIVE 1 : COVER ONLY AIR CARRIER PASSENGER AIRPLANES

Not covering air carrier production cargo airplanes would reduce the
present value of the costs by \$37 million while the benefits would be
the same. However, that would leave pilots flying production cargo
airplanes at a greater risk than the pilots flying production passenger
airplanes. Given the goal of one level of safety, we included these
commercial cargo pilots in the rule because it costs substantially less
to install FTI on production airplanes than on existing airplanes.
Further, these production cargo airplanes will be flying for 40 more
years, whereas a retrofitted cargo airplane will have fewer years in
service.

## alternative 2 : eXEMPT AUXILIARY TANKS

Boeing commented there are few auxiliary tanks in air carrier passenger
service and nearly all of those airplanes will be retired by 2017. As a
result, there would be minimal aggregate costs and benefits from
exempting auxiliary fuel tanks from the final rule.

## ALTERNATIVE 3 : COVER ONLY RETROFITTED AIR CARRIER PASSENGER AIRPLANES 

Although this is not really an alternative, it is included to determine
the impact of the final rule specifically on air carrier retrofitted
passenger airplanes. The present value of the final rule's costs would
decrease from \$1.012 billion to \$438 million and the expected benefits
would decrease from \$657 million to \$271 million, which lowers the
benefit-cost ratio from 0.65 to 0.62.

## ALTERNATIVE 4 : COVER ONLY AIR CARRIER PRODUCTION PASSENGER AIRPLANES 

If the final rule were to cover only air carrier production passenger
airplanes, the present value of the final rule's costs would decrease
from \$1.012 billion to \$537 million and the expected benefits would
decrease from \$657 million to \$386 million. The benefit-cost ratio
would increase from 0.65 to 0.72. However, when evaluating the case
where a large airplane were to explode by 2012 with a loss of 180
people, there is an 89 percent probability that such an accident would
happen to an existing airplane and only an 11 percent probability that
it would happen to a production airplane. Thus, we did not select this
alternative because it has a much lower chance of preventing a major
explosion in the immediate future.

## alternative 5 : COVER ONLY AIR CARRIER PRODUCTION PASSENGER AND CARGO AIRPLANES

In comparison to Alternative 4, including air carrier production cargo
airplanes with air carrier production passenger airplanes would increase
the final rule's costs from \$537 million to \$574 million and the
benefits would remain the same. The benefit-cost ratio would decrease
from 0.76 to 0.71.

## alternative 6 : include part 91 operations

Including Part 91 operations would increase the present value costs by
\$14 million while having a minimal benefit because these airplanes fly
an average of less than 750 hours a year and transport few people.

## alternative 7 : include air carrier conversion cargo airplanes 

Including conversion air carrier conversion cargo airplanes would
increase the final rule's costs from \$1.012 billion to \$1.109 billion
and the benefits would remain the same. The benefit-cost ratio would
decrease from 0.65 to 0.59. Although we are committed to the «one level
of safety « principle, the costs to retrofit these airplens that will
fly many fewer hours than production cargo airplanes is not justified by
the costs. 

## alternative 8 : include air carrier conversion and retrofitted cargo airplanes 

Including air carrier retrofitted cargo airplanes would increase the
rule's (plus conversion cargo) costs from \$1.109 billion to \$1.229
billion while the benefits would not change. The benefit-cost ratio
would decrease from 0.59 to 0.53. The average existing cargo airplane
will fly even fewer hours than the average future conversion cargo
airplanes because conversion cargo airplanes are younger than the
average existing airplane.

## COST-EFFECTIVENESS ANALYSIS 

Another way to analyze these alternatives is to evaluate them on an
incremental cost per life saved; i.e., a cost-effectiveness analysis.
For this rule, the effectiveness metric is the number of expected
prevented fuel tank explosions, which is then converted into the present
value of the number of fatalities prevented. The mid-point of the
time-frame in which an accident would happen is 2022 for production
airplanes and 2019 for retrofitted airplanes. For all other airplanes,
the mid-point would be about 100 years from today, or 2110. In Table 8,
the first column lists the specific types of airplanes that could have
FRM installed. The second column reports the number of fuel tank
explosions that FRM would prevent using an SFAR 88 effectiveness rate of
50 percent. The third column provides the present value of the total
costs to install FRM on those airplanes minus the present value of the
destroyed airplane and minus the demand benefits weighted by the number
of flight hours. The passenger airplane hull value is \$50, which gives
present values of \$19 million for production airplanes and \$24 million
for retrofitted airplanes. The present value of the demand benefits
would be \$100 million for retrofitted airplanes and \$151 million for
production airplanes. The fourth column takes the number of prevented
explosions and divides it into the costs to calculate the present value
of the cost to prevent one explosion. The fifth column provides the
number of fatalities that would be prevented if FRM were installed on
the airplane assuming that 80 percent of the explosions would be
in-flight and 20 percent would be on the ground. These numbers are then
adjusted by the discount rate to reflect the present value of the
fatalities for production and retrofitted passenger airplanes. The final
column supplies the average present value of the cost for that option to
prevent one fatality. As shown in Table VII-3, the two most
cost-effective options would be to install FRM on production passenger
airplanes and on existing passenger airplanes. The final rule contains
all of the options except conversion cargo airplanes and retrofitted
cargo airplanes.

TABLE VII-3

INCREMENTAL COST EFFECTIVENESS ANALYSIS OF THE INDIVIDUAL ALTERNATIVES
USING A PRESENT VALUE ANALYSIS WITH A 7 PERCENT DISCOUNT RATE AND A 50
PERCENT SFAR 88 EFFECTIVENESS RATE

(Total Costs in Millions of 2007 Dollars)

  ---------------------- ------------ -------- ---------- ------------ -------------
                                      PV       PV                      PV

  OPTIONS                NUMBER OF    COSTS -- COST TO    AVERAGE      COST TO
                         EXPLOSIONS   HULL and PREVENT    NUMBER OF    PREVENT 1
                         PREVENTED    DEMAND   ONE        FATALITIES   STATISTICAL
                                      LOSS     ACCIDENT                FATALITY

                                                                       

  Production Passenger   1.00         \$367    \$ 367     46           \$ 8
  Airplanes                                                            

  Production Cargo       0.0385       \$ 37    \$ 961     .055         \$17,473
  Airplanes                                                            

  Production Part 91     0.00082      \$ 2     \$2,439    .249         \$9,785
  Airplanes                                                            

  Retrofitted Passenger  0.52         \$314    \$ 604     56           \$ 11
  Airplanes                                                            

  Conversion Cargo       0.095        \$ 83    \$ 874     .055         \$15,891
  Airplanes                                                            

  Retrofitted Cargo      0.064        \$110    \$1,719    .055         \$31,255
  Airplanes                                                            

  Retrofitted Part 91    0.0194       \$ 12    \$6,186    .249         \$24,843
  Airplanes                                                            

                                                                       

  Final Rule             1.5585       \$741    \$ 475     49           \$ 10
  ---------------------- ------------ -------- ---------- ------------ -------------

## conclusion

We determined that the final rule provides the best balance between the
costs and benefits of providing FRM. In particular, although the
benefit-cost ratio is the highest when only air carrier production
passenger airplanes are covered, the greatest probability of preventing
the most catastrophic accident in the near future requires the inclusion
of the existing fleet.

# 

#  VIII. REGULATORY FLEXIBILITY ANALYSIS

[Introduction and Purpose of This Analysis]{.underline}

The Regulatory Flexibility Act of 1980 (Public Law 96-354) (RFA)
establishes "as a principle of regulatory issuance that agencies shall
endeavor, consistent with the objectives of the rule and of applicable
statutes, to fit regulatory and informational requirements to the scale
of the businesses, organizations, and governmental jurisdictions subject
to regulation. To achieve this principle, agencies are required to
solicit and consider flexible regulatory proposals and to explain the
rationale for their actions to assure that such proposals are given
serious consideration." The RFA covers a wide-range of small entities,
including small businesses, not-for-profit organizations, and small
governmental jurisdictions.

Agencies must perform a review to determine whether a rule will have a
significant economic impact on a substantial number of small entities.
If the agency determines that it will, the agency must prepare a
regulatory flexibility analysis as described in the RFA.

We believe that this final rule will have a significant economic impact
on a substantial number of small entities. The purpose of this analysis
is to provide the reasoning underlying the FAA determination. The FAA
has determined that:

-There will not be a significant impact on a substantial number of
manufacturers.

-There will be a significant impact on a substantial number of
operators.

To make this determination in this final rule, we perform a Regulatory
Flexibility Analysis (RFA). Under Section 63(b) of the RFA, the analysis
must address:

Description of reasons the agency is considering the action

Statement of the legal basis and objectives for the rule

Significant issues raised during public comment

Description of the record keeping and other compliance requirements of
the rule

All federal rules that may duplicate, overlap, or conflict with the rule

Description and an estimated number of small entities

Analysis of small firms' ability to afford the rule

Conduct a disproportionality analysis

Conduct a competitive analysis

Estimation of the potential for business closures

Describe the alternatives considered

[Description of reasons the agency is considering the
action]{.underline}

Fuel tank explosions have been a constant threat with serious aviation
safety implications for many years. Since 1960, 18 airplanes have been
damaged or destroyed as the result of a fuel tank explosion. A recent
explosion involving a Boeing Model 747 (TWA Flight 800) off Long Island,
New York in 1996 occurred in-flight and led to the deaths of 230 people.
Two other recent explosions on airplanes operated by Philippine Airlines
and Thai Airlines occurred on the ground (resulting in nine fatalities).
While the accident investigations of the TWA, Philippine Airlines and
Thai Airlines accidents failed to identify the ignition source that
caused the explosion, the investigations found several similarities

The requirements contained in this final rule will reduce the likelihood
of fuel tank fires, and mitigate the effects of a fire if one occurs.

[Statement of the legal basis and objectives for the rule]{.underline}

The FAA's authority to issue rules regarding aviation safety is found in
Title 49 of the United States Code. Subtitle I, Section 106 describes
the authority of the FAA Administrator. Subtitle VII, Aviation Programs,
describes in more detail the scope of the agency's authority.

This rulemaking is promulgated under the authority described in Subtitle
VII, Part A, Subpart III, Section 44701, "General requirements." Under
that section, the FAA is charged with promoting safe flight of civil
aircraft in air commerce by prescribing minimum standards required in
the interest of safety for the design and performance of aircraft;
regulations and minimum standards in the interest of aviation safety for
inspecting, servicing, and overhauling aircraft; and regulations for
other practices, methods, and procedures the Administrator finds
necessary for safety in air commerce. This regulation is within the
scope of that authority because it prescribes---

New safety standards for the design of transport category airplanes, and

New requirements necessary for safety for the design, production,
operation and maintenance of those airplanes, and for other practices,
methods, and procedures related to those airplanes.

Accordingly, this final rule amends Title 14 of the Code of Federal
Regulations and address deficiencies in current regulations regarding
airplane designs of the current and future fleet. The rule will require
transport category airplanes to minimize flammability of fuel tanks.

[Significant issues raised during public comment]{.underline}

Individuals and companies commented that they will incur costs as a
result of the requirements contained in the rule. Although no small
entities commented, we have incorporated commenter cost information in
our final regulatory evaluation and accompanying RFA.

[Description of the record keeping and other compliance requirements of
the rule]{.underline}

We expect no more than minimal new reporting and record-keeping
compliant requirements to result from this rule. The rule will require
additional entries in existing required maintenance records to account
for either the additional maintenance requirements or the installation
of nitrogen-inerting systems and the addition of insulation between
heat-generating equipment and fuel tanks.

[All federal rules that may duplicate, overlap, or conflict with the
rule]{.underline}

SFAR 88 was enacted to ensure no ignition source could ignite the fuel
tank. After that rule was promulgated, we continued to find ignition
sources that we had not know existed. Thus, SFAR 88 cannot eliminate all
future ignition sources. This rule is designed to work in conjunction
with SFAR 88 to prevent future HCWT explosions. We are unaware that the
rule will overlap, duplicate, or conflict with any other existing
Federal Rules.

[Description and an estimated number of small entities]{.underline}

The FAA uses the size standards from the Small Business Administration
for Air Transportation and Aircraft Manufacturing specifying companies
having less than 1,500 employees as small entities. Boeing is the sole
U.S. manufacturer affected by this final rule. As Boeing has more than
1,500 employees and is not considered a small entity, there will not be
a significant impact on a substantial number of manufacturers.

In addition, we considered the economic impact on small-business part 91
operators[^89]. Boeing airplanes are operated in part 91 service. Most
of these affected airplanes are owned by large businesses that operate
these airplanes as corporate jets. Given the ownership and operating
expense of these airplanes, we do not believe these firms will incur a
significant economic impact.

We identified 15 U.S. operators who will be affected by this final rule
and qualify as small businesses because they have less than 1,500
employees.[^90] These entities operate a total of 214 airplanes. Once
the firms were classified as small entities, we gathered information on
their annual revenues.

We obtained the small entities' fleets using data from FAA Flight
Standards and BACK Associates Fleet Database. The number of employees
and revenues were obtained from the U.S. Department of Transportation
Form 41 filings, BTS Office of Airline Information, Hoovers Online, and
Thomas Gale Business and Company Resource Center.

[Analysis of small firms' ability to afford the rule]{.underline}

To assess the cost impact to small business part 121 airlines, we
estimated the present value retrofit cost for the affected aircraft in
the small entities fleet. The following table summarizes the cost to
retrofit per airplane and the associated model types.

  -------------------------------- --------------------------------------
  Retrofit Cost Per Model          

  Model                            Present Value Cost

  B-737-Classic                    \$137,000

  B-737-NG                         \$121,000

  B-757                            \$211,000

  B-767                            \$264,000

  B747-100/100/300                 \$289,000

  B-747-400                        \$289,000

  B-777                            \$311,000

  A-320 Family                     \$137,000

  A-330                            \$311,000
  -------------------------------- --------------------------------------

We estimated each operator's compliance cost by multiplying the average
retrofit cost per airplane by the total number of each type of airplane
the operator currently has. Then we measured the economic impact on
small entities by dividing the firms' total estimated present value
compliance cost by its annual revenue. We believe that if the retrofit
cost exceeds 2% of a firm's annual revenue, then there is a significant
economic impact. As shown in the following table, the present value of
the retrofitting costs is estimated to be greater than two percent of
annual revenues for three small operators. Thus, we determined that this
final rule will have a significant impact on a substantial number of
small entities.

  -------------- --------------- ---------- ------------- ----------------- ---------
  Airplane Model Small Entity    Number of  Cost          Annual Revenue    Cost as a
                 Operator        Affected                                   % of
                                 Aircraft                                   Revenue

  BOEING 737-700 ALOHA AIRLINES  2          \$242,000                       

  BOEING 737-700 ALOHA AIRLINES  5          \$605,000                       

  BOEING 737-700 ALOHA AIRLINES  1          \$121,000                       

                                 Total      \$968,000     \$300,601,582     0.32%

                                                                            

  BOEING 737-300 ATA AIRLINES    3          \$411,000                       

  BOEING 737-800 ATA AIRLINES    11         \$1,331,000                     

  BOEING 737-800 ATA AIRLINES    1          \$121,000                       

  BOEING 757-200 ATA AIRLINES    4          \$1,055,000                     

  BOEING 757-200 ATA AIRLINES    2          \$422,000                       

  BOEING 757-300 ATA AIRLINES    4          \$844,000                       

                                 Total      \$4,184,000   \$330,177,135     1.27%

                                                                            

  BOEING 757-200 EOS AIRLINES    3          \$633,000     \$1,084,907       58.350%

                                                                            

                                                                            

  AIRBUS         FRONTIER        8          \$1,096,000                     
  A318-100       AIRLINES                                                   
                 \[CO-USA\]                                                 

  AIRBUS         FRONTIER        39         \$5,343,000                     
  A319-100       AIRLINES                                                   
                 \[CO-USA\]                                                 

  AIRBUS         FRONTIER        10         \$1,370,000                     
  A319-100       AIRLINES                                                   
                 \[CO-USA\]                                                 

                                 Total      \$7,809,000   \$1,130,837,682   0.69%

                                                                            

  BOEING 767-300 HAWAIIAN        4          \$1,056,000                     
                 AIRLINES                                                   

  BOEING 767-300 HAWAIIAN        8          \$2,112,000                     
                 AIRLINES                                                   

  BOEING 767-300 HAWAIIAN        3          \$792,000                       
                 AIRLINES                                                   

  BOEING 767-300 HAWAIIAN        3          \$792,000                       
                 AIRLINES                                                   

                                 Total      \$4,752,000   \$881,599,398     0.54%

                                                                            

  BOEING 767-200 MAXJET AIRWAYS  1          \$264,000                       

  BOEING 767-200 MAXJET AIRWAYS  1          \$264,000                       

  BOEING 767-200 MAXJET AIRWAYS  1          \$264,000                       

                                 Total      \$792,000     \$2,422,199       32.70%

                                                                            

  BOEING 737-400 MIAMI AIR       2          \$274,000                       
                 INTERNATIONAL                                              

  BOEING 737-800 MIAMI AIR       3          \$363,000                       
                 INTERNATIONAL                                              

  BOEING 737-800 MIAMI AIR       1          \$121,000                       
                 INTERNATIONAL                                              

  BOEING 737-800 MIAMI AIR       1          \$121,000                       
                 INTERNATIONAL                                              

  BOEING 737-800 MIAMI AIR       2          \$121,000                       
                 INTERNATIONAL                                              

                                 Total      \$1,000,000   \$73,403,477      1.36%

                                                                            

  BOEING 757-200 PRIMARIS        1          \$211,000     \$19,403,658      1.09%
                 AIRLINES                                                   

                                                                            

  BOEING 737-300 RYAN            1          \$137,000                       
                 INTERNATIONAL                                              
                 AIRLINES                                                   

  BOEING 737-400 RYAN            1          \$137,000                       
                 INTERNATIONAL                                              
                 AIRLINES                                                   

  BOEING 737-800 RYAN            2          \$242,000                       
                 INTERNATIONAL                                              
                 AIRLINES                                                   

  BOEING 737-800 RYAN            1          \$121,000                       
                 INTERNATIONAL                                              
                 AIRLINES                                                   

  BOEING 737-800 RYAN            1          \$121,000                       
                 INTERNATIONAL                                              
                 AIRLINES                                                   

  BOEING 757-200 RYAN            1          \$211,000                       
                 INTERNATIONAL                                              
                 AIRLINES                                                   

  BOEING 757-200 RYAN            1          \$211.000                       
                 INTERNATIONAL                                              
                 AIRLINES                                                   

  BOEING 757-200 RYAN            2          \$422,000                       
                 INTERNATIONAL                                              
                 AIRLINES                                                   

                                 Total      \$1,602,000   \$101,560,750     1.58%

                                                                            

  AIRBUS         SPIRIT AIRLINES 30         \$4,100,000                     
  A319-100       \[USA\]                                                    

  AIRBUS         SPIRIT AIRLINES 6          \$822,000                       
  A321-100       \[USA\]                                                    

                                 Total      \$4,922,000   \$540,426,363     0.91%

                                                                            

  BOEING 737-800 SUN COUNTRY     2          \$242,000                       
                 AIRLINES                                                   

  BOEING 737-800 SUN COUNTRY     6          \$726,000                       
                 AIRLINES                                                   

  BOEING 737-800 SUN COUNTRY     2          \$242,000                       
                 AIRLINES                                                   

  BOEING 737-800 SUN COUNTRY     3          \$363,000                       
                 AIRLINES                                                   

                                 Total      \$1,573,000   \$225,789,595     0.70%

                                                                            

                                                                            

  AIRBUS         USA 3000        1          \$137,000                       
  A320-100       AIRLINES                                                   

  AIRBUS         USA 3000        1          \$137,000                       
  A320-100       AIRLINES                                                   

  AIRBUS         USA 3000        9          \$1,233,000                     
  A320-100       AIRLINES                                                   

                                 Total      \$1,507,000   \$132,077,603     1.14%

                                                                            

  B-737-429      Casino Express  1          \$137,000                       

  B-737-46B      Casino Express  1          \$137,000                       

  B-737-4S3      Casino Express  1          \$137,000                       

  B-737-8Q8      Casino Express  2          \$242,000                       

  B-737-8Q8      Casino Express  1          \$121,000                       

  B-737-86N      Casino Express  1          \$121,000                       

                                 Total      \$895,000     \$34,178,453      2.62%

                                                                            

  B-737-3Y0      Pace Airlines   1          \$137,000                       

  B-757-256      Pace Airlines   1          \$137,000                       

  B-757-236      Pace Airlines   1          \$137,000                       

                                 Total      \$411,000     \$40,411,353      1.02%
  -------------- --------------- ---------- ------------- ----------------- ---------

[Disproportionality Analysis]{.underline}

Due to the potential lower cost that could arise from fleet discounts,
large operators may be able to negotiate better pricing. The result is
that small operators could bear a disproportionate cost compared to
larger operators.

[Competitive Analysis]{.underline}

Given the specialization and target markets for some of these small
entities, we do not believe that this final rule will reduce the ability
of small operators to compete.

Two small business airlines (MAXjet and EOS) are beginning to establish
service in the market for business class operations. Maxjet is a
business class, transatlantic airline with service to Stansted Airport
in London. It has been in business since 2005. EOS airlines was founded
in 2004 and also services Stansted Airport.

Other operators who will be significantly affected by this final rule
operate in primarily international travel, vacation travel and
specialized travel markets. Because these small business airlines
operate in a niche market, there is expected to be little change in
competition or market share resulting from this final rule.

[Estimation of the potential for business closures]{.underline}

For affected small entity operators, the ratio of present-value costs to
annual revenue shows that four of the U.S. small business air operators
analyzed will have ratios in excess of two percent. Such a ratio could
have a significant financial impact. To fully assess whether this final
rule will force a small entity into bankruptcy requires more financial
information than is readily available. However, we believe the
compliance cost of this rule will not force these firms into bankruptcy.

[Describe the alternatives considered]{.underline}

The section titled "Analysis of Alternatives" can be found in the Final
Regulatory Evaluation. It contains discussion and cost estimates for
alternatives that were considered.

[]{.mark}

[Regulatory Flexibility Analysis Summary]{.underline}

Therefore, as the FAA Administrator, I certify that this rule:

-will not be a significant impact on a substantial number of
manufacturers.

-will be a significant impact on a substantial number of operators.

# IX. INTERNATIONAL TRADE IMPACT ANALYSIS

The Trade Agreements Act of 1979 (Public Law 96-39) prohibits Federal
agencies from establishing any standards or engaging in related
activities that create unnecessary obstacles to the foreign commerce of
the United States. Legitimate domestic objectives, such as safety, are
not considered unnecessary obstacles. The statute also requires
consideration of international standards and, where appropriate, that
they be the basis for U.S. standards. The FAA has assessed the effects
of this rule and note the purpose is to ensure the safety of the
American public and thus the rule is not considered as creating an
unnecessary obstacle to foreign commerce.

# X. UNFUNDED MANDATES REFORM ACT ASSESSMENT

Title II of the Unfunded Mandates Reform Act of 1995 (Public Law 104-4)
requires each Federal agency to prepare a written statement assessing
the effects of any Federal mandate in a proposed or final agency rule
that may result in an expenditure of \$100 million or more (adjusted
annually for inflation with the base year 1995) in any one year by
State, local, and tribal governments, in the aggregate, or by the
private sector; such a mandate is deemed to be a "significant regulatory
action." The FAA currently uses an inflation-adjusted value of \$128.1
million in lieu of \$100 million.

There will be 3 years (2015, 2016, and 2017) in which the undiscounted
costs will be greater than \$128.5 million. Consequently, as shown in
Table 1 in the Executive Summary, we evaluated the costs and benefits of
8 alternatives to the final rule.

## 

## **APPENDIX a:** 

## **POTENTIAL QUANTIFIED BENEFITS FROM MISTAKING A HCWT EXPLOSION FOR THE RESULT OF A TERRORIST ATTACK**

## A.I. SUMMARY 

This Appendix evaluates a reasonable quantitative estimate for the
economic impacts from a potential government and industry mistaken
preliminary interpretation that an in-flight HCWT explosion was the
consequence of a terrorist action. As will be shown, adding this
quantitative benefit estimate would increase the present value of the
benefits to \$1.582 billion while the present value costs would be \$986
million, resulting in a benefit cost ratio of 1.60. Thus, the rule would
be cost-beneficial with the inclusion of the precautionary action
benefits.

## 

## a.2. BACKGROUND

As an in-flight explosion caused by a HCWT ignition is initially
indistinguishable from an explosion caused by a terrorist bomb in the
cargo or passenger area, the initial government and public reaction to
an explosion could be to assume the worst -- that the accident is part
of a larger terrorist plot requiring immediate action to thwart an
imminent danger to other air travelers.

A cautious government and industry response to an in-flight passenger
airplane fuel tank explosion would be to re-examine passengers and cargo
on airplanes that have not left the airport for potential bombs until a
preliminary determination could be made that the explosion was an
accident and not a terrorist attack. The effect of a potential terrorist
threat may also cause individual airlines to react cautiously. For
example, after the August 9 late night arrests of the liquid bomb
plotters in England, British Airways cancelled 360 of its 550 flights
out of Heathrow on August 10, 2006, 110 of its flights out of Heathrow
on August 11, and 80 of its flights out of Heathrow on August 12. Easy
Jet cancelled 300 flights on August 10 and 112 flights on August 11. The
conclusion is that public trust concerns will likely result in risk
minimizing decision making by all concerned.

It is also possible that, if it takes an extended time to determine that
the explosion was a HCWT explosion and not the result of a terrorist
act, more extensive and stringent cargo requirements would be mandated,
as well as more intrusive passenger screening for all airplanes -- even
for McDonnell-Douglas airplanes, regional jets, and commuter turboprops
that do not have HCWTs.

## a.3. POTENTIAL BENEFITS FROM NOT REACTING TO A MISTAKEN TERRORIST THREAT 

### A.3.a. [Quantified Benefits from Preventing a Mistaken Reaction]{.underline}

We have estimated that it cost the aviation industry about \$2 billion
for grounding all airplanes for two and a half days after the September
11, 2001, terrorist attacks. This estimate does not include subsequent
security costs. The effects on the aviation industry of an in-flight air
carrier passenger airplane HCWT fuel tank explosion could be \$1.2
billion until it can be established that the explosion was not the
result of a terrorist act. We have also determined that the effects on
the aviation industry of an on-the-ground passenger airplane explosion
could be \$400 million. Thus, the average aviation system losses could
be \$1.04 billion (the 80 percent probability of an in-flight explosion
times \$1.2 billion plus the 20 percent probability of an on-the-ground
explosion times \$400 million) as the consequence of mistakenly
believing the explosion to be the result of a terrorist act.

The ancillary benefits from preventing an air carrier in-flight cargo
airplane explosion will be less than those for a passenger airplane
explosion because a cargo airplane explosion, which is more likely to
occur at night will not have the media coverage or fatalities that a
passenger airplane explosion would have. Thus, the disruption to the US
aviation system will be minimal.

Similarly, the ancillary benefits from preventing a Part 91 passenger
airplane explosion will be minimal because the government would not
likely view it as a terrorist plot and it would have a minimal effect on
the aviation system.

Thus, there could be economic losses if security or other measures are
taken by the aviation authorities and the airlines in response to a
mistaken belief that a HCWT in-flight explosion was the consequence of a
terrorist bomb.

The experience of the past 30 years combating acts of air piracy and
terrorist actions confirms that the losses associated with aircraft
bombings and hijackings are identifiable, measurable, and confined. The
enormous economic cost of a catastrophic terrorist act against a
passenger airplane can be estimated in terms of lives lost, property
damage, decreased public utilization of air transportation, etc. as
demonstrated by the September 11, 2001, attacks.

Several studies analyzing the economic impact of the September 11
attacks offer important insights for this analysis. One study[^91]
estimated that shutting down the entire air transportation network for
two-and-a-half days cost almost \$1.5 billion in 2001 just from lost
airfares and cargo-shipping revenues. Although a solitary explosion
likely would not shut down the entire air transportation network for
two-and-a-half days, the government's immediate reaction to a potential
terrorist attack from a mid-air passenger airplane explosion may be to
ground all passenger and cargo airplanes not in the air until we could
ascertain that this event is not part of a larger terrorist plot. In the
mid-1990s, there was a terrorist plan to simultaneously explode bombs in
cargo holds aboard a dozen US passenger airplanes flying over the
Pacific Ocean and that parallel would be applicable in this case. Once
the airplanes were grounded, the would likely want to re-examine all
cargo (particularly cargo in passenger airplanes) and baggage would
likely be re-examined to make certain that there were no terrorist
bombs. Further, there would be long-term costs of the probable increased
inspections of cargo (X-rays, more physical inspections, plastic
explosive sensing machines, etc.

Brian S. Wesbury, Chief Economist, Griffin, Kubik, Stephens & Thompson,
Inc., estimated that the short-term impact of the September 11, 2001,
attacks in terms of total life and property losses was an estimated \$40
billion. This direct cost pales in comparison to certain indirect costs,
which included:

-   "Shopping centers and restaurants across the country were closed for
    at least 24 hours;

-   High-risk office buildings (such as the Sears Tower in Chicago) were
    evacuated;

-   The stock market ceased trading for four consecutive days;

-   Airlines immediately received a \$15 billion government assistance
    loan;

-   Insurance costs skyrocketed, with some premiums up 300 percent or
    more from pre-attack levels. An insurance gradient has been created
    that increases the cost of doing business the closer companies are
    to centers of political and financial power; and

-   The costs of security also increased sharply; in addition to an
    increase in the number of security guards at most major urban
    buildings, time-consuming security procedures have been implemented.
    Some firms have gone as far as installing X-ray machines and metal
    detectors."[^92]

There were specific effects in September 2001 and for the last 4 months
of the year that were influenced, to a large extent, by the September
11^th^ events. It is difficult to isolate out those effects that were
directly as a result of 9/11 and what would be attributable to other
events; however, in September 2001:

-   "Retail sales fell by \$6 billion (2.1 percent);

-   Durable goods new orders fell \$11.6 billion (6.8 percent);

-   New claims for unemployment insurance surged by 50,000, the biggest
    monthly jump since August 1982;

-   Industrial production fell 1.0 percent in September; and

-   Because of closer scrutiny at border crossings and shipping
    terminals, bottlenecks appeared in supply-chain management systems;
    durable goods shipments fell \$9.2 billion in September 2001 as
    transportation issues played havoc with order flows and drove up
    shipping costs."[^93]

And, in terms of the economic effects for the rest of the year:

-   "Major airlines immediately cut scheduled flights by 30 percent, and
    even with fewer flights, planes were not full;

-   Hotels experienced a surge in vacancies and the economy shed 1.1
    million jobs in the final four months of 2001; and

-   Through December 29, 2001, the Bureau of Labor Statistics attributed
    408 major layoff events (defined as those shedding 50 or more jobs)
    as a direct or indirect result of the attacks, with 70 percent of
    those layoffs in the air transportation and travel industries."[^94]

Today, if an airplane explodes one of the first things examined will be
whether the cause is terrorism and the public will likely want
assurances that there would not be another explosion.

As previously noted, the air transportation network lost almost \$1.5
billion for the two-and-a-half days that the network was shut down in
2001,[^95] which is a loss of \$600 million per day. We believe that a
day and a half of lost flights after an in-flight explosion (a half a
day on the day of the explosion and one day to evaluate the situation
and begin to resume many aviation operations) is a reasonable average
response for a loss of \$900 million in 2001 dollars. This response may
be done either by government fiat or by the individual airlines. For
example, after the August 9 late night arrests of the liquid bomb
plotters in England, British Airways cancelled 360 of its 550 flights
out of Heathrow on August 10, 2006, of its flights out of Heathrow on
August 11, and 80 of its flights out of Heathrow on August 12. Easy Jet
cancelled 300 flights on August 10 and 112 flights on August 11. Public
trust concerns will likely result in risk minimizing decision making by
all concerned.

For an on-the-ground explosion on a passenger airplane, we believe that
a half a day loss (\$300 million in 2001 dollars) would be likely
because the passengers and cargo would need to be taken off of airplanes
preparing to depart and re-inspected. This reverse flow will also result
in delays and cancellations of flights scheduled for later in the day.
Further, there will be disruption of crew schedules that would cascade
through the system.

The undiscounted real value of these losses, however, is not a fixed
number but a percentage of the economy at the time the accident would
occur. As the economy grows, the absolute real value of the loss
resulting from that fixed percentage will similarly grow. Consequently,
the undiscounted value is updated for each year to account for economic
growth.

As shown in Table A-1, updating the 2001 value of a \$900 million loss
to 2007 values to incorporate the average annual real growth rate of 3
percent results in a real loss of \$1.075 billion in 2001 dollars. We
updated the \$1.075 billion 2001 dollars by the Consumer Price Index
6-year cumulative inflation rate of 11.6 percent for the years 2002
through 2007 in order to value it in 2007 dollars, which results in the
current value of the loss at \$1.2 billion in 2007. Thus, the loss per
day is \$800 million. As 80 percent of the explosions are expected to
occur in flight and 20 percent on the ground, the expected loss from the
system reaction to terrorism has a weighted average of \$1.04 billion.
We continued to modify the loss in real 2007 dollars by the annual
growth rate of 3 percent, which we then discounted by 7 percent and 3
percent.[^96]

TABLE A-1

PRESENT VALUE OF THE BENEFITS USING A 7 PERCENT DISCOUNT RATE FROM
PREVENTING AN AIR CARRIER PASSENGER AIRPLANE EXPLOSION INITIALLY
BELIEVED TO HAVE BEEN CAUSED BYA TERRORIST ACT

(in Millions of 2007 Dollars)

  ---------- --------------------------- --------------------------------
  YEAR       UNDISCOUNTED                PRESENT VALUE

                                         

  2007       \$1,040                     \$1,040

  2008       \$1,071                     \$1,001

  2009       \$1,103                     \$964

  2010       \$1,136                     \$928

  2011       \$1,171                     \$893

  2012       \$1,206                     \$860

  2013       \$1,242                     \$827

  2014       \$1,279                     \$797

  2015       \$1,317                     \$767

  2016       \$1,357                     \$738

  2017       \$1,398                     \$711

  2018       \$1,440                     \$684

  2019       \$1,483                     \$658

  2020       \$1,527                     \$634

  2021       \$1,573                     \$610

  2022       \$1,620                     \$587

  2023       \$1,669                     \$565

  2024       \$1,719                     \$544

  2025       \$1,771                     \$524

  2026       \$1,824                     \$504

  2027       \$1,878                     \$485

  2028       \$1,935                     \$467

  2029       \$1,993                     \$450

  2030       \$2,053                     \$433

  2031       \$2,114                     \$417

  2032       \$2,178                     \$401

  2033       \$2,243                     \$386

  2034       \$2,310                     \$372

  2035       \$2,379                     \$358

  2036       \$2,451                     \$344

  2037       \$2,524                     \$332

  2038       \$2,600                     \$319

  2039       \$2,678                     \$307

  2040       \$2,758                     \$296

  2041       \$2,841                     \$285

  2042       \$2,926                     \$274
  ---------- --------------------------- --------------------------------

### A.3.b. [Potential Benefits]{.underline} 

Using the same analysis used in Section IV-G, we established the 3.64
mean expected accident years are 2012, 2019, 2026, and (0.64 of an
accident) in 2035. In Table C-2, we sum the undiscounted and present
values of preventing an air carrier passenger airplane explosion in each
of those three years from Table C-1 and Table IV-11. The present value
of these potential benefits will be \$3.982 billion, of which \$2.251
billion are from not reacting as if the explosion were a terrorist plot,
\$629 million are prevented aviation demand losses, and \$1.102 billion
are direct benefits.

TABLE A-2

UNDISCOUNTED AND PRESENT VALUE OF THE POTENTIAL BENEFITS FROM PREVENTING
3.64 AIR CARRIER PASSENGER AIRPLANE EXPLOSIONS USING A 7 PERCENT
DISCOUNT RATE

(in Millions of 2007 Dollars)

  ----------- --------------- ------------- --------------- ------------- --------------- ----------- --------------- -------------
              TOTAL                         REACTION                      DEMAND                      DIRECT          

  YEAR        UNDIS-COUNTED   PRESENT VALUE UNDIS-COUNTED   PRESENT VALUE UNDIS-COUNTED   PRESENT     UNDIS-COUNTED   PRESENT VALUE
                                                                                          VALUE                       

                                                                                                                      

  2012        \$ 2,240        \$1,597       \$1,206         \$ 860        \$ 338          \$241       \$ 696          \$ 496

  2019        \$ 2,595        \$1,150       \$1,483         \$ 658        \$ 416          \$183       \$ 696          \$ 309

  2026        \$ 3,032        \$ 835        \$1,824         \$ 504        \$ 512          \$139       \$ 696          \$ 192

  2035        \$ 2,397        \$ 359        \$1,523         \$ 229        \$ 429          \$ 63       \$ 445          \$ 67

                                                                                                                      

  **TOTAL**   **\$10,264**    **\$3,941**   **\$6,036**     **\$2,251**   **\$1,695**     **\$626**   **\$2,533**     **\$1,064**
  ----------- --------------- ------------- --------------- ------------- --------------- ----------- --------------- -------------

### A.3.c. [Discounted Potential and Realized Quantified Total Benefits]{.underline}

As shown in Table C-3, applying the SFAR 88 effectiveness rate of 50
percent and the percentages of flight hours for each category to the
values in Table C-2 results in a present value of the potential benefits
(if all HCWT explosions were prevented) of \$1.970 billion for SFAR 88
and \$1.971 billion for the final rule. Of this \$1.971 billion
potential benefits for the final rule, airplanes with FRM will account
for (hence, prevent) \$1.562 billion while airplanes without FRM will
account for (and not prevent) \$409 million.

TABLE A-3

PRESENT VALUE OF THE POTANTIAL TOTAL BENEFITS FOR AIR CARRIER PASSENGER
AIRPLANES

(in Millions of Dollars)

  ----------- ------------- -------------- ------------- ------------- -----------
              PRESENT VALUE                                            
              POTENTIAL                                                
              TOTAL                                                    
              BENEFITS                                                 

                            ATTRIBUTABLE                               
                            TO                                         

                                           FINAL RULE                  

  YEAR        TOTAL         SFAR 88        TOTAL         WITH FRM      NO FRM

                                                                       

  2012        \$1,597       \$ 798         \$ 799        \$ 390        \$409

  2019        \$1,150       \$ 575         \$ 575        \$ 575        \$ 0

  2026        \$ 835        \$ 417         \$ 417        \$ 417        \$ 0

  2035        \$ 359        \$ 180         \$ 180        \$ 180        \$ 0

                                                                       

  **TOTAL**   **\$3,941**   **\$1,970**    **\$1,971**   **\$1,562**   **\$409**
  ----------- ------------- -------------- ------------- ------------- -----------

As shown in Table A-4, of the rule's total realized benefits of \$1.562
billion, \$625 million (40.0 percent of the total benefits) will be
attributable to retrofitted airplanes and \$937 million (60 percent of
the total benefits) will be attributable to production airplanes.

TABLE A-4

PRESENT VALUE OF THE **TOTAL BENEFITS** FOR AIR CARRIER PASSENGER
AIRPLANES BY FRM INSTALLATION TYPE

(in Millions of Dollars)

  -------------------- ---------------- ---------------- -----------------
  YEAR                 FRM TOTAL        RETROFIT         PRODUCTION

                                                         

  2012                 \$ 390           \$207            \$183

  2019                 \$ 575           \$310            \$265

  2026                 \$ 417           \$108            \$309

  2035                 \$ 180           \$ 0             \$180

                                                         

  **TOTAL**            **\$1,562**      **\$625**        **\$937**

  **PERCENT OF TOTAL**                  **40.0%**        **59.9%**
  -------------------- ---------------- ---------------- -----------------

As shown in Table A-5, of the potential present value total reaction
benefits of \$1.126 billion, \$906 million (80.5 percent) will be
realized by airplanes with FRM and \$220 million (19.5 percent) will not
be realized because those hours will be flown by airplanes without FRM.
Of the \$906 million in realized reaction benefits, \$354 million (39
percent) will be realized by retrofitted airplanes and \$552 million (61
percent) will be realized by production airplanes.

TABLE A-5

PRESENT VALUE OF THE POTENTIAL AND REALIZED **REACTION BENEFITS** FOR
AIR CARRIER PASSENGER AIRPLANES BY FRM INSTALLATION TYPE

(in Millions of Dollars)

  ------------- ------------- ----------- ----------- ------------ -----------
                PRESENT VALUE                                      
                (7 %)                                              

                              REALIZED                             
                              WITH FRM                             

  YEAR          POTENTIAL     TOTAL       RETROFIT    PRODUCTION   NO FRM

                                                                   

  2012          \$ 430        \$210       \$112       \$ 98        \$220

  2019          \$ 329        \$329       \$177       \$152        \$ 0

  2026          \$ 252        \$252       \$ 65       \$187        \$ 0

  2035          \$ 115        \$115       \$ 0        \$115        \$ 0

                                                                   

  **TOTAL**     **\$1,126**   **\$906**   **\$354**   **\$552**    **\$220**

  **PERCENT OF                **80.5%**   **31.4%**   **49.1%**    **19.5%**
  POTENTIAL**                                                      

  **PERCENT OF                            **39.0%**   **61.0%**    
  REALIZED**                                                       
  ------------- ------------- ----------- ----------- ------------ -----------

### 

## a.4. BENEFIT-COST ANALYSIS

As shown in Table C-6, the rule's total quantified benefits have a
present value of \$1.562 billion, all of which are related to a
prevented air carrier passenger airplane explosion. Of the \$1.562
billion, \$625 million is attributable to air carrier retrofitted
passenger airplanes and \$957 million is attributable to air carrier
production passenger airplanes. The rule's present value of the total
cost is \$986 million, of which \$937 million will be incurred by air
carrier passenger airplane operators. Of this \$937 million, \$423
million will be incurred by operators of air carrier retrofitted
passenger airplanes and \$514 million will be incurred by operators of
air carrier production passenger airplanes.

The rule's total benefits have a present value that is \$581 million
greater than its total present value costs. For air carrier passenger
airplanes, the present value benefits are \$630 million greater than its
total present value costs.

The overall benefit-cost ratio for the final rule is 1.59. The overall
benefit-cost ratio for air carrier passenger airplanes is 1.68. It is
1.48 for air carrier retrofitted passenger airplanes and 1.83 for air
carrier production airplanes. The cost benefit ratio is lower for
retrofitted airplanes because it is more expensive to retrofit FTI on an
airplane than it is to install it on a production airplane. Further, all
production airplanes will fly 25 years whereas retrofitted airplanes
will fly fewer than 25 years after being retrofitted.

TABLE A-6

TOTAL PRESENT VALUE BENEFITS AND COSTS

(in Millions of 2007 Dollars)

  ----------------------- ------------- ------------- ----------- --------------
                                        PRESENT VALUE             
                                        (7%)                      

  TYPE OF OPERATION       NUMBER OF     BENEFITS      COSTS       BENEFIT/COST
                          PREVENTED                               RATIO
                          ACCIDENTS                               

                                                                  

  **AIR CARRIER                                                   
  PASSENGER**                                                     

  RETROFITTED             0.52          \$ 625        \$421       1.48

  PRODUCTION              1.00          \$ 937        \$511       1.83

  **TOTAL**               **1.52**      **\$1,562**   **\$932**   **1.68**

                                                                  

  **AUXILIARY TANKS**     **0**         **\$0**       **\<\$1**   

  **AIR CARRIER CARGO**   **0.03**      **\<\$0.1**   **\$ 36**   

  **PART 91**                                                     

  RETROFITTED             \<.0025                     \$ 11       

  PRODUCTION              \<.0025                     \$ 2        

  **TOTAL**               **0.00375**   **\<\$0.1**   **\$ 13**   

                                                                  

  **GRAND TOTAL**         **1.55**      **\$1,562**   **\$981**   **1.59**
  ----------------------- ------------- ------------- ----------- --------------

As shown in Table A-7, the prevented costs to society from a reaction
mistaking a terrorist threat for a HCWT explosion is \$906 million, the
prevented loss of aviation demand is \$273 million and the direct
benefits from the prevented deaths and property losses are \$384
million. Thus, 58.0 percent of the benefits arise from preventing
mistaken reactions, 17.5 percent arise from preventing the loss in
overall demand for air travel resulting from HCWT explosions, and 24.6
percent arise from preventing the direct loss of life and property from
the HCWT explosions.

TABLE A-7

PRESENT VALUE OF TOTAL BENEFITS BY SOURCE OF BENEFITS

(in Millions of 2007 Dollars)

  -------------------- ------------- ------------ -------------- ------------
                       TOTAL         REACTION     DEMAND         DIRECT

  AIR CARRIER                                                    

  RETROFITTED          \$ 605        \$354        \$100          \$151

  PRODUCTION           \$ 958        \$552        \$173          \$233

                                                                 

  **TOTAL**            **\$1,563**   **\$906**    **\$273**      **\$384**

  **PERCENT OF TOTAL**               **58.0%**    **17.5%**      **24.6%**
  -------------------- ------------- ------------ -------------- ------------

#  

## 

## **APPENDIX B:** 

## **SENSITIVITY ANALYSIS OF BENEFITS**

## INTRODUCTION

This Appendix reports the following five alternate estimated benefits
using \$3 million, \$5.5 million, and \$8 million for the value of a
prevented fatality and 3 percent and 7 percent discount rates:

Section A . Value of a prevented fatality: \$5.5 million

Discount rate: 3 percent

Section B . Value of a prevented fatality: \$3 million

Discount rate: 7 percent

Section C . Value of a prevented fatality: \$3 million

Discount rate: 3 percent

Section D . Value of a prevented fatality: \$8 million

Discount rate: 7 percent

Section E . Value of a prevented fatality: \$8 million

Discount rate: 3 percent

The methodology used in calculating these estimates follows the
methodology in Section 4 and is not repeated in the 5 sensitivity
analysis section.

## 

## SECTION A. estimated benefits using a \$5.5 MILLION VALUE FOR A PREVENTED FATALITY AND A 3 percent discount rate

###  A.1. Demand [Benefits]{.underline}

A 3 percent discount rate exactly offsets a 3 percent real economic
growth rate. Thus, the present value of a \$292 million demand impact in
2007 remains the same for every year.

### A.2. [Direct Benefits]{.underline}

As shown in Table A-1, we calculated the direct weighted average
benefits (based on an 80 percent probability of an in-flight explosion
and a 20 percent probability of an on-the-ground explosion) from an
average HCWT explosion using a \$5.5 million value for a prevented
fatality.

TABLE A-1

PRESENT VALUE OF THE **DIRECT BENEFITS** FROM PREVENTING AN AIR CARRIER
AIRPLANE EXPLOSION USING A \$5.5 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  -------------- --------------------------------------------------------
                 PRESENT VALUE

                 DISCOUNT RATE

  YEAR           3%

                 

  2007           \$696.123

  2008           \$675.848

  2009           \$656.163

  2010           \$637.051

  2011           \$618.496

  2012           \$600.482

  2013           \$582.992

  2014           \$566.012

  2015           \$549.526

  2016           \$533.520

  2017           \$517.981

  2018           \$502.894

  2019           \$488.247

  2020           \$474.026

  2021           \$460.219

  2022           \$446.815

  2023           \$433.801

  2024           \$421.166

  2025           \$408.899

  2026           \$396.989

  2027           \$385.426

  2028           \$374.200

  2029           \$363.301

  2030           \$352.720

  2031           \$342.446

  2032           \$332.472

  2033           \$322.789

  2034           \$313.387

  2035           \$304.259

  2036           \$295.397

  2037           \$286.793

  2038           \$278.440

  2039           \$270.330

  2040           \$262.457

  2041           \$254.812

  2042           \$247.391
  -------------- --------------------------------------------------------

### 

### A.3. [Total Benefits]{.underline} 

As shown in Table A-2, the present values of the potential total
benefits from preventing an air carrier passenger airplane explosion in
each of the years (2012, 2019, 2026, and 2035) in which a statistical
accident would occur will be \$2.748 billion, of which \$1.057 billion
will be from demand benefits, and \$1.691 billion will be from direct
benefits.

TABLE A-2

PRESENT VALUE OF THE **POTENTIAL TOTAL BENEFITS** FROM PREVENTING AIR
CARRIER HCWT PASSENGER AIRPLANE EXPLOSIONS USING A \$5.5 MILLION VALUE
OF A PREVENTED FATALITY AND A 3 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ------------- ------------------- ----------------- -------------------
                POTENTIAL BENEFITS                    

  YEAR          TOTAL               DEMAND            DIRECT

                                                      

  2012          \$ 893              \$ 292            \$ 601

  2019          \$ 780              \$ 292            \$ 488

  2026          \$ 689              \$ 292            \$ 397

  2035          \$ 386              \$ 181            \$ 205

                                                      

  **TOTAL**     **\$2,748**         **\$1,057**       **\$1,691**
  ------------- ------------------- ----------------- -------------------

As shown in Table A-3, applying the SFAR 88 effectiveness rate of 50
percent and the percentages of flight hours for each airplane category
presented in Table IV-14 to the total benefits in Table A-2 results in a
present value of the rule's potential benefits (if all HCWT explosions
were prevented) of \$1.374 billion for SFAR 88 and \$1.374 billion for
the final rule. Of this \$1.374 billion potential benefits for the final
rule, airplanes with FRM will account for \$1.141 billion while \$263
million will not be realized due to airplanes flying without FRM. Thus,
final rule total benefits will be \$1.141 billion.

TABLE A-3

POTENTIAL PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR
CARRIER PASSENGER AIRPLANES USING A \$5.5 MILLION VALUE OF A PREVENTED
FATALITY AND A 3 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ----------- ------------- -------------- ------------- ------------- -----------
              PRESENT VALUE                                            
              POTENTIAL                                                
              TOTAL                                                    
              BENEFITS                                                 

                            ATTRIBUTABLE                               
                            TO                                         

                                           FINAL RULE                  

  YEAR        TOTAL         SFAR 88        TOTAL         WITH FRM      NO FRM

                                                                       

  2012        \$ 893        \$ 446         \$ 447        \$ 214        \$263

  2019        \$ 780        \$ 390         \$ 390        \$ 390        \$ 0

  2026        \$ 689        \$ 345         \$ 344        \$ 344        \$ 0

  2035        \$ 386        \$ 193         \$ 193        \$ 193        \$ 0

                                                                       

  **TOTAL**   **\$2,748**   **\$1,374**    **\$1,374**   **\$1,141**   **\$263**
  ----------- ------------- -------------- ------------- ------------- -----------

As shown in Table A-4, of the final rule's total benefits of \$1.141
billion, \$412 million (36.1 percent of the total benefits) will be
attributable to retrofitted airplanes and \$729 million (63.9 percent of
the total benefits) will be attributable to production airplanes.

TABLE A-4

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$5.5 VALUE OF A PREVENTED FATALITY AND A 3
PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  --------------------- -------------- ----------------- -----------------
  YEAR                  FRM TOTAL      RETROFIT          PRODUCTION

                                                         

  2012                  \$ 214         \$114             \$100

  2019                  \$ 390         \$210             \$180

  2026                  \$ 344         \$ 89             \$255

  2035                  \$ 193         \$ 0              \$193

                                                         

  **TOTAL**             **\$1,141**    **\$412**         **\$729**

  **PERCENT OF TOTAL**                 **36.1%**         **63.9%**
  --------------------- -------------- ----------------- -----------------

As shown in Table A-5, of the final rule's demand benefits of \$452
million, \$153 million (33.9 percent of the total demand benefits) will
be attributable to retrofitted airplanes and \$299 million (66.1 percent
of the total demand benefits) will be attributable to production
airplanes.

TABLE A-5

PRESENT VALUE OF THE FINAL RULE **DEMAND BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$5.5 VALUE OF A PREVENTED FATALITY AND A 3
PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  --------------------- -------------- ----------------- -----------------
  YEAR                  FRM TOTAL      RETROFIT          PRODUCTION

                                                         

  2012                  \$ 69          \$ 37             \$ 32

  2019                  \$146          \$ 78             \$ 68

  2026                  \$146          \$ 38             \$108

  2035                  \$ 91          \$ 0              \$ 91

                                                         

  **TOTAL**             **\$452**      **\$153**         **\$299**

  **PERCENT OF TOTAL**                 **33.9%**         **66.1%**
  --------------------- -------------- ----------------- -----------------

As shown in Table A-6, multiplying the direct benefits in Table A-3 by
the percentages in Table IV-13, results in the present value of \$846
million for the potential direct benefits, of which \$688 million (81.3
percent) will be realized by airplanes with FRM and \$158 million (18.7
percent) will not be realized. Of the \$688 million in realized direct
benefits, \$256 million (37.2 percent) will be realized by retrofitted
airplanes and \$432 million (62.8 percent) will be realized by
production airplanes.

TABLE A-6

PRESENT VALUE OF THE FINAL RULE **DIRECT BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$5.5 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  ------------- ----------- ----------- ----------- ------------ -----------
                PRESENT                                          
                VALUE OF                                         
                DIRECT                                           
                BENEFITS                                         

                            WITH FRM                             NO FRM

  YEAR          TOTAL RULE  TOTAL       RETROFIT    PRODUCTION   

                                                                 

  2012          \$301       \$143       \$ 72       \$ 71        \$158

  2019          \$244       \$244       \$122       \$122        \$ 0

  2026          \$199       \$199       \$ 62       \$137        \$ 0

  2035          \$103       \$103       \$ 0        \$103        \$ 0

                                                                 

  **TOTAL**     **\$846**   **\$688**   **\$256**   **\$432**    **\$158**

  **PERCENT OF              **81.3%**                            **18.7%**
  POTENTIAL**                                                    

  **PERCENT OF                          **37.2%**   **62.8%**    
  REALIZED**                                                     
  ------------- ----------- ----------- ----------- ------------ -----------

### A.4. [Benefits by Manufacturer]{.underline}

As shown in Table A-7, Boeing airplanes will accumulate present value
benefits of \$664 million of which \$268 million will be attributable to
retrofitted airplanes and \$396 million will be attributable to
production airplanes. Airbus airplanes will accumulate present value
benefits of \$477 billion of which \$144 million will be attributable to
retrofitted airplanes and \$333 million will be attributable to
production airplanes.

TABLE A-7

**PRESENT VALUE OF THE FINAL RULE TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$5.5 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION AND BY
MANUFACTURER

(Numbers in Millions)

  ----------------- ----------------- -------------------- ----------------
  CATEGORY          TOTAL FLIGHT      PERCENTAGE OF FLIGHT TOTAL BENEFITS
                    HOURS             HOURS                

                                                           

  **RETROFITTED**   **104.3**         ** **                **\$412**

                                                            

  BOEING            67.9              65.10%               \$268

  AIRBUS            36.4              34.90%               \$144

                                                            

                                                            

  **PRODUCTION**    **199.3**         ** **                **\$729**

                                                            

  BOEING            108.3             54.34%               \$396

  AIRBUS            91                45.66%               \$333

                                                            

                                                            

  **TOTAL**         **303.6**         ** **                **\$1.141**

  BOEING            176.2             58.04%               \$ 664

  AIRBUS            127.4             41.96%               \$ 477
  ----------------- ----------------- -------------------- ----------------

## 

## SECTION B. 

## estimated benefits using a \$3 MILLION VALUE FOR A PREVENTED FATALITY AND A 7 PERCEMT DISCOUNT RATE

### 

### B.1. [Demand Benefits]{.underline}

As the demand benefits are not affected by the value of a prevented
fatality, they are the same as those presented in Table IV-6 .

### B.2. [Direct Benefits from Preventing an Air Carrier Passenger Airplane Explosion]{.underline}

### [B.2.a. An In-Flight Accident]{.underline} 

As shown in Table B-1, the "average" quantified direct benefits from
preventing an air carrier passenger airplane in-flight explosion using a
\$3 million value for a prevented fatality ranges from \$353 million to
\$1.239 billion.[^97]

TABLE B-1

DIRECT BENEFITS FROM PREVENTING AN AIR CARRIER PASSENGER AIRPLANE
IN-FLIGHT EXPLOSION USING A \$3 MILLION VALUE FOR A PREVENTED FATALITY
BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ ------------ ---------- --------------- ------------
  Model               Avg. Num.    Value of     Value of   Cost of         Total Cost
                      Fatalities   Fatalities   Airplane   Investigation   of Accident

                                                                           

  B-737-200           99           \$ 297       \$ 1       \$8             \$ 306

  B-737-Classic       110          \$ 330       \$ 15      \$8             \$ 353

  B-737-NG            123          \$ 369       \$ 30      \$8             \$ 407

  B-757               176          \$ 528       \$ 34      \$8             \$ 570

  B-767               224          \$ 672       \$ 50      \$8             \$ 730

  B-747-100/200/300   332          \$ 996       \$ 15      \$8             \$1,019

  B-747-400           372          \$1,116      \$ 85      \$8             \$1,209

  B-747-800           372          \$1,116      \$115      \$8             \$1,239

  B-777               290          \$ 870       \$100      \$8             \$ 978

  B-787               224          \$ 672       \$ 75      \$8             \$ 755

  A-300               224          \$ 672       \$ 34      \$8             \$ 714

  A-310               204          \$ 612       \$ 25      \$8             \$ 645

  A-320 Family        123          \$ 369       \$ 30      \$8             \$ 407

  A-330               290          \$ 870       \$ 85      \$8             \$ 963

  A-340               332          \$ 996       \$100      \$8             \$1,104

  A-350               224          \$ 672       \$ 75      \$8             \$ 755

  A-380               502          \$1,506      \$150      \$8             \$1,664
  ------------------- ------------ ------------ ---------- --------------- ------------

As shown in Table B-2, the average of the direct benefits weighted by
the number of flight hours and using a \$3 million value for a prevented
fatality is \$479 million.

TABLE B-2

WEIGHTED AVERAGE DIRECT BENEFITS FROM PREVENTING AN IN-FLIGHT AIR
CARRIER PASSENGER AIRPLANE EXPLOSION USING A \$3 MILLION VALUE FOR A
PREVENTED FATALITY BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ ---------------- ----------- ---------------
  Airplane Model      Total        Total Num.       Percent of  Weighted
                      Accident     Flight Hours     All Flight  Accident Cost
                      Cost         (2008-2043)      Hours       

                                                                

  B-737-200           \$ 306       0.643            0.18%       \$ 0.544

  B-737-Classic       \$ 353       14.782           4.08%       \$ 14.415

  B-737-NG            \$ 407       150.505          40.49%      \$164.789

  B-757               \$ 570       26.430           7.30%       \$ 41.618

  B-767               \$ 730       14.350           3.96%       \$ 28.938

  B-747-100/200/300   \$1,019      0.798            0.22%       \$ 2.248

  B-747-400           \$1,209      4.997            1.36%       \$ 16.499

  B-747-800           \$1,239      0.000            0.00%       \$ 0.000

  B-777               \$ 978       13.485           3.68%       \$ 35.978

  B-787               \$ 755       0.000            0.00%       \$ 0.000

  A-300               \$ 714       0.149            0.04%       \$ 0.294

  A-310               \$ 645       0.000            0.00%       \$ 0.000

  A-320 Family        \$ 407       134.776          36.36%      \$147.978

  A-330               \$ 963       4.413            1.21%       \$ 11.643

  A-340               \$1,104      0.000            0.00%       \$ 0.000

  A-350               \$ 755       1.976            0.52%       \$ 3.963

  A-380               \$1,664      2.210            0.59%       \$ 9.768

                                                                

  **TOTAL**                        **363.784**                  **\$478.676**
  ------------------- ------------ ---------------- ----------- ---------------

### B.2.b. [An On-The-Ground Accident]{.underline}

As shown in Table B-3, the direct benefits from preventing an
on-the-ground air carrier passenger airplane explosion range from \$49
million to \$234 million.[^98]

TABLE B-3

DIRECT BENEFITS FROM PREVENTING AN ON-THE-GROUND AIR CARRIER PASSENGER
AIRPLANE EXPLOSION USING A \$3 MILLION VALUE FOR A PREVENTED FATALITY BY
AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ ------------ ---------- --------------- ------------
  Model               Avg. Num.    Value of     Value of   Cost of         Total Cost
                      Fatalities   Fatalities   Airplane   Investigation   of Accident

                                                                           

  B-737-200           10           \$ 30        \$ 1       \$1             \$ 32

  B-737-Classic       11           \$ 33        \$ 15      \$1             \$ 49

  B-737-NG            12           \$ 36        \$ 30      \$1             \$ 67

  B-757               18           \$ 54        \$ 34      \$1             \$ 89

  B-767               22           \$ 66        \$ 50      \$1             \$117

  B-747-100/200/300   33           \$ 99        \$ 15      \$1             \$115

  B-747-400           37           \$111        \$ 85      \$1             \$197

  B-747-800           37           \$111        \$115      \$1             \$227

  B-777               29           \$ 87        \$100      \$1             \$188

  B-787               22           \$ 66        \$ 75      \$1             \$142

  A-300               22           \$ 66        \$ 34      \$1             \$101

  A-310               20           \$ 60        \$ 25      \$1             \$ 86

  A-320 Family        12           \$ 36        \$ 30      \$1             \$ 67

  A-330               29           \$ 87        \$ 85      \$1             \$173

  A-340               33           \$ 99        \$100      \$1             \$200

  A-350               22           \$ 66        \$ 75      \$1             \$142

  A-380               50           \$150        \$150      \$1             \$301
  ------------------- ------------ ------------ ---------- --------------- ------------

As shown in Table B-4, the average of the direct benefits weighted by
the number of flight hours from preventing an on-the-ground air carrier
passenger airplane explosion will be \$79 million.

TABLE B-4

WEIGHTED AVERAGE DIRECT BENEFITS FROM PREVENTING AN ON-THE-GROUND AIR
CARRIER PASSENGER AIRPLANE EXPLOSION USING A \$3 MILLION VALUE FOR A
PREVENTED FATALITY BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------- ------------- -------------- --------------
  Model               Total         Total Num.    Percent of All Weighted
                      Accident Cost Flight Hours  Flight Hours   Accident Cost

                                                                 

  B-737-200           \$ 32         0.643         0.18%          \$ 0.057

  B-737-Classic       \$ 49         14.782        4.08%          \$ 2.001

  B-737-NG            \$ 67         150.505       40.49%         \$27.128

  B-757               \$ 89         26.430        7.30%          \$ 6.498

  B-767               \$117         14.350        3.96%          \$ 4.638

  B-747-100/200/300   \$115         0.798         0.22%          \$ 0.254

  B-747-400           \$197         4.997         1.36%          \$ 2.688

  B-747-800           \$227         0.000         0.00%          \$ 0.000

  B-777               \$188         13.485        3.68%          \$ 6.916

  B-787               \$142         0.000         0.00%          \$ 0.000

  A-300               \$101         0.149         0.04%          \$ 0.042

  A-310               \$ 86         0.000         0.00%          \$ 0.000

  A-320 Family        \$ 67         134.776       36.36%         \$24.360

  A-330               \$173         4.413         1.21%          \$ 2.092

  A-340               \$200         0.000         0.00%          \$ 0.000

  A-350               \$142         1.976         0.52%          \$ 0.745

  A-380               \$301         2.210         0.59%          \$ 1.767

                                                                 

  **TOTAL**                         **363.784**                  **\$79.185**
  ------------------- ------------- ------------- -------------- --------------

### B.2.c. [Direct Benefits Weighted by the Probabilities of an Air Carrier Passenger Airplane Explosion Happening In-Flight and On the Ground]{.underline} 

As shown in Table B-5, the weighted average value of the expected direct
benefits from preventing an air carrier passenger explosion is \$399
million in 2007 (80 percent times \$478.676 million plus 20 percent
times \$79.185 million). Table B-5 also contains the present values of
these benefits for each year through 2042 using a 7 percent discount
rate.

TABLE B-5

PRESENT VALUE OF THE WEIGHTED AVERAGE **DIRECT BENEFITS** FROM
PREVENTING AN AIR CARRIER PASSENGER AIRPLANE EXPLOSION USING A \$3
MILLION VALUE FOR A PREVENTED FATALITY AND A 7 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ---------------- ------------------------------------------------------
  YEAR             PRESENT VALUE

                   7 % DISCOUNT RATE

                   

  2007             \$398.778

  2008             \$372.690

  2009             \$348.308

  2010             \$325.522

  2011             \$304.226

  2012             \$284.323

  2013             \$265.723

  2014             \$248.339

  2015             \$232.092

  2016             \$216.909

  2017             \$202.718

  2018             \$189.456

  2019             \$177.062

  2020             \$165.479

  2021             \$154.653

  2022             \$144.535

  2023             \$135.080

  2024             \$126.243

  2025             \$117.984

  2026             \$110.265

  2027             \$103.052

  2028             \$96.310

  2029             \$90.009

  2030             \$84.121

  2031             \$78.618

  2032             \$73.474

  2033             \$68.668

  2034             \$64.175

  2035             \$59.977

  2036             \$56.053

  2037             \$52.386

  2038             \$48.959

  2039             \$45.756

  2040             \$42.763

  2041             \$39.965

  2042             \$37.351
  ---------------- ------------------------------------------------------

### B.3. [Potential Benefits from Preventing Air Carrier Passenger Airplane Explosions]{.underline}

In Table B-6, we provide the present values of preventing an air carrier
passenger airplane explosion in each of the years 2012, 2019, 2026, and
2035 from Tables IV-16 and B-5. The present value of the potential total
benefits will be \$1.231 billion of which \$622 million will be demand
losses and \$609 million will be direct losses.

TABLE B-6

PRESENT VALUE OF THE POTENTIAL BENEFITS FROM PREVENTING AIR CARRIER HCWT
PASSENGER AIRPLANE EXPLOSIONS USING A \$3 MILLION VALUE FOR A PREVENTED
FATALITY AND A 7 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  -------------- ------------------- ----------------- -------------------
  YEAR           TOTAL               DEMAND            DIRECT

                                                       

  2012           \$ 524              \$240             \$284

  2019           \$ 359              \$182             \$177

  2026           \$ 248              \$138             \$110

  2035           \$ 100              \$ 62             \$ 38

                                                       

  **TOTAL**      **\$1,231**         **\$622**         **\$609**
  -------------- ------------------- ----------------- -------------------

### B.4. [Discounted Potential and Realized Quantified Benefits]{.underline}

As shown in Table B-7, applying the SFAR 88 effectiveness rate of 50
percent and the percentages of flight hours for each airplane category
presented in Table IV-14 to the total benefits in Table B-6 results in a
present value of the final rule's potential benefits (if all HCWT
explosions were prevented) will be \$605 million for SFAR 88 and \$606
million for the final rule. Of this \$606 million potential benefits for
the final rule, airplanes with FRM will account for \$469 million while
\$137 million will not be realized due to airplanes flying without FRM.
Thus, the present value of the final rule total benefits will be \$469
million.

TABLE B-7

PRESENT VALUE OF THE **POTENTIAL TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$3 MILLION VALUE FOR A PREVENTED FATALITY
AND A 7 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ----------- ------------- -------------- ----------- ----------- -----------
              PRESENT VALUE                                        
              POTENTIAL                                            
              TOTAL                                                
              BENEFITS                                             

                            ATTRIBUTABLE                           
                            TO                                     

                                           FINAL RULE              

  YEAR        TOTAL         SFAR 88        TOTAL       WITH FRM    NO FRM

                                                                   

  2012        \$ 524        \$262          \$262       \$125       \$137

  2019        \$ 359        \$169          \$170       \$170       \$ 0

  2026        \$ 248        \$124          \$124       \$124       \$ 0

  2035        \$ 100        \$ 50          \$ 50       \$ 50       \$ 0

                                                                   

  **TOTAL**   **\$1,231**   **\$605**      **\$606**   **\$469**   **\$137**
  ----------- ------------- -------------- ----------- ----------- -----------

As shown in Table B-8, of the final rule's total benefits of \$469
million, \$190 million (40.6 percent of the total benefits) will be
attributable to retrofitted airplanes and \$279 million (59.4 percent of
the total benefits) will be attributable to production airplanes.

TABLE B-8

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$3 MILLION VALUE FOR A PREVENTED FATALITY
AND A 7 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  -------------------- ---------------- --------------- ------------------
  YEAR                 FRM TOTAL        RETROFIT        PRODUCTION

                                                        

  2012                 \$125            \$ 67           \$ 58

  2019                 \$170            \$ 92           \$ 78

  2026                 \$124            \$ 32           \$ 92

  2035                 \$ 50            \$ 0            \$ 50

                                                        

  **TOTAL**            **\$469**        **\$190**       **\$279**

  **PERCENT OF TOTAL**                  **40.6%**       **59.4%**
  -------------------- ---------------- --------------- ------------------

As shown in Table B-9, which replicates Table IV-16, the total potential
demand benefits will be \$311 million, of which \$251 million (80.7
percent) will be realized by airplanes with FRM and \$61 million (19.6
percent) will occur to airplanes without FRM. Of the \$251 million in
realized demand benefits, \$99 million (39.5 percent) will be realized
by retrofitted airplanes and \$151 million (60.9 percent) will be
realized by production airplanes.

TABLE B-9

PRESENT VALUE OF THE FINAL RULE **DEMAND BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$3 MILLION VALUE FOR A PREVENTED FATALITY
AND A 7 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  ------------- ----------- ----------- ----------- ------------ -----------
                PRESENT                                          
                VALUE (7 %)                                      

                            REALIZED                             
                            WITH FRM                             

  YEAR          POTENTIAL   TOTAL       RETROFIT    PRODUCTION   NO FRM

                                                                 

  2012          \$120       \$ 59       \$32        \$ 27        \$61

  2019          \$ 91       \$ 91       \$49        \$ 42        \$ 0

  2026          \$ 69       \$ 69       \$18.       \$ 51        \$ 0

  2035          \$ 31       \$ 31       \$ 0        \$ 31        \$ 0

                                                                 

  **TOTAL**     **\$311**   **\$250**   **\$99**    **\$151**    **\$61**

  **PERCENT OF              **80.4%**                            **19.6%**
  POTENTIAL**                                                    

  **PERCENT OF                          **39.5%**   **60.5%**    
  REALIZED**                                                     
  ------------- ----------- ----------- ----------- ------------ -----------

Finally, as shown in Table B-10, the present value of the potential
direct benefits will be \$305 million, of which \$231 million (75.7
percent) will be realized by airplanes with FRM and \$75 million (24.3
percent) would occur to airplanes without FRM. Of the \$231 million in
realized direct benefits, \$96 million will be attributable to
retrofitted airplanes and \$135 million will be attributable to
production airplanes.

TABLE B-10

PRESENT VALUE OF THE FINAL RULE **DIRECT BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$3 MILLION VALUE FOR A PREVENTED FATALITY
AND A 7 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  ------------------ ----------- ----------- ----------- ------------- -----------
                     PRESENT                                           
                     VALUE                                             

                                 REALIZED                              
                                 WITH FRM                              

  YEAR               POTENTIAL   TOTAL       RETROFIT    PRODUCTION    NO FRM

                                                                       

  2012               \$142       \$ 67       \$34        \$ 33         \$75

  2019               \$ 89       \$ 90       \$45        \$ 45         \$ 0

  2026               \$ 55       \$ 55       \$17        \$ 38         \$ 0

  2035               \$ 19       \$ 19       \$ 0        \$ 19         \$ 0

                                                                       

  **TOTAL**          **\$305**   **\$231**   **\$96**    **\$135**     **\$75**

  **PERCENT OF                   **75.7%**                             **24.3%**
  POTENTIAL**                                                          

  **PERCENT OF                               **41.5%**   **58.5%**     
  REALIZED**                                                           
  ------------------ ----------- ----------- ----------- ------------- -----------

### B.5. [Benefits by Manufacturer]{.underline}

As shown in Table B-11, Boeing airplanes will accumulate present value
benefits of \$279 million of which \$124 million will be attributable to
retrofitted airplanes and \$152 million will be attributable to
production airplanes. Airbus airplanes will accumulate present value
benefits of \$194 million of which \$66 million will be attributable to
retrofitted airplanes and \$127 million will be attributable to
production airplanes.

TABLE B-11

PRESENT VALUE OF THE FINAL RULE TOTAL BENEFITS FOR AIR CARRIER PASSENGER
AIRPLANES BY TYPE OF FRM INSTALLATION AND BY MANUFACTURER USING A \$3
MILLION VALUE FOR A PREVENTED FATALITY AND A 7 PERCENT DISCOUNT RATE

(Numbers in 2007 Millions)

  ----------------- ----------------- -------------------- ----------------
  CATEGORY          TOTAL FLIGHT      PERCENTAGE OF FLIGHT TOTAL BENEFITS
                    HOURS             HOURS                

                                                           

  **RETROFITTED**   **104.3**         ** **                **\$190**

                                                            

  BOEING            67.9              65.10%               \$124

  AIRBUS            36.4              34.90%               \$ 66

                                                            

                                                            

  **PRODUCTION**    **199.3**         ** **                **\$279**

                                                            

  BOEING            108.3             54.34%               \$152

  AIRBUS            91                45.66%               \$127

                                                            

                                                            

  **TOTAL**         **303.6**         ** **                **\$469**

  BOEING            176.2             58.04%               \$275

  AIRBUS            127.4             41.96%               \$194
  ----------------- ----------------- -------------------- ----------------

## 

## SECTION C. 

## estimated benefits using a \$3 MILLION VALUE FOR A PREVENTED FATALITY AND A 3 percent discount rate

### 

### C.1. [Demand Benefits]{.underline}

A 3 percent discount rate exactly offsets a 3 percent real economic
growth rate. Thus, the present values of a \$292 million for the demand
impact in 2007 remains the same for every year.

### C.2. [Direct Benefits]{.underline}

As shown in Table C-1, we calculated the direct weighted average
benefits (based on an 80 percent probability of an in-flight explosion
and a 20 percent probability of an on-the-ground explosion) from an
average HCWT explosion using a \$3 million value for a prevented
fatality.

TABLE C-1

PRESENT VALUE OF THE **DIRECT BENEFITS** FROM PREVENTING AN AIR CARRIER
PASSENGER AIRPLANE EXPLOSION USING A \$3 MILLION VALUE FOR A PREVENTED
FATALITY AND A 3 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ---------------- ------------------------------------------------------
  YEAR             PRESENT VALUE

                   DISCOUNT RATE

                   3%

                   

  2007             \$398.778

  2008             \$387.163

  2009             \$375.887

  2010             \$364.938

  2011             \$354.309

  2012             \$343.989

  2013             \$333.970

  2014             \$324.243

  2015             \$314.799

  2016             \$305.630

  2017             \$296.728

  2018             \$288.086

  2019             \$279.695

  2020             \$271.548

  2021             \$263.639

  2022             \$255.960

  2023             \$248.505

  2024             \$241.267

  2025             \$234.240

  2026             \$227.418

  2027             \$220.794

  2028             \$214.363

  2029             \$208.119

  2030             \$202.058

  2031             \$196.172

  2032             \$190.459

  2033             \$184.911

  2034             \$179.525

  2035             \$174.297

  2036             \$169.220

  2037             \$164.291

  2038             \$159.506

  2039             \$154.860

  2040             \$150.350

  2041             \$145.971

  2042             \$141.719
  ---------------- ------------------------------------------------------

### C.3. [Total Benefits]{.underline} 

As shown in Table C-2, the present values of the potential total
benefits from preventing an air carrier passenger airplane explosion in
each of the years (2012, 2019, 2026, and 2035) in which a statistical
accident would occur will be \$2.016 billion, of which \$1.057 billion
will be from demand benefits and \$959 million will be from direct
benefits.

TABLE C-2

PRESENT VALUE OF THE **POTENTIAL TOTAL BENEFITS** FROM PREVENTING AIR
CARRIER HCWT PASSENGER AIRPLANE EXPLOSIONS USING A \$3 MILLION VALUE FOR
A PREVENTED FATALITY AND A 3 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  --------------- ----------------- ------------------ ------------------
                  POTENTIAL                            
                  BENEFITS                             

  YEAR            TOTAL             DEMAND             DIRECT

                                                       

  2012            \$ 636            \$ 292             \$344

  2019            \$ 572            \$ 292             \$280

  2026            \$ 519            \$ 292             \$227

  2035            \$ 289            \$ 181             \$108

                                                       

  **TOTAL**       **\$2,016**       **\$1,057**        **\$959**
  --------------- ----------------- ------------------ ------------------

As shown in Table C-3, applying the SFAR 88 effectiveness rate of 50
percent and the percentages of flight hours for each airplane category
in Table IV-16 to the total benefits in Table C-2 results in a present
value of the rule's potential benefits (if all HCWT explosions were
prevented) of \$1.008 billion for SFAR 88 and \$1.008 billion for the
final rule. Of this \$1.008 billion potential benefits for the final
rule, airplanes with FRM will account for \$842 million while \$166
million will not be realized due to airplanes flying without FRM. Thus,
the present value of the final rule total benefits will be \$842
million.

TABLE C-3

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$3 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ----------- ------------- -------------- ------------- ----------- -----------
              PRESENT VALUE                                          
              POTENTIAL                                              
              TOTAL                                                  
              BENEFITS                                               

                            ATTRIBUTABLE                             
                            TO                                       

                                           FINAL RULE                

  YEAR        TOTAL         SFAR 88        TOTAL         WITH FRM    NO FRM

                                                                     

  2012        \$ 636        \$ 318         \$ 318        \$152       \$166

  2019        \$ 572        \$ 286         \$ 286        \$286       \$ 0

  2026        \$ 519        \$ 259         \$ 260        \$260       \$ 0

  2035        \$ 289        \$ 145         \$ 144        \$144       \$ 0

                                                                     

  **TOTAL**   **\$2,016**   **\$1,008**    **\$1,008**   **\$842**   **\$166**
  ----------- ------------- -------------- ------------- ----------- -----------

As shown in Table C-4, of the final rule's total benefits of \$842
million, \$304 million (36.1 percent of the total benefits) will be
attributable to retrofitted airplanes and \$528 million (63.9 percent of
the total benefits will be attributable to production airplanes.

TABLE C-4

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$3 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION (in Millions
of 2007 Dollars)

  -------------------- ---------------- ---------------- -----------------
  YEAR                 FRM TOTAL        RETROFIT         PRODUCTION

                                                         

  2012                 \$152            \$ 82            \$ 70

  2019                 \$286            \$154            \$132

  2026                 \$260            \$ 68            \$192

  2035                 \$144            \$ 0             \$144

                                                         

  **TOTAL**            **\$842**        **\$304**        **\$538**

  **PERCENT OF TOTAL**                  **36.1%**        **63.9%**
  -------------------- ---------------- ---------------- -----------------

As shown in Table C-5, of the final rule's demand benefits of \$452
million, \$153 million (33.9 percent of the total benefits) will be
attributable to retrofitted airplanes and \$299million (66.1 percent of
the total benefits will be attributable to production airplanes.

TABLE C-5

PRESENT VALUE OF THE FINAL RULE **DEMAND BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$3 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  -------------------- ---------------- ---------------- -----------------
  YEAR                 FRM TOTAL        RETROFIT         PRODUCTION

                                                         

  2012                 \$ 69            \$ 37            \$ 32

  2019                 \$146            \$ 78            \$ 68

  2026                 \$146            \$ 38            \$108

  2035                 \$ 91            \$ 0             \$ 91

                                                         

  **TOTAL**            **\$452**        **\$153**        **\$299**

  **PERCENT OF TOTAL**                  **33.9%**        **66.1%**
  -------------------- ---------------- ---------------- -----------------

As shown in Table C-6, multiplying the direct benefits in Table C-2 by
the percentages in Table IV-14, results in the present value of the
potential direct benefits of \$480 million, of which \$392 million (81.7
percent) will be realized by airplanes with FRM and \$88 million (18.3
percent) will not be realized due to airplanes flying without FRM. Of
the \$392 million in realized direct benefits, \$149 million (38.1
percent) will be realized by retrofitted airplanes and \$243 million
(61.9 percent) will be realized by production airplanes.

TABLE C-6

PRESENT VALUE OF THE FINAL RULE **DIRECT BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$3 MILLION FOR THE VALUE OF A PREVENTED
FATALITY AND A 3 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  ------------- ----------- ----------- ----------- ------------ -----------
                PRESENT                                          
                VALUE OF                                         
                DIRECT                                           
                BENEFITS                                         

                            WITH FRM                             NO FRM

  YEAR          TOTAL RULE  TOTAL       RETROFIT    PRODUCTION   

                                                                 

  2012          \$172       \$ 84       \$ 45       \$ 39        \$88

  2019          \$140       \$140       \$ 75       \$ 65        \$ 0

  2026          \$114       \$114       \$ 29       \$ 85        \$ 0

  2035          \$ 54       \$ 54       \$ 0        \$ 54        \$ 0

                                                                 

  **TOTAL**     **\$480**   **\$392**   **\$149**   **\$243**    **\$88**

  **PERCENT OF              **81.7%**                            **18.3%**
  POTENTIAL**                                                    

  **PERCENT OF                          **38.1%**   **61.9%**    
  REALIZED**                                                     
  ------------- ----------- ----------- ----------- ------------ -----------

### C.4. [Benefits by Manufacturer]{.underline}

As shown in Table C-7, Boeing airplanes will accumulate present value
benefits of \$492 million of which \$198 million will be attributable to
retrofitted airplanes and \$294 million will be attributable to
production airplanes. Airbus airplanes will accumulate present value
benefits of \$353 million of which \$106 million will be attributable to
retrofitted airplanes and \$247 million will be attributable to
production airplanes.

TABLE C-7

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING \$3 MILLION FOR A PREVENTED FATALITY AND A 3
PERCENT DISCOUNT RATE BY FRM INSTALLATION AND BY MANUFACTURER

(Numbers in Millions)

  ----------------- ----------------- -------------------- ----------------
  CATEGORY          TOTAL FLIGHT      PERCENTAGE OF FLIGHT TOTAL BENEFITS
                    HOURS             HOURS                

                                                           

  **RETROFITTED**   **104.3**         ** **                **\$304**

                                                            

  BOEING            67.9              65.10%               \$198

  AIRBUS            36.4              34.90%               \$106

                                                            

                                                            

  **PRODUCTION**    **199.3**         ** **                **\$541**

                                                            

  BOEING            108.3             54.34%               \$294

  AIRBUS            91                45.66%               \$247

                                                            

                                                            

  **TOTAL**         **303.6**         ** **                **\$845**

  BOEING            176.2             58.04%               \$492

  AIRBUS            127.4             41.96%               \$353
  ----------------- ----------------- -------------------- ----------------

## 

## SECTION D. 

## estimated benefits using aN \$8 MILLION VALUE FOR A PREVENTED FATALITY AND A 7 percent discount rate

### 

### D.1. [Demand Benefits]{.underline}

As the demand benefits are not affected by the value of a prevented
fatality, they are the same as those presented in Table IV-6 .

### [D.2. Direct Benefits from Preventing an Air Carrier Passenger Airplane Explosion]{.underline} 

### [D.2.a. In-Flight Accident]{.underline} 

As shown in Table D-1, the "average" quantified benefits from preventing
an air carrier passenger airplane in-flight explosion using an \$8
million value for a prevented fatality range from \$900 million to \$3.1
billion.[^99]

TABLE D-1

DIRECT BENEFITS FROM PREVENTING AN AIR CARRIER PASSENGER AIRPLANE
IN-FLIGHT EXPLOSION USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY
BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ ------------ ---------- --------------- ------------
  Model               Avg. Num.    Value of     Value of   Cost of         Total Cost
                      Fatalities   Fatalities   Airplane   Investigation   of Accident

                                                                           

  B-737-200           99           \$ 792       \$ 1       \$8             \$ 801

  B-737-Classic       110          \$ 880       \$ 15      \$8             \$ 903

  B-737-NG            123          \$ 984       \$ 30      \$8             \$1,022

  B-757               176          \$1,408      \$ 34      \$8             \$1,450

  B-767               224          \$1,792      \$ 50      \$8             \$1,850

  B-747-100/200/300   332          \$2,656      \$ 15      \$8             \$2,679

  B-747-400           372          \$2,976      \$ 85      \$8             \$3,069

  B-747-800           372          \$2,976      \$115      \$8             \$3,099

  B-777               290          \$2,320      \$100      \$8             \$2,428

  B-787               224          \$1,792      \$ 75      \$8             \$1,875

  A-300               224          \$1,792      \$ 34      \$8             \$1,834

  A-310               204          \$1,632      \$ 25      \$8             \$1,665

  A-320 Family        123          \$ 984       \$ 30      \$8             \$1,022

  A-330               290          \$2,320      \$ 85      \$8             \$2,413

  A-340               332          \$2,656      \$100      \$8             \$2,764

  A-350               224          \$1,792      \$ 75      \$8             \$1,875

  A-380               502          \$4,016      \$150      \$8             \$4,174
  ------------------- ------------ ------------ ---------- --------------- ------------

As shown in Table D-2, the weighted average of the benefits using an \$8
million value for a prevented fatality is \$1.2 billion.

TABLE D-2

WEIGHTED AVERAGE DIRECT BENEFITS FROM PREVENTING AN IN-FLIGHT AIR
CARRIER PASSENGER AIRPLANE EXPLOSION USING AN \$8 MILLION VALUE FOR A
PREVENTED FATALITY BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ --------------- ------------- -------------
  Airplane Model      Total        Total Num.      Percent of    Weighted
                      Accident     Flight Hours    All Flight    Accident Cost
                      Cost         (2008-2043)     Hours         

                                                                 

  B-737-200           \$ 801       0.643           0.18%         \$ 1.442

  B-737-Classic       \$ 903       14.782          4.08%         \$ 36.842

  B-737-NG            \$1,022      150.505         40.49%        \$ 413.808

  B-757               \$1,450      26.430          7.30%         \$ 105.850

  B-767               \$1,850      14.350          3.96%         \$ 73.260

  B-747-100/200/300   \$2,679      0.798           0.22%         \$ 5.894

  B-747-400           \$3,069      4.997           1.36%         \$ 41.738

  B-747-800           \$3,099      0.000           0.00%         \$ 0.000

  B-777               \$2,428      13.485          3.68%         \$ 89.350

  B-787               \$1,875      0.000           0.00%         \$ 0.000

  A-300               \$1,834      0.149           0.04%         \$ 0.734

  A-310               \$1,665      0.000           0.00%         \$ 0.000

  A-320 Family        \$1,022      134.776         36.36%        \$371.599

  A-330               \$2,413      4.413           1.21%         \$ 29.197

  A-340               \$2,764      0.000           0.00%         \$ 0.000

  A-350               \$1,875      1.976           0.52%         \$ 9.750

  A-380               \$4,174      2.210           0.59%         \$ 24.627

                                                                 

  **TOTAL**                        **363.784**                   **\$1,204**
  ------------------- ------------ --------------- ------------- -------------

### D.2.b. [An On-The-Ground Accident]{.underline}

As shown in Table D-3 the benefits from preventing an on-the-ground air
carrier passenger airplane explosion range from \$104 million to \$412
million.[^100]

TABLE D-3

DIRECT BENEFITS FROM PREVENTING AN ON-THE-GROUND AIR CARRIER PASSENGER
AIRPLANE EXPLOSION USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY
BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------ ------------ ---------- --------------- ------------
  Model               Avg. Num.    Value of     Value of   Cost of         Total Cost
                      Fatalities   Fatalities   Airplane   Investigation   of Accident

                                                                           

  B-737-200           10           \$80         \$ 1       \$1             \$ 82

  B-737-Classic       11           \$88         \$ 15      \$1             \$104

  B-737-NG            12           \$96         \$ 30      \$1             \$127

  B-757               18           \$144        \$ 34      \$1             \$179

  B-767               22           \$176        \$ 50      \$1             \$227

  B-747-100/200/300   33           \$264        \$ 15      \$1             \$280

  B-747-400           37           \$296        \$ 85      \$1             \$382

  B-747-800           37           \$296        \$115      \$1             \$412

  B-777               29           \$232        \$100      \$1             \$333

  B-787               22           \$176        \$ 75      \$1             \$252

  A-300               22           \$176        \$ 34      \$1             \$211

  A-310               20           \$160        \$ 25      \$1             \$186

  A-320 Family        12           \$96         \$ 30      \$1             \$127

  A-330               29           \$232        \$ 85      \$1             \$318

  A-340               33           \$264        \$100      \$1             \$365

  A-350               22           \$176        \$ 75      \$1             \$252

  A-380               50           \$400        \$150      \$1             \$551
  ------------------- ------------ ------------ ---------- --------------- ------------

As shown in Table D-4, the average of the direct benefits weighted by
the number of flight hours from preventing an on-the-ground air carrier
passenger airplane explosion will be \$151 million.

TABLE D-4

WEIGHTED AVERAGE DIRECT BENEFITS FROM PREVENTING AN ON-THE-GROUND AIR
CARRIER PASSENGER AIRPLANE EXPLOSION USING AN \$8 MILLION VALUE FOR A
PREVENTED FATALITY BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ------------- ------------- -------------- ---------------
  Model               Total         Total Num.    Percent of All Weighted
                      Accident Cost Flight Hours  Flight Hours   Accident Cost

                                                                 

  B-737-200           \$ 82         0.643         0.18%          \$ 0.148

  B-737-Classic       \$104         14.782        4.08%          \$ 4.243

  B-737-NG            \$127         150.505       40.49%         \$ 51.422

  B-757               \$179         26.430        7.30%          \$ 13.067

  B-767               \$227         14.350        3.96%          \$ 8.989

  B-747-100/200/300   \$280         0.798         0.22%          \$ 0.616

  B-747-400           \$382         4.997         1.36%          \$ 5.195

  B-747-800           \$412         0.000         0.00%          \$ 0.000

  B-777               \$333         13.485        3.68%          \$ 12.254

  B-787               \$252         0.000         0.00%          \$ 0.000

  A-300               \$211         0.149         0.04%          \$ 0.084

  A-310               \$186         0.000         0.00%          \$ 0.000

  A-320 Family        \$127         134.776       36.36%         \$ 46.177

  A-330               \$318         4.413         1.21%          \$ 3.848

  A-340               \$365         0.000         0.00%          \$ 0.000

  A-350               \$252         1.976         0.52%          \$ 1.310

  A-380               \$551         2.210         0.59%          \$ 3.251

                                                                 

  **TOTAL**                         **363.784**                  **\$150.606**
  ------------------- ------------- ------------- -------------- ---------------

### D.2.c. [Present Benefits Weighted by the Probabilities of an Air Carrier Passenger Airplane Explosion Happening In-Flight and On the Ground]{.underline} 

As shown in Table D-5, the weighted average value of the expected direct
benefits from preventing an air carrier passenger explosion is \$993
million in 2007 (80 percent times \$1.204 billion plus 20 percent times
\$151 million). Table D-5 also contains the present values of these
benefits for each year through 2042 using a 7 percent discount rate.

TABLE D-5

PRESENT VALUE OF THE WEIGHTED AVERAGE **DIRECT BENEFITS** FROM
PREVENTING AN AIR CARRIER PASSENGER AIRPLANE EXPLOSION USING AN \$8
MILLION VALUE FOR A PREVENTED FATALITY AND A 7 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ---------------- ------------------------------------------------------
  YEAR             PRESENT VALUE

                   7% DISCOUNT RATE

                   

  2007             \$993.400

  2008             \$928.411

  2009             \$867.674

  2010             \$810.910

  2011             \$757.860

  2012             \$708.280

  2013             \$661.944

  2014             \$618.640

  2015             \$578.168

  2016             \$540.344

  2017             \$504.994

  2018             \$471.957

  2019             \$441.081

  2020             \$412.226

  2021             \$385.258

  2022             \$360.054

  2023             \$336.499

  2024             \$314.485

  2025             \$293.911

  2026             \$274.683

  2027             \$256.713

  2028             \$239.919

  2029             \$224.223

  2030             \$209.555

  2031             \$195.845

  2032             \$183.033

  2033             \$171.059

  2034             \$159.868

  2035             \$149.410

  2036             \$139.635

  2037             \$130.500

  2038             \$121.963

  2039             \$113.984

  2040             \$106.527

  2041             \$ 99.558

  2042             \$ 93.045
  ---------------- ------------------------------------------------------

### D.3. [Potential Benefits from Preventing Air Carrier Passenger Airplane Explosions]{.underline}

In Table D-6, we provide the present values of preventing an air carrier
passenger airplane explosion in each of the years 2012, 2019, 2026, and
2035 from Tables IV-16 and D-5. The present value of the potential total
benefits will be \$4.3 billion of which \$2.25 billion are reactions to
terrorism, \$561 million are aviation demand losses, and \$1.5 billion
are direct losses.

TABLE D-6

PRESENT VALUE OF THE POTENTIAL **TOTAL BENEFITS** FROM PREVENTING AIR
CARRIER HCWT PASSENGER AIRPLANE EXPLOSIONS USING AN \$8 MILLION VALUE
FOR A PREVENTED FATALITY AND A 7 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  -------------- ------------------- ----------------- -------------------
  YEAR           TOTAL               DEMAND            DIRECT

                                                       

  2012           \$ 948              \$240             \$ 708

  2019           \$ 623              \$182             \$ 441

  2026           \$ 413              \$138             \$ 275

  2035           \$ 156              \$ 62             \$ 94

                                                       

  **TOTAL**      **\$2,140**         **\$622**         **\$1,518**
  -------------- ------------------- ----------------- -------------------

### D.4. [Discounted Potential and Realized Quantified Benefits]{.underline}

As shown in Table D-7, applying the SFAR 88 effectiveness rate of 50
percent and the percentages of flight hours for each airplane category
presented in Table IV-14 to the total benefits in Table D-6 results in a
present value of the potential benefits (if all HCWT explosions were
prevented) of \$1.070 billion for SFAR 88 and \$1.070 billion for the
final rule. Of this \$1.070 billion in potential benefits for the final
rule, airplanes with FRM will account for \$828 million while \$242
million will not be realized due to airplanes flying without FRM. Thus,
the final rule total benefits will be \$828 million.

TABLE D-7

PRESENT VALUE OF THE **POTENTIAL TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY
AND A 7 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ----------- ------------- -------------- ------------- ----------- -----------
              PRESENT VALUE                                          
              POTENTIAL                                              
              TOTAL                                                  
              BENEFITS                                               

                            ATTRIBUTABLE                             
                            TO                                       

                                           FINAL RULE                

  YEAR        TOTAL         SFAR 88        TOTAL         WITH FRM    NO FRM

                                                                     

  2012        \$ 948        \$ 474         \$ 474        \$232       \$242

  2019        \$ 623        \$ 311         \$ 312        \$312       \$ 0

  2026        \$ 413        \$ 207         \$ 206        \$206       \$ 0

  2035        \$ 156        \$ 78          \$ 78         \$ 78       \$ 0

                                                                     

  **TOTAL**   **\$2,140**   **\$1,070**    **\$1,070**   **\$828**   **\$242**
  ----------- ------------- -------------- ------------- ----------- -----------

As shown in Table D-8, of the rule's total benefits of \$828 million,
\$344 million (41.6 percent of the total benefits) will be attributable
to retrofitted airplanes and \$484 million (58.4 percent of the total
benefits) will be attributable to production airplanes.

TABLE D-8

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY
AND A 7 PERCENT DISCOUNT RATE BY FRM INSTALLATION TYPE

(in Millions of 2007 Dollars)

  ------------------- --------------- ----------------- -----------------
  YEAR                FRM TOTAL       RETROFIT          PRODUCTION

                                                        

  2012                \$232           \$123             \$108

  2019                \$312           \$168             \$144

  2026                \$206           \$ 53             \$153

  2035                \$ 78           \$ 0              \$ 78

                                                        

  **TOTAL**           **\$828**       **\$344**         **\$484**

  **PERCENT OF                        **41.6%**         **58.4%**
  TOTAL**                                               
  ------------------- --------------- ----------------- -----------------

As shown in Table B-9, which replicates Table IV-16, the total potential
demand benefits will be \$311 million, of which \$251 million (80.7
percent) will be realized by airplanes with FRM and \$61 million (19.6
percent) will occur to airplanes without FRM. Of the \$251 million in
realized demand benefits, \$99 million (39.5 percent) will be realized
by retrofitted airplanes and \$151 million (60.9 percent) will be
realized by production airplanes.

TABLE D-9

PRESENT VALUE OF THE FINAL RULE **DEMAND BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING A \$8 MILLION VALUE FOR A PREVENTED FATALITY
AND A 7 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  ------------- ----------- ----------- ----------- ------------ -----------
                PRESENT                                          
                VALUE (7 %)                                      

                            REALIZED                             
                            WITH FRM                             

  YEAR          POTENTIAL   TOTAL       RETROFIT    PRODUCTION   NO FRM

                                                                 

  2012          \$120       \$ 59       \$32        \$ 27        \$61

  2019          \$ 91       \$ 91       \$49        \$ 42        \$ 0

  2026          \$ 69       \$ 69       \$18.       \$ 51        \$ 0

  2035          \$ 31       \$ 31       \$ 0        \$ 31        \$ 0

                                                                 

  **TOTAL**     **\$311**   **\$250**   **\$99**    **\$151**    **\$61**

  **PERCENT OF              **80.4%**                            **19.6%**
  POTENTIAL**                                                    

  **PERCENT OF                          **39.5%**   **60.5%**    
  REALIZED**                                                     
  ------------- ----------- ----------- ----------- ------------ -----------

Finally, as shown in Table D-10, the present value of the potential
direct benefits will be \$759 million, of which \$578 million (76.2
percent) will be realized by airplanes with FRM and \$181 million (23.8
percent) would occur to airplanes without FRM. Of the \$578 million in
realized direct benefits, \$246 million (42.6 percent) will be
attributable to retrofitted airplanes and \$332 million (57.4 percent)
will be attributable to production airplanes.

TABLE D-10

PRESENT VALUE OF THE FINAL RULE **DIRECT BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY
AND A 7 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  --------------- ----------- ----------- ----------- ------------ -----------
                  PRESENT                                          
                  VALUES                                           

                              REALIZED                             
                              WITH FRM                             

  YEAR            POTENTIAL   TOTAL       RETROFIT    PRODUCTION   NO FRM

                                                                   

  2012            \$354       \$173       \$ 92       \$ 81        \$181

  2019            \$221       \$221       \$119       \$102        \$ 0

  2026            \$137       \$137       \$ 35       \$102        \$ 0

  2035            \$ 47       \$ 47       \$ 0        \$ 47        \$ 0

                                                                   

  **TOTAL**       **\$759**   **\$578**   **\$246**   **\$332**    **\$181**

  **PERCENT OF                **76.2%**                            **23.8%**
  TOTAL**                                                          

                                          **42.6%**   **57.4%**    
  --------------- ----------- ----------- ----------- ------------ -----------

### D.5. [Benefits by Manufacturer]{.underline}

As shown in Table D-11, Boeing airplanes will accumulate present value
benefits of \$487 million of which \$224 million will be attributable to
retrofitted airplanes and \$263 million will be attributable to
production airplanes. Airbus airplanes will accumulate present value
benefits of \$341 million of which \$120 million will be attributable to
retrofitted airplanes and \$221 million will be attributable to
production airplanes.

TABLE D-11

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES BY TYPE OF FRM INSTALLATION AND BY MANUFACTURER
USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY AND A 7 PERCENT
DISCOUNT RATE

(Numbers in Millions)

  ----------------- ----------------- -------------------- ----------------
  CATEGORY          TOTAL FLIGHT      PERCENTAGE OF FLIGHT TOTAL BENEFITS
                    HOURS             HOURS                

                                                           

  **RETROFITTED**   **104.3**         ** **                **\$344**

                                                            

  BOEING            67.9              65.10%               \$224

  AIRBUS            36.4              34.90%               \$120

                                                            

                                                            

  **PRODUCTION**    **199.3**         ** **                **\$484**

                                                            

  BOEING            108.3             54.34%               \$263

  AIRBUS            91                45.66%               \$221

                                                            

                                                            

  **TOTAL**         **303.6**         ** **                **\$828**

  BOEING            176.2             58.04%               \$487

  AIRBUS            127.4             41.96%               \$341
  ----------------- ----------------- -------------------- ----------------

## 

## SECTION E. 

## ESTIMATED BENEFITS USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY AND A 3 PERCENT DISCOUNT RATE

### 

### E.1. [Demand Benefits]{.underline}

A 3 percent discount rate exactly offsets a 3 percent real economic
growth rate. Thus, the present value of a \$292 million for the demand
impact in 2007 remains the same for every year.

### E.2. [Direct Benefits]{.underline}

As shown in Table E-1, we calculated the direct weighted average
benefits (based on an 80 percent probability of an in-flight explosion
and a 20 percent probability of an on-the-ground explosion) from an
average HCWT explosion using an \$8 million value for a prevented.

TABLE E-1

PRESENT VALUE OF THE **DIRECT BENEFITS** FROM PREVENTING AN AIR CARRIER
PASSENGER AIRPLANE EXPLOSION USING AN \$8 MILLION VALUE FOR A PREVENTED
FATALITY AND A 3 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ---------------- ------------------------------------------------------
  YEAR             PRESENT VALUE

                   DISCOUNT RATE

                   3%

                   

  2007             \$993.400

  2008             \$964.466

  2009             \$936.375

  2010             \$909.102

  2011             \$882.623

  2012             \$856.916

  2013             \$831.957

  2014             \$807.725

  2015             \$784.199

  2016             \$761.358

  2017             \$739.183

  2018             \$717.653

  2019             \$696.751

  2020             \$676.457

  2021             \$656.754

  2022             \$637.626

  2023             \$619.054

  2024             \$601.023

  2025             \$583.518

  2026             \$566.522

  2027             \$550.021

  2028             \$534.001

  2029             \$518.448

  2030             \$503.348

  2031             \$488.687

  2032             \$474.453

  2033             \$460.634

  2034             \$447.218

  2035             \$434.192

  2036             \$421.546

  2037             \$409.268

  2038             \$397.347

  2039             \$385.774

  2040             \$374.538

  2041             \$363.629

  2042             \$353.038
  ---------------- ------------------------------------------------------

### E.3. [Total Benefits]{.underline} 

As shown in Table E-2, the present values of the potential total
benefits from preventing an air carrier passenger airplane explosion in
each of the years (2012, 2019, 2026, and 2035) in which a statistical
accident would occur will be \$73.456 billion of which, \$1.057 billion
will be from demand benefits, and \$2.399 billion will be from direct
benefits.

TABLE E-2

PRESENT VALUE OF THE POTENTIAL TOTAL BENEFITS FROM PREVENTING AIR
CARRIER PASSENGER AIRPLANE HCWT EXPLOSIONS USING AN \$8 MILLION VALUE
FOR A PREVENTED FATALITY AND A 3 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ----------- -------------------- -------------------- ------------------
  YEAR        TOTAL                DEMAND               DIRECT

                                                        

  2012        \$1,149              \$ 292               \$ 857

  2019        \$ 989               \$ 292               \$ 697

  2026        \$ 859               \$ 292               \$ 567

  2035        \$ 459               \$ 181               \$ 278

                                                        

  **TOTAL**   **\$3,456**          **\$1,057**          **\$2,399**
  ----------- -------------------- -------------------- ------------------

As shown in Table E-3, applying the SFAR 88 effectiveness rate of 50
percent and the percentages of flight hours for each airplane category
in Table IV-14 to the total benefits in Table E-2 results in a present
value of the rule's potential benefits (if all HCWT explosions were
prevented) of \$1.728 billion for SFAR 88 and \$1.728 billion for the
final rule. Of this \$1.728 billion potential benefits for the final
rule, airplanes with FRM will account for \$1.434 billion while \$294
million will not be realized due to airplanes flying without FRM. Thus,
the present value of the final rule total benefits will be \$1.434
billion.

TABLE E-3

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING AN \$8 MILLION VLAUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE

(in Millions of 2007 Dollars)

  ----------- ------------- -------------- ------------- ------------- -----------
              PRESENT VALUE                                            
              POTENTIAL                                                
              TOTAL                                                    
              BENEFITS                                                 

                            ATTRIBUTABLE                               
                            TO                                         

                                           FINAL RULE                  

  YEAR        TOTAL         SFAR 88        TOTAL         WITH FRM      NO FRM

                                                                       

  2012        \$1,149       \$ 574         \$ 575        \$ 281        \$294

  2019        \$ 989        \$ 495         \$ 494        \$ 494        \$ 0

  2026        \$ 859        \$ 429         \$ 430        \$ 430        \$ 0

  2035        \$ 459        \$ 230         \$ 229        \$ 229        \$ 0

                                                                       

  **TOTAL**   **\$3,456**   **\$1,728**    **\$1,728**   **\$1,434**   **\$294**
  ----------- ------------- -------------- ------------- ------------- -----------

As shown in Table E-4, of the final rule's total benefits of \$1.434
billion, \$526 million (36.7 percent of the total benefits) will be
attributable to retrofitted airplanes and \$908 million (63.3 percent of
the total benefits) will be attributable to production airplanes.

TABLE E-4

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION (in Millions
of 2007 Dollars)

  ------------------- --------------- ----------------- -----------------
  YEAR                FRM TOTAL       RETROFIT          PRODUCTION

                                                        

  2012                \$ 281          \$149             \$132

  2019                \$ 494          \$266             \$228

  2026                \$ 430          \$111             \$319

  2035                \$ 229          \$ 0              \$229

                                                        

  **TOTAL**           **\$1,434**     **\$526**         **\$908**

  **PERCENT OF                        **36.7%**         **63.3%**
  TOTAL**                                               
  ------------------- --------------- ----------------- -----------------

As shown in Table E-5, of the final rule's demand benefits of \$452
million, \$153 million (33.9 percent of the total benefits) will be
attributable to retrofitted airplanes and \$299million (66.1 percent of
the total benefits will be attributable to production airplanes.

TABLE E-5

PRESENT VALUE OF THE FINAL RULE **DEMAND BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  -------------------- ---------------- ---------------- -----------------
  YEAR                 FRM TOTAL        RETROFIT         PRODUCTION

                                                         

  2012                 \$ 69            \$ 37            \$ 32

  2019                 \$146            \$ 78            \$ 68

  2026                 \$146            \$ 38            \$108

  2035                 \$ 91            \$ 0             \$ 91

                                                         

  **TOTAL**            **\$452**        **\$153**        **\$299**

  **PERCENT OF TOTAL**                  **33.9%**        **66.1%**
  -------------------- ---------------- ---------------- -----------------

As shown in Table E-6, multiplying the direct benefits in Table E-2 by
the percentages in Table IV-14, results in the present value of the
potential direct benefits of \$1.2 billion, of which \$981 million (81.8
percent) will be realized by airplanes with FRM and \$219 million (18.2
percent) will not be realized due to airplanes flying without FRM. Of
the \$981 million in realized direct benefits, \$372 million (37.9
percent) will be realized by retrofitted airplanes and \$609 million
(62.1 percent) will be realized by production airplanes.

TABLE E-6

PRESENT VALUE OF THE FINAL RULE **DIRECT BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION

(in Millions of 2007 Dollars)

  ----------------- ------------- ----------- ----------- ------------ -----------
                    PRESENT VALUE                                      
                    OF DIRECT                                          
                    BENEFITS                                           

                                  WITH FRM                             NO FRM

  YEAR              TOTAL RULE    TOTAL       RETROFIT    PRODUCTION   

                                                                       

  2012              \$ 429        \$210       \$112       \$ 98        \$219

  2019              \$ 348        \$348       \$187       \$161        \$ 0

  2026              \$ 284        \$284       \$ 73       \$211        \$ 0

  2035              \$ 139        \$139       \$ 0        \$139        \$ 0

                                                                       

  **TOTAL**         **\$1,200**   **\$981**   **\$372**   **\$609**    **\$219**

  **PERCENT OF                    **81.8%**                            **18.2%**
  POTENTIAL**                                                          

  **PERCENT OF                                **37.9%**   **62.1%**    
  REALIZED**                                                           
  ----------------- ------------- ----------- ----------- ------------ -----------

### E.4. [Benefits by Manufacturer]{.underline}

As shown in Table E-7, Boeing airplanes will accumulate present value
benefits of \$835 million of which \$342 million will be attributable to
retrofitted airplanes and \$493 million will be attributable to
production airplanes. Airbus airplanes will accumulate present value
benefits of \$599 million of which \$184 million will be attributable to
retrofitted airplanes and \$415 million will be attributable to
production airplanes.

TABLE E-6

PRESENT VALUE OF THE FINAL RULE **TOTAL BENEFITS** FOR AIR CARRIER
PASSENGER AIRPLANES USING AN \$8 MILLION VALUE FOR A PREVENTED FATALITY
AND A 3 PERCENT DISCOUNT RATE BY TYPE OF FRM INSTALLATION AND BY
MANUFACTURER

(Numbers in Millions)

  ----------------- ----------------- -------------------- ----------------
  CATEGORY          TOTAL FLIGHT      PERCENTAGE OF FLIGHT TOTAL BENEFITS
                    HOURS             HOURS                

                                                           

  **RETROFITTED**   **104.3**         ** **                **\$ 526**

                                                           

  BOEING            67.9              65.10%               \$ 342

  AIRBUS            36.4              34.90%               \$ 184

                                                           

                                                           

  **PRODUCTION**    **199.3**         ** **                **\$ 908**

                                                           

  BOEING            108.3             54.34%               \$ 493

  AIRBUS            91                45.66%               \$ 415

                                                           

                                                           

  **TOTAL**         **303.6**         ** **                **\$1,434**

  BOEING            176.2             58.04%               \$ 835

  AIRBUS            127.4             41.96%               \$ 599
  ----------------- ----------------- -------------------- ----------------

## 

## 

## **APPENDIX C:** 

## **COMPLIANCE COSTS FOR THREE ALTERNATIVES TO THE FINAL RULE FOR AIR CARRIER CARGO AIRPLANES**

## INTRODUCTION 

In this Appendix we discuss and estimate the compliance costs for the
following 3 alternatives to the final rule:

> Alternative A. Final rule requires FTI on conversion cargo airplanes;
>
> Alternative B. Final rule requires FTI on existing cargo airplanes by
> 2017; and
>
> Alternative C. Final rule requires FTI on conversion cargo airplanes
> and retrofitting on existing cargo airplanes.

ALTERNATIVE A:

REQUIRE FTI FOR AIR CARRIER CONVERSION cargo AIRPLANES

## 

## Summary of the AIR CARRIER Conversion Cargo Airplanes Compliance Cost

As shown in Table A-1, the undiscounted compliance costs for air carrier
conversion cargo airplane operators would be \$211 million, which has a
present value of \$95 million using a 7 percent discount rate and a
present value of \$146 million using a 3 percent discount rate.

TABLE A-1

COMPLIANCE COSTS FOR AIR CARRIER PRODUCTION CARGO AIRPLANE OPERATORS

(in Millions of 2007 Dollars)

  --------------------- ---------------- ---------------- ----------------
                        TOTAL COST                        

  FTI COSTS             UNDISCOUNTED     PRESENT VALUE    PRESENT VALUE
                                         (7%)             (3%)

                                                          

  ENGINEERING           \$ 19            \$16             \$ 18

                                                          

  INSTALLATION          \$ 46            \$31             \$ 39

  INVENTORY             \$ 1             \$ 1             \$ 1

  FUEL                  \$ 53            \$18             \$ 33

  OPERATIONAL           \$ 22            \$ 8             \$ 14

  ASM REPLACEMENT       \$ 70            \$21             \$ 41

                                                          

  **TOTAL**             **\$211**        **\$95**         **\$146**
  --------------------- ---------------- ---------------- ----------------

As shown in Table A-2, the undiscounted compliance costs for air carrier
Boeing cargo airplane operators would be \$151 million, which has a
present value of \$60 million using a 7 percent discount rate and a
present value of \$99 million using a 3 percent discount rate. The
undiscounted compliance costs for air carrier Airbus cargo airplane
operators would be \$60 million, which has a present value of \$34
million using a 7 percent discount rate and a present value of \$47
million using a 3 percent discount rate.

TABLE A-2

COMPLIANCE COSTS FOR AIR CARRIER CARGO AIRPLANE OPERATORS BY
MANUFACTURER

(in Millions of 2007 Dollars)

  -------------------- ---------------- ----------------- -----------------
                       TOTAL COSTS                        

  COST CATEGORY        UNDISCOUNTED     PRESENT VALUE     PRESENT VALUE
                                        (7%)              (3%)

                                                          

  **BOEING**           **\$151**        **\$60**          **\$ 99**

  ENGINEERING          \<\$1            \<\$1             \<\$1

  CONVERSION           \$ 34            \$22              \$ 28

  INVENTORY            \$ 1             \$ 1              \$ 1

  FUEL                 \$ 43            \$14              \$ 27

  OPERATIONAL          \$ 18            \$ 6              \$ 11

  ASM REPLACEMENT      \$ 55            \$17              \$ 32

                                                          

  **AIRBUS**           **\$ 60**        **\$34**          **\$ 47**

  ENGINEERING          \$ 19            \$16              \$ 18

  CONVERSION           \$ 12            \$ 9              \$ 11

  INVENTORY            \<\$1            \<\$1             \<\$1

  FUEL                 \$ 10            \$ 3              \$ 6

  OPERATIONAL          \$ 4             \$ 2              \$ 3

  ASM REPLACEMENT      \$ 15            \$ 4              \$ 9

                                                          

  **GRAND TOTAL**      **\$211**        **\$94**          **\$146**
  -------------------- ---------------- ----------------- -----------------

## A.I. Individual FTI System Compliance Cost Components

Most of the background discussion and basic data reported in Section VI
for air carrier production cargo airplanes applies to air carrier
conversion cargo airplanes. We will not generally repeat that
information in this section.

### A.I.a. [FTI Engineering Assessment Costs]{.underline} 

As described in Section V.G., all of the engineering costs to design
production cargo models are allocated to their passenger model
counterparts. However, as shown in Table A-3, Airbus would need to
perform 3 model and 1 derivative FTI engineering assessments for the
out-of-production A-300/A-300-600 and the A-310 that will be converted
from passenger to cargo use.

TABLE A-3

NUMBERS OF AIRBUS CARGO AIRPLANE FTI ENGINEERING ASSESSMENTS

  ----------------- ---------------- ---------------- --------------------
                    NUMBER OF                         
                    ASSESSMENTS                       

  MODEL             INITIAL          MODEL            DERIVATIVE

                                                      

  A-300/A-300-600   0                2                1

  A-310             0                1                0

                                                      

  **TOTAL**         **0**            **3**            **1**
  ----------------- ---------------- ---------------- --------------------

A.I.b. [Engineering Costs per FTI Engineering Assessment]{.underline}

FTI engineering assessments for cargo airplanes cost the same as FTI
engineering assessments for passenger airplanes, which are \$11.732
million for an initial assessment, \$5.456 million for a model
assessment, and \$2.744 to \$2.788 million for a derivative assessment.

A.I.c. [Total FTI Engineering Assessment Costs]{.underline}

All of the FTI engineering assessments for Airbus conversion cargo
airplanes would be completed by 2009 in order to start retrofitting in
2010. As shown in Table A-4, the total FTI engineering assessment costs
to develop and obtain the amended TCs would be \$19.2 million, which has
a present value of \$16.2 million using a 7 percent discount rate and a
present value of \$17.8 million using a 3 percent discount rate.

TABLE A-4

FTI ENGINEERING ASSESSMENT COSTS FOR AIR CARRIER CONVERSION CARGO
AIRPLANES

(in Millions of 2007 Dollars)

  ------------------- ----------------- ----------------- -----------------
                      TOTAL COSTS                         

  MODEL               UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                        (7%)              (3%)

                                                          

  A-300/A-300-600     \$13.678          \$11.556          \$12.705

  A-310               \$ 5.456          \$ 4.610          \$ 5.068

                                                          

  **TOTAL**           **\$19.134**      **\$16.166**      **\$17.773**
  ------------------- ----------------- ----------------- -----------------

### A.II. FTI costs for conversion cargo airplane OPERATORs 

### A.II.a. [Costs to Install FTI]{.underline}

Converting a passenger airplane to a cargo airplane requires the hull to
be opened and the interior to be gutted. From a construction
perspective, installing FTI on a conversion cargo airplane is similar to
installing it on a production airplane. We assume that FTI would be
retrofitted during the conversion construction because it would be
extremely expensive to first convert the airplane to cargo, close it,
and then re-open it to retrofit FTI . Thus, the kit costs and the labor
hours to install FTI on a production or a conversion cargo airplane
would be the same. As shown in Table V-9, the costs to install FTI on a
conversion cargo airplane would range from \$98,333 to \$212,574.

We used the Boeing forecast that 75 percent of the new cargo fleet will
be conversion airplanes and 25 percent will be production airplanes.

As shown in Table A-5, which reprises Table V-3, we project that there
will be 352 new cargo airplanes of which 262 will be conversion
airplanes (CON) and 90 will be production airplanes (PROD). Of the 262
conversion airplanes, 198 will be Boeing conversion cargo airplanes and
64 will be Airbus conversion cargo airplanes.

TABLE A-5

ANNUAL NUMBERS OF AIR CARRIER CONVERSION AND PRODUCTION CARGO AIPLANES
BY MANUFACTURER AND BY YEAR

("CON" is conversion and "PROD" is production)

  ----------- ----------- --------- -------- --------- --------- -------- -------- -------- --------
  YEAR        ALL                            BOEING                       AIRBUS            
              AIRPLANES                                                                     

              TOTAL       CON       PROD     TOTAL     CON       PROD     TOTAL    CON      PROD

                                                                                            

  2009        22          17        5        12        9         3        10       8        2

  2010        41          30        11       30        22        8        11       8        3

  2011        38          28        10       28        21        7        10       7        3

  2012        40          30        10       28        21        7        12       9        3

  2013        42          31        11       32        24        8        10       7        3

  2014        37          28        9        32        24        8        5        4        1

  2015        35          26        9        31        23        8        4        3        1

  2016        47          35        12       34        25        9        13       10       3

  2017        50          37        13       39        29        10       11       8        3

                                                                                            

  **TOTAL**   **352**     **262**   **90**   **266**   **198**   **68**   **86**   **64**   **22**
  ----------- ----------- --------- -------- --------- --------- -------- -------- -------- --------

As no conversion cargo airplane would have had FTI installed while it
was in passenger service,[^101] every conversion cargo airplane would
have FTI installed while it is being converted. As shown in Table A-6,
which summarizes Appendix A-1, the undiscounted costs for retrofitting
FTI on air carrier conversion cargo airplanes would be \$46.5 million,
which has a present value of \$30.9 million using a 7 percent discount
rate and a present value of \$38.7 million using a 3 percent discount
rate.

TABLE A-6

UNDISCOUNTED AND PRESENT VALUE COSTS TO INSTALL FTI ON AIR CARRIER
CONVERSION CARGO AIRPLANES BY YEAR

(in Millions of 2007 Dollars)

  ------------ --------------------- ------------------- -----------------
               TOTAL COST                                

  YEAR         UNDISCOUNTED          PRESENT VALUE (7%)  PRESENT VALUE
                                                         (3%)

                                                         

  2009         \$3.182               \$2.780             \$3.000

  2010         \$5.770               \$4.710             \$5.281

  2011         \$5.333               \$4.068             \$4.738

  2012         \$5.132               \$3.659             \$4.427

  2013         \$5.257               \$3.503             \$4.403

  2014         \$4.606               \$2.868             \$3.745

  2015         \$4.313               \$2.510             \$3.404

  2016         \$6.067               \$3.300             \$4.650

  2017         \$6.800               \$3.457             \$5.060

                                                         

  **TOTAL**    **\$46.459**          **\$30.855**        **\$38.707**
  ------------ --------------------- ------------------- -----------------

As shown in Table A-7, of the undiscounted costs of \$46.5 million, \$34
million would be for Boeing airplane operators and \$12.4 million would
be for Airbus airplane operators. Of the present value costs of \$30.9
million using a 7 percent discount rate, \$22.4 million would be for
Boeing airplane operators and \$8.5 million would be for Airbus airplane
operators. Of the present value of \$38.7 million using a 3 percent
discount rate, \$28.2 million would be for Boeing airplane operators and
\$10.5 million would be for Airbus airplane operators.

TABLE A-7

TOTAL AND PRESENT VALUE OF THE COSTS FOR AIR CARRIER CONVERSION CARGO
AIRPLANE OPERATORS BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COST                          

  MANUFACTURER      UNDISCOUNTED COST PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$34.028          \$22.354          \$28.219

  AIRBUS            \$12.431          \$ 8.501          \$10.488

                                                        

  **TOTAL**         **\$46.459**      **\$30.855**      **\$38.707**
  ----------------- ----------------- ----------------- -----------------

### A.II.b. [Water Separator/filter Assembly Inventory Cost]{.underline} 

We determined that the inventory cost for a conversion cargo airplane
water separator/filter assembly would be the same as it would cost for a
passenger airplane. As shown in Table A-8, the unit cost would range
from \$18,433 to \$30,467.

TABLE A-8

INVENTORY COST OF A WATER SEPARATOR/FILTER ASSEMBLY BY MODEL

  ---------------------------- ------------------------------------------
  MODEL                        TOTAL

                               

  B-737-CLASSIC                \$18,433

  B-737-NG                     \$18,433

  B-757                        \$26,000

  B-767                        \$26,000

  B-747-1/2/300                \$30,467

  B-747-400                    \$30,467

  B-747-800                    \$30,467

  B-777                        \$30,467

  B-787                        \$26,000

  A-300/300-600                \$26,000

  A-310                        \$26,000

  A-320 FAMILY                 \$18,433

  A-330                        \$30,467

  A-340                        \$30,467

  A-350                        \$26,000

  A-380                        \$30,467
  ---------------------------- ------------------------------------------

We determined that the production cargo airplane 15 percent inventory
rate would be the same rate for conversion cargo airplanes. As shown in
Table A-9, which summarizes Appendix A-2, we determined that air
carriers would add 39 assemblies for conversion cargo airplanes, of
which 30 would be for Boeing conversion airplanes and 9 would be for
Airbus conversion airplanes.

TABLE A-9

ANNUAL NUMBERS OF INVENTORY ADDED BY OPERATORS FOR AIR SEPARATOR/FILTER
ASSEMBLIES FOR AIR CARRIER CONVERSION CARGO AIPLANES BY MANUFACTURER AND
BY YEAR

  ------------ ---------------- -------------------- ----------------------
  YEAR         TOTAL            BOEING               AIRBUS

                                                     

  2009         2                1                    1

  2010         5                3                    2

  2011         4                3                    1

  2012         5                3                    2

  2013         5                4                    1

  2014         4                4                    0

  2015         4                4                    0

  2016         5                4                    1

  2017         5                4                    1

                                                     

  **TOTAL**    **39**           **30**               **9**
  ------------ ---------------- -------------------- ----------------------

As shown in Table A-10, the undiscounted cost of the water
separator/filter assembly inventory for conversion cargo airplanes would
be \$1.1 million, which has a present value of \$0.7 million using a 7
percent discount rate and a present value of \$0.9 million using a 3
percent discount rate.

TABLE A-10

UNDISCOUNTED AND PRESENT VALUE OF THE ANNUAL AIR SEPARATOR/FILTER
ASSEMBLY INVENTORY COSTS FOR AIR CARRIER CONVERSION CARGO AIRPLANE
OPERATORS

(in Millions of 2007 Dollars)

  ----------- ------------------ -------------- -------------- ---------------
                                 TOTAL COST                    

  YEAR        NUMBER OF          UNDISCOUNTED   PRESENT VALUE  PRESENT VALUE
              ASSEMBLIES ADDED                  (7%)           (3%)

                                                               

  2009        2                  \$0.069        \$0.060        \$0.065

  2010        5                  \$0.130        \$0.107        \$0.119

  2011        4                  \$0.121        \$0.092        \$0.107

  2012        5                  \$0.118        \$0.084        \$0.102

  2013        5                  \$0.122        \$0.081        \$0.102

  2014        4                  \$0.109        \$0.068        \$0.089

  2015        4                  \$0.103        \$0.060        \$0.081

  2016        5                  \$0.138        \$0.075        \$0.106

  2017        5                  \$0.152        \$0.078        \$0.113

                                                               

  **TOTAL**   **39**             **\$1.062**    **\$0.704**    **\$0.885**
  ----------- ------------------ -------------- -------------- ---------------

As shown in Table A-11, of the inventory costs of \$1.1 million for
conversion cargo airplane operators, \$0.8 million would be for Boeing
airplane operators and \$0.3 million would be for Airbus airplane
operators. Of the present value costs of \$0.7 million using a 7 percent
discount rate, \$0.5 million would be for Boeing airplane operators and
\$0.2 million would be for Airbus airplane operators. Of the present
value of \$0.9 million using a 3 percent discount rate, \$0.7 million
would be for Boeing airplane operators and \$0.2 million would be for
Airbus airplane operators.

TABLE A-11

UNDISCOUNTED AND PRESENT VALUE OF THE INVENTORY COSTS FOR AIR CARRIER
CONVERSION CARGO AIRPLANE AIR SEPARATOR/FILTER ASSEMBLIES BY
MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COST                          

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$0.802           \$0.526           \$0.665

  AIRBUS            \$0.268           \$0.178           \$0.220

                                                        

  **TOTAL**         **\$1.062**       **\$0.704**       **\$0.885**
  ----------------- ----------------- ----------------- -----------------

### A.II.c. [Fuel Consumption Costs]{.underline} 

As shown in Table A-12, which summarizes Table IV-27, air carrier Airbus
and Boeing conversion cargo airplanes will fly 19.1 million flight hours
of which 15.7 million will be flown by Boeing airplanes and 3.4 million
will be flown by Airbus airplanes.

TABLE A-12

ANNUAL NUMBER OF FLIGHT HOURS BY AIRBUS AND BOEING CONVERSION CARGO
AIRPLANE OPERATORS BY MANUFACTURER AND YEAR

(in Millions of Flight Hours)

  ----------- -------------------- -------------------- --------------------
              FLIGHT HOURS                              

  YEAR        TOTAL                BOEING               AIRBUS

                                                        

  2009        0.105                0.053                0.052

  2010        0.158                0.085                0.072

  2011        0.261                0.168                0.094

  2012        0.357                0.243                0.114

  2013        0.443                0.306                0.137

  2014        0.536                0.379                0.157

  2015        0.619                0.452                0.167

  2016        0.699                0.524                0.175

  2017        0.796                0.598                0.198

  2018        0.908                0.688                0.220

  2019        0.790                0.629                0.161

  2020        0.778                0.624                0.154

  2021        0.766                0.618                0.147

  2022        0.754                0.613                0.141

  2023        0.741                0.607                0.134

  2024        0.729                0.602                0.127

  2025        0.717                0.596                0.121

  2026        0.705                0.591                0.114

  2027        0.693                0.585                0.107

  2028        0.680                0.580                0.100

  2029        0.668                0.574                0.094

  2030        0.656                0.569                0.087

  2031        0.644                0.563                0.080

  2032        0.632                0.558                0.074

  2033        0.619                0.552                0.067

  2034        0.607                0.547                0.060

  2035        0.595                0.541                0.054

  2036        0.555                0.508                0.047

  2037        0.471                0.430                0.040

  2038        0.392                0.359                0.033

  2039        0.333                0.306                0.027

  2040        0.265                0.245                0.020

  2041        0.196                0.183                0.013

  2042        0.127                0.121                0.007

  2043        0.065                0.065                0.000

                                                        

  **TOTAL**   **19.061**           **15.666**           **3.395**
  ----------- -------------------- -------------------- --------------------

Using the same unit cost data provided in Tables V-5 and V-6 multiplied
by the flight hours in Table A-12, as shown in Table A-13, which
summarizes Appendix A-3, the total increased fuel consumption by air
carrier conversion cargo airplanes would be about 32.2 million gallons.
At an average price of \$1.65 per gallon, the undiscounted cost would be
\$53.1 million, which has a present value of \$17.6 million using a 7
percent discount rate and a present value of \$31.7 million using a 3
percent discount rate.

TABLE A-13

TOTAL INCREASED FUEL COST AND CONSUMPTION FOR AIR CARRIER CONVERSION
CARGO AIRPLANE OPERATORS

(All Numbers in Millions)

  ----------- --------------- ---------------- ----------------- ------------
              TOTAL COST                                         

  YEAR        UNDISCOUNTED    PRESENT VALUE    PRESENT VALUE     GALLONS
                              (7%)             (3%)              

                                                                 

  2009        \$0.142         \$0.125          \$0.134           0.086

  2010        \$0.443         \$0.362          \$0.406           0.269

  2011        \$0.720         \$0.549          \$0.639           0.436

  2012        \$0.947         \$0.675          \$0.817           0.574

  2013        \$1.195         \$0.797          \$1.001           0.725

  2014        \$1.424         \$0.887          \$1.157           0.863

  2015        \$1.643         \$0.956          \$1.297           0.996

  2016        \$1.906         \$1.037          \$1.461           1.155

  2017        \$2.214         \$1.125          \$1.647           1.342

  2018        \$2.066         \$0.981          \$1.492           1.252

  2019        \$2.058         \$0.914          \$1.444           1.247

  2020        \$2.051         \$0.851          \$1.397           1.243

  2021        \$2.044         \$0.793          \$1.351           1.238

  2022        \$2.036         \$0.738          \$1.307           1.234

  2023        \$2.029         \$0.687          \$1.264           1.230

  2024        \$2.021         \$0.640          \$1.223           1.225

  2025        \$2.014         \$0.596          \$1.183           1.221

  2026        \$2.006         \$0.555          \$1.144           1.216

  2027        \$1.999         \$0.517          \$1.107           1.212

  2028        \$1.992         \$0.481          \$1.071           1.207

  2029        \$1.984         \$0.448          \$1.036           1.203

  2030        \$1.977         \$0.417          \$1.002           1.198

  2031        \$1.969         \$0.388          \$0.969           1.194

  2032        \$1.962         \$0.361          \$0.937           1.189

  2033        \$1.955         \$0.337          \$0.906           1.185

  2034        \$1.947         \$0.313          \$0.877           1.180

  2035        \$1.861         \$0.280          \$0.814           1.128

  2036        \$1.619         \$0.228          \$0.687           0.981

  2037        \$1.356         \$0.178          \$0.559           0.822

  2038        \$1.157         \$0.142          \$0.463           0.701

  2039        \$0.925         \$0.106          \$0.359           0.561

  2040        \$0.694         \$0.074          \$0.262           0.420

  2041        \$0.462         \$0.046          \$0.169           0.280

  2042        \$0.252         \$0.024          \$0.090           0.153

                                                                 

  **TOTAL**   **\$53.071**    **\$17.609**     **\$31.671**      **32.164**
  ----------- --------------- ---------------- ----------------- ------------

Further, as shown in Table A-14, Boeing conversion cargo airplane
operators would incur undiscounted fuel costs of \$43 million which has
a present value of \$14.2 million using a 7 percent discount rate and a
present value of \$26.6 using a discount rate of 3 percent. Airbus
conversion cargo airplane operators would incur undiscounted costs of
\$10.1 million which has a present value of \$3.4 million using a 7
percent discount rate and a present value of \$6.0 using a 3 percent
discount rate.

TABLE A-14

UNDISCOUNTED AND PRESENT VALUE OF THE INCREASED FUEL COST FOR AIR
CARRIER CONVERSION CARGO AIRPLANE OPERATORS BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COST                          

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$42.941          \$14.248          \$26.626

  AIRBUS            \$10.130          \$ 3.361          \$ 6.045

                                                        

  **TOTAL**         **\$53.071**      **\$17.609**      **\$32.671**
  ----------------- ----------------- ----------------- -----------------

### 

### A.II.d. [Operational Costs]{.underline} 

The unit operational costs for a conversion cargo airplane would be the
same as the unit operational costs for a production cargo airplane (See
Table V-8). As shown in Table A-15, which summarizes Appendix A-4, the
undiscounted operational costs for conversion cargo airplane operators
would be \$22.4 million, which has a present value of \$8.1 million
using a 7 percent discount rate and a present value of \$13.9 million
using a 3 percent discount rate.

TABLE A-15

OPERATIONAL COSTS FOR AIR CARRIER CONVERSION CARGO AIRPLANE OPERATORS

(in Millions of 2007 Dollars)

  ------------ -------------------- ------------------ ------------------
                                                       

  YEAR         UNDISCOUNTED         PRESENT VALUE (7%) PRESENT VALUE (3%)

                                                       

  2009         \$0.185              \$0.161            \$0.174

  2010         \$0.306              \$0.250            \$0.280

  2011         \$0.418              \$0.319            \$0.371

  2012         \$0.523              \$0.373            \$0.451

  2013         \$0.635              \$0.423            \$0.531

  2014         \$0.735              \$0.458            \$0.598

  2015         \$0.832              \$0.484            \$0.657

  2016         \$0.952              \$0.518            \$0.730

  2017         \$1.088              \$0.553            \$0.810

  2018         \$0.948              \$0.451            \$0.685

  2019         \$0.932              \$0.414            \$0.654

  2020         \$0.916              \$0.380            \$0.624

  2021         \$0.900              \$0.349            \$0.595

  2022         \$0.884              \$0.320            \$0.567

  2023         \$0.867              \$0.294            \$0.541

  2024         \$0.851              \$0.269            \$0.515

  2025         \$0.835              \$0.247            \$0.491

  2026         \$0.819              \$0.226            \$0.467

  2027         \$0.803              \$0.207            \$0.444

  2028         \$0.786              \$0.190            \$0.423

  2029         \$0.770              \$0.174            \$0.402

  2030         \$0.754              \$0.159            \$0.382

  2031         \$0.738              \$0.145            \$0.363

  2032         \$0.722              \$0.133            \$0.345

  2033         \$0.706              \$0.121            \$0.327

  2034         \$0.689              \$0.111            \$0.310

  2035         \$0.641              \$0.096            \$0.280

  2036         \$0.544              \$0.077            \$0.231

  2037         \$0.454              \$0.060            \$0.187

  2038         \$0.385              \$0.047            \$0.154

  2039         \$0.306              \$0.035            \$0.119

  2040         \$0.226              \$0.024            \$0.085

  2041         \$0.146              \$0.015            \$0.054

  2042         \$0.074              \$0.007            \$0.026

                                                       

  **TOTAL**    **\$22.371**         **\$8.091**        **\$13.872**
  ------------ -------------------- ------------------ ------------------

Further, as shown in Table A-16, Boeing airplane operators would incur
undiscounted operational costs of \$18.4 million which has a present
value of \$6.4 million using a 7 percent discount rate and a present
value of \$11.2 million using a 3 percent discount rate. Airbus airplane
operators would incur undiscounted operational costs of \$4.0 million
which has a present value of \$1.7 million using a 7 percent discount
rate and a present value of \$2.7 million using a 3 percent discount
rate.

TABLE A-16

UNDISCOUNTED AND PRESENT VALUE OF THE OPERATIONAL COSTS FOR AIR CARRIER
CONVERSION CARGO AIRPLANE OPERATORS BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COST                          

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$18.411          \$6.358           \$11.186

  AIRBUS            \$ 3.960          \$1.733           \$ 2.686

                                                        

  **TOTAL**         **\$22,371**      **\$8.091**       **\$13.872**
  ----------------- ----------------- ----------------- -----------------

### A.II.e. [ASM Replacement Costs]{.underline} 

As shown in Table V-35, an ASM replacement for a cargo airplane costs
between \$30,520 and \$151,144.

We used the same methodology to determine the number of ASM replacements
that was used in Section VI and that the ASM will be replaced every
27,000 flight hours. We also determined that all of the 86
B-737-Classics and the 12 B-757 conversion cargo airplanes will be
retired before they would need an ASM replacement. As shown in Table
A-17, which summarizes Appendix A-5, we determined that there would be
492 ASM replacements for conversion cargo airplanes, of which 393 would
be on Boeing airplanes and 99 would be on Airbus airplanes.

TABLE A-17

ANNUAL NUMBERS OF ASM REPLACEMENTS FOR AIR CARRIER CONVERSION CARGO
AIPLANES BY MANUFACTURER AND BY YEAR

  ------------ ---------------- -------------------- ----------------------
  YEAR         TOTAL            BOEING               AIRBUS

                                                     

  2015         3                3                    0

  2016         17               17                   0

  2017         16               16                   0

  2018         11               11                   0

  2019         23               15                   8

  2020         23               15                   8

  2021         36               28                   8

  2022         37               28                   9

  2023         32               24                   8

  2024         26               22                   4

  2025         17               14                   3

  2026         36               27                   9

  2027         39               31                   8

  2028         23               23                   0

  2029         20               14                   6

  2030         24               17                   7

  2031         38               32                   6

  2032         32               24                   8

  2033         26               20                   6

  2034         16               14                   2

                                                     

  **TOTAL**    **492**          **393**              **99**
  ------------ ---------------- -------------------- ----------------------

As shown in Table A-18, which summarizes Appendix A-5, the undiscounted
ASM replacement costs for air carrier conversion cargo airplane
operators would be \$70 million, which has a present value of \$21.4
million using a 7 percent discount rate and a present value of \$41.1
million using a 3 percent discount rate.

TABLE A-18

TOTAL ASM REPLACEMENT COSTS FOR AIR CARRIER CONVERSION CARGO AIRPLANE
OPERATORS

(in Millions of 2007 Dollars)

  ----------- -------------------- ------------------- -------------------
              TOTAL COSTS                              

  YEAR        UNDISCOUNTED         PRESENT VALUE (7%)  PRESENT VALUE (3%)

                                                       

  2015        \$0.406              \$0.236             \$0.320

  2016        \$2.397              \$1.304             \$1.837

  2017        \$2.194              \$1.115             \$1.633

  2018        \$1.586              \$0.754             \$1.146

  2019        \$3.252              \$1.444             \$2.281

  2020        \$3.367              \$1.397             \$2.293

  2021        \$5.077              \$1.969             \$3.356

  2022        \$5.198              \$1.884             \$3.337

  2023        \$4.527              \$1.534             \$2.821

  2024        \$3.714              \$1.176             \$2.247

  2025        \$2.455              \$0.726             \$1.442

  2026        \$5.117              \$1.415             \$2.918

  2027        \$5.624              \$1.454             \$3.114

  2028        \$3.107              \$0.750             \$1.670

  2029        \$2.809              \$0.634             \$1.466

  2030        \$3.496              \$0.737             \$1.772

  2031        \$5.372              \$1.059             \$2.643

  2032        \$4.458              \$0.821             \$2.129

  2033        \$3.620              \$0.623             \$1.679

  2034        \$2.234              \$0.359             \$1.006

                                                       

  **TOTAL**   **\$70.007**         **\$21.391**        **\$41.106**
  ----------- -------------------- ------------------- -------------------

As shown in Table A-19, Boeing airplane operators would incur
undiscounted ASM replacement costs of \$55.0 million which has a present
value of \$17.0 million using a 7 percent discount rate and a present
value of \$32.4 million using a 3 percent discount rate. Airbus airplane
operators would incur undiscounted operational costs of about \$15.0
million which has a present value of \$4.4 million using a 7 percent
discount rate and a present value of \$8.7 million using a 3 percent
discount rate.

TABLE A-19

UNDISCOUNTED AND PRESENT VALUE OF THE ASM REPLACEMENT COSTS FOR AIR
CARRIER CONVERSION CARGO AIRPLANE OPERATORS BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$54.989          \$16.975          \$32.410

  AIRBUS            \$15.018          \$ 4.416          \$ 8.696

                                                        

  **TOTAL**         **\$70.007**      **\$21.391**      **\$41.106**
  ----------------- ----------------- ----------------- -----------------

## A.III. TOTAL AIR CARRIER CONVERSION CARGO AIRPLANE COMPLIANCE COSTS

The total costs for production cargo airplane operators, as shown in
Table A-20, are the costs for retrofitting FTI (Table A-5), the water
separator/filter assemblies for inventory (Table A-9), the additional
fuel consumption (Table A-12), the operational costs (Table A-14), and
the ASM replacement costs (Table A-17). The undiscounted compliance
costs for air carrier production cargo airplane operators would be \$193
million, which has a present value of \$79 million using a 7 percent
discount rate and a present value of \$126 million using a 3 percent
discount rate.

TABLE A-20

UNDISCOUNTED AND PRESENT VALUE TOTAL COSTS FOR AIR CARRIER CONVERSION
CARGO AIRPLANE OPERATORS BY YEAR

(in Millions of 2007 Dollars)

  ----------- -------------------- -------------------- ------------------
              TOTAL COSTS                               

  YEAR        UNDISCOUNTED         PRESENT VALUE (7%)   PRESENT VALUE (3%)

                                                        

  2009        \$3.578              \$3.126              \$3.373

  2010        \$6.649              \$5.429              \$6.086

  2011        \$6.592              \$5.028              \$5.855

  2012        \$6.720              \$4.791              \$5.797

  2013        \$7.209              \$4.804              \$6.037

  2014        \$6.874              \$4.281              \$5.589

  2015        \$7.297              \$4.246              \$5.759

  2016        \$11.460             \$6.234              \$8.784

  2017        \$12.448             \$6.328              \$9.263

  2018        \$4.600              \$2.186              \$3.323

  2019        \$6.242              \$2.772              \$4.379

  2020        \$6.334              \$2.628              \$4.314

  2021        \$8.021              \$3.111              \$5.302

  2022        \$8.118              \$2.942              \$5.211

  2023        \$7.423              \$2.515              \$4.626

  2024        \$6.586              \$2.085              \$3.985

  2025        \$5.304              \$1.569              \$3.116

  2026        \$7.942              \$2.196              \$4.529

  2027        \$8.426              \$2.178              \$4.665

  2028        \$5.885              \$1.421              \$3.164

  2029        \$5.563              \$1.256              \$2.904

  2030        \$6.227              \$1.313              \$3.156

  2031        \$8.079              \$1.592              \$3.975

  2032        \$7.142              \$1.315              \$3.411

  2033        \$6.281              \$1.081              \$2.912

  2034        \$4.870              \$0.783              \$2.193

  2035        \$2.502              \$0.376              \$1.094

  2036        \$2.163              \$0.305              \$0.918

  2037        \$1.810              \$0.238              \$0.746

  2038        \$1.542              \$0.189              \$0.617

  2039        \$1.231              \$0.141              \$0.478

  2040        \$0.920              \$0.098              \$0.347

  2041        \$0.608              \$0.061              \$0.223

  2042        \$0.326              \$0.031              \$0.116

                                                         

  **TOTAL**   **\$192.972**        **\$78.649**         **\$126.247**
  ----------- -------------------- -------------------- ------------------

As shown in Table A-21, which sums the costs in Tables A-6, A-10, A-13,
A-15, and A-18, the undiscounted costs for all air carrier production
Boeing cargo airplane operators would be \$151.2 million, which has a
present value of \$60.5 million using a 7 percent discount rate and a
present value of \$99.1 million using a 3 percent discount rate. The
undiscounted costs for all air carrier Airbus production cargo airplane
operators would be \$41.8 million, which has a present value of \$18.2
million using a 7 percent discount rate and a present value of \$28.1
million using a 3 percent discount rate.

TABLE A-21

UNDISCOUNTED AND PRESENT VALUE COSTS FOR AIR CARRIER PRODUCTION CARGO
AIRPLANE OPERATORS BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$151.171         \$60.461          \$ 99.106

  AIRBUS            \$ 41.807         \$18.189          \$ 28.135

                                                         

  **TOTAL**         **\$192.978**     **\$78.650**      **\$127.241**
  ----------------- ----------------- ----------------- -----------------

## A.IV. ADDITIONAL BENEFITS FROM ALTERNATIVE A

Based on the 19.1 million flight hours for conversion cargo airplanes,
if these airplanes were included in the rule, there would be 0.191 air
carrier conversion cargo airplane accidents between 2008 and 2043. Using
a 50 percent SFAR 88 effectiveness rate, we calculated that SFAR 88 will
prevent 0.095 air carrier cargo airplane explosions and the final rule
will prevent 0.095 explosions.[^102]

We did not calculate the quantified present value of benefits from
preventing 0.095 air carrier cargo airplane explosions, which has a 2007
undiscounted value of \$7 million, over a 35 year period.

##  

## 

## ALTERNATIVE B: 

## REQUIRE FTI TO BE RETROFITTED ON AIR CARRIER cargo AIRPLANES

## 

## Summary of the RETROFITTED Cargo Airplane Compliance Costs

As shown in Table B-1, the undiscounted compliance costs for air carrier
retrofitted cargo airplane operators would be \$213 million, which has a
present value of \$118 million using a 7 percent discount rate and a
present value of \$163 million using a 3 percent discount rate.

TABLE B-1

COMPLIANCE COSTS FOR RETROFITTED AIR CARRIER CARGO AIRPLANE OPERATORS

(in Millions of 2007 Dollars)

  --------------------- ---------------- ---------------- ----------------
                        TOTAL COST                        

  FTI COSTS             UNDISCOUNTED     PRESENT VALUE    PRESENT VALUE
                                         (7%)             (3%)

                                                          

  ENGINEERING           \<\$1            \<\$1            \<\$1

                                                          

  INSTALLATION          \$126            \$ 82            \$105

  INVENTORY             \$ 2             \$ 1             \$ 1

  FUEL                  \$ 36            \$ 16            \$ 25

  OPERATIONAL           \$ 16            \$ 7             \$ 11

  ASM REPLACEMENT       \$ 33            \$ 12            \$ 21

                                                          

  **TOTAL**             **\$213**        **\$118**        **\$163**
  --------------------- ---------------- ---------------- ----------------

As shown in Table B-2, the undiscounted compliance costs for operators
of retrofitted air carrier Boeing cargo airplanes are \$120 million,
which has a present value of \$68 million using a 7 percent discount
rate and a present value of \$93 million using a 3 percent discount
rate. The undiscounted compliance costs for operators of air carrier
retrofitted Airbus cargo airplane are \$93 million, which has a present
value of \$50 million using a 7 percent discount rate and a present
value of \$70 million using a 3 percent discount rate.

TABLE B-2

COMPLIANCE COSTS FOR RETROFITTED AIR CARRIER CARGO AIRPLANE OPERATORS BY
MANUFACTURER

(in Millions of 2007 Dollars)

  -------------------- ---------------- ----------------- -----------------
                       TOTAL COSTS                        

  COST CATEGORY        UNDISCOUNTED     PRESENT VALUE     PRESENT VALUE
                                        (7%)              (3%)

                                                          

  **BOEING**           **\$120**        **\$ 68**         **\$ 93**

  ENGINEERING          \<\$1            \<\$1             \<\$1

  RETROFIT             \$ 74            \$ 48             \$ 61

  INVENTORY            \$ 1             \$ 1              \$ 1

  FUEL                 \$ 24            \$ 11             \$ 17

  OPERATIONAL          \$ 10            \$ 4              \$ 7

  ASM REPLACEMENT      \$ 11            \$ 4              \$ 7

                                                          

  **AIRBUS**           **\$ 93**        **\$ 50**         **\$ 70**

  ENGINEERING          \<\$1            \<\$1             \<\$1

  RETROFIT             \$ 52            \$ 34             \$ 44

  INVENTORY            \$ 1             \<\$1             \<\$1

  FUEL                 \$ 12            \$ 5              \$ 8

  OPERATIONAL          \$ 6             \$ 3              \$ 4

  ASM REPLACEMENT      \$ 22            \$ 8              \$ 14

                                                          

  **GRAND TOTAL**      **\$213**        **\$118**         **\$163**
  -------------------- ---------------- ----------------- -----------------

## b.i. individual fti compliance cost components

Most of the background discussion and basic data reported in Section V
for retrofitted passenger airplanes and in Section VI for production
cargo airplanes also applies to retrofitted cargo airplanes. We will not
generally repeat that information in this section.

### B.I.a. [FTI Engineering Assessment Costs]{.underline} 

There would be minimal FTI engineering assessment costs to develop FTI
systems for retrofitted cargo airplanes because these FTI engineering
assessments would have been completed to retrofit FTI in the passenger
models.

## 

## B.II. fti costs for retrofitted cargo airplanes

### B.II.a. [Cost to Retrofit]{.underline} 

The retrofitting kit costs, the number of labor hours, and the down time
to retrofit an air carrier cargo airplane would be the same as those for
a retrofitted passenger airplane. However, no air carrier cargo retrofit
would require a special maintenance session because there is more
scheduling flexibility in cargo maintenance operations.

The retrofitting equipment kit and labor cost would be \$158,000 to
\$331,000 an airplane. We also determined that the losses for a day out
of service and the number of out-of-service days would be the same for
both cargo and passenger airplanes. Thus, the two days out-of-service
losses for an air carrier cargo airplane would be between \$9,552 and
\$27,829, resulting in a total retrofit cost of \$167,552 to \$358,829
an airplane.

As shown in Table B-3, which summarizes Appendix B-1, we determined that
401 air carrier cargo airplanes would need to be retrofitted with FTI.
Of the 401 airplanes, 231 would be Boeing airplanes and 170 would be
Airbus airplanes.

TABLE B-3

NUMBERS OF AIR CARRIER RETROFITTED CARGO AIRPLANES BY MANUFACTURER

  ------------------------------ ----------------------------------------
  MANUFACTURER                   TOTAL

                                 

  BOEING                         231

  AIRBUS                         170

                                 

  **TOTAL**                      **401**
  ------------------------------ ----------------------------------------

We determined that an equal number of these 401 airplanes would be
retrofitted in each year. Thus, as shown in Table B-4, which summarizes
Appendix B-1, we calculated that the annual undiscounted costs to
retrofit air carrier cargo airplanes would be \$15.6 million. The total
undiscounted retrofitting costs would be \$125 million, which has a
present value of \$81.5 million using a 7 percent discount rate and a
present value of \$103.4 million using a 3 percent discount rate.

TABLE B-4

UNDISCOUNTED AND PRESENT VALUE OF THE ANNUAL RETROFITTING COSTS FOR AIR
CARRIER CARGO AIRPLANE OPERATORS BY YEAR

(in Millions of 2007 Dollars)

  ------------ -------------------- -------------------- ------------------
               TOTAL COSTS                               

  YEAR         UNDISCOUNTED         PRESENT VALUE (7%)   PRESENT VALUE (3%)

                                                         

  2010         \$ 15.633            \$12.761             \$ 14.306

  2011         \$ 15.633            \$11.926             \$ 13.890

  2012         \$ 15.633            \$11.146             \$ 13.485

  2013         \$ 15.633            \$10.417             \$ 13.092

  2014         \$ 15.633            \$ 9.735             \$ 12.711

  2015         \$ 15.633            \$ 9.098             \$ 12.341

  2016         \$ 15.633            \$ 8.503             \$ 11.981

  2017         \$ 15.633            \$ 7.947             \$ 11.632

                                                         

  **TOTAL**    **\$125.062**        **\$81.534**         **\$103.438**
  ------------ -------------------- -------------------- ------------------

As shown in Table B-5, of the undiscounted retrofitting costs of \$125
million, \$72.7 million would be incurred by operators of Boeing cargo
airplanes and \$52.3 million would be incurred by operators of Airbus
cargo airplanes. Of the present value costs of \$81.5 million using a 7
percent discount rate, \$47.4 million would be incurred by operators of
Boeing cargo airplanes and \$34.1 million would be incurred by operators
of Airbus cargo airplanes. Of the present value of \$103.5 million using
a 3 percent discount rate, \$60.2 million would be incurred by operators
of Boeing cargo airplanes and \$43.3 million would be incurred by
operators of Airbus cargo airplanes.

TABLE B-5

TOTAL AND PRESENT VALUE OF THE COSTS FOR AIR CARRIER OPERATORS OF
RETROFITTED CARGO AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$ 72.748         \$47.427          \$ 60.169

  AIRBUS            \$ 52.315         \$34.106          \$ 43.269

                                                        

  **TOTAL**         **\$125.063**     **\$81.533**      **\$103.438**
  ----------------- ----------------- ----------------- -----------------

B.II.b. [Inventory Costs]{.underline}

As shown in Table B-6, which summarizes Appendix B-2, air carriers would
add 60 air separator/filter assemblies as inventory for retrofitted
cargo airplanes, of which 35 would be for Boeing airplanes and 25 would
be for Airbus airplanes.

TABLE B-6

ANNUAL NUMBERS OF AIR SEPARATOR/FILTER ASSEMBLIES INVENTORY BY AIR
CARRIER OPERATORS OF RETROFITTED CARGO AIPLANES BY MANUFACTURER AND BY
YEAR

  ------------ ---------------- -------------------- ----------------------
  YEAR         TOTAL            BOEING               AIRBUS

                                                     

  2010         8                5                    3

  2011         7                4                    3

  2012         8                5                    3

  2013         7                4                    3

  2014         8                5                    3

  2015         7                4                    3

  2016         8                4                    4

  2017         7                4                    3

                                                     

  **TOTAL**    **60**           **35**               **25**
  ------------ ---------------- -------------------- ----------------------

As shown in Table B-7, the undiscounted cost of water separator/filter
assembly inventory for operators of retrofitted air carrier cargo
airplanes would be \$1.6 million, which has a present value of \$1.1
million using a 7 percent discount rate and a present value of \$1.3
million using a 3 percent discount rate.

TABLE B-7

UNDISCOUNTED AND PRESENT VALUE OF THE AIR SEPARATOR/FILTER ASSEMBLY
INVENTORY COSTS FOR OPERATORS OF AIR CARRIER RETROFITTED CARGO AIRPLANES

(in Millions of 2007 Dollars)

  ----------- ------------------ -------------- -------------- ---------------
                                 TOTAL COSTS                   

  YEAR        NUMBER OF          UNDISCOUNTED   PRESENT VALUE  PRESENT VALUE
              ASSEMBLIES ADDED                  (7%)           (3%)

                                                               

  2010        8                  \$0.203        \$0.165        \$0.185

  2011        7                  \$0.203        \$0.155        \$0.180

  2012        8                  \$0.203        \$0.144        \$0.175

  2013        7                  \$0.203        \$0.135        \$0.170

  2014        8                  \$0.203        \$0.126        \$0.165

  2015        7                  \$0.203        \$0.118        \$0.160

  2016        8                  \$0.203        \$0.110        \$0.155

  2017        7                  \$0.203        \$0.103        \$0.151

                                                               

  **TOTAL**   **60**             **\$1.624**    **\$1.057**    **\$1.341**
  ----------- ------------------ -------------- -------------- ---------------

As shown in Table B-8, of the undiscounted costs of water
separator/filter assembly inventory for air carrier operators of
retrofitted cargo airplanes of \$1.6 million, \$1 million would be
incurred by operators of Boeing airplanes and \$0.6 million would be
incurred by operators of Airbus airplanes. Of the present value costs of
\$1.1 million using a 7 percent discount rate, \$0.6 million would be
incurred by operators of Boeing airplanes and \$0.5 million would be
incurred by operators of Airbus airplanes. Of the present value of \$1.3
million using a 3 percent discount rate, \$0.8 million would be incurred
by operators of Boeing airplanes and \$0.5 million would be incurred by
operators of Airbus airplanes.

TABLE B-8

UNDISCOUNTED AND PRESENT VALUE OF THE INVENTORY COSTS FOR AIR CARRIER
OPERATORS OF RETROFITTED CARGO AIRPLANE AIR SEPARATOR/FILTER ASSEMBLIES
BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COST                          

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$0.958           \$0.624           \$0.792

  AIRBUS            \$0.666           \$0.433           \$0.549

                                                        

  **TOTAL**         **\$1.624**       **\$1.057**       **\$1.341**
  ----------------- ----------------- ----------------- -----------------

### B.II.c. [Fuel Consumption Costs]{.underline} 

As shown in Table B-9, which summarizes Appendix B-3, air carrier
retrofitted cargo airplanes would fly 12.785 million flight hours of
which 7.678 million will be flown by Boeing airplanes and 5.107 million
will be flown by Airbus airplanes.

TABLE B-9

ANNUAL NUMBER OF FLIGHT HOURS BY RETROFITTED CARGO AIRPLANES BY
MANUFACTURER AND YEAR

(in Millions of Flight Hours)

  ------------ -------------------- -------------------- ------------------
               FLIGHT HOURS                              

  YEAR         TOTAL                BOEING               AIRBUS

                                                         

  2010         0.118                0.071                0.047

  2011         0.235                0.141                0.094

  2012         0.353                0.212                0.141

  2013         0.470                0.283                0.188

  2014         0.588                0.353                0.235

  2015         0.706                0.424                0.282

  2016         0.906                0.544                0.362

  2017         1.107                0.665                0.442

  2018         1.038                0.623                0.415

  2019         0.969                0.582                0.387

  2020         0.899                0.540                0.359

  2021         0.830                0.499                0.332

  2022         0.761                0.457                0.304

  2023         0.692                0.415                0.276

  2024         0.623                0.374                0.249

  2025         0.553                0.332                0.221

  2026         0.484                0.291                0.193

  2027         0.415                0.249                0.166

  2028         0.346                0.208                0.138

  2029         0.277                0.166                0.111

  2030         0.208                0.125                0.083

  2031         0.138                0.083                0.055

  2032         0.069                0.042                0.028

                                                         

  **TOTAL**    **12.785**           **7.678**            **5.107**
  ------------ -------------------- -------------------- ------------------

As shown in Table B-10, which summarizes Appendix B-4, the increase in
air carrier retrofitted cargo airplane fuel consumption due to FTI
weight, bleed air, and ram drag would be 21.8 million gallons.[^103] At
an average price of \$1.65 per gallon, the undiscounted cost would be
\$35.9 million, which has a present value of \$15.8 million using a 7
percent discount rate and a present value of \$24.8 million using a 3
percent discount rate.

TABLE B-10

TOTAL INCREASED FUEL COST AND CONSUMPTION FOR AIR CARRIER RETROFITTED
CARGO AIRPLANES BY YEAR

(All Numbers in Millions)

  ----------- ---------------- ---------------- ----------------- ------------
              TOTAL COST                                          

  YEAR        UNDISCOUNTED     PRESENT VALUE    PRESENT VALUE     GALLONS
                               (7%)             (3%)              

                                                                  

  2010        \$0.331          \$0.270          \$0.303           0.200

  2011        \$0.661          \$0.504          \$0.587           0.401

  2012        \$0.992          \$0.707          \$0.856           0.601

  2013        \$1.322          \$0.881          \$1.107           0.801

  2014        \$1.653          \$1.029          \$1.344           1.002

  2015        \$1.984          \$1.154          \$1.566           1.202

  2016        \$2.548          \$1.386          \$1.952           1.544

  2017        \$3.111          \$1.582          \$2.315           1.886

  2018        \$2.917          \$1.386          \$2.107           1.768

  2019        \$2.723          \$1.209          \$1.910           1.650

  2020        \$2.528          \$1.049          \$1.722           1.532

  2021        \$2.334          \$0.905          \$1.543           1.414

  2022        \$2.139          \$0.775          \$1.373           1.296

  2023        \$1.945          \$0.659          \$1.212           1.179

  2024        \$1.750          \$0.554          \$1.059           1.061

  2025        \$1.556          \$0.460          \$0.914           0.943

  2026        \$1.361          \$0.376          \$0.776           0.825

  2027        \$1.167          \$0.302          \$0.646           0.707

  2028        \$0.972          \$0.235          \$0.523           0.589

  2029        \$0.778          \$0.176          \$0.406           0.471

  2030        \$0.583          \$0.123          \$0.296           0.354

  2031        \$0.389          \$0.077          \$0.191           0.236

  2032        \$0.194          \$0.036          \$0.093           0.118

                                                                  

  **TOTAL**   **\$35.938**     **\$15.835**     **\$24.800**      **21.780**
  ----------- ---------------- ---------------- ----------------- ------------

Further, as shown in Table B-11, operators of Boeing retrofitted cargo
airplanes would incur undiscounted fuel costs of \$24.1 million which
has a present value of \$10.6 million using a 7 percent discount rate
and a present value of \$16.7 million using a discount rate of 3
percent. Operators of Airbus retrofitted cargo airplanes would incur
undiscounted fuel costs of \$11.8 million which has a present value of
\$5.2 million using a 7 percent discount rate and a present value of
\$8.1 million using a 3 percent discount rate.

TABLE B-11

UNDISCOUNTED AND PRESENT VALUE OF THE INCREASED FUEL COST FOR AIR
CARRIER OPERATORS OF RETROFITTED CARGO AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$24.134          \$10.634          \$16.654

  AIRBUS            \$11.804          \$ 5.201          \$ 8.146

                                                        

  **TOTAL**         **\$35.938**      **\$15.835**      **\$24.800**
  ----------------- ----------------- ----------------- -----------------

### B.II.d. [Operational Costs]{.underline}

As shown in Table B-12, which summarizes Appendix B-5, the total
operational costs for air carrier operators of retrofitted cargo
airplanes would be about \$16.0 million, which has a present value of
\$7.0 million using a 7 percent discount rate and a present value of
\$11.1 million using a 3 percent discount rate.

TABLE B-12

OPERATIONAL COSTS FOR AIR CARRIER OPERATORS OF RETROFITTED CARGO
AIRPLANES

(in Millions of 2007 Dollars)

  ------------ ------------------- ------------------- -------------------
               TOTAL COSTS                             

  YEAR         UNDISCOUNTED        PRESENT VALUE (7%)  PRESENT VALUE (3%)

                                                       

  2010         \$0.147             \$0.120             \$0.134

  2011         \$0.294             \$0.224             \$0.261

  2012         \$0.441             \$0.314             \$0.380

  2013         \$0.587             \$0.391             \$0.492

  2014         \$0.734             \$0.457             \$0.597

  2015         \$0.881             \$0.513             \$0.696

  2016         \$1.132             \$0.616             \$0.867

  2017         \$1.382             \$0.703             \$1.028

  2018         \$1.296             \$0.616             \$0.936

  2019         \$1.209             \$0.537             \$0.848

  2020         \$1.123             \$0.466             \$0.765

  2021         \$1.037             \$0.402             \$0.685

  2022         \$0.950             \$0.344             \$0.610

  2023         \$0.864             \$0.293             \$0.538

  2024         \$0.777             \$0.246             \$0.470

  2025         \$0.691             \$0.204             \$0.406

  2026         \$0.605             \$0.167             \$0.345

  2027         \$0.518             \$0.134             \$0.287

  2028         \$0.432             \$0.104             \$0.232

  2029         \$0.346             \$0.078             \$0.180

  2030         \$0.259             \$0.055             \$0.131

  2031         \$0.173             \$0.034             \$0.085

  2032         \$0.086             \$0.016             \$0.041

                                                       

  **TOTAL**    **\$15.963**        **\$7.034**         **\$11.056**
  ------------ ------------------- ------------------- -------------------

As shown in Table B-13, operators of Boeing retrofitted cargo airplanes
would incur undiscounted costs of \$9.9 million which has a present
value of \$4.4 million using a 7 percent discount rate and a present
value of \$6.9 million using a discount rate of 3 percent. Operators of
Airbus retrofitted cargo airplanes would incur undiscounted costs of
\$6.1 million which has a present value of \$2.7 million using a 7
percent discount rate and a present value of \$4.2 million using a
discount rate of 3 percent.

TABLE B-13

UNDISCOUNTED AND PRESENT VALUE OF THE OPERATIONAL COSTS FOR AIR CARRIER
OPERATORS OF RETROFITTED CARGO AIRPLANES

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$ 9.913          \$4.368           \$ 6.871

  AIRBUS            \$ 6.050          \$2.666           \$ 4.175

                                                        

  **TOTAL**         **\$15.963**      **\$7.034**       **\$11.056**
  ----------------- ----------------- ----------------- -----------------

### B.II.e. [ASM Replacement Costs]{.underline}

As shown in Table V-35, replacing an ASM on a cargo airplane costs
between \$30,520 and \$151,144.

As noted in Section VI, we determined that the ASM needs to be replaced
every 27,000 flight hours. We used the same methodology to determine the
number of ASM replacements used in Section VI. As shown in Table B-14,
there would be 220 ASM replacements on retrofitted cargo airplanes, of
which 76 would be on Boeing airplanes and 144 would be on Airbus
airplanes.

TABLE B-14

ANNUAL NUMBERS OF ASM REPLACEMENTS FOR AIR CARRIER OPERATORS OF
RETROFITTED CARGO AIPLANES BY MANUFACTURER AND BY YEAR

  ------------ ---------------- -------------------- ----------------------
                                MANUFACTURER         

  YEAR         TOTAL            BOEING               AIRBUS

                                                     

  2016         1                1                    0

  2017         13               2                    11

  2018         13               1                    12

  2019         13               2                    11

  2020         19               7                    12

  2021         20               8                    12

  2022         28               8                    20

  2023         28               8                    20

  2024         20               8                    12

  2025         19               8                    11

  2026         23               11                   12

  2027         23               12                   11

                                                     

  **TOTAL**    **220**          **76**               **144**
  ------------ ---------------- -------------------- ----------------------

As shown in Table B-15, which summarizes Appendix B-6, the undiscounted
ASM replacement costs for air carrier operators of retrofitted cargo
airplanes would be about \$32.9 million, which has a present value of
\$11.7 million using a 7 percent discount rate and a present value of
\$20.9 million using a 3 percent discount rate.

TABLE B-15

TOTAL ASM REPLACEMENT COSTS FOR AIR CARRIER OPERATORS OF RETROFITTED
CARGO AIRPLANES

(in Millions of 2007 Dollars)

  ----------- ------------------ -------------------- --------------------
              TOTAL COSTS                             

  YEAR        UNDISCOUNTED       PRESENT VALUE (7%)   PRESENT VALUE (3%)

                                                      

  2016        \$ 0.201           \$ 0.109             \$ 0.154

  2017        \$ 1.953           \$ 0.993             \$ 1.453

  2018        \$ 1.953           \$ 0.928             \$ 1.411

  2019        \$ 1.953           \$ 0.867             \$ 1.369

  2020        \$ 2.856           \$ 1.185             \$ 1.945

  2021        \$ 2.856           \$ 1.108             \$ 1.888

  2022        \$ 2.998           \$ 1.087             \$ 1.924

  2023        \$ 4.235           \$ 1.434             \$ 2.639

  2024        \$ 4.093           \$ 1.296             \$ 2.476

  2025        \$ 2.856           \$ 0.845             \$ 1.678

  2026        \$ 3.494           \$ 0.966             \$ 1.993

  2027        \$ 3.494           \$ 0.903             \$ 1.935

                                                      

  **TOTAL**   **\$32.942**       **\$11.720**         **\$20.855**
  ----------- ------------------ -------------------- --------------------

As shown in Table B-16, operators of Boeing cargo airplanes would incur
undiscounted ASM replacement costs of \$11.2 million which has a present
value of \$3.8 million using a 7 percent discount rate and a present
value of \$6.9 million using a 3 percent discount rate. Operators of
Airbus cargo airplanes would incur undiscounted operational costs of
about \$21.7 million which has a present value of \$8 million using a 7
percent discount rate and a present value of \$13.9 million using a 3
percent discount rate.

TABLE B-16

UNDISCOUNTED AND PRESENT VALUE OF THE ASM REPLACEMENT COSTS FOR AIR
CARRIER OPERATORS OF RETROFITTED CARGO AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$11.202          \$ 3.766          \$ 6.926

  AIRBUS            \$21.740          \$ 7.954          \$13.929

                                                        

  **TOTAL**         **\$32.942**      **\$11.720**      **\$20.855**
  ----------------- ----------------- ----------------- -----------------

## B.III. TOTAL AIR CARRIER RETROFITTED CARGO AIRPLANE COMPLIANCE COSTS

As shown in Table B-17, which sums Tables B-4, B-7, B-10, B-12, and
B-15, the undiscounted compliance costs for air carrier operators of
retrofitted cargo airplanes would be \$212 million, which has a present
value of \$117 million using a 7 percent discount rate and a present
value of \$161 million using a 3 percent discount rate.

TABLE B-17

UNDISCOUNTED AND PRESENT VALUE TOTAL COSTS FOR AIR CARRIER OPERATORS OF
RETROFITTED CARGO AIRPLANES BY YEAR

(in Millions of 2007 Dollars)

  ----------- --------------------- -------------------- ------------------
              TOTAL COSTS                                

  YEAR        UNDISCOUNTED          PRESENT VALUE (7%)   PRESENT VALUE (3%)

                                                         

  2010        \$16.314              \$13.316             \$14.928

  2011        \$16.791              \$12.809             \$14.918

  2012        \$17.269              \$12.311             \$14.896

  2013        \$17.745              \$11.824             \$14.861

  2014        \$18.223              \$11.347             \$14.817

  2015        \$18.701              \$10.883             \$14.763

  2016        \$19.717              \$10.724             \$15.109

  2017        \$22.282              \$11.328             \$16.579

  2018        \$6.166               \$2.930              \$4.454

  2019        \$5.885               \$2.613              \$4.127

  2020        \$6.507               \$2.700              \$4.432

  2021        \$6.227               \$2.415              \$4.116

  2022        \$6.087               \$2.206              \$3.907

  2023        \$7.044               \$2.386              \$4.389

  2024        \$6.620               \$2.096              \$4.005

  2025        \$5.103               \$1.509              \$2.998

  2026        \$5.460               \$1.509              \$3.114

  2027        \$5.179               \$1.339              \$2.868

  2028        \$1.404               \$0.339              \$0.755

  2029        \$1.124               \$0.254              \$0.586

  2030        \$0.842               \$0.178              \$0.427

  2031        \$0.562               \$0.111              \$0.276

  2032        \$0.280               \$0.052              \$0.134

                                                         

  **TOTAL**   **\$211.532**         **\$117.179**        **\$161.459**
  ----------- --------------------- -------------------- ------------------

As shown in Table B-18, which sums Tables B-5, B-8, B-11, B-13, and
B-16, the undiscounted costs for all air carrier operators of
retrofitted Boeing cargo airplanes would be \$119 million, which has a
present value of \$67 million using a 7 percent discount rate and a
present value of \$91 million using a 3 percent discount rate. The
undiscounted costs for air carrier operators of Airbus retrofitted cargo
airplanes would be \$93 million, which has a present value of \$50
million using a 7 percent discount rate and a present value of \$70
million using a 3 percent discount rate.

TABLE B-18

UNDISCOUNTED AND PRESENT VALUE COSTS FOR AIR CARRIER OPERATORS OF
RETROFITTED CARGO AIRPLANES BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$118.955         \$ 66.819         \$ 91.412

  AIRBUS            \$ 92.575         \$ 50.360         \$ 70.068

                                                        

  **TOTAL**         **\$211.530**     **\$117.179**     **\$161.490**
  ----------------- ----------------- ----------------- -----------------

## B.IV. ADDITIONAL BENEFITS FROM ALTERNATIVE B

Based on the 12.8 million flight hours for retrofitted cargo airplanes,
if these airplanes were included in the rule, there would be 0.128 air
carrier conversion cargo airplane accidents between 2008 and 2043. Using
a 50 percent SFAR 88 effectiveness rate, we calculated that SFAR 88 will
prevent 0.064 air carrier cargo airplane explosions and the final rule
will prevent 0.064 explosions.

We did not calculate the quantified present value of benefits from
preventing 0.064 air carrier cargo airplane explosions, which has a 2007
undiscounted value of \$4.6 million, over a 35 year period.

## 

## ALTERNATIVE C: 

##  REQUIRE FTI ON AIR CARRIER CONVERSION CARGO AND RETROFITTED ON EXISTING CARGO AIRPLANES

## C.I. TOTAL AIR CARRIER CONVERSION AND RETROFITTED CARGO AIRPLANE COMPLIANCE COSTS

As shown in Table C-1, which sums A-1 and B-1, the undiscounted
compliance costs for air carrier conversion and retrofitted cargo
airplane operators would be \$424 million, which has a present value of
\$213 million using a 7 percent discount rate and a present value of
\$309 million using a 3 percent discount rate.

TABLE C-1

COMPLIANCE COSTS FOR AIR CARRIER CONVERSION AND RETROFITTED CARGO
AIRPLANE OPERATORS

(in Millions of 2007 Dollars)

  --------------------- ---------------- ---------------- ----------------
                        TOTAL COST                        

  FTI COSTS             UNDISCOUNTED     PRESENT VALUE    PRESENT VALUE
                                         (7%)             (3%)

                                                          

  ENGINEERING           \$ 19            \$ 16            \$ 18

                                                          

  INSTALLATION          \$172            \$113            \$144

  INVENTORY             \$ 3             \$ 2             \$ 2

  FUEL                  \$ 89            \$ 34            \$ 58

  OPERATIONAL           \$ 38            \$ 15            \$ 25

  ASM REPLACEMENT       \$103            \$ 33            \$ 62

                                                          

  **TOTAL**             **\$424**        **\$213**        **\$309**
  --------------------- ---------------- ---------------- ----------------

As shown in Table C-2, which sums A-2 and B-2, the undiscounted
compliance costs for operators of air carrier Boeing conversion and
retrofitted cargo airplanes would be \$271 million, which has a present
value of \$147 million using a 7 percent discount rate and a present
value of \$192 million using a 3 percent discount rate. The undiscounted
compliance costs for operators of air carrier Airbus conversion and
retrofitted cargo airplanes would be \$153 million, which has a present
value of \$84 million using a 7 percent discount rate and a present
value of \$117 million using a 3 percent discount rate.

TABLE C-2

COMPLIANCE COSTS FOR AIR CARRIER CONVERSION AND RETROFITTED CARGO
AIRPLANE OPERATORS BY MANUFACTURER

(in Millions of 2007 Dollars)

  -------------------- ---------------- ----------------- -----------------
                       TOTAL COSTS                        

  COST CATEGORY        UNDISCOUNTED     PRESENT VALUE     PRESENT VALUE
                                        (7%)              (3%)

                                                          

  **BOEING**           **\$271**        **\$147**         **\$ 192**

  ENGINEERING                                             

  CONVERSION           \$108            \$ 70             \$ 89

  INVENTORY            \$ 2             \$ 2              \$ 2

  FUEL                 \$ 67            \$ 25             \$ 44

  OPERATIONAL          \$ 28            \$ 10             \$ 18

  ASM REPLACEMENT      \$ 66            \$ 21             \$ 39

                                                          

  **AIRBUS**           **\$153**        **\$ 84**         **\$ 117**

  ENGINEERING          \$ 19            \$ 16             \$ 18

  CONVERSION           \$ 64            \$ 43             \$ 55

  INVENTORY            \$\<1            \$\<1             \$\<1

  FUEL                 \$ 22            \$ 8              \$ 14

  OPERATIONAL          \$ 10            \$ 5              \$ 7

  ASM REPLACEMENT      \$ 37            \$ 12             \$ 23

                                                          

  **GRAND TOTAL**      **\$424**        **\$212**         **\$309**
  -------------------- ---------------- ----------------- -----------------

As shown in Table C-3, which sums Tables A-20 and B-17, the undiscounted
compliance costs for including air carrier conversion and retrofitted
cargo airplanes in the final rule would be \$405 million, which has a
present value of \$196 million using a 7 percent discount rate and a
present value of \$288 million using a 3 percent discount rate.

TABLE C-3

UNDISCOUNTED AND PRESENT VALUE TOTAL COSTS FOR AIR CARRIER CONVERSION
AND RETROFITTED CARGO AIRPLANE OPERATORS BY YEAR

(in Millions of 2007 Dollars)

  ------------ ------------------- ------------------- -------------------
               TOTAL COSTS                             

  YEAR         UNDISCOUNTED        PRESENT VALUE (7%)  PRESENT VALUE (3%)

                                                       

  2009         \$ 3.578            \$ 3.126            \$ 3.373

  2010         \$22.963            \$18.745            \$21.014

  2011         \$23.383            \$17.837            \$20.773

  2012         \$23.989            \$17.102            \$20.693

  2013         \$24.954            \$16.628            \$20.898

  2014         \$25.097            \$15.628            \$20.406

  2015         \$25.998            \$15.129            \$20.522

  2016         \$31.177            \$16.958            \$23.893

  2017         \$34.730            \$17.656            \$25.842

  2018         \$10.766            \$5.116             \$7.777

  2019         \$12.127            \$5.385             \$8.506

  2020         \$12.841            \$5.328             \$8.746

  2021         \$14.248            \$5.526             \$9.418

  2022         \$14.205            \$5.148             \$9.118

  2023         \$14.467            \$4.901             \$9.015

  2024         \$13.206            \$4.181             \$7.990

  2025         \$10.407            \$3.078             \$6.114

  2026         \$13.402            \$3.705             \$7.643

  2027         \$13.605            \$3.517             \$7.533

  2028         \$7.289             \$1.760             \$3.919

  2029         \$6.687             \$1.510             \$3.490

  2030         \$7.069             \$1.491             \$3.583

  2031         \$8.641             \$1.703             \$4.251

  2032         \$7.422             \$1.367             \$3.545

  2033         \$6.281             \$1.081             \$2.912

  2034         \$4.870             \$0.783             \$2.193

  2035         \$2.502             \$0.376             \$1.094

  2036         \$2.163             \$0.305             \$0.918

  2037         \$1.810             \$0.238             \$0.746

  2038         \$1.542             \$0.189             \$0.617

  2039         \$1.231             \$0.141             \$0.478

  2040         \$0.920             \$0.098             \$0.347

  2041         \$0.608             \$0.061             \$0.223

  2042         \$0.326             \$0.031             \$0.116

                                                       

  **TOTAL**    **\$404.504**       **\$195.828**       **\$287.706**
  ------------ ------------------- ------------------- -------------------

As shown in Table C-4, which sums Tables A-21 and B-18, the undiscounted
costs for all air carrier conversion and retrofitted Boeing cargo
airplane operators would be \$270 million, which has a present value of
\$127 million using a 7 percent discount rate and a present value of
\$191 million using a 3 percent discount rate. The undiscounted costs
for air carrier conversion and retrofitted Airbus cargo airplane
operators would be \$134 million, which has a present value of \$69
million using a 7 percent discount rate and a present value of \$98
million using a 3 percent discount rate.

TABLE C-4

UNDISCOUNTED AND PRESENT VALUE COSTS FOR AIR CARRIER CONSERSION AND
RETROFITTED CARGO AIRPLANE OPERATORS BY MANUFACTURER

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  MANUFACTURER      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  BOEING            \$270.126         \$127.280         \$190.518

  AIRBUS            \$134.382         \$68.549          \$98.203

                                                        

  **TOTAL**         **\$404.508**     **\$195.829**     **\$288.731**
  ----------------- ----------------- ----------------- -----------------

## C.II. ADDITIONAL BENEFITS FROM ALTERNATIVE C

Based on the 31.8 million flight hours for conversion and retrofitted
cargo airplanes, if these airplanes were included in the rule, there
would be 0.318 air carrier conversion and retrofitted cargo airplane
accidents between 2008 and 2043. Using a 50 percent SFAR 88
effectiveness rate, we calculated that SFAR 88 will prevent 0.159 air
carrier cargo airplane explosions and the final rule will prevent 0.159
explosions.

We did not calculate the quantified present value of benefits from
preventing 0.064 air carrier cargo airplane explosions, which has a 2007
undiscounted value of \$11.4 million.

## 

## **APPENDIX D:** 

## **STATISTICAL VARIATION OF FRM BENEFITS AND BENEFIT-COST RATIO**

Our principal analysis is based on the statistical average of FRM
benefits. In our base case we calculate the present value of
[average]{.underline} benefits and the [average]{.underline}
benefit-cost ratio assuming a discount rate of 7%, SFAR 88 effectiveness
of 50%, and the value of a statistical life (VSL) of \$5.5 million. We
also undertake a sensitivity analysis by varying the discount rate to 3%
and, in an appendix of this report, by varying SFAR 88 effectiveness to
25% and 75% and VSL to \$3 and \$8 million.

In this section we use Crystal Ball to conduct a Monte Carlo simulation
of the benefits of the FRM rule. We assume our base case of a 7%
discount rate, SFAR 88 effectiveness of 50%, and a VSL of \$5.5 million.
The Crystal Ball simulation allows us to easily see the important
consequences of the natural statistical variation in the FRM benefits.
This variation has three sources, number of accidents, size of airplane
(and hence variation in value of averted accident), and timing of
accident (and hence variation in present value of accident).

The direct benefits of the FRM rule are the value of averting accidents,
most importantly the value of averted fatalities, or the value of a
statistical life. Since over 98% of the averted accidents and almost
100% of the FRM benefits are for passenger airplanes, we exclude
production cargo and part 91 airplanes from our analysis. We assume that
20% of the accidents will take place on the ground, in which case the
value of an averted accident is much lower. Accordingly, for the value
of an averted accident, for each passenger model, we take a weighted
average of the ground and in-air values. (See Tables IV-8 to IV-10.) As
discussed in a principal section, for passenger airplanes there are also
ancillary benefits of the FRM rule: (1) the avoided losses from demand
reductions as a result of an airplane accident and (2) the losses from
disruption of the air transportation system from perceptions that a HCWT
accident might be a terrorist attack. The basic cost and benefit data
are shown in Table 1 below:

**Table 1. Basic Costs and Benefits of Preventing an Accident with the
FRM Rule**

+----+------------+---------------+--------+------------+------------+
|    | **Direct   | **Indirect    |        | **Total    | **Present  |
|    | benefits** | Benefits**    |        | Indirect   | Value of   |
|    |            |               |        | Benefits** | Costs**    |
|    | **(2007 \$ | **(2007 \$    |        |            |            |
|    | mil.)**    | mil.)**       |        | **(2007 \$ | **(2007 \$ |
|    |            |               |        | mil.)**    | mil.)**    |
+----+------------+---------------+--------+------------+------------+
|    | **Value of | **Avoidance   | **Avoi | ** **      | **Discount |
|    | averted    | of reduced    | dance\ |            | rate: 7%** |
|    | accident** | demand for    | of air |            |            |
|    |            | air           | tr     |            |            |
|    | *          | tr            | anspor |            |            |
|    | *(weighted | ansportation\ | tation |            |            |
|    | avg.)**    | (\$ mil.)**   | n      |            |            |
|    |            |               | etwork |            |            |
|    |            |               | disrup |            |            |
|    |            |               | tion** |            |            |
+----+------------+---------------+--------+------------+------------+
| *  | \$695      | \$265         | \      | \$1,305    | \$1,116    |
| *P |            |               | $1,040 |            |            |
| AX |            |               |        |            |            |
| ** |            |               |        |            |            |
+----+------------+---------------+--------+------------+------------+

We note that costs are shown in present value 2007 dollars. Direct
benefits\--the value of averted accident---are discounted in accordance
with the year that the simulation model predicts the accident to occur.
We expect the air transportation network to have a real growth rate of
3%, so the total value for ancillary benefits increases each year by 3%.

We use the Poisson distribution to model the probability of HCWT
accidents since that distribution has been shown to be appropriate for
rare event discrete outcomes, e.g. HCWT airplane accidents. The Poisson
is a one-parameter distribution whose parameter, λ, is equal to the
expected number of accidents. For each year of the analysis (2009-2043),
we estimate λ for passenger versions of HCWT models (Boeing 737-200,
Boeing 737 Classic, etc.) [^104] by multiplying each model's predicted
flight hours by our estimated post-SFAR 88 accident rate. Calculating
lambdas for each year has the virtue of allowing calculation of benefits
year by year. The present value of the rule benefits can then readily be
calculated by discounting yearly benefits by their appropriate discount
factors and summing. Calculating lambdas for each model allows us to
pick up the great variation in the value of an averted accident, which
can range from \$452 million for a Boeing 737-200 to \$2.421 billion for
an Airbus A380, with an average of \$695 million as shown in our table
above.

For our base case we assume a pre-SFAR 88 HCWT accident rate of 0.01 per
million miles and 50% SFAR 88 effectiveness, and, therefore, a post-SFAR
88 HCWT accident rate of 0.0050 accidents per million flight hours\--or
1 accident in 200 million flight hours. Using these assumptions, we ran
10,000 trials of our simulated Crystal Ball model. In Table 2 we first
show the results for the expected number of accidents.

Table 2. Estimated Average No. of HCWT Passenger

Airplane Accidents, with and without the FRM Rule

(50% SFAR 88 Effectiveness)

  ----------------------- --------------------------- -------------------
                          Without Rule                With Rule

  PAX                     1.81                        1.54
  ----------------------- --------------------------- -------------------

The table shows that the FRM rule will prevent 1.54 of the expected 1.81
passenger airplane (The rule does not prevent all accidents because
compliance for production airplanes is not required until 2009 and
retrofitting for existing airplanes is phased in over the period
2010-2017.) These results are very close to the results we found in our
main benefits section.

The value of the Crystal Ball simulation, however, lies not in
calculation of averages, but rather to see the variation in the
outcomes. In the chart below, we show first the variation for the number
of averted passenger airplane accidents.

Chart 1. Frequency Distribution of Passenger Airplane Accidents
Preventable by FRM Rule

(50% SFAR 88 Effectiveness, Post-SFAR 88 Accident Rate: 0.0050 per
million flight hours)

![](media/image1.png){width="5.645833333333333in" height="3.59375in"}

Although the expected number of passenger airplane accidents averted by
the rule is 1.54, the chart shows that this is average of highly
variable outcomes. Approximately 21% of the time there will be no
accidents and there will be no benefit to the rule and over 32% of the
time there will be just 1 accident. However, approximately 26% of the
time there will be two accidents, over 12% of the time there will be 3
accidents, and 5 % of the time there will be 4 accidents, etc. The
important point to derive from this analysis is that ex-post the rule
could be much more cost beneficial than indicated by the expected values
because without the rule 2, 3, 4, 5, 6, or even 7 preventable accidents
could occur. In fact there is a high probability (47%) of 2 or more
preventable accidents without the rule.

The latter probability is brought out more clearly in the reverse
cumulative frequency, another useful perspective from which to view
these results. The reverse cumulative frequency is shown in Chart 2. The
reverse cumulative frequency shows us that there is about a 7% chance of
4 or more accidents, a 20% change of 3 or more accidents, and, as
already note, a 47% change of 2 or more accidents.

Chart 2. Reverse Cumulative Frequency Distribution of HCWT Passenger
Airplane Accidents Preventable by FRM Rule

(50% SFAR 88 Effectiveness, Post-SFAR 88 accident Rate: 0.0050 per
million flight hours)

![](media/image2.png){width="5.645833333333333in" height="3.59375in"}

As already noted, this variation in the number of accidents along with
variation in accident size and accident timing is what determines
variation in the benefits of the FRM rule benefits. Table 3 shows our
Crystal Ball results for expected benefits. The expected present value
of direct benefits is \$384 million, resulting in a benefit-cost ratio
of 0.34. The expected present value of indirect benefits is \$1.075
billion, resulting in total expected benefits of \$1.459 billion and a
total benefits benefit-cost ratio of 1.31.

Table 3. Expected PV Benefits of FRM Rule for HCWT Passenger Airplanes

(50% SFAR 88 Effectiveness, Post-SFAR 88 Accident Rate: 0.0050 per
million flight hours)

  ---------------- ----------- ----------- ------------- ----------- -----------
  **Statistics**   **Direct    **Direct    **Indirect    **Total     **Total
                   Benefits    Benefits    Benefits      Benefits    Benefits
                   \@7%**      B/C Ratio   \@1.07**      \@7%**      B/C Ratio
                               \@7%**                                \@7%**

  Mean             \$384       0.34        \$1,075       \$1,459     1.31
  ---------------- ----------- ----------- ------------- ----------- -----------

> Notes: 1. Dollar values are in millions.
>
> 2\. The undiscounted indirect benefits are avoidance of reduced demand
> (\$265 million) and avoidance of air transportation system shutdown
> (\$1,040 million) for total indirect benefits of \$1,305 billion.
>
> 3\. Costs of the FRM rule are \$1,116 million at a discount rate of
> 7%.

Using the perspective of the reverse cumulative frequency distribution,
Chart 3 shows that the mean direct benefit-cost ratio of 0.34 masks
tremendous variability in direct benefits. Even though the expected
direct benefit-cost is only 0.34, Chart 3 shows that there is a 20%
chance the benefit-cost ratio will be 0.8 or better, a 10% chance that
it will be 0.9 or better, and even a 5% chance that the benefit-cost
ratio will be greater than 1.

> Chart 3. Reverse Cumulative Frequency Distribution of FRM Rule Direct
> Benefit-Cost
>
> Ratio (50% SFAR 88 Effectiveness, Post-SFAR 88 accident Rate: 0.0050
> per million flight hours)

![](media/image3.png){width="5.645833333333333in" height="3.59375in"}

Chart 4 shows the reverse cumulative frequency distribution for the
total benefit-cost ratio. Even though the expected total benefit-cost
ratio is 1.31, there is an almost 25% chance that the benefit-cost ratio
will be 2 or better. In other words, costs could be double their current
estimate, and there is still a 25% chance that the rule would turn out
to be cost beneficial.

Chart 4. Reverse Cumulative Frequency Distribution of FRM Rule Total
Benefit-Cost

Ratio

(50% SFAR 88 Effectiveness, Post-SFAR 88 accident Rate: 0.0050 per
million flight hours)

![](media/image4.png){width="5.645833333333333in" height="3.59375in"}

## 

## **APPENDIX E** 

## **QUANTIFIED BENEFITS AND COSTS IF THE FRM RULE APPLIED TO PART 91 AIRPLANES**[^105]

### 

### E.I. QUANTIFIED BENEFITS FROM PREVENTING A PART 91 AIRPLANE EXPLOSION

### E.I.1. [Risk of an Explosion]{.underline}

We use the risk of one accident every 100 million flight hours for Part
91 airplanes.

### E.I.2. [Demand Benefits]{.underline}

The impact on passenger demand resulting from a Part 91 airplane
explosion will be minimal because the public will likely not relate a
private airplane explosion with relatively few fatalities to the impact
of a commercial jetliner explosion with hundreds of fatalities.

### E.I.3. [Assumptions]{.underline}

We made the following assumptions and calculations to quantify the
benefits from preventing a Part 91 airplane explosion.

1.  Part 91 airplane explosions are in-flight catastrophic accidents in
    which the crew and passengers die and the airplane is completely
    destroyed.

2.  There will be no Part 91 on-the-ground explosions.

3.  As established by DOT, the value for preventing a fatality is \$5.5
    million in 2007 dollars.

4.  There are 2 flight crew members and an average of 8 passengers on a
    Part 91 airplane.

5.  The average Part 91 airplane replacement values are based on a GRA
    Incorporated report.

6.  The airplane real replacement values will remain constant.

7.  The average cost to the U.S. government and the manufacturer to
    investigate an in-flight Part 91 airplane accident will be \$8
    million.

8.  We used a 7 percent discount rate to calculate the present values of
    these quantified benefits.

### E.I.4. [Benefits from Preventing an In-Flight Part 91 Passenger Airplane Explosion]{.underline}

As shown in Table E-1, the "average" direct benefits from preventing an
in-flight Part 91 airplane explosion range from \$64 million to \$178
million.

TABLE E-1

DIRECT BENEFITS FROM PREVENTING AN AIR CARRIER PASSENGER AIRPLANE
IN-FLIGHT EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- -------------- -------------- ------------ ----------------- ------------
  **Airplane Model**  **Avg. Num.    **Value of     **Value of   **Cost of         **Total Cost
                      Fatalities**   Fatalities**   Airplane**   Investigation**   of
                                                                                   Accident**

                                                                                   

  B-737-200           10             \$55           \$ 1         \$8               **\$ 64**

  B-737-Classic       10             \$55           \$ 15        \$8               **\$ 78**

  B-737-NG            10             \$55           \$ 30        \$8               **\$ 93**

  B-757               10             \$55           \$ 34        \$8               **\$ 97**

  B-767               10             \$55           \$ 50        \$8               **\$113**

  B-747-100/200/300   10             \$55           \$ 15        \$8               **\$ 78**

  B-747-400           10             \$55           \$ 85        \$8               **\$148**

  B-747-800           10             \$55           \$115        \$8               \$178
  ------------------- -------------- -------------- ------------ ----------------- ------------

We followed the same procedure we used to determine the average value of
an in-flight accident for an air carrier passenger airplane. As shown in
Table E-2, these Part 91 airplanes will accumulate about 764,000 flight
hours. Dividing the number of flight hours for each model by the total
number of flight hours generated the percentage of all flight hours
operated by that model. We multiplied that percentage by the total
accident cost and then summed the individual model results to obtain the
weighted average of the undiscounted benefits from preventing an
in-flight air carrier passenger airplane explosion of \$99.8
million.[^106]

TABLE E-2

WEIGHTED AVERAGE DIRECT BENEFITS FROM PREVENTING AN IN-FLIGHT PART 91
PASSENGER AIRPLANE EXPLOSION BY AIRPLANE MODEL

(in Millions of 2007 Dollars)

  ------------------- ---------- --------------- -------------- -------------
  **Model**           **Total    **Total Num.    **Percent of   **Weighted
                      Accident   Flight Hours    All Flight     Accident
                      Cost**     (2008-2043)**   Hours**        Cost**

                                                                

  B-737-200           \$ 64      0.050           6.54%          \$ 4.2

  B-737-Classic       \$ 78      0.039           5.10%          \$ 4.0

  B-737-NG            \$ 93      0.511           66.88%         \$ 62.2

  B-757               \$ 97      0.015           1.96%          \$ 1.9

  B-767               \$113      0.029           3.80%          \$ 4.3

  B-747-100/200/300   \$ 78      0.032           4.19%          \$ 3.3

  B-747-400           \$148      0.014           1.83%          \$ 2.7

  B-747-800           \$178      0.074           9.69%          \$17.2

                                                                

  **TOTAL**                      **0.764**                      **\$99.8**
  ------------------- ---------- --------------- -------------- -------------

### 

### E.II. NUMBER OF FLIGHT HOURS

As shown in Table E-3, the Part 91 passenger airplane fleet will
accumulate about 763,700 flight hours. Of these 763,700 flight hours,
163,800 will be flown by production airplanes and 599,900 will be flown
by existing Part 91 airplanes, of which 388,150 will be flown by
retrofitted Part 91 airplanes and 211,750 will be flown by Part 91
airplanes without FTI.

TABLE E-3

ANNUAL NUMBER OF FLIGHT HOURS FOR PART 91 AIRPLANES

(2008-2017 for All Airplanes and 2018-2043 for the 2017 Fleet)

  ----------- ------------- ------------- ------------- ------------- ---------------
                            EXISTING                                  
                            AIRPLANES                                 

  YEAR        TOTAL         TOTAL         NO FTI        RETROFIT      PRODUCT

                                                                      

  2008        33,250        33,250        33,250        0             0

  2009        33,250        32,550        32,550        0             700

  2010        33,250        31,850        30,100        1,750         1,400

  2011        33,250        31,150        27,300        3,850         2,100

  2012        33,250        30,450        23,800        6,650         2,800

  2013        33,250        29,750        20,300        9,450         3,500

  2014        33,250        29,050        16,800        12,250        4,200

  2015        33,250        28,350        12,950        15,400        4,900

  2016        33,250        27,650        9,100         18,550        5,600

  2017        33,250        26,950        4,900         22,050        6,300

  2018        33,250        26,950        700           26,250        6,300

  2019        31,850        25,550        0             25,550        6,300

  2020        31,150        24,850        0             24,850        6,300

  2021        30,450        24,150        0             24,150        6,300

  2022        29,750        23,450        0             23,450        6,300

  2023        28,350        22,050        0             22,050        6,300

  2024        26,250        19,950        0             19,950        6,300

  2025        24,150        17,850        0             17,850        6,300

  2026        22,050        15,750        0             15,750        6,300

  2027        20,300        14,000        0             14,000        6,300

  2028        19,250        12,950        0             12,950        6,300

  2029        18,200        11,900        0             11,900        6,300

  2030        16,800        10,500        0             10,500        6,300

  2031        15,750        9,450         0             9,450         6,300

  2032        14,700        8,400         0             8,400         6,300

  2033        13,650        7,350         0             7,350         6,300

  2034        12,600        6,300         0             6,300         6,300

  2035        10,850        5,250         0             5,250         5,600

  2036        9,100         4,200         0             4,200         4,900

  2037        7,000         2,800         0             2,800         4,200

  2038        5,250         1,750         0             1,750         3,500

  2039        4,200         1,400         0             1,400         2,800

  2040        3,150         1,050         0             1,050         2,100

  2041        2,100         700           0             700           1,400

  2042        1,050         350           0             350           700

                                                                      

  **TOTAL**   **763,700**   **599,900**   **211,750**   **388,150**   **163,800**
  ----------- ------------- ------------- ------------- ------------- ---------------

E.III. TOTAL RULE BENEFITS FOR PART 91 HCWT EXPLOSIONS

Based on the 763,700 Part 91 flight hours affected by the rule, there
will be 0.0076 Part 91 airplane explosions. Using a 50 percent SFAR 88
effectiveness rate, the final rule will prevent 0.0038 Part 91 airplane
explosions. Based on an expected benefit of \$99.8 million for a Part 91
airplane explosion, the undiscounted benefit of the rule will be \$3.2
million. We did not calculate present values for this small benefit.

E.IV. COST OF COMPLIANCE

E.IV.a. [Introduction]{.underline}

In this Section we discuss and estimate the compliance costs to part 91
operators of HCWT airplanes. The first section summarizes the total
compliance costs. The rest of the section discusses and develops these
costs in more detail. Most of the background discussions and basic data
reported in Section V for air carrier passenger airplanes also apply to
part 91 airplanes. We do not generally repeat this information unless it
differs from the air carrier information.

E.IV.b. [Summary of Part 91 Airplane Compliance Costs]{.underline}

As shown in Table E-4, the undiscounted compliance costs for part 91
airplanes are about \$20.6 million, which has a present value of \$13.0
million using a 7 percent discount rate and a present value of \$16.7
million using a 3 percent discount rate. For retrofitted airplanes, the
undiscounted costs will be \$17 million, which has a present value of
\$11 million using a 7 percent discount rate and a present value of \$14
million using a 3 percent discount rate. For production airplanes, the
undiscounted costs will be \$3.6 million which has a present value of
\$2.1 million using a 7 percent discount rate and a present value of
\$2.7 million using a 3 percent discount rate.

TABLE E-4

COMPLIANCE COSTS FOR PART 91 AIRPLANES

(in Millions of 2007 Dollars)

  -------------------- ---------------- ----------------- -----------------
                       TOTAL COST                         

  CATEGORY             UNDISCOUNTED     PRESENT VALUE     PRESENT VALUE
                                        (7%)              (3%)

                                                          

  **ENGINEERING**      **\$ 0.000**     **\$ 0.000**      **\$ 0.000**

                                                          

  **RETROFITTED**                                         

  INSTALLATION         \$16.447         \$10.712          \$13.628

  INVENTORY            \$ 0.000         \$ 0.000          \$ 0.000

  FUEL                 \$ 0.573         \$ 0.240          \$ 0.386

  OPERATIONAL          \$ 0.000         \$ 0.000          \$ 0.000

  ASM REPLACEMENT      \$ 0.000         \$ 0.000          \$ 0.000

                                                          

  TOTAL                **\$17.020**     **\$10.952**      **\$14.014**

                                                          

  **PRODUCTION**                                          

  INSTALLATION         \$ 2.666         \$ 1.800          \$ 2.200

  INVENTORY            \$ 0.000         \$ 0.000          \$ 0.000

  FUEL                 \$ 0.886         \$ 0.275          \$ 0.512

  OPERATIONAL          \$ 0.000         \$ 0.000          \$ 0.000

  ASM REPLACEMENT      \$ 0.000         \$ 0.000          \$ 0.000

                                                          

  TOTAL                **\$ 3.552**     **\$ 2.075**      **\$ 2.712**

                                                          

  **GRAND TOTAL**      **\$20.572**     **\$13.027**      **\$16.726**
  -------------------- ---------------- ----------------- -----------------

E.IV.c. [Engineering Costs to Design Part 91 Airplane FTI
Systems]{.underline}

There will be minimal engineering costs to adjust air carrier FTI
engineering data to part 91 FTI applications because it will have been
completed for their air carrier passenger and cargo airplanes.

E.IV.d. [Retrofitting Airplane Costs]{.underline}

### E.IV.d.1. [Unit Retrofitting Costs]{.underline}

With two differences, the FTI retrofitting costs for part 91 airplanes
are the same as those for retrofitting air carrier passenger airplanes.
The first exception is that Part 91 airplanes do not generally undergo a
"D" check because they do not accumulate enough flight hours to make a
total overhaul necessary. Therefore, an FTI retrofit will be completed
during a special maintenance session. The second exception is that Part
91 airplanes will incur minimal out-of-service losses because they have
greater scheduling flexibility and there are times when the airplane is
not used. Thus, as shown in Table E-5, the retrofitting costs range from
\$176,000 to \$350,000.

TABLE E-5

COSTS TO RETROFIT FTI ON A PART 91 AIRPLANE DURING A SPECIAL MAINTENANCE
SESSION BY MODEL

(in Thousands of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    COST                                

  MODEL             TOTAL             KIT               LABOR

                                                        

  B-737-CLASSIC     \$176             \$110             \$66

  B-737-NG          \$176             \$110             \$66

  B-757             \$308             \$235             \$73

  B-767             \$308             \$235             \$73

  B-747-1/2/300     \$325             \$250             \$75

  B-747-400         \$325             \$250             \$75

  B-747-800         \$325             \$250             \$75

  B-777             \$350             \$275             \$75

  B-787             \$308             \$235             \$73

  A-300/300-600     \$308             \$235             \$73

  A-310             \$308             \$235             \$73

  A-320 FAMILY      \$176             \$110             \$66

  A-330             \$350             \$275             \$75

  A-340             \$325             \$250             \$75

  A-350             \$308             \$235             \$73

  A-380             \$325             \$250             \$75
  ----------------- ----------------- ----------------- -----------------

### E.IV.d.2. [Number of Retrofitted Part 91 Airplanes]{.underline}

We do not have information about retirement rates for Part 91 airplanes.
We also do not know how many air carrier passenger airplanes will be
converted to Part 91 configurations. Consequently, we assumed that the
net retirements will equal the additions from converted passenger
airplanes for a net change of zero in the 2006 fleet that will need to
be retrofitted by 2017.

As shown in Table E-6, 79 Boeing and no Airbus airplanes currently
operate under Part 91. A list of these operators and the number of HCWT
airplanes (as of January 1, 2006) is provided in Appendix VII-1. As
there are 8 years to retrofit these airplanes, we determined that 10 of
them will be retrofitted every year.[^107]

TABLE E-6

NUMBERS OF PART 91 HCWT AIRPLANES

(JANUARY 1, 2006)

  ------------------------------------- ---------------------------------
  **AIRPLANE MODEL**                    **TOTAL NUMBER OF AIRPLANES**

                                        

  B-737-200                             18

  B-737-Classic                         7

  B-737-NG                              36

  B-747-100/200/300                     9

  B-747-400                             2

  B-747-800                             0

  B-757                                 6

  B-767                                 1

  B-777                                 0

  B-787                                 0

  A-300                                 0

  A-310                                 0

  A-320 Family                          0

  A-330                                 0

  A-340                                 0

  A-350                                 0

  A-380                                 0

                                        

  **GRAND TOTAL**                       **79**
  ------------------------------------- ---------------------------------

### E.IV.d.3. [Total Part 91 Retrofitting Cost]{.underline}

As shown in Table E-7, which summarizes Appendix VII-1, it will cost
\$2.1 million a year for the first 8 years to retrofit Part 91
airplanes. The total undiscounted retrofitting costs will be \$16.5
million, which has a present value of \$10.7 million using a 7 percent
discount rate and a present value of \$13.6 million using a 3 percent
discount rate.

TABLE E-7

UNDISCOUNTED AND PRESENT VALUE OF THE ANNUAL RETROFITTING COSTS FOR PART
91 AIRPLANES BY YEAR

(in Millions of 2007 Dollars)

  ------------ ------------------- ------------------- -------------------
               TOTAL COSTS                             

  YEAR         UNDISCOUNTED        PRESENT VALUE (7%)  PRESENT VALUE (3%)

                                                       

  2010         \$ 2.060            \$ 1.681            \$ 1.885

  2011         \$ 2.060            \$ 1.571            \$ 1.830

  2012         \$ 2.060            \$ 1.468            \$ 1.777

  2013         \$ 2.060            \$ 1.372            \$ 1.725

  2014         \$ 2.060            \$ 1.283            \$ 1.675

  2015         \$ 2.060            \$ 1.199            \$ 1.626

  2016         \$ 2.060            \$ 1.120            \$ 1.579

  2017         \$ 2.060            \$ 1.047            \$ 1.533

                                                       

  **TOTAL**    **\$16.477**        **\$10.742**        **\$13.628**
  ------------ ------------------- ------------------- -------------------

### E.IV.e. [Production Airplane Costs]{.underline} 

### E.IV.e.1. [Unit Costs for Production Airplanes]{.underline}

Although Boeing has stated they intend to install FTI on their
production airplanes, we determined that most purchasers will request
that Boeing leave FTI out of their airplane because it is an expensive
piece of equipment and they would likely not see a pressing need for it.
Unless there is a rule, it is likely that a manufacturer would accede to
a customer's request. Thus, the Part 91 Boeing production airplane costs
are a cost of the final rule.

The kit costs and the labor hours to install FTI on a Part 91 B-737-NG
production passenger airplane are the same as the \$98,733 costs to
install FTI on an air carrier B-737-NG production passenger airplane.

E.IV.e.2. [Numbers of Production Passenger Airplanes]{.underline}

In reviewing the current Part 91 fleet, the only production airplanes
are the B-737-NG and the B-747-400. We believe that it is likely that
the 2 B-747-400s were originally used in air carrier service and later
converted to private use. Consequently, as discussed in Section II, we
determined that 3 new B-737-NGs will be annually purchased for Part 91
operators. We cannot distinguish between Part 91 airplanes involved in
passenger and in cargo operations, but we assume that all of them will
be passenger airplanes.

E.IV.e.2. [Total Production Airplane Costs]{.underline}

The annual cost to install FTI on the 3 B-737-NGs will be \$296,000,
which results in a total cost of \$2.666 million, which has a present
value of \$1.8 million using a 7 percent discount rate and a present
value of \$2.2 million using a 3 percent discount rate.

E.IV.e.3. Inventory Costs

There will be no water separator/filter assembly costs for the Part 91
airplanes because no operator has more than 6 of them and that is too
few to inventory infrequently changed parts. Further, none of these
operators will perform their own maintenance.

E.IV.e.4. Additional Fuel Consumption Costs

The Part 91 and the air carrier airplane FTI systems weigh the same. We
do not have specific estimates of the additional fuel consumption by
pound per flight hour for these airplanes in Part 91 operations. Nor do
we have specific estimates for the increased fuel consumption in Part 91
operations due to bleed air and ram drag. In the absence of those data,
we adapted the MAC weight and the Boeing bleed air and ram drag fuel
consumption rates for Part 91 operations based on numbers of flight
hours. The GRA study reports that the average general aviation turbofan
airplane weighing more than 60,000 pounds flies about 350 hours a
year.[^108] As shown in Table E-8, the total increased Part 91 airplane
fuel consumption due to FTI ranges from 248 to 625 gallons per year, of
which 142 to 504 gallons are due to weight and 98 to 179 gallons are due
to bleed air and ram drag.

TABLE E-8

INCREASED FUEL CONSUMPTION DUE TO FTI FOR A PART 91 AIRPLANE MODEL

  --------------- --------- ---------- ------------ ---------- ---------- ---------
                  FTI       FL. HRS.   FUEL BURN    GALLONS               
                  WEIGHT    (Yr.)      (MAC)        PER YEAR              

  MODEL           WEIGHT               GAL/LB/FL.   WEIGHT     BLEED AIR  TOTAL
                  (lbs.)               HR.                     & RAM DRAG 

                                                                          

  B-737-Classic   105       350        0.0045       142        106        248

  B-737-NG        105       350        0.0045       142        106        248

  B-757           280       350        0.0060       142        149        248

  B-767           280       350        0.0050       504        100        604

  B-747-1/2/300   257       350        0.0065       420        98         518

  B-747-400       257       350        0.0065       501        124        625

  B-747-800       257       350        0.0065       501        124        625

  B-777           300       350        0.0040       501        124        625

  B-787           280       350        0.0045       360        179        539

  A-300           280       350        0.0040       378        98         476

  A-310           280       350        0.0040       336        98         434

  A-320 Family    105       350        0.0095       336        98         434

  A-330           300       350        0.0040       299        149        448

  A-340           300       350        0.0040       360        179        539

  A-350           280       350        0.0050       360        124        484

  A-380           257       350        0.0065       420        98         518
  --------------- --------- ---------- ------------ ---------- ---------- ---------

Although air carriers can obtain aviation fuel at an average cost of
\$2.01 a gallon, individual Part 91 operators do not buy in bulk and
cannot avail themselves of volume discounts when purchasing aviation
fuel. We determined that the average aviation fuel cost to a Part 91
operator will be about \$2.50 a gallon.[^109] Thus, as shown in Table
E-9, we calculated that an FTI system will increase the annual Part 91
passenger fuel cost by \$620 to \$1,563.

TABLE E-9

INCREASED PART 91 AIRPLANE FUEL CONSUMPTION DUE TO FTI BY MODEL

  ------------------- ---------------------- -----------------------------
  MODEL               ANNUAL COST            ANNUAL GALLONS

                                             

  B-737-Classic       \$ 620                 248

  B-737-NG            \$ 620                 248

  B-757               \$ 620                 248

  B-767               \$1,510                604

  B-747-1/2/300       \$1,295                518

  B-747-400           \$1,563                625

  B-747-800           \$1,563                625

  B-777               \$1,563                625

  B-787               \$1,348                539

  A-300               \$1,190                476

  A-310               \$1,085                434

  A-320 Family        \$1,085                434

  A-330               \$1,120                448

  A-340               \$1,348                539

  A-350               \$1,210                484

  A-380               \$1,295                518
  ------------------- ---------------------- -----------------------------

As shown in Table E-10, which summarizes Appendix VII-2, the increased
fuel consumption by Part 91 retrofitted and production passenger
airplanes will be about 583,000 gallons. At an average price of \$3.05
per gallon, the undiscounted cost will be about \$1.78 million, which
has a present value of \$0.6 million using a 7 percent discount rate and
a present value of \$1.1 million using a 3 percent discount rate.

TABLE E-10

UNDISCOUNTED AND PRESENT VALUE FUEL COST AND CONSUMPTION FOR PART 91
AIRPLANES BY YEAR

(All Numbers in Millions)

  ----------- --------------- --------------- --------------- --------------
              TOTAL COST                                      

  YEAR        UNDISCOUNTED    PRESENT VALUE   PRESENT VALUE   GALLONS
                              (7%)            (3%)            

                                                              

  2009        \$0.00          \$0.00          \$0.00          0.001

  2010        \$0.02          \$0.01          \$0.01          0.005

  2011        \$0.03          \$0.02          \$0.03          0.010

  2012        \$0.04          \$0.03          \$0.03          0.012

  2013        \$0.05          \$0.03          \$0.04          0.015

  2014        \$0.05          \$0.03          \$0.04          0.018

  2015        \$0.06          \$0.04          \$0.05          0.020

  2016        \$0.07          \$0.04          \$0.05          0.023

  2017        \$0.08          \$0.04          \$0.06          0.026

  2018        \$0.08          \$0.04          \$0.06          0.026

  2019        \$0.08          \$0.04          \$0.05          0.026

  2020        \$0.08          \$0.03          \$0.05          0.026

  2021        \$0.08          \$0.03          \$0.05          0.026

  2022        \$0.08          \$0.03          \$0.05          0.026

  2023        \$0.08          \$0.03          \$0.05          0.026

  2024        \$0.08          \$0.02          \$0.05          0.026

  2025        \$0.08          \$0.02          \$0.05          0.026

  2026        \$0.07          \$0.02          \$0.04          0.024

  2027        \$0.07          \$0.02          \$0.04          0.023

  2028        \$0.06          \$0.02          \$0.03          0.021

  2029        \$0.06          \$0.01          \$0.03          0.019

  2030        \$0.05          \$0.01          \$0.03          0.018

  2031        \$0.05          \$0.01          \$0.02          0.016

  2032        \$0.04          \$0.01          \$0.02          0.014

  2033        \$0.04          \$0.01          \$0.02          0.012

  2034        \$0.03          \$0.00          \$0.01          0.011

  2035        \$0.03          \$0.00          \$0.01          0.009

  2036        \$0.18          \$0.03          \$0.08          0.059

  2037        \$0.02          \$0.00          \$0.01          0.007

  2038        \$0.02          \$0.00          \$0.01          0.005

  2039        \$0.01          \$0.00          \$0.00          0.004

  2040        \$0.01          \$0.00          \$0.00          0.003

  2041        \$0.00          \$0.00          \$0.00          0.001

  2042        \$0.00          \$0.00          \$0.00          0.000

                                                              

  **TOTAL**   **\$1.78**      **\$0.63**      **\$1.09**      **0.583**
  ----------- --------------- --------------- --------------- --------------

As shown in Table E-11, Part 91 retrofitted airplanes will incur
undiscounted costs of \$698,000, which has a present value of \$292,000
using a 7 percent discount rate and a present value of \$470,000 using a
3 percent discount rate. Part 91 production airplanes will incur
undiscounted costs of \$1.079 million, which has a present value of
\$335,000 using a 7 percent discount rate and a present value of
\$624,000 using a 3 percent discount rate.

TABLE E-11

TOTAL AND PRESENT VALUE OF THE FUEL COSTS FOR PART 91 OPERATORS BY FTI
INSTALLATION

(in Millions of 2007 Dollars)

  ----------------- ----------------- ----------------- -----------------
                    TOTAL COSTS                         

  INSTALLATION      UNDISCOUNTED      PRESENT VALUE     PRESENT VALUE
                                      (7%)              (3%)

                                                        

  RETROFITTED       \$0.698           \$0.292           \$0.470

  PRODUCTION        \$1.079           \$0.335           \$0.624

                                                        

  **TOTAL**         **\$1.777**       **\$0.627**       **\$1.094**
  ----------------- ----------------- ----------------- -----------------

E.IV.e.5. Operational Costs

We determined that Part 91 operators will incur minimal operational
costs from FTI because they do not fly enough hours to require
sufficient operational costs to have a measurable impact.

E.IV.e.6. ASM Replacement Costs

As ASMs will be replaced every 27,000 flight hours, there will be few if
any, Part 91 airplanes that will replace an ASM, resulting in minimal
costs.

## E.V. TOTAL PART 91 AIRPLANE COMPLIANCE COSTS

As shown in Table VII-9, the undiscounted cost for Part 91 operators
will be about \$21 million, which has a present value of \$13 million
using a 7 percent discount rate and a present value of \$17 million
using a 3 percent discount rate. Finally, as shown in Table E-12, of the
present value of \$13 million using a 7 percent discount rate for the
production cargo airplane compliance costs, about 95 percent will be due
to the \$12.5 million in installation costs and about 5 percent will be
due to the annual fuel costs. This result is significantly different
from that found for air service passenger and cargo airplanes because
part 91 airplanes will fly far fewer hours than will air service
airplanes.

TABLE E-12

COMPLIANCE COSTS FOR PART 91 AIRPLANES

(in Millions of 2007 Dollars)

  -------------------- ---------------- ----------------- -----------------
                       TOTAL COST                         

  CATEGORY             UNDISCOUNTED     PRESENT VALUE     PRESENT VALUE
                                        (7%)              (3%)

                                                          

  **ENGINEERING**      **\$ 0.000**     **\$ 0.000**      **\$ 0.000**

                                                          

  **RETROFITTED**                                         

  INSTALLATION         \$16.447         \$10.712          \$13.628

  INVENTORY            \$ 0.000         \$ 0.000          \$ 0.000

  FUEL                 \$ 0.698         \$ 0.292          \$ 0.470

  OPERATIONAL          \$ 0.000         \$ 0.000          \$ 0.000

  ASM REPLACEMENT      \$ 0.000         \$ 0.000          \$ 0.000

                                                          

  TOTAL                **\$17.145**     **\$11.004**      **\$14.098**

                                                          

  **PRODUCTION**                                          

  INSTALLATION         \$ 2.666         \$ 1.800          \$ 2.200

  INVENTORY            \$ 0.000         \$ 0.000          \$ 0.000

  FUEL                 \$ 1.079         \$ 0.335          \$ 0.624

  OPERATIONAL          \$ 0.000         \$ 0.000          \$ 0.000

  ASM REPLACEMENT      \$ 0.000         \$ 0.000          \$ 0.000

                                                          

  TOTAL                **\$ 3.745**     **\$ 2.135**      **\$ 2.824**

                                                          

  **GRAND TOTAL**      **\$20.890**     **\$13.139**      **\$16.922**
  -------------------- ---------------- ----------------- -----------------

## **APPENDIX F** 

## **REVISED AVIATION FUEL FORECAST** 

## 

Table F-1 presents our methodology and derivation of an updated aviation
fuel cost. In the development of the fuel cost for a version of the
final rule that was reviewed by the Office of Management and Budget
(OMB). The basis of the fuel costs was a fleet weighted fuel cost
derived from the [FAA Aerospace Forecast Fiscal Years 2007-2022
forecasts of future fuel costs (Table 18). This resulted in an average
cost of]{.underline} \$1.65 a gallon. At their suggestion, we derived a
new 10-year average fuel cost.

We used the [FAA Aerospace Forecast Fiscal Years 2008-2025 (Table 18) as
the basis for future year prices.]{.underline} We then multiplied these
costs by the numbers of airplanes that we forecast will be equipped FRM
in each year by the new fuel price forecast and divided the cumulative
fuel price by the cumulative number of airplanes. The new weighted fuel
cost is \$2.01 a gallon. Thus, the forecast price of fuel has increased
121.8 percent since the \$1.65 a gallon estimate for the final rule. We
multiplied the \$199 million original present value estimate for the
total cost of fuel by 121.6 to obtain the \$242 million updated present
value cost of fuel for the final rule.

This methodology is presented in Table F-1. In that Table, Columns D, E,
and F supply the numbers of airplanes that have FRM operating in each
year. Column G contains the forecasted price of aviation fuel for each
year. Thus, multiplying the total number of airplanes that have FRM in
each year times the forecasted aviation fuel price for that year
(results presented in Column H) gives a total increased aviation fuel
expenditure in that year.

Row 19 then provides the cumulative number of airplane years with FRM
(21,325) and the cumulative aviation fuel costs associated with having
FRM (\$42,776.67). The logic for this is best explained by example. If
only one airplane had FRM and paid \$2.00 a gallon in 2010 and 5,000
airplanes had FRM in 2011 and paid \$1.00 per gallon, you would not use
an average fuel cost of \$1.50 for these 5,001 airplanes, but, rather a
weighted fuel cost average of \$1.002 per gallon. In this case, more
airplanes with FRM are affected over time by the aviation fuel costs
because they are being added to the fleet while non-FRM airplanes are
either being retrofitted or retired. After 2017, the total number of
airplanes with FRM decline through retirements in this analysis.

Row 21 provides the weighted average fuel cost (cumulative airplane
years/cumulative fuel expenditure) of \$2.01 a gallon.

Row 23 provides the \$1.65 average fuel cost used in the Final Rule.

Row 25 provides the percentage increase in average fuel costs using the
\$2.01 fuel cost forecast over the \$1.65 fuel cost in the Final rule of
121.57 percent.

Row 27 provides the present value of the fuel costs (using a 7% discount
rate) of \$199 million using the final rule fuel cost.

Row 29 provides the re-calculated present value of the fuel costs of
\$242 million using the 121.57 percent increase in fuel costs over the
final rule fuel cost.

TABLE 1

WEIGHTED AVERAGE FUEL COST CALCULATIONS

  ---- ---------------- ---------------- ----------------- ------------ -------------- -----------------
       C                D                E                 F            G              H

  4                     **NUMBER OF HCWT                                **FUEL PRICE   **TOTAL FUEL
                        FRM SCHEDULED                                   FORECAST PER   COST**
                        PASSENGER                                       GALLON**       
                        AIRPLANES                                                      
                        AFFECTED IN EACH                                               
                        YEAR**                                                         

  5    **YEAR**         **PRODUCTION**   **RETROFITTED**   **TOTAL**                   

  6                                                                                    

  7    **2009**         **244**          **0**             **244**      **\$2.4392**   **\$595.16**

  8    **2010**         **443**          **283**           **726**      **\$2.2278**   **\$1,617.26**

  9    **2011**         **635**          **566**           **1,201**    **\$2.1859**   **\$2,625.02**

  10   **2012**         **840**          **849**           **1,689**    **\$2.1208**   **\$3,581.67**

  11   **2013**         **1,065**        **1,132**         **2,197**    **\$2.0641**   **\$4,534.36**

  12   **2014**         **1,356**        **1,415**         **2,771**    **\$2.0120**   **\$5,574.69**

  13   **2015**         **1,689**        **1,698**         **3,387**    **\$1.9670**   **\$6,661.57**

  14   **2016**         **1,978**        **2,180**         **4,158**    **\$1.9355**   **\$8,048.45**

  15   **2017**         **2,290**        **2,663**         **4,953**    **\$1.9258**   **\$9,538.49**

  16                                                                                   

  17   **TOTAL**        **2,290**        **2,663**         **4,953**                   

  18                                                                                   

  19   **CUMULATIVE**                                      **21,325**                  **\$42,776.67**

  20                                                                                   

  21   **WEIGHTED                                                                      **\$2.01**
       AVERAGE PRICE                                                                   
       PER GALLON**                                                                    

  22                                                                                   

  23   **AVERAGE PRICE                                                                 **\$1.65**
       PER GALLON IN                                                                   
       FINAL RULE**                                                                    

  24                                                                                   

  25   **PERCENTAGE                                                                    **121.57%**
       INCREASE IN FUEL                                                                
       COST**                                                                          

  26                                                                                   

  27   **PV TOTAL FUEL                                                                 **\$199**
       COST IN FINAL                                                                   
       RULE**                                                                          

  28                                                                                   

  29   **PV TOTAL FUEL                                                                 **\$242**
       COST @ \$2.01 A                                                                 
       GAL**                                                                           
  ---- ---------------- ---------------- ----------------- ------------ -------------- -----------------

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[^1]: The National Transportation Safety Board (NTSB) has been cited as
    saying 346 people, not the 239 people reported in the preceding
    paragraph, have died from these explosions. These additional
    fatalities come from a May 11, 1990, in-flight Colombia Airlines
    airplane explosion. However, that explosion was the result of a bomb
    that ruptured the fuel tank, started a fire, and destroyed the
    airplane. Many believe that a fuel tank flammability protection
    system could not have prevented that fuel tank fire after the tank
    was ruptured by the initial explosion.

[^2]: The rule addresses "high flammability" tanks -- not just HCWTs.
    Although there may be non-heated CWT airplanes that may be affected
    by the rule, for the purposes of this analysis, we focus solely on
    HCWT airplanes.

[^3]: U.S. Department of Transportation Federal Aviation Administration
    Aviation Policy and Plans, [FAA Aerospace Forecast Fiscal Years
    2007-2025]{.underline}.

[^4]: Boeing reported that 24 B-767s do not have center wing tanks and
    these 24 airplanes are not included in this analysis.

[^5]: Boeing reported that 12 B-777s do not have center wing tanks and
    these 12 airplanes are not included in this analysis.

[^6]: The B-787 is not included in the costs or benefits because it
    needs FRM to comply with its existing Part 25 certification
    requirements. Nevertheless, their data are included on the
    spreadsheets in the Appendix.

[^7]: Airbus stated in its comment that the A-330-300 does not have a
    HCWT, although the A-330-200 does.

[^8]: In order to minimize repetition, the terms "airplane" and "fleet"
    refer to only HCWT airplanes unless otherwise noted.

[^9]: Generally, all air carriers with about 5 airplanes are required to
    file a Form 41. Consequently, several very small air carriers do not
    file it because they are not required.

[^10]: The ESG forecast is found in Appendix II-1. Note that the
    forecast for passenger airplanes must be calculated as a residual
    from the forecasts for all airplanes and for cargo airplanes.

[^11]: In the Initial Regulatory Evaluation, we included airplanes that
    were available for lease but were not currently in active service in
    the total number of affected airplanes. Since then, we have
    determined that the airplane leasing industry has changed and that a
    large number of these airplanes available for lease are too old for
    economic use in the United States and, hence, not subject to the
    final rule. Therefore, these airplanes are not included in the
    number of airplanes affected by the final rule.

[^12]: This excludes the B-787.

[^13]: A list of the number of Part 91 airplanes by operator and by
    airplane model is provided in Appendix II-5.

[^14]: Jet Information Services, Inc. [World Jet Inventory Year-End
    2005]{.underline}, Section 6 Table 2, pp. 138-143 and Section 2,
    Table 2, pp. 192-197, 2006.

[^15]: The specific models in Class X (the largest-sized business jet
    category and the only ones potentially affected by the final rule)
    are the Avcraft Corporate Shuttle (all), the Embraer Legacy Shuttle
    (all), Bombardier Challenger 800, Boeing 717 VIP, Airbus ACJ, Boeing
    BBJ, Boeing BBJ2 (B-737-800), and the Avcraft Envoy 3.

[^16]: The specific forecast is provided in Appendix II-6.

[^17]: These flight hours exclude those 41.4 million that will be flown
    by the B-787.

[^18]: GRA, Incorporated, [Economic Values for FAA Investment and
    Regulatory Decisions, A Guide]{.underline}, Draft Final Report,
    Table 3-10, p. 3-14, December 31, 2004.

[^19]: Sandia National Laboratories. Sandia Report: Assessment of
    Preventing Ignition Sources with SFAR 88 Airworthiness Directives.
    November, 2005.

[^20]: For example, at the time of the first explosion in 1990, Boeing
    HCWT airplanes had logged about 25 times the cumulative number of
    flight hours than Airbus airplanes had logged.

[^21]: If the 41 million B-787 flight hours are included, the percentage
    of flight hours flown by airplanes with FRM increases to 84.9
    percent (344 million hours out of 405 million hours).

[^22]: If the B-747 production passenger airplane flight hours were
    included, it would add 41 million flight hours that would generate
    0.41 accidents.

[^23]: Although it flies in the face of common sense to talk of
    fractions of accidents (either an accident occurs or it doesn't),
    the difficulty in discussing statistical accidents of infrequent
    events is that using whole numbers can lead to significantly
    misleading results. Thus, it is appropriate to use fractions of
    statistical accidents for greater accuracy.

[^24]: This sensitivity analysis is provided in Appendix B.

[^25]: As noted earlier, there is no such thing as 0.64 of an accident.
    However, there is some accident risk associated with the 64 million
    flight hours and this fraction is a means of mathematically
    representing that risk.

[^26]: The 32^nd^ millionth flight hour (halfway point of the 63.8
    million flight hours occurs in 2035.

[^27]: It needs to be remembered that this is [not]{.underline} the
    total number of potential accidents to the U.S. air carrier HCWT
    passenger fleet because the flight hours from airplanes built after
    2017 are not included in this benefits analysis.

[^28]: We provide a example of a quantitative estimate of this effect in
    Appendix A.

[^29]: Although this estimate cannot be applied directly to the result
    from a fuel tank explosion, it demonstrates the principle that there
    can be a significantly negative effect on air travel if the public
    believes that it is unsafe (regardless of the accident's cause).

[^30]: However, people do make some distinction between an airplane and
    the airline industry. When the Pan Am explosion occurred over
    Lockerbie, the largest negative impact on trans-Atlantic travel
    occurred to Pan Am, although all airlines flying trans-Atlantic
    routes suffered extensive reductions in demand on those routes.

[^31]: Wong, Jinn-Tsai and Yeh, Wen-Chien, "Impact of Flight Accident on
    Passenger Traffic Volume of the Airlines in Taiwan," Journal of the
    Eastern Asia Society for Transportation Studies, vol. 5, October,
    2003.

[^32]: The authors specifically noted that externality effects and the
    duration of these effects for different accidents differed by
    accident severity.

[^33]: Back Aviation Solutions, US Department of Transportation Form 41
    Database, Quarterly Data, Calendar Year 2005. The complete table is
    presented in Appendix IV-1.

[^34]: We assumed that the percentage decline for scheduled air travel
    is the same as the percentage decline for chartered air travel.

[^35]: Obviously, a 3 percent growth rate and a 3 percent discount rate
    cancel each other so that the present value in every year is \$292
    million, while a 7 percent discount rate in combination with a 3
    percent growth rate is, effectively, a 4 percent discount rate.

[^36]: Federal Aviation Administration, [FAA Aerospace Forecast Fiscal
    Years 2006-2017]{.underline}, Table 13, p. 68, 2006.

[^37]: Does not include the B-737-200 and the A-380 models.

[^38]: GRA, Incorporated, [Economic Values for FAA Investment and
    Regulatory Decisions, A Guide]{.underline}, October 2004.

[^39]: Excludes the B-737-200 and the A-380 models.

[^40]: [Ibid]{.underline}.

[^41]: This excludes the B-737-200 and the A-380 models.

[^42]: The B-787 flight hours are not included in this weighted average.

[^43]: Table II-10 provides more detailed information.

[^44]: As detailed in Appendix B, there is a 6.20 percent probability
    (sum of the percentage of flight hours for all the B-747s, the
    B-777, the A-330, A-340, and the A-380) that the accident could
    occur to a large airplane with a resultant loss of at least \$900
    million.

[^45]: If the B-787 were included, the weighted average would be \$875
    million.

[^46]: The total number of flight hours differs slightly from the 364.4
    million in Table IV-3 due to rounding.

[^47]: Ten percent is approximately the percentage of passengers on
    board the Philippines Airliner who died in that explosion. We
    believe the Thailand accident is an aberration in that only the
    flight crew was on board at the time. The typical US airline tends
    to exhibit quicker turnaround during which passengers are on board a
    higher percentage of time than they are on foreign flights.

[^48]: This excludes the B-737-200 and the A-380,

[^49]: The total number of flight hours differs slightly from the 364.4
    million in Table IV-3 due to rounding.

[^50]: A SDR is a unit of account established by the World Bank. It is
    based on a combination of 4 currencies (the dollar, the Euro, the
    British pound, and the Yen). It is used as a bookkeeping device to
    settle transactions at the World Bank.

[^51]: The specific probability is 51.3 percent that the airplane would
    not have FRM.

[^52]: It should be noted that there is a 50 percent probability that
    SFAR 88 would prevent the accident that would occur to an airplane
    without FRM.

[^53]: Rather than doubling the 432 outcomes to 864 outcomes, we took a
    50 percent average of the present value of preventing the 0.64 of an
    accident that would occur during the last 64 million flight hours

[^54]: Office of Management and Budget, OMB Circular No. A-4, [New
    Guidelines for the Conduct of Regulatory Analysis]{.underline}, Mar.
    2, 2004.

[^55]: The two ARAC working groups used the same approach.

[^56]: We had used an engineer hourly compensation rate of \$115 in the
    IRE.

[^57]: In the IRE we had used a rate of \$80 an hour. The EASA used an
    estimated mechanic rate of \$78 an hour based on 15 of its European
    airlines.

[^58]: Only skilled airplane mechanics employed by the manufacturers,
    the major airlines, and the large repair stations will work on these
    FTI installations.

[^59]: As the B-787 is required to have FRM to comply with its existing
    certification, this model would incur no incremental engineering
    assessment costs due to the final rule.

[^60]: The engineering work for FRM has been completed for the A-380.
    However, it will not be installed unless required by a final rule.

[^61]: Many of the same engineers will be used on both types of projects
    and the production models will be given priority.

[^62]: If the final rule included retrofitting cargo airplanes then the
    engineering costs would increase by the costs for A-300 & A-310
    models because they are the only exclusively cargo models. This
    increase would be about \$22 million, which has a present value of
    \$18.5 million using a 7 percent discount rate and a present value
    of \$20 million using a 3 percent discount rate.

[^63]: Appendix V-3 contains a list of the individual retrofitting kit
    components with their draft ARAC unit costs that were used in the
    IRE.

[^64]: The large increase in the Boeing estimated B-757 kit cost is a
    result of Boeing reclassifying it as a B-767-sized airplane whereas
    it had been classified as a "small" airplane by ARAC. United has
    classified it as well as the A-300 and A-310 as midway between a
    small airplane and a B-767.

[^65]: These are "spares" costs, which are generally 1.5 to 2 times
    greater than the component cost when it is part of the original kit.
    As Boeing did not provide a kit ASM component cost, we used the
    spares costs to illustrate the probable ASM cost increase. Airbus
    did not provide any specific costs, but they commented that the ASMs
    had become significantly more expensive than the ARAC group had been
    informed by suppliers.

[^66]: It should be noted that Boeing is placing these FTI
    pre-installations in only B-737-NGs that have been sold to U.S.
    operators. These pre-installations are not being equipped on non-US
    registered B-737-NGs.

[^67]: The learning curve effect states that the more times a task has
    been performed, the less time will be required on each subsequent
    iteration. This relationship was first quantified in 1936 at
    Wright-Patterson Air Force Base in the United States. In the late
    1960s Bruce Henderson of the Boston Consulting Group (BCG) began to
    emphasize the implications of the experience curve for strategy and
    in 1972 published "Perspectives on Experience". This book explains
    the experience curve effect, which is an observation that the costs
    of virtually every class of products decline by a constant and
    predictable percentage over time, as a function of experience.
    Recently, in 1991, Charles J. Teplitz published the "The Learning
    Curve Deskbook" which provides a basic understanding of the
    underlying theory of learning curves, as well as ready access to
    commonly used learning curve models, formulas, and tables. .

[^68]: "[American Methods of Aircraft Production]{.underline}", T.P.
    Wright, 1939.

[^69]: Of course, using natural logs means that this is a continuous
    improvement function. The discrete example in the text is to help
    the reader understand the underlying principle.

[^70]: However, as these labor hours will occur in 2016 and 2017, the
    learning curve effects will have reduced the number of hours by
    about 45 percent. This, paradoxically, makes the actual labor hours
    higher for airplanes retrofitted during a regular maintenance
    session in the early years (2010 -- 2012) greater than the labor
    hours for airplanes retrofitted during special maintenance sessions
    in 2016 and 2017.

[^71]: This does not mean that an air carrier can actually lease an
    airplane for a day because there are substantial transactions costs
    in transporting the airplane, completing the paperwork, etc.

[^72]: GRA, Incorporated, Draft Final Report, [Economic Values for FAA
    Investment and Regulatory Decisions, A Guide]{.underline}, Table
    5-2, p. 5-4, December 31, 2004.

[^73]: Lease rates are functions of both the number of seats and the
    costs of operating the airplane. Newer airplanes cost less to
    operate and, on average, the medium airplane fleet is several years
    younger than the large airplane fleet.

[^74]: In present value terms, the savings from completing the retrofit
    in 2017 rather than in 2010 would be between \$18,000 and \$51,000
    per airplane if done during a scheduled maintenance check and
    between \$39,000 and \$103,000 if done during a special maintenance
    session.

[^75]: GRA, Incorporated[, Economic Values for FAA Investment and
    Regulatory Decisions, A Guide]{.underline}, Draft Final Report,
    December 31, 2004, Table 6-1, p. 6-7. The specific HCWT models
    listed were the following:

    AIRPLANE MODELGALLONS PER POUND PER FLIGHT HOURB-737 "Classic"
    0.0045B-747
    "NG"0.0065B-7570.0060B-7670.0050B-7770.0040A-3000.0040A-320
    Family0.0095

    For models that were not specifically reported, we applied these
    values for similarly-sized airplanes. Thus, the B-737 "NG" was
    assigned the B-737 "Classic" value, the B-747-100/200/300 was
    assigned the B-747-400 value, the B-787 was assigned the B-767
    value, the A-310 model was assigned the A-300 value, and the A-330
    was assigned the B-777 value, the A-340 and the A-380 models were
    assigned the B-747 value, and the A-350 was assigned the B-767
    value.

[^76]: In the IRE, these estimated ranges were from 761 gallons to 1,346
    gallons per year.

[^77]: In the IRE, the estimated increased fuel consumptions for
    passenger airplanes were 1,478 gallons to 5,339 gallons.

[^78]: Federal Aviation Administration, [FAA Aerospace Forecast Fiscal
    Years 2008-2025]{.underline}, Table 18, p. 77, 2007.

[^79]: The methodology and calculations for this average aviation fuel
    cost per gallon is provided in Appendix F.

[^80]: This \$2.01 a gallon price applies for air carriers. The price
    for part 91 operators will be greater - as discussed in Appendix E.

[^81]: We assumed that the entire year's flight hours are attributed to
    a retrofitted airplane in the year that it is retrofitted. This
    generates a slight upward bias to the estimated costs because the
    airplane would have flown part of the year without FTI.

[^82]: We took the average of the two costs (\$4,495) as the cost for
    the B-757 and B-767. We assigned these costs to similarly-sized
    other Boeing and Airbus models. The Boeing costs were divided by 2
    to obtain an annual cost.

[^83]: For Airbus models and for Boeing models for which Boeing did not
    provide an estimate, we assigned values based on the Boeing comment
    for similarly-sized models.

[^84]: However, if the cost were per year of future service, older
    airplanes would have greater installation costs but lower
    operational costs.

[^85]: Comair, America West, ExpressJet, Southwest, Pinnacle,
    Continental, US Airways, Alaska, Delta, Atlantic, Southeast,
    JetBlue, Atlas, Polar Air Cargo, North American, EOS, Orbis,
    Northwest, and United.

[^86]: 28 of these are on A-321s, 14 on B-737s, and 4 on MD 83s.

[^87]: Although if FRM were on the pre-conversion passenger version of
    the airplane, it cannot be removed when the airplane is converted.

[^88]: This price applies for air carriers. The price to part 91
    operators will be greater as discussed in that section.

[^89]: Foreign operators of U.S. registered aircraft operating under
    part 129 have the option of registering these aircraft outside the
    U.S. and avoiding compliance with the rule.

[^90]: World Aviation Directory and Reference USA

[^91]: Source: Peter Navarro and Aron Spencer, \"September 11, 2001:
    Assessing the Costs of Terrorism,\" Milken Institute Review, Fourth
    Quarter 2001, Milken Institute, as quoted in [The Cost of
    Terrorism]{.underline}, Daily Policy Digest, Terrorism Issues, May
    15, 2002.

[^92]: Ibid.

[^93]: Ibid.

[^94]: Ibid.

[^95]: Industry analysts estimated that the anticipated accumulated
    losses for the airline industry from 2001 to 2004 at more than \$30
    billion

[^96]: Obviously, a 3 percent growth rate exactly cancels out a 3
    percent discount rate, so that the present value of the benefit will
    always be \$1.04 billion.

[^97]: This excludes the B-737-200 and the A-380.

[^98]: This excludes the B-737-200 and the A-380,

[^99]: This excludes the B-737-200 and the A-380.

[^100]: This excludes the B-737-200 and the A-380,

[^101]: If FTI had been installed for the airplane when it was in
    passenger service, then there would be no costs attributable to the
    Alternative Rule because the costs were already incurred.

[^102]: All of the conversion cargo airplanes will enter the fleet with
    FTI, so there will be no conversion cargo airplanes without FTI
    flight hours.

[^103]: We assumed that the entire year's flight hours are attributed to
    a retrofitted airplane in the year that it is retrofitted. This
    generates a slight upward bias to the estimated costs because part
    of the year will have been flown without FTI equipment.

[^104]: We exclude the Boeing 787 since it is required to have FRM by
    its design certificate.

[^105]: Technically, there are no "part 91 airplanes"; there are
    "airplanes operated under part 91". However, for clarity of
    exposition, we use "part 91 airplanes" in the text.

[^106]: The present value table for this undiscounted value of \$74.787
    is found in Appendix C-6.

[^107]: This averaging implies that there will be fractions of airplane
    models retrofitted every year, but, for example, we do not know in
    which specific years each of the 2 B-747-400s will be retrofitted
    and averaging is simply a method to evenly spread out the costs.

[^108]: GRA, Incorporated, [Economic Values for FAA Investment and
    Regulatory Decisions, A Guide]{.underline}, Draft Final Report,
    Table 3-10, p. 3-14, December 31, 2004.

[^109]: In addition, general aviation operators pay an FAA fuel tax to
    support the air traffic control system.