The Army & Air Force Exchange Service (or AAFES) is an agency of the United States Department of Defense. Its dual missions are to provide quality merchandise and services of necessity and convenience to authorized customers at uniformly low prices, and to generate reasonable earnings to supplement appropriated funds for the support of United States Army and Air Force Morale, Welfare and Recreation (MWR) programs. AAFES is headquartered in Dallas, Texas and is presently commanded by MG Keith Lee Thurgood. The position of AAFES commander rotates between the Army and Air Force. The Navy operates the equivalent Navy Exchange (NEX), while the Marine Corps operates the Marine Corps Exchange (MCX) and the United States Coast Guard operates the Coast Guard Exchange (CGX).
AAFES is charged with generating reasonable earnings, but returns roughly two-thirds of its net earnings to its customer base through their respective MWR programs (). The only congressionally appropriated money spent in AAFES comes in the form of utilities and transportation of merchandise to overseas exchanges and for salaries of U.S. military personnel assigned to AAFES. A non-appropriated fund instrumentality (NAFI) of the Department of Defense, AAFES funds 98% of its operating budget, including civilian employee salaries, inventory investments, utilities and capital investments for equipment, vehicles and facilities, from the sale of merchandise, food and services to customers.
Roughly 67% of AAFES earnings are paid to MWR programs. As of 2006, more than $2.24 billion has been contributed by AAFES over a 10-year period to the Army and Air Force to spend on quality of life improvements for Soldiers, Airmen and their families--Youth Services, Armed Forces Recreation Centers, arts and crafts, aquatic centers, post functions and golf courses.
In Fiscal Year 2006, AAFES earned $427 million from direct sales (retail, food, and vending/services), finance revenue, and concessions on revenues of $8.9 billion. MWR and services programs received $228 million, which was distributed as follows:
The per capita dividend in 2006 was $229 for every Soldier and Airman.
In addition to funding MWR programs, AAFES earnings are used to build new stores or renovate existing facilities without expense to the federal government. Funds to construct these new or replacement facilities come entirely from sales of merchandise and services.
AAFES is also a major source of employment for members of the U.S. Army and Air Force family. Approximately 31% of the 47,323 AAFES associates are military family members. Many associates have worked for years with AAFES as they moved from one installation to another with their military sponsors. Another 1.9% of associates are military members who work part time in exchanges during their off duty hours.
AAFES operates more than 3,100 facilities worldwide, in more than 30 countries, five U.S. territories and 49 states. AAFES operates some 147 retail stores and more than 2,000 fast food restaurants, such as Taco Bell, Burger King, Popeyes and Cinnabon. AAFES also provides military communities with convenience, specialty stores and movie theaters on installations worldwide, including locations in Operations Enduring (such as Camp Phoenix,) and Iraqi Freedom.
In the spring of 2007, the largest PX (Post Exchange) in the world opened on Fort Campbell, Kentucky. This project will construct a 165,000 square foot (SF) expansion to the existing 107,400 SF shopping center. The end position will be 164,000 SF sales area, 18,800 SF food court with 458 seats, expansion of both food concepts and concession operations.
On its website, AAFES states its business aim is "to serve Soldiers, Airmen and their families around the world."
Although AAFES facilities do not charge taxes on products (which includes excise taxes), the prices for alcohol and tobacco products are only marginally cheaper than retail stores that charge taxes. The lowest price for which tobacco and alcohol can be sold is limited by DoD directive. For tobacco products sold in CONUS, the price floor is 5% less than the most competitive local price in the local community; for OCONUS, tobacco prices fall within the range of the CONUS market. Alcohol sold in CONUS will be sold not less than 10% below the best price in Alcohol Beverage Control states, and not less than 5% below the competitive rate at non Alcohol Beverage Control states. According to AAFES, these limits are set by the Department of Defense, per DoD Instruction 1330.9 According to the DoD, the purpose of this is to comply with the deglamorization of alcohol and tobacco policy.
AAFES has received a great deal of criticism due to their fuel pricing practices. Many people mistakenly believe that AAFES is immune to fuel taxes, but the Hayden Cartwright Act does require AAFES to pay these taxes. Fuel sold to military personnel on military installations is often sold at nearly the same rate as that found at nearby civilian locations, with it becoming increasingly common to find stations in surrounding communities selling fuel for several cents less per gallon. According to AAFES, gasoline prices are only marginally cheaper because the individual stores are required to be "competitive" with off-post locales.