Commercial Viability of the Next Generation
High-Speed Civil Transport (HSCT)

By
GEORGE SAOUNATSOS
COPYRIGHT  1996

You may find the Abstract and some compound Graphs of the above titled Report.
Click HERE for the full text on 'Technology Readiness and Development Risks'.


1.  Abstract

The report investigates the technological feasibility and economic viability of the Next Generation High-Speed Civil Transport (HSCT), as the most important aspects of its commercial success.

Realistic specifications for the new SST call for a 2.2 Mach, 270 passengers, 5,500nm range aircraft. The total cost of R&D is estimated at $15-20 billion with an actual development period of 7-10 years.  Improvements in aerodynamic analysis methods promise an enhanced L/D ratio of about 45% in subsonic and 25% in supersonic cruise. The resized increment in weight reduction due to the elimination of the droop nose is estimated at 4,500kg.  Adequate sonic-boom reduction does not appear feasible at present.  A 5-15% lower specific fuel consumption is projected through the use of a variable cycle engine, capable of generating acceptable (FAR 36 - Stage 3) community noise.  The Mixed-Flow Turbofan has been indicated by Americans as a more likely engine to be used over the equally advantageous Mid-Tandem Fan supported by Rolls Royce.  The use of the Lean-Premixed-Prevaporized or the Rich-burn/Quick-quench combustion processes could reduce the NOx Emission Index to 5, resulting in less than 1% annual ozone depletion.  Studies indicate that 50% of passengers would accept an average 25% surcharge over subsonic fares, while a 30-40% surcharge seems to be more pragmatic for an adequately profitable HSCT. The estimated market needs of about 550 units by 2020 justify a satisfactory return on investment (12%) for only one manufacturer. The unit cost should be about 1.8 times that of the Boeing 747-400 in order to generate satisfactory profit for both airlines and manufacturers.  The corresponding yield, for a 12% ROI, could then range between 11-13 cents/RPM.

Technology transfer through a well structured international consortium would minimize the development time and cost, establishing common environmental and certification rules. The most probable Entry-Into-Service can be placed at 2010-2015.  Japan will play a determining role by selecting certain technology concepts to finance, coming from Europe or the United States.
 

2.  Graphs on economic-related issues
 
Figure 1:  The starting point in the economic assessment is the technical characteristics of the aircraft, which reflect the performance and its capabilities.  Several factors can then be determined, such as the potential network based on the cruise Mach number and aircraft range, or the block fuel required as derived by the specific fuel consumption (SFC).  In parallel, the number of seats available determines the potential scheduling, while the utilization rate and stimulation enter the picture as a function of the routing chosen.  Furthermore, the constraints applied in the operation of supersonic vehicles directly affect the scheduling of the HSCT and the network that can be operated profitably.  This network is also based on the projected traffic of each route, which ensures that there is a sufficient volume to support the operation of supersonic transports.  Additional key elements in the economic success of the future HSCT are the value of the supersonic fare and the corresponding passenger share, which are directly related to the Total Operating Cost (TOC) of the aircraft.  At the same time the production cost, as affected by the total number of aircraft required, determines the unit acquisition price.  It also plays a fundamental role in the total operating cost of the HSCT, closing in this way a decisive economic loop for its success.  In other words, the next generation HSCT must be economically competitive with the subsonic fleet, in order to be able to earn a return on investment (ROI) at least similar to the return that could be earned by operating subsonic airplanes on the same route system.  This concept is fundamental to the analysis methods used in evaluating the economic worth of the future HSCT aircraft.
 

Figure 2:  An investigation made by the Boeing company resulted in some preliminary elasticity demand curves, which relate ticket price to market share as a function of time saved.  The initial data were collected from four surveys conducted on a 50-50 mix of business and economy class travelers.  The results indicate that the percentage of passengers choosing supersonic service decreases substantially as the price is increased.  At the same time, the percentage of travelers willing to go supersonic increases as time savings become larger.  From the above graph can be observed that for a 40% time saving, a 10% ticket price increase would reduce the market share by over 65%.  When elasticity curves, however, are more accurately established for all specific HSCT market segments, airlines would be able to calculate possible yields from a mixture of subsonic and supersonic flights.  Varying the surcharge for supersonic service could be certainly used to optimize the traffic volume and mix for highest profit potential. [SOURCE: Boeing]
 

Figure 3:  Focusing in the relation between the development cost, the potential number of aircraft required and the unit cost as a function of the design range, the compound chart presented above gives a thorough understanding of the resulted interdependency.  For large design ranges the development cost increases, dragging up the unit price and lowering the amount of units required.  Consequently, passenger share decreases as a result of higher ticket prices, although a larger range capability could accommodate the needs of a larger public, i.e. a higher market share.  For a 5,000nm-range HSCT can be observed that about 700 units are needed at an average price of about US$ 260 million.  At this number of required HSCTs, the aircraft cost could be 1.4 times that of the VLA, or almost 2 times that of the Boeing 747-400.  [SOURCE: JADC - Japan Aircraft Development Corporation]
 

Figure 4:  In another sensitivity study, Boeing related fleet size variability to the required yield to achieve a 12% return on investment.  For this study, was assumed that if a modest increase of 10% was made in the first and business class passengers' fare, and if the their corresponding class sections of the airplane were expanded so that the economy-class demand was not entirely accommodated, then the revenue level would be "enriched" by the enlarged percentage of the higher priced fare classes.  In parallel, the potential surcharge on economy passengers was varied as above.  It can be noticed that the per passenger yield level, required to meet the ROI target, increases as market share drops.  That is because there are fewer passengers on any given route and the physical airplane remains the same.  On the other hand, with about an 18% economy ticket price increase and 22% economy market share, the yield required for a 12% ROI equals the yield available.  The next generation HSCT, however, becomes economically viable with a 49% market share and a worldwide sales of 650 to 700 units.   This amount is perceived as the bottom line of the economic evaluation of the Boeing company, suggesting that while it reflects an adequate demand for a single manufacturer, it is not adequate for two or more.  The tactic of yield "enrichment", however, brings with it operational problems from the airline's perspective by excluding economy class passengers.  For example, an airline operating an HSCT which accommodates less than half the total demand, would have to provide another subsonic aircraft type on the same route to carry the remaining demand, probably consisting of mostly low fare classes.  The fleet efficiency may therefore be reduced by the requirement to provide two airplane types to serve a single market. [SOURCE: Boeing]

A similar passenger-class oriented approach was followed by Deutsche Aerospace-Airbus.  DASA examined the operation of a fleet of HSCTs in consideration of a standard class mix used in subsonic transports, as well as a supersonic class-mix where discount fares were totally banned (figure 5).

 
Figure 5:  It can be observed that surcharges on subsonic ticket prices determine the market share and thus the number of aircraft put into service.  When the fare premiums are set to cover just the extra operational cost, it is indicated that about 800 HSCTs are required with a 30% surcharge applied.  Whereas the tendency of the manufacturers would be clearly to maximize the number of aircraft produced and sold, the airlines would more likely follow a strategy to maximize the extra profit from HSCT operation.  For extra yield therefore, in the order of 13%, higher surcharges (.40%) at standard subsonic class mix could reduce the total fleet size to about 400 aircraft.  Alternatively, yields could be improved by banning discount fares through the use of the more attractive supersonic class mix, leading to lower surcharges (.18%) in the remaining ticket types.  This effect would again result in a fleet of about 800 HSCTs, and a price ratio of about 1.8 to the Boeing 747-400. [SOURCE: DASA]