PLAAF Flyaway Costs Thread

[stannislas]

As you are agreeing with your comments, acquisition cost is not the sole metrics in comparing across platforms. There are other important considerations such as sustainability, serviceability, parts availability, support services, upgrade pathways et al. as evident from the Malaysian experience making acquisition decisions on cost is short sighted and runs counter to a sustainable value proposition.

US could keep producing parts for F-18 to make sure its maintenance cost low, so does China, but USSR can't as it falls. That's why I said it's not a fair comparison in the first place since it's comparing the cost produced from China and the US, not a regime that no longer exists.

I disagree with the general argument of comparability on the basis of mission sets as they are too broad in nature. Based on mission set, I can make the argument that a B-25 and a F-117 is comparable because both are aerial platforms for delivering bombs. In a J-20 vs F-22 conversation, there are many capabilities that are classified and unknown. In the case of the J-20 we hardly know anything about its capabilities. How on earth can you make an argument that they are comparable? What is your basis? You need to make your case based on facts, not opinion.

Of course, you can argue B-25 and F-117 are comparable, and they do in a certain level, but when the conditions of a mission getting more and more specific, like to get around a 80-90s Soviet air defense system than B-25 will no longer fit the bill. Continue this process for a few rounds, you will find certain weapons that were used to conduct comparable missions or server similar roles by different countries, and those weapons are comparable.

I can give you an example of this, RQ-9 Reaper and Wing Loong are usually be considered as comparable, as their characteristics are all very close to each other, many countries have adopted either system. But can people like us, without knowing their specific parameters, still get this conclusion? Of course, based on their role and performance. Of course, we might not able to tell how much Wing Loong 2 is better than Wing Loong 1, but with more and more results come out we might.

The method I'm using here is not based on my opinion, it's base on the fact, and this kind of method has been wildly used in almost all subjects, math, physics, engineering, etc. If I remembered correctly, it's called 'Induction'. People always use this method to find out what's inside a black box system and evaluate its performance and functionality without knowing what's inside.

One more thing I want to stress here, I'm not trying to say which one is better between RQ-9 and Wing Loong, I'm just saying giving the fact that they are conducting a similar role and mission. We could say, to achieve a similar mission, the US needs to spend X times more cost (assuming RQ-9 is more expensive than Wing Loong, which I think it is) than Chinese, and X could be something like, weapon price ratio * weapon unit ratio used in this mission. You can add the operational cost and other facts to the equations, it will be more completed, but you will get a better comparison for sure.

 

[Inst]

Bear in mind the fly away prices between a foreign buyer and PLAAF is very different. Government owned and controlled AVIC is restricted by the government on maximum profit margin they are allowed to earn on selling to another government entity, i.e. PLAAF. And such restriction is not valid for foreign customer.

Selling to PLA, PLAAF and PLAN are done in socialist way, as doing a service to the country earning only token profits. Thus fly away "cost" = ex-factory cost + token profit margin.

Selling to foreign customers is done in a market capitalist way as in making maximum profit permissible under competitive condition, fighting off other sellers. Fly away "cost" = ex-factory cost + big profit margin and may be + other add-on parts and services,

Correct, and even when you go between USAF vs Lockheed Martin the same factor applies. If you read the article on the Soviet comparative advantage in military manufacturing (lower labor costs), the Soviet Union actually wanted to hide its actual cost structure because it could command global prices that were to a degree set by the Americans. That resulted in large profits for the Soviet defense export sector.

Still, foreign pricing still provides an upper ceiling on how much the Chinese can produce airframes for, for instance, if the JF-17 Blk I were exported at 16 million as per rumored, we know the actual cost to produce would be 16 million or less on flyaway cost (since, going from microeconomics vendors are highly unlikely to sell below marginal cost, although there are circumstances where they'll sell below unit cost).

 

[Brumby]

US could keep producing parts for F-18 to make sure its maintenance cost low, so does China, but USSR can't as it falls. That's why I said it's not a fair comparison in the first place since it's comparing the cost produced from China and the US, not a regime that no longer exists.

The question you need to address is not whether it is a fair comparison but whether the comparison is representative of a subject matter. In other words it is about context and meaning.

II is important that we both have a common starting point on the subject. If not we are simply commenting past each other. As such I am outlining the premise of my position. You are free to agree or disagree provided you explain your position.

Acquisition of a modern combat airplane is a fairly complex process because it is a capital purchase and not an expendable. For example, the evaluation process you go through to buy a car vs buying a book is different. With a capital item, the main considerations are its economic value and longevity relative to initial outlay and ongoing maintenance.Therefore it is about probabilistic outcome. Your argument of spare parts availability and nature of condition (be it second hand) are positive factors in the determination of economic life and not excuses in the acquisition consideration. All factors are important considerations in the conversation - not just initial cost.

Airplane designs often are about trade offs and that may include ease for manufacturing at the expense of future maintenance issues down stream.

Of course, you can argue B-25 and F-117 are comparable, and they do in a certain level, but when the conditions of a mission getting more and more specific, like to get around a 80-90s Soviet air defense system than B-25 will no longer fit the bill. Continue this process for a few rounds, you will find certain weapons that were used to conduct comparable missions or server similar roles by different countries, and those weapons are comparable.

I can give you an example of this, RQ-9 Reaper and Wing Loong are usually be considered as comparable, as their characteristics are all very close to each other, many countries have adopted either system. But can people like us, without knowing their specific parameters, still get this conclusion? Of course, based on their role and performance. Of course, we might not able to tell how much Wing Loong 2 is better than Wing Loong 1, but with more and more results come out we might.

Using your example of Wing Long 1 and Wing Long 2. Would you say they are comparable? If yes, why? If not, why not?

The method I'm using here is not based on my opinion, it's base on the fact, and this kind of method has been wildly used in almost all subjects, math, physics, engineering, etc. If I remembered correctly, it's called 'Induction'. People always use this method to find out what's inside a black box system and evaluate its performance and functionality without knowing what's inside.

Inductive reasoning is a logical process in which multiple premises, all believed true or found true most of the time, are combined to obtain a specific conclusion. Inductive reasoning is often used in applications that involve prediction, forecasting, or behavior.

Are you attempting to invoke inductive reasoning in your argument? If yes you then need to outline your premises to make your case in accordance with the process of inductive reasoning.

One more thing I want to stress here, I'm not trying to say which one is better between RQ-9 and Wing Loong, I'm just saying giving the fact that they are conducting a similar role and mission. We could say, to achieve a similar mission, the US needs to spend X times more cost (assuming RQ-9 is more expensive than Wing Loong, which I think it is) than Chinese, and X could be something like, weapon price ratio * weapon unit ratio used in this mission. You can add the operational cost and other facts to the equations, it will be more completed, but you will get a better comparison for sure.

Very often the term used is analogous rather than comparable because the latter is describing the functional nature rather than capabilities.

Correct, and even when you go between USAF vs Lockheed Martin the same factor applies. If you read the article on the Soviet comparative advantage in military manufacturing (lower labor costs), the Soviet Union actually wanted to hide its actual cost structure because it could command global prices that were to a degree set by the Americans. That resulted in large profits for the Soviet defense export sector.

Still, foreign pricing still provides an upper ceiling on how much the Chinese can produce airframes for, for instance, if the JF-17 Blk I were exported at 16 million as per rumored, we know the actual cost to produce would be 16 million or less on flyaway cost (since, going from microeconomics vendors are highly unlikely to sell below marginal cost, although there are circumstances where they'll sell below unit cost).

I think there is a general misnomer about the profit margins of US military complex such as Lockheed Martin. Its gross profit generally is about 14-15 % and its net is around 10 %. This is based on its financials as it is publicly listed.



This is also consistent with RAND's study.


Frankly a 5% profit margin is not a sustainable business model and likely than not go out of business over time.

 

[Inst]

@Brumby

My point is more that Soviet defense firms had higher operating margins because they could work at international prices while paying low wages to workers. I am reading that article and assuming it's a myth that the Soviets collapsed the way they did because of excessive defense spending; defense spending as a percentage of GDP was only 8-15% toward the end.

A bigger issue was probably over-accumulation of capital goods without a corresponding increase in total factor productivity; i.e, the Soviets missed the American digitization revolution by being content to stay a generation behind or so alongside the inefficiencies caused by a command economy.

====

And regarding Lockmart, there's arguments for monopoly based on the effects of capital accumulation (more profits -> more R&D spending), but a monopoly isn't healthy, as cost overruns and excessive delays by Lockmart have shown. IIRC, in the F135 vs F136 case, the moment GE got nixed, PW stopped attempting cost controls on the F135 because the US no longer had an alternative option.

In the US, the NGAD program seems to have gone toward the "Digital Century Fighter" concept, where to prevent a repeat of the F-35 debacle, the Pentagon is seeking rapid development (the biggest problem with the F-35 program) and a sequence of different fighters, presumably by different vendors, even if it costs more.

(And that's something most posters here don't want to face, i.e, NGAD with 5.5th gen or 6th gen will be hitting IOC around 2025 and J-20 wank is dead unless Chengdu upgrades the aircraft to keep up with the times).

 

[Brumby]

@Brumby

My point is more that Soviet defense firms had higher operating margins because they could work at international prices while paying low wages to workers. I am reading that article and assuming it's a myth that the Soviets collapsed the way they did because of excessive defense spending; defense spending as a percentage of GDP was only 8-15% toward the end.

A bigger issue was probably over-accumulation of capital goods without a corresponding increase in total factor productivity; i.e, the Soviets missed the American digitization revolution by being content to stay a generation behind or so alongside the inefficiencies caused by a command economy.

Your primary objective of this thread as you outlined is to establish the probable cost of PLAAF production. I do not understand what has Soviet command economy policies have to do with the subject matter of this thread. If there is some causative relationship please point it out.

And regarding Lockmart, there's arguments for monopoly based on the effects of capital accumulation (more profits -> more R&D spending), but a monopoly isn't healthy, as cost overruns and excessive delays by Lockmart have shown. IIRC, in the F135 vs F136 case, the moment GE got nixed, PW stopped attempting cost controls on the F135 because the US no longer had an alternative option.

In the US, the NGAD program seems to have gone toward the "Digital Century Fighter" concept, where to prevent a repeat of the F-35 debacle, the Pentagon is seeking rapid development (the biggest problem with the F-35 program) and a sequence of different fighters, presumably by different vendors, even if it costs more.

(And that's something most posters here don't want to face, i.e, NGAD with 5.5th gen or 6th gen will be hitting IOC around 2025 and J-20 wank is dead unless Chengdu upgrades the aircraft to keep up with the times).

I am afraid I have to say that you are making a bunch of non sequitur and incomprehensible statements. My only point about LM is to point out that as the facts suggest, net profit margins are approximately 10 % within the US aerospace industry.

As I stated from the outset, you need to articulate clearly the objective(s) of this thread because any conversation need to tie back to the objectives. If not, it will be a bunch of incoherent statements which I am witnessing.

 

[stannislas]

The question you need to address is not whether it is a fair comparison but whether the comparison is representative of a subject matter. In other words it is about context and meaning.

II is important that we both have a common starting point on the subject. If not we are simply commenting past each other. As such I am outlining the premise of my position. You are free to agree or disagree provided you explain your position.

Acquisition of a modern combat airplane is a fairly complex process because it is a capital purchase and not an expendable. For example, the evaluation process you go through to buy a car vs buying a book is different. With a capital item, the main considerations are its economic value and longevity relative to initial outlay and ongoing maintenance.Therefore it is about probabilistic outcome. Your argument of spare parts availability and nature of condition (be it second hand) are positive factors in the determination of economic life and not excuses in the acquisition consideration. All factors are important considerations in the conversation - not just initial cost.

Airplane designs often are about trade offs and that may include ease for manufacturing at the expense of future maintenance issues down stream.

You are really funny person you know, keep quibbling the question without listening to other people saying and answer it directly.

When I was referring to two similar aircraft with the different price tag, you came up with a ridiculous example on Malaysian retiring old Soviet jet, dude, different countries have different situation, why don't you use Chinese as an example, they still haven't fully retired their first batch Su-27SK, and it was imported way earlier than Malaysia and the flying hour are much higher. Simply because the Chinese can produce what they need cheaply, so their old aircraft are maintained in a much better condition.

Then when I point out this is not a fair comparison, you start to redirect questions, saying is not about fair or not and talks about trade-offs, tell me, if it's not fair, why you use it in the first place? and what trade-off stops Chinese manufacture their parts for their weapons cheaply?

Most importantly, where are you going to redirect to this time?

Using your example of Wing Long 1 and Wing Long 2. Would you say they are comparable? If yes, why? If not, why not?

Yes, and it's the same reason I just explained to you

Inductive reasoning is a logical process in which multiple premises, all believed true or found true most of the time, are combined to obtain a specific conclusion. Inductive reasoning is often used in applications that involve prediction, forecasting, or behavior.

Are you attempting to invoke inductive reasoning in your argument? If yes you then need to outline your premises to make your case in accordance with the process of inductive reasoning.


Very often the term used is analogous rather than comparable because the latter is describing the functional nature rather than capabilities.

Like I said, "if I remember correctly", I got confused with the terminology. But whatever, my arguments stays the same:

"Similar Aircraft could be compared"

Please don't quibbling again. It's not a discussion anymore.

 

[Brumby]

You are really funny person you know, keep quibbling the question without listening to other people saying and answer it directly.
.

The question keeps popping up because you have not provided any answer beyond a generalized opinion..

When I was referring to two similar aircraft with the different price tag,
.

What different price tag? Please point your post that actually has specific numbers.

why don't you use Chinese as an example, they still haven't fully retired their first batch Su-27SK, and it was imported way earlier than Malaysia and the flying hour are much higher. Simply because the Chinese can produce what they need cheaply, so their old aircraft are maintained in a much better condition.

.I am all ears them. Provide me with some Chinese numbers then.

[E="stannislas, post: 584892, member: 5282"]
Then when I point out this is not a fair comparison, you start to redirect questions, saying is not about fair or not and talks about trade-offs, tell me, if it's not fair, why you use it in the first place? and what trade-off stops Chinese manufacture their parts for their weapons cheaply?
[/QUOTE]
I don't think you even understand what I had been saying to you (twice).

You said it was not fair that the Malaysian example is used because they are either old equipment or lacks spare. In reply I actually walk you through the buying process of capital equipment. Do you think the Malaysians are morons that they don't know what the are buying or from whom? The negotiated price is a sum of many parts and price is just one of them. In other words it is a holistic consideration. Do you seriously think that price is the sole consideration?

The principle I was making is a universal one when it comes to buying capital items. It doesn't matter whether you are buying from, China, Russia or from Timbaktu.

Your respond is China can sell cheap - period. Sorry that is simply a claim. You need to substantiate it in some shape or form.

Yes, and it's the same reason I just explained to you
.

If Wing Long 1 and Wing Long 2 are comparable, please address the follow up question. Is Wing Long 2 and Wing Long 1 being sold at the same price? What would be your response?

 

[stannislas]

The question keeps popping up because you have not provided any answer beyond a generalized opinion..


What different price tag? Please point your post that actually has specific numbers.



.I am all ears them. Provide me with some Chinese numbers then.


Then when I point out this is not a fair comparison, you start to redirect questions, saying is not about fair or not and talks about trade-offs, tell me, if it's not fair, why you use it in the first place? and what trade-off stops Chinese manufacture their parts for their weapons cheaply?

I don't think you even understand what I had been saying to you (twice).

You said it was not fair that the Malaysian example is used because they are either old equipment or lacks spare. In reply I actually walk you through the buying process of capital equipment. Do you think the Malaysians are morons that they don't know what the are buying or from whom? The negotiated price is a sum of many parts and price is just one of them. In other words it is a holistic consideration. Do you seriously think that price is the sole consideration?

The principle I was making is a universal one when it comes to buying capital items. It doesn't matter whether you are buying from, China, Russia or from Timbaktu.

Your respond is China can sell cheap - period. Sorry that is simply a claim. You need to substantiate it in some shape or form.



If Wing Long 1 and Wing Long 2 are comparable, please address the follow up question. Is Wing Long 2 and Wing Long 1 being sold at the same price? What would be your response?

Here we go again, when could you stop quibbling and stop circling around over and over again?

Let me repeat again, all my replies above were simply opposed to your statement on "weapons could not be compared to each other"

You are the person who started picking tiny details and specifics, which surprisingly if you read my answer carefully, you will learn how to conduct a rough comparison without knowing the military secret.

The answer I gave has nothing to do with cost, because the statement I made was, similar weapons between China and the US have price difference, and your answer was the "Cost (even if known) itself is a very poor measure because there are other important attributes in a weapons platform", seriously, have you read other people's responses before you reply?

Also, stop using sentimental language like "Malaysians are morons", I haven't said or imply anything like that what so ever, it all came from your mouth. And just to enlight your from the confusion you got in there, NO, military purchase is not like what you said, probably the only country in the world will conduct the full life cycle estimation and buy all the spear parts first is Taiwan, as the "One China policy" sometimes cease them getting parts when they seriously needed, so they have to prepare everything, in case when Sino-US relationship get better and military sells got paused. Other countries will normally store some parts till for example its first major service/repair but not for the whole life cycle of a weapon.

Lastly, to answer your Wing Long question, I don't know the price besides of Google results, and it doesn't matter, because with my original example was about "similar weapons are comparable", and I don't how many times I have already. I also said "I'm not trying to say which one is better between RQ-9 and Wing Loong, I'm just saying giving the fact that they are conducting a similar role and mission", and now you keep asking me to compare between Wing Long 2 and Wing Long 1? Seriously? again you didn't read other people's responses, and just simple quibble your and answer and keep twisting the question.

 

[plawolf]

Correct, and even when you go between USAF vs Lockheed Martin the same factor applies.

No it absolutely does not!

The extent of pork barrelling and gravy training that happens with US defence procurement is so widespread and well known there is not one but two terms for it.

If we look at some actual numbers, Singapore purchased a dozen F15SGs for $1bn.

The USAF just set aside $1.2bn for the first 12 of its 80 F15X order for this financial year.

That’s about as direct a comparison as you can hope to realistically get.

 

[Inst]

No it absolutely does not!

The extent of pork barrelling and gravy training that happens with US defence procurement is so widespread and well known there is not one but two terms for it.

If we look at some actual numbers, Singapore purchased a dozen F15SGs for $1bn.

The USAF just set aside $1.2bn for the first 12 of its 80 F15X order for this financial year.

That’s about as direct a comparison as you can hope to realistically get.

Remember that the Chinese bought Su-35 at a per-unit cost of $83 million. That implies that the total cost of the support package attached to the Su-35s (engines, spares) comes out to about $40 million.

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Nope, latest claim is $2.5 billion putting the cost including support package at about 100 million per plane.

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When Singapore orders F-15SGs, the cost of purchase usually includes a support package of some kind (since, if the fighters break down or are otherwise damaged, the manufacturer is expected to provide provisions for repairs).

So going in for export pricing usually includes a few fudge factors (spares, support, etc).