Commercial Aircraft Pricing: Application of Lessons Learned

Abstract

The procurement of commercial items presents both opportunities and challenges for the Department of Defense. Among the challenges is the negotiation of fair and reasonable prices with suppliers where competitive sources are not relevant. This paper presents analyses to address this challenge for commercial aircraft that serve as the basis for military systems. Using insights from the economics literature on aspects of the commercial aircraft market, we develop estimating models for aircraft price that take into account both supply and demand drivers, across both aircraft models and time. These models are applied to the KC-46A airborne tanker and Presidential Aircraft Replacement (PAR) programs, prices of which are subject to negotiation. Other factors affecting the commercial aircraft market and aircraft used in these programs (the Boeing 767 and 747), are also addressed. Lessons learned applicable to the general problem of negotiation of contracts for commercial items are enumerated.

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Document Details

Document Type
Technical Report
Publication Date
Dec 01, 2017
Accession Number
AD1048156

Entities

People

  • Bruce R. Harmon
  • Mark F. Kaye

Organizations

  • Institute for Defense Analyses

Tags

Communities of Interest

  • Air Platforms

DTIC Thesaurus Topics

  • Aircraft Equipment
  • Aircraft Industry
  • Aircrafts
  • Airframes
  • Commerce
  • Commercial Aircraft
  • Contracts
  • Department Of Defense
  • Governments
  • Military Aircraft
  • National Security
  • Passenger Aircraft
  • Procurement
  • Regression Analysis
  • Statistical Analysis
  • Tanker Aircraft
  • Transport Aircraft

Readers

  • Aviation Science / Aeronautics.
  • Defense Financial Management and Audit.
  • Economics