The United States Office of Management and Budget has recommended the use of costbenefit assessment for all proposed federal regulations. Since 9/11 government agencies in Australia, United States, Canada, Europe and elsewhere have devoted much effort and expenditure to attempt to ensure that a 9/11 type attack involving hijacked aircraft is not repeated. This effort has come at considerable cost, running in excess of US$6 billion per year for the United States Transportation Security Administration (TSA) alone. In particular, significant expenditure has been dedicated to two aviation security measures aimed at preventing terrorists from hijacking and crashing an aircraft into buildings and other infrastructure: (i) Hardened cockpit doors and (ii) Federal Air Marshal Service. These two security measures cost the United States government and the airlines nearly $1 billion per year. This paper seeks to discover whether aviation security measures are cost-effective by considering their effectiveness, their cost and expected lives saved as a result of such expenditure. An assessment of the Federal Air Marshal Service suggests that the annual cost is $180 million per life saved. This is greatly in excess of the regulatory safety goal of $1-$10 million per life saved. As such, the air marshal program would seem to fail a cost-benefit analysis. In addition, the opportunity cost of these expenditures is considerable, and it is highly likely that far more lives would have been saved if the money had been invested instead in a wide range of more cost-effective risk mitigation programs. On the other hand, hardening of cockpit doors has an annual cost of only $800,00 per life saved, showing that this is a cost-effective security measure.
Centre for Infrastructure Performance and Reliability Research Report 267.04.08