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39 Software Quick Start The Airport Forecasting Risk Assessment Program is a Microsoft Excel spreadsheet; the user will need Microsoft Excel 2000 or later to run the software, and Excel macros must be enabled. Open the spreadsheet. Go to the SelectLOCID worksheet, and select an airport from the pull-down menu (Ex- hibit II-1). Press Update Tables . The program takes the user to the OAGHistory worksheet (Exhibit II-2) where he or she can view 20-year trends for the airport including average domestic flight departures, domestic seat departures, average seat size, and number of domestic destinations served. The pull-down menu is used to focus on specific airlines at the airport or to compare the airport to others. The user should also examine the TAFHistory worksheet (Exhibit II-3), which shows how ac- curate recent TAF forecasts have been for the subject airport. Exhibit II-1. SelectLOCID worksheet.

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40 Impact of Jet Fuel Price Uncertainty on Airport Planning and Development Exhibit II-2. OAGHistory worksheet. The CurrentService worksheet (Exhibit II-4) shows the air services available in individual do- mestic markets by identified airlines in 2009. The user can modify this information by adding new cities in the first two columns and new average weekly departures and average seat size in the last two columns labeled User Updates . The user can also modify existing services information in the last two columns. All of the modifications will show up in red font. To take account of these modifications in a new Baseline Forecast, press Update Tables . The software will then take the user to the Baseline&Scenarios worksheet (Exhibit II-5). If modifications were made in the CurrentService worksheet, the Baseline Forecast at the top of the page will reflect those changes. If modifications were not made in the CurrentService work- sheet, the Baseline Forecast at the top of the page will be the TAF forecast. The user can further modify the forecast directly in the columns labeled User Updates by typ- ing in the numbers or using standard Excel commands. For the ACY example shown in Exhibit II-5, the results of increasing future activity by 5 percent across the board (relative to the default TAF baseline) are shown in Exhibit II-6. Changes will be shown in red font.

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Software Quick Start 41 Exhibit II-3. TAFHistory worksheet. ACY Air Carrier + Air Taxi Operations: TAF Predicted vs. Actual 37,000 32,000 27,000 22,000 17,000 12,000 7,000 2,000 2004 2005 2006 2007 2008 2009 TAF 2003 TAF 2004 TAF 2005 TAF 2006 TAF 2007 TAF 2008 Actual Exhibit II-4. CurrentService worksheet. Exhibit II-5. Upper portion of Baseline&Scenarios worksheet.

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42 Impact of Jet Fuel Price Uncertainty on Airport Planning and Development Exhibit II-6. Results of user updates to ACY example scenario. Default Baseline User Updates Domestic Forecast (changes in red) Domestic Domestic Domestic Domestic Year Operations Enplanements Operations Enplanements 2009 14,406 520,470 14,406 520,470 2010 14,548 527,543 15,275 553,920 2011 14,692 534,712 15,427 561,448 2012 14,836 541,979 15,578 569,078 2013 14,983 549,350 15,732 576,818 2014 15,133 556,821 15,890 584,662 In the lower portion of the Baseline&Scenarios worksheet (Exhibit II-7), the user can input ranges for key air service drivers, which in turn will create scenarios for the Baseline Forecast. In general, increases in these drivers will have the following impacts on air services: Jet fuel price: (-) Economic growth: + Inflation:19 + Average seats:20 + Airport concentration: (-) Other airport competition:21 (-) The HerfindahlHirschman airport concentration index (shown at the bottom left of the worksheet) is a measure of the level of market competition at the airport. It is computed as the sum of the squared seat-departure shares of all the carriers at the airport, and ranges from 0 to 10,000, with higher values reflecting less competition. If an airport were served by only a single monopoly carrier, the index would equal 10,000 (= 100 percent seat share squared). This driver has a negative impact on air services, reflecting the fact that the higher the index, the lower is the level of competition and therefore the lower the level of overall air service. The user can compute the index for a given set of market shares by using the calculator shown at the bottom of the Baseline&Scenarios worksheet. The user can also create Confidence Bands around the Baseline Forecast taking account of jet fuel price and economic uncertainty by pressing the buttons: Set Jet Fuel Scenarios based Set Income Scenarios based on Futures Uncertainty on EIA GDP Uncertainty 19 In the air services model, inflation is used to adjust nominal jet fuel prices to real prices; so high inflation results in lower real prices for jet fuel and thus more air service. 20 Average seat size is a proxy for the cost of producing a seat departure; larger aircraft produce lower seat costs, which in competitive markets result in lower prices and thus more air service. 21 Competition from large or medium hub airports within 50 miles tends to reduce air service.

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Software Quick Start 43 Exhibit II-7. Lower portion of Baseline&Scenarios worksheet. Forecast Drivers for Domestic Scenarios (International Forecast is Fixed) 2005-2009 data are fixed; you may change the Baseline and/or Scenario assumptions below for 2010-2014. If you entered updates to the Baseline Domestic Forecast above, you should ensure that the Baseline assumptions below are consistent with those updates. JetFuelValues Set Jet Fuel Scenarios based View the latest Heating Oil futures prices by clicking here on Futures Uncertainty Baseline Price of Jet Fuel Baseline Year (Current Yr $/gal) Scenario 1 Scenario 2 Year Inflation Rate Scenario 1 Scenario 2 2005 $1.622 2005 3.34% 2006 $1.906 2006 3.25% 2007 $2.025 2007 2.87% 2008 $2.938 2008 2.14% 2009 $1.844 $1.199 $3.227 2009 1.18% 2010 $2.174 $1.500 $4.000 2010 1.47% 0.00% 0.00% 2011 $2.258 $2.258 $2.258 2011 1.31% 1.31% 1.31% 2012 $2.499 $2.499 $2.499 2012 1.43% 1.43% 1.43% 2013 $2.719 $2.719 $2.719 2013 1.76% 1.76% 1.76% 2014 $2.888 $2.888 $2.888 2014 1.73% 1.73% 1.73% (Default baseline from 2010 forward based on change in projected price of (Default baseline from 2010 forward based on projected GDP Implicit Price jet fuel from EIA Annual Energy Outlook 2010.) Deflator from EIA Annual Energy Outlook 2010.) Set Income Scenarios based on EIA GDP Uncertainty RealIncomeValu SeatsizeValues Not relevant for Small Hubs Baseline Baseline Local Real Airport Avg Year Income Growth Scenario 1 Scenario 2 Year Seatsize Scenario 1 Scenario 2 2005 0.43% 2005 119.9 2006 0.73% 2006 126.7 2007 0.27% 2007 130.1 2008 0.34% 2008 140.2 140.2 140.2 2009 -2.83% #N/A #N/A 2009 141.9 141.9 141.9 2010 1.07% 4.00% -1.00% 2010 141.9 141.9 141.9 2011 3.52% 3.52% 3.52% 2011 141.9 141.9 141.9 2012 3.64% 3.64% 3.64% 2012 141.9 141.9 141.9 2013 2.80% 2.80% 2.80% 2013 141.9 141.9 141.9 2014 2.46% 2.46% 2.46% 2014 141.9 141.9 141.9 (Default baseline from 2010 forward based on projected US GDP from EIA (Default baseline from 2010 forward equal to 2009 value.) Annual Energy Outlook 2010; 2009 value equal to US GDP growth.) HHIValues Set50Values Not relevant for Small Hubs Baseline Baseline Airport Domestic Daily Seat- Concentration Departures at Index - HHI Lrg/Med Hubs within Year (0-10,000) Scenario 1 Scenario 2 Year 50 Miles Scenario 1 Scenario 2 2005 8,189 2005 0 2006 8,450 2006 0 2007 8,804 2007 0 2008 9,715 9,715 9,715 2008 0 0 0 2009 8,333 8,333 8,333 2009 0 0 0 2010 8,333 8,333 8,333 2010 0 0 0 2011 8,333 8,333 8,333 2011 0 0 0 2012 8,333 8,333 8,333 2012 0 0 0 2013 8,333 8,333 8,333 2013 0 0 0 2014 8,333 8,333 8,333 2014 0 0 0 (Default baseline from 2010 forward equal to 2009 value.) (Default baseline from 2010 forward derived from TAF.)

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44 Impact of Jet Fuel Price Uncertainty on Airport Planning and Development The Baseline and Sensitivity Cases will be shown in the Projections and One-Page Report worksheets (Exhibits II-8 and II-9). Exhibit II-8. Projections worksheet. Projected Annual Operations for ACY 22,000 20,000 18,000 16,000 14,000 Projected Annual Revenues for ACY 12,000 $30,000,000 10,000 2008 Act 2009 2010 2011 2012 2013 2014 Baseline 17,962 14,406 15,275 15,427 15,578 15,732 15,890 $25,000,000 Scenario 1 17,962 14,406 15,275 15,940 15,861 15,891 15,980 Scenario 2 17,962 14,406 15,275 14,589 15,076 15,418 15,679 $20,000,000 Projected Annual Enplanements for ACY $15,000,000 650,000 $10,000,000 600,000 $5,000,000 2008 Act 2009 2010 2011 2012 2013 2014 Baseline $21,809,615 $13,886,975 $14,587,270 $14,731,777 $14,877,321 $15,024,827 $15,174,229 Scenario 1 $21,809,615 $13,886,975 $14,587,270 $15,126,114 $15,095,449 $15,147,055 $15,244,057 550,000 Scenario 2 $21,809,615 $13,886,975 $14,587,270 $14,083,422 $14,489,700 $14,782,287 $15,011,764 500,000 450,000 2008 Act 2009 2010 2011 2012 2013 2014 Baseline 553,177 520,470 553,920 561,448 569,078 576,818 584,662 Scenario 1 553,177 520,470 553,920 580,140 579,441 582,641 588,000 Scenario 2 553,177 520,470 553,920 530,975 550,752 565,295 576,911

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Software Quick Start 45 Exhibit II-9. One-Page Report worksheet.

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46 Impact of Jet Fuel Price Uncertainty on Airport Planning and Development In creating the sensitivity cases, the user should keep in mind how the drivers affect air ser- vices at an airport. Exhibit II-10 summarizes these impacts. As with any forecasting process, the user is ultimately responsible for the assumptions used in the analysis. The software provides a structured way to improve airport forecasts and create sen- sitivity cases, but it is not a substitute for a well-thought-out analysis. Exhibit II-10. Impact of drivers on air services. Effect on Air Service if Driver is Driver Higher Lower Explanation If nominal fuel prices rise, air services decline, and Jet Fuel Prices + vice versa. If real local income increases, air services increase, Real Local Income + and vice versa. If inflation increases, it reduces real jet fuel prices Inflation + and air services rise, and vice versa. Average Seat Size at If average seat size increases, airline costs fall and + Airport air services rise, and vice versa. Airport Concentration If one or a few carriers dominate seat departures, air + Index services decline, and vice versa. If average daily seat departures from an FAA large Competition from + or medium hub airport within 50 miles grow, air Large/Medium Hubs services decline and vice versa.