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 Force Cost 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 ), 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 PMAI Annual FH per PMAI Total Annual FH FH % Ops** Total Annual Ops FH Annual Cost per FH Total Annual Cost Recent Mix* AC ,70043%38,800$25,900$2.80B RC ,70025%16,900$22,200$1.55B Assoc3004,10020%800$16,000$0.07B Total660181,60056,600$4.41B Cost-optimal Mix AC ,40043%43,800$26,300$3.17B RC ,80025%11,900$23,400$1.12B Assoc3004,10020%800$16,000$0.07B Total660172,30056,600$4.35B *Costs and flying hours are 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 PMAI Annual FH per PMAI Total Annual FH FH % Ops Total Annual Ops FH Annual Cost per FH Total Annual Cost Recent Mix* AC ,80076%81,600$19,200$2.05B RC ,80050%41,700$21,900$1.83B Assoc1009,30038%3,500$20,300$0.19 Total331199,900126,900$4.07B Cost-optimal Mix AC ,10077%123,400$19,200$3.08B RC Assoc1009,30038%3,500$20,300$0.19 Total331170,300126,900$3.27B KC-135s *Costs and flying hours are 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 20 th FW F-16 Ops & maint mil pay $136M 9th th AF Mil pay $39M Other direct missions Mil pay $55M 20 th FW F-16 Other costs linked to F-16 $168M 20 th FW F-16 Prorated unlinked costs $131M 20 th FW F-16 Total AFTOC costs $435M 59% 20 th FW F-16 Extended med costs $10M 20 th FW F-16 Training pipeline costs $38M 20 th FW F-16 Total Costs $483M Note: Costs shown here are uninflated 5-year averages. Calculations used in models were inflated to FY2010 dollars. Direct missions Total mil pay $230M 20 th 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 187 th FW F-16 Ops & maint mil pay $8.0M Alabama ANG Hq Mil pay $1.2M Other direct missions (C-26, student flight) Mil pay $2.6M 187 th FW F-16 Other costs linked to F-16 $41.2M 187 th FW F-16 Prorated unlinked costs $14.4M 187 th FW F-16 Total AFTOC costs $63.6M 68% 187th FW F-16 Man-day costs $11.7M 187 th FW F-16 Training pipeline costs $4.4M 187 th FW F-16 Total Costs $79.7M Note: Costs shown here are uninflated 5-year averages. Calculations used in models were inflated to FY2010 dollars. Direct missions Total mil pay $11.8M 187 th 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 R 2 = RC: intercept = $39,977,418 ; flying hours coefficient = $12,828 ; adjusted R 2 = 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 R 2 = RC: intercept = $31,236,689 ; flying hours coefficient = $13,542 ; adjusted R 2 = 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 R 2 = RC: intercept = $38,879,888; flying hours coefficient = $ 8,961 ; adjusted R 2 = 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 PMAI Annual FH per PMAI Total Annual FH FH % Ops Total Annual Ops FH Annual Cost per FH Total Annual Cost Recent Mix* AC ,10068%54,400$22,000$1.76B RC ,60055%44,800$20,700$1.69B Assoc2306,10060%3,600$35,800$0.22 Total291167,800102,900$3.67B Mix and Expected Cost (without Pope active equipped wing) AC ,20068%42,800$22,600$1.42B RC ,20055%46,300$20,900$1.76B Assoc2306,10060%3,600$35,800$0.22 Total286153,40092,700$3.40B Cost-optimal Mix (without Pope active equipped wing) AC ,00068%39,200$22,100$1.28B RC ,70055%49,900$20,900$1.90B Assoc6,10060%3,600$35,800$0.22 Total286154,80092,700$3.40B C-130s *Costs and flying hours are 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