Cost-Benefit Case Lags Funding For NextGen Equipage

By Sean Broderick, John Croft, James R. Asker
Source: Aviation Week & Space Technology
April 22, 2013

Though more than $1 billion in government-backed loans for FAA Next Generation Air Transportation System (NextGen) avionics could soon be available, airlines remain cautious about investing in the technologies even as the first milestone—equipping with automatic dependent surveillance-broadcast (ADS-B)—is rapidly approaching.

Per FAA mandate, airlines must have ADS-B “out” installed as a surveillance source by Jan. 1, 2020, to gain unfettered access to the FAA's air traffic management system. To meet that date, carriers say they must begin planning and investing now to fit the upgrades in with usual maintenance cycles.

At issue are uncertainties in the some of the accuracy and timing requirements for ADS-B “out” and, potentially more damning, a lack of clarity on what airlines will gain by investing in the technology.

“There are no clear financial economic benefits for an airplane for ADS-B 'out,'” says Kent Horton, director of engineering for Southwest Airlines. “There are some illusions of better air traffic control or flight times.”

Questions aside, the NextGen equipage fund, set up by NEXA Capital Partners, is moving forward with loan talks. The company's managing director and CEO, Michael Dyment, says he is in advanced talks with three airlines—including one very large U.S. carrier—and expects to announce at least one customer by mid-year.

The upgrades are required to meet the FAA's goal of transitioning to a more efficient system over the next decade, but they have been a tough sell for operators. Speaking at Aviation Week's MRO Americas conference on April 16, Dyment said NEXA's analysis shows that operators will start to reap real benefits from satellite-based air traffic management when 60-65% of the fleet is upgraded. Right now, the figure is not anywhere near that.

This puts early adopters in a tough position, a lesson Southwest learned the hard way when it invested heavily in Required Navigation Performance (RNP) to use more efficient satellite-based approaches at many airports, only to find its aircraft stuck in lines of unequipped planes that could not take advantage of the new procedures.

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