Aviation and the Environment: Transition to Quieter Aircraft	 
Occurred as Planned, but Concerns About Noise Persist (28-SEP-01,
GAO-01-1053).							 
								 
The transition to quieter aircraft required by the Airport Noise 
and Capacity Act (ANCA) of 1990 was expected to benefit 	 
communities, airports, and airlines. In turn, the transition was 
expected to reduce community opposition to airport operations and
expansion and to reduce the demand for funds provided for noise  
abatement through federal grants and user charges. The results	 
expected from the transition to quieter aircraft were partially  
realized. The transition occurred as planned and considerably	 
reduced the population exposed to noise levels incompatible with 
residential living. Nevertheless, noise concerns remain a barrier
to airport expansion, and the demand for federally authorized	 
support for noise abatement efforts has continued. GAO identified
two key issues for review by the aviation community. First, even 
though fewer people are exposed to aircraft noise, according to a
survey in 1999-2000, more than half of the noise complaints came 
from people living in areas exposed to noise levels that FAA	 
considers compatible with residential living. Second, if people  
are allowed to move to areas close to an airport, they may later 
find themselves exposed to noise levels that FAA considers	 
incompatible with residential living as the airport's operations 
grow to meet rising demands. Furthermore, residential development
in such areas could generate new opposition to airports 	 
operations and future expansion plans.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-1053					        
    ACCNO:   A02040						        
  TITLE:     Aviation and the Environment: Transition to Quieter      
Aircraft Occurred as Planned, but Concerns About Noise Persist	 
     DATE:   09/28/2001 
  SUBJECT:   Aircraft						 
	     International cooperation				 
	     International law					 
	     Commercial aviation				 
	     Noise pollution control				 
	     Airport and Airway Trust Fund			 
	     FAA Airport Improvement Program			 
	     FAA Passenger Facility Charge Program		 
	     FAA/ICAO Model for Assessing Global		 
	     Exposure to the Noise of Transport 		 
	     Aircraft						 
								 

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GAO-01-1053
     
Report to the Ranking Democratic Member, Committee on Transportation and
Infrastructure, House of Representatives

United States General Accounting Office

GAO

September 2001 AVIATION AND THE ENVIRONMENT

Transition to Quieter Aircraft Occurred as Planned, but Concerns About Noise
Persist

GAO- 01- 1053

Page i GAO- 01- 1053 Aviation and the Environment Letter 1

Results in Brief 2 Background 4 Transition to Quieter Aircraft Was Expected
to Benefit

Communities, Airports, and Airlines 9 Expectations Were Partially Realized
11 Transition Raises Two Key Issues 17 Agency Comments 20

Appendix I Development and Implementation of U. S. Aircraft Noise Standards
22

Appendix II Development of International Aircraft Noise Standards 29

Appendix III Objectives, Scope, and Methodology 35

Appendix IV Methodology for Estimating Airlines? Costs to Transition to
Stage 3 Aircraft Noise Standards 36

Appendix V GAO Contacts and Staff Acknowledgments 42

Tables

Table 1: Issues Raised by the Transition to Quieter Aircraft Noise Standards
19 Table 2: Options for Compliance With Stage 3 Aircraft Noise

Standards 23 Table 3: Methodology for Estimating the Cost to Meet Stage 3

Noise Standards 39 Contents

Page ii GAO- 01- 1053 Aviation and the Environment Figures

Figure 1: Federally Authorized Noise Abatement Funding Since the Passage of
ANCA, Fiscal Years 1991- 2000 14 Figure 2: Noise Standards for Stage 3
Aircraft by Number of

Engines- Takeoff 26 Figure 3: Noise Standards for Stage 3 Aircraft
Regardless of the

Number of Engines- Sideline 27 Figure 4: Noise Standards for Stage 3
Aircraft Regardless of the

Number of Engines- Approach 28 Figure 5: Developing and Implementing New
Aircraft Noise

Standards in the International Civil Aviation Organization 33

Abbreviations

ANCA Airport Noise and Capacity Act of 1990 CAEP Committee on Aviation
Environmental Protection FAA Federal Aviation Administration ICAO
International Civil Aviation Organization MAGENTA Model for Assessing Global
Exposure to the Noise of

Transport Aircraft

Page 1 GAO- 01- 1053 Aviation and the Environment

September 28, 2001 The Honorable James L. Oberstar Ranking Democratic Member
Committee on Transportation

and Infrastructure House of Representatives

Dear Mr. Oberstar: Aircraft noise is a major concern in communities around
airports despite considerable reductions in such noise and a corresponding
decrease in the population exposed to it. Moreover, concern about noise
remains a constraint on efforts to expand airport capacity to meet the
growing demand for air travel. The Congress has authorized the Federal
Aviation Administration (FAA) to regulate aircraft noise. The Airport Noise
and Capacity Act (ANCA) of 1990 established December 31, 1999, as the
deadline for airlines to phase out the use of existing jet aircraft weighing
more than 75,000 pounds that had not been modified to comply with current
aircraft noise standards, called ?Stage 3.? 1 Until ANCA?s passage, only
newly designed or newly manufactured aircraft were required to comply with
the Stage 3 aircraft noise standards. Recently, the United States
participated with other countries in the International Civil Aviation
Organization (ICAO) to develop a more stringent aircraft noise standard for
subsonic jets and large propeller- driven aircraft. On June 27, 2001, the
ICAO Council approved the adoption of a new noise certification standard
called ?Chapter 4.?

Because the United States is considering moving to a new, more stringent
noise standard, you asked us to provide a retrospective analysis of the
transition to our current Stage 3 aircraft noise standards. This report
discusses expectations, results, and issues raised by the transition. 2 To
determine expectations and results, we reviewed the legislative history of

1 In the United States, noise standards are referred to as ?Stages,? whereas
the International Civil Aviation Organization, the international body that
sets international noise standards for aircraft, refers to them by the
chapter of the ICAO document in which the standard appears. Unless otherwise
noted, we refer to the standards in terms of Stages.

2 The transition to more stringent noise standards involves technological
and economic circumstances different than those that existed during the
transition to Stage 3; therefore, the results from that transition may not
be directly applicable.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 1053 Aviation and the Environment

ANCA, as well as interviewed agency officials, industry representatives, and
other aviation experts. Appendixes I and II discuss how noise standards are
developed in the United States and internationally. To assess the
reliability of the computerized model FAA uses to estimate the number of
people exposed to various noise levels, we also interviewed agency
officials, industry representatives, and other aviation experts. To estimate
the airlines? costs to transition to the current aircraft noise standards,
we developed a cost model. We compared and analyzed expectations with
results to identify issues raised by the transition. See appendix III for
more detailed information on our scope and methodology and appendix IV for a
discussion of our model for estimating the costs to the airlines of the
transition to the current U. S. standards.

The transition to quieter aircraft required by ANCA was expected to benefit
communities, airports, and airlines. According to agency officials and
aviation experts, the levels of noise affecting communities near airports
were expected to decline, providing a better quality of life for those
communities. That decline was, in turn, expected to reduce community
opposition to airport operations and expansion and to reduce the demand for
funds provided for noise abatement through federal grants and user charges.
The airlines expected the transition to facilitate their long- term planning
for investment and fleet operations because the law mandating the transition
to quieter aircraft resolved two key issues: (1) determining whether
existing aircraft would have to comply with the quieter noise standards and
(2) establishing guidelines to prevent the development of a ?patchwork
quilt? of airport access restrictions- such as limits on the number of Stage
2 aircraft that can land. However, expectations varied concerning the extent
to which the airlines would replace rather than convert old aircraft to
comply with the new noise requirements. Expectations of the airlines?
transition costs also varied, ranging from as little as $17 million to as
much as $175 billion. In 1991, we estimated that these costs would range
between $2.1 billion and $4.6 billion in 1990 dollars. 3

The results expected from the transition to quieter aircraft were partially
realized. The transition occurred as planned and considerably reduced the
population exposed to levels of noise that FAA considers incompatible

3 See Aviation Noise: Costs of Phasing Out Noisy Aircraft (GAO/ RCED- 91-
128, July 2, 1991). Results in Brief

Page 3 GAO- 01- 1053 Aviation and the Environment

with residential living. FAA estimated a decline from 2.7 million people in
1990 to about 440,000 people in 2000. Nevertheless, noise concerns remain an
impediment to airport expansion, and the demand for federally authorized
support for noise abatement efforts has continued. Furthermore, the
airlines? long- term plans for their fleets may be in jeopardy because an
association representing major airports and some individual airports are
recommending the early retirement of aircraft within 5 decibels of Stage 3
noise standards. Many of these aircraft have engines that were
technologically converted, ?hushkitted,? to comply with current standards.
The law mandating the transition did, however, limit the implementation of
new airport access restrictions. We currently estimate that the airlines?
costs directly attributable to complying with the transition to quieter
aircraft noise standards ranged from $3.8 billion to $4.9 billion in 2000
dollars.

The results of the transition, especially compared with the expectations,
raise some issues that may be relevant to the future consideration of new
aircraft noise standards. In particular, we identified two key issues for
review by the aviation community. First, why does concern about noise
continue to generate substantial opposition to airport operations and
expansion after such a major decline in the number of people living in areas
exposed to incompatible levels of noise? Even though fewer people are
exposed to aircraft noise, according to 35 of the 50 busiest commercial
passenger airports we surveyed in the 1999- 2000 period, over half of the
noise complaints in the preceding year came from persons living in areas
exposed to noise levels that FAA considers compatible with residential
living. Second, as noise levels decrease, how can local governments be
encouraged to take responsibility for minimizing the exposure of residents
to noise by preventing new residential development from encroaching on
airports, when such areas may later become incompatible as airport
operations and noise increase? If people are allowed to move into areas
close to an airport, they may later find themselves exposed to noise levels
that FAA considers incompatible with residential living as the airport?s
operations grow to meet the rise in demand. Furthermore, residential
development in such areas could generate new opposition to airports
operations and future expansion plans.

We provided the Department of Transportation, the Environmental Protection
Agency, the National Aeronautics and Space Administration, Airports Council
International- North America, the Air Transport Association of America, and
the American Association of Airport Executives with copies of a draft of
this report for their review and comment. The Environmental Protection
Agency, the National

Page 4 GAO- 01- 1053 Aviation and the Environment

Aeronautics and Space Administration, and the American Association of
Airport Executives provided no comments.

We received oral comments from the Department of Transportation, the
Airports Council International- North America, and the Air Transport
Association. Officials from these organizations generally agreed with the
facts presented in the report. FAA's Office of Energy and Environment,
Department of Transportation, provided a revised estimate of the number of
people exposed to noise levels that FAA considers incompatible with airport
operations. This estimate is based on recent updates to the model used for
this purpose. The Senior Vice President of Technical and Environmental
Affairs, Airports Council International, clarified the Airports Council's
position with respect to phasing out older, noisier aircraft. The Airports
Council called for retiring aircraft on the basis of the noise they produce
(those that are within 5 decibels of the Stage 3 noise standards) rather
than on a design feature such as hushkitted engines. The Air Transport
Association's Assistant General Counsel cautioned that the results of the
transition from Stage 2 to Stage 3 aircraft are not directly applicable to a
transition from Stage 3 to Stage 4 because of different economic and
technological circumstances. We revised the report to incorporate these
comments and other clarifying and technical comments as appropriate.

Aircraft noise standards establish the noise limits that civil subsonic jet
aircraft are permitted to generate for takeoff, landing, and sideline
measurements. 4 These standards are based on an aircraft?s weight and number
of engines. In general, they allow heavier aircraft and those with more
engines to generate more noise than lighter aircraft and those with fewer
engines. The noise generated by an aircraft generally correlates to the
thrust powering the aircraft. The heavier the aircraft, the more thrust it
needs.

In the United States, the Federal Aviation Act of 1958, as amended in 1968,
gives FAA the authority to regulate aircraft noise. 5 (See app. I for a
description of the development and implementation of U. S. aircraft noise
standards.) Under that act, FAA issued regulations in 1969 that established

4 Sideline noise is measured at a point parallel to the flight path where
the noise level is the greatest. 5 49 U. S. C. 44715. Background

Page 5 GAO- 01- 1053 Aviation and the Environment

noise standards for new designs of civil subsonic jet aircraft. In 1973, FAA
amended its regulations to apply the noise standards to all newly
manufactured aircraft, no matter when the aircraft were designed. In 1977,
additional amendments established lower noise standards for all new
aircraft, as well as the concept of ?noise Stages.? Aircraft meeting the
original 1969 standards were categorized as ?Stage 2? aircraft; those
meeting the more stringent 1977 standards, the current standards, were
categorized as ?Stage 3? aircraft; and aircraft meeting neither standard
were categorized as ?Stage 1? aircraft.

In 1976, FAA prohibited all Stage 1 subsonic jet aircraft weighing more than
75,000 pounds from flying into or out of U. S. airports after January 1,
1985, unless the aircraft had been converted to meet the quieter noise
standards. 6 In 1990, ANCA required all existing civil subsonic jet aircraft
weighing more than 75,000 pounds to comply with the current U. S. Stage 3
noise standards by December 31, 1999, or be retired from service. To meet
this requirement, the engines on Stage 2 aircraft could be modified or
replaced. The Stage 3 standards for takeoff, landing, and sideline
measurements range from 89 to 106 decibels, depending on the aircraft?s
weight and number of engines. 7

FAA regulations governing the transition to meet Stage 3 noise standards
went into effect on September 25, 1991, and offered two options for meeting
the December 31, 1999, deadline. One option permitted a phased reduction in
Stage 2 aircraft (phaseout), while the other called for a phased increase in
the proportion of Stage 3 aircraft in the total fleet (phase- in). According
to FAA, these options would result in significant cost savings for the
industry while still preserving environmental gains. Although the greatest
environmental gains would occur near the end of the phase- out period, FAA
noted that both approaches offered steady progress throughout the decade
toward an all- Stage- 3 fleet. Phaseout of older, noisier Stage 1 and 2
aircraft was possible, in part, because the National Aeronautics and Space
Administration, in cooperation with the aviation industry, developed new,
quieter engines. The National Aeronautics and

6 However, the Aviation Safety and Noise Abatement Act of 1979 directed FAA
to grant exemptions from compliance until January 1, 1988, to civil subsonic
jet aircraft with two engines and fewer than 100 passenger seats.

7 The noise measurement level is defined in terms of the ?effective
perceived noise level,? which includes a correction for tones and takes into
account the duration of the noise event. A food blender makes about 88
decibels of noise, while a rock band playing indoors makes about 108 to 114
decibels of noise.

Page 6 GAO- 01- 1053 Aviation and the Environment

Space Administration, in cooperation with FAA and the aviation industry, is
continuing to develop new technologies to reduce the impact of aircraft
noise, although they have indicated that there are no significant
breakthroughs in sight.

FAA has several federal programs that address noise issues associated with
civilian airports. Through one of these programs, FAA controls aircraft
noise by regulating aircraft operations. FAA also administers two programs
that fund noise mitigation projects. The Airport Improvement Program
provides federal grants- funded by congressional appropriations from the
Airport and Airway Trust Fund- for developing airport infrastructure,
including projects that reduce airport- related noise or mitigate its
effects. Grants are made using either funds subject to apportionment or
discretionary funds. Funds subject to apportionment are distributed by a
statutory formula to commercial service airports according to the number of
passengers served and the volume of cargo moved, 8 and to the states
according to a percentage of the total amount of the appropriated funds.
Discretionary funds are, for the most part, those funds remaining after
funds subject to apportionment are allotted and certain other amounts are
?set aside? for special categories, including noise- related projects. The
Passenger Facility Charge program is a voluntary program that enables
airports to impose a fee of up to $4. 50 on each boarding passenger. The
airports retain the money for airport infrastructure projects. Airports
wishing to participate in the program must seek FAA?s approval both to levy
the fee and to use the revenues for particular development projects. Both
programs include noise reduction projects such as soundproofing buildings
(including homes and schools) and land acquisition, which includes acquiring
homes and relocating the people displaced to quieter communities.

ANCA required FAA to establish regulations on airport noise and access
restrictions on the operations of Stage 2 and Stage 3 aircraft. 9 Existing
access restrictions were grandfathered, permitting them to remain in effect.
To restrict the access of Stage 2 aircraft, an airport has to publish the
proposed restrictions at least 180 days before they go into effect. The
airport is also required to publish other information with the restrictions
such as cost- benefit analyses of the proposed restrictions and any

8 Commercial service airports handle all regularly scheduled commercial
airline traffic and have at least 2, 500 enplanements (boarding by
passengers) annually. 9 FAA established these regulations in 1991 with the
promulgation of 14 C. F. R. Part 161.

Page 7 GAO- 01- 1053 Aviation and the Environment

alternatives considered. If the restrictions are to apply to Stage 3
aircraft, they must be approved by FAA or agreed to by the airport and all
the aircraft operators at an airport. To approve restrictions, FAA must find
that the proposed restrictions (1) are reasonable, nonarbitrary, and
nondiscriminatory; (2) do not create an undue burden on interstate or
foreign commerce; (3) are not inconsistent with maintaining the safe and
efficient utilization of the navigable airspace; (4) do not conflict with
any existing federal statute or regulations; (5) have been adequately
provided to the public for comment; and (6) do not create an undue burden on
the national aviation system. 10

The primary responsibility for integrating airport considerations into local
land- use planning rests with local governments- presenting a difficult
problem for many airports, because they often do not have control over
development in surrounding communities. However, airports are held
accountable by these communities when aircraft noise adversely affects uses
such as schools and residences built close to airports. FAA set the
standards that airports use to measure the level of noise to which
communities around airports are exposed over time and had issued guidelines
that identify land uses that would and would not be compatible with the
noise generated by a nearby airport?s operations.

ICAO is the international body charged with ensuring the safe and orderly
growth of international civil aviation throughout the world. One of ICAO?s
functions is to set international noise standards for aircraft. The primary
purpose of establishing noise standards is to reduce aircraft noise. This
noise reduction, when combined with other noise reduction measures, can
reduce the number of people exposed to significant levels of aircraft noise.
Any new standard must receive the approval of two- thirds of the members of
ICAO?s Council, one of whom is the United States, and the standard becomes
effective unless it is then disapproved by a majority of ICAO?s members
through the Assembly. 11 (See app. II for a description of the development
of international aircraft noise standards.) Member nations then implement
the new standards through their own political and legal

10 49 USC 47524 (c) (2). 11 The Assembly, composed of representatives from
all 187 member countries, is the sovereign body of ICAO. It meets at least
once every 3 years, reviewing in detail the work of ICAO and setting policy
for the coming years. Each member country is entitled to one vote, and
decisions of the Assembly are taken by a majority of the votes cast except
when otherwise provided in the Convention. In practice, according to an FAA
official, the Assembly usually reaches decisions by consensus.

Page 8 GAO- 01- 1053 Aviation and the Environment

processes. International recognition of aircraft noise standards is a
cornerstone of the international system of air travel, enabling airlines to
plan and operate their fleets more efficiently than if there were a
patchwork of national noise standards or operating restrictions.

In January 2001, ICAO?s Committee on Aviation Environmental Protection
(CAEP), a technical body that recommends international aircraft noise
standards for the organization, endorsed a balanced approach to noise
management that included such things as the reduction of noise from
aircraft, improved land- use planning and control around airports, and the
use of aircraft noise abatement procedures and aircraft operating
restrictions. To reduce aircraft noise, CAEP recommended, and the Council
adopted, 12 new Chapter 4 noise standards that are 10 decibels lower, on a
cumulative basis, than the Chapter 3 standards. 13 The standards will apply
to new designs submitted on or after January 1, 2006. On the basis of a
cost- benefit analysis, CAEP recommended that there be no global phaseout of
aircraft meeting Chapter 3 noise standards. CAEP considered the question of
operating restrictions on Chapter 3 aircraft but reached no final
conclusion. ICAO?s members are expected to make a final decision on these
issues when the Assembly meets from September 25 to October 5, 2001. FAA is
the official U. S. representative to CAEP. Representatives from the State
Department, the Environmental Protection Agency, the U. S. aviation
industry, and environmental groups also participate in CAEP?s work.

12 Because it is up to each member country to adopt noise standards, FAA has
begun the rulemaking process to adopt the new standard. 13 This cumulative
noise basis is the total difference between the measured noise level and the
Chapter 3 noise limits at three different points: takeoff, approach, and
sideline. The new standard requires at least a 2 decibel reduction at each
of these points. For example, if the takeoff noise level is 3 decibels below
the takeoff limit, the approach noise level is 3 decibels below the approach
limit, and the sideline noise level is 4 decibels below the sideline limit,
then the cumulative margin would be 10 decibels.

Page 9 GAO- 01- 1053 Aviation and the Environment

The mandated transition to quieter aircraft was expected to reduce the
number of people exposed to noise levels that FAA considers incompatible
with residential living, to facilitate needed airport expansion, and to
enable airlines to embark on long- term planning for investing in and
operating their fleets. Expectations concerning how the airlines would
comply with the mandated transition, and what that transition might cost the
airlines, varied.

The mandated transition to quieter aircraft was expected to reduce the
overall levels of noise to which nearby communities were exposed, thereby
reducing the annoyance caused by airport- generated noise and improving the
quality of life for people living in those communities. Communities near
airports are exposed to noise directly attributable to airport operations-
primarily from aircraft taking off and landing. 14 The impact of such noise
on communities is usually analyzed in terms of the extent to which the noise
annoys people by interfering with their normal activities, such as sleep,
relaxation, speech, television, school, and business operations. According
to FAA?s final rulemaking implementing the transition, the number of people
living in areas exposed to noise levels that were incompatible with
residential living was expected to fall from about 2.7 million in 1990 to
about 400,000 in 2000, when the mandated transition to quieter aircraft was
complete. 15

Less noise from airport operations was expected to reduce community
opposition to airport expansion. ANCA, in particular, acknowledged that
aviation noise was linked to airport expansion and community opposition to
that expansion. The findings of ANCA state that aviation noise management is
crucial to the continued increase in airport capacity and that community
noise concerns can be alleviated, in part, through the use of quieter
aircraft and revenues for noise management. At the time the transition was
mandated, aircraft noise was a major impediment to increasing airport
capacity, particularly if the increase was to be provided by constructing
new runways. New capacity was needed at the time because the demand for air
travel was causing increasing delays- in 1988, 21 airports experienced more
than 20,000 hours of delays. Airports were thus expected to benefit from the
transition to quieter aircraft by being able to plan for growth and develop
the capacity needed to meet the rising

14 Engine maintenance and the taxiing of aircraft on runways are other
activities that contribute to airport noise. 15 56 Fed. Reg. 48628, Sept.
25, 1991. Transition to Quieter

Aircraft Was Expected to Benefit Communities, Airports, and Airlines

Page 10 GAO- 01- 1053 Aviation and the Environment

demand for air travel. The lower noise levels were also expected to reduce
the airports? need for federal investments in noise abatement programs.

ANCA?s passage was also expected to provide a stable environment that would
enable the airlines to develop long- term business plans for their fleets.
Ongoing uncertainty about whether existing aircraft would be required to
comply with Stage 3 noise standards and the promulgation of a plethora of
airport access restrictions had been impeding the airlines? development of
long- term investment and operating plans. By 1990, many communities had
established restrictions on the use of their airports- such as limits on the
number of Stage 2 aircraft that could land- to reduce the amount of noise
the airports were generating. Additionally, before ANCA?s passage, many
airports were planning to adopt use restrictions in the absence of a
federally mandated phaseout of Stage 2 aircraft. 16 The airlines believed
that a resulting ?patchwork quilt? of restrictions would likely produce a de
facto phaseout of Stage 2 aircraft by 2000.

ANCA settled both of these issues in 1990 by mandating that heavier aircraft
meet Stage 3 standards by December 31, 1999, and by establishing an FAA
review process that airports had to follow if they wanted to adopt new noise
or access restrictions. With these decisions made, the airlines expected to
be able to develop long- term fleet plans that could include operating
Stage- 3- compliant aircraft for their useful lives.

At the time of ANCA?s passage, there were varying assumptions as to how the
airlines would comply with the transition. Some in the aviation community
thought the airlines would comply with the transition largely by purchasing
new aircraft rather than converting existing aircraft to meet Stage 3 noise
standards. Conversion could be achieved by replacing an aircraft?s engines
or by installing a noise reduction technology known as a ?hushkit.? 17
Because new aircraft were generally quieter than aircraft with hushkits,
replacing aircraft was expected to provide a greater reduction in aircraft
noise. Some anticipated that aircraft replacement would be the primary means
for complying with Stage 3 standards because of high fuel prices at the time
the law was passed; new Stage 3 aircraft were generally

16 See GAO/ RCED- 91- 128, July 2, 1991. 17 An airline representative told
us that at the time ANCA was passed, hushkits had not yet been certified for
most models of Stage 2 aircraft and there was concern that hushkits might
affect the weight and performance of the aircraft as had occurred with
hushkits used to meet the Stage 2 standards.

Page 11 GAO- 01- 1053 Aviation and the Environment

more fuel efficient than existing Stage 2 aircraft. Others in Congress and
the aviation community, however, noted that hushkitting was as likely an
expectation for compliance as aircraft replacement.

At the time the transition was mandated, estimates of the airlines? cost to
comply with the transition ranged from $17 million to $175 billion. The wide
variation depended largely on whether an analysis assumed modification, full
cost for replacement, and/ or fleet growth. In 1991, we reported on the
assumptions and methodologies of four major studies. 18 Two of the studies
were limited to a single segment of the aviation community- one to major
passenger airlines and the other to freight aircraft. A third study used the
purchase price of an aircraft as the cost of meeting Stage 3 noise
standards- a cost we considered excessive. A fourth study, the one offered
by FAA, was more comprehensive- including the domestic jet fleet for both
passenger and cargo air traffic- and incorporated generally reasonable
assumptions in its methodology. Using FAA?s methodology as a base and making
certain changes in the assumptions, such as the discount rate used to
compute future expenditures and costs savings, we estimated at the time that
complying with the Stage 3 noise standards would cost the airlines from $2.1
to $4.6 billion in 1990 dollars. 19 Our low estimate assumed all aircraft
owners would adopt the least expensive approach to compliance for each
aircraft, whereas our high estimate assumed premature replacement of all
aircraft. 20

The results anticipated from the transition to meet Stage 3 noise standards
were partially realized. The transition to quieter aircraft worked smoothly
and was achieved within the required time frame. Also, FAA estimates that
the transition to aircraft compliant with Stage 3 noise standards
considerably reduced the population exposed to levels of noise from

18 The estimates from these studies ranged from $17 million to $59.6
billion. The estimate of $175 billion was presented by the Air Transport
Association of America, Inc. (hereafter referred to as the Air Transport
Association) in testimony on October 2, 1990, as the total cost to be borne
in the United States to achieve an all- Stage- 3 fleet, including growth
(see

Statement of Robert J. Aaronson, President, Air Transport Association Before
the Subcommittee on Aviation, House Committee on Public Works and
Transportation, House of Representative (Oct. 2, 1990)).

19 GAO/ RCED- 91- 128, July 2, 1991. 20 The premature replacement cost used
in our estimate was $2.2 million per aircraft in 1990 dollars. Premature
replacement costs are substantially less than the price of a new aircraft.
Expectations Were

Partially Realized

Page 12 GAO- 01- 1053 Aviation and the Environment

airport operations that FAA considers incompatible with residential living.
Nevertheless, community opposition remains the primary impediment to airport
expansion, and concern about noise is the reason most frequently cited as
the basis for such opposition. Despite the significant decrease in the
population exposed to incompatible noise, the demand continues for federally
authorized support for noise mitigation efforts that are provided through a
federal grant program and a federally authorized passenger boarding fee.
Furthermore, while the adoption of new airport noise and access restrictions
has been limited since the law was passed, 21 the airlines? long- term plans
for their fleets may nevertheless be jeopardized by challenges to the
continued use of older Stage 3 aircraft that are noisier than those newly
manufactured. We currently estimate that the airlines? costs directly
attributable to complying with the transition to quieter aircraft noise
standards (i. e., the cost of hushkitting or the incremental cost of
financing a new aircraft early, whichever was lower) ranged from $3.8
billion to $4.9 billion in 2000 dollars.

According to FAA, expectations for the reduction in the number of people
living in areas incompatible with airport- generated noise levels have
essentially been met. 22 FAA estimates that in 2000 there were about 440,000
people living in areas exposed to incompatible noise levels, only a slightly
higher number than FAA originally estimated, and a considerable reduction
from FAA?s 1990 estimate of 2.7 million. FAA?s current population exposure
estimates are based on the use of what FAA and ICAO consider to be a
substantially credible model that is used to project the number of people
exposed to various airport- generated noise levels- the Model for Assessing
Global Exposure to the Noise of Transport Aircraft (MAGENTA).

We discussed the MAGENTA model with FAA to assure ourselves that the model?s
estimate of the number of people living in areas exposed to incompatible
noise levels was reliable. According to a FAA official, the model was
extensively reviewed and vetted through ICAO?s MAGENTA Working Group. This
official also said that it is the only model that is available to do this
type of estimate. The development and testing phases

21 No Stage 3 restrictions have been implemented under ANCA. 22 See Aviation
and the Environment: FAA?s Role in Major Airport Noise Programs

(GAO/ RCED- 00- 98, Apr. 28, 2000) for a discussion of the issues concerning
the definition of incompatible land use and the measurement methods used to
identify community exposure and annoyance levels.

Page 13 GAO- 01- 1053 Aviation and the Environment

of the model were completed last year and used by ICAO?s environmental
technical experts to evaluate various noise issues. FAA?s estimates using
MAGENTA were based on the best available data, which FAA is currently
updating. FAA recently updated the U. S. version of MAGENTA with new airport
operational data and 2000 census data. The net effect of this update is a
new estimate of 440,000 people exposed in 2000 instead of 448,000 as
estimated earlier. FAA is also updating two other data inputs to further
improve the accuracy of the estimate. These data inputs are the type of
aircraft using each airport and new runways or runway extensions added since
the mid- 1990s. While the updated data may produce some changes in the
estimated number of persons exposed to incompatible levels of noise, FAA and
others believe these changes are not likely to be significant.

Although it is unclear whether community annoyance declined with lower noise
levels, opposition to airport expansion continues. In our 1999- 2000 survey
of the 50 busiest commercial passenger airports, noise issues were
identified as the primary environmental concern and challenge for airports.
23 We found that although airports had implemented various measures to
reduce the impact of aircraft noise, community concerns persisted.

While the extent to which areas around airports have been built up since the
transition to an all- Stage- 3 fleet is not known, strong pressure exists to
develop residential areas around heavily used airports, particularly in
metropolitan areas with more than 50,000 people. Our 1999- 2000 survey found
that officials from 13 of the nation?s 50 busiest commercial service
airports view increases in the residential population near their airport as
a major concern. Thirty- five of the airports reported that over half of the
noise complaints in the preceding year had come from persons living in areas
whose noise levels FAA considers compatible with residential development.
According to an October 2000 report by the Airports Council International-
North America, an association representing airports, noise remains the
single biggest impediment to increasing airport capacity across the country.
24 More recently, FAA found that public opposition to

23 Aviation and the Environment: Airport Operations and Future Growth
Present Environmental Challenges (GAO/ RCED- 00- 153, Aug. 30, 2000). 24 The
Next Stage in Noise Abatement Policy: ACI- NA?s Plan for A Quieter
Environment

(Airports Council International- North America, Oct. 2000).

Page 14 GAO- 01- 1053 Aviation and the Environment

airport expansion continues to rise, with noise cited as the primary reason.
25

The reduction in the population exposed to incompatible noise levels, as
defined by FAA, has also not led to a decrease in the demand for federally
authorized funding for noise projects. As figure 1 shows, the demand for
funds for noise abatement continued throughout the decade, albeit at varying
levels from year to year.

Figure 1: Federally Authorized Noise Abatement Funding Since the Passage of
ANCA, Fiscal Years 1991- 2000

Note: Data for Airport Improvement Program funds are the grant amounts for
noise abatement projects by fiscal year. These grant amounts are primarily
determined by the amount set aside each year for noise abatement from FAA?s
appropriations. For fiscal year 2001, 34 percent of the Airport Improvement
Program?s funds available for discretionary airport grants (or $315 million)
was targeted for noise abatement projects. Data for passenger facility
charge funds represent the amount approved for collection for noise
abatement in a given fiscal year. Peaks and valleys occur in the data
because of differences in the amount of funds that airports happen to
request for noise abatement in a given year. While FAA approves a project
only once, funds are generally collected and spent over many years. FAA
first approved passenger facility charge collections in fiscal year 1992.

Source: GAO?s compilation of data from FAA.

ANCA did limit the implementation of new airport noise and access
restrictions. According to FAA, since ANCA?s passage in 1990, no formal

25 Report to the U. S. Congress on Environmental Review of Airport
Improvement Projects,

(U. S. Department of Transportation, May 2001).

Page 15 GAO- 01- 1053 Aviation and the Environment

proposals for new Stage 3 restrictions have been completed under ANCA?s
implementing regulations. 26 FAA has been asked to review draft analyses of
proposed restrictions at (1) Pease Airport in New Hampshire to restrict the
nighttime scheduling of Stage 3 aircraft, (2) Burbank Airport in California
to implement a nighttime curfew affecting all aircraft operating at the
airport, and (3) Kahului Airport in Hawaii to phase out Stage 2 aircraft. 27
FAA is currently reviewing a proposed restriction by the Naples Municipal
Airport in Florida to ban Stage 2 aircraft that weigh less than 75,000
pounds. 28 In addition, two new proposed restrictions on Stage 2 aircraft
were withdrawn. 29

The airlines have met the deadline for completing their transition to meet
Stage 3 noise standards. According to the draft 1999 Progress Report on the
Transition to Quieter Airplanes, FAA is satisfied that all known affected
aircraft operators are in compliance with the December 31, 1999, statutory
requirements. By the end of 1999, the 221 active operators? fleets included
only Stage- 3- compliant aircraft.

Despite full compliance with the transition to Stage 3, the airlines?
longterm fleet plans may now be in jeopardy. Some in the aviation community
have called for the retirement of aircraft that are within 5 decibels of
Stage 3 standards, many of which are hushkitted, even though the aircraft
meet Stage 3 standards. The Airports Council International- North America
reports that the noise levels produced by hushkitted aircraft meet the Stage
3 standard or are 1 to 5 decibels quieter than it, while newly manufactured
Stage 3 aircraft are as much as 10 to more than 20 decibels quieter than the
standard. 30 As a result, Airports Council officials noted

26 14 C. F. R. 161 establishes the process for FAA?s review of airport
access and noise restrictions. 27 Hawaii and Alaska are exempt from the ANCA
Stage 2 aircraft phaseout requirements.

28 ANCA did not require a mandatory transition of aircraft weighing less
than 75,000 pounds to meet Stage 3 noise standards. 29 The Minneapolis- St.
Paul International Airport and the San Francisco International Airport
proposed restrictions on Stage 2 aircraft weighing over 75, 000 pounds
before the ANCA phaseout date of December 31, 1999. Both airports withdrew
their proposals. In late 1999, the Minneapolis- St. Paul International
Airport banned any Stage 2 aircraft that might receive phaseout waivers
under ANCA. This restriction had no effect because FAA did not grant
waivers.

30 For example, a hushkitted Boeing 727 is about 2 decibels quieter than the
Stage 3 standard, while a newer Boeing 757 is up to 20 decibels quieter than
the Stage 3 standard.

Page 16 GAO- 01- 1053 Aviation and the Environment

that while noise levels declined following the transition, they did not
decline as much as they would have if aircraft had been replaced rather than
converted. Noise is still a problem in part because of these older, noisier
aircraft. Therefore, the Airports Council and some individual airports are
recommending retiring aircraft within 5 decibels of Stage 3 limits.

Airline representatives have noted that there have been an increasing number
of requests for ?voluntary? phaseouts of hushkitted aircraft at individual
airports, along with operating procedures or runway use restrictions that
target hushkitted aircraft. According to these representatives, this is a
major concern for commercial passenger airlines because they developed their
Stage 3 compliance strategies and long- term fleet plans with the
expectation that those aircraft would be available for their useful lives;
therefore, any premature retirement of hushkitted aircraft would have a
further economic impact on the industry. Additionally, a cargo industry
representative noted that cargo airlines are currently dependent on older
aircraft that are hushkitted to stay in business.

More recently, two estimates of the cost of complying with the mandated
transition to Stage 3 noise standards have been completed. In 1999, the Air
Transport Association, an association representing major U. S. commercial
airlines, commissioned an analysis of the airlines? costs for complying with
the mandated transition. That analysis concluded that these costs were about
$32 billion in 1999 dollars, not including the cost of fleet growth. Another
estimate by a major aircraft engine manufacturer placed the costs to
airlines at about $15.5 billion. Both of these cost analyses, however,
included the full cost of aircraft purchased to replace older Stage 2
aircraft. We believe that including the full replacement cost of an aircraft
exceeds the cost directly attributable to compliance with the mandated
transition. An airline representative noted that some carriers chose to
incur the additional cost of replacing their aircraft, in part, to respond
to their customers? environmental concerns.

On the basis of a model we developed, we estimated that the airlines? costs
directly attributable to the mandated transition ranged from a low of $3.8
billion to a high of $4.9 billion in 2000 dollars. We determined that the
appropriate cost that could be attributed to compliance with the noise
standards was the cost for the conversion of an aircraft- that is, by

Page 17 GAO- 01- 1053 Aviation and the Environment

hushkitting the engines-- or the incremental capital cost of financing the
early replacement of an aircraft, whichever cost was lower. 31 This estimate
is based on 2,372 Stage 2 aircraft over 75,000 pounds in the U. S. fleet on
November 5, 1990, the date ANCA became law. We applied the actual hushkit
cost, or range of costs, for a particular model of aircraft and the cost of
installing the hushkit. 32 (See app. IV for a more detailed discussion of
our cost methodology.) We adopted this approach as the way to reflect only
the cost of compliance, although many carriers opted to exceed FAA?s
requirement and incurred significant additional costs in so doing. 33 Since
hushkitting was expected and proved to be available for almost all types of
aircraft, when the airlines chose more costly methods to achieve compliance-
such as replacing the engines or purchasing new aircraft- we attributed that
choice to other economic reasons or benefits, such as improved fuel
efficiency, lower maintenance costs, and tax advantages.

The transition to quieter aircraft worked smoothly, was achieved within the
required time frame, and was successful in reducing the number of residents
living in areas FAA considered incompatible for residential use. However,
concerns about aircraft noise continue to be a constraint on future airport
expansion. Also, FAA and other officials are concerned that as flights
increase to meet the expected growth in travel, the population exposed to
incompatible noise levels may rise again around some airports. Thus some of
the gains obtained by the transition to quieter aircraft may be eliminated.

Our review of the results of the transition, however, especially compared
with the expectations, raises two key issues: (1) Why does concern about
noise continue to generate substantial opposition to airport operations and

31 We estimated that the cost of capital to the airline industry in 1999 was
7.8 percent. Our capital cost estimate was calculated using a weighted
average of the costs of receiving financing from both the debt and equity
markets where the weights are the proportion of total capital obtained from
each. This estimate relied on information from Value Line, a common
financial information source, for a representative firm (United Airlines) in
the airline industry.

32 For those aircraft for which we could not obtain specific hushkit model
cost data, we applied the average cost, or range of costs, of those hushkits
available for the aircraft model and type.

33 We did not include the cost savings associated with a new aircraft due to
factors such as better fuel economy or a smaller crew. We also did not
include increased costs associated with hushkitting an aircraft such as
downtime and fuel burn increases. Transition Raises Two

Key Issues

Page 18 GAO- 01- 1053 Aviation and the Environment

expansion after such a major decline in the number of people living in areas
exposed to incompatible levels of noise? and (2) As noise levels decrease,
how can local governments be encouraged to take responsibility for
minimizing the exposure of residents to noise by preventing new residential
development from encroaching on airports, when such areas may later become
incompatible as airport operations and noise increase? Table 1 discusses
these issues and identifies some specific questions for the aviation
community to explore to address these issues.

Page 19 GAO- 01- 1053 Aviation and the Environment

Table 1: Issues Raised by the Transition to Quieter Aircraft Noise Standards
Issue Context of issue Discussion

1. Why does concern about noise continue to generate substantial opposition
to airport operations and expansion after such a major decline in the number
of people living in areas exposed to incompatible levels of noise?

As required by law, FAA has selected a single method for measuring the noise
exposure of communities near airports and determined what kinds of
development are compatible with various noise exposure levels. FAA?s
selection was reinforced by an interagency review of noise measurement
options. Federal agencies can use additional information when implementing
programs that use measures of noise exposure levels. FAA?s designation of
when noise levels are compatible with residential development helps the
agency set priorities for funding noise abatement activities through the
Airport Improvement Program and passenger facility charges.

Although the number of people living in areas exposed to incompatible noise
levels, according to FAA?s designation, has dropped substantially since the
transition to quieter aircraft, aircraft noise continues to be a major
impediment to airport expansion. Moreover, complaints not only continue but
also emanate from areas exposed to noise levels FAA considers compatible
with residential dwelling- 35 of the 50 busiest commercial passenger
airports reported to us in a 1999- 2000 survey that over half of the noise
complaints in the preceding year came from persons living in compatible
areas.

 Can noise reduction alone, or reduction to a specific level, substantially
mitigate opposition to airport expansion?

 Is there a standard, other than the standard FAA currently uses to measure
noise levels, that would better gauge opposition to aircraft noise?

2. As noise levels decrease, how can local governments be encouraged to take
responsibility for minimizing the exposure of residents to noise by
preventing new residential development from encroaching on airports, when
such areas may later become incompatible as airport operations and noise
increase?

Zoning authority lies with states and communities, not the federal
government. While FAA regulations establish noise exposure levels compatible
with various kinds of development, FAA has no authority to decide what
development is authorized. However, FAA policy prohibits using Airport
Improvement Program funds for remedial noise mitigation- such as
soundproofing buildings- for buildings that were known to be located in
areas incompatible with prevailing noise exposure levels before they were
built. FAA uses noise exposure levels to set priorities for funding noise
abatement projects. This results in the approval of few noise abatement
projects in areas where land uses are considered compatible with residential
development.

Areas once considered incompatible with residential development under FAA?s
designation of compatible noise levels may now be quiet enough for
residential development. Many in the aviation community are concerned that
new residential development has occurred and may continue to occur in those
areas. However, as the demand for air travel grows, increasing the number of
takeoffs and landings at airports, noise exposure levels may begin to rise
around some airports. People moving closer to an airport may then find
themselves living in areas whose noise levels FAA considers incompatible
with residential development. Residential development in those areas could
also generate new opposition to airport operations and future airport
expansion plans. Furthermore, such development could create a demand for
additional noise abatement efforts funded through federally authorized
programs. While FAA has launched a land- use planning initiative to help
communities consider airport issues in their planning efforts, that
initiative has focused on improving the communication of the agency?s noise
policies and noise compatibility information in order to help communities
and airports work together to minimize the noise impact of airports. a The
extent to which areas around airports have built up since the transition to
an all- Stage- 3 fleet is not known. However, two limited studies prior to
this transition show that land- use control measures around airports had not
been fully implemented despite the airports? participation in FAA?s program
designed to prevent the development of new noncompatible land use. In one
study this was true for 7 of 16 airports and in another study it was true
for 6 of 10 airports.

 How can communities be encouraged to adopt zoning and other land- use
measures to restrict noise- sensitive development around airports?

 What, if anything, can the federal government do to help communities
address this issue? a See Aviation and the Environment: FAA?s Role in Major
Airport Noise Programs (GAO/ RCED- 00- 98

Apr. 28, 2000) for a discussion of FAA?s land- use initiative.

Page 20 GAO- 01- 1053 Aviation and the Environment

We provided the Department of Transportation, the Environmental Protection
Agency, the National Aeronautics and Space Administration, the Airports
Council International- North America, the Air Transport Association of
America, and the American Association of Airport Executives with copies of a
draft of this report for their review and comment.

The Environmental Protection Agency, the National Aeronautics and Space
Administration, and the American Association of Airport Executives provided
no comments.

We received oral comments from the Department of Transportation,
specifically from FAA?s Office of Environment and Energy. These officials
generally agreed with the facts in the report. They provided updated
information on their MAGENTA model, which was used to estimate the number of
people exposed to noise levels that FAA considers incompatible with airport
operations. In the draft report, we noted that some of the data used in the
model were not the most current and that FAA's estimates of the number of
people exposed to incompatible noise levels may be affected by this
limitation. FAA officials provided us with updated information on the
population exposed to incompatible noise levels. They noted that two of four
key data inputs to the model have been updated and that FAA is updating the
other two. FAA agreed that the updated data would improve the accuracy of
the data. We revised the report to reflect this information. FAA officials
also provided us with technical comments, which we incorporated as
appropriate.

The Airports Council International- North America provided oral comments.
The Senior Vice President of Technical and Environmental Affairs
complimented our staff on expertly capturing the complex issues raised by
the subject. He clarified the Airports Council?s position with respect to
phasing out older, noisier aircraft. The draft report stated that the
organization had recommended phasing out the operation of aircraft whose
engines were technologically converted, or hushkitted, to comply with
current standards. The Airports Council has called for retiring aircraft
that are within 5 decibels of the Stage 3 standard rather than retiring an
aircraft based on a design feature such as a hushkit. On a related note, the
Airports Council believes that part of the reason for the continuing concern
about noise is that these older aircraft are generally noisier and a
significant number of them are still in operation. We revised the report to
clarify their position on this subject. The Airports Council provided other
technical comments, which we incorporated as appropriate. Agency Comments

Page 21 GAO- 01- 1053 Aviation and the Environment

The Air Transport Association also provided oral comments. The Assistant
General Counsel noted that we did a good job of capturing the important
factors that went into the transition from Stage 2 to Stage 3. However, the
Association cautioned that not all of the results would be directly
applicable as the industry transitions from Stage 3 to Stage 4. In
particular, the Association noted that the technological and economic
circumstances are much different now than they were back in 1990, when the
Congress mandated the transition to Stage 3. Although the report states that
our objective is to provide a retrospective analysis of the transition to
Stage 3, we agree that the transition to Stage 4 needs to be viewed apart
from the transition to Stage 3. We revised the report to clarify this point.
The Association also made other technical comments, which we incorporated as
appropriate.

We conducted our review from January 2001 through August 2001 in accordance
with generally accepted government auditing standards.

As agreed with your office, unless you publicly release its contents
earlier, we plan no further distribution of this report until 14 days after
the date of this letter. At that time, we will send copies of the report to
the appropriate congressional committees; the Secretary of Transportation;
the Administrator, FAA; the Administrator, Environmental Protection Agency;
and the Administrator, National Aeronautics and Space Administration. We
will also make copies available to other interested parties upon request.
Please call me at (202)- 512- 2834 if you have any questions about this
report. Key contributors to this report are listed in appendix V.

Sincerely yours, Gerald L. Dillingham, Ph. D. Director, Physical
Infrastructure Issues

Appendix I: Development and Implementation of U. S. Aircraft Noise Standards

Page 22 GAO- 01- 1053 Aviation and the Environment

In the United States, responsibility for aircraft noise standards resides
with the Federal Aviation Administration (FAA). The Federal Aviation Act of
1958, as amended in 1968, gave FAA the authority to regulate aircraft noise
through the aircraft type certification process. FAA can implement new
aircraft noise standards through the standard federal rulemaking process.
Under that process, FAA must consult with the Environmental Protection
Agency, but the final decision lies with FAA. However, the Environmental
Protection Agency may also initiate new aircraft standards by submitting
proposed regulations to FAA, which FAA is required to initiate through the
federal rulemaking process. As part of the federal rulemaking process, FAA
must consider whether a proposed standard is economically reasonable,
technologically practicable, and consistent with the highest degree of
safety in air transportation or commerce.

Under the Federal Aviation Act, as amended, FAA issued regulations in 1969
that established noise standards for new designs of civil subsonic jet
aircraft. Initially, these regulations prescribed noise standards that
applied only to new types or designs of aircraft. In 1973, FAA amended its
regulations to apply the noise standards to all newly manufactured aircraft,
whether or not the aircraft design was new. In 1976, FAA prohibited any
subsonic jet aircraft weighing over 75,000 pounds from flying into or out of
U. S. airports after January 1, 1985, unless their engines had been modified
or replaced to meet the new standards. 1 In 1977, additional amendments to
the regulations established more stringent noise standards for all new
aircraft, as well as the concept of noise ?Stages.? Aircraft meeting the
original 1969 standards were categorized as ?Stage 2? aircraft; those
meeting the more stringent 1977 standards were categorized as ?Stage 3?
aircraft; and aircraft meeting neither set of standards were categorized as
?Stage 1? aircraft.

1 However, the Aviation Safety and Noise Abatement Act of 1979 directed FAA
to grant exemptions from compliance until January 1, 1988, to jet aircraft
with two engines and fewer than 100 passenger seats. Appendix I: Development
and

Implementation of U. S. Aircraft Noise Standards

Appendix I: Development and Implementation of U. S. Aircraft Noise Standards

Page 23 GAO- 01- 1053 Aviation and the Environment

Under the Airport Noise and Capacity Act (ANCA) of 1990, civil subsonic jet
aircraft weighing more than 75,000 pounds that did not meet the Stage 3
standards were required to comply with these standards by December 31, 1999,
or be retired from service in the United States. 2 Regulations implementing
the transition went into effect on September 25, 1991. The regulations
provided two options for the transition, which are described in table 2.

Table 2: Options for Compliance With Stage 3 Aircraft Noise Standards Phased
transition deadlines Option December 31,

1994 December 31, 1996 December 31,

1998 December 31, 1999

1- Reduction in the percentage of Stage 2 aircraft in a carrier?s fleet

25% 50% 75% 100% 2- Increase in the percentage of Stage 3 aircraft in a
carrier?s fleet

55% 65% 75% 100% Source: 14 C. F. R. 91.865.

FAA stated that this combination of methods would result in significant cost
savings for the industry while still preserving environmental gains. Since
the greatest environmental gains would occur near the end of the phase- out
period, according to FAA, there was no ultimate difference in the two
approaches. FAA expected both approaches to achieve steady progress toward
an all- Stage- 3 fleet throughout the decade.

Each domestic and foreign aircraft operator of large civil subsonic jet
aircraft in the United States was required to submit an annual report on its
progress toward compliance with the phased elimination of Stage 2 aircraft
weighing over 75,000 pounds. Each report was required to contain information
on the operator?s fleet composition. Domestic carriers were required to
provide initial compliance plans in 1992, followed by annual updates. Each
airline had to provide FAA with the following information annually: (1) any
Stage 2 aircraft added to its fleet; (2) any Stage 2 aircraft removed from
U. S. operations and either transferred to another recipient

2 Under the statute, jet aircraft weighing 75, 000 pounds or less may
continue to operate without meeting the Stage 3 aircraft noise standards.
Transition to Current

Noise Standard Mandated by Statute

FAA Monitored Compliance Through Annual Progress Reports

Appendix I: Development and Implementation of U. S. Aircraft Noise Standards

Page 24 GAO- 01- 1053 Aviation and the Environment

or retired, destroyed, or put into storage; (3) any Stage 2 aircraft
returned to or imported from a foreign source; (4) any Stage 2 aircraft
modified to meet Stage 3 noise standards; (5) all Stage 3 aircraft meeting
U. S. operations requirements; and (6) the date for achieving full
compliance with Stage 3 noise standards. 3

According to an FAA official, FAA monitored each aircraft operator?s
progress toward meeting the statutory compliance date of December 31, 1999.
The agency also monitored domestic operators? progress in meeting their
compliance plans through direct communications and provided for contact with
foreign operators and foreign civil aviation officials to ensure that they
were aware of and prepared to meet the statutory compliance deadline. FAA
reviewed all annual reports to ensure accuracy and completeness and followed
up by contacting operators when necessary. Compliance monitoring was an
ongoing effort with the goal, according to an FAA official, of monitoring
and reminding operators about the statutory compliance deadline. FAA is
satisfied that all known affected operators are in compliance with the
December 31, 1999, statutory requirements.

The ANCA statute allowed a domestic carrier to apply for a limited waiver
that would extend the date by which compliance was required. To be eligible
for consideration, a petitioner was required to have a fleet mix of 85
percent Stage 3 aircraft by July 1, 1999, and show, among other criteria,
that a waiver would be in the public interest. A petitioner was also
required to show that a good faith effort had been made to comply. A plan,
providing for compliance by December 31, 2003, was required. 4

FAA received 10 petitions for waivers from the Stage 3 transition rule. No
waivers were granted. One petitioner requested that it be allowed to operate
Stage 2 airplanes after December 31, 1999; that petition was denied. The
other nine petitioners requested permission to operate nonrevenue flights
for purposes of Stage 3 modifications, storage, maintenance, and/ or
exportation. FAA notified these petitioners that it did not have the
authority to authorize such operations under the provisions of the law. For
a limited time, foreign carriers were also allowed to apply for a waiver
from the final compliance deadline for transition to Stage 3

3 14 C. F. R. 891.875. 4 49 U. S. C. 47528( 6). No Waivers Were

Granted

Appendix I: Development and Implementation of U. S. Aircraft Noise Standards

Page 25 GAO- 01- 1053 Aviation and the Environment

noise standards, but according to an FAA official, FAA received no requests
for such waivers.

In November 1999, the Congress amended ANCA to allow the operation of Stage
2 aircraft in nonrevenue service after December 31, 1999, under specific
conditions. 5 FAA chose to implement the provision by issuing special flight
authorizations. An operator of a Stage 2 airplane that wanted to operate in
the contiguous United States for any of the purposes listed in the revised
statute had to apply in advance. Applications are due 30 days in advance of
the planned flight and must provide the information necessary for FAA to
determine that the planned flight is within the limits prescribed by law.

Figures 2 through 4 show the Stage 3 aircraft noise standards and the
increases in noise allowed as aircraft weight increases. 6 As figure 2
illustrates, the noise standards for takeoff operations also vary with the
number of engines.

5 See Section 1000( a)( 5) of P. L. 106- 113. 6 Aircraft must be tested in
accordance with the conditions established in appendix A of 14 C. F. R. part
36. This appendix sets the test requirements for such things as weather
conditions, test procedures, and the noise measurement systems to be used.
Appendix B describes how to translate those measurements into a measure of
the ?effective perceived noise level,? which includes a correction for tones
and takes into account the duration of the noise event. The noise standards
are established in appendix C, and are defined in terms of the effective
perceived noise level. Stage 3 Aircraft Noise

Standards

Appendix I: Development and Implementation of U. S. Aircraft Noise Standards

Page 26 GAO- 01- 1053 Aviation and the Environment

Figure 2: Noise Standards for Stage 3 Aircraft by Number of Engines- Takeoff

Note: The noise measurement level is defined in terms of the ?effective
perceived noise level,? which includes a correction for tones and takes into
account the duration of the noise event. The weight scale in the figure is a
logarithmic scale.

Source: GAO?s compilation of data from FAA.

Appendix I: Development and Implementation of U. S. Aircraft Noise Standards

Page 27 GAO- 01- 1053 Aviation and the Environment

Figure 3: Noise Standards for Stage 3 Aircraft Regardless of the Number of
Engines- Sideline

Note: The noise measurement level is defined in terms of the ?effective
perceived noise level,? which includes a correction for tones and takes into
account the duration of the noise event. The weight scale in the figure is a
logarithmic scale.

Source: GAO?s compilation of data from FAA.

Appendix I: Development and Implementation of U. S. Aircraft Noise Standards

Page 28 GAO- 01- 1053 Aviation and the Environment

Figure 4: Noise Standards for Stage 3 Aircraft Regardless of the Number of
Engines- Approach

Note: The noise measurement level is defined in terms of the ?effective
perceived noise level,? which includes a correction for tones and takes into
account the duration of the noise event. The weight scale in the figure is a
logarithmic scale.

Source: GAO?s compilation of data from FAA.

Appendix II: Development of International Aircraft Noise Standards

Page 29 GAO- 01- 1053 Aviation and the Environment

The International Civil Aviation Organization (ICAO) develops international
noise standards to provide consistent aircraft noise standards across
nations. ICAO, the international body charged with ensuring the safe and
orderly growth of international civil aviation throughout the world,
operates under the Convention on International Civil Aviation, ratified in
1947. Although not a regulatory body, ICAO promulgates standards and
recommends practices for international civil aviation. According to the
terms of the Convention, ICAO makes its decisions through an Assembly and a
Council with various subordinate committees, commissions, and panels,
including the Committee on Aviation Environmental Protection (CAEP), which
conducts most of ICAO?s technical environmental work. CAEP does its
technical work through various working groups relying on the participation
and technical expertise of its member countries.

The Assembly, composed of representatives from ICAO?s 187 member countries,
is ICAO?s ultimate decisionmaking body. It meets at least once every 3 years
to review ongoing work and set policy for the coming years. Each member
country is entitled to one vote, and decisions of the Assembly are taken by
a majority of the votes cast except when otherwise provided in the
Convention. According to FAA, in practice, most Assembly decisions are made
by consensus.

The Council, composed of representatives from 33 countries, is elected by
the Assembly for a 3- year term. The Assembly chooses the members of the
Council with representation from three categories: (1) major air transport
countries, (2) countries making the largest contribution to the provision of
air navigation facilities for international civil air navigation, and (3)
countries from major areas of the world not represented by members selected
in the first two categories. 1 Member nations are selected to represent only
one of these three categories. The Council is the governing body that
provides continuing direction to the organization?s activities,

1 The 32nd session of the Assembly in 1998 elected the states listed below
as members of the Council for the 1998- 2001 period. The election process
was divided into three parts, with the following states elected: Part 1 -
States of chief importance to air transport: Australia, Brazil, Canada,
France, Germany, Italy, Japan, the Russian Federation, the United Kingdom,
and the United States. Part 2 - States that make the largest contribution to
the provision of facilities for international air navigation: Argentina,
China, Colombia, Egypt, India, Mexico, the Netherlands, Nigeria, Norway,
Saudi Arabia, and Spain. Part 3 - States ensuring geographic representation:
Algeria, Botswana, Cameroon, Cuba, Indonesia, Kenya, Lebanon, Pakistan,
Panama, Senegal, Slovakia, and Uruguay. Appendix II: Development of
International

Aircraft Noise Standards

Appendix II: Development of International Aircraft Noise Standards

Page 30 GAO- 01- 1053 Aviation and the Environment

and it is responsible for adopting standards and recommended practices that
govern all aspects of international civil aviation, ranging from safety and
security to the noise and environmental aspects of aircraft operations.
Proposed new aviation standards submitted to the Council require a twothirds
majority vote for adoption. After adoption, the standards are submitted to
the member countries. The new standards become effective unless a majority
of the member countries disapprove them through the Assembly. According to
FAA, the Council also reaches most decisions through consensus. If a
government organization within a member country, like FAA, certifies that an
aircraft meets ICAO?s standards, then all ICAO member countries must
recognize that certification as valid. An ICAO member that does not adopt
ICAO?s standards must provide a written explanation to ICAO. If an ICAO
member files such an explanation, other ICAO members are absolved from their
obligation to recognize that country?s certification of aircraft- they do
not have to allow such aircraft into their country. Furthermore, if a member
country fails to file a written notification, it will be in default of its
obligation, and will risk the exclusion of its aircraft from travel in other
ICAO member countries and the loss of its voting power in the Assembly and
Council.

The Council accomplishes its work through committees and commissions that
provide technical expertise for the review of issues the Council considers.
CAEP conducts most of ICAO?s environmental work, from reviewing aircraft
noise issues and developing aircraft noise standards and recommended
practices to recommending actions for the Council?s adoption. CAEP is
responsible for striking a balance among conflicting objectives for aircraft
technical specifications, since every change made to an aircraft or its
engines can affect its safety performance, emissions performance, noise
level, and fuel efficiency. CAEP is the only committee that reports directly
to the Council, unlike other ICAO technical groups, which report through
either the Air Navigation Commission or the Air Transport Committee. 2
CAEP?s membership is established by the Council and specific members are
nominated by member nations and international

2 The primary mandate of the Air Navigation Commission is to recommend to
the ICAO Council the most appropriate course of action in the process of
developing and amending aviation standards and recommended practices. The
Air Navigation Commission is composed of 15 technical experts appointed by
the Council on the basis of their experience and expertise. Although the
experts are nominated by member nations, they are independent experts rather
than official representatives of their respective nations. The Air Transport
Committee advises the Council on problems associated with air transport.
Membership is open to any Council member willing to take an active and
continuous part in the Committee?s work.

Appendix II: Development of International Aircraft Noise Standards

Page 31 GAO- 01- 1053 Aviation and the Environment

observer organizations. CAEP is currently composed of experts from 19 ICAO
member countries and observers from 12 organizations representing all major
sectors of the aviation industry, including airports, airlines, aircraft
manufacturers, environmental organizations, and two countries (Norway and
Greece). The U. S. government, industry, and environmental representatives
participate in or observe CAEP.

ICAO develops aviation standards, including aircraft noise standards,
through the amendment of annexes to the Convention on International Civil
Aviation. 3 The main parts of each annex are the international standards and
recommended practices. A standard is defined as a specification, the uniform
application of which is necessary for the safety or regularity of
international civil air navigation. A recommended practice, on the other
hand, is defined as a specification, the uniform application of which is
desirable in the interest of safety, regularity, or the efficiency of
international civil aviation.

As figure 5 shows, proposals to amend or add either new standards or
recommended practices may come from any ICAO members, observers, committees,
commissions, panels, or other ICAO units. The Council establishes CAEP?s
work program and must approve the initiation of any work to amend or add new
environmental standards. According to the Council?s mandate, CAEP imposes
conditions for adopting environmental standards. The proposed standard must
be economically reasonable, technologically feasible, and environmentally
beneficial. Proposed new standards recommended for adoption by CAEP are
submitted to the Council, where a two- thirds majority vote is required for
adoption. Depending on the issue, the Council refers CAEP?s recommendations
to either the Air Navigation Commission, the Air Transport Committee, or
other appropriate body for review before acting on the recommendations.
Technical standards are adopted by the Council unless a majority of ICAO
members disapprove them. Policy issues are usually forwarded by the Council
to the Assembly for resolution, where a majority vote is required for final
action. If any member nation finds it impossible to comply, the country is
required to notify ICAO of any differences that will exist at the time the
standards or practices take effect. ICAO then publishes those notifications
of differences in supplements to the annexes. For policy issues covered by
an Assembly resolution, there is no requirement to file a

3 An annex is an appendix to the main part of an agreement. ICAO?s
Development

of Aircraft Noise Standards

Appendix II: Development of International Aircraft Noise Standards

Page 32 GAO- 01- 1053 Aviation and the Environment

difference if the nation chooses not to comply with any or all of the
provisions.

Appendix II: Development of International Aircraft Noise Standards

Page 33 GAO- 01- 1053 Aviation and the Environment

Figure 5: Developing and Implementing New Aircraft Noise Standards in the
International Civil Aviation Organization

Source: GAO?s compilation from ICAO documents.

Proposals to develop new aircraft noise standards come from various sources,
including ICAO members, observers, committees, commissions, panels, other
ICAO units, the United Nations, or other interested international
organizations.

The Council must approve the proposals for the study of possible new
aircraft noise standards.

CAEP develops a recommendation for a new noise standard and submits it to
the Council.

The recommendation is referred by the Council to the Air Navigation
Commission, Air Transport Committee, and/ or other appropriate body for
review as appropriate.

Standards recommended by CAEP are submitted to the Council, where a
twothirds majority vote is required for adoption; however, most actions by
the Council are made through consensus.

New ICAO noise standards are adopted unless a majority of ICAO members
disapprove them. The standards must then be implemented by member countries.

Any member country that cannot comply with an ICAO standard must inform ICAO
of any differences that will apply when the standards go into effect. ICAO
publishes these differences in supplements to the annexes. A member whose
aircraft do not meet ICAO's standards risk exclusion of those aircraft from
international travel.

Appendix II: Development of International Aircraft Noise Standards

Page 34 GAO- 01- 1053 Aviation and the Environment

International aircraft noise standards adopted by ICAO are published as
Chapters in Volume I of Annex 16 to the Convention on International Civil
Aviation. Chapter 2 of Annex 16, Volume I, contains the aircraft noise
standards that apply to jet aircraft designed prior to October 1977. Chapter
3 contains more stringent noise standards that apply to aircraft designed
after that date. Chapter 4 contains ICAO?s new noise standards, adopted in
June 2001. The primary purpose of establishing noise standards is to reduce
aircraft noise. This noise reduction, when combined with other measures, is
intended to reduce the number of people exposed to significant levels of
aircraft noise.

On January 17, 2001, CAEP recommended the adoption of new aircraft noise
standards. The new standards, incorporated into a Chapter 4 of Annex 16,
Volume 1, are 10 decibels quieter than the Chapter 3 standards, on a
cumulative basis, from aircraft noise measurements at takeoff, approach, and
sideline. 4 The Chapter 4 standards apply to new aircraft designed after
January 1, 2006. The new standards do not apply to the current fleet or to
current designs in production. On June 27, 2001, the ICAO Council
unanimously approved the adoption of the new Chapter 4.

CAEP also recommended procedures for recertifying existing aircraft to meet
the new standards. According to FAA, based on the cost and environmental
impact information reviewed by CAEP, there was unanimous agreement within
CAEP that there should be no global phaseout of existing aircraft. The
committee remained divided, however, over whether or not to recommend a
regional phaseout of existing aircraft. The Assembly will consider this
issue at its meeting from September 25 to October 5, 2001. CAEP also
endorsed a balanced approach to noise management, which is an airport- by-
airport approach to managing noise using all available measures- aircraft
noise reduction, land use planning and noise mitigation measures, noise
abatement operational procedures, and operating restrictions on aircraft- to
address specific noise problems in a very targeted way.

4 Sideline noise is measured at a point parallel to the flight path where
the noise level is the greatest. ICAO?s Consideration

of New Aircraft Noise Standards

Appendix III: Objectives, Scope, and Methodology

Page 35 GAO- 01- 1053 Aviation and the Environment

Because the United States is moving to a new, more stringent noise standard,
we were asked to provide a retrospective analysis of the transition to
current aircraft noise standards, including a discussion of expectations,
results, and issues raised by the transition.

To identify expectations and results and to discuss issues raised by the
transition of existing aircraft to the current U. S. noise standards, known
as ?Stage 3,? we (1) reviewed the legislative history of the Airport Noise
and Capacity Act of 1990; (2) conducted interviews and gathered information
from the following agencies and organizations: FAA, the Environmental
Protection Agency, the National Aeronautics and Space Administration, the
International Civil Aviation Organization, the Aerospace Industries
Association, the Airports Council International- North America, the Air
Transport Association of America, Inc. (hereafter referred to as the Air
Transport Association), the American Association of Airport Executives, the
Cargo Airline Association, the General Aviation Manufacturers Association,
the National Association of State Aviation Officials, the National Business
Aviation Association, the Natural Resources Defense Council, Pratt &
Whitney, and the Regional Airline Association; (3) conducted a literature
search through the Internet and Lexis- Nexis and reviewed key documents; (4)
discussed the Model for Assessing Global Exposure to the Noise of Transport
Aircraft with FAA to assess the reliability of the model?s estimate of the
number of people living in areas exposed to incompatible noise levels; (5)
developed our own model for estimating the costs to airlines of moving to
the current aircraft noise standards; and (6) compared results with
expectations and analyzed the results to identify issues raised by the
transition. We provided a written summary of our findings to the
organizations listed under (2) above for their review and comment before
completing the final draft report. Appendix III: Objectives, Scope, and

Methodology

Appendix IV: Methodology for Estimating Airlines? Costs to Transition to
Stage 3 Aircraft Noise Standards

Page 36 GAO- 01- 1053 Aviation and the Environment

We identified two recent estimates- one by the Air Transport Association 1
and one by Pratt & Whitney 2 -of the costs to airlines to comply with
current Stage 3 aircraft noise standards. Because both of these estimates
attributed the full cost of new replacement aircraft to the noise
requirements, we developed an estimate that focuses on the costs of the
transition that are directly attributable to compliance with the noise
standards (i. e., the cost of hushkitting or the incremental cost of
financing a new aircraft early, whichever was lower). We estimated that the
cost to comply with Stage 3 noise standards ranged from $3. 8 billion to
$4.9 billion in 2000 dollars.

In 1999, the Air Transport Association commissioned the Campbell- Hill
Aviation Group, a consulting firm, to estimate the airlines? costs to
transition to the current Stage 3 aircraft noise standards. 3 Campbell- Hill
estimated that the costs attributable to compliance were about $32 billion
in 1999 dollars, not including fleet growth. This estimate covers the cost
of replacing Stage 2 aircraft (including both the interest expense
associated with the acquisition of replacement aircraft and the depreciation
for new aircraft acquired prior to the end of the useful lives of the
aircraft they replaced) and the cost of hushkitting or reengining Stage 2
aircraft to meet Stage 3 standards. Air Transport Association officials said
that some airlines, depending on their fleet composition, were faced with
significant commercial risk in deciding how to comply with ANCA if they
chose to wait for the development and certification of the now
retrospectively less expensive hushkits. These kits are now readily
available, but the airlines did not have the advantage of a perfect forecast
of the availability of hushkit solutions for their aircraft affected by the
phaseout. In cases where aircraft replacement actually was chosen during the
phase- out

1 The Air Transport Association is a trade organization for major U. S.
airlines. 2 Pratt & Whitney designs and manufactures engines for commercial,
military, and general aviation aircraft. 3 In 1990, the Air Transport
Association originally estimated that the cost to U. S. airlines to
transition to an all Stage 3 fleet, including aircraft purchased for fleet
growth, would be about $175 billion. According to an association official,
this figure includes the costs to the airlines that were directly
attributable to the Stage 3 transition, as well as the costs of additional
investments made by the air carriers. Since details of the methodology used
to generate this estimate are no longer available, the Air Transport
Association commissioned a new analysis by the Campbell- Hill Aviation Group
to provide a current estimate of the costs after the transition. The
Campbell- Hill analysis estimated that with the inclusion of fleet growth,
the airlines? costs were about $110 billion in 1999 dollars. Appendix IV:
Methodology for Estimating

Airlines? Costs to Transition to Stage 3 Aircraft Noise Standards

Two Estimates Include the Full Cost of Replacement Aircraft

Appendix IV: Methodology for Estimating Airlines? Costs to Transition to
Stage 3 Aircraft Noise Standards

Page 37 GAO- 01- 1053 Aviation and the Environment

period, the Campbell- Hill analysis gives the airlines credit for the entire
replacement cost of a new aircraft because of this commercial risk, even if
hushkitting would have been an option.

Pratt & Whitney also estimated the cost to the airlines of making their
fleets compliant with the Stage 3 noise standards- about $15.5 billion in
1999 dollars. About $4 billion of this estimate was attributed to the cost
of converting existing aircraft to meet the standard. The remaining $11.5
billion was the estimated cost to purchase replacement aircraft to comply
with Stage 3 noise standards. The estimate includes the full purchase price
of the new aircraft- an average price of $40 million each for 287 narrowbody
jets designated as being replaced because of the phaseout of Stage 2
aircraft. This represents one- third of the total number of narrow- body
jets that were replaced between 1990 and 1999. 4

We developed our own estimate of the airlines? transition costs directly
attributable to compliance with the Stage 3 noise standards. We estimated
that the appropriate cost directly attributable to requirements to comply
with the Stage 3 noise standards ranged from $3.8 billion to $4.9 billion in
2000 dollars. We determined that the appropriate cost that could be
attributed to compliance with the Stage 3 noise standards was either the
cost for the conversion of an aircraft- the cost to retrofit an aircraft
with a hushkit-- or the incremental capital cost to finance the early
purchase of a replacement aircraft, whichever cost was lower.

Since hushkitting was expected and proved to be available for almost all
types of aircraft, 5 when the airlines chose more costly methods to achieve
compliance- such as replacing the engines or purchasing new aircraft- we
attributed that choice to other economic reasons or benefits, such as

4 Pratt & Whitney assumed that one- third of the narrow- body aircraft
replaced in the 1990s were replaced because of the Stage 2 phaseout. They
assumed that the others were replaced for economic reasons.

5 Hushkits were not available for five types of aircraft (16 aircraft in
total), primarily Boeing 720s. The primary reason for this was that only a
few of these older aircraft were in existence and they were to be retired
soon. Thus, there was no demand for the development of a hushkit for them.

In addition, while a hushkitting alternative known as the Raisbeck method
was less costly, it could only be applied to 727s and was not available
until 1996. Many airlines had to plan for ANCA well before the Raisbeck
method was available. We only used the cost of the Raisbeck method when it
was actually used to comply with Stage 3 noise standards. Cost to Airlines
of the

Transition Ranged From $3.8 Billion to $4.9 Billion

Appendix IV: Methodology for Estimating Airlines? Costs to Transition to
Stage 3 Aircraft Noise Standards

Page 38 GAO- 01- 1053 Aviation and the Environment

improved fuel efficiency, lower maintenance costs, and tax advantages. For
example, changing an aircraft?s engines instead of hushkitting them would
provide added fuel benefits not available simply by hushkitting the engines.
6

To develop our estimate, we purchased data from AvSoft Limited, which
provided the list of Stage 2 aircraft over 75,000 pounds in the U. S. fleet
on November 5, 1990, the day that ANCA was passed. Using the 1990 database,
we identified 2,372 Stage 2 aircraft in the U. S. fleet as of that date.
Matching the AvSoft database to 2001 FAA data, we were able to directly
identify 1,051 aircraft as being hushkitted (or reengined) and still in the
fleet. For 689 of these 1,051 aircraft, FAA data indicated the exact hushkit
used on the aircraft by Supplemental Type Certificate code. 7 The FAA data
indicated that another 362 of these 1,051 aircraft had been hushkitted or
reengined but did not identify the exact hushkit used or indicate whether
the aircraft had been reengined. For these 362 aircraft, since we did not
know the exact hushkit used, we used the average of the cost for all the
hushkits available for that model aircraft. In addition, we found that
another 272 aircraft were Stage 3, so most likely had been hushkitted or
reengined as well, although there was no direct match (the average cost of
all hushkits available was also used for these 272 aircraft). Thus, we
determined that at least 1,323 aircraft were modified (primarily hushkitted)
to meet Stage 3 standards.

6 Air Transport Association officials noted that our approach differs from
that of the Campbell- Hill study, which took into account the cost of
replacing an aircraft rather than hushkitting it even when the replacement
cost was greater than the hushkitting cost. The officials also said that
there was risk involved to the airlines in waiting for the full development
of hushkit technology.

7 Supplemental Type Certificate codes are used by FAA to identify types of
hushkits.

Appendix IV: Methodology for Estimating Airlines? Costs to Transition to
Stage 3 Aircraft Noise Standards

Page 39 GAO- 01- 1053 Aviation and the Environment

Table 3: Methodology for Estimating the Cost to Meet Stage 3 Noise Standards
How aircraft met Stage 3 noise standards Type of cost used in estimate
Number of

aircraft

Hushkitted or reengined a Hushkit cost 1,323 Replaced Hushkit cost, capital
cost (if less

than hushkit cost), or no cost (if aircraft beyond retirement age)

1,049

Total 2,372

a Of these aircraft, 1, 051 were verified with FAA data to have been
hushkitted or reengined. The other 272 were known to be either hushkitted or
reengined because the most recent aircraft record indicates they are Stage 3
aircraft.

Source: GAO.

We developed cost estimates for the remaining 1,049 aircraft. We found that
386 aircraft were beyond retirement age on December 31, 1999. To make this
judgment, we assumed that the typical life span of a passenger aircraft was
30 years, while the typical life span of a cargo aircraft was 40 years. 8 We
assigned a hushkitting cost of zero to these aircraft. Next, we assumed that
the cost of replacing an aircraft earlier than it would have otherwise been
retired was the incremental cost of retiring the aircraft early- that is,
the cost of borrowing the capital for the replacement aircraft earlier than
would have normally occurred. 9 In 54 cases, we found that the aircraft were
so close to retirement that the lowest cost option to comply with Stage 3
noise standards was the cost of capital expended before the anticipated
retirement date to purchase a new aircraft. Lastly, for 611

8 According to our database, 26 years was the approximate average age of
passenger aircraft. We rounded this figure up to 30 years to be
conservative. Additionally, according to our database, 31 years was the
average age of cargo aircraft. We rounded up from the average cargo aircraft
age of 31 years to 40 years because 41 years was the maximum age of cargo
aircraft and cargo aircraft typically fly many fewer cycles (a cycle is
defined as one departure and landing of an aircraft) per day than passenger
aircraft. Cargo aircraft therefore typically have longer life spans in
years, although their life span measured in cycles are frequently similar.

9 If the interest cost associated with replacing an aircraft early exceeded
the cost of hushkitting an aircraft, we used the hushkit value. We did not
include the cost savings associated with a new aircraft due to factors such
as better fuel economy or a smaller crew. Including these factors likely
would have decreased our estimate of the cost to the airlines slightly. We
estimated that the cost of capital to the airline industry in 1999 was 7.8
percent. Our capital cost estimate was calculated using a weighted average
of the costs of receiving financing from both the debt and equity markets
where the weights are the proportion of total capital obtained from each.
This estimate relied on information from Value Line, a common financial
information source, for a representative firm (United Airlines) in the
airline industry.

Appendix IV: Methodology for Estimating Airlines? Costs to Transition to
Stage 3 Aircraft Noise Standards

Page 40 GAO- 01- 1053 Aviation and the Environment

aircraft, we determined that the cost of hushkitting was an appropriate
estimate for the cost of complying with ANCA because the incremental capital
cost to finance the early purchase of aircraft was greater.

To estimate the cost of hushkitting an aircraft, we obtained data on hushkit
base prices or a range of base prices, 10 installation costs, additional
maintenance costs and hours, and performance gains or losses from hushkit
manufacturers. These data were generally available by aircraft model type.
We applied the actual hushkit cost, or range of costs, for a particular
model of aircraft and the cost of installing the hushkit. For the aircraft
whose specific hushkit model cost data we could not obtain, we applied the
average cost, or range of costs, of those hushkits available for the
aircraft model and type.

Because all hushkit manufacturers reported that increased maintenance was
negligible, we did not include any cost in our estimate for changes in
maintenance once an aircraft was compliant with Stage 3 noise standards. In
addition, we did not include costs for downtime to install the hushkit.
Although several airlines stated that hushkitting could not be scheduled
during regular maintenance, we only received downtime cost information from
one airline. An Air Transport Association official indicated that such
information was not available for other airlines because of business
confidentiality concerns. The one airline estimated that the cost to their
business as the result of downtime amounted to $31 million, about 7 percent
of the total cost to hushkit their fleet. As a result, our estimate of the
cost to the airlines to meet Stage 3 noise standards may be slightly higher
if information on downtime costs was universally available.

Generally, hushkit manufacturers also reported that performance changes
after an aircraft was hushkitted were negligible, so we did not include a
cost estimate of these factors in our calculations. Some hushkit
manufacturers, however, did report slight speed decreases, weight

10 The range of the estimate is due to the availability of different
hushkitting options for some types of aircraft (we could not be certain
which option was selected for an individual aircraft).

Appendix IV: Methodology for Estimating Airlines? Costs to Transition to
Stage 3 Aircraft Noise Standards

Page 41 GAO- 01- 1053 Aviation and the Environment

increases, and/ or fuel burn increases. The use of engine upgrades for
Boeing 747 aircraft to meet Stage 3 noise standards also resulted in slight
fuel burn increases.

Appendix V: GAO Contacts and Staff Acknowledgments

Page 42 GAO- 01- 1053 Aviation and the Environment

Gerald L. Dillingham (202) 512- 3650 Belva Martin (202) 512- 4285

In addition to those named above, Beverly Ann Bendekgey, David K. Hooper,
Arthur L. James, Kieran E. McCarthy, Mark E. Stover, and John A. Thomson
made key contributions to this report. Appendix V: GAO Contacts and Staff

Acknowledgments GAO Contacts Staff Acknowledgments

(390004)

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