Air Traffic Infrastructure Global Markets

Air Traffic InfrastructureGlobal Markets 2012World Forecasts 2012 - 2021

MARKETS • POLICIES • INFRASTRUCTURE FINANCE

FEATURING

S The Inflection Point Facing World ATI Markets

S The New Economics of ATI, Including Infrastructure Finance

S Disruptive and Rapidly Emerging Technologies Challenging NextGen and SESAR

S The Airline Business Case

Multi-Client StudyReport Prospectus

ii • NEXA • ATI Global Markets

Table of Contents

ATI Global Markets 2012 Study Objectives 1Eroding Infrastructure – Global Opportunity 1Air Transport Continues its Growth, Slowed by Congestion 2Airlines: ATI Modernization’s New Gate Keepers 3ANSPs Evolve as Global Fiscal Crises Deepen 5Disruptive Technologies Emerge 5Institutional Finance Comes of Age for Future ATI 5

Innovative Finance 6Public-Private Partnerships 6Commercial Contracting Models 6

The Environment: Catalysis or Paralysis 6ATI Global Markets 2012 Study Methodology 9

Study Audiences 9Research Methodology 9

Primary Market Research 10Secondary Market Research 10

Market Forecasts 11World Economic Indicators Model 11Air Traffic Model 11ATI Market Forecasts Model 11Business Case and Financing Model 11

ATI Global Markets 2012 NEXA and Study Authors 13About NEXA Advisors 13Editorial Board 13

Michael J. Dyment, Managing Editor 13Russell G. Chew, Editorial Advisor 14James P. Hughey, Contributing Editor 14Carter Brockman, Contributing Editor 14Tulinda Larsen, Market Analyst 15

NEXA Project Team 15Table of Contents ATI Global Markets 2012 17ATI Global Markets 2012 Subscriber Order Information 24

Topics for Additional Study 24Delivery 24Method of Payment 24

ATI Global Markets 2012 Order Form 25

Publisher’s Note: ATI Global Markets 2012 is published according to exacting standards for clari-ty and legibility, in a style and typographical format similar to that found in this Prospectus.

1 • NEXA • ATI Global Markets

ATI Global Markets 2012 Study Objectives

The world’s air traffic infrastructure (ATI) and its complex modernization programs have reached an inflection point.1 As air traffic volumes recover from the latest global re-cession, congestion and gridlock are again becoming visible. But aviation infrastructure continues to erode. Governments are broke and must turn to new fees and taxes, and private sources of funding, for infrastruc-ture renewal. Disruptive new technologies and regional differences in the vision of fu-ture ATI architectures will challenge the Next Generation Air Transportation System (Next-Gen) and Single European Sky ATM Research (SESAR) programs. Airlines, coming out of a difficult decade of losses, find that they may foot most of the bill for ATI modernization, whether through investment in avionics or through increased user fees to pay for new ground infrastructure. Airlines are quick-ly realizing that they are and should be the new gate keepers for ATI modernization. All the while, aerospace companies are trying to understand the new ATI market dynamics, as corporate acquisitions work their way back into M&A agendas for 2012.

Air Traffic Infrastructure Global Markets 2012 is an essential tool for business strat-egists and top executives alike, providing facts and insights that will support business planning and investment decision-making. Packed with information on air traffic infra-structure opportunities, communications, navigation, surveillance/air traffic manage-ment (CNS/ATM), NextGen, SESAR and their rapidly evolving successor systems, aircraft avionics and space systems, ATI Global Mar-kets 2012 does the heavy lifting. It provides comprehensive opportunity assessments of ATI markets in 60 countries within each of the nine ICAO regions. Of tremendous val-

1 Inflection Point: “A moment of dramatic change, especially in the development of a company, industry or market. An event that changes the way we think and act.” Andrew Grove, founder of Intel Corporation.

ue, ATI Global Markets 2012 lays out the new economics of ATI finance. This study is a Must-Have for top executives, providing the factual foundation for answering key ques-tions (Figure 1) to support their strategic de-cision-making.

Figure 1

Critical Questions Answered

ATI Global Markets 2012 Answers

These Critical Questions (and Much More):

• What are the next decade’s top 100 ATI projects globally, and what policy, technology and financial is-sues will define them?

• How can the new paradigm for ATI finance translate into distinct com-petitive advantages for ATI ven-dors and consortiums?

• Who are the most innovative com-panies in the ATI supply chain and how is their role critical to ATI modernization?

• How will the new controls wielded by airlines change forever the pace and markets for ATI?

• How will commercially available and rapidly evolving broadband telecomm services provide disrup-tive opportunities in ATI?

• Why will the next round in the con-solidation of the aerospace indus-try be important to ATI markets?


Eroding Infrastructure – Global Oppor-tunity

The air transportation system of the world is at a critical crossroads. Aviation activity and capacity growth are resuming their upward trends after the deepest global recession in generations. Traffic and delay data in several busy regions of the world show that today’s existing ATI systems are not keeping pace with this growth, ultimately causing dra-matic negative economic impacts related to gridlock. Yet today, governments are finding that they are not up to the challenge of mod-ernizing the complex infrastructure and de-veloping the new operating models needed to add capacity and keep air traffic moving. Many countries, facing fiscal challenges of enormous significance, have been forced to transform their air traffic operations into air navigation service providers (ANSPs), code for “privatized” or “corporatized,” with new authority to levy user fees and taxes. Lack-ing knowledge of or, in some cases, access to credit markets, many ANSPs struggle to find the capital to modernize, let alone the expertise and governance structures to over-see the process.

Economists and policy makers acknowledge that commercial air transportation plays an essential role in global industrial compet-itiveness. Improved air transportation re-sults in more efficient business operations, reduced costs and increased international competitiveness and tourism. Air trans-portation also enables a region to attract high-quality employees, which raises un-derlying productivity. Countries and regions expecting to compete successfully in global trade by necessity will need to invest heav-ily in air transport infrastructure. Growing numbers of policy makers who are unwilling to risk their future economic well-being on their fiscally constrained bureaucracies in-creasingly will look to share this responsibili-ty with the private sector.

Hence a global opportunity exists, well in ex-cess of $100 billion in products and services, for those vendors and suppliers well posi-tioned to address the new realities of ATI. The ATI supply chain, largely nestled within the aerospace sector, has the expertise and

reach to transform the infrastructure in most regions of the world. New participants – air-lines and financial sector partners – can pro-vide the catalytic funding to rapidly and suc-cessfully transform ATI services into modern means of achieving the next level of efficient air passenger and cargo transportation. ATI Global Markets 2012 has identified the com-ing decade’s top 100 opportunities in the world.

Air Transport Continues its Growth, Slowed by Congestion

Worldwide economic growth, reflected by increases in gross domestic product (GDP), is the most powerful driver of growth in air transport and the resultant demand for both aircraft and for air traffic infrastructure. Ac-cording to numerous commercial forecasts, worldwide passenger traffic will average 5.3 percent growth and cargo traffic will average 5.9 percent growth over the 20-year forecast period shown in Figure 2.

Figure 2

Global Air Traffic Growth


To meet the demand for commercial passen-ger growth, the number of airplanes in the worldwide air transport fleet is expected to grow at an annual rate of 3.2 percent, near-ly doubling from about 19,000 airplanes to-day to more than 36,000 airplanes in 2029 (Sources: Boeing and Airbus). Airplane de-liveries, for fleet growth and replacement of aging aircraft, will total 30,900 over this 20-year period, with a value of $3.6 trillion.

While global air travel declined in 2009, there were nonetheless many markets that experienced growth. Diverse demand for air services throughout the world will continue to change in response to market opportu-nities and challenges. New airline business models, the dynamic growth of air travel in emerging economies throughout the world and changes in air traffic infrastructure own-ership and investment create even more complex and challenging outcomes.

That growth is constrained, however, by air traffic infrastructure that in key parts of the world rely on technologies 60 or more years old, such as ground-based long-range and terminal radars, instrument landings systems and rigid airways systems. These collective-ly limit the number of aircraft that can move through given airspace, extend the distance and duration of flights and add to delays. In addition to inconveniencing passengers and shippers, these delays cause airlines to burn more jet fuel, increasing operating costs and emissions.

As NextGen and SESAR advance, the ANSPs will be required to deliver on infrastructure upgrades to ensure that stakeholders and particularly users reap the benefits of sys-tem investments in a timely way. Extending these benefits to other areas of the world point to new and ever more challenging opportunities for well-informed ATI supply chain participants. ATI Global Markets 2012 has comprehensively mapped these oppor-tunities.

Airlines: ATI Modernization’s New Gate Keepers

Despite the current efforts to improve air transportation infrastructure and air traffic flow, the continuous change in the industry landscape presents challenging investment decisions for airline executives. As the air-line industry recovers from the global finan-cial crisis, individual carriers have adjusted by using cost-cutting measures, leaner op-erations and major contractions in capacity. Global airline profits have lost recovery mo-mentum; IATA expects net post tax profits for the whole industry to fall from $7.9 billion in 2011 to to $3 billion in 2012, just 0.5% of reveneues. The industry continues to be de-pendent on several external drivers that im-pact profitability. ATI Global Markets 2012 has examined the fundamentals of the new ATI gate keepers – airlines (Figure 3).

Figure 3Airline Critical Issues Defined

ATI Global Markets 2012 has ex-

amined Fundamentals of the New ATI Gate Keepers – Airlines:

• What is the share of ATI capital costs, on the ground as well as in the air, that airlines will (and must be willing to) invest in to get to pay-back?

• Which airlines in each region of the world will become the front run-ners and likely early adopters for the next-generation air transporta-tion system?

• What factors make the definitive business case for airlines that do not have the capital to modernize their fleets?

• Are equipage subsidies the best or only way for airlines to close the business case for investment in new avionics?

• For which ATI opportunities do alli-ance models hold the greatest im-portance and promise?


How will the control that airlines wield for-ever change the pace and markets for ATI? For commercial airlines to benefit from im-proved ATI, they must make substantial in-vestments to their aircraft and supporting operational control systems. Any successful ATI business strategy will need to enlist the influence and support of airlines as key par-ticipants. The good news is that because the airlines are largely driven by rational com-mercial goals, they can be committed and dedicated partners under the right business and investment conditions.

Figure 4 lists the benefits airlines will enjoy, some of which will accrue to the first mov-ers years before the rest of their competi-tors. In ATI Global Markets 2012, we map these benefits to capabilities, systems and inter-dependencies. ATI Global Markets 2012 has examined the options for financ-ing billions of dollars in capital investment, including ANSP capital assistance programs, export banks, infrastructure banks and spe-cial “public-private partnership” situations such as the NextGen Equipage Fund, for their applicability to airline investment. These solutions will create new opportunities. Get ready to team with airlines as industrial part-ners to move the ATI ball forward.

ANSPs Evolve as Global Fiscal Crises Deepen

ANSPs, like most infrastructure services, tend to be low-profile organizations with cost recovery tied to fixed fee schedules. Traditionally, air traffic control operations were government agencies; but we have seen many transition to either state-owned companies or privatized organizations in the last two decades. Many governments have experimented with commercialization as a method of improving their ANSPs’ perfor-mance, which has produced some extraordi-nary innovation.

Today’s ANSPs are becoming more indepen-dent and, therefore, increasingly responsible for recovering the cost of their operations through airline user fees. At the same time, they are entering capital markets for long-term infrastructure development funds.

Figure 4Airline Benefits Defined

ATI Global Markets 2012 has

Identified Benefits Of ATI Improve-ments for Airlines

• Improved Revenue◊ Increased Network Access Opportunities◊ Increased connection options◊ More flights during peak times (slots,

turn-around)◊ Predictable schedule drives loyalty◊ Increased market share and yields

• Direct Cost Savings◊ Fuel burn per passenger◊ Block times, flight times◊ Indirect Network Savings◊ Better utilization of gates, airplanes and

crews◊ Reduced operational contingency costs◊ Less missed connections and lost bag-

gage

• Environmental◊ Reduced carbon emissions◊ Noise benefits could increase late air-

port access

• Safety◊ Reduced runway incursions and safer

taxiing◊ Safer aircraft servicing from ground ve-

hicles◊ Reduced near misses

• Customer Value◊ Passenger value of time◊ Improved customer service◊ Less customer stress◊ Greater customer loyalty

• Investment in Advanced Avionics◊ Equipage funds and low-cost bridge

support


These trends have put cost-recovery strate-gies into sharper focus, creating new capital investment options for this sector that only ten years ago were not on the table. The next decade will see many tens of billions of dollars flowing into long-term ATI projects, helped by mechanisms such as the collat-eralization and securitization of revenue streams paid by air transport operators. Add to this a mix of sovereign loan guarantees and other finance leverage mechanisms and the ATI sector should enjoy a renaissance in capital construction programs. ATI Global Markets 2012 has fully quantified these op-portunities.

Disruptive Technologies Emerge

The introduction of new information tech-nology and network architectures are chal-lenging the very foundation of the large and complex institutional CNS/ATM structures that global aviation has been built upon for the last 50 years. Growth economies will create enormous pressure to inject these disruptive technologies into the existing overloaded ATI, dramatically altering this multi-billion dollar market. This will intro-duce considerable risk for the aerospace and technology companies deeply embedded in today’s structure, by creating opportunities and reducing the long-standing barriers of entry for new competitors at the same time. This emerging “paradigm shift” is already being played out among today’s technology companies, where mobile “cloud comput-ing” is rapidly eroding the value of the in-cumbent companies, which are on the verge of getting left behind. The inevitable spill-over of these information system platforms into civil aviation systems will disrupt the global ATI marketplace in ways that haven’t been seen in decades.

More than ever, it is crucial that aerospace companies revisit their corporate vision and business strategies based on a comprehen-sive understanding of these emerging risks and opportunities. ATI Global Markets 2012 provides the factual foundation for develop-ing long-term business strategies and deci-sion-making for companies that are interest-

ed in achieving first-mover advantages in this rapidly changing space.

Institutional Finance Comes of Age for Future ATI

In the wake of the global recession, ATI fund-ing is both the most difficult and most im-portant ingredient for the acceleration of modernized ATI systems deployment (Figure 5). Across all modes of transportation, capi-tal investment needs have outstripped avail-able funding from traditional government sources. This situation has led to a push for alternative financing models, requiring new policy changes to assist in narrowing this gap. With the need for applying new tools and approaches to capitalize ATI projects, new forms of financing are coming of age. Options include those listed on the following page.

Figure 5

Financial Institutions - Critical Issues Defined

ATI Global Markets 2012 Examines

for the First Time the Impact of Private-Sector Finance on ATI:

• What future role will government institutions have in ATI moderniza-tion?

• What are the top 20 government institutions of importance to ATI modernization?

• What are the world’s top private infrastructure banks and funds, and does each have a unique in-vestment thesis?

• Can an array of new infrastructure banks contemplated by govern-ments around the world accelerate ATI deployment?

• How can the ATI industry stimulate programs through mechanisms such as Private Sector Partner-ships, Build-Operate Programs and the like?


Innovative Finance

The term “innovative finance” is essentially out of date, and is being replaced by a more bundled, flexible approach to financing that enhances interest in private-sector capital participation. The use of innovative finance techniques creates some concern regarding the level of reliance on debt finance, and cap-ital markets increasingly seek private equity, managed by experienced money managers, to strike the right balance. Without pri-vate-sector equity and professional investor involvement, this could possibly limit trans-portation investments. Efforts to extract value from the transportation system (as has been accomplished by some transit agencies through joint development programs) could help to offset this trend, provide much-need-ed revenues and reduce pressure on taxpay-er-supported debt financing.

Public-Private Partnerships

A public-private partnership (PPP) is a con-tractual agreement between a public agency (federal, state or local) and a private-sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the de-livery of the service and/or facility. Models for the PPP are quickly emerging in dozens of countries, which ATI Global Markets 2012 has identified.

Commercial Contracting Models

Build-Operate models are quickly finding a major role in contracts being let by ANSPs this decade. In the United States, programs including Automatic Dependent Surveil-lance-Broadcast (ADS-B) and Data Commu-nications will require prime contractor finan-cial investments, resulting in private sector ownership, for these major programs and systems.


ATI Global Markets 2012 Study Methodology

Study Audiences

ATI Global Markets 2012 focuses upon, and provides value to, a wide range of audiences in several industrial sectors. These are iden-tified in Figure 6 below.

Research Methodology

NEXA’s disciplined research program is built on our decades of experience supporting business investment and strategic planning for some of the largest and most successful aerospace companies in the world. We ap-ply this approach to ensure that subscrib-ers achieve a balanced view of the global marketplace and can make informed stra-tegic decisions to reach their business and investment objectives. The method of mar-ket research chosen for ATI Global Markets 2012 identifies major issues and trends in a market characterized by technological in-novation, competition, industry standards, government regulation, global economic and political turmoil, as well as impacts from fluctuation in oil prices. Data is presented

quantitatively so that the analysis results can be used to judge the impact of policy, finance, market and industry trends on busi-ness strategies and tactics.

Our research for ATI Global Markets 2012 fo-cuses on the following dimensions:

• Economic: In-depth research focused on timely and critical global, regional and country-specific trends, including the political, demographic and socioeco-nomic landscapes that influence or im-pact ATI developments.

• Technical: Technology and systems in-formation that examines existing as well as emerging ATI technologies, new R&D programs, technology forecasting and supporting analysis.

• Market: Market segment analysis that provides ATI drivers and restraints, mar-ket trends, regulatory changes, compet-itive insights, growth forecasts, industry challenges, end-user perceptions and strategic recommendations. Over 60

Figure 6

ATI Global Markets 2012 Appeals to a Wide Audience

ATI Industry and Global Supply Sectors

Government and Academic Sectors

Institutional and Financial Sectors

ATI Service Providers ATI Information System Firms ATI Workstation/Display Mfrs. Satellite Equipment Mfrs. Weather Information Providers Weather Systems Mfrs. Avionics and Equipment Mfrs. Defense Electronics Mfrs. Communication Providers/Mfrs. NextGen and SESAR Suppliers Aircraft Manufacturers Airlines and Operators Multi/Inter Modal Companies Airport Service Companies ATI Associations ATI Consultants ATI Seminar/Training Orgs.

Air Navigation Service Providers Civil Aviation Authorities Public Transport Depts. Ministries of Defense Tariff Authorities Taxing Counties and Municipalities Legislative Bodies ATI Research Agencies Space Agencies Research Academia Market Research Companies Technical Research Libraries

Private Infrastructure Banks Investment Banks Commercial Banks Private Equity Funds Equipage Funds Insurance Companies Pension Funds Sovereign Wealth Funds Public Infrastructure Banks Financial Advisors

countries in all ICAO regions have been included (Figure 7).

• Financial and Investment: Consideration was given to the new capital models – engines of investment for air traffic in-frastructure that power opportunities in the sector, country by country.

The mix of primary market research, second-ary market research, and supporting analy-sis, is explained below.

Primary Market Research

Primary market research was performed by the NEXA team, and includes the collec-tion and analysis of industry and market data from industry interviews and informal expert panels. It was an important part of NEXA’s methodology to hold these research sessions and interviews with a cross-section of academics, government agencies/ANSPs (federal, local and international), aerospace and defense experts, airline executives, sys-tem integrators, ATI equipment suppliers, private/public funding and international fi-nancial aid agencies.

Secondary Market Research

Secondary market research includes inves-tigations that focus on secondary sources of information, such as census data, econo-metric studies, technical and market litera-ture, trade journals, syndicated databases, etc. Topics of relevance in the international context were analyzed by user or industry benefits, with the most detailed data sum-marized.

• Syndicated Data Sources: Secondary research sources are varied and rich in facts as they pertain to all aspects of the global ATI, CNS and ATM markets and industries. NEXA carefully performed a comprehensive syndicated database review relating to the topics presented. NEXA’s research staff drew on global electronic research databases including, but not limited to, ABI/INFORM Global, Business Source Complete, ProQuest Dissertations and Theses Database, Fac-tiva, Google Scholar, AviationNow (Mc-Graw Hill), and LexisNexis.

• Physical Libraries: NEXA reached out to academic institutions and trade associ-

Figure 7ATI Global Markets 2012 Examines ATI Opportunities in More Than 60 Countries in All ICAO Regions

Source: ICAO


ation for studies and data that provide further clarity on the subjects contained in the outline of ATI Global Markets 2012 provided in this prospectus. The World Bank and affiliated economic reposito-ries were researched for global econom-ic data. In addition, NEXA sought the latest available data from the libraries of the FAA, the US National Center of Excel-lence for Aviation Operations Research (NEXTOR), ICAO, Eurocontrol, SESAR and other organizations whose resources are relevant. Government data sources re-lating to aircraft delays and performance improvements were treated as primary data sources for the research. Addition-ally, NEXA sought to work with the sup-ply chain and operators to gather addi-tional data sources that are relevant.

Market Forecasts

Market outlooks and forecasts are essential to provide strategic understanding of the long-term trends and perspectives within ATI Global Markets 2012. NEXA forecasted the emerging trends and global market op-portunities in ATM equipment, systems, and services. New concepts in CNS/ATM were explored and future revenue forecasts were developed. The study utilizes econometric forecasting to determine the size, composi-tion and probity of the CNS/ATM markets by country and ICAO-defined regions.

The forecast models contained within ATI Global Markets 2012 have four relational di-mensions (Figure 8):

World Economic Indicators Model

Economic performance directly affects the financial conditions of airlines, their national governments and the ability of each to fund ATI modernization. Countries with strong economic positions and growth can be ex-pected to have the financial capacity for procurement of necessary equipment in ac-cordance with new financial models, such as direct contracts, public-private partnerships, build-operate structures, privatization and more.

Air Traffic Model

Air traffic volume is a key factor in deter-mining the air traffic demand, thus air traf-fic requirements, systems and equipment in each country or region where countries are banding together for services. The rate of air traffic growth was forecasted for each region over the forecast period.

ATI Market Forecasts Model

Each country and region has unique require-ments for CNS/ATM to support air traffic volume because of the number and class of airports and differences in en route architec-tures, air transport and supporting infrastruc-tures. A wide range of modernization archi-tectures (concept families) were developed, mapped and interlaced across each ICAO region and country. Estimates and forecasts are broken down by technology, geography and year of anticipated expenditure, includ-ing development and deployment.

Business Case and Financing Model

Regardless of the market demand and equip-ment needs, ATI markets are progressive, willing to modernize and capable of obtain-ing sufficient financial resources to do so. The business case and financial model care-fully examine the notion of buyer propensity, based on modernization costs, benefits and impacts on each nation’s economic perfor-mance and national security.

Figure 8ATI Global Markets 2012 Forecast Models


ATI Global Markets 2012 NEXA and Study Authors

About NEXA Advisors

ATI Global Markets 2012 is a NEXA Advisors project. NEXA Advisors provides strategic advisory services to the aerospace indus-try. Clients seek out NEXA Advisors to help develop transformational business mod-els in the aerospace supply chain, business aviation, air traffic management, homeland security, energy and clean technologies and geomatics.

NEXA Advisors is a member of NEXA Capital Partners, an investment banking firm help-ing clients develop and implement effective corporate finance, capital investment and M&A strategies leading to higher growth in enterprise value. NEXA has served small, mid-market and large aerospace companies since 2007. In 2010, NEXA Capital Partners founded The NextGen Equipage Fund, LLC, a new investment fund created to accelerate equipage of aircraft with NextGen avionics. The NextGen Fund is an innovative $1.5 bil-lion infrastructure fund, whose investors in-clude some of the largest and most success-ful aerospace companies in the world.

Editorial Board

The Editorial Board of ATI Global Markets 2012 includes a number of the world’s lead-ing thinkers on air traffic control and infra-structure finance. The Editorial Board dic-tated the tone and direction of the editorial policy of ATI Global Markets 2012.

Michael J. Dyment, Managing Editor

Mr. Dyment is the founder and managing partner of NEXA Capital Partners and NEXA Advisors. He is also a founder and general partner of The NextGen Equipage Fund.

Prior to NEXA, Mr. Dyment was a partner, senior managing director or principal with

the aerospace practices of Pricewaterhouse-Coopers LLP, Arthur Andersen LLP, and Booz Allen & Hamilton Inc. He was also an offi-cer and vice president of the Transportation Practice of A.T. Kearney, Inc. When at PwC, he was principal advisor to ITT on its 2007 $1.85 billion ADS-B award from the US FAA. Mr. Dyment’s past clients include the world’s leading aerospace companies, such as the Boeing Company, Embraer Empresa Brasilei-ra de Aeronáutica S.A., Lockheed Martin Cor-poration, Inmarsat, and Rolls-Royce, to name a few. Airline and aviation industry clients include brand names such as Delta Airlines, Lufthansa, Swiss, EasyJet, Grupo TACA, and Orbitz. He has been an advisor to top policy makers and agencies such as the FAA, the US Transportation Security Administration, and the National Academy of Sciences. At A.T. Kearney, he led the acquisition and financial advisory team that ultimately secured the $1 billion purchase of Jet Aviation for Permira Beteiligungsberatung GmbH. His career in aerospace began in the supply chain, where in the early 1980s he was an engineer and product manager for GPS avionics and geo-detic programs at Canadian Marconi Com-pany in Montreal. While at Booz Allen, Mr. Dyment was author of the ground-breaking 1996 multi-client study, Air Traffic Control and Air Traffic Management Systems: An Analysis of Policies, Technologies, and Glob-al Markets. This study established a global industry understanding of CNS/ATM for the 21st century for many companies. Upon completion of the study, he advised many aerospace companies on CNS/ATM strategy and authored numerous articles relating to air traffic management, with a keen focus on both technology and market issues.

A popular and respected speaker on aero-space matters, his opinion is regularly sought by the media. He has been quoted in The Wall Street Journal, The International Her-ald Tribune, The Financial Times and The Los


Angeles Times. He has contributed to sto-ries in Forbes Magazine, Wired Magazine, and Business Week and has been a guest on CNN, MSNBC, CBS, and ABC, offering insights on aerospace industry matters. Currently, he is a member of the Aviation Week Mag-azine Board of Advisors on Top Performing Aerospace Companies and Top Performing Airlines.

Mr. Dyment holds a Master of Science in Aeronautics and Astronautics from the Mas-sachusetts Institute of Technology, and a B.Sc.E. in Geodesy and Geomatics from the University of New Brunswick.

Russell G. Chew, Editorial Advisor

Mr. Chew is a managing partner of NEXA Capital Partners and NEXA Advisors. He is a general partner of The NextGen Equipage Fund.

Some call Mr. Chew the “Father of NextGen.” While serving as chief operating officer of the Air Traffic Organization of the FAA, he set the groundwork for the current program ar-chitecture and structures. As COO, Mr. Chew was responsible for the operational and financial performance of the US air traffic control system and research and acquisition programs from 2003 to 2007.

After his years at the FAA, Mr. Chew served as president and COO of JetBlue Airways during the successful turnaround in its busi-ness model, sustained profitability, and op-erational integrity following its highly publi-cized operating debacle in the February 2007 snowstorm.

Prior to joining the FAA, Mr. Chew spent 18 years with American Airlines, Inc. where he headed System Operations Control and was responsible for performance of the airline’s operation of 2,300 flights daily to more than 220 cities in the US, Europe, Latin America, and Asia. He was responsible for the airline’s evaluation, acquisition, and implementation of new aircraft and ground technologies for airline fleet and operations planning. He per-formed technical and regulatory manage-ment in flight operations, systems develop-ment, and engineering and maintained line

qualification as captain at American Airlines in B767, B757, and MD80 air-craft.

He has served on corporate executive boards and activities focused on airline operations, new technologies/air traffic control system requirements, and global air traffic control modernization programs. Mr. Chew attend-ed Stanford University for his undergraduate studies and earned his doctoral degree at the University of Southern California.

James P. Hughey, Contributing Editor

Mr. Hughey is Senior Vice President at NEXA Capital Partners and an experienced finan-cial professional with operational and strate-gic expertise in the logistics, transportation, and technology sectors where his roles have ranged from operations management to consulting and private equity/venture cap-ital. He supports both NEXA and its clients in shaping business strategy and growing enterprise value through corporate finance advisory and structured investment transac-tions.

In a management consulting role with Ac-centure, he advised several government agencies as well as private clients on logistics and technology issues ranging from strategic resource allocation to asset management and workforce efficiency. As an industrial engineer with UPS, he managed package operations planning and supervised the technical implementation of industry-lead-ing programs within the sorting and delivery functions.

Mr. Hughey earned his MBA from The Darden School of Business and dual Bachelor of Sci-ence degrees in Industrial Engineering and Manufacturing Engineering from Northwest-ern University.

Carter Brockman, Contributing Editor

Mr. Brockman is a senior analyst with NEXA Advisors. He assists NEXA and its clients with key investment analysis and due diligence ef-forts throughout the financing lifecycle. He is a key contributor on global aviation and air traffic infrastructure projects, including


modernization programs and next genera-tion technologies.

Mr. Brockman holds a Master of Business Administration and a Bachelor of Science in Aerospace Engineering with a specialization in propulsion from Embry-Riddle Aeronau-tical University in Daytona Beach, FL. Mr. Brockman also holds a private pilot certifi-cate.

Tulinda Larsen, Market Analyst

Tulinda Larsen contributed to NEXA’s econo-metric forecast models of ATI industry and market demand. She brings more than 30 years of transportation industry expertise to develop strategic and technical solutions for clients. Prior to joining NEXA, Ms. Larsen directed analytical, consulting, and research services for several transportation compa-nies, including SH&E and OAG. She provided extensive market research and forecasting services to aircraft engine and aircraft man-ufacturers including G.E., Pratt & Whitney, Japanese Aero Engines Corporation, Bom-bardier Regional Aircraft Division, Saab Air-craft, Embraer, Fairchild Dornier/AvCraft, Raytheon (Beech Aircraft), China’s AVIC, and the new turboprop freighter, Skylander. She has advised regional aircraft financial com-panies, including IHI, Export Development Bank of Canada, AeroCentury Aircraft Leas-ing, and G.E. Commercial Aviation Services.

She is a private pilot, past-president (2001) of the Aero Club of Washington DC, member of the board of directors (2005-2006) of In-ternational Trade Data Users, member of the board of directors of the International Avia-tion Club, member of the International Avi-ation Woman’s Association, the Royal Aero-nautics Society, and various committees of the Transportation Research Board, National Academies.

Ms. Larsen holds a Master’s degree in Eco-nomics and a Bachelor’s in Political Science from The George Washington University. She is candidate for a doctorate in manage-ment (2013).

NEXA Project Team

A dedicated, cross-functional team of NEXA professionals was assembled for this proj-ect. Each team member has a unique under-standing and discipline to apply, including research, policy expertise, CNS/ATM tech-nology understanding, market forecasting, financial and cost benefit modeling, invest-ment banking, and infrastructure finance.


Table of Contents ATI Global Markets 2012

1.0 Executive Summary1.1 Key Findings1.2 ATI Economics and Policies1.3 ATI Investment and Financing1.4 ATI Technologies and Applications1.5 ATI Supply Chain1.6 ATI Global Forecasts1.7 ATI Airline Business Case

2.0 ATI - A Global Economic and Policy Perspective

2.1 The Economics of ATI2.1.1 Airport Infrastructure

2.1.2.1 Airport Revenues2.1.2.2 Airport Project Financing

2.1.2 ANSPs and Finances2.1.3.1 ANSP Revenues

2.1.3 ATI Economic Drivers 2.1.3.1 Pressures and Pace of Change in Global Trade2.1.3.2 Infrastructure as a Competitive Tool2.1.3.3 Liberalization and Deregulation of Air Transport Services2.1.3.4 De-Institutionalization of Civil Aviation Agencies2.1.3.5 Privatization and Commercializa-tion2.1.3.6 CNS/ATM and Harmonization2.1.3.7 CNS/ATM and Globalization2.1.3.8 Multinational Facilities and Ser-vices2.1.3.9 CNS/ATM and Information Tech-nologies

2.2 Institutional Drivers and Benefits of Emerging CNS/ATM Systems

2.2.1 Limitations of Present Communica-tions, Navigation, and Surveillance, and New Concepts2.2.2 Limitations of Existing Air Traffic Man-agement, and New Concepts

2.2.2.1 Next Generation Air Transporta-tion System (NextGen)2.2.2.2 SESAR Joint Undertaking.2.2.2.3 CARATS

2.2.2.4 Other Regional and National Initiatives

2.2.3 Benefits of ATI Modernization to Stake-holders

2.2.3.1 Business and Tourism Passengers2.2.3.2 Commercial Airlines 2.2.3.3 Commercial/Professional Pilots2.2.3.4 Air Traffic Controllers and ATS Personnel2.2.3.5 ANSPs2.2.3.6 General Aviation (GA)2.2.3.7 Military Operations2.2.3.8 Airport Authorities and Owners2.2.3.9 National Governments2.2.3.10 CNS/ATM Equipment Suppliers

2.3 Policy Trends in Global and Regional CNS/ATM Programs

2.3.1 Existing CNS/ATM Infrastructure2.3.1.1 History and Perspective2.3.1.2 Inefficiencies and General Eco-nomic Impacts

2.3.2 CNS/ATM Modernization Programs and Policy Implications by Concept

2.3.2.1 Evolving CNS/ATM Concepts Shaping Modernization Policies2.3.2.2 ICAO Policy on CNS/ATM Systems Implementation2.3.2.3 ICAO Annexes2.3.2.4 Regional Participation2.3.2.5 Joint ATI Financing through ICAO2.3.2.6 ICAO Policies on User Charges2.3.2.7 ICAO’s Policies on Charges for Air Navigation Services

2.4 Other International, Regional, and Nation-al Policies and Air Law Instruments

2.4.1 National Security, Regional Security, and CNS/ATM

2.4.1.1 NATO and Europe’s Militaries2.4.1.2 DOD and the US2.4.1.3 Developing Countries and Less Developed Countries

2.4.2 Interoperability Factors: Standards, Procedures, and Certification

2.4.2.1 Importance of Interoperability and Need for Global Standards


2.4.2.2 RTCA2.4.2.3 EUROCAE

3.0 ATI Investment and Financing3.1 Background3.2 Overview of Historical ATI Capital Financ-ing by Government

3.2.1 Government Fiscal Landscape: 2012 through 20213.2.2 ANSP Funding

3.2.2.1 Evolution in ATI Revenues3.2.2.2 Air Navigation Charges

3.2.3 Restructuring of ANSP Charging Sys-tems

3.3 Capital and Investment Programs3.3.1 Credit and ANSPs3.3.2 Current Momentum with Private-Sec-tor Participation3.3.3 Emerging Commercial Build-Operate Models

3.4 Characteristics of Private Sector ATI Fi-nancing

3.4.1 Policy and Regulatory Needs3.4.2 Securitization of Revenues, Project Finance, and Risk

3.5 Identification of Future Funding Options for ATI3.6 Active Sources for ATI Capital Investment

3.6.1 Government Agency Support and Sov-ereign Wealth Funds3.6.2 Pension Funds and Endowments 3.6.3 Private Equity and Debt Capital

3.7 Top 100 ATI Projects4.0 CNS/ATM Technologies & Applications

4.1 Introduction and General Overview4.1.1 Background

4.1.1.1 Shift to Trajectory-Based Opera-tions4.1.1.2 Required Separation Minima4.1.1.3 Summary of Emerging CNS/ATM Concepts

4.1.2 Chapter Overview4.2 Global CNS/ATM and Automation Applica-tions

4.2.1 ATM Operational Concept Components4.2.1.1 Airspace Organization and Man-agement4.2.1.2 Aerodrome Operations4.2.1.3 Demand and Capacity Balancing4.2.1.4 Traffic Synchronization4.2.1.5 Conflict Management4.2.1.6 Airspace User Operations

4.2.1.7 ATM Service Delivery Manage-ment4.2.1.8 Operational Concept Components Summary

4.2.2 ATM Automation Applications4.2.2.1 Oceanic and En route Applications4.2.2.2 Terminal Applications4.2.2.3 Surface Applications4.2.2.4 Human Factors

4.2.3 Technical Issues4.2.4 Operational Issues4.2.5 Institutional Issues4.2.6 Future Trends

4.3 Communications4.3.1 Radio Frequency Spectrum4.3.2 High Frequency (HF)

4.3.2.1 Technical Issues4.3.2.2 Operational Issues4.3.2.3 Institutional Issues4.3.2.4 Future Trend

4.3.3 Very High Frequency (VHF)4.3.4 Future Air-to-Ground Communications

4.3.4.1 VHF Digital Link (VDL)4.3.4.2 Current VDL Service Providers4.3.4.3 Mode S Datalink4.3.4.4 Technical Issues4.3.4.5 Operational Issues4.3.4.6 Institutional Issues4.3.4.7 Future Trends

4.3.5 Communications Systems Integration 4.3.5.1 Aeronautical Telecommunications Network (ATN)4.3.5.2 Future Air Navigation System (FANS)4.3.5.3 Operational Issues4.3.5.4 Institutional Issues4.3.5.5 Future Trends

4.3.6 Ground-to-Ground Communications4.3.6.1 Landline Communications4.3.6.2 Federal Telecommunications Infra-structure (FTI) (US)4.3.6.3 Pan-European Network Service (PENS) 4.3.6.4 System Wide Information Man-agement (SWIM) 4.3.6.5 Microwave Communications4.3.6.6 Technical Issues4.3.6.7 Operational Issues4.3.6.8 Institutional Issues4.3.6.9 Future Trends


4.3.7 Satellite Communications4.3.7.1 Technical Issues4.3.7.2 Operational Issues4.3.7.3 Institutional Issues4.3.7.4 Future Trends

4.3.8 Network Switching Equipment4.3.8.1 Important Digital Switching Sys-tem Features4.3.8.2 Technical Issues4.3.8.3 Operational Issues4.3.8.4 Institutional Issues4.3.8.5 Future Trends

4.4 Navigation, Approach and Landing Systems4.4.1 Performance Based Navigation (PBN)

4.4.1.1 Area Navigation (RNAV)4.4.1.2 Required Navigation Performance (RNP)4.4.1.3 Airspace Concepts by Area of Operation

4.4.2 Current and Developing Global Navi-gation Satellite Systems

4.4.2.1 Global Positioning System (GPS)4.4.2.2 Global Navigation Satellite System (GLONASS)4.4.2.3 GALILEO4.4.2.4 COMPASS/BeiDou-24.4.2.5 GNSS Transitional Issues

4.4.3 Current Regional Satellite Navigation Systems

4.4.3.1 Indian Regional Navigation Satel-lite System (IRNSS)4.4.3.2 Quasi-Zenith Satellite System (QZSS)

4.4.4 Current and Developing Augmentation Systems

4.4.4.1 Satellite-Based Augmentation System (SBAS)4.4.4.2 Ground Based Augmentation System (GBAS)4.4.4.3 Aircraft-Based Augmentation System (ABAS)

4.4.5 Terrestrial-Based Precision Navigation, Approach, and Landing Systems

4.4.5.1 Instrument Landing System (ILS)4.4.5.2 Microwave Landing System (MLS)

4.4.6 Terrestrial-Based Non-Precision Navi-gation, Approach, and Landing Systems

4.4.6.1 VOR/DME/TACAN4.4.6.2 VOR4.4.6.3 DME4.4.6.4 TACAN

4.4.6.5 Non-Directional Radio Beacon (NDB)4.4.6.6 Alternative Positioning, Naviga-tion, and Timing (APNT)

4.4.7 Airfield Lighting4.4.7.1 Runway Lighting4.4.7.2 Runway Status Light System (RWSL)4.4.7.3 Approach Light Systems4.4.7.4 VFR Approach Light Systems4.4.7.5 Technical Issues4.4.7.6 Operational Issues4.4.7.7 Future Trends

4.5 Surveillance Systems4.5.1 Primary Radar

4.5.1.1 Technical Issues4.5.1.2 Operational Issues4.5.1.3 Institutional Issues4.5.1.4 Future Trends

4.5.2 Secondary Surveillance Radar4.5.2.1 Mode S4.5.2.2 Technical Issues4.5.2.3 Operational Issues4.5.2.4 Institutional Issues4.5.2.5 Future Trends

4.5.3 Automatic Dependent Surveillance (ADS)

4.5.3.1 Automatic Dependent Surveil-lance− Broadcast (ADS-B)4.5.3.2 Automatic Dependent Surveillance − Contract (ADS-C)4.5.3.3 Automatic Dependent Surveillance − Rebroadcast (ADS−R)4.5.3.4 Technical Issues4.5.3.5 Operational Issues4.5.3.6 Institutional Issues4.5.3.7 Future Trends

4.5.4 Multilateration4.5.4.1 Technical Issues4.5.4.2 Operational Issues4.5.4.3 Institutional Issues4.5.4.4 Future Trends

4.5.5 Surface Surveillance4.5.5.1 Airport Surface Detection Equip-ment - Model X (ASDE-X)4.5.5.2 Technical Issues4.5.5.3 Operational Issues4.5.5.4 Institutional Issues4.5.5.5 Future Trends

4.5.6 Airborne Collision Avoidance


4.5.6.1 Traffic Collision Avoidance System (TCAS)4.5.6.2 Technical Issues4.5.6.3 Operational Issues4.5.6.4 Institutional Issues4.5.6.5 Future Trends

4.6 Weather Systems4.6.1 Automated Weather Stations

4.6.1.1 Technical Issues4.6.1.2 Operational Issues4.6.1.3 Institutional Issues4.6.1.4 Future Trends

4.6.2 Wind Shear and Air Turbulence Detec-tion Systems

4.6.2.1 Doppler Radars4.6.2.2 Technical Issues4.6.2.3 Operational Issues4.6.2.4 Institutional Issues4.6.2.5 Future Trends

4.6.3 Weather Dissemination and Display Technology

4.6.3.1 Technical Issues4.6.3.2. Operational Issues4.6.3.4 Institutional Issues4.6.3.4 Future Trends

5.0 The ATI Supply Chain5.1 General Aerospace and Defense (A&D) Industry Sector Considerations

5.1.1 Economic and Political Factors 5.1.2 Market Factors5.1.3 Industry Sector Factors5.1.4 ATI Companies and Principal Products, Systems, and Services

5.2 Supply Chain Model5.2.1 Mapping

Tier 0 (End Customers and Stakeholders)Tier 1 (Integration Suppliers)Tier 2 (System Suppliers)Tier 3 (Component Suppliers)Tier 4 (Core Technology and Materials Suppliers)

5.3 CNS/ATM Ground and Space Systems Supply Chain

5.3.1 Supplier Tiers5.3.2 Key Developments and Challenges Af-fecting CNS/ATM Ground and Space Systems Supply Chain

5.4 CNS/ATM Avionics Supply Chain5.4.1 Supplier Tiers5.4.2 Key Developments and Challenges Af-fecting the CNS/ATM Avionics Supply Chain

6.0 ATI Industry & Market Forecast6.1 ATI Forecast Model - Methodology and Assumptions

6.1.1 Econometric Model Overview6.1.1.1 World Economic Indicators6.1.1.2 Air Traffic Forecasting Model6.1.1.3 Buyer Policies and Financial Model6.1.1.4 ATI Industry and Market Forecast Model

6.1.2 ANSP and Commercial Aircraft ATI Industry and Market Forecast

6.1.2.1 World Economic Assumptions6.1.2.2 Political and Policy Assumptions6.1.2.3 Technological Assumptions6.1.2.4 Exclusions6.1.2.5 Risks to Forecast

6.2 ANSP ATI Investment - Unconstrained6.2.1 ANSP ATI Investment Overview6.2.2 Forecast Methodology

6.2.2.1 Capital Investments for Selected Countries6.2.2.2 World Region Forecasts

6.2.3 ANSP ATI Forecast by Program6.2.3.1 Communication, Navigation, and Surveillance6.2.3.2 ATM & Automation6.2.3.3 Weather, Facilities, and Mission Support

6.2.4 ANSP ATI Forecast by Function6.2.4.1 Equipment6.2.4.2 Systems6.2.4.3 Services

6.3 Commercial Aircraft Equipage Investment — Unconstrained

6.3.1 Forecast Methodology6.3.2 Global Fleet Forecast (2012-2021)6.3.3 Equipage Classes

6.4 Incorporating Investment Constraints 6.4.1 ANSP ATI Investment — Constrained6.4.2 Aircraft Equipage Investment – Con-strained

6.5 ATI Funding Gap6.5.1 Customer/User Pays Concepts6.5.2 Private Sector Financing

7.0 The Airline Business Case7.1 Cost of Capital and Hurdle Rates7.2 “Cash is King” – Return of Invested Princi-pal7.3 CNS/ATM Implementation Delays7.4 Predominant Equipage7.5 Technical Refresh


7.6 Role of Government7.7 Summary7.8 Airline Cost of Capital for Discretionary Investments

Appendix of Selected Air Navigation Ser-vice Providers

Islamic Republic of Afghanistan

Argentina

Australia

Bahrain

Bangladesh

Bolivia

Brazil

Bulgaria

Canada

Chile

China

Colombia

Egypt

Ethiopia

France

Federal Republic of Germany

Ghana

India

Indonesia

Ireland

Italy

Jamaica

Japan

Jordan

Kazakhstan

Kenya

Republic of Korea

Lebanon

Libya

Malaysia

Mexico

Myanmar

Netherlands

New Zealand

Federal Republic of Nigeria

Norway

Oman

Pakistan

Panama

Peru

Philippines

Romania

Russia

Saudi Arabia

Republic of Senegal

Singapore

South Africa

Spain and the Canary Islands

Switzerland

Tanzania

Thailand

Trinidad and Tobago

Turkey

United Arab Emirates

Ukraine

United Kingdom

Uruguay

United States of America

Venezuela

Vietnam

Selected Bibliography


ATI Global Markets 2012 Subscriber Order Information

Method of Payment

Payments of US$19,995 per subscription can be made by check or wire.

If by check, make payable to NEXA Advisors, LLC and mail along with completed subscription form to:

NEXA Advisors, LLC 1250 24th Street NW, Suite 300 Washington, DC 20037 Tel: +1-202-558-7417

If by wire, instructions are below. Please fax the completed subscription form to +1-202-355-0299.

Delivery

All deliverable items, including ATI Global Markets 2012 itself, companion databases, worksheets, etc., will be made available to Subscribers shortly after payment.

Confidentiality

All subscribers may, if requested at the time of subscription, have their names withheld and kept confidential from all other Subscribers and the public.

Account Name and Address: NEXA Advisors, LLC1250 24th Street NW, Suite 300Washington, DC 20037Tel: +1-202-558-7417

Bank Name: HSBC National Bank USA

ABA Number (Domestic, Int’l): 021001088

Account Number: 767012798

Bank Address: HSBC National Bank USA1800 Tysons BlvdSuite 50McLean, VA 22102(703) 883-8029

Figure 9Multi-Client Value Defined

What is a “Multi-Client Study”?

ATI Global Markets 2012 pro-vides subscribers with volumes of relevant information and in-depth analysis of markets and specific opportunities. To a subscriber, the cost of under-taking this work from a top-tier consultancy could be 10 to 50 times the cost to a subscriber. A “Multi-Client” project, on the other hand, shares these costs among multiple subscribers.


ATI Global Markets 2012 Order Form

Please detach this page (pages 18/19) from its binding, carefully fill it out following the instruc-tions provided, and forward it to NEXA Advisors, LLC, at 1250 24th Street NW, Suite 300, Washing-ton DC 20037.

Subscriber Identifica-tion:

Please enter the company name below as the Subscriber. The Subscriber agrees to the terms and conditions of purchase stipulated herein. Furthermore Subscriber acknowledges that ATI Global Markets 2012 is © Copyright 2012 by NEXA Advisors, LLC with all rights reserved in the United States of Ameri-ca. Subscriber agrees that the publication is for Subscriber’s sole and exclusive use, and is not to be transmitted, loaned, rented, sold, displayed or otherwise conveyed to other companies or to any individuals not employees of Subscrib-er without the express written permission of NEXA Advisors, LLC.

______________________________________________________________Subscriber Name

______________________________________________________________Address

______________________________________________________________City State/Province Country

______________________________________________________________Zip/Postal Code Telephone Email address

Authority: On behalf of the Subscriber named above, I certify that I have the authority to place an order for ATI Global Markets 2012.

______________________________________________________________Signature Name (printed)

______________________________________________________________Title Date Telephone

Enclosed Payment:

Enclosed is a o check o wire confirmation o purchase order in the amount of $19,995. NEXA Advisors, LLC agrees to issue a receipt upon acceptance of this Subscription and of payment.

Confiden-tiality:

o We wish to have our company identity kept confidential as a subscriber to ATI Global Markets 2012.


1250 24th Street NW, Suite 300 Washington, DC 20037 USA

Tel: +1-202-558-7417Fax: +1-202-355-0299 www.nexacapital.com

ATI Global Markets 2012

Documents

Air Traffic Infrastructure Global Markets