Competition and Innovation in Military Fixed-Wing Aircraft Industry Threatened

For Release

October 29, 2003

There will be less competition and innovation in the U.S. military aircraft industry and some highly skilled specialists will leave the industry over the next 10 years unless the nation begins additional aircraft development programs, according to a RAND Corporation study released today.

In 1960 there were 11 U.S. contractors able to design and build military aircraft that met the nation's needs. The number dropped to eight in 1990. Today, as a result of mergers and other developments, only three companies—Lockheed-Martin, Boeing and Northrop Grumman—are capable of developing and producing major military aircraft systems.

The number of military aircraft contractors could shrink further because the nation has only one major aircraft project in development and no others planned, according to an analysis by RAND's National Defense Research Institute.

The RAND findings are found in two reports. One is titled: “Competition and Innovation in the U.S. Fixed-Wing Military Aircraft Industry.” The other is titled: “The U.S. Combat Aircraft Industry, 1909-2000: Structure, Competition, Innovation.”

One alternative to pursuing a costly new aircraft production project would be to fund a number of projects to design and build prototype aircraft, which could provide an incentive for manufacturers to keep their design teams and other infrastructure in place, according to the RAND reports.

“When some manufacturers look to the future, they just don't see enough business on the horizon to keep their design teams in place,” said John Birkler, a RAND senior analyst and lead author of the first report. “Unless something is done, business practices will dictate that they reassign their talent to other areas. Indeed, this already is beginning to happen.”

Military aircraft designers have unique skills that are needed only for the specialized aircraft, such as designing pilot and weapon system interfaces. Once those skills are lost, they cannot be easily replaced, researchers say.

“While the fundamentals are taught in the classroom, you cannot substitute for 20 to 30 years of experience,” Birkler said. “If these skills are allowed to be lost, the only way to regain them is to spend a lot of time and money building and training a new generation of designers.”

The RAND reports are the result of a request made by the U.S. Senate in December 2001 asking the Department of Defense to study whether a dwindling number of military aircraft suppliers could degrade national security by diminishing the industry's competition and innovation.

Concern about the future capability of the U.S. fixed-wing military aircraft industry increased after the Department of Defense chose Lockheed-Martin as the prime contractor to develop and build the Joint Strike Fighter—the F-35.

The Joint Strike Fighter is expected to be one of the largest acquisition projects in history, worth some $300 billion. It is the only new fighter aircraft program the U.S. military has planned for the next 30 years.

Different versions of the plane will be used by the U.S. Air Force, Navy and Marines, as well as by the United Kingdom and other U.S. allies. By 2026, some 3,000 of the F-35s are planned to be integrated into U.S. and U.K. forces.

Under past practice, each version of the Joint Strike Fighter would have been designed, development of different versions of the F-35 for each service was integrated to reduce production and maintenance costs.

RAND researchers reviewed the history of U.S. military aircraft manufacturers to give policymakers a view of how the industry became the world leader and how it has evolved over time. Researchers found that competition has been a key part of the technological success of the U.S. military aircraft industry over the past century, with most innovations being made by smaller companies that were working to gain a larger role in the industry.

While the competition over the F-35 is over, there are several smaller projects being planned that will provide work for military aircraft designers. But work on a planned air tanker, a new Unmanned Combat Air Vehicle, and a new intelligence, surveillance and reconnaissance airplane will only sustain design teams through the end of the decade, Birkler and his colleagues conclude.

Spreading production of the F-35 among the major military aircraft manufacturers has been suggested as a way to support industry competition, but an earlier RAND study found that option would be very expensive and do little to directly support the design skills that are the most critical to preserve.

A better and less-expensive option, RAND researchers say, would be to fund a continuing series of advanced design studies and development of experimental concept demonstrators. This approach would yield a range of new technologies and system concepts to support future military capabilities, while sustaining a vigorous and competitive design and development capability in the industry. This would cost less and could motivate manufacturers to keep their prized design teams intact, Birkler said.

While policymakers can act to encourage competition and innovation in the military aircraft industry, they also must consider whether it is in the country's best interest to preserve the current industry structure and capabilities for the military aircraft.

The industry already has undergone fundamental changes and is evolving toward a different posture in response to a changing demand. New developments such as the growing role for unmanned combat aircraft are likely to alter the military's requirements in the future, RAND's analysts conclude.

Instead of preserving the current systems, researchers say, policymakers may want to consider new types of aircraft research and development programs that could do a better job of meeting the U.S. military's future needs.

Other authors of the first report on competition and innovation are Anthony G. Bower, Jeffrey A. Drezner, Gordon Lee, Mark Lorell, Giles Smith, Fred Timson, William P.G. Trimble, and Obaid Younossi. Mark Lorell authored the historical overview of the U.S. combat aircraft industry.

Support for the project was provided by the Industrial Policy Office of the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics.

RAND's National Defense Research Institute is a federally funded research and development center supported by the Office of the Secretary of Defense, the Joint Staff, the unified commands, and the defense agencies.

Printed copies of “Competition and Innovation in the U.S. Fixed-Wing Military Aircraft Industry” (ISBN: 0-8330-3350-6) and “The U.S. Combat Aircraft Industry, 1909-2000: Structure, Competition, Innovation” (ISBN: 0-8330-3366-2) can be ordered from RAND Distribution Services ( or call toll-free 877-584-8642).

About RAND

RAND is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous.