Wingman: Why Guaranteed Loans Are Needed For Free Flight Avionics

In previous commentaries, Wingman has argued that technology is now available - and should be used - to measure Free Flight benefits ("More Can Be Gained From GAIN"), and how accurately determined benefits could be converted to cash equivalents to repay government loans to attain them ("How To Get Users To Invest In Free Flight Avionics").

Making these assertions still begs the question of why government should get involved.  Wingman believes the rationale is based on two continuing realities, and two current facts of life.

The two continuing realties are these:

1. The U.S. economy needs a healthy civil aviation sector, because Americans per capita use aviation more than any other country in the world.  There are many statistics to support this assertion, but two will suffice to make the point for now.  Civil aviation generates more than $1 trillion of economic activity in the U.S. every year, and accounts for approximately 6 percent of its gross domestic product.

2. The U.S. airspace capacity problem is still there and will get worse.  As far back as 1997, The National Civil Aviation Review Commission, chaired by now Secretary of Transportation, Norman Mineta, said that the U.S. airspace system is approaching “gridlock with dramatic negative impacts on the economy.”  Many other groups and individuals have warned that, in spite of recent events, this problem hasn’t gone away.

The two current facts of life are these:

1. Several initiatives under the general description of Free Flight (the term is used generically here) are essentially stalled because of a lack of synchronization between government airspace modernization, and any corresponding plans by airspace users (especially airlines) to install the necessary avionics to make the overall system work.
2. Users are not installing Free Flight avionics at the rate and magnitude required, because the equipment – including onerous installation in some cases – is often expensive, and the perceived risk of getting an investment payback is deemed to be excessive.

Let's look more closely at these realities.

Last week (March 20) the U.S. Aerospace Commission, which was established to advise the White House and Congress on how to address pressing issues in both the defense and civil aerospace sectors, said that the FAA’s Operational Evolution Plan (OEP) is extremely important to the future capacity needs to U.S. aviation – and so is user equipage.

While nobody has seriously advocated mandatory equipage yet - and Wingman would argue that such a move is probably unworkable - voluntary equipage isn’t happening.  As the Aerospace Commission put the situation in its second interim report: The problem with voluntary equipage is that it will cost an estimated $11 billion, and "Given the economic realities airlines are facing today, this is a highly problematic assumption."

Wingman agrees.  Everyone knows that airlines, especially, are currently against the financial ropes.  But even in recent better times, their profits and cash flow have made it difficult to upgrade their fleets - no matter how compelling the need to modernize their so-called "factory" - the operation that occurs from the time the airplane leaves the departure gate until it arrives at its arrival gate.

But the Aerospace Commission says, the problem isn’t only investing, it is also timing: "The system and the users will not achieve the benefits of the new technologies and capabilities unless they are deployed together....  This will require the synchronization of both public and private investments."

Wingman agrees again.

Currently, a Boeing-lead group, called the Working Together Team (WTT) is taking another look at the requirements for an air traffic management system of the future.  The WTT believes that it is necessary to look at a future ATM’s overall system performance to assess its ultimate success.  In other words, it is a mistake to look at airspace improvement as individual technologies, infrastructure or procedures developed and implemented independently. 

In this way, the WTT team agrees that many ATM initiatives require both ground infrastructure and aircraft systems to realize benefits.  And the WTT also agrees that airlines and other users are reluctant to invest in new equipment and training without some guarantee of improved operational performance.  To overcome this obstacle, the Boeing team is recommending that governments consider subsidizing a part of the user’s cost to equip and finding ways to reduce their investment risks, among other incentives.

Wingman believes that the time has come to consider a guaranteed avionics equipment investment program as a possible incentive mechanism.  And Wingman further believes that the required guarantees can be paid back by accurately measured, and thus tangible, efficiencies.

This is a large, but important undertaking.

FAA Administrator Jane Garvey said earlier this month that the voluntary investment by airlines to equip and train is nearly equal to the government’s investment, and this is one of the biggest challenges to the successful implementation of the FAA's Operational Evolution Plan.  But she went on to say that while "The price is high; the benefits will be enormous.  [And] the process of measuring benefits will provide the business case for these investments."

Wingman has previously outlined a government guaranteed avionics loan program that might work; albeit in very general terms.  More details are required, and at some point Congress will need to pass authorizing legislation to make it happen.

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