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Costs of Operating AC & RC Flying Units

Costs of Operating AC & RC Flying Units. Al Robbert June 2013. Research Objective. Examine the costs of operating active and reserve flying units to meet key demands: Strategic : providing a fleet large enough to meet surge requirements

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Costs of Operating AC & RC Flying Units

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  1. Costs of Operating AC & RC Flying Units Al Robbert June 2013

  2. Research Objective • Examine the costs of operating active and reserve flying units to meet key demands: • Strategic: providing a fleet large enough to meet surge requirements • Operational: providing operational flying hours to meet garrison and deployed operational mission requirements • Proficiency flying: provide sufficient total flying hours to meet training frequency, currency, and upgrade requirements

  3. Analysis Based on Detailed Air ForceCost Collection System • Primary source: Air Force Total Ownership Cost (AFTOC) data collected by the Air Force Cost Analysis Agency • Four MDSs examined: F-16, C-130, C-17, KC-135 • Unit of analysis: operational wing, burdened with installation support costs • Allocated installation support costs to operational wings and other missions (e.g., numbered Air Force, state ANG headquarters) on the same installation • Supplemented AFTOC costs with: • Pipeline training costs (primarily aircrew) • DoD-funded military medical expenses (AC units) • MPA man-days (RC units) • ANG state costs not included • Costs for most enterprise-level activities not included • Regarded as total force costs—not specifically AC or RC costs • Generally don’t vary as a function of the force mix

  4. Some Limitations on Data • Generally captured five fiscal years of data (FY 2006-2010), but some incomplete • Man-day costs available for only two fiscal years • No transition costs considered—steady-state only • Judgment calls required to sort direct mission costs from support costs • Full fleets not represented • CA and CC-coded aircraft only • Omitted some bases due to data or mission issues (e.g., first or last year of unit activity)

  5. Component Comparisons Based on Cost per Output • For each wing, determined . . . • Five-year average annual costs • Five-year average annual output levels • PMAI • Flying hours (FH) • Operational FH (differentiated from training FH) • Tasked aircraft-days (fighters only) • Calculated burdened cost per output • Per unit (typically a wing), PMAI, FH, operational FH, and tasked aircraft-day* • Note: fully-burdened cost per person is not a relevant output measure for Air Force flying units * ACC tracks the inclusive dates and number of aircraft from each unit tasked to support specific COCOM requirements . Capacity to meet strategic demand Capacity to meet proficiency flying training demand Capacity to meet operational demand

  6. Costs Reflect Economies of Scale and AC’s Greater Ops Intensity F-16s Active ANG AFRC

  7. Costs Reflect Economies of Scale and AC’s Greater Ops Intensity F-16s

  8. F-16s AC and RC Operating On Different Parts of Their Average Cost Curves

  9. F-16s Mix of Ops vs. Training Flying Hours Also Affects Output Costs • AC F-16 units fly, on average, 1.3 training hours for each operational hour • 2.3 total hours yield 1 operational hour • RC F-16 units fly, on average, 3 training hours for each operational hour • 4 total hours yield 1 operational hour • Can, and often does, result in higher cost per operational hour in RC units

  10. Examined Alternative Force Mixes Using an Optimization Model • Model minimizes cost, subject to: • Specified fleet size • Operational flying hours ≥ specified level • For fighters, tasked aircraft-days ≥ current level • Flying hours per PMAI ≤ 5-year average • AC Flying hours per PMAI ≥ proficiency flying requirements • Ops % of flying hours ≤ 5-year average • Overseas units same as in current mix • CONUS/overseas ratio of AC CA- or CC-coded aircraft ≥ 50% (mobility) or 30% (fighters) • Unit’s cost per flying hour varies as function of unit’s annual flying hours

  11. F-16s Optimal Mix (More in AC) Would Have Yielded Negligible Savings $60M * Costs and flying hours are 2006-2010 averages. ** Excludes Kunsan and Osan.

  12. F-16s Lower Ops Demand More RC,Smaller Fleet More AC Below 600 aircraft, no feasible solution at historic operating intensity

  13. KC-135s Optimal Mix (100% AC) Would Have Yielded Substantial Savings $800M * Costs and flying hours are 2006-2010 averages.

  14. Overall Observations • RC units operate at markedly lower cost per flying hour than active units operating at the same scale, but active units achieve significant economies of scale • AC and RC average costs per flying hour often comparable • RC units fly fewer hours per owned aircraft • Results in proportionally lower cost per owned aircraft • AC units generally fly a larger proportion of their hours as operational (vs training) • Appropriate shift in mix can yield: • Reduced flying hours • Reduced cost • Extended fleet life • Cost-based analysis requires sensitivity to flying hour costs and usage

  15. Cost-optimal Mix Depends on Strategic Capacity (Fleet Size) Relative to Operational Demand

  16. Back-up Slides

  17. Example of Cost Calculations – Shaw AFB F-16s 20th FW F-16 Ops & maint mil pay $136M 20th FW F-16 • Other costs linked to F-16 • $168M 20th FW F-16 • Prorated unlinked costs$131M 20th FW F-16 • Total AFTOC costs • $435M Typical items: fuel, depot-level reparables, civ pay. 59% 20th FW F-16 • Extended med costs • $10M 9thth AF • Mil pay • $39M Other costs not linked to F-16 or other direct mission$222M 20th FW F-16 • Training pipeline costs • $38M Other direct missionsMil pay$55M Typical items: CE Sq, SF Sq, MS Sq, contract services, utilities, supplies. 20th FW F-16 • Total Costs • $483M Direct missionsTotal mil pay$230M 20th FW F-16 ops & maint mil mpwr is 59% of this total. Note: Costs shown here are uninflated 5-year averages. Calculations used in models were inflated to FY2010dollars.

  18. Example of Cost Calculations – Montgomery, AL, F-16s 187th FW F-16 Ops & maint mil pay $8.0M 187th FW F-16 • Other costs linked to F-16 • $41.2M 187th FW F-16 • Prorated unlinked costs$14.4M 187th FW F-16 • Total AFTOC costs • $63.6M Typical items: fuel, depot-level reparables, civ pay. 68% 187th FW F-16 Man-day costs $11.7M Alabama ANG Hq • Mil pay • $1.2M Other costs not linked to F-16 or other direct mission$21.2M 187th FW F-16 • Training pipeline costs • $4.4M Other direct missions (C-26, student flight)Mil pay $2.6M Typical items: CE Sq, SF Sq, MS Flt, contract services, utilities, supplies. 187th FW F-16 • Total Costs • $79.7M Direct missionsTotal mil pay$11.8M 187th FW F-16 ops & maint mil mpwr is 68% of this total. Note: Costs shown here are uninflated 5-year averages. Calculations used in models were inflated to FY2010dollars.

  19. Active ANG AFRC KC-135s Costs Reflect Economies of Scale and AC’s Greater Ops Intensity Operational Training

  20. KC-135s Costs Reflect Economies of Scale and AC’s Greater Ops Intensity

  21. F-16s Total Unit Costs Vary with Flying Hours Regression results: - AC: intercept = $131,150,122 ; flying hours coefficient = $17,426 ; adjusted R2 = .67. - RC: intercept = $39,977,418 ; flying hours coefficient = $12,828 ; adjusted R2 = .41. - FH coefficients significant at p < .001.

  22. KC-135s Total Unit Cost Varies with Flying Hours Regression results. - AC: intercept = $103,055,542; flying hours coefficient = $13,320 ; adjusted R2 = .79. - RC: intercept = $31,236,689 ; flying hours coefficient = $13,542 ; adjusted R2 = .44. - Intercepts and coefficients significant at p < .001.

  23. KC-135s AC and RC Operating On Different Parts of Their Average Cost Curves

  24. KC-135s No Equipped RC Units in Cost-minimizing Mix Over Wide Range of Demands and Fleet Sizes

  25. C-130s Costs Reflect Economies of Scale and AC’s Greater Ops Intensity Active AFRC ANG

  26. C-130s Costs Reflect Economies of Scale and AC’s Greater Ops Intensity

  27. C-130s Total Unit Costs Vary with Flying Hours Regression results. - AC: intercept = $ 165,647,746; flying hours coefficient = $11,907; adjusted R2 = .84. - RC: intercept = $38,879,888; flying hours coefficient = $ 8,961 ; adjusted R2 = .36. - Intercepts and coefficients significant at p < .001.

  28. C-130s AC and RC Operating On Different Parts of Their Average Cost Curves Note: RC units average 425 flying hours per PMAI; CONUS AC units average 845 flying hours per PMAI.

  29. C-130s Mix of Ops vs. Training Flying Hours Also Affects Output Costs • AC C-130 units fly, on average, .5 training hours for each operational hour • 1.5 total hours yield 1 operational hour • RC C-130 units fly, on average, .8 training hours for each operational hour • 1.8 total hours yield 1 operational hour • Can, and often does, result in higher cost per operational hour in RC units

  30. C-130s After Pope Wing Deactivated, Mix Was Optimal $270M * Costs and flying hours are 2006-2010 averages. .

  31. C-130s Lower Ops Demand More RC,Smaller Fleet More AC

  32. F-16s Increasing RC Ops and Total Flying Hours Introduces Risk But No Cost Advantage • Risk incurred because • cost-minimizing mix must shift to RC as RC ops and total flying hours increase • RC capacity and availability for increased hours unknown

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