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training service run by Thales UK where RAF engineers train as well. The Voyager contract is estimated to be worth upwards from £10 billion over 24 years of service till 2035 depending on extra usage of services, rising to an expected £13 billion in total. Whereas Voyager's main operating base and training center is at RAF Brize Nor- ton in Oxfordshire, further operating bases around the world will support the aircraft with secure communications systems. The Voyager contract with AirTanker specifies a fixed annual fee of around £400 million over the 27 years of the project, this baseline fee covering all costs includ- ing aircraft acquisition and support ser- vices but excluding surge services. It is expected that a quarter of the fee covers operational expenses whereas the remain- ing three quarters will cover capital costs, including aircraft and infrastructure, fi- nance and SPV profits. The annual fee is based on a minimum of 9,000 annual flight hours beyond which the contract specifies the payments. An extra £60 mil- lion on RAF personnel, fuel and other costs. Moreover, contract clauses include performance indicators and profit-shar- ing if commercial revenues deviate from targets. Finally, the contract specifies the higher fees payable for surge services and the advance notice required if the four non-core aircraft were to be recalled to RAF service. AirTanker consortium, i.e. the SPV, has five shareholders that are also primary sub- contractors for the programme: EADS (Airbus manufacturer and initial converter of A330s at Airbus Military), Cobham (refuelling equipment and aircraft conver- sion), Thales UK (mission simulators, de- fensive aids, avionics and mission planning systems), VT Group (ground support and IT services) and Rolls-Royce (engine as- sembly, support and project management). Babcock is a major subcontractor, delivering AirTanker's operational hub at RAF Brize Norton (hangar and other buildings, and training facilities), support communications and information systems of Voyager, and all ground support equipment training as well as all operational software training. Aircraft deliveries started in 2011, and by August 2014, ten had been delivered, nine constituting the core fleet and one for ci- vilian purposes. The remaining four, deliv- ered by 2016, constitute the "surge capa- bility," available to the RAF when needed, but otherwise available to AirTanker for leasing to allied countries and to market uses without military equipment in order to generate revenue. Of these four aircraft, two are leased to Thomas Cook (travel and tourism, British airline) and Jet2 (no-frills, British airline), and one to TUI Group (travel and tourism, German) to generate commercial revenues. Moreover, Voyager operates semi-commercial flights to RAF Akrotiri in Cyprus and RAF Mount Pleas- ant in the Falkland Islands with private pas- sengers and cargo. In the light of the discussion above on internal capacities, the Voyager program is designed to preserve UK's smart-buy- er internal capacity for the evaluation of AirTanker performance. Sixty-two RAF engineers are permanently embedded in various structures within AirTanker opera- tions. This experience exposes RAF staff to private sector management, commer- cial and financial skills and facilitates iden- tification of grey areas originating from information asymmetries, realization of unforeseen circumstances and imprecise contractual terms governing the relation- ship so that the partnership resolves issues before they become disputes. UK's Strategic Seali Strategic Sealift (the SPV being AWSR Shipping and more recently Foreland Shipping) provided the Royal Navy (RN) originally with six RORO ships but now provides five upon experience that dem- onstrated the need for lower capacity. The vessels can move UK forces, equipment and supplies world-wide and at short no- tice. The SPV make generates commercial revenues when ships are not in MoD use as in Voyager. The novel difference from Voyager is that the commercial activity can be blended with its military use. For example, upon deliveries to Falklands Is- lands, return trips allow Foreland to con- duct commercial transport. (More on this capability elsewhere and in the future.) Early evidence Both acquisitions proceeded reasonably well: Voyager suffered delays whereas RORO entered service earlier than antici- pated, in 2003 instead of 2004. In terms of their performance, Voyager program generated modest savings, and, in terms of its interface with RAF (i.e. com- mand and control), it has performed flaw- lessly and the relationship between RAF and AirTanker in terms of resolving issues seems to be progressing smoothly (as elic- ited in a purpose-specific interview with a high-ranking RAF officer in charge of con- tract implementation). As for RORO, whereas the command and control performance has been flawless, there have been two areas of concern (elic- ited in a purpose-specific interview with a MoD Defence Equipment & Support offi- cer). First, the original requisition to build a fleet of six ships has been proven ambi- tious and in excess of actual RN needs. In fact, the capability is now reduced to five ships, and another ship is under consider- ation for divestment. Second, commercial success has not reached the anticipated performance. Yet, financially, modest sav- ings have still been achieved. Ugurhan G. Berkok is Assoc. Prof. of Econ. at the Royal Military College, and Ad- junct Prof. at Queen's Univ. Econ. Dept. (BA Econ. from Bosphorus Univ., Turkey, MA Quantitative Econ. from Univ. East Anglia, UK and PhD in Economics from Queen's Univ.) His previous positions were at Laval, McGill, Montréal, UQAM, Concordia and Sussex in the UK. His current teaching in- terests include defence and national secu- rity economics and health economics. His current research interests include defence procurement, defence industrial policy (off- sets, in-service support, munitions man- agement, PPPs), defence alliances, defence force generation, intelligence agencies and coordination in intelligence. www.vanguardcanada.com JUNE/JULY 2018 21 in serViCe sUpport

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