[Note: See the accompanying PDF to view the charts from this article.]
While many from the World War II era still remember "skies blackened by military aircraft," trends in aircraft production by the US and its allies since the war paint a different picture. As this article will show, there has been a persistent decline over the last three decades in the total number of aircraft being produced each year and in the number of new aircraft types being introduced into the NATO arsenal.
While aircraft performance has shown dramatic improvements from generation to generation, costs have gone up equally rapidly. The result is a distinct shift toward very few, very-high-performance aircraft in the inventory of each nation. Although this broad trend is well known to aircraft industry observers, the data in this article underscores its magnitude and consistency and raises questions on what the future holds for our military effectiveness if these trends are not reversed.
The clear implication is that new approaches to aircraft design and procurement are needed and needed quickly.
Chart 1 shows the sharp drop in new aircraft types introduced by the US and its allies over the last three decades. The data was compiled for the 132 different types of NATO military aircraft that had their initial operational capability (IOC) in the decades of the 1960s through 1980s. For the US alone, the number of new types of military aircraft has dropped from about thirty-five a decade to eleven.
When one recognizes that many of these different types are, in fact, "major upgrades" of existing aircraft (for example, redesign of the F-15 from a fighter/interceptor aircraft to a strike/ground-attack aircraft), it is clear that this greater than-three-to-one reduction in new types of aircraft entering the inventory has been a very significant one. Interestingly, the data is consistent for both new US aircraft programs and those of our NATO allies.
This reduction has not been brought about by a lowering of the priority placed on military aircraft by the US and its allies. "Air superiority" remains a basic tenet of NATO strategy. Rather, the reduction in types of aircraft has been driven by the billions of dollars required to develop a new aircraft and by the extremely high cost of producing each one.
As Chart 2 shows, the average unit cost of US fighter aircraft has been growing from generation to generation at a compound rate of around seven percent per year (even after adjusting downward for the effects of inflation and the reduced quantities being produced). This means that each decade has essentially seen a doubling in unit costs. Similar trends have been found for attack aircraft and bombers (as the $20.6 billion for 100 B-lB bombers demonstrates), for non-US NATO fighters (growing at approximately the same annual seven percent compound rate), and even for Soviet fighter aircraft (to the best of our ability to estimate Soviet costs).
Naturally, when the cost of an individual aircraft reaches such a high level, one wants to amortize the development and production facilities expenses across as many aircraft as possible. Thus, it is impractical to have a large number of different types of aircraft in this high-cost environment.
Performance for a Price
While the data on rising unit costs is certainly staggering, this cost growth has been justified on the basis that these higher-cost aircraft are, in fact, providing dramatically higher individual performance. Studies that compare performance from generation to generation of aircraft bear this out.
While it is difficult to compare one aircraft precisely with another, techniques have been developed—frequently based on detailed interviews with pilots to determine important performance parameters—and these show clearly that the US and its allies have been increasing the performance of their aircraft from generation to generation by a compound rate of around five to six percent per year. Thus—within the accuracy of these analyses—it is fair to say that we are essentially getting what we are paying for, i.e., increasing performance for increasing cost.
The challenge, of course, is to find a way to get off this curve—to find a way to control costs without compromising improved performance. It is undoubtedly necessary and advantageous for military aircraft design to keep pace with the state of the art. Yet there are ways to do this and still control costs. Unfortunately, these approaches often face strong institutional barriers. Nontraditional solutions to military mission needs frequently offer high performance at lower costs—for example, using standoff weapons or remotely piloted vehicles—but are "culturally" resisted.
In the same way, compromising maximum possible individual aircraft performance for reduced costs—and greater quantities—means we'd get "less than the best." This may not be "good enough." Many people are not willing to accept the fact that the last few percent of performance gains often increase the weapon's cost by thirty to fifty percent, thus dramatically reducing overall force effectiveness because of the resultant reduced quantities.
A way out of this dilemma appears to be through better application of advanced technology not only to improve performance but simultaneously to reduce costs. In recent years, the commercial world has been able to achieve these dual objectives—for example, in electronics. Here, the cost of computers, data-processing systems, communications equipment, etc., has been falling rapidly, while the performance has been increasing dramatically. The military can learn from such commercial practices.
The Packard Commission recommended that commercially based "design-to-cost" techniques be utilized for defense weapon systems. The design-to-cost philosophy is geared to keeping costs down, but it doesn't necessarily mean that performance will be traded away. In many cases, such new technology as structural composite materials and very-high-speed integrated circuit (VHSIC) electronics can be used to improve the performance of next-generation military aircraft systems as well as to make it possible to build them at low cost.
This "design-to-cost" technique was tried initially on the F-16 aircraft, with a considerable degree of success. However, meeting a low-cost objective in next-generation aircraft has historically proven to be a lower-priority objective. We have tried to incorporate rapid advances inexpensive and high-risk technologies—often before they are "ready." Despite our initial success in meeting F-16 design-to-cost goals, subsequent modifications have driven up the cost, pushing it closer to the curve on Chart 2.
Off the Curve
The Air Force's management is determined to move the cost of its next-generation fighter aircraft (the Advanced Tactical Fighter, or ATF) "off the curve." By looking at the data in Chart 2 and performing preliminary analyses of the cost for the ATF in the absence of any design-to-cost philosophy, one could expect that, by the time of its deployment, a unit production cost approaching—or even exceeding—$100 million would have been likely. This is plotted on Chart 2 as "Option A." Instead, the Air Force has chosen a number in the $35 million to $40 million unit production-cost range—shown as "Option B" on Chart 2—and will use this as a principal criterion in the selection of the winning designs and contractors.
Meeting these dual goals of advanced performance at an "affordable" price will be a formidable engineering challenge when you consider, for example, the difficulty of fabricating stealth airframes. To succeed, it will undoubtedly also require the early application of advanced manufacturing technology.
Finally, to keep costs down while continuing to improve performance as the program evolves will likely require market incentives, such as continuous competition between two producers (of both the aircraft and its principal subsystems). This technique ("dual sourcing") has historically been found to have very significant performance and cost benefits when it has been applied to defense weapon systems and is usually well worth the added investment costs for the second producers.
Clearly, new aircraft must move off of the historical cost curve. The reason is shown by the data in Chart 3, which illustrates the decline in the average number of fighters bought by the US each year over the last four decades. Similar quantity reductions have been found for bombers and for our NATO allies.
Only the significant increases in defense budgets brought about by the Reagan Administration prevented this quantity trend from dropping further over the last few years.
It is the data in Chart 3 that has the most critical implications for military effectiveness. We could manage to fight a war with fewer types of aircraft, and if we had sufficient resources, we could afford to pay for enough aircraft, no matter how high their individual cost. However, with the limited resources that the nation is willing to set aside for security, it is obvious that even though we continue to spend billions of dollars for military aircraft each year, the number of aircraft that we can buy will fall as the unit cost goes up.
The military issue is that numbers do matter. Whether you believe that overall force effectiveness goes up as the numbers are squared (as did Frederick W. Lanchester, a famous British military historian) or believe that numbers—like the performance of individual systems—simply combine to create overall force effectiveness, the logical extension of the data in Chart 3 is a war in which the US and its allies have very few aircraft with which to fight.
As a matter of fact, Norm Augustine [Norman R. Augustine, who has been a DoD R&D manager, an Under Secretary of the Army, and president of a major defense contractor and who is the author of the wise and witty Augustine's Laws, published in 1982 by the American Institute of Aeronautics and Astronautics] has taken the data from Chart 3 and projected it forward to show that—given the likely resources available in the future—by the year 2054 the DoD will buy one fighter per year. This will obviously be a very-high-performance aircraft, but not adequate to win in the high attrition environment likely for future warfare.
The less-expensive/higher-performance route being pursued by the Air Force in the ATF program is clearly preferable. It represents a challenge for our technologists, but it is the way the commercial world has been operating for some time, and the approach is one that the military world needs to adopt.
"Internationalization" of Industry
A final observation, based on these long-term military aircraft trends, is that there is a rather significant shift toward multinational ventures in the military aircraft arena. This is a direct consequence of the extremely high cost of developing and producing new aircraft. As the data in Chart 4 shows (for the same 132 new aircraft types produced by NATO nations in the last three decades), there has been a reduction of almost four to one in the number of single-country new aircraft to the point where, in the 1980s, the number of multinational new aircraft types equaled that of the single-country new aircraft.
Considering that, historically, most nations have believed it important to have a self-sufficient defense industry, this result may seem quite surprising. Nonetheless, it is consistent with broad trends toward internationalization that are being seen across the full spectrum of defense equipment. In the US, for example, we have recently "discovered" that large (and growing) shares of our critical weapon system components and subsystems—especially electronics—are now produced offshore. It is also consistent with trends in commercial aircraft (for example, with the European Airbus and the more recent joint venture between Boeing and its Japanese partner on the next large commercial aircraft).
What is unique to the military case, however, is that these multinational aircraft programs are often not done for purely economic considerations. The dual—and conflicting—objectives of self-sufficiency and economies of scale often result in multinational developments that conclude with each participating nation independently—and noncompetitively—building its own aircraft in very limited quantities, thereby losing the potential for multinational economies of scale. Overall, this internationalization of the defense industry—both at the component and system levels—is a policy area crying for attention.
In conclusion, it is fair to say that none of the trends pointed out here should surprise anyone who has been following the aircraft industry. Rather, what may come as a surprise is the magnitude of the shift and the consistency of the long-term trends. What is necessary now is for people to face these realities and their implications (in terms of structural adjustment of both the aircraft industry and of our military strategy and posture) and/or for people to work seriously on ways to attempt to reverse these trends (by actually utilizing advanced technology to lower the basic cost of weapon systems and by using advanced manufacturing technology and competitive market forces to drive down these costs still further). This is obviously a formidable challenge, but the alternatives are even less appealing.
Dr. Jacques S. Gansler is Vice President of The Analytic Sciences Corp. (TASC). He is a former Deputy Assistant Secretary of Defense, a former industrial executive, and the author of The Defense Industry (MIT Press, 1980). He is also a faculty member of the Kennedy School of Government at Harvard University. His most recent contribution to AIR FORCE Magazine was "What Ails the Acquisition Process?" in the July '85 issue.
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