# Surveillance and Broadcast Services (SBS) 260 Business Case Analysis Program DO‐

December 8, 2008

Introduction In response to the ADS-B Notice of Proposed Rulemaking (NPRM), the ADS-B Aviation Rulemaking Committee (ARC) provide d a set of thirty six recommendations to the FAA in their report dated 26 September 2008. Two recomme ndations in particular referenced the consideration of ut ilizing DO-260 equipage to ac hieve near-term user bene fits. Specif ically, the ARC’s Recommendation #6 stated “the FAA s hould enable the use of DO–260-approved equipment for non-separation applications in the NPRM business case such as conflict probe in radar airspace.” Additionall y, the ARC Recommendation #10 cite d “to approve the use of DO– 260-like equipage, the FAA should adopt, for 5 nm separations in non-radar airspace to include at least the Gulf of Mexico, European Aviati on Safety Agency (EASA) Acceptable Means of Compliance (AMC) 20–24, with appropriate m easures to ensure ADS–B integrity.”
As part of the FAA’s consideration of Recommendations #6 and #10, the SBS program developed a business case analysis to explore the associated econom ic trade-offs. An analysis was conducted for the following three alternatives:

• Alternative 1 – Accep t ARC Recommendation #6

• Alternative 2 – Accep t ARC Recommendation #10

• Alternative 3 – Accept A RC Recommendations #6 and #10



### Equipage Assumptions The magnitude of benefits associ ated with the alternatives is dependent on the level of DO-260 equipage assumed. Benefits were estimated incr ementally to those projected in the SBS Joint Resources Council (JRC) business case which estim ated equipage according to the standards defined in the NPRM. To determine how sensitive the results are to the equipage assumptions and to provide a reasonable range, two equipage scenarios were considered. The first scenario represents a lower bound and assume s benefits for the current fleet of DO-260 equipped aircraft as well as any aircraft delivered prior to 2010. All new deliveries staring in 2010 were assumed to meet the NPRM requirements in the SBS JRC bus iness case and, therefore, contribute to the baseline benefit claims. Based on data collected by Honeywell, approximately 1,300 air transport aircraft currently are equipped w ith properly functioning DO-260 avionics. This number was projected to grow to approximately 1,500 aircraft by 2010. The second scenarioassumes the current fleet of DO-260 equipped aircra ft plus acceleration in avionics upgrades for another portion of the fleet. More specifically, the second scenario assumes an additional 4,000 aircraft beyond the baseline will receive an upgrade between 2011 and 2014. Given these aircraft require some type of upgrade to partic ipate and would eventually need to meet the NPRM specifications, it was assumed that they would upgrade directly to DO-260A rather than upgrading twice: first to DO-260 and subsequently to DO-260A . These additional aircraft provide incremental benefits in the alternatives because they re present acceleration in equipage beyond the baseline. Figure 1 displays the percen tage of the air transport fleet which achieves ADS-B Out benefits in the baseline as well as the two DO-260 e quipage scenarios.

ADS-B Out Air Transport Equipage

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Scenario 2 Scenario 1 Baseline

Figure 1: Air Transport ADS-B Out Equipage Curves



### Cost Analysis There are two benefits identified and estimated in the SBS JRC business case analysis that could be accelerated based on the ARC Recommen dation #6. Both involve improving existing decision support tools, URET and TMA, by provi ding more accurate and timely surveillance input data. The benefit mechan isms and estimating assumptions are documented in the SBS Benefits Analysis Basis of Estimate Repor t dated August 2007. In order to achieve the accelerated benefit with DO-260 equipped aircraft , each ARTCC would require a fusion trackerto integrate DO-260 ADS-B with other surveillance sensor inputs. The existing en route automation tracker would not track DO-260 for current safety functions or display. This separate fusion tracker would be required to accept ASTERIX formats and more frequent updates. One tracker at each ARTCC would in terface with both URET and TMA.

To accelerate the benefits documented in the SBS Benefits Analysis Basis of Estimate Report for the Gulf of Mexico, several investments ne ed to occur to include automation upgrades, additional surveillance, RAIM prediction, and procedure updates. Auto mation upgrades include an ASTERIX interface, an aircraft certification list to ensure that DO-260 aircraft have been certified for 5nm separation, a flight plan to tr ack association based on ai rcraft call sign and/or ICAO address, ability to select validated ADS -B targets for display, assessment of RAIM availability for flight operations, and a target selection filter. Embedded in the automation activities would be the level of effort to test the upgrades and to achieve separation standards approval. External to automation, an additional three ground stations would need to be procured and maintained to support robust validation ensuring it is complete and the validation function has a high availability. Additiona lly, a RAIM prediction capability would need to be deployed. Procedures to address the inac curacies of the transponder 4096 c ode as well as changes to emergency codes would need to be developed and implemented. The pr ocedure costs include the effort to train the air traffic control workforce.
In addition to the investments specific to th e individual ARC recommendations, the FAA would need to provide increased staffing to certify DO -260 avionics. The duration for this additional support varies depending on the eq uipage scenario assumed as pr eviously discussed. Figure 2 provides the main assumptions for the FAA costs as well as the estimates in present value dollars for both equipage scenarios. As noted, aircraft certification costs are th e only FAA cost element to vary based on equipage scenarios.

Figure 2: FAA Costs (PV $K)
Avionics costs for existing DO-260 e quipped aircraft are estimated to be $15K per aircraft for an STC or service bulletin. For equipage Scenario 2, the cost to upgrade additional aircraft isequivalent to the upgrade costs in the SBS JRC bus iness case analysis. However, the upgrade is now assumed to occur in two increments, DO- 260A and then GPS augmentation, with the first increment accelerated. As a result, the costs fo r the DO-260 business case are assessed based on the time value of money associated with expend ing the first upgrade incr ement earlier than the assumed baseline.



### Benefits Analysis As mentioned, the benefits are a function of the difference betw een the baseline and equipage scenario levels. The baseline equipage curve fr om the SBS JRC business case varies for some of the individual benefit elements due to specifi c airspace or regional assumptions, however, the incremental improvement is assumed to be equi valent to the comparison of the NAS baseline equipage curve as presented in Figure 1 above. In addition to equipage, the timeframe when the application or benefit is operati onally viable was varied for the DO-260 business case. In the SBS JRC business case, the benefits associatedwith improvements to URET initiated in 2017 based on the tool being availabl e to the R-side cont roller starting in 2016. Similarly, the TMA related benefits were assumed to begin in 202 0 to be conservative in the estimate by not assessing benefits in a mixed equipage scenari o. Given the late timeframe of these starting points for the benefits and that the opportunity for incremental benefits ends in 2020 when the baseline ADS-B Out equipage r eaches full compliance, the starting point for these two benefits was accelerated to 2014 after NAS-wide deployment of ADS-B infrastructure. The capability acceleration was included for the baseline as well as across the alternatives in order to provide a window of opportunity to assess the potential benefits. The benefits within the Gulf of Mexico start in 2011 after the initial operating capabil ity is achieved in 2010 both in the SBS JRC business case and in the DO-260 business case analysis.



### Economic Analysis A comparison of incremental costs and benefits for all three a lternatives acro ss each of the equipage scenarios is presented in the figure below. It should be noted that the benefits are additive across Alternative 1 and 2 to determine th e total benefits of Alternative 3 while the costs are not. The avionics costs and the associated FAA certification costs are equivalent for all three alternatives and woul d not be additive.Figure 3: Economic Analysis Results

Alternative 1 or ARC Recommendation #6 to uti lize DO-260 for non-separation applications is cost beneficial while Altern ative 2 or ARC Recommendation #10 is not. The business case results improve when upgradeable aircraft are c onsidered to further accelerate equipage in Equipage Scenario 2, however, not to the point where Alternative 2 becomes cost beneficial.

Alternative 3 is also cost benefi cial for both equipage scenarios. If it were assumed that ARC Recommendation #6 were to be adopted based on the economic results then the analysis should next consider the marginal costs and benef its of Recommendation #10 before determining whether or not there is an economic case for pur suing. The results for Alternative #2 indicate that it is not cost beneficial on its own merits. However, to determine if the benefits outweigh the additional costs over and above implementi ng Alternative #1, the net present value (NPV) should be compared between the combined investme nt of Alternative #3 a nd that of Alternative #1. Under Equipage Scenario #1, the NPV decreas es approximately $10M indicating that the marginal costs of Recommendation #10 exceed th e marginal benefits. Assuming Equipage Scenario #2, however, the NPV increases from A lternative #1 to Alternative #3 indicating that the increased equipage would be sufficient to re sult in the Gulf of Mexico becoming a cost beneficial incremental investment option.
A major risk area is the ability to accelerate the applications in Alternative 1 as discussed in the benefits analysis description. Achieving URET benefits prior to the R-side deployment or TMA benefits in a mixed equipage environment was considered highly speculative and assumed for analysis purposes only. As mentioned, the SBS JRC business case analysis assumed later dateswhich would have greatly constrained the opportunity to achieve ear lier benefits associated with DO-260 equipage.
As mentioned, Alternative #1 requires a commitm ent by the airline indus try to certify their existing DO-260 avionics in order for the FAA au tomation systems to receive and process the surveillance data. FAA would need to invest in a fusion tracker to provide the data to the nonseparation decision support tools to avoid additional costly upgrades to the automation systems. Given the uncertainty in the econom ic results, consensus on the ai rline investment could not be reached and remains an open action item with in the Air Traffic Management Advisory Committee (ATMAC).
Furthermore, in reviewing the results with the ARC membership, users were most interested in accruing early benefits in the non-radar airspace a nd were surprised at the poor economic results for Alternative #2. Based on the SBS JRC business cas e, the user benefits in the Gulf of Mexico were substantial. However, the benefits initia te at a low level and gr ow steeply over time as demand projections exceed current non-radar capacity . As a result, the o pportunity for benefits is limited prior to 2020 and, therefore, accelerati ng benefits through the use of DO-260 doesn’t outweigh the costs to enable the operation.