One less employee
It seems to me as a member of the military he owed the Air Force his source code. Military members do not have the same rights as a contractor or civilian.
Still, the way the Air Force attempted to force him into submitting the code (demotion, punitive measures) seems to me to only ensure that he'll leave the force once his time is up. Thereby ensuring that they have one less talented individual working for them - just what they need.