| Many years ago we were enjoying the sun and a | | | | equipment, renewal cycles and so on, all vying for the |
| sandwich on Schiphol's observation deck during lunch | | | | same airspace, airports and services, that there is no |
| hour when news came that one of the major airlines | | | | such thing as a credible, positive CBA for the whole |
| there had a new top executive who was neither | | | | of the industry. In any given case, some airlines |
| pilot, nor engineer. He was a bean-counter! I | | | | would equip, others would delay, still others would try |
| remember the initial feeling of horror and | | | | to wiggle out of the requirement... each according to |
| consternation at what back then appeared nothing | | | | their temperament and circumstances. A positive |
| short of blasphemy. Of course, in the years since we | | | | CBA is not the silver bullet it is often claimed to be. |
| grew used to the idea that for leading an airline or | | | | The effects of the cyclical airline business - Although |
| car manufacturer successfully you did not necessarily | | | | airlines are much better now in managing the cyclical |
| have to know the difference between a car and an | | | | nature of their business, the boom and bust cycles |
| airplane. You had to understand the costs involved in | | | | continue to affect everyone. When in the boom and |
| making or operating them. | | | | delays grow up, almost anything that eases the |
| With the aviation industry, including airlines, ruled more | | | | delays can have a good business case. The trouble is, |
| and more by the need to cut costs to survive, | | | | by the time the money needs to be spent, the bust |
| having commercial, rather than engineering talent at | | | | is on us, delays mostly disappear... with a dead |
| the top seemed indeed an increasingly good idea. If | | | | business case as the result. |
| only they had taught them to understand cost | | | | Vision, strategy and mandate |
| benefit analyses properly! | | | | A fairly senior person at one of the US airlines once |
| What is a cost/benefit analysis? | | | | said to me when we were talking about the need to |
| Cost/benefit analysis or CBA for short is the tool | | | | introduce something new to support the future air |
| through which managers are given an answer to the | | | | traffic management paradigm: You give us a mandate |
| question: is there a proper return on investment | | | | and it will be done. Otherwise not a chance in hell. |
| within a reasonable time and what is the risk (of | | | | Airlines tend to look on mandates as something of |
| losing money) involved? On first sight this sounds like | | | | the devil himself. With good reason too, as in the |
| a good thing and indeed, used properly a CBA is a big | | | | past many things had been mandated that cost the |
| help in making the right decision. | | | | industry millions without any return at all. |
| No new project is started these days without a | | | | But if a positive CBA is not enough and mandates hail |
| CBA... Why do then some of us cringe when we hear | | | | from hell, what is the solution? |
| this abbreviation? | | | | How can we ensure that the many changes required |
| CBAs and airspace users | | | | by the future ATM system, most of which will have |
| It is well known that airspace users and airlines in | | | | an impact on the aircrafts' "cost" side, can in fact be |
| particular, have a very short event horizon... Most | | | | introduced in time and across the industry? |
| things beyond three years or so disappear in the fog | | | | The key words are VISION, FASTER TO MARKET, |
| of the unknown future. If an investment does not | | | | INDUSTRY STRATEGY and AGREED MANDATE. |
| provide the desired return within that period, forget | | | | Vision - airline executives must realise that refusing to |
| it... | | | | look beyond their financial models is in fact a |
| You can divide an aircraft into two parts. Everything | | | | disservice to the company. Things not bolted on the |
| to the left of the front exit is a cost; everything to | | | | aircraft today will come back to bite them in a few |
| the right is potential revenue. This is why airlines (with | | | | years' time costing a good deal more. They must |
| a few notable exceptions) will spend millions on new | | | | look beyond the horizon and invest in what is needed. |
| seats or passenger entertainment systems while | | | | This may sound like heresy to-day but it must |
| leaving the cockpit (you know, the bit to the left of | | | | become common practice for long term viability. |
| the front door) to fend for itself and usually get new | | | | Faster to market - In aviation we prefer evolution to |
| stuff only when it is truly unavoidable. Unless safety | | | | revolution... But it is not really acceptable to mull over |
| is directly involved but that is another story. | | | | things (like which data link should we have.... |
| The reason for this is simple and it is not the fault of | | | | remember?) for a decade or more. Nobody will invest |
| the airlines as such. While projects for front and rear | | | | in things that become obsolete by the time the |
| must have a solid business case (supported by a | | | | choice is made. When the requirement is identified, |
| CBA), it is so much easier to make a business case | | | | the solution must be agreed and marketed as soon |
| for the new seats than it is for air/ground digital link | | | | as possible. |
| or ADS-B. | | | | Industry strategy - Many, many air traffic |
| If competitors are installing new seats or new | | | | management strategies have been written over the |
| entertainment systems, so must we... That link thing | | | | years, most of them ending up on bookshelves with |
| that will not bring money in the first 4-5 years can | | | | little benefit to the industry as a whole. They were |
| wait... | | | | either not shared by everyone or getting the |
| CBA horrors | | | | partners to sign up took too long and the thing |
| From the past decade or so, a nice collection of air | | | | became obsolete. We must do better and agree a |
| traffic management CBA related horror stories stand | | | | strategy that covers the now as well as the |
| as silent warnings for the future. We must learn from | | | | tomorrow and beyond. |
| those if we want to avoid the pitfalls in the future. | | | | Agreed mandate - Once the strategy is there and |
| When the CBA is negative - well this should be | | | | everyone knows what has to be done (and yes, a |
| simple. No go! But many promising things have been | | | | credible CBA has been produced) there must be a |
| thrown away simply because the CBA results were | | | | mandate that is agreed by the majority of the |
| not put into the proper context. An investment may | | | | industry. The mandate is needed to ensure that all |
| be needed even if it will not in itself bring benefits | | | | players act in unison and that the benefits become |
| but it lays the foundation of something that will be | | | | something one can actually plan on. Voluntary |
| hugely beneficial. The benefit bringing bits were over | | | | equipage is a nice concept but it does not work yet. |
| the event horizon... | | | | Is SESAR and NextGen the answer? |
| When the CBA is not credible - Thou shall have a | | | | Those even a little familiar with the US NextGen and |
| CBA for everything... Even for things that are so far | | | | the European SESAR programs will recognise that |
| in the future that the input data are nothing but | | | | things like faster-to-market and industry strategy are |
| educated, and often not even educated, guesses. | | | | integral parts of those initiatives. |
| The result is a CBA that lacks credibility and will be | | | | The question is: are they going to handle the issue of |
| laughed at... not a good start for any long term | | | | cost/benefit analyses better and is the vision thing |
| project! | | | | any different to-day than it was 3 years ago? After |
| When the CBA is positive - this should be the aim, | | | | all, the problem with CBA's is not what they are but |
| the nice, comfortable starting shot for a positive | | | | how they are used. A CBA must help in decision |
| decision. No way! Positive results are usually | | | | making but not replace decisions... |
| contested by the industry not least because there | | | | Is there real support for the required investment or |
| have been cases in the past where CBA results were | | | | are things going to fall apart when the time comes to |
| cooked to show major benefits... only to be proven | | | | spend the money? |
| way out and without foundation. Defending a positive | | | | Both SESAR and NextGen are bigger than anything |
| CBA is as difficult as creating one... | | | | ever tried before in air traffic management. But size |
| The myth of airspace user reaction to a positive | | | | and complexity alone are no guarantee for success... |
| CBA - It has been said often that if a proposed | | | | Learning the lessons of the past (including the CBA |
| project offers a positive, credible business case, | | | | horrors), understanding the reasons for past failures |
| airspace users will equip without a mandate. This is a | | | | and doing something about them in airline and ANSP |
| nice thought and I wish it were true. But it is not. | | | | boardrooms is what offers the best chance for |
| The trouble is, the industry is composed of so many | | | | success. |
| players with so many different business models, | | | | |