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Drawing on economic theory, empirical investigations and data from government, private and academic literature, this report revises economic values commonly used by the Federal Aviation Administration (FAA) in the evaluation of investment and regulatory programs. These include the value of time in air travel, the value of a statistical life, unit costs of statistical aviation injuries, aircraft capacity and utilization factors, aircraft variable operating costs, unit replacement and restoration costs of damaged aircraft, weight penalty costs, and probabilities of third-party damage. These values, often referred to as 'critical values', provide the bases upon which the effectiveness of the aviation system or changes therein may be denominated and assessed in monetary terms. FAA decision making should ideally discriminate among alternative investment and regulatory actions according to whether or not they entail socially and economically acceptable uses of user and general taxes. Benefit-cost analysis, Economic values, Value of life, Cost of injuries, Value of time, Aircraft replacement costs, Aircraft operating costs.
This paper addresses the cost of the delay module that was developed by Federal Aviation Administration Technical Center to be incorporated into the National Airspace System Analysis Capability (NASPAC) model. This module was developed to address the savings which could be realized when changes are made to the Air Traffic Control (ATC) System. The purpose of this module is to translate delay into a cost metric and, thus, give policy makers a better understanding of potential cost saving measures. These cost saving measures are a direct result of an operational or procedural change to the ATC System. Cost estimates for major air carriers using the National Airspace System (NAS) were derived from Form 41 (operating expenses) data provided by the Office of Airline Statistics. General aviation and military cost estimates were derived from the Economic Values for Evaluation of Federal Aviation Administration Investment and Regulatory Programs, FAA-APO-89-10. The cost of the delay module has been tested and is fully operational with the latest release of NASPAC.
Executive Order 12866, issued on September 30, 1993, directed Federal Government agencies to undertake a far-reaching review of their regulatory process and practices. One aspect of this review was to examine and improve as necessary the methods used for assessing the benefits and costs of regulatory actions. In complying with the directives of EO 12866, the Federal Aviation Administration (FAA) initiated a search for ways to improve and expand its analytical capabilities and products, especially those related to benefit-cost analysis (BCA) methodology. In this connection, FAA asked the Transportation Research Board (TRB) to convene a group of experts, skilled in economic analysis and statistics, for the purpose of reviewing FAA's current methods of economic analysis and suggesting new approaches, refinements, or supplements to conventional BCA methods. This circular is a summary of the results of a workshop on BCA conducted by TRB in April 1996. At FAA's request, the focus of the workshop was on analysis of benefits, a concentration that stemmed from FAA's experience that costs are relatively easier to quantify than benefits and are not particularly difficult to estimate.
Benefit-Cost Analysis (BCA) aids in making capital investment decisions by determining whether the benefits of a proposed action justify its costs. This synthesis, Effective Practices for Preparing Airport Improvement Program Benefit-Cost Analysis, defines and describes benefit assessment techniques used by airports as well as other modes, highlights best practices, and identifies inconsistencies of how benefits are calculated and where there is confusion in the benefit-cost guidance published by the FAA. The project focused on a review of benefit-cost literature, including benefit-cost analyses submitted to the FAA, and structured interviews with airport managers and other applicants, consultants who prepared BCA studies, and FAA staff. BCA is a tool to aid agencies in project selection and prioritization. At its core, it is a computational tool to determine whether an investment will generate benefits that will exceed its costs. This analysis is accomplished by expressing all current and future benefits and costs on an equivalent basis, which is their present value (PV). A project is economically efficient if it has a positive Net Present Value (calculated as the PV of benefits minus the PV of costs), and hence also a Benefit-Cost Ratio exceeding one.