The cost of operating the JSF
The JSF will continue to cost money, even after the formal purchase transaction has been completed. The money involved consists of the annual cost of operating and maintaining (or ‘sustaining’, as this is known) the aircraft. The Minister of Defence refers to these costs as ‘operating costs’.
Operation and maintenance of the JSF
- aircraft fuel;
- training and employing pilots and maintenance personnel;
- spare parts;
- gradual improvements made to the aircraft during the course of its service life.
Under the terms of the financial framework, the aggregate operating costs may not exceed €270 million per annum. This upper limit is index-linked, which means that it is adjusted every year in line with inflation so as to keep pace with current prices. The operating costs budget includes a 10% contingency reserve that is not available for spending.
Contingency reserve
The operating costs budget includes a 10% contingency reserve that is not available for spending.
Transfer of funds
It became clear in 2013 that, while the annual budget for operating costs would not be sufficient to pay for 37 aircraft, there was nonetheless a large surplus on the budget for investment costs. For this reason, the government decided to transfer part of the investment costs budget, viz. a figure of €270 million, to the annual budget for operating costs. This represents an annual increase of €9 million in the budget for operating costs over a 30-year period, which may now exceed the maximum limit of €270 million per annum (based on 2013 prices).
Breakdown of operating costs in 2016
The chart shows, very broadly speaking, the nature of the costs involved in operating the JSF and their relative shares of the aggregate operating costs (please note that the chart shows the figures for 2016; the estimates may differ from year to year).
Estimates
The Minister of Defence includes the latest cost estimates in the regular progress reports on the replacement of the F-16 and the acquisition of the JSF. The progress reports also quote the amounts actually paid, which may be either higher or lower than the estimates. Under the terms of the financial framework, the aggregate operating costs may not exceed €270 million per annum (plus the amount transferred from the investment costs budget).
The Ministry of Defence changed the breakdown of operating costs in its annual report for 2013, since when the breakdown has not been exactly the same as that shown in the pie chart above. This type of alteration makes it harder to track the diachronic changes in each cost item.
Uncertainty surrounding maintenance network
The JPO wants the manufacturers to club together to set up a global maintenance network for the JSF. However, even in 2018 it is unclear what such a network would look like and how much it would cost. This lack of clarity has also created a great deal of uncertainty about the cost estimates.