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

Costs of Operating AC & RC Flying Units

Al Robbert

June 2013

AC/RC Costs - 2 August 2011

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

AC/RC Costs - 3 August 2011

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

AC/RC Costs - 4 August 2011

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)

AC/RC Costs - 5 August 2011

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 operational demand

Capacity to meet proficiency flying training demand

AC/RC Costs - 6 August 2011

F-16s

ANG

Active

AFRC

Costs Reflect Economies of Scale and AC’s Greater Ops Intensity

AC/RC Costs - 7 August 2011

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

AC/RC Costs - 8 August 2011

AC and RC Operating On Different Parts of Their Average Cost Curves

F-16s

AC/RC Costs - 9 August 2011

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

F-16s

AC/RC Costs - 10 August 2011

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

AC/RC Costs - 11 August 2011

Optimal Mix (More in AC) Would Have Yielded Negligible Savings

PMAIAnnual FH per PMAI

Total Annual

FH

FH % Ops**

Total AnnualOps FH

Annual Cost per

FH

Total Annual

Cost

Recent Mix*

AC 340 317 107,700 43% 38,800 $25,900 $2.80B

RC 319 219 69,700 25% 16,900 $22,200 $1.55B

Assoc 300 4,100 20% 800 $16,000 $0.07B

Total 660 181,600 56,600 $4.41B

Cost-optimal Mix

AC 421 286 120,400 43% 43,800 $26,300 $3.17B

RC 239 200 47,800 25% 11,900 $23,400 $1.12B

Assoc 300 4,100 20% 800 $16,000 $0.07B

Total 660 172,300 56,600 $4.35B

* Costs and flying hours are 2006-2010 averages.** Excludes Kunsan and Osan.

F-16s

$60M

AC/RC Costs - 12 August 2011

F-16s

Lower Ops Demand More RC,Smaller Fleet More AC

Below 600 aircraft, no feasible solution at historic operating intensity

AC/RC Costs - 13 August 2011

PMAIAnnual FH per PMAI

Total Annual

FH

FH % Ops

Total Annual Ops FH

Annual Cost per FH

Total Annual

Cost

Recent Mix*

AC 128 830 106,800 76% 81,600 $19,200 $2.05B

RC 203 410 83,800 50% 41,700 $21,900 $1.83B

Assoc 100 9,300 38% 3,500 $20,300 $0.19

Total 331 199,900 126,900 $4.07B

Cost-optimal Mix

AC 331 490 161,100 77% 123,400 $19,200 $3.08B

RC

Assoc 100 9,300 38% 3,500 $20,300 $0.19

Total 331 170,300 126,900 $3.27B

KC-135s

* Costs and flying hours are 2006-2010 averages.

$800M

Optimal Mix (100% AC) Would Have Yielded Substantial Savings

AC/RC Costs - 14 August 2011

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

AC/RC Costs - 15 August 2011

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

AC/RC Costs - 17 August 2011

Back-up Slides

AC/RC Costs - 18 August 2011

Example of Cost Calculations – Shaw AFB F-16s

20th FW F-16Ops & maint mil pay $136M

9thth AFMil pay$39M

Other direct missionsMil pay$55M

20th FW F-16Other costs linked to F-16$168M

20th FW F-16Prorated unlinked costs$131M

20th FW F-16Total AFTOC costs$435M

59% 20th FW F-16Extended med costs$10M

20th FW F-16Training pipeline costs$38M

20th FW F-16Total Costs$483M

Note: Costs shown here are uninflated 5-year averages. Calculations used in models were inflated to FY2010 dollars.

Direct missionsTotal mil pay$230M

20th FW F-16 ops & maint mil mpwr is 59% of this total.

Other costs not linked to F-16 or other direct mission$222M

Typical items: fuel, depot-level reparables, civ pay.

Typical items: CE Sq, SF Sq, MS Sq, contract services, utilities, supplies.

AC/RC Costs - 19 August 2011

Example of Cost Calculations – Montgomery, AL, F-16s

187th FW F-16Ops & maint mil pay $8.0M

Alabama ANG HqMil pay$1.2M

Other direct missions (C-26, student flight)Mil pay $2.6M

187th FW F-16Other costs linked to F-16$41.2M

187th FW F-16Prorated unlinked costs$14.4M

187th FW F-16Total AFTOC costs$63.6M

68% 187th FW F-16Man-day costs$11.7M

187th FW F-16Training pipeline costs$4.4M

187th FW F-16Total Costs$79.7M

Note: Costs shown here are uninflated 5-year averages. Calculations used in models were inflated to FY2010 dollars.

Direct missionsTotal mil pay$11.8M

187th FW F-16 ops & maint mil mpwr is 68% of this total.

Other costs not linked to F-16 or other direct mission$21.2M

Typical items: fuel, depot-level reparables, civ pay.

Typical items: CE Sq, SF Sq, MS Flt, contract services, utilities, supplies.

AC/RC Costs - 20 August 2011

ANG

Active

AFRC

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

Operational

Training

AC/RC Costs - 21 August 2011

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

AC/RC Costs - 22 August 2011

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.

F-16s

AC/RC Costs - 23 August 2011

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.

KC-135s

AC/RC Costs - 24 August 2011

AC and RC Operating On Different Parts of Their Average Cost Curves

KC-135s

AC/RC Costs - 25 August 2011

No Equipped RC Units in Cost-minimizing Mix Over Wide Range of Demands and Fleet Sizes

KC-135s

AC/RC Costs - 26 August 2011

C-130s

ANG

Active

AFRC

Costs Reflect Economies of Scale and AC’s Greater Ops Intensity

AC/RC Costs - 27 August 2011

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

AC/RC Costs - 28 August 2011

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.

C-130s

AC/RC Costs - 29 August 2011

AC and RC Operating On Different Parts of Their Average Cost Curves

C-130s

Note: RC units average 425 flying hours per PMAI; CONUS AC units average 845 flying hours per PMAI.

AC/RC Costs - 30 August 2011

Mix of Ops vs. Training Flying Hours Also Affects Output Costs

C-130s

• 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

AC/RC Costs - 31 August 2011

After Pope Wing Deactivated, Mix Was Optimal

PMAIAnnual FH per PMAI

Total Annual

FH

FH % Ops

Total Annual Ops FH

Annual Cost per FH

Total Annual

Cost

Recent Mix*

AC 99 808 80,100 68% 54,400 $22,000 $1.76B

RC 192 425 81,600 55% 44,800 $20,700 $1.69B

Assoc 230 6,100 60% 3,600 $35,800 $0.22

Total 291 167,800 102,900 $3.67B

2009-2010 Mix and Expected Cost (without Pope active equipped wing)

AC 88 718 63,200 68% 42,800 $22,600 $1.42B

RC 198 425 84,200 55% 46,300 $20,900 $1.76B

Assoc 230 6,100 60% 3,600 $35,800 $0.22

Total 286 153,400 92,700 $3.40B

Cost-optimal Mix (without Pope active equipped wing)

AC 73 799 58,000 68% 39,200 $22,100 $1.28B

RC 213 425 90,700 55% 49,900 $20,900 $1.90B

Assoc 6,100 60% 3,600 $35,800 $0.22

Total 286 154,800 92,700 $3.40B

C-130s

* Costs and flying hours are 2006-2010 averages..

$270M

AC/RC Costs - 32 August 2011

C-130s

Lower Ops Demand More RC,Smaller Fleet More AC

AC/RC Costs - 33 August 2011

Increasing RC Ops and Total Flying Hours Introduces Risk But No Cost Advantage

F-16s

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