Economic Impact Of ATC

Jeff Poole, March 2007

Air transport is critical to the global economy

We are a US$450 billion industry

We support US$2.9 trillion in economic activity

But an industry in crisis since 2001 needs leadership

2001-2005 airlines globally lost over US$40 billion

2006 expect losses of US$1.7 billion

series of crises that changed air transport

Since 2001:

Airlines improved their bottom line even

as fuel prices skyrocketed

The industry is moving in the right direction

Since 2001…

Labor productivity increased 33%

Sales & distribution costs dropped 10%

Non-fuel unit costs reduced 13%

But it’s a bit early to celebrate…

Globally ATC unit costs raised with 9,4%

The costs of ATC inefficiency are too high

ATC impacts an airline in many ways

Safety

Performance

Capacity

Cost Efficiency

We need to ensure the right balance

SAFETY

PERFORMANCECAPACITY

COST-EFFICIENCY

We need a continuous focus on Improved Performance

Financial Performance

Operational Performance

Both Impact Our Bottom Line

Financial Performance:

The global Airport & ATC share of the costs is large:

Global USD 42 billion bill

11% of average airline cost base

We experience major global differences in:

Transparency

Stakeholder Engagement

Efficiency

And major ATC cost variations:

From USD 0,04 per KM to USD 4 per KM of

controlled flight

Control operational costs

Efficiency:

Invest wisely

Harmonize Services

Control overhead

Invest Wisely:Hudson Bay Example

Radar Investment $ 37 mln

ADS Investment $ 10 mln

Annual operational benefits:$ 11 mln

The choice for ADS-B:

Lower investment

Operational benefits

Future technology

Avoided Investment,USD 22 million…… through:

Proper Cost Benefit Analysis

Stakeholder Engagement

Airline involvement will lead to successful implementation

Stakeholder Engagement

Involving airline expertise will lead to more efficient investments

Airlines are customers and are directly affected

Justification is required that charges are cost based

Transparency

Major investments should be justified and required

Airlines should exactly know what they pay for

Transparency should lead to improved benchmarking

Operational Performance:

The high price of oilcontinues to hurt airlines

The industry fuel bill rose from…

2001 fuel bill:USD 43 billion

2005 fuel bill:USD 91 billion

2006 fuel bill:USD 115 billion

Which Reinforces:Flying Time = Money

There are multiple ways

From A

8200 nm

9100

To B

8200 nm

With Major Cost Differences….

Saving 43 Minutes

Saving 8400 kg of fuel

Move from this……

To this……

Straighter routes and removal of barriers are of great importance to an improved performance

Pretoria

Algiers

UM731

UM998

RUDASGBV

MAIDUGURI NODJAMENA

ORAN

African Red Carpet express routes annually save the industry USD 7.6 million in costs

The European Challenge

EUR 9,5 billion in ATM costs

EUR 1 billion in delay

EUR 1,5 billion in inefficiency

EUR 7 billion in provision costs

The European Challenge

EUR 3,3 billion in possible improvement

EUR 0,5 billion airspace redesign

EUR 0,3 billion capacity planning

EUR 2,5 billion consolidation

Military operations are also affecting performance……….

One Military Atlantic Exercise

600 NM Restricted Airspace

NAT traffic heavily impacted

Airlines lost USD 1,9 mlnIn one day

The Global Performance Challenges

Harmonization of airspace

Standardization of Infrastructure

Consolidation of providers

Lower Unit Costs

What can ANSPs do?

Drive cost reduction and efficiency improvement with more speed

Agree to challenging efficiency targets

Work together with airlines as business partners in long term strategies and investments

What can Governments do?

Ensure independent regulation

Establish a level playing field

Set clear efficiency targets

Remove obstacles

Let’s improve our performance as an industry

IATA is here to help