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Fighter Cost Final July 06

Fighter Cost Final July 06

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Published by: DoxCak3 on Jan 01, 2012
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Sticker Shock:Estimating the Real Cost of Modern FighterAircraft
 An occasional report by defense-aerospace.com 
Highlights:- Average unit costs exceed $100 million- Longer production runs do not always equate to lower unit costs- International cooperation does not necessarily lead to savings- One fighter is worth its weight in gold, three are worth their weight in caviar 
Revised version
This version, posted on July 12, corrects minor editing errors primarily pertaining to theJoint Strike Fighter.
I. Introduction 2II. Highlights and conclusions 4III. Benchmark comparisons 6IV. Aircraft Costs by program:- Dassault Aviation Rafale 7- Saab JAS-39 Gripen 8- Boeing F/A-18E Super Hornet 9- Boeing F-15E Strike Eagle 9- Eurofighter 10- Lockheed Martin J-35 Joint Strike Fighter 11- Lockheed Martin F-22A Raptor 12Appendix: Methodology 13
Sticker Shock:
Estimating the Real Cost of Modern Fighter Aircraft
The average unit procurement cost of fighter aircraft produced in the NATO area is $112.43 million,and varies in a ratio of almost 3 to 1 from $62.1 million for a Dassault Rafale C to $177.6 millionfor a Lockheed F-22A. Three aircraft have a unit procurement cost of around $70 million, andanother three cost around $110 million.When total research and development costs are added, however, the picture is very different, asthe average program unit cost rises to $148.7 million. On this basis, only two aircraft cost less than$100 million, another costs $112 million, and two (Eurofighter and Rafale) cost around $140million. Again, the F-22A is the most expensive, with a unit program cost of $338.8 million.These figures can appear surprising, especially as they indicate that the Rafale costs less than theGripen, yet they reflect the actual price paid for these fighters by domestic customers. We opted todisregard other prices, such as those offered on export competitions, on the grounds that they areslewed by commercial considerations, while prices paid by domestic customers more accuratelyreflect the real cost of developing and procuring combat aircraft. The methodology followed isdescribed on page 14.Most intriguing is the tentative conclusion that aircraft prices (or costs to governments), like thoseof other manufactured goods, are determined as much by how much the market can bear as bytheir actual development and production costs (see Tables 2, 3)This report is intended to provide an objective basis for estimating the true costs of combat aircraftfor their domestic buyers, at a time when manufacturers, locked in increasingly bitter competitionon the export market, routinely inflate the cost of competitors’ aircraft while making demonstrablymisleading claims about their own.
Table 1: Combat Aircraft Ranked by Unit Production Costs
(in millions of currency units) (prices first in local currency, then converted to $ at current exchange rates)
Aircraft Type Unit Procurement Costs Program Unit Costs Comments
Rafale C (EUR 51.8) $ 62.1 (EUR 113.2) $ 135.8 Air force single-seat (inc VAT)Rafale M (EUR 56.6) $ 67.9 (EUR 121.4) $ 145.7 Naval version (inc VAT)JAS-39C Gripen (Poland bid) $ 68.9 (SEK 552.9) $ 76.07 Swedish version (inc VAT)F-18E Super Hornet $ 78.4 $ 95.3 MYP II contractEurofighter (Germany) (EUR 85.7) $ 102.8 (EUR 118.3) $ 141.9 Tranche 2, Dec. 2003 pricesF-15E Strike Eagle $ 108.2 Not significant FY06 orderF-35 Joint Strike Fighter $ 115.0 $ 112.5 LRIP aircraft (estimates)Eurofighter Typhoon (UK) (GBP 64.8) $ 118.6 (GBP 78.6) $ 143.8 Tranche 2, July 2004 pricesEurofighter (Spain) Not available (EUR 105.6) $ 126.7 Tranche 2, mid 2005 pricesF-22A Raptor $ 177.6 $ 338.8 FY06 contract
(Sources: GAO, CBO, NAO, DoD, UK MoD, French Parliament for data; defense-aerospace.com for analysis.Figures are latest available)
Our ambition is not to accurately peg actual aircraft prices, but rather to provide general estimatesand a mass of data and sources that readers can use to compute their own price, depending ontheir requirements, by building on the elements provided in this study.
 These costs may differ substantially from the ones publicly quoted by the various manufacturers.In some cases, this is due to different definitions of what a given price includes, to different ratesof value-added tax, or to how R&D costs are accounted for.In many cases, however, the differences are due to “creative accounting” intended to distort trueprices to gain a public relations competitive advantage, while the complexity of the issue makes itunlikely that the media will devote sufficient time and energy to confirm or infirm prices publiclyquoted by manufacturers. This is another reason for which we opted to compare prices paid bynational customers.The study also compares aircraft prices using various benchmarks:- exchange rates at Purchasing Power Parity;- prices per kilo, compared to luxury goods;- prices as a multiple of Gross Domestic Product per head.This study makes no claim to absolute accuracy, or to perfect methodology. Indeed, as onemanufacturer noted, “we know all cost estimates are wrong because they never include the samethings, sometimes purposely.” For example, some aircraft costs include EW systems and weaponsintegration, while others do not. Currency exchange fluctuations, and the random use of then-year- as opposed to current - prices, and of fly-away as opposed to unit production prices, furthercomplicate the issue. Finally, European prices include value-added tax on domestic sales, while USdomestic prices do not.To obtain the most objective price data available, we opted to only use prices quoted to thedomestic customer (including, as applicable, value-added tax). We also examined two benchmarkprices:-
Program Unit Cost
, obtained by dividing the total program cost by the number of aircraftproduced. This is possibly the most significant benchmark, as it includes research and developmentcosts as well as all related ancillary costs (support equipment, spare parts, documentation etc.);-
Unit Procurement Cost
, obtained by dividing the cost of the latest production contract (thusexcluding most R&D and support costs) by the number of aircraft contracted. In some respects,this can also be defined as the marginal cost of additional aircraft, and provides a benchmark forcomparisons.To avoid any possible bias, manufacturers were not initially consulted (except for Gripen, see notep. 8), but were offered the opportunity to comment the study’s findings and to offer their own pricefigures. When provided, these are included in the relevant notes below. Lockheed is the onlycompany that did not respond to our requests for information.We also opted (except for Gripen) to disregard export contracts, as their costs depend on therequirements of each customer (size of spares inventory; number of operating bases; paymentsterms; R&D recoupment charged or not, etc.), and often have no direct link to the actual cost of the aircraft themselves.Despite these obstacles, this analysis summarizes the most recent cost figures and clearly sets outwhat information was provided by which source. It should thus contribute to a betterunderstanding of these costs, and provide a credible basis for future cost and price comparisons.We believe it provides the most accurate information currently available of the price of Westerncombat aircraft to their domestic buyers.To allow readers to refine these price estimates, we have listed all of our sources of aircraftfinancial data, and added hypertext links. Readers will thus also be able to confirm the origin of data used as the basis of this study.

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