Over the past several decades, a substantial change has occurred in the composition of demand for military aircraft, as has a consequent change in the size and composition of the industry supplying those aircraft. At one point in the middle of the last century, when the technology of jet engines and jet-powered aircraft was evolving rapidly, the Air Force alone was simultaneously funding eight jet-fighter research and development (R&D) programs and seven jet-bomber R&D programs (Lorell, 2003). During that period, 12 to 15 different military aircraft models were usually in production at the same time, not counting trainers.

That plethora...

The United States now has nearly a century of experience building aircraft for military use. The present report deals with the recent past and the near future; however, a review of the longer span of experience appears in order here for providing a richer understanding of the forces and events that have led to the current status and issues.

We begin with a brief overview of the industry, from its beginnings to the end of the Cold War, focusing on changes in the number of prime contractors and the major events that caused those changes. The important observation from that...

The preceding chapter provided an overview of how the military aircraft industry evolved throughout the twentieth century. It paid particular attention to aspects of that evolution that might affect competition among the firms. But competition has no particular value in and of itself; instead, it is a mechanism for achieving other goals, such as enhancing innovation and controlling costs.

In this study, we are interested in how competition in the military aircraft industry affects the rate of technological innovation in that industry, and especially in whether a reduction in the number of competing firms might affect the overall rate of...

In Chapter Two, we summarized some past and current trends in the size, composition, and revenue of the military aircraft industry. Although the industry has consolidated from over a dozen firms in the 1940s to three today, those three firms appear to be vigorously competitive. Unfortunately, the history of the past and circumstances of the present do not provide strong insights into how the industry structure is likely to evolve over the future—or even over the next few years. That future evolution is important: If further consolidation does occur, the remaining firms—or firm—might not exhibit the same...

In the preceding chapters, we presented information suggesting that production business is likely to be sufficient to sustain the general corporate structure of all three firms, but we can foresee situations in which the amount of new design and development business might fall short of that needed to enable all three firms to sustain a vigorous competition on future weapon-system programs. Thus, we believe it appropriate to examine options for sustaining key elements of the industry through a fallow period without new system starts, should that occur.

Of the several approaches that have been suggested for addressing this situation, we...

In this study, we have argued that the future composition and capabilities of the military aircraft industry depend largely on the amount of business they receive from DoD and on how that business is distributed among development of technology, development of new designs, and production of completed designs. From this general perspective, we examined three broad policy options:

No New Investments Beyond FY03 FYDP. This is the “base case,” in which it is assumed that no new system-development programs will be introduced during the next few years, beyond those programs already included in the FYDP. The corresponding policy is to...