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Should the Congress add funding for the Air Force's new primary trainer, the T-46? Or would modifications to the current trainer, the T-37, suffice? How would such a decision affect the cost and capabilities of the trainer fleet? These will be important questions as the Congress continues debate over the Department of Defense budget for 1987. This analysis by the Congressional Budget Office (CBO) assesses the costs and effects of alternative procurement or modification profiles that could result from these decisions. The study was done at the request of the House Committee on Armed Services. In keeping with CBO's mandate to provide objective analysis, the study contains no recommendations.

Lane Pierrot, of CBO's National Security Division, and William P. Myers, of CBO's Budget Analysis Division, prepared the analysis under the general supervision of Robert F. Hale and John D. Mayer, Jr. Robert Kornfeld, of CBO, provided extensive assistance during the study's preparation. The authors gratefully acknowledge the contributions of Wayne Glass, Diane Griffith, Rebecca J. Kees, and Francis Pierce.
 

Rudolph G. Penner
Director
March 1986
 
 

Each year the U.S. Air Force trains about 2,100 new pilots. Early phases of that training currently take place in a T-37 aircraft. But the T-37 is old and lacks features the Air Force believes are important. So in 1982 the Air Force contracted with Fairchild Republic Company to produce a new trainer aircraft, the T-46. Fairchild, however, has suffered major losses due to cost overruns and management problems in developing the T-46. The Air Force has also had to hold down its planned spending. For these and possibly other reasons, the Air Force has not put any money into its 1987 budget for further purchases of the T-46 and is considering alternatives.

This paper analyzes the costs and effects of several alternative approaches that meet Air Force trainer needs, including:

• Continued procurement of T-46 aircraft;
  
  
• Major modification of existing T-37 aircraft coupled with purchases of some additional trainer aircraft other than the T-46;
  
  
• Minor modifications of the T-37 coupled with purchases of other aircraft.

The T-46 Approach

The T-46 would meet Air Force needs for a new trainer with a new, more capable aircraft. It would have a better engine than the existing T-37, a pressurized cockpit allowing flight at higher altitudes less congested with civilian aircraft, better bad-weather capability, improved ejection seats for safety, and other advantages like improvements in reliability and maintainability. These improvements, the Air Force argues, would allow the T-46 to provide better training for more hours per month than the existing T-37 but at less operating cost per hour.

Costs to design and buy 650 T-46s would total about $2.6 billion, more than the costs to modify the T-37s. Costs to operate the T-46 would, however, be lower than the T-37. Thus 20-year costs for the T-46 would total about $6.1 billion (see the Summary Table and Alternative I in the text). These costs include investment and costs to operate the fleet for 20 years (1987-2006), discounted at an annual real rate of 4 percent. (Alternative discount rates of 3 and 5 percent do not alter the relative rankings of the options considered in most cases.)

There is considerable risk of growth in T-46 investment costs, however. These investment costs reflect the funding that was included in the 1986 budget submission. Fairchild's cost difficulties in lot 1 of production suggest that actual investment costs could be higher than those assumed here, though it is difficult to assess the amount of the increase.

Major Modification of the T-37

An alternative approach would buy no more T-46s and instead make major modifications of the T-37 to give it many of the same capabilities as the T-46. These would include altering it to extend its service life into the next century, providing a new engine, pressurizing its cockpit, and improving its ejection seat and up-grading its avionics. In addition, this approach entails buying 100 of a new trainer to offset the limited size of the T-37 fleet. For specificity in costing, the new trainer is assumed to be additional purchases of the TTB trainer aircraft that the Air Force already plans to buy for other missions.

This option would eventually meet all Air Force requirements for training capacity with a modified T-37 designed to be nearly as capable as the T-46. It is not, however, identical in capability to the T-46 approach. Most importantly, this approach would not meet all needs until the mid or late 1990s because of the time needed to design and implement modifications and to buy the new TTB aircraft. The T-46--if it stays on the schedule assumed in last year's budget--would avoid most near-term shortfalls.

Given Air Force assumptions about the "utilization" hours that modified T-37s would be flown each month, total costs of this approach would be similar to those for the T-46, though investment costs would be less. This approach would cost much less in investment over the next five years than continuing to buy the T-46 because it would take more time to accomplish the modifications and buy TTB aircraft than to buy new T-46s that are already designed and under construction. Total investment costs for this option would also be less than for the T-46 by 23 percent. Twenty-year costs, however, would be 2 percent higher because investment savings are offset by higher operating costs (see Summary Table and Alternative IV A in the text).

On the other hand, if the Air Force obtained improvements in utilization similar to those it expects for the T-46, this option would be substantially cheaper in terms of total investment (46 percent) and in terms of 20-year costs (16 percent). (See Summary Table and Alternative IV B in the text.) Currently, the Air Force believes that the T-46 can be operated 60 hours per month, but that the T-37--even though extensively improved--could not get above its current level of 45 hours per month. Since many of the factors that lead to assumed improvements in utilization of the T-46 are also part of this major modification, it would seem reasonable to expect some improvement in the utilization of the modified T-37, though it might be difficult to achieve 60 hours of monthly utilization. Absent a good assessment of potential utilization, this analysis shows both cases. In both cases, there should be less uncertainty about T-37 operating costs than about the T-46 because the Air Force has had extensive experience with the plane.
 

Minor Modifications of the T-37

If funds are stringent over the next few years, Air Force needs could be met at least partially through less extensive modifications of the T-37, such as modifications necessary to extend the life of the aircraft or those plus new engines. While these alternatives would be 35 to 69 percent cheaper in terms of total investment than continuing with the T-46 or making major modifications of the T-37, they would only be 3 percent to 12 percent cheaper in terms of 20-year costs as lower investment costs are offset by higher operating costs (see Summary Table and Alternatives I and II in the text). Moreover, in the long run, past the 20 years of this analysis, the advantages of lower investment costs would be outweighed by higher operating costs for these alternatives. Also, these more limited modifications would not provide the improvements in safety and utilization that the Air Force believes are important.

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