A Closer Look at Air Traffic Management Systems, Zpryme Airline Insights January 2013

AIRLINE
INSIGHTS Intelligence by Zpryme

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 A Closer Look at Air Management Systems | January 2013

Copyright © 2013 Zpryme Research & Consulting, LLC All rights reserved. www.zpryme.com

Closer Look at Air Traffic Management Systems information to pilots and air traffic controllers than older
radar systems which enables them to make safer and
The International Air Transport Association’s (IATA) latest more efficient decisions. The new ATM systems do not rely
industry traffic forecast shows that airlines expect to fly 3.6 on radar data but are able to detect weather conditions
billion passengers in 2016 – about 800 million more than the in mountainous regions which enable planes to fly new
2.8 billion passengers carried by airlines in 2011.1 Tied to the and more direct routes.2
rising passenger growth is the air traffic management
systems (ATM) market. The ATM global market will Aviation authorities are taking note of ATM’s potential.
experience significant industry growth from 2012 to 2020. Canada has led the way in ATM technology and is seeing
Zpryme predicts the ATM global market will grow from $5.9 the rewards by way of a 25% reduction in its work force but
billion in 2012 to $8.1 billion in 2020 (CAGR of 4.0%). a 50% increase in traffic.3 This increase in efficiency has
caught other countries’ attention and led the U.S. to invest
Global ATM Market Value Forecast, 2012 - 2020
in a two year, $45 billion update to its ATM system.
in U.S. billions
figure 1 (source: Zpryme)
Given IATA’s forecast of rapid growth in plane ridership,
$9.0
$8.1 ATM’s ability to increase route capacity and reduce costs
$8.0 $7.5 makes ATM an attractive and necessary technology.
$7.1
$7.0 $6.4 $6.6
$6.0 $6.2 $6.2 Will 2013 be a big year for ATM?
$5.9
$6.0

$5.0 An increase in global ridership, as well as an increase in
aerospace congestion, is expected in the next year. The
$4.0
IATA has urged nations to upgrade their air traffic
$3.0 infrastructures. According to a study done by the IATA,
$2.0 poor traffic management costs the EU alone €5 billion per
year.4 Accordingly, many countries and airlines are taking
$1.0 advantage of ATM to impact their bottom line as ATM can
$0.0 greatly reduce these costs by allowing for better air traffic
2012 2013 2014 2015 2016 2017 2018 2019 2020 management. The U.S. is in the second year of its ATM
upgrade project “NextGen”, and the E.U. has already
ATM is taking advantage of next generation technology to begun to deploy new ATM technology as part of its “Single
optimize air traffic safety, time efficiencies and a decrease
in carbon emissions. ATM is able to provide more 2 2www.airtrafficmanagement.net/2012/12/nextgen-tech-improves-western-colorado-safety-
efficiency/
3 www.bloomberg.com/news/2012-12-14/fixing-u-s-air-traffic-dysfunction-seen-in-example.html
1 www.airtrafficmanagement.net/2012/12/36-billion-passengers-expected-in-2016/ 4 www.nationmultimedia.com/business/CSR-briefs-30194651.html



European Sky initiative”. Developing countries are also Dan Crowley, the head of Raytheon’s ATM systems said.
investing in updating their ATM systems as they are seeing “We know there will be a need for increased density in the
record growth in their air traffic, and according to the skies, and therefore improved air traffic control.”9 ATM can
IATA, they will require ATM’s increased route capacity alleviate the problems caused by increased congestion
capabilities to meet demand.5 China has contracted by creating more efficient routes. India has already
with Honeywell to install new ATM systems in most of their installed advanced ATM systems at its three major airports.
50 new airports in 2013, and Mexico has vowed to invest As mentioned earlier, Airbus has announced that it will
5.3% of its GDP in air traffic infrastructure.6 In Latin partner with Atech to implement ATM systems in Brazil and
America, Airbus, in collaboration with Atech and the other Latin American countries. Eric Stefanello, CEO of
Brazilian Aviation Authority, has announced it will Airbus ProSky, said: “Together, Atech and Airbus ProSky
implement advanced ATM systems to support increased can deploy intelligent ATM solutions that are proven to
air traffic demand. With the need for developed countries handle the long-term growth of air traffic, while
to meet new regulations and efficiency targets, and the successfully managing the peak demands associated with
expectation of the expanding market in developing global tourism events that are being hosted in the
countries, 2013 is slated to be a big year for ATM. region.”10

ATM in Developing Countries As the middle class rises across the globe and millions
more fly for the first time, ATM will be integral in ensuring
As the world’s economy changes, so does its air traffic. For that there will be efficient use of our air space.
instance, Latin America, which has experienced above
average growth in the last ten years and is expected to ATM Global News & Developments
double its middle class within the next 20 years, has seen
tremendous growth in airplane ridership.7 It has seen a ATM is an important tool in helping governments meet
10.2% air travel passenger increase in the last year alone.8 safety, efficiency and environmental goals. Due to ATM’s
Latin America is not the only region to experience record attractive economic and efficiency properties, the IATA
growth in air travel. The Middle East’s ridership grew 8.9% has encouraged aviation authorities to utilize new ATM
last year. systems to ensure seamless, global air traffic. The U.S. and
the E.U. have already begun to test and implement new
While the increase in air travel is great for the economy, it ATM technology. China has privately contracted with
places a strain upon already congested airways. “The air ATM manufacturers to install new ATM systems into most of
traffic system is already stressed at the current capacity,” its 50 new airports. In Latin America, private airlines are
contracting with ATM technology producers to install ATM
5 www.airtrafficmanagement.net/2012/12/36-billion-passengers-expected-in-2016/
6 afm.aero/magazine/airports-and-routes/item/464-onwards-and-upwards-plans-for-progress
7 www.onlineamd.com/latin-america-airbus-aircrafts-111812.aspx 9 www.raytheon.com/media/fia12/atm/
8 www.raytheon.com/media/fia12/atm/ 10 www.airtrafficmanagement.net/2012/11/airbus-prosky-atech-sign-latam-mou/



systems in their terminals. From East to the West, ATM is technology to the world's leading airports and air
being utilized to decrease costs, strengthen safety and traffic control organizations. The GAREX 220 family
increase route capacity. meets all voice communication needs, from small
tower applications to approach systems and large
Europe area control centers.13

 In order to increase safety and efficiency, the North America
European Union (E.U.) has developed a single
airspace policy to unite all air traffic controllers  The U.S. has plans to upgrade its ATM system over
within the E.U. under one system The undertaking is the next 13 years under the federal government’s
titled the “Single European Sky ATM Research”, also project, “NextGen.” The University of New Orleans
known as SESAR. The policy has recently been (UNO) was awarded a $1.5 million, 3 year contract
updated from the original 2009 plan to meet revised from NASA to develop a system which will enable
performance targets. SESAR will now have to meet pilots to have increased decision making power
a 2.8% increase in fuel efficiency, a 40% decrease in while flying their planes, as opposed to following air
flight accident risks per flight hour, and a 27% traffic controllers’ instructions. The UNO’s project is
increase in airspace traffic capacity.11 titled “Integrated Trajectory Information Processing
and Management for Aircraft Safety,” and will
 SESAR is already hard at work to meet new develop a 4-dimensional informational processing
performance targets. This past November, SESAR system that will let pilots have more information
ran its first Airborne Separation Assistance System about their own and other plane trajectories.14
Spacing (ASAP) trial flight using the flight
management function developed by Thales. ASPA  Meanwhile, in Colorado, project “NextGen” is
automatically distances aircraft from one another in already underway. The Federal Aviation
the approach phase of flight, thereby improving the Administration (FAA) is testing Wide Area
safety and efficiency of converging flights in a Multilateration (WAM) technology which is designed
congested space.12 to allow air traffic controllers to track aircraft in
mountainous areas that are outside radar
 Indra Navia was awarded contracts for GAREX 220 coverage. WAM is expected to increase safety and
VCCS installations in Norway. Indra Navia supplies efficiency in mountainous regions and allow pilots to
communication, navigation, and surveillance land in conditions that were not previously possible.

11 www.ainonline.com/aviation-news/ainsafety/2012-11-05/europe-updates-air-traffic-management- 13 www.prnewswire.com/news-releases/indra-navia-is-awarded-contracts-for-garex-220-vccs-
plan installations-in-norway-angola-sri-lanka-and-georgia-179428611.html
12 www.airtrafficmanagement.net/2012/11/thales-embarks-on-sesar-approach-spacing-flight-trials/ 14 www.airtrafficmanagement.net/2012/11/uno-gets-15m-nasa-grant-for-nextgen/



It is expected that this will save billions of dollars in Asia
flight delays and cancellations.15
 Honeywell is currently anticipating a set of reforms
 While the U.S. is currently updating its air traffic on the country’s airspace from China’s new
system, Canada began updating its ATM systems in government leaders including the opening up of
1996. As a result, the country is able to boast that Chinese military airspace for commercial use. In the
they are handling 50% more traffic with 25% fewer meantime, Honeywell is implementing their ground-
employees, relative to 1996 figures.16 Canadian based augmentation system (GBAS) in 50 new
aviation authorities attribute this to taking Chinese airports to increase safety, efficiency and
advantage of new ATM technology to increase savings in fuel.19
efficiency.
 At the Airspace Association of Asia Pacific Airlines
Central/South America (AAPA) Assembly of Presidents in Kuala Lumpur. the
International Air Transport Association (IATA), urged
 Airbus ProSky is partnering with ATM provider, Atech, Asia-Pacific to invest in their ATM infrastructure and
to provide increased efficiency for growing air traffic commit to a less segmented airspace. Airspace
in Latin America. Airbus predicts a 5.3% increase in fragmentation is estimated to have cost €5 billion
air traffic per year in Latin America over the next 20 annually and the cost to the environment is 16
years and anticipates that their partnership with million tons of CO2 emissions.20 Asia is experiencing
Atech will improve efficiencies in air traffic and fuel record expansion in air transit and will need
efficiency.17 governmental investments to maintain the
infrastructure necessary for fast-paced trade. In
 Due to Latin America’s fast growth in air traffic response, the Asia-Pacific community is forming a
demand, Airbus predicts that Latin America will regional initiative called “Seamless Asian Sky” which
need 2,120 new aircraft between 2012 and 2031 at is modeled after the E.U.’s “Single European Sky
an expected cost of $4 trillion.18 initiative”.

15 www.airtrafficmanagement.net/2012/12/nextgen-tech-improves-western-colorado-safety-
efficiency/
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-in- 19 www.ainonline.com/aviation-news/ain-air-transport-perspective/2012-12-03/honeywell-pushes-
Latin-America_77858.html#.UMYsfxwXs7p technology-china-awaits-atm-reform
18 www.onlineamd.com/latin-america-airbus-aircrafts-111812.aspx 20 www.airtrafficmanagement.net/2012/11/infrastructure-must-support-asian-growth/



ATM Global Market Implications Zpryme Outlook

ATM has the potential to greatly increase air travel by Market indicators, such as increased ridership and
decreasing congestion along busy routes, and to save government and private investments, show ATM as an
billions of dollars in delay time and fuel costs. According integral instrument to increase and keep pace with global
to the FAA, project “NextGen” has the potential to save air traffic. In addition to high growth markets such as
travelers, air traffic operators, and the FAA $23 billion by United States and United Kingdom that lead in
the year 2018 and 1.4 billion gallons of jet fuel.22 international travel, Canada, which has implemented and
developed next generation ATM technology since 1996,
Some of the technology harnessed by ATM will automate has seen improvements in employee and air traffic
certain time periods during a flight, thus optimizing efficiencies. Further, it has increased Canadian air space
efficiency and safety. For example, the Airborne capacity to easily allow for increased air traffic.26 Canada
Separation Assistance System (ASAP) automates spacing is a solid example of the positive impacts ATM can have.
between planes during the approach phase and allows
for better sequencing and a decrease in taxi time which, With large air traffic expansion and aggressive ATM
in turn, reduces fuel and time costs.23 Other ATM overhauls in developing countries such as hidden gems
technology enables pilots to have more control over their Latin America and Middle East and the majority of airlines
decisions by providing a direct, real-time 4-dimensional struggling to reduce costs for another year, Zpryme
display which enables them to have more control over foresees a strong twelve months for ATM technologies
their route and less reliance on air traffic controllers.24 globally.

Additionally, ATM can open up already busy flying routes, IATA Industry Traffic Forecasts
allowing for increased and faster trade. According to the Data: International Air Transport Association (IATA)27
University of New Orleans Professor X. Rong Li, who is
developing ATM technology for project “NextGen”: “Air International Passenger Development
traffic demand in the United States has been forecast to
double by the year 2025, and the current system is already  International passenger numbers are expected to
strained and cannot scale to meet this demand. “Our grow from 1.11 billion in 2011 to 1.45 billion
project will enable heavier yet safer air traffic.”25 ATM will passengers in 2016, bringing 331 million passengers
aid in increased and less expensive air travel. for a compound annual growth rate (CAGR) of
5.3%.
22 www.faa.gov/nextgen/media/ng2011_implementation_plan.pdf
23 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/ 26 www.bloomberg.com/news/2012-12-14/fixing-u-s-air-traffic-dysfunction-seen-in-example.html
25 www.airtrafficmanagement.net/2012/11/uno-gets-15m-nasa-grant-for-nextgen/ 27 www.iata.org/pressroom/pr/pages/2012-12-06-01.aspx



 Five of the 10 fastest growing markets for industry’s third largest domestic market after the
international passenger traffic are among the United States and China, will experience an 8%
Commonwealth of Independent States or were part CAGR, adding 38 million new passengers.
of the former Soviet Union with the others in Latin
America, Africa and the Asia-Pacific region.  By 2016 the five largest markets for domestic
Kazakhstan leads at 20.3% CAGR, followed by passengers will be the United States (710.2 million),
Uzbekistan (11.1%), Sudan (9.2%), Uruguay (9%), China (415 million), Brazil (118.9 million), India (107.2
Azerbaijan (8.9%), Ukraine (8.8%), Cambodia (8.7%), million), and Japan (93.2 million).
Chile (8.5%), Panama (8.5%) and the Russian
Federation (8.4%). International Freight Developments

 By 2016, the top five countries for international travel  International freight volumes are expected to grow
measured by number of passengers will be the at a five-year CAGR of 3.0%, which is the result of an
United States (at 223.1 million, an increase of 42.1 upward growth trend over forecast period – starting
million), the United Kingdom (at 200.8 million, 32.8 at 1.4% growth in 2012 and reaching 3.7% in 2016.
million new passengers), Germany (at 172.9 million,
+28.2 million), Spain (134.6 million, +21.6 million), and  The five fastest growing international freight
France (123.1 million, +23.4 million). markets over the 2011-2016 period will be Sir Lanka
(8.7% CAGR), Vietnam (7.4%), Brazil (6.3%), India
Domestic Passenger Development (6.0%) and Egypt (5.9%). Five of the 10 fastest
growing countries are in the Middle East North Africa
 Domestic passenger numbers are expected to rise (MENA) region, reflecting MENA’s growing
from 1.72 billion in 2011 to 2.21 billion in 2016, a 494 importance in international air freight.
million increase reflecting a CAGR of 5.2% over the
period.  By 2016, the largest international freight markets will
be the United States (7.7 million tonnes), Germany
 Kazakhstan will experience the fastest growth rate (4.2 million tonnes), China (3.5 million tonnes), Hong
at 22.5% CAGR, adding 3.9 million passengers to the Kong (3.2 million tonnes), Japan (2.9 million tonnes),
2.2 million in 2011. India will have the second highest the United Arab Emirates (2.5 million tonnes), the
growth rate at 13.1% CAGR, adding 49.3 million new Republic of Korea (1.9 million tonnes), the United
passengers. China’s 10.1% rate will result in 158.9 Kingdom (1.8 million tonnes), India (1.6 million
million new domestic passengers. No other country is tonnes) and the Netherlands (1.6 million tonnes).
expected to experience double-digit growth rates
over the forecast period. Brazil, which has the



 Freight carriage within the Asia-Pacific region will
account for around 30% of the expected total  Latin America will see international passenger
increase in freight tonnage over the period. 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 growth–4.3% CAGR.
International freight demand will rise 2.4%.



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A Closer Look at Air Management Systems | January 2013

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