Embry-Riddle Aeronautical University
Copyright © Society of Automotive Engineers
ABSTRACT
This paper summarizes several years of research which considered the National Aeronautics and
Space Administration’s assertion that the Small
Aircraft Transportation System (SATS) will be an economical alternative to automobile and airline travel, when considering the value of travelers’ time. Performance was studied in the corporate aviation environment, using NASA’s metric for cost effectiveness. Cost, cost effectiveness, and the sensitivity of cost effectiveness to key independent variables were examined. Analyses shed favorable light on
NASA’s premise.
INTRODUCTION
The National Aeronautics and Space
Administration (NASA,) supported by several coalitions of public, private, and educational institutions, is investing millions of dollars to demonstrate the feasibility of a Small Aircraft
Transportation System (SATS.) “The envisioned outcome is to improve travel between remote communities and transportation centers in urban areas by utilizing a new generation of singlepilot light airplanes for personal and business transportation between the nation’s 5,400 public use general aviation” [1].
NASA’s vision includes the following. “One of the most significant emergent forces in the first decade of the 21 st century will be the value of human time … Burgeoning transportation demand will be dominated by the increasing value of time during the information age, when human/intellectual capital replaces physical capital as the basis for the creation of wealth.
The new value of time makes doorstep-todestination speed the premium commodity during this new era” [2].
But research strongly suggests that the successful development of a SATS mass-market will most likely be preceded by the development of industrial and institutional markets [3-5]. In this study, therefore, NASA’s hypothesis was examined in the context of corporate aviation.
Aside the theoretical argument, NASA itself has speculated that this will be a likely early market
[6-7]. The summary criteria for evaluation of
SATS cost effectiveness was one that has been articulated by NASA for studies of this type,
“Trip*mph/cost” [8]. “Trip” was the number of passengers aboard a vehicle during a trip, mph was door-to-door statute air miles per hour, and costs were considered on a Life Cycle and Direct
Operating Cost basis, before and after considering the value of time.
METHODOLOGY
In January of 2000 the author delivered to NASA a baseline study of the Life Cycle Costs of SATS aircraft. The original cost model developed was complex and driven by over 80 independent variables and cannot be addressed here, but it has been summarized in another SAE publication
[9]. The model envisaged SATS aircraft to be evolutionary derivatives of General Aviation and
Business Aviation aircraft commonplace at the time of writing. This model was used as a tool to conduct a series of studies. Here, six aircraft types were re-researched and reconstructed to simulate operations in a typical corporate aviation environment. The six configurations studied were (a.) a four-seat, single internal combustion engine (ICE) aircraft, (b.) an eightseat, twin ICE aircraft, (c.) an eight seat, twin turbofan (TF) engine aircraft, (d.) an eight-seat, twin turboprop (TP) engine aircraft, (e.) an eight seat, twin turbine engine rotorcraft, and (f.) a four seat, single turbofan engine aircraft.
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In contrast to the first five aircraft, the last aircraft was unprecedented by year-2000 technology. However, significant R&D was pushing the state of the art of all aviation technologies, so that this aircraft type seemed likely to become technologically and commercially feasible [10-12]. This novel configuration of technologies will be codified as
{SATS}, while the notations designating the other five aircraft will be abbreviations of the above descriptions.
Costs were calculated based on a ten-year period of ownership; one hundred trips per year in a small and lean, single-aircraft corporate scenario.
Four passengers were assumed to be aboard each vehicle, and the pilot was assumed to be a passenger as well. Life Cycle Cost (LCC) per operating hour, and Direct Operating Cost
(DOC) per operating hour were calculated. DOC for business aircraft is the sum of fuel and oil, maintenance, inspection, and overhaul, parts replacement, and aircraft replacement. LCC is an all-inclusive method of costing, including all traditional Fixed costs plus costs sometimes overlooked, such as initial pilot training, landing fees, disposal, and so forth.
Next, corporate aviation and the National
Business Aviation Association (NBAA) argue that one of the advantages of a corporate flight department is its impact on employee time and productivity [13]. Related to this advocacy role,
Travel$ense is software developed under the continuing sponsorship of the NBAA. Its main purpose is to provide corporate aviation managers with the ability to track the cost effectiveness of flight departments. It does this by comparing trips made in corporate aircraft, to trips made on commercial airlines. Alternatively, a clever user can create and model a hypothetical aircraft (e.g., SATS,) or even another mode of transportation (e.g., autos.)
In addition to comparing trip costs on an ordinary accounting basis, the software calculates the economic value of the amount of time consumed by each passenger during a trip, using legitimate estimation algorithms adopted from professional business administration communities [14]. The software calculates the value of time by calculating the hourly salary
(here assuming a salary of $60,000) times the number of hours spent traveling (determined by the trip profile,) multiplied by a factor (here 3.5) to cover overhead and similar assumptions, but
2 then reduces that figure by a calculation of employee productivity (i.e., it is common for employees to work while traveling.) Here, all employees on all modes were assumed to be
50% productive while traveling, which was more conservative than the software’s default values, especially for corporate aircraft. It is also worth repeating that travel time was calculated on a door-to-door basis, which varied considerably among different modes of travel. This software was used to calculate the costs of traveling on
SATS, airlines, and autos among a sample of city pairs.
The auto was modeled as a vehicle that cost $.35 per mile, the Standard Mileage Rate recommended for use by the U.S. Internal
Revenue Service at the time of the study. This rate included gasoline, oil, repairs, tires, insurance, regular fees, and depreciation [15].
(This metric differed from the concept of DOC by the inclusion of depreciation. In corporate aviation depreciation was considered a fixed cost and in the terms of this study, was included in
LCC.) The average “ground” speed of the auto was modeled in the software as 55 statute miles per hour. The difference between statute air miles and statute road miles was adjusted separately.
A common road atlas was consulted for a matrix of road-miles between city pairs in the United
States [16]. A ten-percent stratified sample was constructed of trips between 100 and 600 miles, because aviation scholars have speculated [17] that SATS would be more economical than autos for trips of (roughly) over 200 miles, and more economical than airline trips (roughly) under 500 miles. The sampling procedure resulted in a sample size of 53 trips.
Once vehicles are modeled and a specific trip is profiled, Travel$ense dials Travelocity, a realtime internet service that allows subscribers to research airline itineraries and fares. Thus
Travelocity was queried as to the airline fares for each of the 53 city pairs. The itineraries with the lowest fares were always recorded, and to avoid last-minute fare pricing distortions, each trip was scheduled 30 days in advance. The research was conducted in July-August of 2001, and all data were collected before 9/11.

ANALYSIS
The analysis will first examine costs, cost effectiveness, and the sensitivity of cost effectiveness to key independent variables, before considering the value of time. A similar analysis considering the value of time will follow. Because of space limitations, LCC will be discussed and DOC will be given short attention afterward.
LCC WITHOUT THE VALUE OF TIME.
Figure 1 shows cumulative Life Cycle Cost without the value of time, examining the major/aggregated cost categories in the model.
Readily one can see how Acquisition-related costs dominated. Only overall airline fares really compared. The turbofan and turboprop aircraft had Acquisition costs that were about double the overall airline fares; yet the Acquisition costs of the other SATS aircraft were much smaller than airline fares. Also, because these costs were so large, auto costs hardly stood out in comparison.
An examination was conducted at lower levels of analysis. Acquisition costs were dominated by
Monthly Payments. (The model assumed cash flow instead of depreciation.) Therefore the dominating independent variable was the Base
Price of SATS aircraft. Second-most in importance were Insurance, Taxes and Fees, and several logistical categories such as
Maintenance. Again, these costs were all partly determined by the Base Price of Aircraft.
Figure 2 looks at cost effectiveness. Airline, auto, and the {SATS} aircraft data are shaded to help facilitate comparisons. The ICE aircraft were the most cost effective among SATS options, and both were somewhat similar to auto travel. Thus even before considering the value of time, under certain assumptions, the viability of the SATS concept for certain technology groups did seem possible. The {SATS} aircraft was not as cost effective as ICE or airline travel, but was nevertheless more cost effective than all else. Again, this was because of the impact of
Base Price. Note that airline travel was the least cost effective.
Since Trip Distance was implicitly hypothesized from the beginning as being a key determinant of performance, sensitivity analysis of cost effectiveness was performed from 50% to 150%
3 of the original assumption of 350 miles. Thus the trip range examined in Figure 3 is from 175 to 525 miles. One immediately notices the striking contrast of autos to all else. While the cost effectiveness of autos plummeted to about half its value, the cost effectiveness of everything else rose modestly. However, this is largely explained by methodology. Recall that auto costs were calculated as 35 cents per mile, which amortized costs such as depreciation, insurance, etc., which might otherwise be categorized as Fixed costs. Thus since auto
Trip*mph was almost constant with Trip
Distance, a linear increase in the denominator made the drop in auto performance inevitable (it was non-linear because the overall calculation of
“mph” was door-to-door.) With aircraft, however, the classification of costs as Fixed,
DOC, etc. allowed for a mathematical economy of scale with Trip Distance. Variable costs did not accumulate as fast as Fixed costs, so LCC was amortized over Distance. However, returns diminished and almost stopped at distances over
500 miles. Airline fares, obviously, were unaffected.
To gain one view of the effect of another likely economy of scale, Trips per Year was varied from 50% to 150% of the original assumption of
100, and is shown in Figure 4. At around 50 trips per year, autos were superior to all SATS aircraft; but at around 150, both ICE were as effective or better. Again, there was no economy in airline travel suggested by this variable.
LCC WITH THE VALUE OF TIME. In Figure
5, the values of time are shown alongside ordinary accounting costs. Eexamining only the value of time, one immediately notices the appearance of significant auto-related costs, which rivaled not only the value of time in airline travel (both which exceeded the value of time traveling on any SATS aircraft), and actually exceeded many of the ordinary accounting cost categories of several SATS aircraft.
Overall cost effectiveness is shown in Figure 6.
Compared to Figure 2, the first impression is the dramatic plunge in auto cost effectiveness, and an impressive rise in the {SATS} cost effectiveness. Also, the {SATS} aircraft about rivaled the internal combustion variants. The improved speed more than offset the higher accounting costs, most notably driven by Base
Price.

Examining the sensitivity of cost effectiveness to
Trip Distance, one notices a very different pattern in Figure 7, compared to Figure 3.
Internal combustion configurations have changed relative places with each other, and at the longer trip distances, the {SATS} aircraft gained relative competitiveness. Interestingly, though, for these three configurations, whereas before considering time there was an increase in cost effectiveness with Trip Distance, now there was degradation. The improved Trip*mph was being more than offset by overall costs. But this did not apply to TF and TP aircraft. Finally, auto travel dropped, and was no longer generally competitive with ICE and the {SATS} aircraft, except at short distances. Airline travel remained consistently poor.
A similar effect was seen when examining Trips per Year, comparing Figure 8 to 4. The effect was non-linear, and showed diminishing (but not negative) returns. Again, configurations seemed to be most competitive in two groups – the ICE configurations and SATS, and the heavier, larger and more costly TF, TP, and Rotorcraft.
Finally, since a major issue was the value of time, Employee Salary was varied from 50% to
150% of the baseline. Figure 9 shows the results, and indicates degraded performance with increased salary. The explanation lies in a mathematical anomaly of the cost effectiveness metric coupled with the fact that Travel$ense includes offsetting employee productivity in the calculation of the value of time.
DIRECT OPERATING COST WITHOUT THE
VALUE OF TIME. Mostly because of the removal of costs associated with Base Price, cumulative airline fares were now by far the highest cost (not shown.) However, auto costs were still competitive with any SATS configuration, and were generally lower. Cost effectiveness is shown in Figure 10. Now, the single ICE aircraft was by far the most cost effective. The cost effectiveness of autos was worse than any SATS aircraft other than the
Rotorcraft, and airline travel looked very poor.
Sensitivity analysis roughly paralleled the conclusions made earlier when addressing Life
Cycle Costs.
DIRECT OPERATING COST WITH THE
VALUE OF TIME. Since Direct Operating
Costs are much less than Life Cycle Costs, the effect of the Value of Time was relatively the
4 greatest in this view. The value of time in autos dwarfed ordinary (accounting) mileage costs, and the value of time in SATS aircraft generally exceeded respective DOCs. For airlines, of course, there was no effect. In terms of cost effectiveness, and comparing Figure 11 to Figure
10, there was a relative collapse of the single
ICE aircraft, and a strong improvement in the
TF. Relative performance of autos dropped below all SATS aircraft. Speed seemed to convey an important advantage. Again, sensitivity analysis yielded roughly similar conclusions as when accomplished on an LCC basis.
DISCUSSION
The SATS concept represents a revolutionary transportation paradigm without a straightforward precedent – in a sense the vision is a hybrid -- so comparisons among automobile travel, the airlines, and corporate aviation are worthwhile but plagued by “apples to oranges” conundrums. Here, the most meaningful comparisons addressed the effect of the value of an individual’s time to the overall economic viability of SATS.
At the complete sacrifice of experimental control, many assumptions were made in the spirit of trying to realistically capture the NASA vision. Thus each mode of transport was both helped and injured by specific assumptions. In favor of autos, it was assumed that passengers would always be just as productive as on the other modes, all the time. Autos were also assumed to operate always at an optimal speed and by implication, no breaks were allowed.
Against autos worked the inclusion of depreciation in its “Direct Operating Cost.”
Depreciation or its cash flow counterpart,
Monthly Payment, was not included in aircraft
Direct Operating Cost, but it was very much a part of aircraft Life Cycle Costs. Standard methods of costing the different modes of transportation were not decomposed and reconstructed, so comparisons should take some care.
In favor of SATS, a very important assumption in the cost model that generated DOC and LCC data was that NASA cost and performance targets would be achieved. Also, hourly costs were calculated assuming a fairly high rate of use, which always drives down unit costs in the presence of fixed costs. There was no pilot/crew

cost in terms of additional salary (though initial and recurring training were Life Cycle Costs.)
Against SATS worked the assumption of a single-plane operation; larger fleets can exploit economies of scale and scope, driving down unit costs. Also, the 50% productivity factor may have been too low, especially for corporate aircraft. Conversely, it may have been too high for autos.
In favor of airline travel, it is again open to speculation that productivity is 50%. Also, the lowest fares were always accepted among all the itineraries Travelocity offered; and thirty days advance booking was assumed, which is known to confer savings. Against airline travel worked the insistence that travel be accomplished during the workday; off-hour travel can be much cheaper. Similarly, no trip allowed a Saturday night stay over. Finally, there was always three hours of ground time for airline travel, while for
SATS and autos, one hour was assumed.
Even at the LCC level, the consideration of the value of time was important. As expected, the effectiveness of autos always plunged when time was considered. Under almost no conditions did airlines make an especially strong showing in terms of cost or cost effectiveness. Considering the value of time, of course, always accentuated this.
Value of time notwithstanding, the Base Price of aircraft will be a major factor that determines the economic viability of SATS. This is true not only because of the effect on Monthly Payments, but secondarily because of costs that are partly determined by price, such as insurance and taxes.
Partly because of the effect of Base Price, advanced versions of ICE aircraft appeared to be cost effective even on an ordinary accounting basis. They were competitive with autos even before considering the value of time. TF and TP aircraft were much more costly to buy. But after considering the value of time, which was so much better for turboprop and turbofan aircraft because of their superior speeds, these configurations appeared to be good choices.
Assumptions about Trip Distances did make a large difference. On the whole, interpretations suggested that SATS’ viability does lie within a range of trips from about 200 to 500 miles. Auto effectiveness plummeted with distance, while
SATS’ effectiveness gradually improved.
Airline fares were mostly determined by factors other than distance within this range.
There was an economy of scale in the Number of
Trips made. Even though sophisticated macroeconomic effects of scale in extensive
SATS infrastructures, were not modeled, simple mathematics did predict that SATS unit costs will drop importantly in proportion to the scale of use, even at a micro level of analysis.
NASA’s performance metric, Trip*mph/Cost, should be used with some caution when the value of time is at issue. More specifically, without a more thorough treatment of productivity, it can produce counterintuitive interpretations.
The greatest overall change was observed by considering the value of time, and always hurt auto performance the most. Secondarily, the method of costing SATS was important, Direct
Operating v. Life Cycle.
Overall, while the study was exploratory and non-empirical, NASA’s assertion about the economic viability of SATS received qualified support. By association a longstanding assertion of the NBAA and corporate aviation enthusiasts received support. Corporate aviation may be a viable testing and maturation ground for SATS technologies and operational concepts.
CONCLUSION
NASA’s hypothesis that the economic value of an individual’s time will increase is intuitively appealing. As such, the extant understanding of information-age economics deserves expansion.
The present study was hamstrung by a lack of empirical research addressing the value of time in transportation economics. The design of the study was accordingly modest.
Using NASA’s metric for benchmarking progress and success, this study examined the effect of considering the value of time on the overall economic viability of a new aviation paradigm. Overall study parameters and assumptions cast a net hoped to be wide enough to capture the most likely possibilities in the present vision and goal set. Considering the value of time did change economic patterns a great deal, supporting but by no means validating
NASA’s hypothesis, and the cause of the NBAA.
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