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Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership (2023)

Chapter: Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting

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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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Suggested Citation:"Chapter 1 - Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. Washington, DC: The National Academies Press. doi: 10.17226/27050.
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1   Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting 1.1 Introduction In traditional terms, total cost of ownership (TCO) refers to the lifetime cost of buying an asset. In simple terms, it is the total monetary cost attributed to an asset from purchase planning to its disposal (Vaidya 2013). TCO analysis can assist with identifying all direct, indirect, and hidden costs associated with an asset purchase to determine whether a purchase is as cost- effective as initially assumed. As air travel returns to prepandemic levels and costs continue to rise, the application of TCO principles to airport baggage handling systems (BHSs) is more important than ever. Given the overall duration of airport terminal projects, from conceptualization to close out, forethought into the 10–30-year operation, maintenance, and asset management of the BHS is essential. 1.2 Content and Structure This guide is intended to be a resource for airport stakeholders in the support of the imple- mentation of their BHS program to help them consider their TCO. It has been organized to allow readers to find and focus on areas of information or interest within the guide. Chapter 1 provides background on the ACRP Project 03-53, “Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership,” research that produced this guide, its content and organization, purpose, background on the evolution of BHS, the research approach and methodology used, and required ongoing and future evolution. Chapter 2 introduces the reader to what comprises TCO for BHSs, including variables versus considerations, the impact of equipment selection and design on TCO, energy consumption, security, and checked baggage screening. Chapter 3 explores what airports can expect to see in future trends and technologies, including predictive analytics, blockchain/Internet of Things (IoT), self-service applications, international arriving baggage technologies, video coding, radio frequency identification (RFID), automated guided vehicles (AGVs), digital twin, and robotics. Chapter 4 is a primer on BHS funding mechanisms, including those available through federal, state, and local sources and those that came about through industry-disrupting events such as 9/11 and the COVID-19 global pandemic. Chapter 5 reviews various methodologies traditionally used for BHS procurement and their respective cost trade-offs, including design-bid-build (DBB), design-build (DB), progressive design-build (PDB), and construction manager at risk (CMAR). C H A P T E R   1

2 Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership Chapter 6 summarizes the major themes developed in the process described herein and provides suggestions for further research. The following appendices are available on the National Academies Press website (nap.national academies.org) by searching for ACRP Research Report 252:Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership. • Appendix A: Interview Findings: Detailed Components of TCO – Summary of the findings from the interview process. • Appendix B: Case Studies – Specific case studies on Transportation Security Administration (TSA) design submittal process cost challenges, individual carrier system (ICS) versus conventional conveyor cost trade-offs, and BHS motor efficiency. • Appendix C: PGDS [Planning Guidelines and Design Standards] Design Submittal Process – Process for submitting design reviews to TSA. • Appendix D: TCO Toolkit – Graphical decision-making toolkit for airport stakeholders. 1.3 Guidebook Purpose 1.3.1 Objectives This guide is the product of ACRP Project 03-53 and builds on ACRP Research Report 172: Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement (Fortin, Alfaqih, and Bell 2017). ACRP Research Report 172 addresses various airport infrastructures but not aspects of the BHS that impact the overall TCO for the system’s owners, operators, and maintainers. Objectives for this guide were established by the project panel at the inception of the study. Ultimately, this guide is intended to assist airport stakeholders to accomplish the following: • Incorporate BHSs into benefit-cost analyses and financial models. • Identify and evaluate potential project delivery methods. • Define fixed and variable costs for capital expenditure and ongoing operating costs. • Identify intangible costs that should be considered for BHS, such as customer experience, worker productivity, and risk management. Project researchers collected the experiences and considerations of airports, airline stake- holders, and equipment manufacturers as they embarked on BHS projects and attempted to forecast where the industry is heading. The researchers then worked to create a set of consid- erations, best practices, and guidelines to support airline and airport stakeholders in a holistic evaluation of their BHS TCO needs. A’s planners chart their course, this report will help them to set goals and develop their own set of key performance indicators (KPIs) for the overall program, select the right design team, initiate the appropriate procurement strategy, and choose the right technology vendor for implementation. While topics contained in this guide are more geared toward U.S. airports, most of the concepts and best practices can be applied internationally as well. 1.4 Background 1.4.1 Evolution of Baggage Handling in Air Travel Air travel became commonplace toward the end of the 1950s when the increased size of aircrafts and the expansion of routes allowed the commercial aviation industry to grow. By the 1970s, air travel was flourishing, due in part to less expensive flights made possible by even larger planes, the rise of global tourism, and trade. Customer demand drove an increase in flights, new routes, and the need for longer distances. These factors, along with the establishment of

Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting 3 hub-and-spoke networks across airlines that increased the number of bag transfers, necessitated the development of systems that efficiently move passenger luggage from check-in to plane. Airports continued to grow and became more modern and more focused on providing a positive experience for customers. As new airports were built and terminals expanded to accommodate the increased traffic, BHSs became more complex, introducing automation and multiple destination sortation. Manufacturers began to develop more advanced systems that could process bags faster and more efficiently and reduce the incidence of lost bags. However, as the systems became more complex and faster, KPIs—such as bag jams and sortation inaccu- racies resulting in an increase in mishandled bag rates (MBRs)—gave rise to a new set of concerns around bag hygiene and how to move bags quickly without damaging them. 1.4.2 Elements of a BHS While many within the industry view baggage handling as a “necessary evil,” it is a pillar of the baseline purpose of an airport terminal facility: move passengers and baggage from curb to gate efficiently, safely, and securely. There are many ways to accomplish this for baggage, depending on the size, complexity, location, economic viability of the airport, and preferences of key stakeholders (airlines, airport operators, regulating authorities, etc.). From completely nonexistent—where passengers carry their bags all the way to the plane side—to complex, fully automated inbound systems [domestic/terminating, international arrivals (Federal Inspection Service), claim] and outbound systems [curbside, ticket counter, international recheck, Checked Baggage Inspection System (CBIS), sortation, make-up, and storage, etc.], most airports through- out the world have some combination of manual and automated portions. Factors such as processing rates, number of sortation locations, geographic processing distances, and security requirements play a large part in determining the level of automation for maximizing efficiency. In the end, the BHS must operate harmoniously with other systems in the terminal facility construct. There is a myriad of operational parameters to bear in mind that affects BHS TCO. For example, staffing requirements play a major part in the recurring cost of the BHS. This includes customer- facing personnel, such as those staffing ticket counters and claim areas; operations personnel for loading and unloading baggage carts and manual encoding; and maintenance personnel for keeping the BHS up and running. Staffing levels typically escalate as the size and complexity of the BHS increase. Maintaining a balance between required personnel and complexity is essential to managing TCO efficiently. Functionality is another parameter of the operational characteristics of the BHS. Functionality typically includes such aspects as the start-up or phase-in of the system, backup or contingency procedures for unexpected outages or malfunctions, flexibility to account for spikes in demand without oversizing the system, and expansion for future growth. Many factors go into how the BHS is configured and sized. Below are some examples of variables that must be considered: • Baggage characteristics (bags per passenger, international/domestic, size) • Growth factors and expansion capabilities/expectations • Peak factors (daily, seasonal, holiday) • Passenger traffic characteristics (that is, arrival curves) • Service criteria • Screening requirements • Ramp service characteristics • Physical constraints (existing facility, brownfield, greenfield) • Contingencies • Redundancy

4 Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership • Number of sort destinations • Early Bag Storage (EBS) requirements Other critical needs of a BHS, over and above the sizing of a system, include such factors as reliability, maintainability (that is, sufficient and clear access to components and quantity of required maintenance personnel), future expansion opportunities, stakeholder-required mini- mum functionality, and efficiency criteria, such as bag time in the system. Finally, there is the intangible piece of valuing the success or failure of a BHS: customer satis- faction. The general traveling public is mostly unaware of all that comprises a BHS. Regardless of the overall success of a passenger’s journey, their interaction with the handling of baggage is typically their first and last experience of the journey. If the flight is on time, security is a breeze, and airside concessions meet their needs, but their bag arrives in the claim area late, damaged, or not at all, the BHS will be considered the culprit. Ultimately, this is a highly intangible com- ponent of TCO. Although an airport’s BHS fulfills a service function, it is typically not considered a revenue generator (airline checked baggage fees notwithstanding) and is therefore one-sided when it comes to the cost of ownership. However, as is explored in this guide, BHS TCO is complex and difficult to calculate. But, according to Andrew Price, Head of Baggage Transformation at Future Travel Experience (FTE), the goal for the future of BHS should be simple: The “North Star” must be for passengers and baggage moving successfully to their collective final destination efficiently, cost-effectively, and happily. 1.4.3 Industry Disruptors and Opportunities Since the introduction of BHSs into airport infrastructure, various incidents involving the aviation industry have occurred that impact how airlines and federal agencies view BHSs in the context of investment, security, and resiliency. However, the three most impactful over the last 40 years were the Airline Deregulation Act, 9/11, and COVID-19. These industry disruptors shaped not only the physical layouts and complexity of BHSs but also how they are funded. 1.4.3.1 The Airline Deregulation Act Commercial aviation was the first transportation mode in the United States to be deregulated. The Airline Deregulation Act was passed in 1978, removing U.S. federal government control over airfares, routes, and market entry of new airlines, and introducing a free market in the commercial airline industry. Before then, airlines were regulated by the Civil Aeronautics Board (CAB), which approved routes, set ticket prices, and controlled agreements. The CAB also approved mergers between airlines and approved new airlines entering the market, which could take many months or even years. There was a general sentiment that this arrangement benefited airlines at the expense of the traveling public and drove up ticket prices. Deregulation had a dramatic impact on the aviation industry and affected countless stake- holders as the industry completely transformed over the coming years. Deregulation may have contributed to the travel boom that occurred in the decades to follow. Though many airlines went out of business, new airlines entered the industry, and airlines competed on pricing, ultimately bringing down fares. Deregulation also lifted restrictions on where airlines could fly. As a result, airlines began flying more routes between more cities than they had previously. New business models emerged to adapt to and profit from deregulation. The most successful of these innova- tions was the adoption of the hub-and-spoke system that used a few major airports as central connecting points (hubs) and then connected flights to their ultimate destination (spokes) on smaller aircraft. This model increased efficiency and allowed airports to serve more markets,

Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting 5 thereby boosting the percentage of seats filled and driving down fares. This approach allowed airlines to maximize aircraft use by increasing passenger loads on each flight. Another result of deregulation was more passengers flying and more multisegment flights, sometimes on planes with limited cabin space for carry-on baggage. BHSs needed to evolve to meet the needs of this more complex system through automation. 1.4.3.2 9/11 Perhaps the biggest impact on the BHS industry and the overall impact on TCO stem from the tragic events of September 11, 2001 (9/11). Though commercial flight bombings occurred prior to September 11, 2001, and flight hijackings were a source of national anxiety in the 1960s and 1970s, it was the events of 9/11 that would spark a focus on screening baggage. Prior to then, there was very little baggage security for checked bags. The focus of security efforts to that point had been on screening passengers. Baggage screening technology had been implemented by the Federal Aviation Administration (FAA) in the 1990s, but most airports did not screen baggage for domestic flights prior to 9/11. Within months after the attacks, however, airport and airline security reform became a key focus of international antiterrorist efforts. The United States Congress passed the Aviation and Transportation Security Act, which created a new agency, the TSA, with the mandate to develop and implement policies to ensure the safety of the nation’s transportation systems. In addition to requiring cockpit doors to be reinforced and more federal air marshals be put on flights, it also required all airports to implement checked-baggage screening solutions capable of screening 100% of checked bags by December 31, 2002. This mandate left some airports scrambling to comply by reconfiguring their existing baggage systems, in essence performing “open heart surgery” by inserting screening systems into the middle of the BHS, while in others, quickly installing completely new systems. Beyond requiring brand-new technology, the new security mandates represented a comprehensive change in outbound baggage processing methodology with the insertion of a federal agency in the middle of the process. To comply with the deadline, compromises were made with regard to efficiency in terms of energy, staff, and standards. The screening machines that were initially selected came from the medical field and were not necessarily sized for checked baggage. These changes impacted customer behavior because carry-on bags were subject to a new set of rules as well. Bags per passenger increased as a result, creating greater demand on the BHS. The new systems proved to be inefficient and required a greater number of personnel. The deadline was met but at the primary cost of efficiency. Further, as excerpted from Airport Consulting in 2013 (Studdiford 2013), Subsequent years were spent developing, implementing, and refining national standards of practice for the design and implementation of checked baggage screening systems. After 4 years of tweaking installed systems and deploying new systems that still posed operational concerns, TSA’s Aviation Security Advisory Committee (ASAC) voted in 2006 to create a working group to identify funding and financing strategies for installing optimal checked baggage screening systems. This working group comprised capable and experienced industry professionals who were called upon to develop standards of practice for the design and implementation of BHSs at airports nationwide. They were to ensure the new systems offered the utmost in safety, efficiency, and security. The group that participated in this initial Baggage Screening Investment Study (BSIS) included representatives from airports, airlines, aviation consultants, architects, engineers, BHS designers and suppliers, and original equipment manu- facturers (OEMs), many of whom had been involved with some of the world’s most complex BHSs. Over a period of 1 year, this group met to discuss design philosophies, examples of what had and had not worked, and operational considerations when applied to the screening of checked baggage. The primary objective of the BSIS was to outline an investment strategy for funding TSA’s checked baggage screening program (ASAC Working Group 2006). The BSIS, which was submitted to the Office of Management and Budget by TSA, was considered the final component of TSA’s strategic plan for checked baggage screening. The investment study recommended investment options, including bonds, appropria- tions for explosives detection systems (EDS) procurement and installation, and use of passenger facility

6 Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership charge funding. In addition to investment strategies, the resulting product of the working group’s diligent efforts was the initial release of TSA’s Planning Guidelines and Design Standards [PGDS] for Checked Baggage Inspection Systems in October 2007 (TSA 2007). TSA’s PGDS incorporated the insights and experience of industry stakeholders; it continually evolves in response to changing requirements. Since its initial release, all U.S. CBIS installations, with few exceptions, have been designed, reviewed, and commissioned against the first and subsequent releases of the document. Following the initial release, the industry has seen innovation, continued lessons learned, and emerging threats that have changed the way that the security of checked baggage is viewed. TSA recently released Version 8.0 on March 24, 2023 (TSA 2023). Industry involvement in these subsequent releases, however, waned over the early 2010s. Following the release of the first couple of versions, TSA’s in-house subject matter expertise (SME) began to grow. Through insourcing and reorganization, follow-on working groups outside of TSA and their immediate contractors never materialized, thus limiting industry engagement in not only design best practices, but in commissioning processes and procedures as well. Although a procedure was established whereby comments to the most current version could be submitted online for potential incorporation into subsequent releases, the general opinion of the industry was that the voices of the “boots on the ground” were not being heard, fueling tension between CBIS designers and TSA. Stemming from collective feedback received within various trade organizations in early 2012, a proposal was presented to TSA to formally reengage a collaborative task force comprising CBIS SMEs from the industry and TSA to update the PGDS content and format. The resultant task force kicked off in March 2012 and was formally chartered in 2013 as the PGDS Industry Working Group (IWG). Collaboration between TSA and the IWG continues today, with periodic meetings to discuss and vet potential changes to the PGDS. Continuing the effort of recapitalizing aging equipment and infrastructure, while recognizing the continued financial burdens by airports and the downward trend of federal funding, the BHS industry is working to ensure the utmost in safe, optimal, efficient, cost-effective screening solutions that meet the needs of the traveling public while making the best use of taxpayers’ dollars. While ensuring the utmost security of checked baggage, the requirements set forth in the PGDS contain little consideration for maintaining and operating the baggage system as a whole, since TSA only provides for the installation and maintenance of the EDS units. It only accounts for the efficiency of the CBIS from the perspective of the number of TSA staff required to perform the screening and maintenance of machines, and therefore TCO for the entire BHS is often overlooked. 1.4.3.3 COVID-19 Though COVID-19 has brought about unprecedented changes in airport and airline operations, few of these changes impact baggage handling. The bulk of the changes to minimize the spread of the virus have been similar to the interventions seen in other industries—social distancing, mask mandates, available hand sanitizer, increased cleaning and sanitization protocols in public spaces, glass barriers, and reconfiguring public spaces where people line up, such as checkpoints. Airports have emphasized public-facing precautions, not only because they felt that these efforts kept the traveling public safe but also because they had the double impact of restoring confidence in the safety of air travel. Cleaning that has always been done quietly behind the scenes became more visible to travelers in response to concerns about travel during the pandemic. Some airlines initially considered restricting carry-on baggage to expedite the boarding process, which could ultimately have an impact on the number of checked bags per passenger. However, no such practices are known to have been implemented to date.

Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting 7 Though technologies were developed, such as ultraviolet tray sanitization and sanitizing misters for baggage, interest in these comparably expensive upgrades waned, as research showed that COVID-19 was less commonly transmitted via surfaces and more commonly transmitted via contact with an infected individual. Still, the massive impact of the pandemic on the industry has created an opportunity for airlines and airports to rethink how to improve the experience passengers have on the airplane and as they move through the airport. This thinking has led to a renewed interest in technologies that had some traction prior to the COVID-19 pandemic. Prepandemic, many airports had significant capacity issues and were considering how to move travelers and baggage more efficiently through their travel journey while still effectively implementing required safety measures. Such technologies as self-service bag drops, which focus on limiting queues and creating more efficient, self-supported flows have the dual impact of ensuring a more efficient travel experience as well as reduced human contact throughout the journey. Other technologies, such as on-demand claims, provide for social distancing for passengers in the arrivals hall but do require additional infrastructure and complexity for the sortation of inbound baggage. These added costs for up-front and recurring maintenance costs must be weighed against the improvements to the passenger experience. 1.5 Where We Are Today Though the experience passengers have with checking and retrieving their bags bookends their travel experience and potentially vastly overshadows the excellent experience they may have had on their flight, BHS projects are routinely isolated from the larger airport ecosystem and deprioritized in the United States. Bag systems are largely excluded and seen as a stand-alone service that needs only to function efficiently. Often, innovation and future-driven designs are “value engineered” to meet capital expenditure (CAPEX) priorities. Further, CAPEX priorities drive decision-making to the point that demonstrated savings in longer-term operational expenses (OPEX) are ignored. In some cases, OPEX is not considered part of the BHS decision- making process. Even when U.S. airports are focused on marketing themselves as innovative or seeking Leadership in Energy and Environmental Design (LEED) Certification for energy efficiency, for example, their BHS might not fit the image they seek to portray. In short, few U.S. airport and airline stakeholders view their BHS as a main driver of the customer experience, although it is travelers’ first and last impression of their experience, and failure of the BHS overshadows all that comes in between. Space constraints are also a major obstacle for U.S. airports. Some BHS technologies require more space or the ability to configure the space in ways that may not be possible unless the project involves the construction of new facility spaces. Another factor that contributes to the lack of innovation in the United States BHS is risk aversion. Airports are often reluctant to be the first (even if only the first in the United States) to implement new technology. The Denver International Airport (DEN) set out to install a fully automated, technologically advanced baggage system; however, the baggage system project saw cost overruns and resulted in opening delays for the new airport. These difficulties are still referenced today by airport stakeholders and contribute to a culture of caution and risk aver- sion regarding new technology until it has been proven effective in other places. The literature review, as well as information gleaned from interviews with U.S., Canadian, Israeli, and European airports, suggested that airports outside of the United States take a more holistic view of both the BHS TCO and the baggage experience as a component of customer experience. Several of the airports interviewed were self-financed and, unlike most U.S. airports, consider the costs of energy consumption and maintenance in the total evaluation of their BHS projects. Further, due in part to the high cost of labor, airports outside of the United States appear to be more

8 Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership open to innovation and new technology. For example, ICSs have been commonplace in European and Asian airports for at least the past decade with verifiable returns on investment. There is some indication that changes are afoot for U.S. airports. The unprecedented growth of the industry before the pandemic followed by the most significant and deepest decline has plunged airlines and airports into a period of rebuilding and reconsideration of their previous business models. The traveling public has fundamentally changed their service expectations, with a shift in a higher percentage of business to leisure travel (which also impacts the average number of bags per passenger). Companies like Amazon have influenced consumer behavior in significant and lasting ways, creating an expectation of convenience, expediency, efficiency, and transparency, where the customer is truly at the center of the experience. For baggage handling, this translates into an expectation not only that bags arrive at their destination but also that the experience is hassle-free, and travelers can check on the bag’s progress throughout the journey with issues being resolved seamlessly. Some in the industry, as reported in the Vanderlande Airports Podcast (2020), suggest that failure to adapt to this new customer expectation may create space for industry disruptors, third-party players with the infrastructure and data systems in place to provide an “on-demand” experience. Innovations from other industries, such as manufacturing and warehousing, are also being adopted into the BHS context. Examples of these include mobile inspection tables (MITs) in the checked baggage resolution area (CBRA), AGVs, and crane-and-rack systems for EBS systems. These innovations are largely driven by OEMs, who invest in developing technologies to set themselves apart from the competition. 1.6 Research Approach and Methodology TCO is an expansive topic with many reports and papers describing its elements and offering approaches and strategies for calculating TCO in various contexts. TCO in the BHS context, however, has not been the subject of extensive research, nor has it typically been a key con- sideration in BHS procurement and selection for reasons that are outlined more fully in this paper. The research team took a three-pronged approach to gain a full understanding of the considerations that drive decision-making. The objective was simple: Engage airport, airline, and industry stakeholders in applied aviation to understand what methods airport operators are currently implementing or considering for their future BHS solutions to ensure that TCO is considered and minimized. 1.6.1 Literature Review The team first conducted an in-depth literature review to identify current practices, guidelines, and strategies related to BHS solution procurement and deployment. The review consisted of published documents including federal guides, academic research, scholarly reports, documents written for the aviation industry, conference materials and presentations, studies, podcasts, webinars, and relevant trade publications. The literature review focused on three primary areas: • Identification of industry best practices and factors related to TCO calculations, funding and procurement, and cost implications for CAPEX and OPEX • Identification of BHS industry trends in technology, preventive/predictive maintenance, energy efficiency, pandemic response, and customer experience • Review of various regulating authority documentation that dictates or provides best practices for development and associated cost-bearing models for specific areas within the airport that

Total Cost of Ownership for Baggage Handling Systems: Introduction and Setting 9 have implications for the BHS, namely, Customs and Border Protection (CBP) and TSA as well as various projects sponsored by ACRP and National Safe Skies Alliance’s Program for Applied Research in Airport Security 1.6.2 Interviews Much of what is understood about this topic is not captured in publications, so the research team also conducted interviews with airports, airlines, OEMs, operations and maintenance (O&M) providers, SMEs, general contractors, and consultants. Results from the literature review were used to form the interview questions, and the questions were grouped into common themes, such as CAPEX, OPEX, emerging trends and technologies, maintenance, energy, and outliers. A total of 31 interview sessions were conducted, in which 63 individuals participated. Eighteen of the interviews were with airport personnel, ranging from maintenance personnel to finance managers to operations personnel. A diverse mix of experts was interviewed to provide a broad range of experience with projects currently considering deploying a new system, implementing a new BHS, recently deployed systems, and operating older systems. These interviews focused on lessons learned from previous projects, features, and customizable options available to airports and insight into next-generation technologies, in which the OEMs are investing research and development funding. While conducting the targeted interviews, the team followed a standard script to ensure the consistency of information derived from each interview. These interviews allowed the team to gather relevant information, solutions, and lessons learned from several aspects within the airport industry. 1.6.3 Industry Events Much of the learning in the aviation industry occurs at in-person conferences and gatherings. The research team identified several industry events, meetings, and presentations to attend where BHS topics would be addressed. Such events included the following: • Joint Airport Consultants Council (ACC)/American Association of Airport Executives (AAAE) Planning, Design & Construction Symposium • Passenger Terminal Expo • inter airport europe • FTE events • AAAE Annual Conference • Airports Council International (ACI) Airports @ Work • ACI Public Safety & Security Conference Unfortunately, due to COVID-19 and the ensuing worldwide quarantine, most industry events were either cancelled, postponed, or virtual, negating the opportunities for interviews and product reviews usually afforded by them. 1.6.4 Data Gathering Limitations Much of the research phase of this effort was conducted during the COVID-19 quarantine period. In addition to the numerous conferences and industry events that were cancelled during this period as mentioned above, the industry was reacting to this unprecedented disruption, and interviews were difficult to schedule. Many airport and airline personnel were laid off, redeployed, or took early retirement, both domestically and abroad. The reliance upon firsthand knowledge was limited to what was originally scoped for this study.

10 Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership 1.6.5 Ongoing Evolution Detailed information concerning evolving technologies, trends, their rate of change and development, and associated costs in the BHS industry become out-of-date quickly. Federal funding streams, impacts on supply chain raw materials, and the volatility of the airline industry make much of what is written about the industry fairly obsolete the minute it is published. As a result, as new BHS projects are being scoped or investigation into strategies for conceptualization through deployment is being made, design teams and airport stakeholders are encouraged to obtain updated information regarding the current state of BHS technologies and their associ- ated procurement. This includes such sources of updated information as • Updated ACRP studies; • Updates to TSA’s PGDS; • Publications by industry trade associations such as the International Association of Baggage System Companies; • Reports, white papers, or webinars from select committees of ACC, ACI, or AAAE; • Ongoing evolution of the FTE Baggage Innovation Working Group; • Articles from airports as they complete new BHS projects in trade publications such as Passenger Terminal World, Airport Improvement, Airport Business Magazine, International Airport Review, and Airport Magazine; • Various consultants who specialize in BHS design, project/program management, installation, integration, operational readiness and airport transition (ORAT), or construction management/ administration; and • OEMs (though information should be viewed in the context of their commercial objectives).

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Investments in baggage handling systems are crucial to airport operations and customer satisfaction, yet decisions are often made solely based on initial capital investment without considering the total cost of ownership (TCO). A TCO analysis could lead to cost savings and opportunities for innovation, energy efficiency, and automation.

ACRP Research Report 252: Airport Baggage Handling System Decision-Making Based on Total Cost of Ownership, from TRB's Airport Cooperative Research Program, is designed to help stakeholders understand current operation and maintenance costs, establish a comprehensive governance structure, and consider procurement options and equipment selection in the context of TCO factors.

Supplemental to the report are the Baggage Handling Systems TCO Decision Assist Toolkit and Appendices A–D, which present interview findings, case studies, and the baggage system design submittal process.

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