International Civil Aviation Organization

World-wide CNS/ATM Systems

Implementation Conference

Rio de Janeiro, 11 – 15 May 1998

WW/IMP-WP/35

8/4/1998

Item 3

Agenda Item 3:	Financial matters

ECONOMIC ISSUES RELATING TO THE TRANSITION TO CNS/ATM

(Presented by International Air Transport Association (IATA))

Action Paper

Summary

The purpose of this paper is to reiterate the concerns, from an economic and financial point of view, that the commercial air carriers have regarding the transition to the CNS/ATM systems.

1.	Introduction

1.1	At an early stage in the development of the new ICAO satellite-based CNS/ATM system, it was recognized that the full benefits would only accrue if the transition is carefully planned and full, global implementation is ensured. Therefore, when ICAO established the FANS Phase II Committee (1993), one of its principal terms of reference was:

"To develop a global co-ordinated plan, with appropriate guidelines for transition, including the necessary recommendations to ensure the progressive and orderly implementation of the ICAO global, future air navigation system in a timely and cost beneficial manner."

1.2	However, transition will be progressively achieved at the regional level, and clearly there will be benefits to be obtained from selective application of the various components to meet the needs of a particular region or situation.

1.3	IATA welcomes the publication of the ICAO Global Plan for CNS/ATM Systems volume I (Version 0.57), which provides useful general information on what CNS/ATM is and what is involved in its implementation. Since the transition period of the implementation process is so important it is regrettable that Chapter 16, which initially addressed "Transition and Implementation Guidelines", has been totally eliminated from the Global Plan. Further, a number of significant trends, such as ANS commercialization and the increasingly important role of the private sector in the financing of CNS/ATM systems and facilities deserve to be discussed and included in the ICAO document. As the Global Plan is a living document, we strongly recommend to see these issues included in future releases.

2.	Transition timetable

2.1	In any transition timetable, there will be a period when the new CNS/ATM systems and the existing systems are operating in parallel. While this period allows for aircraft operators to equip (or not) their fleets and for service providers to phase out those ground facilities no longer required, maintaining two systems is very costly. To control the associated costs, a detailed transition plan is essential. IATA recognized this and stated in 19961:

a)	"During the transition period the costs, both fixed and variable, should be included in the cost base [to be recovered through charges] of the service provider. The ICAO Regional Plan should be adjusted to reflect the length of the transition period and which ground facilities should be withdrawn and when. The transition period should be as short as possible.

b)	IATA recognizes that the length of the transition period to move from ground-based to satellite-based navigation services will vary by region. It is therefore vital that the political, institutional, technical and financial sectors of the aviation industry maintain a high degree of co-ordination and co-operation during the transition period.

c)	Detailed technical input to identify redundant equipment will be necessary for each region to ensure national cost bases are reduced accordingly. A defined transition period should be established, taking into account regional circumstances."

3.	Cost-effective new systems

3.1	Airlines are willing to pay their proper share for cost-effective systems they require. Depending on the regional situation, the new systems will allow for operational efficiencies and/or provide much needed increases in airspace capacity. In the longer run, the cost of operating and maintaining CNS/ATM should be lower than that of the current ground-based systems, and should therefore translate into reduced charges, in line with ICAO's principle of cost-relationship.

3.2	The transition to CNS/ATM requires a phased approach and must be benefit-driven. The importance of cost-benefit analysis as a decision tool to estimate the economic impact on service providers and aircraft operators of a planned investment project is now widely recognized. CBA must be undertaken in support of business cases prior to financial commitments to implementation, and in consultation with the users.

3.3	However, to date CBA has not been carried out at the regional level. Regional plans generally provide little detail of the costs, let alone benefits, involved. Within the regions, costs must be quantified by homogeneous ATM areas and major international traffic flows. Further, the corresponding benefits that are expected will have to be identified and evaluated. The implementation priorities and time frame must be based on the regional net benefits that are expected, commencing with those projects that deliver the greatest net benefits. Where applicable, the propagation of multinational air navigation facilities or services between neighbouring States is encouraged for its significant synergistic effects and cost savings.

4.	Action by the Conference

4.1	Commitment from the States

Operating and maintenance costs of CNS/ATM systems should be lower than those of the current ground-based systems - in particular for countries with a large land-mass and/or remote regions. The redundant terrestrial navigation aids will eventually be decommissioned. To allow for the savings to be realized and not remain hypothetical, the States need to give their individual commitment to a decommissioning program identifying a detailed list of which equipment is expected to become redundant and when. This should be reflected in the Facilities and Services Implementation Directories (FASIDs) of the regional air navigation plans (ANPs). Such a clear commitment will facilitate the financing of the CNS/ATM systems, particularly when the private sector is involved and will also encourage users to properly equip their aircraft in a timely manner.

END