Nobody disputes that the air traffic management systems in Europe and the United States need to be modernized.

Single European Sky ATM Research (SESAR) is in its development phase (2008-2013). Deployment is scheduled to begin in 2014. Once complete, it should facilitate a threefold increase in capacity and a 50% reduction in air navigation costs. An aircraft's environmental impact will be cut by 10% per flight.

The US equivalent to SESAR is the Federal Aviation Administration's (FAA) Next Generation Air Transportation System (NextGen). This will be implemented in stages between 2012 and 2025, and will save 1.4 billion gallons of fuel and 14 million tonnes of CO2 by 2018. Delays will be cut by 35%. It all adds up to $23 billion in benefits by 2018 compared with 2010, according to the FAA.

Demonstrable benefits
Both systems are about more than technology. They offer a better way of doing business—reducing delays and emissions while improving safety and aviation's economic benefits. For example, communities will be able to make better use of their airports, enhancing positive returns.

There is no doubt that technology provides the foundation, however. Both SESAR and NextGen use Automatic Dependent Surveillance-Broadcast (ADS-B). GPS satellite signals accurately broadcast the exact position of aircraft in the skies in real time.

The technology has already proved its worth. United Parcel Service (UPS) was the first US carrier to get involved with FAA NextGen trials, and has retrofitted about 100 of its aircraft with ADS-B equipment, which is used for precision approaches at its main air hub in Louisville, Kentucky.

"Data from our test flights with ADS-B-enabled continuous descent approaches suggests a 30% reduction in noise emissions, a 34% reduction in nitrous oxide emissions, and fuel savings of up to 100 gallons per landing," says Captain Christian Kast, Advanced Flight Systems Manager at UPS. "From an efficiency perspective, the data also points to a 10-15% increase in landing capacity."

The carrier uses ADS-B-adapted surface mapping technology to manage ground traffic at Louisville. "Our Surface Decision Surveillance System allows us to minimize aircraft taxiing times, saving more than 250,000 gallons of Jet fuel per year," adds Kast.

Southwest Airlines has also started to use precision approaches at a dozen airports across the United States. Southwest estimates it will save some $60 million a year in fuel. And Alaska Airlines reports that bad weather would have led to cancellation of 729 flights into Juneau International Airport last year were it not for GPS-based approaches.

In Europe, KLM has recently retrofitted its entire widebody fleet with ADS-B equipment. "We are seeing benefits on our north Atlantic routings over Hudson Bay, where we are able to take shorter flight paths," says Michiel van Dorst, EVP Flight Operations and Deputy Chief Operating Officer at KLM. "We also expect to see benefits from routings over China. Retrofitting with ADS-B costs us about $57,000 (EUR40,000) per aircraft, and we always try to retrofit during scheduled maintenance."

Implementation issues
Clearly, with considerable advantages on offer, implementation needs to be swift. But all stakeholders have expressed frustration at slow progress, particularly of SES. "There has been a lot of talking and not very much action," says KLM's van Dorts. "We have become a bit cynical and disappointed about the progress of SES and we want things to move forward for everyone's benefit. On the positive side, there have been some concrete proposals during the past six months, and I think that the European Commission also realizes you cannot simply go on talking for ever."

Graham Lake, Director-General of the Civil Air Navigation Services Organisation (CANSO), also believes that 2011 will be a turning point. "We are at the stage where hard decisions have to be made about the actual implementation of new generation ATM systems. The introduction of the EU performance scheme is critical but there are numerous funding issues—both on the ground and in the air—that need to be resolved."

Indeed, solving the financial aspects of the schemes could prove the catalyst for speedier adoption. Jeff Poole, Director of Airport & ATC Charges, Fuel, and Taxation at IATA says the issue of how to finance SESAR and NextGen is the hot topic at the moment. "We have been arguing that we need to see the overall business case and what that means for the various stakeholders," he says.

The total cost of developing and deploying SESAR has been estimated at about $43 billion (EUR30 billion). The current development phase is being operated as a public private partnership, costing roughly $14 billion (EUR10 billion). And of the $29 billion (EUR20 billion) to be spent during the forthcoming deployment phase, more than half is expected to come from airspace users. Poole notes that much of this money will be spent by airlines retrofitting existing aircraft with the appropriate avionics.

In the United States, the FAA is anticipating spending about $1 billion a year through 2025 on the development and deployment of NextGen, but it acknowledges that there remains some ambiguity regarding future budgets. It intends to synchronize its investments with those of other government agencies, airport authorities and the private-sector aviation community. If one of the major contributors falters in its commitment to NextGen, however, the effectiveness of the others' commitments could be at risk.

By 2020 all aircraft flying in controlled airspace in the United States must be equipped with ADS-B avionics. Airlines will be responsible for paying for airborne avionics equipage. For transport-category aircraft the FAA estimates the cost of the avionics to be $32,000-$175,000, depending on aircraft type and existing avionics.

The business case
While Poole is happy to accept that airlines pay their share for equipage, the problem is timing. At the moment, future timelines on SESAR and NextGen deployment are hazy enough to cloud airline decision-making. Do you equip an aircraft that may be decommissioned in seven years' time, for example?

Perhaps implementation of the new systems will be swift enough for benefits to accrue before the end of the aircraft's commercial life, but perhaps it won't.

"We need to be able to demonstrate business cases for the benefits, along with a clear timetable," says Rob Eagles, Director of Infrastructure at IATA. "Then airlines will be able to make an informed decision. Airlines want the transition to new technology, but considering the significant costs involved there first needs to be a good business case."

For example, van Dorst cannot yet justify retrofitting KLM's narrowbody fleet. "We have specific investment criteria at KLM and we will make an investment only if there is a rationale for it," he says. "At the moment, without a clear timetable, it is difficult to make a concrete business case for investing in ADS-B on our narrowbody fleet. Although we have a fairly clear idea of the cost, we cannot, at the moment, calculate any return on that investment. We don't know what the timing of that return would be. We are in limbo until we have clear decisions on the implementation of SES."

Funding mechanisms
Last year the European Commission engaged aviation consultants Booz & Co to undertake a study defining innovative funding mechanisms to facilitate the deployment phase of SESAR. Some 29 stakeholders, including airports, ANSPs, airlines, and manufacturers were involved. Additional interviews were undertaken with financial institutions, including the European Investment Bank. The study also looked at financing arrangements for the US NextGen program.

Analysis of the results revealed that the benefits of SESAR will vary considerably depending on the type of airspace user. Some users, such as airlines operating between non-capacity constrained airports but using congested airspace, should see significant savings relatively quickly; others may not see sufficient benefits to offset the initial costs of investment within a sensible timeframe.

After analyzing different financing options, Booz & Co suggests that the most appropriate solution is the establishment of an SES airborne equipage deployment fund. How this could best be achieved is under discussion. Airbus ProSky, SESAR, and IATA are reviewing options for preferential loans or leases to airlines, whereby the airline will only have to pay back once the benefits from SES come into play.

Similar noises are being made in the United States. The FAA has indicated that the Obama Administration's proposed ‘Infrastructure Bank' will be available for retrofitting the relevant airborne avionics to US aircraft. Details have yet to be confirmed so the industry is making moves of its own.

Several leading US aerospace companies, led by Nexa Capital Partners, are teaming up to establish a fund that could provide a private-sector solution for the bulk purchase of onboard avionics via a NextGen Equipage Fund. Several large aerospace manufacturers are said to have committed to providing money but full details are still to emerge. The aim is to spread the risks of retrofitting with airlines only paying back once the benefits from NextGen start to come in.

There is an additional complication. With the proportion of leased commercial aircraft increasing, it may not be up to the operator of the aircraft whether or not to retrofit the aircraft. That would be the owner's decision. With aircraft being deployed in various regions of the world, possibly only for relatively short periods of time, a leasing company may not want to invest in retrofitting an aircraft that might fly in skies where the systems are not yet implemented.

"Despite all the difficulties, there is no doubt that SESAR and NextGen are essential to the future of the industry," concludes Eagles. "Fuel, financial, and CO2 savings are on offer, as is enhanced safety. The devil is in the detail."