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Cost per Flying Hour (CPFH) Metric Is Multidimensional and Used by DoD in Different Ways

• CPFH is a metric widely used by the military services for different purposes, such as for flying-hour programs (FHP), for flying-hour reimbursable billing rates, and to compare O&S costs of different aircraft programs.
• The key difference between CPFH used for FHP and reimbursable billing and the CPFH used to compare O&S costs of different aircraft programs is that cross-system O&S comparisons intentionally include some categories that are fixed (i.e., do not vary with flying hours).

O&S Cost per Aircraft Is Alternative Affordability Metric to CPFH in Comparing O&S Costs of Different Aircraft

• The CPFH metric can behave counterintuitively: When flying hours are reduced, total program costs are reduced, but cost per flight hour can increase.
• Decisionmakers could use CPFH to compare O&S costs of different aircraft when the appropriate standardization steps mentioned in the report are taken.
• Comparisons of CPFH are most appropriate when the intention is to compare costs that vary closely with flying hours, such as fuel, depot-level reparables, or perhaps engine-related costs.
• O&S costs will include elements that are largely fixed or insensitive to changes in flying hours — such as unit-level personnel, sustaining support, or modifications.

This report examines several issues associated with the cost-per-flying-hour (CPFH) metric used in the Department of Defense (DoD). CPFH is calculated as the ratio of an aircraft fleet's operating-and-support (O&S) costs divided by its flying hours. Subsets of an aircraft fleet's total annual O&S cost are budgeted in DoD for the flying-hour program used to achieve and maintain flight-crew proficiency and used to calculate hourly rates when DoD aircraft are flown on a reimbursable basis. In addition, other aggregations of costs are used to calculate CPFH and compare O&S costs of different aircraft for various other reasons, including informing decisions on aircraft acquisition and force structure.

This report examines usages of CPFH in DoD, including its use to compare O&S costs of different aircraft. The report recommends a definition of CPFH to be used when comparing aircraft and recommends several ways the cost and usage data should be normalized. The report also recommends a cost-per-aircraft metric (where primary aircraft inventory [PAI] is used for the number of aircraft) as an alternative metric for comparing the O&S costs of aircraft.

• Chapter One

  Introduction

• Chapter Two

  Background

• Chapter Three

  Applications of Cost per Flying Hour in DoD

• Chapter Four

  Alternative Metrics for Aircraft Operating and Support Costs

• Chapter Five

  Recommendations

• Appendix A

  An Example of How Cost per Flying Hour and Cost per Aircraft Change When Flying Hours Are Reduced

• Appendix B

  Statistical Analysis of the Relationship Between Aircraft Annual O&S Costs and Number of Aircraft and Flying Hours