1 

# MEMORANDUM

Eastern Research Group, Inc. 110 Hartwell Avenue Lexington, MA 02421

Date: February 8, 2012 To: James Covington, EPA From: Cal Franz, ERG Re: Extrapolation of Airport Impact Analysis Through 2009

EPA extended the economic impact analysis of the Airport Deicing Operations Effluent Limitations Guidelines to cover the years following the 2004-2005 baseline. A primary motivation for extending the analysis is that the air transportation industry has continually been subject to negative economic shocks. EPA initially believed the 2004-2005 season would reflect a “worst-case scenario” due to the sequence of events affecting the industry starting with the ec onomic downturn in 2001. Because it was anticipated the industry would return to a more normal financial e nvironment in the years following 2004, EPA expected if the rule was economically achievable in 2004, it w ould be achievable in the following years. However, as documented in the memorandum: Airport Deicing Operations Effluent Guideline Economic Analysis: Economic Profile Update , significant negative economic shocks continued to affect the industry. Therefore, in this memorandum, EPA extrapolates estimated compliance costs through 2009, and projects the potential economic impacts associated with t hose costs based on publicly available data.

1. Method for Extrapolating Compliance Costs

For Options 1 and 2, EPA extrapolated 2004 average annualized compliance costs to extend the analysis beyond the 2004-2005 deicing season. In this extrapola tion, capital costs were treated differently from operating and maintenance (O&M) costs. EPA held a nnualized capital costs constant in all years. Once construction is completed and equipment purchased, they become a fixed cost for the purposes of future deicing; neither the number of aircraft deiced in years 2005 through 2009, nor the price of the same capital equipment in those years affects capital expenditu res (or their annualized value) that were made in 2004. Airports pay the amortized value of those costs over time, but those do not change from year to year, even due to inflation.

The operating and maintenance (O&M) costs of perfo rming airfield deicing and collecting and treating ADF, however, are likely to vary over time. First, operating costs will vary from year-to-year as wages, gas, potassium acetate and other component prices change from year-to-year. In addition, the number of aircraft departures and thus the number of aircraft de iced will vary from year to year. To model this, EPA calculated an airport-specific O&M cost per aircraft deiced in the 2004 baseline, and inflated those costs to represent unit deicing costs for 2005 through 2009. To estimate annual O&M costs for those years, the unit deicing costs were multiplied by the number of airport-specific departures for those years. In summary, Option 1 and Option 2 airport-specific compliance costs for year 200x, were calculated as:



###        

  

x x x



### Departures Airport x PPI PPI Departures Airport Costs M & O Annual Costs Capital Annualized Costs Compliance

200 2004 200

2004 2004 2004 2002 Under Option 3, the capital costs associated with airfield deicing product substitution are treated identically as for Options 1 and 2. That is, once c onstruction is performed and equipment purchased, they become a fixed cost for the purposes of future airfield deicing. Airports pay the amortized value of those costs over time, but those do not change from year to year, even due to inflation.

O&M costs under Option 3, however, are treated differen tly than O&M costs for Options 1 and 2. Under Options 1 and 2, O&M costs will vary with aircraft operations; more departur es during the deicing season would, other things constant, increase the amount of ADF used, and thus the cost of collecting and treating that ADF. Under Option 3, weather will be the primary driver of the amount of potassium acetate used to deice the airfield. EPA assumes the weather for the 2004-2005 baseline deicing season is representative of each in-scope airport’s winter w eather. The demand for airfield deicing will vary around that baseline, but the baseline represents the ty pical weather, and therefore the typical amount of airfield deicing required. Thus, average airfield deicing O&M costs under Option 3 will increase with the cost of potassium acetate, labor, fuel, and other necessiti es for performing airfield deicing, but, in general, not the number of aircraft departures. Thus, estimated Option 3 costs are extrapolated as:

       

  
2004 200 2004 2004 200 PPI PPI Costs M & O Annual Costs Capital Annualized Costs Compliance x
x

Table 1 presents the price deflators used to account for inflation when projecting 2004 unit compliance costs through 2009 (i.e., PPI 200x /PPI 2004 in equation above).

Table 1. Deflators to Convert Compliance Costs from 2004 Dollars to Specified Year’s Dollars [a] Year Deflator 2004 1.000 2005 1.037 2006 1.074 2007 1.084 2008 1.111 2009 1.166 [a] Derived from Bureau of Labor Statistics Producer Price Index for Airport Operations (Series ID 48811).

This approach accounts for both changes in the pri ce of materials, equipment, and labor necessary to collect and treat Aircraft Deicing Fluid (ADF)-contaminated stormwater, as well as airport flight operations that affect the demand for those services. This approach implicitly assumes that the winter weather conditions reflected in the Airport Deicing Questionnaire are representative of long-term average conditions at each airport. Also implicit in this approach is that EPA makes no assumptions concerning the source of financing the capital portion of project ed compliance costs, but instead assumes costs are discounted using a 7 percent real rate to account fo r the opportunity cost of capital, and for the purposes of amortization, the project is evaluated over an assumed 20 year service life.

2. Projected Compliance Costs through 2009

Table 2 presents the projected annualized deicing compliance costs for the 2004 to 2009 period. Under the option selected as the basis for the promulgation ru le, Option 3, total annualized compliance costs in3 nominal dollars (i.e., the value of the dollar in that year) for the 198 in-scope airports range from $3.3 million in 2004 to $3.8 million in 2009. Table 2 also provides estimated compliance costs converted to constant 2006 dollars. The indices used to convert nomin al to constant 2006 dollars are listed in Table 3. Under Option 3, projected compliance costs peak in 2005 ($3.52 million), but reach their low point in 2009 ($3.47 million). As shown by the percent change in annualized compliance costs, projected costs decrease in years 2006 through 2009 (in constant 2006 dollars).

Table 2. Projected Annualized Compliance Costs, 2004 – 2009 (millions)

Option In-scope Airports Year 2004 2005 2006 2007 2008 2009 Nominal Dollars (millions) Option 1 Total 198 $73.6 $76.6 $77.4 $80.0 $79.6 $78.2 Capital $24.8 $24.8 $24.8 $24.8 $24.8 $24.8 O&M $48.8 $51.8 $52.6 $55.2 $54.8 $53.4 Option 2 Total 198 $46.4 $48.4 $50.1 $51.7 $51.9 $51.9 Capital $19.7 $19.7 $19.7 $19.7 $19.7 $19.7 O&M $26.7 $28.7 $30.4 $32.0 $32.2 $32.2 Option 3 Total 198 $3.29 $3.39 $3.50 $3.53 $3.60 $3.76 Capital $0.44 $0.44 $0.44 $0.44 $0.44 $0.44 O&M $2.85 $2.96 $3.06 $3.09 $3.17 $3.53 Constant 2006 Dollars (millions) Option 1 Total 198 $78.4 $79.3 $77.4 $79.3 $77.0 $72.0 Capital $26.4 $25.7 $24.8 $24.6 $24.0 $22.8 O&M $52.0 $53.7 $52.6 $54.7 $53.0 $49.2 Option 2 Total 198 $49.4 $50.1 $50.1 $51.3 $50.2 $47.8 Capital $21.0 $20.4 $19.7 $19.5 $19.0 $18.1 O&M $28.4 $29.7 $30.4 $31.7 $31.1 $29.7 Option 3 Total 198 $3.50 $3.52 $3.50 $3.50 $3.49 $3.47 Capital $0.46 $0.45 $0.44 $0.43 $0.42 $0.40 O&M $3.04 $3.06 $3.06 $3.06 $3.06 $3.06 Percent Change in Projected Costs (Constant 2006 $) Option 1 Total 198 -- 1.3% -2.5% 2.4% -2.8% -6.5% Capital -- -2.7% -3.5% -0.9% -2.4% -4.7% O&M -- 3.3% -2.0% 4.0% -3.0% -7.3% Option 2 Total 198 -- 1.5% -0.1% 2.4% -2.1% -4.7% Capital -- -2.7% -3.5% -0.9% -2.4% -4.7% O&M -- 4.6% 2.2% 4.5% -2.0% -4.7% Option 3 Total 198 -- 0.4% -0.5% -0.1% -0.3% -0.6% Capital -- -2.7% -3.5% -0.9% -2.4% -4.7%4 O&M -- 0.9% 0.0% 0.0% 0.0% 0.0% Source: EPA estimates.

Table 3. Deflators to Convert Compliance Costs from 2004 Specified Year’s Dollars to 2006 Dollars [a]
Year Deflator 2004 1.074 2005 1.036 2006 1.000 2007 0.991 2008 0.967 2009 0.921 [a] Derived from Bureau of Labor Statistics Producer Price Index for Airport Operations (Series ID 48811).

For comparison with changes in projected complia nce costs, Table 4 shows the number and percent change in departures and passenger enplanements at in-scope airports from 2004 through 2009.

Table 4. Commercial Airline Departures and Passen ger Enplanements at In-scope Airports by Year Year 2004 2005 2006 2007 2008 2009 Commercial Aircraft Departures (thousands) Total 9,353 9,408 9,115 9,207 8,867 8,240 Percent change -- 0.6% -3.1% 1.0% -3.7% -7.1% Passenger Enplanements (millions) Total 602.3 628.8 631.2 651.2 628.5 594.0 Percent change -- 4.4% 0.4% 3.2% -3.5% -5.5% Source: EPA analysis of BTS T-100 database.

Figure 1 compares the percent change in enplanemen ts, departures, and projected compliance costs by year. Because the method used to project compliance co sts for Options 1 and 2 is a function of aircraft departures, there is a close parallel between the per cent change in departures and the percent change in Option 1 and 2 costs. Because Option 3 costs are primarily a function of weather, and because we assumed 2004 weather was representative of weather in the following years, Option 3 costs show a slow decline as inflation reduces the real value of amortized capital costs, but otherwise show little variation.5 3. Revenue Test Analysis

After projecting compliance costs for in-scope airports for the 2005 through 2009 time frame, EPA performed an impact analysis for each year compari ng airport-specific nominal year costs with airportspecific revenues. As was the case fo r the analysis presented in the Economic Analysis (EA) document, EPA considered that compliance costs exceeding 3 percent of airport operating revenues is not economically sustainable for that airport.

The results of the revenue test are presented in Tabl e 5. The impacts under the Option 3, the basis for the promulgated standards, are consiste nt over time with only one airport projected to incur costs exceeding 3 percent of total operating revenues in each of the 6 years analyzed.6 Table 5. Number of In-scope Airports with Co mpliance Costs greater than/less than 3 Percent of Airport Operating Revenues Year 2004 2005 2006 2007 2008 2009 In-scope Airports with Projected Average Annualized Compliance Costs greater than/less than 3 Percent of Airport Operating Revenues Option 1

< 3% Number 184 185 185 185 185 185 Percent 92.9% 93.4% 93.4% 93.4% 93.4% 93.4%

≥ 3% Number 9 9 9 9 9 9 Percent 4.5% 4.5% 4.5% 4.5% 4.5% 4.5%
Not Analyzable [a] Number 5 4 4 4 4 4 Percent 2.5% 2.5% 2.0% 2.0% 2.0% 2.0% Option 2

< 3% Number 188 189 189 190 190 190 Percent 95.0% 95.5% 95.5% 96.0% 96.0% 96.0%

≥ 3% Number 5 5 5 4 4 4 Percent 2.5% 2.5% 2.5% 2.0% 2.0% 2.0%
Not Analyzable [a] Number 5 4 4 4 4 4 Percent 2.5% 2.0% 2.0% 2.0% 2.0% 2.0% Option 3

< 3% Number 195 195 196 196 196 196 Percent 98.5% 98.5% 99.0% 99.0% 99.0% 99.0%

≥ 3% Number 1 1 1 1 1 1 Percent 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
Not Analyzable [a] Number 2 2 1 1 1 1 Percent 1.0% 1.0% 0.5% 0.5% 0.5% 0.5% [a] Average annualized compliance as a percent of operati ng revenues cannot be calculated because revenue data are unavailable for these airports. More airports can be analyzed under Option 3 because several airports without revenue data are not projected to incur compliance costs. Thus, these airports can be included among those that are not impacted by the regulation despite the fact that the ratio cannot be calculated. The number of airports for each year and option may not sum to 198 due to rounding; similarly, the percent of airports for each year and option may not sum to 100% due to rounding. Source: EPA estimates.

Comparing projected airport compliance costs and operating revenues over time helps explain the consistency in the impacts measured over the 2004 th rough 2009 time frame. Table 6 lists aggregate total operating revenues as well as projected compliance cost s in both nominal and constant 2006 dollars for selected in-scope airports. 1 The fluctuations in revenues and pr ojected compliance costs track closely since projected compliance costs and revenues are both functions of departures. This is illustrated in Figure 2. Thus, if an airport is not projected to incur costs exceeding 3 percent of revenues in 2004, it is unlikely to do so throughout the fluctuations in the following years.

1 The number of airport with revenue data available va ried from year-to-year: 187 in 2009; 193 in 2004 and 2005; and 194 in 2006 through 2008 (e.g., see the final row in Table 5). To ensure that the percent change in projected costs and revenues would be unaffected by this year-to-year variation in data availability, the analysis in Table 6 and Figure 2 includes only the 187 airports with revenue data available for the entire 6 year period.7 Table 6. Airport Revenues and Compliance Costs by Year, Selected Airports [a] Year 2004 2005 2006 2007 2008 2009 Nominal Dollars (millions) Airport Revenues Total Operating Revenues $10,649 $11,262 $12,009 $12,986 $13,195 $13,176 Projected Compliance Costs Option 1 $73.5 $76.5 $77.3 $79.9 $79.5 $78.1 Option 2 $46.3 $48.3 $50.0 $51.6 $51.8 $51.8 Option 3 $3.23 $3.33 $3.44 $3.47 $3.54 $3.70 Constant 2006 Dollars (millions) Airport Revenues Total Operating Revenues $11,336 $11,670 $12,009 $12,868 $12,760 $12,137 Percent Change -- 2.9% 2.9% 7.1% -0.8% -4.9% Projected Compliance Costs Option 1 $78.3 $79.3 $77.3 $79.2 $76.9 $71.9 Percent Change -- 1.3% -2.5% 2.4% -2.8% -6.5% Option 2 $49.3 $50.0 $50.0 $51.2 $50.1 $47.7 Percent Change -- 1.5% -0.1% 2.4% -2.2% -4.7% Option 3 $3.44 $3.46 $3.44 $3.44 $3.43 $3.41 Percent Change -- 0.5% -0.4% -0.1% -0.3% -0.5% [a] Includes the 193 airports (of 198) with revenue data available for the entire 6 year period.8 4. Cost per Enplaned Passenger

EPA examined cost per enplaned passenger at each in -scope airport, and cost per passenger as a percent of average air fare at that airport. The first measure provides a characterization of how much each passenger would need to pay in order to cover the a nnualized compliance costs of the effluent guideline at that airport. The second measure places that increased cost in the context of the typical fare paid on flights departing that airport.

Table 7 reviews how projected compliance costs per enplaned passenger vary over the 2004 through 2009 time period. This analysis only examines compliance costs in constant 2006 dollars. If nominal dollars are used, cost per enplaned passenger will increase sole ly due to inflation; this would be misleading because airport costs can also be e xpected to increase at roughly the same rate, leaving the relative burden unchanged.

As demonstrated in Table 7, at least 89 percent of airports (176 of 198) are projected to incur less than $0.10 in compliance cost per enplaned passenger in an y given year under Option 3. With the exception of 2009, 189 (95.5 percent) or more airports are projected to incur costs less than $0.25 per passenger; because enplanement data were not available for 3 airports in 2009, the figures are not entirely comparable. Only one airport (0.5 percent) is pr ojected to incur costs exceeding $0.50 per enplaned passenger under Option 3.9 Table 7. Compliance Costs per Enplaned Passenger by Year in Constant 2006 Dollars

$/Epax Range [a] Number of Airports with $/Epax in Specified Range by Year 2004 2005 2006 2007 2008 2009 [b] Option 1 $/Epax < $0.10 Number 161 161 157 157 157 156 Percent 81.2% 81.3% 79.0% 79.0% 79.0% 78.5%

$0.10 ≤ $/Epax < $0.25 Number 14 14 18 23 20 13 Percent 7.3% 7.3% 9.2% 11.4% 9.9% 6.7%

$0.25 ≤ $/Epax < $0.50 Number 11 12 8 7 10 15 Percent 5.5% 6.0% 4.0% 3.5% 5.0% 7.7%

$0.50 ≤ $/Epax Number 12 11 15 12 12 11 Percent 6.1% 5.5% 7.7% 6.1% 6.1% 5.5% Option 2 $/Epax < $0.10 Number 164 164 161 161 161 161 Percent 82.7% 82.7% 81.0% 81.0% 81.0% 81.0%

$0.10 ≤ $/Epax < $0.25 Number 15 15 17 22 19 11 Percent 7.8% 7.8% 8.7% 10.9% 9.4% 5.7%

$0.25 ≤ $/Epax < $0.50 Number 11 12 9 8 11 16 Percent 5.5% 6.0% 4.5% 4.0% 5.5% 8.2%

$0.50 ≤ $/Epax Number 8 7 11 8 8 7 Percent 4.0% 3.5% 5.7% 4.0% 4.0% 3.5% Option 3 $/Epax < $0.10 Number 176 178 178 178 176 176 Percent 88.8% 89.5% 89.5% 89.5% 88.8% 88.8%

$0.10 ≤ $/Epax < $0.25 Number 13 12 15 15 16 10 Percent 6.8% 6.0% 7.5% 7.5% 8.2% 5.2%

$0.25 ≤ $/Epax < $0.50 Number 8 8 5 5 5 8 Percent 4.0% 4.0% 2.5% 2.5% 2.5% 4.0%

$0.50 ≤ $/Epax Number 1 1 1 1 1 1 Percent 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% [a] $/Epax: airport-specific annualized complian ce costs/airport-specific enplaned passengers. [b] Three in-scope airports could not be eval uated in 2009 due to lack of enplanement data.10 After calculating nominal annualized compliance cost per enplaned passenger at each airport, EPA then divided this value by that airport’s average airfare fo r that year. Average airfares by airport and year were downloaded from the BTS website. BTS calculates the average airfare from a 10 percent sample of all airline tickets (the Passenger Origin and Destination (O&D) Survey); the fare in cludes taxes and fees such as PFCs, but excludes other fees such as baggage fees. The sample also does not account for bulk discount fares or frequent flier tickets, and theref ore does not represent average airline revenue per passenger from that airport. However, it is the b est representation available of the price paid by passengers, and cost as a percentage of the average fare provides a characterization of how much demand might decrease as a result of the ELG.

Table 8 provides the results of these calculations. Under Option 3, which was used as the basis for promulgation, compliance costs per passenger compose l ess than 0.1 percent of the average airfare at all but one in-scope airport in 2004 through 2007. Comp liance costs per passenger exceed 0.1 percent of average airfare at only three to nine airports, but in no case do they exceed 0.35 percent of average airfare.

Table 8. Nominal Compliance Cost per Passenger as Percent of Airport-Specific Average Airfare

Compliance Cost as % of Average Airfare [a] Number of Airports with Cost per Passenger as % of Average Airfare in Specified Range [b]
2004 2005 2006 2007 2008 2009 Option 1 $/Avg Airfare < 0.10% 173 175 174 174 176 169 0.10% < $/Avg Airfare < 0.35% 12 15 15 15 12 18 0.35% < $/Avg Airfare 3 3 3 3 4 5 Option 2 $/Avg Airfare < 0.10% 177 180 179 179 181 173 0.10% < $/Avg Airfare < 0.35% 11 13 13 13 11 19 0.35% < $/Avg Airfare 0 0 0 0 0 0 Option 3 $/Avg Airfare < 0.10% 187 191 191 191 189 183 0.10% < $/Avg Airfare < 0.35% 1 1 1 1 3 9 0.35% < $/Avg Airfare 0 0 0 0 0 0 [a] Calculated as the total annualized compliance cost per enplaned passenger at each airport divided by that airport’s average air fare. [b] Average airfare available for 188 airports in 2004, and 192 airports in 2005 through 2009.

5. Cost per Available Seat-mile

EPA projected the impact under the promulgated option of nominal annualized compliance costs per available seat mile (ASM) on flights departing in -scope airports over the 2004 through 2009 time frame. ASM is perhaps the most basic measure of the suppl y of air transportation passenger service. Thus, the analysis approximates the impact of the effluent guideline on the supply of air transportation services.

Due to data limitations, EPA examined impacts to cost per ASM in two different ways. The Bureau of Transportation Statistics provides airport-specific data on ASM on all flights departing that airport. Thus, EPA can calculate the absolute value of the increased cost per ASM attributable to the rule on an airport-11 specific basis. This allows a comparison of impacts between airports.

However, an economically more significant analysis would examine projected compliance costs per ASM relative to airlines’ pre-regulatory operating cost pe r ASM; this would essentially measure the decrease in supply of ASM attributable to the rule. However, airline operating costs for flights departing specific airports are not available. Therefore, this analys is can only be performed on a system-wide basis, and EPA can estimate an overall impact on the supply of air transportation services, but not the impact on supply at any given airport. Hence, EPA chose to pr esent both analyses, neither one of which completely characterizes potential impacts, but both of which provide relevant information. To perform these analyses, EPA obtained airport-specific ASM, system -wide ASM by airline, and system-wide airline operating cost from BTS (2010) for each year in the 2004 through 2009 time frame.

Because ASM data were not available for all airports , EPA performed the airport-specific analysis on 31 of the 37 airports projected to incur costs under Option 3 in 2004; these six airports without ASM data account for $1.04 million of the $3.29 million (31.6 percent) in total annualized compliance costs. However, in 2005 through 2009 only two of these airports do not have ASM data available, and they total less than $12,000 per year (0.3 percent) in each of t hose years. Under Options 1 and 2, EPA evaluated 40 of 198 airports projected to incur costs; however, these 40 airports account for almost 98 percent of annualized compliance costs under those options.

Table 9 summarizes the results of this analysis. U nder Option 3, no airports are projected to incur constant dollar compliance costs exceeding 1/10 th of one cent per ASM in 2004, or 2007 through 2009. In 2005 one airport, and in 2006 three airports are pr ojected to incur constant dollar compliance costs exceeding 1/10 th of one cent per ASM.12 Table 9. Airport Compliance Costs per A vailable Seat-mile on Airport Departures

Compliance Costs per ASM Number of Airports With Compliance Cost per ASM in Specified Range
2004 2005 2006 2007 2008 2009 Nominal Dollar Annualized Compliance Cost per ASM Option 1 [a] $/ASM < $0.0005 24 24 24 26 26 26 $0.0005 < $/ASM < $0.001 10 11 8 8 8 7 $0.001 < $/ASM 6 5 8 6 6 7 Option 2 [a] $/ASM < $0.0005 28 28 28 30 30 30 $0.0005 < $/ASM < $0.001 11 11 9 9 9 8 $0.001 < $/ASM 1 1 3 1 1 2 Option 3 [b] $/ASM < $0.0005 186 186 186 189 189 189 $0.0005 < $/ASM < $0.001 8 9 7 7 7 6 $0.001 < $/ASM 0 1 3 0 0 1 Constant Dollar Annualized Compliance Cost per ASM Option 1 [a] $/ASM < $0.0005 23 24 24 26 26 26 $0.0005 < $/ASM < $0.001 11 10 8 8 8 8 $0.001 < $/ASM 6 6 8 6 6 6 Option 2 [a] $/ASM < $0.0005 27 28 28 30 30 30 $0.0005 < $/ASM < $0.001 12 11 9 9 9 9 $0.001 < $/ASM 1 1 3 1 1 1 Option 3 [b] $/ASM < $0.0005 186 186 186 189 189 189 $0.0005 < $/ASM < $0.001 8 9 7 7 7 7 $0.001 < $/ASM 0 1 3 0 0 0 [a] The 40 airports included in this analysis account for more than 97 percent of projected compliance costs each year. [b] In addition, six airports in 2004, and two airpor ts in 2005 through 2009 could not be analyzed because ASM data were not available.
Table 10 presents EPA’s estimated baseline airline operating cost per ASM for each year of the 2004 through 2009 time frame. EPA edited the list of airline in cluded in the analysis to remove those that:

 operate almost exclusively in Alaska;

 operate primarily in Hawaii, Caribbean, and Micronesia,

 predominantly provide cargo services, or are13  niche airlines that offer high cost service to relatively small numbers of passengers.

Most of these airlines were excluded from the analysis because they are unlikely to be representative of airlines operating from in-scope airports (e.g., Con tinental Micronesia). With the exception of Alaska Airlines, Alaskan airports and airlines were exclude d from the analysis because their financial operating environment differs significantly from that of the 48 c ontinental states; furthermore, most of these airlines utilize propeller-driven aircraft with significantly hi gher operating cost per ASM. Finally, airlines that offer primarily cargo services, and niche passenger airlines that operate at a high cost per ASM are not representative of most passenger airlines, and were therefore excluded from the analysis. Although a large number of airlines are excluded from the analysis, th e airlines included in the analysis account for well over 95 percent of ASM flown each year by all U.S. airlines.

EPA estimates that cost per ASM (in nominal dollars) ranges from $0.1131 in 2004, peak at $0.1504 (due to the spike in fuel prices) and returns to $0.129 in 2009. Under Option 3, nominal annualized compliance costs range from $0.000022 to $0.000026 per domestic ASM on flights departing from in-scope airports. Thus, under the promulgated rule, airline cost per AS M is projected to increase on average less than 0.02 percent on departures from in-scope airports. These departures account for roughly 15 percent of systemwide ASM. Including total departures in the analysis decreases the projected incremental cost per ASM to no more than 0.013 percent of baseline airline cost per ASM. However, this incremental cost is incurred on about 24 percent of system-wide ASM.14 Table 10. Annualized Compliance Cost Impacts on Airline Cost per Available Seat-mile [a, b]

Metric Year
2004 2005 2006 2007 2008 2009 Average Airline Operating Cost per ASM $0.1131 $0.1204 $0.1254 $0.1272 $0.1504 $0.1290

Option 1 Annualized compliance costs per in-scope airport domestic ASM $0.00050 $0.00050 $0.00051 $0.00051 $0.00052 $0.00054
Compliance cost per ASM as percent of airline cost per ASM 0.44% 0.42% 0.41% 0.40% 0.34% 0.42%
In-scope airport domestic ASM as percent of system-wide ASM 15.0% 15.0% 14.8% 15.2% 15.2% 15.0%
Annualized compliance costs per in-scope airport total ASM $0.00034 $0.00033 $0.00033 $0.00032 $0.00032 $0.00033
Compliance cost per ASM as percent of airline cost per ASM 0.30% 0.28% 0.26% 0.25% 0.21% 0.26%

In-scope airport total ASM as percent of system-wide ASM 22.3% 22.6% 23.0% 24.0% 24.5% 24.6%

Option 2

Annualized compliance costs per in-scope airport domestic ASM $0.00031 $0.00032 $0.00033 $0.00033 $0.00034 $0.00036

Compliance cost per ASM as percent of airline cost per ASM 0.28% 0.26% 0.27% 0.26% 0.22% 0.28%

In-scope airport domestic ASM as percent of system-wide ASM 15.0% 15.0% 14.8% 15.2% 15.2% 15.0%

Annualized compliance costs per in-scope airport total ASM $0.00021 $0.00021 $0.00021 $0.00021 $0.00021 $0.00022

Compliance cost per ASM as percent of airline cost per ASM 0.19% 0.18% 0.17% 0.16% 0.14% 0.17%

In-scope airport total ASM as percent of system-wide ASM 22.3% 22.6% 23.0% 24.0% 24.5% 24.6%

Option 3

Annualized compliance costs per in-scope airport domestic ASM $0.000022 $0.000022 $0.000023 $0.000023 $0.000023 $0.000026

Compliance cost per ASM as percent of airline cost per ASM 0.020% 0.019% 0.019% 0.018% 0.016% 0.020%

In-scope airport domestic ASM as percent of system-wide ASM 15.0% 15.0% 14.8% 15.2% 15.2% 15.0%

Annualized compliance costs per in-scope airport total ASM $0.000015 $0.000015 $0.000015 $0.000014 $0.000015 $0.00001615 Compliance cost per ASM as percent of airline cost per ASM 0.013% 0.012% 0.012% 0.011% 0.010% 0.012%

In-scope airport total ASM as percent of system-wide ASM 22.3% 22.6% 23.0% 24.0% 24.5% 24.6%
[a] All compliance costs are included for in-scope airpor t compliance cost per ASM, although ASM for all in-scope airports are not included. With the excep tion of Alaskan Airlines, airlines and in -scope airports in Alaska are excluded from the analysis. [b] EPA did not perform a constant dollar analysis of cost per ASM because the cost of airport operations (used as the basis for estimating constant dollar compliance costs) most likel y grew at a substantially different (and lower) rate than the cost of airline operations due to the spike in jet fuel prices.

6. Conclusion

The analysis presented in this memorandum demonstr ates that the economic impacts projected for the 2004 – 2005 deicing season remain stable when complia nce costs are extrapolated through 2009, despite the worsening of the financial conditions of the industry over that time. Although airport financial resources declined in some years due to the reducti on in air traffic, compliance costs associated with airfield deicing product substitution are generally such a small percent of operating revenues that most airports have adequate resources relative to the projected cost of the rule.

In addition, EPA does not draw the conclusion that this effluent guideline is economically achievable solely on the basis of the airport revenue test. EPA examined a number of metrics, and concluded that because:

 Total annualized compliance costs exceed 3 percen t of operating revenues for a single airport;

 Compliance costs are low per enplaned passenger, both as an absolute value, and as a percent of average air fares, and

 Compliance costs are low relativ e to baseline cost per ASM;

the airport deicing operations effluent guideline is economically achievable.