Transcript File - Airport Ground Transportation Association

BOEING PROPRIETARY
Market and Security Briefing
Robert M. Peterson
Project Director
Boeing Commercial Airplanes
April 2004
BOEING PROPRIETARY
Agenda
 Current Situation
 Market Outlook
 U.S. Aviation Security
BOEING PROPRIETARY
Times Of Uncertainty
 Terrorism, Iraq, SARS, oil prices, security
and capital markets
 Cycle deeper and longer?
 Asia…SARS effect
 Europe…sluggish economy
 U.S…sluggish economy…bankruptcy risks remain
 Industry restructuring
 New business models
 Reduced capacity to match demand
 Simplification and consolidation
BOEING PROPRIETARY
Air Travel Decline is
Unprecedented
300
Air Travel
Growth
Index 1980=100
275
250
Frequency
Growth
225
200
Non-stop
Markets
175
150
125
Average
Airplane Size
100
75
1980
1985
1990
BOEING PROPRIETARY
1995
2000
2003 Current Market Outlook
1970
1980
1990
2000
BOEING PROPRIETARY
2010
2020
Air Travel Growth Varies by Region
Added traffic, 2003 - 2022
Annual
growth %
2003-2022
growth
2002 traffic
Asia Pacific
5.9%
No. America
4.1%
Europe
4.5%
No. Atlantic
5.0%
5.6%
Europe - Asia
Transpacific
5.3%
No. Amer. - L. Amer.
5.1%
Europe - L. Amer.
5.6%
Latin America
7.3%
Africa - Europe
5.1%
Europe - Middle East
5.9%
0
500
1,000
RPKs, billions
BOEING PROPRIETARY
1,500
2,000
GDP Forecast Is Optimistic
March Euro – Area Purchasing Managers Index Is
Expansionary
2004
United States
4.7%
2.0%
European Union
Japan
3.4%
Other Asia
5.5%
3.2%
Other Europe
China (PRC)
8.0%
Latin America
3.9%
Canada
3.0%
Middle East
4.7%
Mexico
3.6%
India and Pakistan
6.2%
Russia and CIS
6.0%
Australia and NZ
3.5%
$0
G
Satisfactory
Y
Cautionary
R
Major Concern
World Growth: 2003 2.7%
2004 3.9%
Based on Monthly Global Insight Data (March Update — Annual Real GDP)
$2,000
$4,000
$6,000
GDP, Billions U.S. Dollars
BOEING PROPRIETARY
$8,000
$10,000
U.S. Business Activity Expansionary
March Readings Exceed Expectations
70
Purchasing Managers’ Indices, %
Contracting |
Expanding
Manufacturing
Non-Manufacturing
60
50
40
30
20
M A M J
2002
J
A S O N D J
F M A M J
2003
BOEING PROPRIETARY
J
A S O N D J
F M
2004
U.S. Domestic Traffic Slowly
Recovering
80
Billions RPKs
70
2000
60
2003
2002
50
2001
2004
February 2004 down 1.7% from February 2000
40
30
J
F
M
A
M
J
J
Domestic traffic of US ATA carriers
BOEING PROPRIETARY
A
S
O
N
D
Boeing Is Committed To The
Success Of Commercial
Aviation
To ensure long term success for our industry, in May 2003,
Boeing initiated an industry – government partnership
focused on ensuring industry vitality.
This group is now known as the US Commercial Aviation
Partnership.
BOEING PROPRIETARY
Study Mission
Overall Mission:
 Promote confidence, convenience and vitality of the U.S.
commercial aviation system
 Enable industry/government cooperative action to develop
an optimum, cost effective aviation security architecture
Study Objectives:
 Develop an aviation security evaluation methodology
 Provide a credible economic and operational model of the U.S.
Commercial Aviation System to evaluate impact of potential
aviation system security actions
 Identify and/or establish an aviation security industrygovernment consortium to use the methodology to guide
evaluations and decisions about security related actions
BOEING PROPRIETARY
Working Together –
Key Stakeholders of U.S. Commercial
Aviation
Transportation
Security Administration
(TSA)
Department of
Transportation
(DOT)
Department of
Homeland Security
(DHS)
Air Transport
Assn (ATA)
American Assn
of Airport Executives
(AAAE)
Partnership to
develop input for
effective decision
making
Federal Aviation
Administration
(FAA)
Airport Council
Intl – North America
(ACI - NA)
Boeing
Provides operational and economic impact analysis
BOEING PROPRIETARY
Information to Decision Makers
To Achieve Balance
Good Transportation Security Decisions
Implementation
Vitality - safe, secure and efficient
Initiating Action
• Plans
• Measures
• Feedback
Threat
Ability to Degrade
System
Security
Ability to Protect
System
Operational &
Economic Impact
of Threat on System
TSA/DHS
TSA/DHS/OSTP
TSA/DOT
• Communication
Impact/Consequence
Assessment Processes
Benefits of Partnership
Government/Industry/Public
• Affordable balance between Safety, Security,
Efficiency, and Customer Satisfaction
• Mechanism to facilitate stakeholder discussion
and analysis of operational and economic
impact/cost consequence of security initiatives
• Define areas of consensus and disagreement
• Methodology/Process for economic policy
stakeholder engagement (OMB)
Inputs/Issues/Recommendations
TSA/DHS/DOT/OSTP
Intel
Threat
&
Risk
BOEING PROPRIETARY
Stakeholders
C
O
N
G
R
E
S
S
Congressional Direction or
Mandates
Performance
Operational &
Economic Impact
of Security Measure
on System
TSA/Partnership
USCAP
Provides Comprehensive Industry Model
Government
DOT
FAA
Local
DHS
TSA
Government
Suppliers
Factors:
•GDP
•Geopolitical
tension
•Cost
•Time
•Fear
•Hassle
Customers
Pax
Freight
Airlines
Airports
Network
Carrier
Int’l
Hub
Low Fare
Carrier
Domestic
Hub
Commuter
Large
O-D
Freighter
Small
O-D
Mail
Travel
GDS
Industry
Airline
Suppliers
BOEING PROPRIETARY
Airport
Suppliers
USCAP
Provides Comprehensive Industry Model
(20 year projections)
Government
DOT
FAA
Local
Taxes and Fees ~ $480 billion
Factors:
•GDP
•Geopolitical
tension
•Cost
•Time
•Fear
•Hassle
Customers
Pax
• Pax ~14 billion O/D
• Freight
Freight
• Mail
DHS
TSA
Fees ~ $ tbd billion
Airlines
Airports
Network
Carrier
Int’l
Hub
Low Fare
Carrier
Domestic
Revenue
~$580 billion
Commuter
Large
O-D
Freighter
Small
O-D
Revenue ~ $3.8 trillion
Mail
• ~ $ tbd billion
Travel
GDS
Industry
Government
Suppliers
• Fuel $368 billion
• Wages ~$600 billion
• Airplanes ~ $400 billion
Airline
Suppliers
BOEING PROPRIETARY
Hub
• ~ $ tbd billion
Airport
Suppliers
USCAP Model Development
USCAP Project Mission: Promote the Vitality of the U.S. Commercial Aviation
Industry.
Purpose: Promote working together cooperation between affected key stakeholders
that enables informed decision making and affordable balance between safety,
security and efficiency.
Model Objective: Create a operational and economic model of issues and possible
alternatives affecting the U.S. Commercial Aviation Industry’s vitality, security and
efficiency.
Boeing initiates prototype model development
Prototype transitioned to a “working together” environment
Initial study question identified
Preliminary [external] analysis completed
2004
March
2003
April
May
June
July
August
Sept
Oct
Nov
Dec
Jan
Underlying research for initial question completed
Model construction complete
Validation completed
Model results published
BOEING PROPRIETARY
Feb
Test Case – Scenario
Examples
Primary Assumption Set
Scenario 0 – “As Is” Baseline
Scenario I – Secure Terminal with
Credentials
Scenario II – Secure Terminal with
Credential Equivalency
and Physical Screening
Airport “perimeter”
Airline Ops Center
Freight
Forwarders
GA
GA,
Contractors,
All others
“Secure area”:
Passenger
access area of
terminal
Passenger
Terminal
Screening area
General Public
Airport “perimeter”
Airline Ops Center
Scenario III – AOA Physical
Screening with
Random Spot Checks
Freight
Forwarders
Wave-through/
Spot check
screening area
GA,
Contractors,
AOA employ
.
GA
Passenger
Terminal
Screening area
General Public
BOEING PROPRIETARY
“Secure area”:
All area within
“Airport Critical
Operations Area”
Model Results Represent
Two Assumption Sets
Primary Assumption Set:
Credentials: @ $ 300
: @ $2,500
Screened Employees – 85% of target
employees already screened
(supported by a detailed buildup)
> March 19 Review – Updated Assumptions:
Credentials: @ $ 100 (new data)
Screened Employees: – 95% of target
employees already screened
(parametric estimate)
BOEING PROPRIETARY
Incremental Security Costs
Primary Assumption Set ( $1.1B - $90.7B)
March 19 input – Updated assumptions ($0.2B - $76.5B)
Incremental
20 Year Total Security Costs
($2003 -Billions)
100
90.7
90
76.5
80
70
60
50
40
30
20
10
0.0
0
1.1
0.2
3.3
0.9
0
Scenario: 0
“As-Is”
I
+Credential
Equivalency
Note: Costs shown exclude current “sunk costs”
II
+Physical
Screening
III
+AOA
Screening
(Data as of 03/27/04)
BOEING PROPRIETARY
Scenario I Results – Secure Terminals with
Credentials
Incremental Security Costs
($2003 -Millions)
March 19 input – Updated assumptions
Estimated incremental security costs (vs.. “As-Is”) = $0.2B
$140
$120
$100
(1, 5, 10, and 20 year cumulative costs)
$80
$60
$40
$20
$0
Airlines
Airports
TSA Operations
TSA Capital
Other
Includes:
• Credentials (@$100) for approximately 960,000 employees in 2004, plus ongoing
credentialing costs for new hires and attrition less construction screening
•
•
Average growth = approx 3.9% per year
Average attrition= approx 11% per year
(Data as of 03/27/04)
BOEING PROPRIETARY
Incremental Security Costs
($2003 -Millions)
Scenario II Results – Secure Terminal with
Credential Equivalency & Physical
Screening
March 19 input – Updated assumptions
Estimated incremental security costs (vs.. “As-Is”) = $0.9B
$600
$500
$400
(1, 5, 10, and 20 year cumulative costs)
$300
$200
$100
$0
Airlines
Airports
TSA Operations
TSA Capital
Other
Includes: $0.2B from Scenario I, Plus:
• Additional TSA Operations Cost = $161M (screening staff, training, lane
•
equip. maintenance)
Additional TSA Capital Cost = $72M (lane equipment)
(Data as of 03/27/04)
BOEING PROPRIETARY
Incremental Security Costs
($2003 -Millions)
Scenario III – AOA Physical Screening with
Random Roving Spot Checks
March 19 input – Updated assumptions
Estimated incremental security costs (vs.. “As-Is”) = $76.5B
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Airlines
Airports
TSA Operations
TSA Capital
Other
(1, 5, 10, and 20 year cumulative costs)
Includes: $1.0B from Scenario II, Plus
• Additional TSA Operations Cost = $30.2 B (roving patrol LEOs, screening
•
staff, training, lane/portal maintenance)
Additional TSA Capital Costs = $16.8 B (AOA portals, roving patrol vehicles),
(Data as of 03/27/04)
BOEING PROPRIETARY
20 Year Total Security Costs
($2003 -Millions)
Scenario II Results– Secure Terminal with
Credentials & Screening Equivalency
1800
Primary Assumption Set
Estimated incremental security costs (vs.. “As-Is”) = $3.3B
1600
1400
1200
1000
800
600
400
200
0
Includes: $1.1B from Scenario I, Plus
• Additional TSA Operations Cost = $483M (screening staff, training, lane equip.
•
maintenance)
Additional TSA Capital Cost = $216M (lane equipment)
(Data as of 03/11/04)
BOEING PROPRIETARY
20 Year Total Security Costs
($2003 -Millions)
Scenario III Results– AOA Screening with
Random Roving Spot Checks
Primary Assumption Set
Estimated incremental security costs (vs. “As-Is”) = $90.7B
35000
30000
25000
20000
15000
10000
5000
0
Includes: $3.3B from Scenario II, Plus
• Additional TSA Operations Cost = $30.5 B (roving patrol LEOs, screening
•
staff, training, lane/portal maintenance)
Additional TSA Capital Costs = $16.9 B (AOA portals, roving patrol vehicles)
(Data as of 03/11/04)
BOEING PROPRIETARY
Enplanement Results – Scenario III
Primary Assumption Set
Scenario III could cause the loss of nearly 140M Enplanements
(Data as of 03/15/04)
BOEING PROPRIETARY
Departure Results –Scenario III
Primary Assumption Set
Scenario III could cause the loss of nearly 2 M Departures
(Data as of 03/1704)
BOEING PROPRIETARY
Industry Worker Results – Scenario
III
Primary Assumption Set
Scenario III could cause the loss of nearly 210,000 worker-years.
Most are in the airline sector.
Assumes incremental security costs are born completely by increased passenger fees.
Includes direct aviation related jobs only, does not include job losses at airplane
manufacturers, engine manufacturers, or indirect job loss.
(Data as of 03/15/04)
BOEING PROPRIETARY
TSA Staffing Results – Scenario III
Primary Assumption Set
Scenario III requires hiring of approximately 15,000 new screening
employees
Note: Staffing requirements include new employee screening lanes,
plus staffing for AOA “Portals”
(Data as of 03/15/04)
BOEING PROPRIETARY
Airline Results – Scenario III
Primary Assumption Set
Scenario III could cause the loss of $8B in Operating Profit
(Data as of 03/15/04)
BOEING PROPRIETARY
Airplane Production Results – Scenario
III
Primary Assumption Set
Scenario III defers delivery of airplanes
Reaches 175 units in 2011 ~ $ 10B direct impact to U.S.
BOEING PROPRIETARY
Working Together
Stakeholder Additions
Transportation
Security Administration
Air Transport
Assn (ATA)
(TSA)
American Assn
Department of
of Airport Executives
Transportation
(DOT)
Partnership to
develop input for
effective decision
making
Full Future
Participation
Department of
Homeland Security
(DHS)
(AAAE)
Airport Council
International –
North America
(ACI - NA)
Federal Aviation
Administration
Boeing
(FAA)
Provides operational and economic impact analysis
BOEING PROPRIETARY
Next Analyses
Passenger Screening
 Relate variables that affect wait times and staffing levels to
system performance
MANPADS
 Pre-emptive & other
 Airplane Based
 Land Based
CAPPS II
 Impact and timing thereof to check-in and screening process
Cargo Screening
 Analyze impact of various levels, locations and methods of
cargo screening
BOEING PROPRIETARY
Perspectives on Aviation Security
BOEING PROPRIETARY