The reimbursement policy

 

Questions
1. Is the $179,750 cost per hour a fixed, variable, or mixed cost? Explain.
2. Exact details about the cost composition of the Air Force One travel are kept secret to protect the president. Use your imagination, and the reading above, to make a list of the costs that you think might be included in $179,750 per hour cost estimate.
3. Categorize each cost in your list as fixed, variable, or mixed.
4. The number of trips taken by a president in any given year fluctuates and is dependent on the political climate, crises, economics, and the like. How useful do you think this cost per hour is?
5. What purpose(s) can the $179,750 cost per hour be used for? Are there any purposes for which that cost is not representative of the “true” cost?
6. Can you think of a better way to represent/communicate the cost of Air Force One?
7. Do you think the reimbursement policy is fair to the president? Why or why not?
8. Do you think the reimbursement policy is fair to the taxpayers? Why or why not?

Sample Solution

Air Force One Costs: Analysis and Discussion

  1. Cost Classification: The $179,750 cost per hour for Air Force One travel is a mixed cost with both fixed and variable components.

Fixed Costs:

  • Aircraft depreciation and maintenance: The cost of upkeep and repairs remains constant regardless of flight hours.
  • Crew salaries and benefits: Pilots, navigators, and other support personnel have fixed salaries and benefits.
  • Base operating costs: Maintaining hangar space, security personnel, and ground-crew salaries are independent of flight frequency.

Variable Costs:

  • Fuel consumption: Directly proportional to flight time and distance.
  • Catering and onboard supplies: Food, beverages, and amenities vary depending on trip length and passenger needs.
  • Landing fees and airport charges: Fluctuate based on destination and airport infrastructure.
  • Security measures: Additional security protocols for specific trips can increase costs.
  1. Cost Components:
  • Fuel: Major variable cost based on flight distance and fuel prices.
  • Crew salaries and benefits: Fixed cost for regular crew, variable for additional personnel on specific trips.
  • Maintenance and repairs: Fixed cost for routine maintenance, variable for unforeseen repairs or equipment upgrades.
  • Security: Fixed cost for basic security infrastructure, variable for additional measures like aerial escorts or ground security at destinations.
  • Catering: Variable cost based on the number of passengers, trip duration, and menu complexity.
  • Landing fees and airport charges: Variable based on destination and airport facilities.
  • Communication and navigation: Variable cost depending on flight routes and technology utilized.
  1. Cost Categorization:
Cost Component Classification Reason
Fuel Variable Consumption varies with flight time and distance
Crew salaries and benefits Fixed/Variable Regular crew fixed, additional personnel variable
Maintenance and repairs Fixed/Variable Routine maintenance fixed, unforeseen repairs variable
Security Fixed/Variable Basic infrastructure fixed, additional measures variable
Catering Variable Cost depends on passengers, trip duration, and menu
Landing fees and airport charges Variable Based on destination and airport facilities
Communication and navigation Variable Technology usage and flight routes impact cost

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  1. Usefulness of Cost per Hour: The cost per hour provides a general estimate of Air Force One travel expenses, but its usefulness is limited due to:
  • Ignoring total annual cost: Fluctuations in flight hours make per-hour cost less informative about overall budget impact.
  • Neglecting trip-specific considerations: Additional security measures or extended trips can significantly increase total cost beyond the hourly estimate.
  • Varying political context: Travel frequency and destinations depend on diverse factors, making historical per-hour data less relevant for future projections.
  1. Cost per Hour Purposes:
  • Budgeting and resource allocation: Provides a rough estimate for financial planning and resource allocation within the Air Force.
  • Public accountability: Offers a general gauge of Air Force One travel expenses for public awareness and discussion.
  • Cost comparison: Can be used for limited comparisons with other modes of presidential travel, keeping limitations in mind.

Not Representative of “True” Cost:

  • Ignoring indirect costs: Security personnel deployment, diplomatic preparation, and potential economic impacts are not captured.
  • Omitting long-term expenses: Aircraft acquisition, upgrades, and infrastructure investments are not reflected.
  • Neglecting strategic value: The aircraft’s symbolic importance and capabilities for crisis response are intangible but valuable.
  1. Better Cost Representation:
  • Total annual cost: Calculate and report the total annual budget allocated for Air Force One travel, providing a clearer picture of resource utilization.
  • Trip-specific cost breakdowns: Offer detailed cost breakdowns for individual trips, highlighting specific factors influencing expenditures.
  • Comparative analysis: Consider including cost comparisons with other presidential travel options and contextualize expenses within the broader national budget.
  1. Reimbursement Policy:
  • Fairness to President: The policy, requiring reimbursement for personal trips, ensures some financial responsibility and discourages frivolous use.
  • Potential Challenges: The president may hesitate to take necessary trips due to cost concerns, impacting diplomatic relations or crisis response.
  1. Fairness to Taxpayers:
  • Transparency and Accountability: Reimbursement ensures some level of cost control and holds the president accountable for unnecessary trips.
  • Limited Scope: The policy only addresses a portion of the overall Air Force One budget, and taxpayers still bear the majority of travel expenses.

These are just some perspectives on the complex issue of Air Force One costs. Further research and discussion are needed to determine the most accurate and fair ways to represent and communicate these expenses to both the president and the public.

 

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