Cover: Implications of an Air Force Budget Downturn on the Aircraft Industrial Base

Implications of an Air Force Budget Downturn on the Aircraft Industrial Base

An Exploratory Analysis

Published Nov 1, 2013

by Mark V. Arena, John C. Graser, Paul DeLuca


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Research Questions

  1. How is the current situation different from previous downturns?
  2. What can we learn from prior industrial base assessments to inform upcoming decisions?
  3. What are the investment options for Air Force aircraft acquisition and how might they affect the industrial base?

The U.S. Air Force is facing a number of challenges as a result of the current defense budget downturn along with the uncertainty of its timing and magnitude. RAND examined the challenge of modernizing the Air Force's aircraft fleet while trying to sustain the industrial base with limited funding. Complicating this challenge is that the pattern of Air Force spending has shifted dramatically away from new aircraft procurement, and a competitor with significant technical and economic capability has emerged. There is a need for careful strategic management of investment choices — and this goes beyond just aircraft. The Air Force will first need to define its capability priorities that fit within budget constraints, then use those priorities to shape a budget strategy. RAND considered six budget strategies for aircraft procurement: from a new high-tech fleet to sustaining and modifying the existing one. Each strategy under a constrained spending future results in challenges and issues for the industrial base. The Air Force will need to help mitigate industrial base problems that result from their chosen budget strategy — but some issues may be beyond their control. There are lessons from foreign acquisitions that the Air Force can leverage to avoid pitfalls. Most importantly, shortfalls in both industry and government skill bases can cause significant problems later during execution. Finding ways to sustain key skills during a spending downturn will be important for the future and potentially produce longer-term savings.

Key Findings

Constraining Factors

  • The Air Force is spending more to keep fewer aircraft flying.
  • New aircraft are getting more expensive and the Air Force is buying fewer of them.
  • A budget upturn is unlikely for at least a decade.
  • RDT&E spending is at an all-time high, so increasing it to preserve industrial capabilities is not realistic.
  • Less of the Air Force's limited procurement funding is going toward new aircraft.
  • Total aircraft inventory has declined.
  • There is a growing demand for capabilities of remotely piloted systems.
  • There are continuing challenges of supporting asymmetric wars.


  • Maintain Technical Edge: Keeps technical and design skills employed but may concentrate industry into sole sources due to fewer new programs and diminished production demand. The AIB may consolidate even further.
  • Hybrid Strategy: May result in some skills and production capabilities moving offshore. Congress might intervene to make this option unworkable. The AIB may consolidate even further.
  • Evolutionary Focus: Moderately uses technical skills, but does not use important skills such as integration and airframe development. Production capabilities are maintained but current suppliers/primes are locked in.
  • Hedging Strategy: Moderately uses technical and design skills. Production skills are not maintained at a level similar to other options. May allow smaller firms to enter market, however.
  • International Partnering: Risks having some key skills and production capabilities move offshore. Congress might also intervene.
  • Maintain Force Levels: With this option, important technical and design skills will atrophy. Again, the IB may consolidate even further due to lack of RDT&E funds.

Research conducted by

The research described in this report was sponsored by the United States Air Force and conducted by RAND Project AIR FORCE.

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