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4 EXAMPLES ILLUSTRATING TIME VALUATION To show how the five-step methodology and calculation process works in practice, three illustrative case studies have been developed. These cases are all drawn from real world examples of airport improvement projects, though they are not identified and the numbers have been altered to make them more generally applicable. Each affects a different set of trip segments. They are: (A) Runway extension -- reducing passenger travel times by enabling new nonstop markets to be served; (B) Ground access â reducing ground access and egress times and enhancing reliability (by constructing an automated people mover connection to a nearby rail station that replaces shuttle buses on a congested airport access road); and (C) Navigation aid upgrade â reducing flight delays (by reducing flight cancellations and diversions due to inclement weather). The second example also demonstrates the use of more detailed information on the income profile of passengers at a specific airport. Example A: Runway Extension Project In this example, a regional airport is proposing a runway extension that will facilitate new nonstop service to and from the airport. The project includes lengthening the main runway by 600 feet, adding complementary taxiway enhancements, acquiring right-of-way for the runway, and relocating local roads to accommodate the runway and an FAA-required runway safety area. Currently, airlines operating from the airport provide nonstop service to five major airports. Extending the main runway would allow nonstop service in six additional major markets, as larger aircraft would be able to use the longer runway. Therefore, airlines would now find it feasible and profitable to operate nonstop service to these new destinations. The main passenger benefit of the project is the time savings created by the new nonstop flights. There are also three other benefit categories: reductions in airline operating costs due to the airportâs ability to accommodate larger aircraft and serve more markets, reduced incidence of aircraft weight penalties due to insufficient runway length, and increased passenger comfort. Since this guidebook does not address these other benefits, the example will focus on the travel time savings. Step 1: Screen Project for Applicability. The analyst checks the project for suitability to use this guidebook by using the Project Screener table (Table 4). This runway extension project is an âairport (non-terminal) â airsideâ project. For many airports, the main benefit of a 4 Page 28
runway extension would be to reduce airline costs (and potentially airfares) by accommodating larger aircraft. However, in this case, the runway expansion is intended to enable new nonstop service, which will result in time savings to passengers.11 Step 2: Identify Relevant Time Categories. The runway extension project impacts the airport-to-airport flight time, which includes time spent for taxi, takeoff, and landing, in- flight time, and time spent at connecting airports. Specifically, the in-flight time and time spent at connecting airports will decline for passengers with an origin or destination at any of the six new nonstop markets. Step 3: Calculate Travel Delay Change. The next step is to calculate the time savings. In this case, the time savings are a function of the number of passengers who utilize the new nonstop service. Currently, the airport has 520,000 outgoing passengers annually. Approximately 17.4 percent of passengers have a destination in one of the six new markets that will be served by nonstop service. Therefore, 90,480 passengers have a destination in one of the six new markets. Assuming that there are also approximately 520,000 incoming passengers annually and that 17.4 percent of passengers landing at the airport had an origin in one of the six new markets, approximately 90,480 passengers have new nonstop access from one of the six new markets. These markets are shown in Table A-1. Overall, approximately 180,960 passengers will now have access to nonstop service, either to or from the regional airport. Currently, Markets A through F can be accessed only via connections at major airports. However, as a result of the runway extension and airlines now offering nonstop flights in each of these new markets, the project will result in time savings to passengers traveling to these markets. For example, in Market C, the current trip duration, including connections, is 4.3 hours. New service would cut the travel time to 2.3 hours, resulting in a 2-hour time saving per passenger. Table A-2 shows the travel times with and without the runway extension as well as the expected travel time savings. 11 The extent to which a runway extension would reduce delay by allowing the airlines to reduce the number of flights by using larger aircraft is a complex issue. Airlines compete on flight frequency, so even if they could reduce the number of flights, they might decide not to. However, even if relevant airlines reduced their number of flights, the passenger benefits of the reduced delay would have to be offset against the dis- benefits of less frequent flights. Page 29
Table A-1: Passenger Volume and Share of New Nonstop Service (Boardings & Alightings) New Market (1) (2) (3) (4) Market Share of Total Passengers at Airport Number of Passenger Boardings Col. (1) x 520,000 Number of Passenger Alightings Col. (1) x 520,000 Total Number of Passengers Col. (2) + Col. (3) A 6.3% 32,760 32,760 65,520 B 4.0% 20,800 20,800 41,600 C 2.9% 15,080 15,080 30,160 D 1.8% 9,360 9,360 18,720 E 1.3% 6,760 6,760 13,520 F 1.1% 5,720 5,720 11,440 Total 17.4% 90,480 90,480 180,960 Table A-2: Average Trip Lengths to New Nonstop Markets New Market (1) (2) (3) (4) (5) Avg. Connecting Trip Length (hour/trip) Avg. Nonstop Trip Length (hour/trip) Time Savings (hour/trip) Col. (2) â Col. (1) Market Share of Total Flights at Airport Weighted Time Savings (hour/passenger) Col. (3) x Col. (4) ÷ 17.4% A 4.0 2.4 1.6 6.3% .58 B 4.4 2.7 1.7 4.0% .39 C 4.3 2.3 2.0 2.9% .33 D 4.9 2.8 2.1 1.8% .22 E 4.0 2.4 1.6 1.3% .12 F 4.5 2.7 1.8 1.1% .11 Total 17.4% 1.75 The time savings are weighted by the corresponding market share. Overall, nonstop trips to these markets are expected to reduce passenger travel time by 1.75 hours per passenger using the new flights. Since both time savings incurred in flight and in making connections are assumed to have the same value, there is no need to determine how much of the travel time savings result from shorter flight times and how much from the elimination of the connection. Step 4: Calculate Value of Delay Reduction. As detailed in Step 2, the runway extension project creates passenger in-flight time savings. At this regional airport, passenger surveys have revealed that approximately 40 percent of passengers are business travelers, while the remaining 60 percent are leisure passengers. Information on the income distribution of passengers is not available. Page 30
As shown in Table 1 in chapter 2, business passengers have an in-flight value of time of $51.00 per hour, while leisure travelers have an in-flight value of time of $34.90 per hour12. To calculate a composite value of time, the analyst uses the following equation: Composite Value of Time = Proportion of Business Travelers x Business Value of Time (VOT) + Proportion of Leisure Travelers x Leisure VOT = (40% x $51.00) + (60% x $34.90) = $41.34 / hour To avoid overstating benefits, the analyst assumes that only 50 percent of passengers utilize the new nonstop service. In addition, the analyst assumes that the market shares of the new nonstop markets do not change as a result of the new nonstop service (i.e. the availability of the new nonstop service does not generate any new passenger trips). As a result, the following equation is used to calculate the monetized passenger time savings: Passenger Time Savings = Total Number of Passengers in the Six New Nonstop Markets x Proportion of Passengers Choosing Nonstop Service x Average Time Savings per Flight per Passenger x Composite Value of Time = 180,960 passengers x 50% x 1.75 hours/passenger x $41.34/hour = $6,560,823 Step 5: Apply to Benefit-Cost Analysis. To use this estimate in a benefit-cost analysis, the projection of the airport business plan is that the runway extension opens in 2015 and that new nonstop service in the six markets begins immediately. (Alternatively, service to new markets could be phased in.) The analyst also assumes that the mix of business and leisure passengers does not change as a result of the new nonstop service and that the total number of passengers departing from or arriving at the airport grows by 2 percent annually. The benefit-cost analysis covers a 22 year span, from 2013-2025. Significant costs, including land acquisition (if any), planning, engineering and construction occur before benefits begin to accumulate, and are assumed in the years 2013 and 2014. The first year of realizing benefits, 2015, is the third year of the BCA period. Table A-3 presents the undiscounted and discounted benefits estimated over the 20-year benefit-analysis period. For the first 20 years of the project in operation, the runway extension is projected to deliver $112.9 million in passenger time savings when benefits are discounted at 3 percent and $75.5 million when discounted at seven percent. These benefits would be larger if a longer analysis period were chosen. 12 These are 2013 values of time (in 2013 dollars). If real incomes rise in the future, the values of time will increase as well. A discussion of updating the values of time is found in Chapter 5 of this guidebook. Page 31
As part of a comprehensive benefit-cost framework, the total passenger travel time savings can be added to other benefit categories, such as safety benefits or reductions in airline operating costs, and compared with capital and operating and maintenance (O&M) costs. Table A-3: Annual Travel Time Savings of the Runway Extension, 2015 - 2034 Year New Nonstop Passengers Annual Travel Time Savings, 2013 $ Undiscounted Discounted at 3% Discounted at 7% 2015 90,480 $6,560,823 $6,184,205 $5,730,477 2016 92,290 $6,692,040 $6,124,164 $5,462,698 2017 94,135 $6,825,881 $6,064,707 $5,207,432 2018 96,018 $6,962,398 $6,005,826 $4,964,094 2019 97,938 $7,101,646 $5,947,517 $4,732,127 2020 99,897 $7,243,679 $5,889,774 $4,510,999 2021 101,895 $7,388,553 $5,832,592 $4,300,205 2022 103,933 $7,536,324 $5,775,965 $4,099,261 2023 106,012 $7,687,050 $5,719,887 $3,907,707 2024 108,132 $7,840,791 $5,664,354 $3,725,103 2025 110,295 $7,997,607 $5,609,361 $3,551,033 2026 112,501 $8,157,559 $5,554,901 $3,385,097 2027 114,751 $8,320,710 $5,500,970 $3,226,915 2028 117,046 $8,487,125 $5,447,562 $3,076,125 2029 119,386 $8,656,867 $5,394,673 $2,932,380 2030 121,774 $8,830,004 $5,342,298 $2,795,353 2031 124,210 $9,006,605 $5,290,431 $2,664,729 2032 126,694 $9,186,737 $5,239,068 $2,540,209 2033 129,228 $9,370,471 $5,188,203 $2,421,508 2034 131,812 $9,557,881 $5,137,832 $2,308,353 Total 2,198,426 $159,410,751 $112,914,289 $75,541,805 It can be seen from Table A-3 that the discount rate used can have a dramatic effect on the present value of the future travel time savings. While a higher discount rate will also reduce the present value of future costs, to the extent that capital costs for a project are typically incurred early in the project, the effect of higher discount rates on the present value of project costs will usually be much less than the effect on the present value of project benefits. Thus care is needed in the selection of an appropriate discount rate when not constrained by a mandated rate (such as the FAAâs requirement of a 7% discount rate for discretionary AIP grant projects). While it is not uncommon to perform a sensitivity analysis with different discount rates (as shown in Table A-3), it should be recognized that this could well result in the present value of the benefits of a project exceeding the present value of project costs at a lower discount rate but not at a higher rate. Page 32
Example B: Ground Access Project In this example, a metropolitan area transit system is proposing a rail connector system that links the existing rail transit service to a regional airport. Currently, direct shuttle bus service is provided between the nearest rail transit station and the airport. The project would replace the bus service with an Automated Guideway Transit (AGT) people mover, a driverless train service on an exclusive aerial guideway. The AGT would have termini at an existing rail transit station and the airport as well as two intermediate stations. The project is intended to improve access to the airport using a grade-separated people- mover connection from the existing rail transit system, reduce travel time between the rail transit station and the airport, enhance reliability, and add capacity compared to the existing shuttle bus service. The shuttle bus shares local roads with other traffic and is subject to traffic delays. Special events in the area can create major delays for the shuttle service. In contrast, the AGT would use an exclusive aerial guideway, eliminating the impacts of local traffic on travel time. Reliability of service times is particularly important to departing airport passengers; holding travel times equal between two alternatives, passengers tend to prefer alternatives with less variation in travel times. When using the shuttle bus service, passengers must exit the rail transit station, purchase a shuttle bus ticket, and wait for the shuttle on the curb. This process takes about four minutes on average. Average headways for the shuttle bus service are 10 minutes, so the average passenger wait for the service is five minutes. However, there is a fair amount of variability in wait times. Field surveys of typical wait times indicated that passengers can wait at the shuttle bus stop from 1 - 26 minutes. The average one-way in-vehicle time from the shuttle bus stop to the airport is 11 minutes, but it can take as long as 25 minutes. The shuttle bus drops off passengers across the curbfront roadway from the airport terminal. The walk from the shuttle bus stop to the terminal is estimated to take 1.5 minutes. The new AGT service would provide expedited travel. The platform transfer to the AGT connector would be located within the paid area of the rail transit station, eliminating the need to purchase an additional ticket within the station. Access to the AGT platform from the rail transit platform is estimated to take 3 minutes. Average headways for the AGT connector are planned to be 3.5 minutes, so the average passenger wait time will be 1.75 minutes. Including the two intermediate stops, the one-way travel time to the airport is projected to be 8.2 minutes. Additional ridership justifies the construction of these two intermediate stops, but this additional ridership is not included in the benefits for the airport passengers. The AGT station at the airport will be located in the parking facility across the curbfront roadway from the terminals. It is estimated that the walk time from the station to the terminal will be 3 minutes. Page 33
Step 1: Screen Project for Applicability. The first step in the process is to screen whether this guidebook is applicable to the project by using the Project Screener table (Table 4). The AGT connector project is an âairport (non-terminal) â groundsideâ project. The AGT connector has two components: ⢠The AGT connector provides a new access link to the airport; and ⢠The AGT connector provides a new transfer facility at the rail transit station. Each of these components can have an impact on air passenger travel times. The new AGT service replaces the current shuttle bus service. Relative to the shuttle bus, the AGT will have shorter trip times, shorter wait times, more reliable trip times, more reliable wait times, and higher capacity. The new transfer facility at the rail transit station reduces transfer time relative to the current shuttle bus service because the transfer takes place within the paid area of the station and passengers no longer have to purchase a separate ticket for the shuttle bus after exiting the rail transit station. However, the new AGT station at the airport will increase the time it takes to walk to the terminal compared to the current shuttle bus service. Step 2: Identify Relevant Time Categories. The rail connector project impacts two of the seven time categories: ⢠Ground Access Time: The travel time from a personâs origin location to their transit stop/station at the airport; and ⢠Terminal Access Time: The time to reach the airport terminal from the transit stop/station at the airport. Step 3: Calculate Travel Delay Change. The next step is to calculate the time savings by comparing travel times for the AGT service and the existing shuttle bus service. These calculations are shown in Table B-1. Table B-1: Average Trip Time under AGT and Shuttle Bus Service Time Category Alternative 1: AGT Rail Connector Alternative 2: Shuttle Bus Average Exit and Wait Time 4.75 minutes 9 minutes Average In-Vehicle Time 8.2 minutes 11 minutes Average Time to Access Terminal 3 minutes 1.5 minutes Average Total Trip Duration 15.95 minutes 21.5 minutes The Exit and Wait category measures the time between exiting the rail transit vehicle and entering the shuttle bus or AGT connector. It consists of the time needed to exit the station plus the average headway for each mode. The average In-Vehicle Time is the trip duration on the shuttle bus or AGT, while the average Time to Access Terminal measures the length Page 34
of time it takes to walk to the terminal building entry from the point where the connector service drops off passengers. The reduction in travel delay can be estimated by comparing the two columns in Table B-1. On average, Alternative 1 saves 5.55 minutes per trip versus Alternative 2. Alternative 1 saves 7.05 minutes in airport ground access time (first two rows) and adds an additional 1.5 minutes in terminal access time (last row). Step 4: Calculate Value of Delay Reduction. Currently, about 50 percent of passengers at the airport travel for business, while the remaining 50 percent travel for leisure. The AGT is expected to open in 2020 and have an annual ridership of five million passengers. As a result, there will be 2.5 million leisure passengers and 2.5 million business passengers who utilize the AGT in 2020. The guidebook presents segmented value of time estimates for business and leisure passengers by income levels, which will be used for this example. Based on the findings of an air passenger survey performed at the airport, 40 percent of business passengers earned less than $75,000 annually in 2013, 30 percent earned between $75,000 and $199,999, and 30 percent earned $200,000 or more annually. For leisure passengers, 50 percent earned less than $75,000 annually in 2013, 25 percent earned between $75,000 and $199,999, and 25 percent earned $200,000 or more annually. The number of passengers by income level is shown in Table B-2. Table B-2: Number of Passengers by Income Level Income Level (2013) Business Leisure (1) (2) (3) (4) Percent Passengers Col. (1) x 2.5 M Percent Passengers Col. (3) x 2.5 M Less than $75,000 45% 1,125,000 55% 1,375,000 $75,000 - $199,999 35% 875,000 30% 750,000 $200,000 and More 20% 500,000 15% 375,000 Using this information, the analyst determines the value of time for these passengers using the information found in Table 6 of the guidebook. The relevant values for ground access time and terminal access time are summarized in Table B-3. Page 35
Table B-3: Passenger Values of Time by Income for Ground Access and Terminal Access Time (in 2013 $) Component Individual Income Less than $75,000 $75,00 - $199,999 $200,000 and More Business Travelers Ground access time $13.90 $21.32 $38.49 Terminal access time $23.75 $36.35 $65.65 Leisure Travelers Ground access time $14.55 $16.65 $22.15 Terminal access time $22.10 $25.20 $33.60 The aggregate annual ground access time savings for business and leisure passengers will be calculated using the 7.05 minutes of ground access time saved per trip estimated in Step 3. In 2020, passengers will save a total of 587,500 hours by utilizing the AGT. This has a monetized value of over $11.1 million. These calculations are presented in Table B-4. Table B-4: Ground Access Time Savings from the AGT Project (in 2020, in 2013 $) Income Level (1) (2) (3) (4) Number of Annual Passengers Ground Access Savings in Hours Col. (1) x 7.05 ÷ 60 Value of Time ($/hour) Savings in Dollars Col. (2) x Col. (3) Business Travelers Less than $75,000 1,125,000 132,188 $13.90 $1,837,406 $75,000 - $199,999 875,000 102,813 $21.32 $2,191,963 $200,000 and More 500,000 58,750 $38.49 $2,261,288 Leisure Travelers Less than $75,000 1,375,000 161,563 $14.55 $2,350,734 $75,000 - $199,999 750,000 88,125 $16.65 $1,467,281 $200,000 and More 375,000 44,063 $22.15 $975,984 Total 5,000,000 587,500 $11,084,656 Table B-5 shows the comparable calculations for the increase in terminal access time. Recall from Step 3 that the AGT adds an additional 1.5 minutes of terminal access time per trip. Page 36
Table B-5: Terminal Access Time Savings from the AGT Project (in 2020, in 2013 $) Income Level (2013) (1) (2) (3) (4) Number of Annual Passengers Terminal Access Time Additional Travel Time in Hours Col. (1) x 1.5 ÷ 60 Value of Time ($/hour) Value of Additional Travel Time in Dollars Col. (2) x Col. (3) Business Travelers Less than $75,000 1,125,000 28,125 $23.75 $667,969 $75,000 - $199,999 875,000 21,875 $36.35 $795,156 $200,000 and More 500,000 12,500 $65.65 $820,625 Leisure Travelers Less than $75,000 1,375,000 34,375 $22.10 $759,688 $75,000 - $199,000 750,000 18,750 $25.20 $472,500 $200,000 and More 375,000 9,375 $33.60 $315,000 Total 5,000,000 125,000 $3,830,938 As a result, the AGT project is projected to save business and leisure travelers: 587,500 â 125,000 = 462,500 person-hours in 2020, valued at $11,084,656 - $3,830,938 = $7,253,719 (in 2013 $). Step 5: Apply to Benefit-Cost Analysis. To use this figure in a lifecycle benefit-cost analysis, the analyst estimates annual travel time benefits over a 20-year period from 2020 to 2039, following three years of planning, engineering and construction from 2017-2019. The AGT service is expected to open in 2020 (the fourth year of the benefit-cost analysis) and AGT ridership is expected to grow at five percent per year. The analyst assumes that the mix of business and leisure passengers as well as their income distribution does not change over time. Table B-6 presents the undiscounted and discounted benefits over the 20-year analysis period. Undiscounted benefits are highest in 2039 due to the passenger growth rate, with an estimated benefit of more than $18.3 million. Over the first 20 years of the project, the AGT connector is projected to deliver $160.4 million in passenger time savings when benefits are discounted at three percent and $99.6 million when discounted at seven percent. Table B-6: Annual Travel Time Savings of the AGT Connector Service, 2020 - 2039 Year Number of Passengers Annual Travel Time Savings, in 2013 $ Undiscounted Discounted at 3% Discounted at 7% Page 37
Year Number of Passengers Annual Travel Time Savings, in 2013 $ Undiscounted Discounted at 3% Discounted at 7% 2020 5,000,000 $7,253,719 $6,638,180 $5,921,195 2021 5,250,000 $7,616,405 $6,767,077 $5,810,519 2022 5,512,500 $7,997,225 $6,898,476 $5,701,911 2023 5,788,125 $8,397,086 $7,032,427 $5,595,333 2024 6,077,531 $8,816,940 $7,168,979 $5,490,747 2025 6,381,408 $9,257,788 $7,308,183 $5,388,117 2026 6,700,478 $9,720,677 $7,450,089 $5,287,404 2027 7,035,502 $10,206,711 $7,594,751 $5,188,574 2028 7,387,277 $10,717,046 $7,742,222 $5,091,591 2029 7,756,641 $11,252,899 $7,892,557 $4,996,422 2030 8,144,473 $11,815,543 $8,045,810 $4,903,030 2031 8,551,697 $12,406,321 $8,202,040 $4,811,385 2032 8,979,282 $13,026,637 $8,361,302 $4,721,453 2033 9,428,246 $13,677,969 $8,523,658 $4,633,201 2034 9,899,658 $14,361,867 $8,689,166 $4,546,599 2035 10,394,641 $15,079,960 $8,857,887 $4,461,616 2036 10,914,373 $15,833,958 $9,029,885 $4,378,221 2037 11,460,092 $16,625,656 $9,205,223 $4,296,386 2038 12,033,096 $17,456,939 $9,383,965 $4,216,079 2039 12,634,751 $18,329,786 $9,566,178 $4,137,274 Total 165,329,771 $239,851,131 $160,358,057 $99,577,058 As part of a comprehensive benefit-cost framework, the total passenger travel time savings can be added to other benefit categories, such as safety or emissions benefits, and compared with capital and O&M costs. Example C: Navigation Aid Upgrade Project In this example, a regional airport is proposing to upgrade an existing instrument landing system (ILS) from Category I to Category III. An instrument landing system is a radio navigation system that emits signals that provide both lateral and vertical guidance to aircraft during approach and landing on a runway. A Category III ILS installation requires more extensive approach and runway lighting than a Category I system. This regional airport regularly experiences weather conditions that obscure visibility to low levels. In fall and winter months, ground fog and snow are common. A Category III ILS would allow planes to land under lower visibility conditions than currently possible using the existing Category I ILS. Page 38
For an aircraft to land on a runway using Category I ILS, visibility must be at least 0.5 mile and the decision height must be at least 200 feet. Decision height is defined as the lowest height at which the pilot must initiate a missed approach if the runway is not visible. Missed approaches require the aircraft to climb clear of the airport and restart the landing process. Runway visual range (RVR) must be at least 2,400 feet. There is no visibility minimum for aircraft to land on runways using Category III ILS. Depending on the level of Category III â IIIa or IIIb â the decision height ranges from 0 to 100 feet. The required RVR ranges from 250 to 660 feet. The navigational aid project is intended to reduce the incidence of flight cancellations and delays. Ten years of historical weather data indicate that hours when weather conditions are below Category I ILS minimums but above Category III ILS minimums affect 1.4 percent of the arriving flights at the airport. Historical data on flight operations indicate what happens to flights scheduled during poor weather conditions. When weather is below the Category I ILS minimums, flights are cancelled or diverted 55 percent of the time, while they are delayed 45 percent of the time. Step C-1: Screen Project for Applicability. The first step in the process is to screen the project to see whether this guidebook is applicable to the project. According to the Project Screener table (Table 4), the navigation aid project falls under the âairport (non-terminal) â airsideâ category. The project involves an upgrade of air traffic control equipment, which should reduce air delay. Step 2: Identify Relevant Time Categories. The navigation aid project impacts the flight delay, which is defined as unanticipated delay in the airport-to-airport flight time experienced by passengers. Step 3: Calculate Travel Delay Change. The next step is to calculate the time savings from the reduced incidence of delay. For this airport, analysis of data on flight delays in recent years showed that flights delayed due to poor weather resulted in passenger delays of 1.75 hours on average. Flights cancelled or diverted due to poor weather result in larger passenger delays, 3.5 hours on average. Data on delayed, diverted, or cancelled flights are available for each airport from the USDOT Airline On-Time Performance database (at http://transtats.bts.gov). Calculating the average passenger delay for diverted or cancelled flights requires an analysis of the subsequent arrival time of a diverted flight or the arrival times of the subsequent flights that did arrive in the case of cancelled flights. However, depending on the load factor on the next flights that do arrive and the number of cancelled flights, passengers on cancelled flights may have to wait through several subsequent flights before there is one with available space. Page 39
With 400,000 annual passenger enplanements at this airport, the number of passengers expected to be impacted by the upgrade in ILS from Category I to Category III is calculated to be: 400,000 * 1.4% = 5,600 passenger per year Table C-1 shows the total annual time savings from the navigational aid upgrade. The new navigational aid is expected to save a total of 15,190 hours of passenger time per year. Table C-1: Total Annual Time Savings from Navigational Aid Flight Impact (1) (2) (3) Proportion (%) Average Delay (hours) Annual Time Savings(hours) Col. (1) x Col. (2) x 5600 Delayed 45% 1.75 4,410 Cancelled or Diverted 55% 3.5 10,780 Total 15,190 Step 4: Calculate Value of Delay Reduction. A passenger survey indicates that approximately 35 percent of travel is for business while 65 percent is for leisure at this airport. There is no information on passenger income distribution. The most recent 12 month spread of airport data show that 79 percent of all flights are on time, 10% of flights are delayed for reasons having unrelated to visibility conditions, and 11 percent of flights are delayed due to weather conditions and poor visibility with an average delay 99 minutes per flight. Table 1 of this guidebook shows that business travelers have a value of time of $286.30 per hour for flight delays, while leisure travelers have a value of time for flight delays of $123.30 per hour. To calculate the composite value of time, the following equations are used: Expected Delayed Minutes = Proportion of Delayed Flights x Average Minutes of Delay = .11 * 99 = 10.92 minutes Composite Value of Time = Hourly Equivalency of Expected Delayed Minutes * ((Proportion of Business Travelers x Business Value of Time (VOT) + (Proportion of Leisure Travelers x Leisure VOT)) =10.92/60*((35% * $286.30) + (65% x $123.30)) = $32.82/ hour The analyst then uses the following equation to calculate monetized passenger time savings: Passenger Time Savings = Total Hours of Delay Avoided by Navigation Aid Upgrade x Composite Value of Time = 15,190 hours x $32.82 / hour = $498,592 per year Page 40
Step 5: Apply to Benefit-Cost Analysis. To use this estimate in a benefit-cost analysis, the analyst assumes that the navigational upgrade will be purchased in 2014 and operational in 2015 (year 2 of the BCA), and that the airport experiences reduced delays immediately. The analyst also assumes that the mix of business and leisure passengers does not change and that the total number of passengers departing from or arriving at the airport grows by 2.5 percent annually. The benefit-cost analysis covers a 20-year analysis period, so it includes annual travel time benefits from 2015 to 2034. Table C-2 presents the undiscounted and discounted benefits estimated over the 20-year analysis period. For the first 20 years of the project, the navigational aid upgrade is projected to deliver $50.8 million in passenger time savings when benefits are discounted at three percent and $35.1 million when discounted at seven percent. As part of a comprehensive benefit-cost framework, the total passenger travel time savings can be added to other benefit categories, such as safety benefits, and compared with capital and operating and maintenance (O&M) costs. Table C-2: Annual Travel Time Savings of the Navigational Aid Upgrade, 2015 - 2034 Year Hours of Delay Saved Annual Travel Time Savings, in 2013 $ Undiscounted Discounted at 3% Discounted at 7% 2015 15,190 $498,592 $484,070 $465,974 2016 15,570 $511,057 $481,720 $446,377 2017 15,959 $523,833 $479,382 $427,604 2018 16,358 $536,929 $477,055 $409,621 2019 16,767 $550,352 $474,739 $392,394 2020 17,186 $564,111 $472,434 $375,891 2021 17,616 $578,214 $470,141 $360,083 2022 18,056 $592,669 $467,859 $344,939 2023 18,508 $607,486 $465,587 $330,432 2024 18,970 $622,673 $463,327 $316,535 2025 19,444 $638,240 $461,078 $303,223 2026 19,931 $654,196 $458,840 $290,471 2027 20,429 $670,551 $456,612 $278,255 2028 20,940 $687,315 $454,396 $266,552 2029 21,463 $704,497 $452,190 $255,342 2030 22,000 $722,110 $449,995 $244,604 2031 22,550 $740,163 $447,811 $234,317 2032 23,113 $758,667 $445,637 $224,462 2033 23,691 $777,633 $443,473 $215,022 2034 24,283 $797,074 $441,321 $205,979 Total 388,023 $12,736,362 $9,247,666 $6,388,076 Page 41
