Addressing Uncertainty about Future Airport Activity Levels in Airport Decision Making (2012) / Chapter Skim
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A Framework and Methodology for Addressing Uncertainty about Future Airport Activity Levels in Airport Decision Making P a r t I I
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43 Part II provides guidance on the application of a systems analysis framework and a series of related methodologies for addressing uncertainty in airport decision making. The framework and related methodologies have been developed from the material summarized in Part I and refined through application to a number of case studies (described in Part III)
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Figure 11. Systems analysis methodology overview.
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45 airport and size of planning project being contemplated, as illustrated in Figure 12. Figure 12 is for guidance only -- issues around the budget and time available for such analysis will also be important.
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46 7.1 Categories of Airport Activity Risk and Uncertainty Airport risks and uncertainty include both threats and opportunities and can be grouped within the following categories: • Macroeconomic: Events in the general economy that can have implications for air traffic, such as a national recession, demographic changes (e.g., aging population) , or more localized events such as the loss of a major employer.
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47 Table 3. Categories of airport activity risks and uncertainties, with examples.
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48 • What is the particular risk/uncertainty? • What is the probability or likelihood of that risk/uncertainty occurring?
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49 assess the likelihood of rare events or to quantify threats and opportunities whose frequency and/or impacts vary with no apparent pattern over time. Planners choosing to evaluate the probable impact of future events based on historical data can: • Use evidence and priors published in the literature.
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50 Subjective assessments of preferences, probabilities, or impacts are typically best obtained via choices (e.g., "choose A or B?
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51 tively provide feedback to the participants and help identify critical uncertainties (those with high probabilities and/or high impacts)
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52 Density Function Description Uniform: a distribution where all values within a range of potential outcomes have the same probability. For example, a uniform distribution should be used to characterize the impacts of a threat that may lead to a 10% reduction in airport activity, a 20% reduction, or any value in between, with the same probability.
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53 that the probability of an event depends on whether it has occurred before. More formally, this can be expressed as: • Dependencies across risks: The occurrence of Event k may increase or decrease the probability of Event j occurring.
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Risk Identification Risk Evaluation Risk ID Risk Category Status Threat or Opportunity Probability/ Likelihood Description of Impact Impact On Magnitude of Impacts (on Traffic) Low Medium High ExpectedDuration Expected Recovery E1 Macroeconomic Rapid increase in fuel prices 10% Rising fuel prices result in increased operating costs, which may either be passed onto consumers in higher fares, (lowering demand)
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55 It may also be beneficial to add fields to incorporate information on the risk response strategies in Step 3 and the risk tracking and evaluation in Step 5. To facilitate this, the risk register can be developed as a spreadsheet or database system, which would offer ease of updating and tracking.
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56 Step 2 involves integrating the risks identified in Step 1 into a structural model of uncertainty. The purpose of this model is to evaluate the combined effect of multiple risks on airport activity and help define and assess alternative courses of action (response strategies)
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57 • Structure and logic diagrams, • Decision trees, • Influence diagrams, • Program flowcharts, • Stock and flow diagrams (system dynamics) , and • Reference class forecasting.
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58 Source: Hickling Corporation (1990, p.
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59 8.2.1 Scenario Analysis Scenario analysis is a process of analyzing the impact of possible future events by considering alternative outcomes. In this case, the scenarios examine the impact of the occurrence of a series of uncertain events that have a defined impact on relevant variables and result in a specific outcome.
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60 have uncertain behavior with well-defined probability density functions. Through the use of Monte Carlo simulations, several point estimates for the total number of aircraft operations are calculated based on individual draws from each probability distribution function associated with each.
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61 output distribution)
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-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Average Aircraft Size New Security Measures Population Growth New Carrier Entry Fuel Prices Economic Growth Expected Traffic Change (Millions of Passengers) Figure 22.
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63 As such, it is recommended that the output from the analysis draw attention to low-probability, high-impact outcomes. For example, the time-series plots from the Monte Carlo simulation could contain information on low-probability forecasts, as illustrated in Figure 23, which highlights the boundary of forecasts with a 1% probability using a dotted line.
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64 Having identified and quantified the risks and uncertainties in air traffic activity and assessed their cumulative impacts, the next step in the methodology is to identify risk response strategies. The following sections define risk response strategies and set out a number of approaches through which they can be developed.
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65 • Evidence based, and • Judgment based. The evidence-based approach relies on reviewing the most current aviation practices and risk-based demand forecasts.
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66 Strategy Risk Types Addressed Comments Land banking: reserving or purchasing land for future development Macroeconomic, market Mitigates or hedges against the upside risk associated with strong traffic growth. The airport authority (or government)
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67 Strategy Risk Types Addressed Comments Linear terminal design and centralized processing facilities Macroeconomic, market, regulatory/policy, technology, social/cultural, shock events Allows the greatest flexibility for airport expansion since it is the most easily expandable in different directions (especially in combination with modular design)
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68 9.3.1 Augmenting the Risk Register The risk response strategies can be incorporated in the risk register, thus providing a more complete living document for the management and tracking of risk and uncertainty (which will be beneficial in Step 5)
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69 The risk response strategies are designed to reduce the likelihood or impact of potential threats and capitalize on possible opportunities. Inevitably, the choice of a strategy to respond to a particular risk is difficult -- in particular, because its effectiveness cannot be fully understood until the risk actually occurs.
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70 The approaches for evaluating the risk response strategies can be broadly categorized as follows: • Largely qualitative: relying on judgment, expert opinion, and some basic quantitative approaches; and • Principally quantitative: using output from Step 2 as a means to conduct analytical assessment. In practice, elements from both categories may be used in the process, although it is likely that Tracks A and B will draw mainly from the first category while Tracks C and D will draw more from the latter category.
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71 more dimensions than the tabular approach (e.g., combinations of response strategies)
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72 the desired outcome of the risk response strategies. If the airport planner is looking for risk response strategies that minimize capital spending, the value could be capital costs.
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73 reflecting a similar concept to value at risk (VAR) , which is used widely in the financial industry.
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74 The first four steps are part of a single exercise to identify and address the risks and uncertainties facing the airport. Step 5, however, is an ongoing process of review, revision, and engagement.
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75 The risk management team may assign a risk owner to particular risks who is responsible for tracking and recording any developments related to these risks and the related risk response strategies. The selection of a risk owner for a specific risk depends on a number of factors: • Impact of the specific risk on the risk owner's activity: risk owners whose activity is threatened by the risk will pay closer attention to it; • Degree of control for implementing the response strategy: risk owners should have a role in any avoid/mitigate/ exploit actions related to the risk they own; and • Internal organizational structure of the airport: risk owners should have direct access to upper-management staff to discuss the implementation of response strategies.
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76 11.2 Updating the Risk Register The risk register provides the foundation for much of the risk tracking and evaluation -- it contains information on the risks facing the airport and can also contain information on the risk response strategies. At the same time, the risk register should be updated as new information becomes available.
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