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Set off
CREDOS project
implementation
Operation Costs
........
Operational Benefits
Figure 21: CBA Timeline
As we can see in the figure shown above, it was assumed for the study that the
implementation of CREDOS project would be carried out during the year 2009. The new
system will begin to be operative in the year 2010 and will be operational in the following
years. The CBA study will analyse the period highlighted (from 2009 to 2028).
Although this is clearly a non-realistic timeline in terms of start of operations, we have
preferred to make this assumption in order to use as precise as possible starting data
(traffic, etc). We understand that this assumption is acceptable in the current level of
development of the CREDOS project.
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6.5 Baseline do nothing option.
6.5.1 Scenario description
Madrid-Barajas Airport has four runways which are working in single operation mode.
That is, there are two runways for departures and two runways for arrivals.
The airport operates in two possible configurations; North and South (see section 3.1).
6.5.2 Demand analysis
Looking at the European situation, and before the analysis of the traffic demand
prediction or the future traffic demand, we know through some reports that more airport
capacity is needed.
The EUROCONTROL Performance Review Commission Report (PRRC7) published in
mid-2004 recorded that the cost and impact of airport-related delays had reached parity
with those for en-route and noted that airports were now a major constraint to growth.
The EUROCONTROL Constraints to Growth study reached the same conclusion. It
predicts that if the traffic demands continue to grow, even at a conservatively predicted
rate, and airport throughput capacity problems are not resolved, some thirty percent of
traffic demand will not be accommodated. Interest in the potential capacity gains from
Wake Vortex (WV) research has increased in recent years, as part of the general need
to increase airport capacity and resilience without extension of the existing airport
infrastructure.
The evolution of the number of movements affected by CREDOS has been assumed to
be equal to the evolution of the demand in the period of the study (2009-2029), extracted
from Aena and medium and long term STATFOR forecast [1], [3]):
Madrid-Barajas Airport.
Annual Operations
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
550000
600000
650000
700000
750000
800000
850000
900000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Year
O
p
e
r
a
t
i
o
n
s
Figure 22: Madrid Barajas Traffic demand
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As we can see from the bar chart above, the number of operations per year at Madrid-
Barajas airport is expected to increase with time. It can be noted that this increase is
expected to be very important and almost linear in time (there are no abrupt changes in
the number of operations), moving from almost 550.000 operations in 2009 to more than
900.000 in 2029 which means almost doubling the number of operations which need to
be managed by the airport in twenty years.
The traffic demand applicable to the CBA study is only the movements associated to
operations in a single departure runway when in South configuration. That is, only one
quarter of the total traffic of the Madrid Barajas when in South Configuration (15% of the
time) is taken into account in the CBA performance, because only this part of the traffic
is really affected by the CREDOS project operation.
6.6 Approach to the cost analysis
6.6.1 Investment Cost
This cost includes all non-recurring cost from the early equipment acquisition up to the
operational readiness of the system. This group of cost covers:
R&D costs: Costs incurred during the process of Research and Development. It
would be recommended to consider the cost of this study (CREDOS) as part of
R&D costs in future analyses. The cost of this project is co-financed by the
European Commission within the Sixth Framework Programme
Acquisition cost: procurement cost including acquisition of spares
Integration and installation cost
Cost of testing and validation
Commissioning and certification cost
At the present level of maturity of the CREDOS project, it is very difficult to obtain some
of the above costs as, for instance, there is no clear architecture defined for the system
yet. In order to solve this problem, a global value for infrastructure costs (including
replacement) was provided by Expert J udgement within the project team in WP4; this
figure was reused for the present study (see Table 14).
6.6.2 Operating Cost
Expenditure associated to the operating phase of the Operational Improvement
including:
Staff (operating and support staff, internal or external).
Operations (maintenance cost, repair, materials, leasing, etc
Overhead: Other costs like administration, repayment, loans.
In this study it is considered that there is no new staff cost from the implementation and
operation of CREDOS. Other operating cost linked to the Operation activity, such as
maintenance, repair, reposition, etcare included in the study.
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6.6.3 Transition Cost
The main transition costs are:
Cost which occur when it is necessary to maintain parts of the current system
during the transition period to a new system.
Training cost: Cost of the training for each stakeholder if it were necessary:
In this case only controllers need training. The analysis of these training needs is done in
section 5. Training includes the cost of a plan which will include 2 hours of theory and 4
hours of practice. 200 controllers will receive this training.
In the present study, it is not necessary to keep parts of the initial system during the
transition period. Only training cost would be included.
6.7 Approach to benefit analysis
The first purpose of the CREDOS concept (Conops B) is to suspend the wake
turbulence time and distance separations up to ideally 60 sec while maintaining
minimum 3 NM (for following on a diverging upwind SID) radar separation and 100 sec
while maintaining 5 NM radar separation (for aircraft following on the same or downwind
SID and where 5 NM have to be applied either because of en-route separations or
because of the 5 NM separation required at a later phase than initial climb phase).
The application of reduced or suspended wake vortex separations has the potential to
significantly increase the efficiency of departure movements by the reduction of
(intermediate) delays and to increase the maximum number of movements per runway.
In order to obtain the benefits explained above, from a safety point of view, a reduction
of wake turbulence separations can be envisaged provided that the crosswind
component transports the wake vortices out of the runway in a shorter lapse of time than
the one applied between two departures. In todays operations on a larger airports the
minimum separation for aircraft on the same track is imposed by the radar constraints (3
NM) which represents approximately a 1 minute time spacing when departing from a
runway. According to the ICAO wake turbulence rules the potential improvement brought
by a CREDOS concept will mainly focus on the suspension of the wake turbulence
separations between:
MEDIUM and LIGHT behind HEAVY (today 2 min and 5 NM)
LIGHT behind MEDIUM (today 2 min and 3 NM)
In this section we identify two main benefits which came from the simulations made in
this deliverable, always under the assumptions and hypothesis made in the Operational
Study (section 3).
6.7.1 Delay decrease
The standard figure for cost per minute of delay includes cost as: fuel, maintenance,
crew, passenger compensation and passenger opportunity costs; it is estimated as 51
[6]. Delay decrease of the aircrafts in queue is the main intuitive benefits from the
CREDOS operation. We must not forget that CREDOS offers a punctual increase of
capacity of the system which can be translated into a delay reduction. This reduction of
the delay has been analysed in the Operational Study trough the simulations described
in section 3.6.
Page 56
6.7.2 Environmental benefits: Decrease of the CO2 emissions
The reduction of time in queue due to the implementation of CREDOS will mean a
reduction on the emission of contaminants from the airport, as well as savings for the
airlines that will need to pay fewer rights to contaminate.
Taking into account the agreement reached by the members of the EU, from 2012 on,
civil aviation will be included in the community system of the CO2 emissions trade. The
normative will be applied on all the flights that land or take off in EU airports.
The agreement mentioned above states that airlines will have to pay for the right to
contaminate, as other industries do. In case of surpassing their limit of emissions, they
will be obliged to buy supplementary rights in other industries markets.
The table below shows the aircrafts fuel consumption during queuing and therefore with
their engines on. Taking into account Madrid-Barajas eight most representative aircraft,
we can calculate the mean CO2 emitted per aircraft. In order to do this, we obtain the
corresponding CO2 emissions from these aircrafts fuel consumption: the combustion of
a ton of fuel causes the emission of approximately 3.15 tons of CO2 [5], values which
are indicated in the table below.
Type of aircraft
[7]
Fuel burn (kg/min)
[6]
CO
2
Emissions
(Tn/min)
AIRBUS A320 10,50 0.023
AIRBUS A319 10,50 0.035
AIRBUS A321 11,17 0.036
BOEING 737/800 11,50 0.040
BOEING 737-800 11,50 0.053
MCDONNELL
DOUGLAS MD87
16,70
0,05
AIRBUS A340-300 12.40 0,04
BOEING B757/200 13,67 0,04
WEIGHT
AVERAGE
11.20 0.035
Table 13: Fuel burn and CO
2
Emissions
6.8 Economical Study
6.8.1 Costs and benefits in economical terms
Not all the costs and benefits listed in the previous sections were included in the
economical study. Some of them were eliminated for the lack of information or for being
irrelevant.
In this section, we have analysed the costs and benefits which have been taken into
account in the economical model.
Page 57
Stakeholder Cost / Benefit Base Value Units
Training Cost 0.4 K/training hour
1
Thousand of euros
Infrastructure Cost 5000
2
Thousand of euros
Operating Costs 140 (yearly) Thousand of euros
A
N
S
P
/
A
T
C
Replacement
750 (every seven
years)
Thousand of euros
Saving delay costs 0.051 Thousand of euros/min
A
I
R
L
I
N
E
S
Fuel burnt reduction
(CO2 reduction)
0.05918
Thousand of euros / Ton
A
I
R
P
O
R
T
None 0 0
Table 14: Cost and benefits in economical terms
6.8.2 Assumptions
In order to carry out the CBA analysis the following assumptions have been taken into
account:
6.8.2.1 Economical assumptions
The monetary unit used is the Euro ().
Constant prices referred to the year 2009 have been used, inflation and discount
tax were not be included;
Following EMOSIAs recommendations, a 8% discount rate was applied;
No external financing was assumed to exist, and therefore all resources would be
the companys own resources;
1
Expert judgment from Aena/INECO
2
Expert judgment from CREDOS partners
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6.8.2.2 Technical assumptions
Incremental costs and benefits were taken into account, this is, all which
appeared when compared to the Base Line;
A global model was developed considering costs and benefits as part of the
whole system, without making any distinction between the two most important
parts involved (stakeholders): air space users and air navigation service
providers;
Due to the nature of the air navigation service provider, it will not be able to
provide benefits. All the costs incurred by the service provider will be made up for
by a fee system (full cost recovery). The calculation of the fee, which represents
a cost for the airspace users, has not been included in this study;
The period ranging from 2009 to 2028 was established as time horizon for the
economical study;
The costs derived from the system operation (e.g.: maintenance) were
considered as 20% of the total costs of the implementation of the system;
The mean price for CO2 was considered as the value published on the 23rd of
J une 2009.
This studys Operational assumptions were included:
o For different reasons such as meteorological ones, CREDOS will only be
used 75% of the total time and in the South configuration (runway 15L)
o The delay will be reduced 0.6 minutes/aircraft during the first year and will
increase 21% during the following years
o CREDOS will have a go/no-go display that shows when CREDOS can be
applied. Pilots always decide go. CREDOS will produce benefits only
when is active. It was estimated that CREDOS separations will be only be
applicable 15% of the time (see section 0)
6.8.3 Net Present Value and Net Cash Flow
The NPV is a measure of assets based on the discounted cash flow; future cash flows
are discounted to their value now.
Otherwise, it is the difference between the present value of cash inflows and the present
value of cash outflows.
The NPV is obtained through the formula below:
The Net Present Value of the implementation and operation of CREDOS project in
Madrid-Barajas, calculated for the period of the study 2009-2028 is 42.02 M
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The cash flows in this period are shown in the figure below.
Figure 23: Net Cash Flow
As we can see in the figure, the most negative cash flow is in year 2009, because in this
year the ANSP incurs in the implementation costs: acquisition of the necessary
elements, installation, trials, etc.., of the CREDOS system.
From 2010, when the benefits appear from the delay cost reduction, the benefits start to
appear. From 2012, as another benefit appears (saving in the payment of the CO2
emission rights), the cash flows start be more and more positive and keep increasing as
the demand is also growing. Each year has higher cash flows than the previous year
because cash flows depend on the traffic demand: If there are more flights, the delay
reduction is bigger for each flight. Although the saving on the payment of CO
2
per aircraft
is constant, as the demand is increasing the total saving from this concept also
increases. There are only two exceptions: years 2016 and 2023. Here, we can see a
smaller increase of the benefits than in the other years because the model takes into
account the cost of the replacement. The cost of the replacement is assumed to happen
every seven years.
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6.8.4 Sensitivity Analysis
This section analyses the influence of the individual parameters in the final results
(NPV).
The value of the following parameters is considered in a range from the best case
(optimistic view) to the worst case (pessimistic view). For instance it is considered that in
the best case the infrastructure costs would be 10% less than the base case considered;
likewise, in the worst case a 10% increase over the base case is considered.
Parameter Best case Base case Worst case
Infrastructure
Costs
Total value
(installation,
Equipments,
elements..)
-10% 5 000 K +10%
Maintenance,
salaries..
100 K 140 K 180 K
Operational Costs Replacement
(each seven
years)
500 K 750 K 1000 K
CBA, Safety
Studies...
Not included Not Included Not included Non Recurring
Costs
Training -15% 480 K +15%
Benefits from delay reduction in
queue
-10% 0.051 K/min +10%
Environmental Benefits (CO2
Emissions costs)
-10% 0.013K/ton +10%
Table 15: Parameter ranges for sensitivity analysis
The sensitivity analysis, that is, the analysis of the NPV with respect to the parameters
ranges listed in the table above, are represented in the following Tornado Diagram:
Page 61
Figure 24: Sensitivity Analysis. Tornado diagram
The data shown in the previous figure reflects the existence of three variables whose
weight is, in different measure, relevant for the calculation of the NPV:
Demand variation percentage: It is the variable with the greatest weight in the
analysis, with a total weight of 63.7% on the NPV. It indicates that the NPV is
very sensitive to changes in demand. As a result, with a 13% increase in the
demand, the NPV can reach values of around 47M. We should also remember
that the demand will determine both the benefit due to decrease in delays (the
more aircraft there are, the greater the delay and therefore the greater the
possibility to reduce it), and the one due to the greater number of aircraft in the
system, as the total savings coming from the decrease in the delays and in the
CO
2
production will be greater.
Delay costs per minute: This variable has a weight of 38.6% on the NPV. If the
delays cost is 51 euros per minute, the NPV will have a value of 42 M. If we
shift the cost of the delay 10% the NPV will reach almost 44M in the positive
case, and 37M in the negative. Therefore, the NPV is very sensible to the
estimation of the delay cost per aircraft.
Implementation costs: Costs in infrastructure, although relevant, do not have a
very significant weight in the NPV. With a weight of 3%, the cost of infrastructure
which involves introduction, verification and approval of all the elements
necessary to launch CREDOS can make the NPV shift between 41.5 and 42.5
M, considering a 10% range in the cost.
6.8.5 Risk Analysis
The risk analysis will be performed with the aid of a probability curve which is shown in
the figure below and which enables us to know the probability of the NPV obtained from
this exercise being exactly that or smaller.
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Figure 25: Probability Curve. Risk analysis
As we can see from the figure, with the economical information used for the model, there
is a 50% probability that the NPV will be exactly the value obtained (42M) or smaller,
and a 90% probability that the NPV will be smaller than 49M.
The probability curve also indicates that the NPV cannot be smaller than 36M, because
there is a 0% probability of this happening.
6.9 CBA conclusions and recommendations
The CBA described in this document relative to the introduction and operation of the
CREDOS Project at the Madrid-Barajas airport, has been carried out taking into account
two types of benefits due to the introduction of this system (the reduction of delay and
the reduction of CO
2
emissions).
After having developed the economical model following the EMOSIA methodology and
taking into account all the assumptions mentioned in this document, the analysis of the
results enables to state that the necessary investment for the introduction of CREDOS in
Madrid-Barajas airport is an investment project which offers positive results in the period
considered, as the NPV brought up by the study is 42M. On the other hand, carrying
out the investment implies a very small risk, as there is a 0% probability of the NPV
being less than 36M.
For these reasons, the introduction and operation of CREDOS at Madrid-Barajas would
be considered advisable from an economic point of view as, compared to the base-line
described before (do nothing), the introduction of the project offers low risk positive
results.
The CBA carried out also identifies the variables whose relative weight with respect to
the NPV is relevant: traffic demand, delay decrease and infrastructure costs. Faced with
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big variations in any of these parameters, a considerable variation in the result obtained
will occur. We must highlight that the variable with the biggest weight is the demand
variation (63.7% out of the NPV value), so there is a need to focus more attention on the
analysis of this variable, and if possible, perform a detailed study of it. We should take
into account that demand is given by external factors (GDP, transport development
parallel to aviation such as trains, roads, etc, or simply the passengers time or security
perception), which can modify its value without taking into account the project we are
studying.
It is important to highlight as part of these conclusions that the analysis was performed
using a global model, that is considering costs and benefits as part of the whole system,
without making any distinction between airlines and ANSPs. It is clear that in this first
analysis the ANSPs would bear the costs while the airline will enjoy the benefit, but
assuming the current Full Recovery System of the ANSP, the cost would eventually be
transferred to the airlines, so it is reasonable to consider a global model.
The realisation of a more precise analysis of the costs included under infrastructure
costs is also advisable, as their influence in NPV is not negligible, and we could re-
adjust these values or study the sensitivity which each one of them brings up.
We can conclude that although the introduction and operation of CREDOS is
recommended by the positive results offered by the CBA, due to the fact that its results
depend to a large extent on a variable impossible to control as the demand, a more
detailed study of this variable is recommended. We should remind ourselves that we
have obtained the demand data from the data offered by AENA in 2007 (last values
published by the Service Provider), which is, without doubt, more positive than the data
offered by more recent studies.
Page 64
7 Methodology used and guidelines
The following graph shows in a logical sequence the activities carried out in the present
study to serve as a guideline other case studies aimed at analysing the applicability of
CREDOS in other airports. The detailed description of the steps has been already
explained in the previous sections.
Figure 26: Case study methodology
After the initial analysis, where we could get a feeling if the use of CREDOS could be
justified (for instance if there is no crosswind or if the mix has few Heavy-Medium pairs),
the path followed by INECO takes in parallel the detailed Operational analysis and the
Human Factors analysis, which would feed into the Cost Benefit analysis at the end.
Once the system components and architecture of CREDOS is further defined, another
analysis should be undertaken (we only did it briefly in the present case study), and that
is the Interoperability analysis to check the necessary additions or modifications in the
current airport systems. These findings will also feed the Economic analysis.
The present guidelines propose a case study at the present level of development of
CREDOS, which would give an impression of the applicability and some initial figures.
For the actual operational implementation of CREDOS at an airport, before the actual
investment is done, a more detailed study would need to be undertaken; the steps
should not be very different from those proposed in the present study, but they should be
performed with a greater level of detail and definition.
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8 References
[1] CREDOS D4.2 Initial CREDOS Concept of operation version B, Mar 2008
[2] EUROCONTROL Medium-Term forecast. IFR flight movements 2004-2014, Feb
2008
[3] EUROCONTROL Long-Term forecast. Flight movements 2008-2030, Nov 2008
[4] CREDOS. D4.7 CREDOS Preliminary System Safety Assessment, Sept 2008
[5] Report prepared by Air Nav, J un, 2009 (www.airnav.com/fuel/report.html)
[6] Standard Inputs for EUROCONTROL Cost Benefit Analysis, 2007 Edition
[7] Aena Traffic Statistics (2008)
END OF DOCUMENT