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SATS and Life Cycle Cost Research, 1999-2004

This presentation reviews a series of life cycle cost studies conducted between 1999-2004 focusing on the Small Airplane Transportation System (SATS). NASA's premise on the value of human time is examined alongside the development of SATS technology and its business viability. The studies included baseline, interim, and latest research, exploring the impact of technology, ownership, operation methods, and market dynamics on the cost-effectiveness of SATS. Conclusions highlight key factors influencing total cost of ownership and the potential of SATS in the transportation sector.

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SATS and Life Cycle Cost Research, 1999-2004

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  1. SATS and Life Cycle Cost Research, 1999-2004 Robert N. McGrath, Ph.D. Embry-Riddle Aeronautical University Daytona Beach, Florida

  2. Presentation Agenda • SATS Background • Baseline Study • Interim Studies • Latest Study • Conclusion

  3. NASA’s Premise • “One of the most significant emergent forces in the first decade of the 21st century will be the value of human time … human/intellectual capital [will replace] physical capital as the basis for the creation of wealth.”

  4. NASA (continued) • “… significant advancement in doorstop-to-destination speed … is possible, if the challenges can be met for making small aircraft and airports more available to the traveling public … enabling technologies include a new generation of engines, avionics, airframe, navigation, communication and operator training.”

  5. SATS • Small Airplane Transportation System • Airplane-based personal transportation • Ultimate vision: substitute for autos • Near term: industrial / govt. niches • NASA+industry+academia+public sector

  6. SATS System

  7. SATS’ Classic Catch-22 • Radical Technologies usually • Come from new entrants • Are costly • Underperform early • Favored by pioneers for the ‘sizzle’ • Mature Technologies usually • Are advanced by incumbents • Are very cost effective • Have run out of potential • Favored by mass markets

  8. Life Cycle Cost Studies • 1999-2000: funded baseline to study aircraft costs - very abstract • 2000-2002: unfunded independent research to include the value of time • 2003: funded study into air taxi as a near-term niche

  9. Baseline Study (1999-2000) • Seven configurations of technology, method of ownership and operation • About 75 independent variables • CER’s mostly extrapolations • NASA’s vision feasible • … given theoretical constraints about pricing, production strategies

  10. Baseline Conclusions • Impressive gains in total cost of ownership • But mass-market not in the near-term future • Keys • Aircraft prices • Fuel and maintenance • Business and operational assumptions

  11. Interim Independent Studies • … what about ‘time?’ • Used the original model as baseline • Modified to include value of time and compare SATS Bizjets to executive travel on airlines • Modified to include value of time and compare autos and SATS Bizjets

  12. What is the Value of Time? • Extant research nonexistent • Employee time assumed in Bizjets • Aircraft modeled in Travel$ense • Samples of city pairs capturing likely trip ranges • Various levels of cost

  13. Interim Conclusions • Without considering the value of time • SATS often appeared competitive in some costs • When considering the value of time • SATS often appeared superior in many costs by wide margins

  14. Without “Time”

  15. With “Time”

  16. The 2003 Study • One of several “business case” studies • Not macro/market/economic … • … Focused on an air taxi business • Compared an entrepreneur’s choice of • Beech Bonanza 33 (4 seats) • Beech King Air 200 (8 seats) • Eclipse 500 (6 seats)

  17. Beech Bonanza 33 Eclipse Bonanza

  18. Beech King Air

  19. Eclipse 500

  20. The 2003 Study (continued) • Hypothetical Air Taxi Enterprise • Today’s “rules of the game” • Minimal “SATS” infrastructure • Two strategic objectives • Low overhead / organizational infrastructure • Operating capacity large enough to exploit possible economies of scale • … 10 a/c, 6 flights/day, 10 year life cycle

  21. Life Cycle Costs

  22. Cost-Effectiveness Analysis • Three measures • Cost per Mile • Cost per Seat Mile • Cost per Hour

  23. Cost Effectiveness

  24. Cost Effectiveness (continued) • Load factors affect business viability of a/c • In the enterprise, the market was assumed constant … • … i.e., regardless of a/c chosen, the same # of passengers would board

  25. Varying “Load”

  26. Load Factor C-E Summary • Extraordinary degradation as passengers removed • The fewer the total seats, the greater the effect • Eclipse emerged as the best, Bonanza and King Air became comparable • Many “mental experiments” can change conclusions

  27. Sensitivity Analysis • Above pointed to uncertainty/risk in: • price • fuel • maintenance • capacity utilization (or scale economy)

  28. Sensitivity Analysis

  29. Air Taxi and SATS • Technology must be aligned with capacity must be aligned with market share • Business innovations (models) are needed as well as technological and marketing innovation

  30. Conclusion • Markets, technologies, etc. will show dynamic and recursive cause and effect • SATS is proceeding in ways that business theory explains well … • Models of technology / industry cycles are robust

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