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Dr Anders Adrem

Partner and Country Manager for Sweden, Quartz+Co Managing Partner, Kihlstedt & Partners Booz Allen Hamilton, European Aviation Leadership Team and Nordic Leadership Team PhD in Finance & Accounting, School of Economics and Management, Lund University Sweden

+ international network

Nordic Aviation Relations

Experiences and education

Dr Anders Adrem

www.quartzco.com

DENMARK Ryesgade 3A 2200 Copenhagen T: +45 33 17 00 00

NORWAY Inkognitogata 35 0256 Oslo T: +47 22 59 36 00

SWEDEN Birger Jarlsgatan 7 111 45 Stockholm T: +46 (0)8 614 19 00

Business Case Remote Towers DR. ANDERS ADREM, QUARTZ+CO

October, 5th 2011

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Target /vision • Regulatory and technologically integrated European airspace • Key success factors: increased capacity, improved safety,

reduced environmental impact and better cost efficiency

Single European Sky key development driver of European air traffic

Background • Serious delays in European air traffic • Increasing congestion of European airspace • Significantly higher ATM unit costs than the US

Legislative package SES I • Establishment of a common European regulator • Definition of airspace as a cross-border resource • Focus on introduction of new technology supporting vision

Legislative package SES II • Introduction of a "Performance scheme" • Acceleration of Functional Air Blocks (FABs) • Strengthening of central network management systems

European Commission adopts proposal for SES, with endorsement from Norway and Switzerland

SESAR established and definition phase initiated

Delivery of SESAR ATM-master plan SES II enters into force end of 2009

Both performance scheme and establishment of FABs operational

End of first reference period (2012-2014) Start of second reference period

1999

2001

2004

2006

2008 2009

2012

2014 2015

2015-25

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SESAR has set ambitious targets; the industry is entering into a take-off phase towards full implementation

DEFINITION Resulted in the European ATM Master Plan

DEVELOPMENT Results in new Standards, new operational procedures, new technologies and pre-industrial components

DEPLOYMENT Implements the results of the development phase, delivers the performance increase

2006-08 EUR 60 million

2009-14 EUR 2.1 billion

2015-25 EUR 25-30 billion

3 phases

VISION / TARGET

Ongoing Full implementation

Enabling EU skies to handle 3 times

more traffic

Improving safety by a factor of 10

Reducing environmental impact

per flight by 10%

Cutting ATM costs by 50%

1. 2.

3. 4.

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SES and SESAR JU will redefine the industry logic – new constellations will emerge

From national monopolies and national ANS providers

To international co-operation and consolidation

National monopolies and

national ANS providers

En-route

Towers

CNS

Other services, new services

• Economical regulation of en-route service • International co-operation (FABs) • Realising full potential will require close

co-operation and international consolidation

Regional co-operation and consolidation

Competition, new players

and new coalitions

Co-operation with other ANSPs and

the industry

• Deregulation and competition for tower services • New players (private) and new coalitions • Remote towers potential game changer

• Technological progress and digitalisation is redefining the service portfolio

• Unbundling of current services, new providers (e.g. Telecom providers)

• Redefinition of service portfolio – future core competences/services – insourcing/outsourcing

• International co-operation, including industry

Unbundling Rebundling What is/will happen?

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Trend towards deregulation in Europe – yet only a few countries has deregulated the TWR business but the path forward is clear

Fully deregulated

Semi-deregulated

Deregulation process ongoing

The UK • TWR market deregulated • NATS main operator of

international airports • Local and regional airports

mainly operated by airports themselves

Switzerland • Deregulation process ongoing • Draft bill propose main airports

continue to be served by Skyguide

Spain • Local and regional airports

deregulated 2010 • Concession for first batch of 13

airports awarded non-state ANSPs in 2011 (mainly NATS)

• No time given for deregulation of international airports

Sweden • Fully deregulated 2010 • ACR took over operation of

three local/regional airports 2011

• Tower services at the largest airports currently up for tender

• All Swedish airports will have been up for tender 2013

Denmark • TWR market never been

regulated • Naviair only operator of ATC

services in Denmark

Germany

• Local and regional airports deregulated 2007

• Local and regional airports mainly operated by DFS Tower Company and Austro Control

• International airports, monopoly operated by DFS

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AFIS ATC

Local and Regional Towers – the unit cost challenge

Expected development of unit costs

ILLUSTRATIVE

Increased unit costs

+10 years 20XX

Expected development of unit costs

20XX

Increased unit costs

+10 years

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+10 years 20XX

Why Remote Towers?

INDEX

"As is"

"As is"

Remote TWR

Remote Towers offer a substantially lower cost level vis-à-vis operations "as is"

Moreover, Remote Towers offer a number of qualitative benefits

• More varied and stimulating tasks, distributed work • Better environment for competence development;

knowledge sharing and working colleagues • Less dependency on few employees and easier to

replace personnel • No/less  “on  call”  duty  and  less  weekend  hours

• Increased competitiveness through cost efficiency • Possibility to create unique advantages and take

advantage of the deregulation of TWR services • Lower investment costs (ref. traditional TWR) • Better cost control • Contribute to maintaining the small airfields

Personnel

• Lower operation costs, lower prices / tariffs • Increased operation stability • Increased flexibility • Improved safety

Customers

ANSP

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Contemporary models for investment decisions are perceived intangible and unreliable

Quartz+Co uses a scenario based business case approach to evaluate the benefits of Remote Towers

Why use a business case approach?

Cost-Benefit analysis and Net Present Value analysis are commonly used for making investment  decisions  …

…  however,  these  methods  are  perceived  intangible and unreliable due to a number of reasons • Often based on unrealistic assumptions • Results intangible and hard to relate

to operations • Hard to visualise actual impact on P&L

and Balance Sheet

…  which  entail  a  number  of  benefits   • Results are based on real operational data • Clarify effects on P&L, Balance Sheet and

Cash Flow Statement vis-à-vis "as is" • Show the full impact of the investment

Business case approach is based on an analysis of Income Statement, Balance Sheet and  Cash  Flow  Statement  …

Income Stat.

Balance Sheet

Cash flow

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Operating conditions – traffic situation/development

"As is" Estimated development "as is" - Operating costs - Investments - Cash flows

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2

Key results – comparison "as is" vs Remote TWR 4

Sensitivity and risk analysis 5

Transition costs and high-level roadmap 6

Business case methodology

Remote TWR 3

Technology Airport specific Remote Central Working station and positions Scenarios

Operations Manning (operating personnel) Other functions Operating concept

a b

Estimated development – Remote TWR c

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Remote TWR operating concept – key principles for business case

Central

Work groups

Work stations (sectors)

Work positions

Operational personnel

The need for operational personnel and the dimensioning of technical components are conditional to the operational prerequisites/conditions

• Information from the air field is transferred to a central

• The central may contain one or several work groups

• Each work group is dedicated to a number of specific airfields

• A work group may have access to one or several work stations from which the tower duty is performed

• A work station may have one or several positions

• The number of manned positions vary through the day and night

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Remote TWR operating concept – Technology set-up

Technology scenarios Different technology scenarios is used and assessed

Main scenarios

I. Visual/cameras, AWOS & ATIS (AFIS) II. Visual/Cameras, AWOS & ATIS, MLAT and ADS-B (AFIS, ATC)

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3

Opening hours

A B C D

D

C

B

A

Sum

Example from ATC Group A; Annual aircraft movements and opening hours

Group A

Aircraft movements 2009

Weekdays: X

Saturday: X

Sunday: X

Weekdays: X

Saturday: X

Sunday: X

Weekdays: X

Saturday: X

Sunday: X

Weekdays: X

Saturday: X

Sunday: X

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121110987654321 28272625242322212019181716151413

87654321 2827262524232221 3130299 11 1410 1512 13 16 17 18 19 20

DCBAJanuary

February

Monthly aircraft movements (2009) Aircraft movements per day

Example from ATC Group A; Monthly aircraft movements

Deep dive

Example of output of analysis (1/2) ILLUSTRATIVE

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Example of output of analysis (2/2)

7

2021

10

19

1516

23

17

22

18

11121314

6

10

7

5

89

4

23

23

10

22

11

21

12

20

13

19

14

18

15

1716

8765

9

0

4321

SUM SUM

Onsdag 28. januar 200910:00

12:00

11:00

11:30

11:45

11:15

10:30

10:45

10:15

10:0410:06

10:16

10:2510:2810:31

10:45

10:54

11:0111:0411:05

10:12

11:07

11:1911:22

11:50

10:22

10:46

11:34

10:0010:04

10:2410:2510:2610:3010:31

10:4210:44

10:50

11:1511:17

11:2811:3011:31

11:41

11:4711:50

Detailed flight pattern for 2 hours with high concurrencyAircraft movements spread through the dayNumber of aircraft movements per hour

Example from ATC Group A; Aircraft movements spread through the day

Wednesday 28. January 2009

23222120191817161514131211109876543210

23222120191817161514131211109876543210

SUM SUM

Aircraft movements spread through the day

2223

2120191817161514131211109876543210

Potential schedule

05:00

13:00

07:00

22:00

07:00

15:00

07:00

15:00

07:00

15:0015:00

23:00

15:00

23:00

15:00

22:00

1:4

2:4

4:4

3:4

1:4

64 h

Example from ATC Group A; Potential schedule

ILLUSTRATIVE

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Further analyses confirm the case study estimates on cost efficiency potential

Potential

Density

30% to 60% Potential

Rationale • Low air traffic density together with limited opening hours at smallest airports result in unproductive ATCO time

• When the number of air movements increase, so does the need for multiple ATCOs at the individual tower and the potential for reduction by multiple airport approach increases

• High density airports with higher complexity reduces the potential of multiple airport approach

The efficiency potential varies depending on airport density ILLUSTRATIVE

Air movements 1,000-5,000 5,000-12,000 12,000-20,000 20,000-50,000

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Business case study – set-up

Set-up of study • Information gathering and systematisation

• Analysis

• First results and main implications

• Potentially complementary analysis

• Final outcome, results and key conclusions

• Key questions/issues to address in the continuing work

• High-level roadmap going forward

Timeline* • Small team approximately 8-12 weeks

• Broader involvement at about 12-16 weeks

Dr. Anders Adrem Partner, Country manager Sweden Quartz+Co M: +46 708 969 522 E: anders.adrem@quartzco.com W: www.quartzco.com

* Depends on number of airports included, information available etc.)