INSIGHTS

Intelligence by Zpryme

AIRLINE

A Closer Look at Air Management Systems

January 2013 www.zpryme.com Zpryme: Intelligent Research for an Intelligent Market

Table of Contents
Closer Look at Air Traffic Management Systems .................. 2 Will 2013 be a big year for ATM? .......................................... 2 ATM in Developing Countries ................................................. 3 ATM Global News & Developments ....................................... 3 Europe ...................................................................................... 4 North America ........................................................................ 4 Central/South America ......................................................... 5 Asia ........................................................................................... 5 ATM Global Market Implications............................................ 6 Zpryme Outlook ...................................................................... 6 IATA Industry Traffic Forecasts ................................................ 6 International Passenger Development ............................... 6 Domestic Passenger Development ..................................... 7 International Freight Developments .................................... 7 Regional Outlook Over the 2012-2016 Forecast Period ... 8

1 ZPRYME AIRLINE INSIGHTS Copyright 2013 Zpryme Research & Consulting, LLC All rights reserved.

A Closer Look at Air Management Systems | January 2013 www.zpryme.com

Closer Look at Air Traffic Management Systems

The International Air Transport Associations (IATA) latest industry traffic forecast shows that airlines expect to fly 3.6 billion passengers in 2016 about 800 million more than the 2.8 billion passengers carried by airlines in 2011.1 Tied to the rising passenger growth is the air traffic management systems (ATM) market. The ATM global market will experience significant industry growth from 2012 to 2020. Zpryme predicts the ATM global market will grow from $5.9 billion in 2012 to $8.1 billion in 2020 (CAGR of 4.0%).
Global ATM Market Value Forecast, 2012 - 2020 in U.S. billions figure 1 (source: Zpryme) $9.0 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 $5.9 $6.0 $6.2 $6.2 $6.4 $7.1 $7.5

information to pilots and air traffic controllers than older radar systems which enables them to make safer and more efficient decisions. The new ATM systems do not rely on radar data but are able to detect weather conditions in mountainous regions which enable planes to fly new and more direct routes.2 Aviation authorities are taking note of ATMs potential. Canada has led the way in ATM technology and is seeing the rewards by way of a 25% reduction in its work force but a 50% increase in traffic.3 This increase in efficiency has caught other countries attention and led the U.S. to invest in a two year, $45 billion update to its ATM system. Given IATAs forecast of rapid growth in plane ridership, ATMs ability to increase route capacity and reduce costs makes ATM an attractive and necessary technology. Will 2013 be a big year for ATM? An increase in global ridership, as well as an increase in aerospace congestion, is expected in the next year. The IATA has urged nations to upgrade their air traffic infrastructures. According to a study done by the IATA, poor traffic management costs the EU alone 5 billion per year.4 Accordingly, many countries and airlines are taking advantage of ATM to impact their bottom line as ATM can greatly reduce these costs by allowing for better air traffic management. The U.S. is in the second year of its ATM upgrade project NextGen, and the E.U. has already begun to deploy new ATM technology as part of its Single
www.airtrafficmanagement.net/2012/12/nextgen-tech-improves-western-colorado-safetyefficiency/ 3 www.bloomberg.com/news/2012-12-14/fixing-u-s-air-traffic-dysfunction-seen-in-example.html 4 www.nationmultimedia.com/business/CSR-briefs-30194651.html
2 2

$8.1

$6.6

ATM is taking advantage of next generation technology to optimize air traffic safety, time efficiencies and a decrease in carbon emissions. ATM is able to provide more
1

www.airtrafficmanagement.net/2012/12/36-billion-passengers-expected-in-2016/

2 ZPRYME AIRLINE INSIGHTS Copyright 2013 Zpryme Research & Consulting, LLC All rights reserved.

A Closer Look at Air Management Systems | January 2013 www.zpryme.com

European Sky initiative. Developing countries are also investing in updating their ATM systems as they are seeing record growth in their air traffic, and according to the IATA, they will require ATMs increased route capacity capabilities to meet demand.5 China has contracted with Honeywell to install new ATM systems in most of their 50 new airports in 2013, and Mexico has vowed to invest 5.3% of its GDP in air traffic infrastructure.6 In Latin America, Airbus, in collaboration with Atech and the Brazilian Aviation Authority, has announced it will implement advanced ATM systems to support increased air traffic demand. With the need for developed countries to meet new regulations and efficiency targets, and the expectation of the expanding market in developing countries, 2013 is slated to be a big year for ATM.

Dan Crowley, the head of Raytheons ATM systems said. We know there will be a need for increased density in the skies, and therefore improved air traffic control.9 ATM can alleviate the problems caused by increased congestion by creating more efficient routes. India has already installed advanced ATM systems at its three major airports. As mentioned earlier, Airbus has announced that it will partner with Atech to implement ATM systems in Brazil and other Latin American countries. Eric Stefanello, CEO of Airbus ProSky, said: Together, Atech and Airbus ProSky can deploy intelligent ATM solutions that are proven to handle the long-term growth of air traffic, while successfully managing the peak demands associated with global tourism events that are being hosted in the region.10 As the middle class rises across the globe and millions more fly for the first time, ATM will be integral in ensuring that there will be efficient use of our air space.

ATM in Developing Countries

As the worlds economy changes, so does its air traffic. For instance, Latin America, which has experienced above average growth in the last ten years and is expected to double its middle class within the next 20 years, has seen tremendous growth in airplane ridership.7 It has seen a 10.2% air travel passenger increase in the last year alone.8 Latin America is not the only region to experience record growth in air travel. The Middle Easts ridership grew 8.9% last year. While the increase in air travel is great for the economy, it places a strain upon already congested airways. The air traffic system is already stressed at the current capacity,
www.airtrafficmanagement.net/2012/12/36-billion-passengers-expected-in-2016/ afm.aero/magazine/airports-and-routes/item/464-onwards-and-upwards-plans-for-progress 7 www.onlineamd.com/latin-america-airbus-aircrafts-111812.aspx 8 www.raytheon.com/media/fia12/atm/
5 6

ATM Global News & Developments

ATM is an important tool in helping governments meet safety, efficiency and environmental goals. Due to ATMs attractive economic and efficiency properties, the IATA has encouraged aviation authorities to utilize new ATM systems to ensure seamless, global air traffic. The U.S. and the E.U. have already begun to test and implement new ATM technology. China has privately contracted with ATM manufacturers to install new ATM systems into most of its 50 new airports. In Latin America, private airlines are contracting with ATM technology producers to install ATM
9 10

www.raytheon.com/media/fia12/atm/ www.airtrafficmanagement.net/2012/11/airbus-prosky-atech-sign-latam-mou/

3 ZPRYME AIRLINE INSIGHTS Copyright 2013 Zpryme Research & Consulting, LLC All rights reserved.

A Closer Look at Air Management Systems | January 2013 www.zpryme.com

systems in their terminals. From East to the West, ATM is being utilized to decrease costs, strengthen safety and increase route capacity. Europe In order to increase safety and efficiency, the European Union (E.U.) has developed a single airspace policy to unite all air traffic controllers within the E.U. under one system The undertaking is titled the Single European Sky ATM Research, also known as SESAR. The policy has recently been updated from the original 2009 plan to meet revised performance targets. SESAR will now have to meet a 2.8% increase in fuel efficiency, a 40% decrease in flight accident risks per flight hour, and a 27% increase in airspace traffic capacity.11 SESAR is already hard at work to meet new performance targets. This past November, SESAR ran its first Airborne Separation Assistance System Spacing (ASAP) trial flight using the flight management function developed by Thales. ASPA automatically distances aircraft from one another in the approach phase of flight, thereby improving the safety and efficiency of converging flights in a congested space.12 Indra Navia was awarded contracts for GAREX 220 VCCS installations in Norway. Indra Navia supplies communication, navigation, and surveillance
13

technology to the world's leading airports and air traffic control organizations. The GAREX 220 family meets all voice communication needs, from small tower applications to approach systems and large area control centers.13 North America The U.S. has plans to upgrade its ATM system over the next 13 years under the federal governments project, NextGen. The University of New Orleans (UNO) was awarded a $1.5 million, 3 year contract from NASA to develop a system which will enable pilots to have increased decision making power while flying their planes, as opposed to following air traffic controllers instructions. The UNOs project is titled Integrated Trajectory Information Processing and Management for Aircraft Safety, and will develop a 4-dimensional informational processing system that will let pilots have more information about their own and other plane trajectories.14 Meanwhile, in Colorado, project NextGen is already underway. The Federal Aviation Administration (FAA) is testing Wide Area Multilateration (WAM) technology which is designed to allow air traffic controllers to track aircraft in mountainous areas that are outside radar coverage. WAM is expected to increase safety and efficiency in mountainous regions and allow pilots to land in conditions that were not previously possible.

www.ainonline.com/aviation-news/ainsafety/2012-11-05/europe-updates-air-traffic-managementplan 12 www.airtrafficmanagement.net/2012/11/thales-embarks-on-sesar-approach-spacing-flight-trials/
11

www.prnewswire.com/news-releases/indra-navia-is-awarded-contracts-for-garex-220-vccsinstallations-in-norway-angola-sri-lanka-and-georgia-179428611.html 14 www.airtrafficmanagement.net/2012/11/uno-gets-15m-nasa-grant-for-nextgen/

4 ZPRYME AIRLINE INSIGHTS Copyright 2013 Zpryme Research & Consulting, LLC All rights reserved.

A Closer Look at Air Management Systems | January 2013 www.zpryme.com

It is expected that this will save billions of dollars in flight delays and cancellations.15 While the U.S. is currently updating its air traffic system, Canada began updating its ATM systems in 1996. As a result, the country is able to boast that they are handling 50% more traffic with 25% fewer employees, relative to 1996 figures.16 Canadian aviation authorities attribute this to taking advantage of new ATM technology to increase efficiency.

Asia Honeywell is currently anticipating a set of reforms on the countrys airspace from Chinas new government leaders including the opening up of Chinese military airspace for commercial use. In the meantime, Honeywell is implementing their groundbased augmentation system (GBAS) in 50 new Chinese airports to increase safety, efficiency and savings in fuel.19 At the Airspace Association of Asia Pacific Airlines (AAPA) Assembly of Presidents in Kuala Lumpur. the International Air Transport Association (IATA), urged Asia-Pacific to invest in their ATM infrastructure and commit to a less segmented airspace. Airspace fragmentation is estimated to have cost 5 billion annually and the cost to the environment is 16 million tons of CO2 emissions.20 Asia is experiencing record expansion in air transit and will need governmental investments to maintain the infrastructure necessary for fast-paced trade. In response, the Asia-Pacific community is forming a regional initiative called Seamless Asian Sky which is modeled after the E.U.s Single European Sky initiative.

Central/South America Airbus ProSky is partnering with ATM provider, Atech, to provide increased efficiency for growing air traffic in Latin America. Airbus predicts a 5.3% increase in air traffic per year in Latin America over the next 20 years and anticipates that their partnership with Atech will improve efficiencies in air traffic and fuel efficiency.17 Due to Latin Americas fast growth in air traffic demand, Airbus predicts that Latin America will need 2,120 new aircraft between 2012 and 2031 at an expected cost of $4 trillion.18

www.airtrafficmanagement.net/2012/12/nextgen-tech-improves-western-colorado-safetyefficiency/ 16 www.bloomberg.com/news/2012-12-14/fixing-u-s-air-traffic-dysfunction-seen-in-example.html 17 www.aviationtoday.com/the-checklist/Airbus-Prosky-Looks-to-Improve-Air-Traffic-Management-inLatin-America_77858.html#.UMYsfxwXs7p 18 www.onlineamd.com/latin-america-airbus-aircrafts-111812.aspx

15

www.ainonline.com/aviation-news/ain-air-transport-perspective/2012-12-03/honeywell-pushestechnology-china-awaits-atm-reform 20 www.airtrafficmanagement.net/2012/11/infrastructure-must-support-asian-growth/
19

5 ZPRYME AIRLINE INSIGHTS Copyright 2013 Zpryme Research & Consulting, LLC All rights reserved.

A Closer Look at Air Management Systems | January 2013 www.zpryme.com

ATM Global Market Implications

ATM has the potential to greatly increase air travel by decreasing congestion along busy routes, and to save billions of dollars in delay time and fuel costs. According to the FAA, project NextGen has the potential to save travelers, air traffic operators, and the FAA $23 billion by the year 2018 and 1.4 billion gallons of jet fuel.22 Some of the technology harnessed by ATM will automate certain time periods during a flight, thus optimizing efficiency and safety. For example, the Airborne Separation Assistance System (ASAP) automates spacing between planes during the approach phase and allows for better sequencing and a decrease in taxi time which, in turn, reduces fuel and time costs.23 Other ATM technology enables pilots to have more control over their decisions by providing a direct, real-time 4-dimensional display which enables them to have more control over their route and less reliance on air traffic controllers.24 Additionally, ATM can open up already busy flying routes, allowing for increased and faster trade. According to the University of New Orleans Professor X. Rong Li, who is developing ATM technology for project NextGen: Air traffic demand in the United States has been forecast to double by the year 2025, and the current system is already strained and cannot scale to meet this demand. Our project will enable heavier yet safer air traffic.25 ATM will aid in increased and less expensive air travel.

Zpryme Outlook Market indicators, such as increased ridership and government and private investments, show ATM as an integral instrument to increase and keep pace with global air traffic. In addition to high growth markets such as United States and United Kingdom that lead in international travel, Canada, which has implemented and developed next generation ATM technology since 1996, has seen improvements in employee and air traffic efficiencies. Further, it has increased Canadian air space capacity to easily allow for increased air traffic.26 Canada is a solid example of the positive impacts ATM can have. With large air traffic expansion and aggressive ATM overhauls in developing countries such as hidden gems Latin America and Middle East and the majority of airlines struggling to reduce costs for another year, Zpryme foresees a strong twelve months for ATM technologies globally.

IATA Industry Traffic Forecasts

Data: International Air Transport Association (IATA)27

International Passenger Development International passenger numbers are expected to grow from 1.11 billion in 2011 to 1.45 billion passengers in 2016, bringing 331 million passengers for a compound annual growth rate (CAGR) of 5.3%.

www.faa.gov/nextgen/media/ng2011_implementation_plan.pdf www.airtrafficmanagement.net/2012/11/thales-embarks-on-sesar-approach-spacing-flight-trials/ 24 www.airtrafficmanagement.net/2012/11/uno-gets-15m-nasa-grant-for-nextgen/ 25 www.airtrafficmanagement.net/2012/11/uno-gets-15m-nasa-grant-for-nextgen/

22 23

26

www.bloomberg.com/news/2012-12-14/fixing-u-s-air-traffic-dysfunction-seen-in-example.html

27 www.iata.org/pressroom/pr/pages/2012-12-06-01.aspx

6 ZPRYME AIRLINE INSIGHTS Copyright 2013 Zpryme Research & Consulting, LLC All rights reserved.

A Closer Look at Air Management Systems | January 2013 www.zpryme.com

Five of the 10 fastest growing markets for international passenger traffic are among the Commonwealth of Independent States or were part of the former Soviet Union with the others in Latin America, Africa and the Asia-Pacific region. Kazakhstan leads at 20.3% CAGR, followed by Uzbekistan (11.1%), Sudan (9.2%), Uruguay (9%), Azerbaijan (8.9%), Ukraine (8.8%), Cambodia (8.7%), Chile (8.5%), Panama (8.5%) and the Russian Federation (8.4%). By 2016, the top five countries for international travel measured by number of passengers will be the United States (at 223.1 million, an increase of 42.1 million), the United Kingdom (at 200.8 million, 32.8 million new passengers), Germany (at 172.9 million, +28.2 million), Spain (134.6 million, +21.6 million), and France (123.1 million, +23.4 million).

industrys third largest domestic market after the United States and China, will experience an 8% CAGR, adding 38 million new passengers. By 2016 the five largest markets for domestic passengers will be the United States (710.2 million), China (415 million), Brazil (118.9 million), India (107.2 million), and Japan (93.2 million).

International Freight Developments International freight volumes are expected to grow at a five-year CAGR of 3.0%, which is the result of an upward growth trend over forecast period starting at 1.4% growth in 2012 and reaching 3.7% in 2016. The five fastest growing international freight markets over the 2011-2016 period will be Sir Lanka (8.7% CAGR), Vietnam (7.4%), Brazil (6.3%), India (6.0%) and Egypt (5.9%). Five of the 10 fastest growing countries are in the Middle East North Africa (MENA) region, reflecting MENAs growing importance in international air freight. By 2016, the largest international freight markets will be the United States (7.7 million tonnes), Germany (4.2 million tonnes), China (3.5 million tonnes), Hong Kong (3.2 million tonnes), Japan (2.9 million tonnes), the United Arab Emirates (2.5 million tonnes), the Republic of Korea (1.9 million tonnes), the United Kingdom (1.8 million tonnes), India (1.6 million tonnes) and the Netherlands (1.6 million tonnes).

Domestic Passenger Development Domestic passenger numbers are expected to rise from 1.72 billion in 2011 to 2.21 billion in 2016, a 494 million increase reflecting a CAGR of 5.2% over the period. Kazakhstan will experience the fastest growth rate at 22.5% CAGR, adding 3.9 million passengers to the 2.2 million in 2011. India will have the second highest growth rate at 13.1% CAGR, adding 49.3 million new passengers. Chinas 10.1% rate will result in 158.9 million new domestic passengers. No other country is expected to experience double-digit growth rates over the forecast period. Brazil, which has the

7 ZPRYME AIRLINE INSIGHTS Copyright 2013 Zpryme Research & Consulting, LLC All rights reserved.

A Closer Look at Air Management Systems | January 2013 www.zpryme.com

Freight carriage within the Asia-Pacific region will account for around 30% of the expected total increase in freight tonnage over the period.

Latin America will see international passenger demand grow 5.8% CAGR. International freight demand will increase 4.4% per annum.

Regional Outlook Over the 2012-2016 Forecast Period Asia-Pacific passenger traffic is forecast to grow at 6.7% CAGR. Traffic within the Asia-Pacific region will represent 33% of global passengers in 2016, up from 29% in 2011. This makes the region the largest regional market for air transport (ahead of North America and Europe which each represent 21%). International freight demand will rise 3% CAGR, in line with global growth over the period. Routes within and connected to the Asia-Pacific region will comprise some 57% of cargo shipments. Africa will report the strongest passenger growth with 6.8% CAGR. International cargo demand will rise 4%. The Middle East is expected to have the third fastest growth rate at 6.6%. International freight demand will grow at 4.9%, the strongest growth among the regions. Europe will see international passenger demand growth of 4.4% CAGR. International freight demand for the region will grow 2.2% CAGR, the slowest for any region. North America will record the slowest international passenger demand growth4.3% CAGR. International freight demand will rise 2.4%.

8 ZPRYME AIRLINE INSIGHTS Copyright 2013 Zpryme Research & Consulting, LLC All rights reserved.

A Closer Look at Air Management Systems | January 2013 www.zpryme.com

Airline Insights
9 ZPRYME AIRLINE INSIGHTS Copyright 2013 Zpryme Research & Consulting, LLC All rights reserved. A Closer Look at Air Management Systems | January 2013 www.zpryme.com

Zpryme: Intelligent Research for an Intelligent Market www.zpryme.com