Costs and Prices of UK Military Aircraft in War and Peace

Abstract

ABSTRACT Much of the literature on military aircraft unit costs is based on US data. This article adds to our knowledge by using an original data set for UK military aircraft costs, profits and prices. A distinction is made between unit costs within a generation of aircraft and between generations. Four research questions are addressed. First, is the UK aircraft industry a decreasing cost industry; second, are new entrants higher cost suppliers; third, what is the evidence on profitability in war and peace and between new entrants and original developers; fourth, what is the UK evidence on Augustine-type cost escalation and on the efficiency of aircraft procurement in war and peace? The UK aircraft industry was found to be a decreasing cost industry reflecting both scale and learning economies. Typically, new entrants were higher cost suppliers and profit rates were higher in peace-time. There was substantial Augustine cost escalation for UK combat aircraft and doubts are raised about the efficiency of military aircraft procurement.