Measuring the Business of the NAS
Presented at: Moving Metrics: A Performance
Oriented View of the Aviation Infrastructure
NEXTOR Conference
January 29, 2004
Pacific Grove, CA
Richard Golaszewski
GRA, Incorporated
115 West Avenue • Jenkintown, PA 19046 • USA
℡ 215-884-7500 • 215-884-1385
richg@gra-inc.com
PRESENTATION OVERVIEW
What business information can be measured for the ATO?
How could business information for the ATO be measured?
What could the ATO do with business information?
GRA, Incorporated
January 29, 2004
1
A LONG HISTORY OF BUILDING BLOCKS
ATC corporation pro forma financial statements (1994)
4ATS vs. non-ATS functions
4Division of budget and projections
4Accrual-based income and cash flow statement and balance sheets
FAA cost allocation for ATS LOB (1997)
4FAA costs
4Activity measures
4Cost models (incremental costs)
4Use of services
Advances in measurement (2003)
4FAA CAS SDP’s for air traffic services
4ETMS flight level data
4Cost models for en route and terminal (developmental)
GRA, Incorporated
January 29, 2004
2
WHAT CAN BE MEASURED FOR THE ATO?
Activity—Who Uses Services?
4En route (ETMS/HAME/ATADS)
4Oceanic (ETMS/OAG)
4Terminal (ETMS/ATADS)
4Flight attributes (aircraft type, user type, passengers, etc.)
Costs—What do ATO Services Cost?
4Total and unit costs by ATO service (time, distance and activity)—en route,
oceanic, terminal, etc.
4Comparative production costs (peer groups and time series)
4Alternative cost concepts for SDP’s
4 CAS categories (AT operations, AF operations, capital, overhead and other)
4 Direct/Indirect
4 Fixed/Variable
4 Incremental/common and fixed
User Economics
4User aircraft operating costs (Form 41)
4User revenues (segment yield curves from DOT ticket sample)
4User taxes (built from activity, costs, revenues, other parameters and tax rates)
GRA, Incorporated
January 29, 2004
3
EFFICIENCY CONCEPTS
Allocative (consumption) efficiency—Value to user in relation
to resources consumed in producing service
4Lack of real prices limits information on value to user
4Measurement of quality difficult
4 Safety
4 Delays
4Needed for economic decisions on what to produce
Productive efficiency—Least cost given desired quality
4Capital-labor trades
4Cost measurement being done with CAS
4Measurement of quality
4 Eurocontrol tracks sum of user charges for air traffic
service and delay costs to users
4Relative efficiency can be measured; theoretical or maximum
efficiency cannot
GRA, Incorporated
January 29, 2004
4
UNIT COST COMPARISONS
Flight
Flight Costs
Costs
Peer Groups
SDP/Service
SDP/Service
Same
Over
Time
SDP/Service
SDP/Service Costs
Costs
Peer Groups
SDP
SDP Costs
Costs
Absolute efficiency measures are difficult;
but relative productive efficiency can and should be measured
GRA, Incorporated
January 29, 2004
5
ALTERNATIVE ATS SDP COST ASSIGNMENTS
CAS
Element
Labor
Non-Labor
ATC Systems Command Center
Contract Weather
Contract Weather Observations
AT Operations Direct User Access
Contract Training
Academy Training
Medical
Security
Workers' Compensation
SSC Labor
SMO Labor
Accruals and Adjustments
Non-Labor
National Network Control Center
Atlantic Operations Control Center
Mid-States Operations Control Center
Pacific Operations Control Center
AF Operations
Telecommunications
Flight Inspaction
Utilities
Maintenance Contracts
Logistics
Academy Training
Workers' Compensation
SMP/Compliance
ATS Regional
ATS Headquarters
Overhead
FAA Regional
FAA Headquarters
Acquisition
Capital
Implementation
Depreciation
RE&D
Other
Gain/Loss
Accrued Liabilities
GRA, Incorporated
SDP
Nature
direct
direct
indirect
direct
direct
direct
direct
direct
direct
direct
indirect
direct
indirect
direct
direct
indirect
indirect
indirect
indirect
indirect
direct
direct
indirect
direct
direct
indirect
indirect
indirect
indirect
indirect
indirect
indirect
indirect
direct
indirect
indirect
indirect
Variability
Function
variable
variable
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
variable
variable
variable
variable
fixed
fixed
fixed
fixed
fixed
fixed
fixed
variable
variable
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
fixed
operating
administration
management
operating
operating
operating
training
training
administration
facilities
administration
maintenance
maintenance
maintenance
maintenance
operating
management
management
management
facilities
maintenance
facilities
maintenance
maintenance
training
administration
facilities
administration
administration
executive
executive
facilities
facilities
facilities
facilities
administration
administration
January 29, 2004
6
MEASUREMENT CONSIDERATIONS
Be Flexible: Understand how choice of measures affects results
4Relative ranking of en route facilities differs when unit costs
measured by time, distance or units
4Controllable costs
4Allocated costs
Align Activity and Cost Data
4Service distinctions
4 Terminal radar vs. tower
4Multiple activity measures
4 ETMS
4 ATADS
4 OAG
4 HAME
4Cost data support monthly measurement
A Need to Get Started
4Need agreed-on source data and measures of ATO output
4Relative measures need history
4Data will not improve unless used
GRA, Incorporated
January 29, 2004
7
EN ROUTE TOTAL COSTS AND OPERATIONS
(MONTHLY)
En Route Centers Appear to Have a Large Fixed Cost Component
$16,000,000
TOTCOST
$14,000,000
Average Total Cost
($62.62/operation)
Linear (TOTCOST)
A
T
A
D
E
V
I
T
A
R
T
S
U
L
IL
Total Cost
$12,000,000
$10,000,000
y = 5,153,922 + 34.56x
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
0
50,000
100,000
150,000
200,000
250,000
Number of Operations
Excludes ZAN
GRA, Incorporated
January 29, 2004
8
COMPARISON OF EN ROUTE UNIT COSTS
PER ACTIVITY
Relative Ranking of Centers Varies with Measure of Unit Cost
180
A
T
A
D
E
V
I
T
A
R
T
S
U
L
IL
Normalized Cost Per Hour
160
140
120
100
80
60
40
Normalized TCOST_OP
Normalized TCOST_HR
20
Normalized TCOST_MI
0
0
50,000
100,000
150,000
200,000
250,000
Number of Operations
Excludes ZAN
Costs normalized based on facility with median number of operations: unit cost = 100
GRA, Incorporated
January 29, 2004
9
MONTHLY AF OPS AND AT OPS COSTS AT
EN ROUTE CENTERS BY OPERATIONS
Air Traffic Operations Costs Vary with Activity,
While Airway Facility Operations Costs Do Not
$10,000
Total Cost Per Month ($000)
A
T
A
D
E
V
I
T
A
R
T
S
U
L
IL
$9,000
AT Ops
$8,000
AF Ops
$7,000
Linear (AT Ops)
$6,000
Linear (AF Ops)
$5,000
$4,000
$3,000
$2,000
$1,000
$-
25,000
75,000
125,000
175,000
225,000
275,000
Number of Operations
Excludes ZAN
GRA, Incorporated
January 29, 2004
10
EN ROUTE UNIT COSTS FOR AT OPS AND AF OPS
Cost Per Operation for AT Ops and AF Ops
A
T
A
D
E
V
I
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A
R
T
S
U
L
IL
45
Cost per Operation
40
R2 = 0.2244
35
30
R2 = 0.8645
25
20
15
AT Ops
10
AF Ops
Linear (AT Ops)
5
Log. (AF Ops)
0
25,000
Excludes ZAN
GRA, Incorporated
75,000
125,000
175,000
225,000
275,000
Number of Operations
January 29, 2004
11
THE FLIGHT IS THE MEASURE OF CONSUMPTION
Per Flight
Measures
Terminal Approach
En Route En Route En Route
ATCT
Control
User type
Flight type
Aircraft type
Average load
Terminal
ATCT
Segment passengers
Segment yield curves
Segment aircraft operating costs }
Segment aviation tax rates* }
Flight distance
Flight time
Segment revenues
User Costs
User Taxes
SDP activity measures (flights, miles, time)
ATO Costs
ATO unit costs by SDP
Total SDP costs/activity
Per SDP
Measures
GRA, Incorporated
Taxes applied to individual flights: passenger segment and ticket tax; international
departures and arrival taxes; freight waybill taxes and aviation fuel taxes
January 29, 2004
12
AGGREGATION MEASURES FOR FLIGHTS
Origin
Destination
Airport Pair
City Pair
Airline flight profitability
Market Area
Domestic
International
Geographic
4 Northeast Æ Florida
Airline system profitability
4 Transcon
4 Intra West Coast
4 Etc.
GRA, Incorporated
January 29, 2004
13
SUMMARY ECONOMIC MEASURES
A
T
A
D
E
V
I
T
A
R
T
S
U
L
IL
Monthly Estimates
Flights
ATO Costs
Terminal
Enroute
User Costs
User Revenues
User Taxes
Notes: 1.
2.
3.
4.
5.
0 - 300
669,592
$182
$86
$96
$1,189
$2,159
$187
Average per Flight by Flight Distance in Nautical Miles
301 - 700
701 - 1,500
1,501 - 2,500
2,501 +
458,406
250,374
67,761
44,133
$264
$368
$528
$375
$101
$110
$111
$63
$163
$258
$417
$312
$3,086
$7,001
$15,073
$50,587
$6,262
$13,811
$26,924
$94,536
$580
$1,323
$2,449
$10,111
Total
1,490,266
$260
$95
$165
$4,843
$9,240
$895
ATO costs include only CAS costs distributed to en route, oceanic and terminal SDPs.
En route costs include oceanic costs.
User costs include only aircraft operating costs including ownership; calculated per flight hour.
For general aviation, military and other, user revenues set equal to user costs.
Includes all user taxes which support more than air traffic programs.
GRA, Incorporated
January 29, 2004
14
ATS* AND USER COSTS PER FLIGHT BY DISTANCE
User Type
0-300
301-700
701-1,500 1,501-2,500 2,501 +
All
ATO Costs Per Flight
$182
$264
$368
$528
$375
$260
User Costs Per Flight
$1,189
$3,086
$7,001
$15,074
$50,587
$4,843
ATO Costs as
15.3%
8.6%
5.3%
3.5%
0.7%
5.4%
Percent of User Costs
Based on CAS costs assigned to ATO SDP's; user costs represent total aircraft operating costs;
flights greater than 2,500 miles generally are international and use oceanic airspace and only one
terminal activity in U.S.
A
T
A
D
E
V
I
T
A
R
T
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U
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IL
18
16
15.3
ATO Percent of User Costs
14
Percent
12
10
8.6
8
5.3
6
All 5.4
3.5
4
2
0.7
0
0 - 300
301 - 700
701 - 1,500
1,500 - 2,500
2,501 +
Distance Blocks
GRA, Incorporated
*Costs for Air Traffic Organization based on FAA CAS
January 29, 2004
15
HOW TO USE
ATO Must Understand Its Business
4Who uses services?
4What do they cost?
4Components of cost
4Cost drivers
Agree on Measure(s) of ATO Service
Outputs
4Source data
4Measure(s)
4 Distance
4 Time
4 Activity
Align CAS with ATO
4Fold ARA into ATO
4System operations LOB
4Technical operations LOB
4Update other service delivery LOBs
GRA, Incorporated
Identify Cost Variances
4Aggregate
4By CAS category
Understand Trades
4Cost-quality
4Investment-operating
Build Analytic Capability
4Cost and activity data
4Distribute all costs to SDPs
4Projected costs
4User taxes attributable to ATO
Build Cost Ethos in ATO
4Cost trends
4ATO cost/user cost relationships
January 29, 2004
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