By Christopher Hinton
NEW YORK (MarketWatch)--New York's bottle-necked flight
corridors have long been notorious for maddening travel delays, to
say nothing of driving up costs for airlines as their jets wait for
an opening to land.
Help was supposed to come by scrapping the 1950s-era
ground-based air-traffic control system in favor of a 21st-Century
satellite-based tracking technology. GPS-assisted aircraft could
then fly closer together, react faster to changing flight
conditions and optimize their landing approaches.
It's an upgrade that could save the airlines hundred of millions
of dollars a year.
But the U.S. plan to achieve that, estimated to cost $40
billion, is stuck on the ground.
Poor planning and the politics of fiscal austerity have left the
system only partially installed. Now, airline executives are so
disillusioned that they're balking at buying additional cockpit
gear for a program they say isn't delivering on its promise.
Even as avionic suppliers with rich contracts at stake in the
plan came up with a novel way of making their equipment more
affordable, aircraft operators haven't changed their position.
"Many carriers--Delta, Southwest, American, United--we have all
made significant investments in equipage for our existing fleets
that we are not using," said Delta Air Lines (DAL) Chief Executive
Richard Anderson, during a recent conference call with reporters.
"We want to leverage the technology we have today before we add
more technology and more cost."
For the Federal Aviation Administration, which is overseeing the
so-called NextGen plan, the loss of confidence is another black eye
for an agency still smarting from the furor over napping
air-traffic controllers and a sharp rise in close calls of mid-air
collisions.
In a watchdog report last week, the U.S. Department of
Transportation's inspector general criticized the FAA for not
coming up with an "integrated master schedule" for NextGen, and
highlighted design decisions that put the entire program's cost and
schedule targets at further risk.
Growth goals
In the long run, such uncertainty threatens to undermine the
program and its broader economic benefits.
Local officials in the New York area have been hopeful that
NextGen would not only drive down delay times, but also allow more
aircraft to land at its airports and help spur more than $5 billion
in growth by 2030.
For the FAA's part, agency officials have shrugged off the
concerns and defended NextGen phase-in as being on schedule since
work began in 2004.
Once it's online, NextGen is supposed to replace a radar system
that first took shape in the aftermath of World War II.
Essentially a GPS system, NextGen is designed to be more
accurate than radar and allow computers to track aircraft. Instead
of flying in easy-to-monitor "skyways," pilots could go "off road"
and fly more efficient trajectories, supporters say.
The system would also help pilots plan their flight times and
plot optimal landing approaches, and it allows dispatchers to
narrow the space between arriving aircraft to less than a mile
compared with the roughly three miles now maintained. Such
optimizing is estimated to reduce flight delays by 35%, lowering
fuel use and cutting pollution.
With the price for jet fuel up four-fold in the last decade,
it's a system the airlines can't start using soon enough. But
higher fuel prices have also squeezed profit margins, and some
airlines say they can no longer stomach NextGen upgrades done
haphazardly or subject to delay.
At the same time, the program's potential $160 billion in
build-out costs over 15 years represent a lucrative target for
aerospace and avionics companies like ITT Corp. (ITT), Boeing Co.
(BA), Lockheed Martin Corp. (LMT), Honeywell International Inc.
(HON), and General Electric Co. (GE).
Last month, avionic companies acted to soften airlines' hardened
position by having Congressional allies propose a public-private
partnership as part of an FAA funding bill. The arrangement aims to
lease avionic equipment to aircraft operators, with options to
buy.
Loan guarantees
Called the NextGen Equipage Fund, it would be financed with $1.5
billion in private capital, with ITT as the lead investor, and
largely guaranteed by the federal government.
Backers say the fund's advantage is that it can equip the
airlines without a large cash outlay or taking on more debt, and
payments would be deferred until the FAA delivers the related
services, according to Russell Chew, managing partner of Nexa
General Partnership Capital, which would manage the fund.
"The deferred payments are an important selling point to
airlines that are short on cash, or have been burnt by the U.S. in
past attempts to upgrade the traffic-control system," Chew
said.
Some of that equipment would include Automatic Dependent
Surveillance-Broadcast, which gives pilots highly accurate data on
an aircraft's position in relation to others. That would allow
pilots to fly more efficient trajectories between airports and
closely line up their planes on final runway approaches, shortening
the times between individual landings and saving fuel.
It could also include revamping communications with a
data-exchange system between air traffic controllers and pilots,
decreasing the reliance on voice communication and reducing the
chance of error. It would also streamline departure clearances,
airborne reroutes and taxiway information.
"The fund is enough to equip up to 75% of the retrofit-able
aircraft," Chew said. "And the airlines need the majority of other
airlines to get equipped; otherwise you have a mix of planes that
burdens air traffic control and reduces NextGen use."
The House passed the FAA funding bill in April, and it now
awaits reconciliation with a version cleared in the Senate.
"If the fund did pass, it would certainly benefit us
significantly," said Clay Jones, CEO of Rockwell Collins Inc.
(COL), which builds some cockpit equipment. "The fund would
accelerate airlines' move to NextGen."
The ground equipment for Automatic Dependent
Surveillance-Broadcast should be in place by 2013, the FAA
says.
'Big sales program'
Airline executives say they support the program's goals, but
they're anxious to use what they've already purchased before buying
more equipment. The fear, as Delta chief Anderson puts it, is that
NextGen otherwise is just a "big sales program by the avionics
sales people."
Parts of NextGen have yet to be fully "switched on" because of
sloppy work and schedule delays by the FAA, according to industry
insiders. The airlines also complain that there isn't a clear
timeline with specific target dates.
Southwest Airlines (LUV) has invested $175 million into
equipment and pilot training related to the NextGen system that
optimizes a plane's landing approach, known as required navigation
performance, or RNP.
Of Southwest's 72 destinations in the nation, only 11 are set up
for the advanced landing procedure, and the FAA hasn't provided any
timeframe for when the remaining airports would come online.
"We've made this investment and not only do we want to make
returns on it, but it will also make our flying more efficient,"
said Marilee McInnis, a spokeswoman for the Dallas-based
airline.
Even the limited use of new landing approach is expected to save
Southwest about $16 million a year. If adopted across all its
destinations, it would lead to more than $60 million in annual
savings, McInnis said.
The FAA said it had already given its stamp of approval to 257
new landing approaches since 2005. The agency couldn't say how many
more need to be completed, but it could be well more than 1,000
based on past data and assuming approaches will be mapped to some
400 U.S. commercial airports.
But many flight crews aren't even using the new approaches
because they were developed to meet internal targets and not for
the benefit of the users, according to the inspector general's
report.
"The FAA has been remiss in fully developing these
approaches--they're not doing the homework," said Hans Weber, a
NextGen expert and aviation consultant with TEPCO International
Inc.
"Many of the approaches are not very different than the standard
approach aircraft fly now, so it doesn't allow for a full curvature
approach, which takes into account weather and wind on the plane's
glide path and actually shortens the distance a pilot has to fly,"
he said.
FAA spokesman Paul Takemoto says the agency is working on the
effort as quickly as possible.
To expedite the new procedures, the FAA teamed up with Naverus,
the General Electric Co. unit that designed the approaches in
Australia, as well as Boeing's Jeppesen unit, but the role of those
companies remains small.
-By Christopher Hinton; 415-439-6400;
AskNewswires@dowjones.com