Defense Science Board 

Task Force Report 

on 

AERIAL REFUELING 

REQUIREMENTS 

May 2004 

Office of the Under Secretary of Defense 

For Acquisition, Technology, and Logistics 

Washington, D.C. 20301-3140 
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Defense Science Board Task Force Report on Aerial Refueling 

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___________________________________________________________ TABLE OF CONTENTS

TABLE OF CONTENTS

Table of Contents .............................................................................................................i

Executive Summary...................................................................................................... iii

Chapter 1. Introduction...............................................................................................11

Chapter 2. KC-135 Aging, Corrosion, and Depot Costs .........................................15

Chapter 3. Future Needs for Aerial Refueling Tankers..........................................27

Chapter 4. Conclusions ................................................................................................35

Appendix I. Terms of Reference ................................................................................37

Appendix II. Task Force Membership ......................................................................41

Appendix III. Briefings................................................................................................43

Appendix IV. Cost Growth.........................................................................................45

Appendix V. Outsourcing Some Aerial Refueling Needs......................................55

Appendix VI. Glossary................................................................................................59

AERIAL REFUELING REQUIREMENTS _______________________________________________ i
TABLE OF CONTENTS____________________________________________________________

ii ____________________________________________________________ DSB REPORT ON
___________________________________________________________EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Aerial refueling capabilities are an essential enabler of U.S. power 

projection and other critical national missions. OPERATIONs 

ENDURING and IRAQI FREEDOM (OEF and OIF) could not have

happened without these aerial refueling capabilities. Aerial refueling 

makes possible rapid deployment of forces to contingencies and the 

elective employment of those forces in the contingencies. In OIF 

there were over 8500 aerial refueling sorties flown and about 450 

million pounds of fuel offloaded. In addition, aerial refueling 

remains a critical element in supporting the bomber leg of U.S. 

nuclear forces and other special national security missions. 

The task force was charged to evaluate current aerial refueling 

capability and to identify and evaluate alternative means of 

meeting future aerial refueling requirements. 

CURRENT SITUATION

The bulk of U.S. air refueling capabilities reside in the USAF’s 

fleet of tankers. This fleet includes 541 KC-135s and 59 of the larger 

KC-10s, which have about twice the refueling capacity of the KC135s. More than half of the KC-135 fleet is assigned to Air National 

Guard and Reserve units. 

The U.S. Navy and Marine Corps also possess aerial refueling 

capabilities with F/A-18 E/F, S-3B, and KC-130 aircraft. While 

delivering only a small fraction of the fuel unloaded in the major 

combat phase of OIF (less than 5 percent of the total), these Navy and 

Marine Corps assets played an important role in supporting tactical 

aircraft employment. 

The KC-135 portion of Air Force’s tanker fleet (90 percent of the 

total number of tankers) is the oldest in the inventory. A total of 

732 KC-135 airframes (a Boeing 707 variant) was built and procured 

at a rate of 75 to 100 per year during the late 1950s and early 1960s. 

These aircraft were not built with longevity as a key acquisition 

AERIAL REFUELING REQUIREMENTS _______________________________________________ iii
EXECUTIVE SUMMARY ___________________________________________________________

objective. The average age of the remaining 541 KC-135s today is 

over 44 years. 

There are two basic versions today — KC-135E and KC-135R — 

both upgrades from the original KC-135As. The 417 KC-135R models 

have been refitted with more modern engines, provide about 20 

percent greater refueling capacity, and have a slightly lower average 

age than the 124 KC-135E models. The plan is to retire 61 of the 124 

older E models over the next three years and reallocate the crews to 

the remaining KC-135s, enabling a higher crew to aircraft ratio for the 

remaining aircraft and thus greater availability per aircraft. These 

retirements will reduce the KC-135 fleet by 10 percent. 

The useful life of an aircraft (or fleet of aircraft) depends on the 

effects of usage and the environment, as well as the costs of 

maintaining mission readiness. 

Usage, which induces material fatigue, is not the driving 

problem. Total flying hours are relatively low for the KC-135s: the 

current airframe average is about 17,000 hours. Fatigue life is 

estimated to be 36,000 hours for the E, 39,000 hours for the R. Cycles 

are commensurately low on average (3800 for the R and 4500 for the 

E). Thus, the airframes should be capable to the year 2040 based on 

current usage rates. 

Effects of airframe aging are a greater concern. These effects 

include corrosion and other environmental causes of material 

degradation. The struts that attach the engine to the wings of the 

KC-135E models are a prime example of the problems of aging and 

environment. The struts are near the end of their service life due to

exposure to high temperatures and corrosive environments and, 

assuming the KC-135Es are not retired, a major structural repair to 

the KC-135E struts is planned for initiation in FY06. 

Annual maintenance costs have increased substantially from 15 

years ago but have recently leveled off. The total annual operation 

and support (O&S) for maintaining the KC-135 fleet is about $2.2 

billion. Programmed depot maintenance (PDM) rose sharply in the 

early 1990s to about 25,000 hours per year. It peaked again in the late 

1990s to almost 35,000 hours — due largely to a major cockpit 

iv ____________________________________________________________ DSB REPORT ON
___________________________________________________________EXECUTIVE SUMMARY

avionics modernization — but then dropped to about 28,000 for the 

past few years. The recent increases in depot hourly rates (versus 

hours) are due to several reasons, including corrections for underpricing depot hours in the late 1990s. The number of KC- 135 aircraft 

in PDM over this period went from 59 to a peak of 187 in 1997 and 

the number is now running at about 80. Estimates of future O&S cost 

trends range from an increase of 1 percent (the USAF 2001 Extended 

Service Life Study) to 6.5 percent (the USAF 2003 Business Case 

Analysis) per year. Examination of hours and hourly cost projections 

on more recent data than was used in the Business Case Analysis

suggest that the annual rate of growth is much less than projected in 

2003.

The task force did not find evidence that corrosion poses an 

imminent catastrophic threat to the KC-135 fleet mission readiness. 

The task force did find evidence of a maintenance regime well 

poised to deal with corrosion and other aging problems. The 

regime includes a field-level maintenance and inspection program 

comprised of an annual inspection involving more than 1300 manhours complemented by more frequent corrosion prevention and 

detection routines and other safety related inspections. The 

maintenance regime also includes a 60-month cycle (shorter for 

aircraft permanently stationed in corrosive environments) 

programmed depot maintenance program. The Air Force has been 

very successful in reducing the time that aircraft are in maintenance 

— from 440 to 210 days — through some innovative production line 

modifications and improved procedures. Further, the number of

major structural repairs in depot appears to be decreasing. 

Solutions are in hand to deal with the known problems with the 

fleet, including the KC-135E engine strut. The task force suggests 

that there may be other modifications to maintenance and 

deployment practices, which could have a significant effect on further 

controlling corrosion. One example is to change the aircraft 

deployment rotation practice so that an aircraft is exposed to the most 

corrosive deployment environment immediately after it has 

undergone depot maintenance and is least susceptible to corrosion. 

Another example is to explore possibilities of low-cost sheltering of

AERIAL REFUELING REQUIREMENTS _______________________________________________ v
EXECUTIVE SUMMARY ___________________________________________________________

aircraft, as recent studies have indicated the significant effect of 

sheltering on reducing corrosion rates. There also may be a 

difference between Navy and Air Force field corrosion control 

practices, which should be examined. 

However, there is a recapitalization challenge that cannot be 

deferred indefinitely. There are risks in continuing to delay 

recapitalization. Even if tanker replacement at a rate of 15 per year 

began now, there will be 80-year-old KC-135 aircraft in the fleet 

awaiting replacement if the entire KC-135 fleet is to be replaced by a 

like number of similar capacity aircraft. 

FUTURE NEEDS

The major driver for future aerial refueling needs is the number 

and type of nearly simultaneous “major” operations. Demands on 

aerial refueling are particularly stressed when time is of the essence 

for the mission and when local infrastructure is immature. There are 

a myriad of other factors that have second order effects on fleet 

characteristics including capabilities to operate on short runways, to 

refuel multiple aircraft simultaneously, to receive as well as offload 

fuel, and to refuel unmanned platforms. 

The scenario based Tanker Requirements Study 2005 (TRS-05) 

found that a fleet of 500-600 aircraft (KC-135R equivalent) and an 

increased crew-to-aircraft ratio would be needed to support the 

Strategic Integrated Operations Plan (SIOP) missions and one 

major theater war (MTW). The study, completed in early 2001 but 

never officially approved, examined the sensitivity of fleet size to 

number and type of nearly simultaneous missions. However, the 

study did not explore how these missions might change in the future. 

It has not been updated to reflect the transition from a two MTW 

sizing strategy to a 1-4-2-1 strategy.1

 

1 The definition of 1-4-2-1 is: 1- Defend the United States and Territories, 4- Deter forward

in four critical regions, 2- Swiftly defeat the effort in overlapping major conflicts, 1- Upon 

the President’s direction, win decisively one of the conflicts. 

vi ____________________________________________________________ DSB REPORT ON
___________________________________________________________EXECUTIVE SUMMARY

The 500 – 600 fleet size finding is the size of the current fleet and is 

not inconsistent with OIF experience. The number of tanker aircraft 

supporting OIF directly and indirectly peaked at 319 — out of 379 

fully mission capable aircraft available — with 182 of these tankers 

forward deployed to U.S. Central Command Air Forces (CENTAF). 

While there were other fully mission capable aircraft not in depot 

maintenance that could have been made available, one can envision 

major theater campaigns of greater scale and intensity than OIF. The 

task force did not examine if OIF could have been supported with 

fewer tankers. 

There are new missions, new modes of operations and changing 

operational situations that could increase or decrease the demand 

for, and nature of, aerial refueling. One is homeland defense, in 

which a sizeable number of interceptor aircraft may need to be 

airborne over major cities for extended periods. Over 100 KC-135 

equivalent tankers could be needed for this mission, depending on 

the number of cities and patrol aircraft aloft. Alternative concepts of 

operations could significantly reduce this number. The shedding of 

organic firepower by U.S. ground forces and concomitant increased 

dependence on responsive firepower delivered from loitering attack 

aircraft is another source of increased demand for aerial refueling. 

Two other possibilities are more U.S. reliance on sea-based operations 

over long distances, and a transition to smaller but more flexible 

tactical tankers in-theater, which may be in order to avoid large 

concentrations of KC-135 and KC-10 tankers at a few airbases. 

Further, if the remaining B-52s are reengined, the fuel savings could 

substantially reduce strategic force demands on tanker assets. The 

impact of leveraging the F/A-22 and F-35 to require only a single 

tanking on either mission ingress or egress as a standard employment 

concept could be significant. 

The task force did not find a comprehensive up-to-date study of 

future aerial refueling needs that takes into account evolving 

planning assumptions (e.g., 1-4-2-1) and new modes of warfare. 

However, the task force believes there is time to conduct such a 

study before embarking on a major tanker replacement program. 

The DoD is currently planning a new Mobility Capabilities Study 

AERIAL REFUELING REQUIREMENTS _______________________________________________ vii
EXECUTIVE SUMMARY ___________________________________________________________

with results expected in Spring 2005, which should provide insights 

in this area. 

WHAT TO DO

The task force has concluded that with manageable growth in 

KC-135 operating and support (O&S) costs and in the absence of 

evidence of imminent fleet-wide catastrophic failure and with 

evidence of a sound corrosion control program, which may be 

further improved, the DoD can defer major recapitalization 

investments at least until the Analysis of Alternatives (AoA) 

directed by AT&L and the Mobility Capability Study (MCS) is 

complete in mid- 2005. There are unknowns but no greater than 

exist for the planning of other elements of the future force. If it were 

possible to accelerate the tanker AoA and MCS for completion by the 

fall of 2004, this would minimize risk and maintain the entire set of 

options currently available. A fall 2004 completion date would allow 

sufficient time to provide input into the budget process. In addition, 

a decision in the fall may minimize disruption to the Boeing 767 

production line as it nears the end of its run. If DoD believes that 767 

is a viable tanker aircraft candidate, then it should consider 

negotiating a “smart shutdown” of the 767 production line. 

The DoD must continue — and expand if necessary — 

aggressive maintenance and corrosion control programs for the 

tanker fleet regardless of near-term decisions on recapitalization. 

There may be demands on the tanker fleet that exceed those of OIF 

before any new aircraft could enter the fleet. 

The task force concurs with the plan to retire 61 KC-135E 

models. It would release crews and spares that could be reassigned 

to the remaining aircraft. These actions would enable the DoD to 

enhance both aircraft and aircrew availability, thereby producing 

higher peak sortie rates and mitigating the 10 percent reduction in

number of KC-135 aircraft. The Air Force and U.S. Transportation 

Command (TRANSCOM) were comfortable with their ability to meet 

current demands with this reduced fleet size. Actions that could 

mitigate any loss in near term capability from the retirement of the 

remaining KC-135Es range from exercising the current lease/buy 

viii ____________________________________________________________ DSB REPORT ON
___________________________________________________________EXECUTIVE SUMMARY

arrangement for the KC-767 tankers to converting used commercial 

aircraft. It should be noted that the task force did not examine the

advantages and/or disadvantages of lease/buy arrangements. 

A tanker fleet consisting of at least two different types of 

aircraft is likely to be the most cost-effective hedge against a 

massive, unanticipated problem grounding a fleet of a single 

airframe type. Furthermore, some missions are dependent on large 

numbers of tanker aircraft (for example, when refueling is widely 

dispersed in area but compressed in time); whereas other missions 

could be more efficiently served by fewer, larger capacity aircraft, 

such as strategic bomber missions. A mix of large tankers for 

strategic and deployment missions and smaller, tactical tankers for 

employment missions may be appropriate. 

The task force recommends serious consideration be given to: 

 Purchasing and converting used aircraft for aerial 

refueling. The task force focused on one option: 

converting some number of available DC-10-30s to 

KC-10s. A recent conversion of two DC-10s to KDC10s for the Netherlands was completed at a cost of 

$45 million per aircraft. Future recapitalization 

could also involve the conversion of other types of 

used aircraft as they become available on the 

market. 

 Re-engining some KC-135Es —if it is deemed 

necessary to offset the near-term loss in capability 

from the programmed KC-135E retirements. 

 Arranging for contractors to provide some of the 

aerial refueling needs — especially applicable, but 

not limited to the homeland defense mission. The 

Navy currently uses a commercial 707 rigged for 

drogue refueling. This aircraft is operated by the 

Omega Aerial Refueling Services, Inc., which has 

expressed interest in purchasing retired KC-135Es so 

it could offer this service for Air Force aircraft as 

well. The United Kingdom is also studying this 

AERIAL REFUELING REQUIREMENTS _______________________________________________ ix
EXECUTIVE SUMMARY ___________________________________________________________

concept and their experience could provide insight

into the viability of a large scale lease of refueling



on aircraft

ce

es

he

her

than a small/government-only production base. 

capability.

Working with manufacturers of large airframes to 

determine the potential to configure new 

generation commercial aircraft for the aerial 

refueling role. It is important not to preclude 

future opportunities with new generati

that might be lost through a near-term 

commitment to major recapitalization. An 

additional aspect of developing a new aircraft 

would be the avoidance of a parts obsolescence

problem in the far term. Obtaining an aircraft 

nearing the end of its production run, coupled with 

very low procurement rates and an expected servi

life of several decades, there is a good possibility

that repair parts and infrastructure will become 

scarce and exceedingly expensive in the latter stag

of a prolonged procurement and operation of the

aircraft. This problem is not unique to aircraft. 

Assuming a commercial market is developed for t

new aircraft, the repair and spare parts would be 

amortized over an increasing production base rat

x ____________________________________________________________ DSB REPORT ON
_______________________________________________________________ INTRODUCTION

CHAPTER 1. INTRODUCTION

Aerial refueling capabilities are an essential enabler of U.S. power 

projection and other critical national missions. Initially procured 

exclusively as tanker aircraft for the nuclear strike force, tanker 

involvement in Southeast Asia from 1964 through 1973 brought 

changes to the tanker mission set. Today, Operations ENDURING 

and IRAQI FREEDOM (OEF and OIF) could not have happened 

without these aerial refueling capabilities. 

As this capability remains vital to DoD missions, evaluation of 

options to sustain and/or to recapitalize the aerial refueling fleet is 

important to determine how best to maintain this capability without 

jeopardizing other major acquisition programs. The convergence of 

several acquisition programs constrains tanker acquisition to ten to 

twenty aircraft per year. The low recapitalization rate implies an 

extended period of time, measured in decades, to replace the existing 

inventory.

SCOPE

At the request of the Deputy Secretary of Defense, the Defense 

Science Board (DSB) formed a task force to evaluate current aerial 

refueling capabilities and future DoD aerial refueling requirements. 

Specifically, the task force was asked to address the following areas 

with respect to DoD aerial refueling capability:2

 Retaining the requisite number of assets to maintain 

capability 

 Performing a service life extension on the requisite 

number of existing aircraft 

 Acquiring new refueling capabilities 

 

2 The complete terms of reference for the Defense Science Board Task Force on Aerial 

Refueling Requirements is in Appendix I. Appendix II lists the task force members. 

Appendix III provides a list of briefings presented to the task force. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 11
CHAPTER 1 __________________________________________________________________

 Evaluating other methods to address refueling 

needs 

Study Approach 

The aerial refueling capability is critical to DoD operations across 

the spectrum of its missions and this capability is expected to remain 

critical to future DoD missions. In order to plan to meet the needs of 

aerial refueling, the past, present, and possible future requirements 

on aerial refueling tankers must be well understood. The analysis 

that follows reviews the background of the tanker fleet, examines the 

current status of and costs associated with aerial refueling 

capabilities, in particular the KC-135, and reviews the future needs of 

the tanker. In conclusion, recommendations are offered to assist the 

DoD in planning for tanker recapitalization. 

TANKER BACKGROUND

The bulk of U.S. aerial refueling capabilities reside in the USAF’s 

fleet of tankers. This fleet includes 541 KC-135s and 59 of the larger 

KC-10s, which have approximately twice the refueling capabilities of 

the KC-135s. These assets can perform secondary missions of 

passenger and cargo transport, as well as aeromedical evacuation. In 

the future, they also can be equipped to serve as communication 

relays, a mission that may rival in importance the refueling mission. 

More than half of the KC-135s are assigned to the Air National Guard 

and Air Reserve, whereas all of the KC-10s are operated by the active 

duty Air Force. 

The KC-135 portion of the Air Force’s tanker fleet is the oldest in 

the inventory. The Air Force procured 732 KC-135A aircraft between 

1954 and 1965, with a delivery rate of 75 to 100 aircraft per year. The 

aircraft is a slightly larger airframe than Boeing’s 367-80 aircraft, the 

prototype for Boeing’s commercial 707 aircraft. In the mid-1950s, the 

Strategic Air Command needed a jet-powered tanker to replace the 

propeller-driven KC-97 and the KC-135 design was fielded as an 

“interim” jet tanker. Unit costs ranged from $2 million to $4 million 

12 ____________________________________________________________ DSB REPORT ON
_______________________________________________________________ INTRODUCTION

per aircraft after the initial lot of 29 aircraft, which cost $8.7 million 

per copy. 

These aircraft were not built with longevity as a key acquisition 

objective, unlike the similarly aged B-52, which had special care taken 

in production to ensure an extended life. The average age of the 

remaining 541 KC-135s is over 44 years today, with a narrow spread 

around the average: the oldest aircraft is 47, the youngest is 38. 

There are two basic versions of the aircraft today — the KC-135E 

and the KC-135R, which are both upgrades from the original KC135As. The original upgrade of the KC-135A to the KC-135E added 

engine struts (pylons) and refurbished P&W JT3D engines from 

retired 707 aircraft. Those retired 707 aircraft averaged 20,000 to 

40,000 hours of flight at that point. Later, a second major upgrade of 

KC-135s, some KC-135Es and some KC-135As, were given new CFM 

56 engines (and new struts and pylons), which resulted in better fuel 

efficiency and less noise. These aircraft were relabeled KC-135Rs. 

The R’s greater efficiency means that a KC-135E is about .8 of a KC135R in fuel offload capability. 

The useful life of an aircraft is a function of the effects of usage 

(e.g., flight hours and cycles, which are the number of takeoffs and 

landings), the environment in which they must operate, and the 

investment in maintenance to sustain mission readiness. Usage, 

which drives material fatigue, is not a problem for these aircraft. 

Current airframe hours average 17,000. Boeing analysis indicates that 

the KC-135E airframe has a fatigue life of 36,000 hours, and a KC135R airframe has a fatigue life of 39,000 hours. As a result, at 

historical usage rates, these airframes should not approach their 

fatigue lives prior to 2040.

Effects of aging are a greater concern. These effects include 

corrosion and other environmental causes of material degradation. A 

prime example is the KC-135E engine struts, which were obtained 

from retired 707 and 720 airframes. Because of their exposure to 

engine heat, severe heat-induced corrosion and fatigue have 

occurred. The Oklahoma City Air Logistics Center at Tinker Air 

Force Base depot has developed an “interim” strut repair for about 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 13
CHAPTER 1 __________________________________________________________________

$100 thousand per strut, awaiting the FY06 program initiation of a 

fully reworked strut repair with a cost of about $1 million per strut. 

It is this Air Force concern with the age of the aircraft and 

potential corrosion affecting the useful life of the airframe, and the 

financial and operational consequences of block obsolescence, which 

led to an acceleration of Air Force plans to recapitalize the KC-135 

portion of the tanker force, rather than wait until the beginning of the 

next decade. It is this combination of factors and needs that drove 

the initiation of this study. 

 

14 ____________________________________________________________ DSB REPORT ON
_______________________________________ KC-135 AGING, CORROSION, AND DEPOT COSTS

CHAPTER 2. KC-135 AGING, CORROSION, AND DEPOT

COSTS

KC-135 AGING

 

KC-135 aircraft were among the first generation of turbojet 

airplanes (707s, DC-8s, etc.), and have experienced significant 

corrosion issues. These issues are directly attributable to what are

viewed today as inferior corrosion resistant metal alloys and inferior 

corrosion prevention applications used in construction and early 

maintenance, as well as to inadequate corrosion prevention programs 

during the initial years of service. In current briefings and the KC135E Business Case Analysis (BCA), the Air Force postulates these 

aircraft will experience significant cost growth for corrosion-related 

maintenance and are susceptible to a potential fleet-wide grounding 

due to a surprise finding related to age or material condition. The

task force reviewed the aging, corrosion, cost, and reliability issues 

with several expert sources, including Air Force maintenance 

management and aerospace structures analysts and academics. 

Despite the aircraft’s already lengthy time in service, the fatigue 

life of the aircraft is not a driving concern. As noted in Chapter 1, 

current airframes average well below the estimated fatigue life of 

36,000–39,000 hours and based on current annual flying hours, the 

airframe fatigue life will last until approximately 2040. Aircraft 

cycles, which are takeoffs and landings, are also a critical factor 

affecting service life. The relatively few cycles experienced by these 

aircraft, about 250 annually, portend an unusually long service life.3 

These factors make the effects of aging, primarily with respect to 

corrosion, the critical determinant in service life. 

3 Current average cycles are 3818 for the R model and 4464 for the E model, with a tight

distribution around the mean. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 15
CHAPTER 2 __________________________________________________________________

KC-135 CORROSION

 

The task force did not find corrosion to be a forcing function for a 

decision to replace the aircraft at this time. Corrosion on the KC-135 

fleet appears to be a challenging, yet manageable issue. This finding 

is consistent with the KC-135 Economic Service Life Study (ESLS). It is 

supported by task force observations and briefings at the Oklahoma 

City Air Logistics Center (ALC)4 and further supported by 

commercial operators, Department of the Navy briefings, and the 

professional judgment of aerospace structures experts who were 

contacted. 

The Air Force has clearly demonstrated the ability to successfully 

address the impact of corrosion on the aircraft. The maintenance 

regime includes a 60-month programmed depot maintenance (PDM) 

cycle (shorter for aircraft permanently stationed in a corrosive 

environment), which includes aggressive discovery and treatment of 

corrosion. Air Force data shows that major structural repairs (MSRs) 

on the KC-135s in PDM have remained relatively constant, showing a 

slight decreasing trend since the mid-1990s. Significantly, as the Air 

Force continues to address corrosion problems on the aircraft, they 

are performing maintenance with state of the art corrosion resistant 

replacement parts, finishes, coatings, sealants, and lubricants. As 

repairs have been completed over the past two decades through 

several depot maintenance periods, the fleet now demonstrates 

improved resistance to corrosion in repaired areas consistent with the 

corrosive resistant behavior of newer generation turbojet aircraft. 

The Air Force also maintains a rigorous corrosion prevention 

regime in its field maintenance activities. Field units conduct annual 

periodic inspections involving more than 1300 man-hours per aircraft 

that include structural inspections for corrosion. The periodic 

program is complemented by more frequent corrosion prevention 

and detection routines and other safety-related inspections. These 

include pre-flight inspection, hourly post flight inspections at 60-day 

4 The task force visited the Oklahoma City ALC, which performs depot-level maintenance 

on the aircraft, to talk with engineers and management assigned to the KC-135 program 

and to examine aircraft undergoing depot maintenance.

16 ____________________________________________________________ DSB REPORT ON
_______________________________________ KC-135 AGING, CORROSION, AND DEPOT COSTS

intervals, and critical corrosion inspections (minor at 180 days and 

major at 360 days), plus an established wash and lube requirement at 

120-day intervals. In addition, there is an aircraft basing rotation 

scheme, wherein aircraft are assigned to severe corrosion zones once 

in a PDM cycle. 

Because of the extraordinarily low utilization rates of these 

aircraft, once corrosion is effectively managed at an acceptable cost, 

there is no compelling rationale for retiring the airframes for reasons 

related to material condition. Data presented at the Oklahoma City 

ALC showed that, although costs grew in the late 1990s, PDM hours 

for heavy structural maintenance and one-time structural repairs 

experienced only slight increases. Heavy structural repair hours 

grew slightly in the late 1990s and then contracted after 2001. Onetime structural repair hours had some year to year variation in the

late 1990s and then gradually decreased after 2001. Therefore, depot 

hours related to structure appear to be well managed. However, 

because the KC-135s are true first generation turbojet aircraft 

designed only 50 years from the time man first began to fly, concerns 

regarding the ability to continue operating these aircraft indefinitely 

are intuitively well founded. The task force suggests that there may 

be other modifications to maintenance and deployment practices that 

could have a significant effect on further controlling corrosion. One 

example is to change the aircraft deployment rotation practice so that 

an aircraft is exposed to the most corrosive deployment environment 

right after it has undergone depot maintenance and is least 

susceptible to corrosion. A second option is to shelter aircraft 

assigned to severe corrosion environments. There also appears to be 

a disparity between Navy and Air Force field corrosion control 

practices for land-based aircraft, which should be examined. 

Although corrosion is currently manageable, the sheer number of 

aged aircraft dictates a need to take action in the near term. The task 

force believes that a near term decision to commence tanker 

recapitalization must be made by FY07 to ensure replacement aircraft 

can start entering the inventory in sufficient numbers. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 17
CHAPTER 2 __________________________________________________________________

KC-135 FLEET GROUNDING FINDINGS

The Air Force did not present any analysis to support the 

assertion, found in USAF reports and briefing materials that the KC135s are subject to a surprise fleet grounding. Given that this aircraft 

has been flown for an extended time and experienced intensive 

maintenance, it is just as likely the fleet will not experience grounding 

than it will (the task force could find no data to support either 

assertion). New aircraft have often provided the surprise that leads

to grounding or to an early retirement of a block of aircraft. There are 

supporting examples in all the Services. Air Force examples include 

precautionary stand-downs for the B-2 in 1996 and 1998 and 

groundings of the F-117 in 1997 and the T-3 in 1998. The partial 

grounding of the KC-135 in late 1999/early 2000 resulted not from a 

surprise finding related to aging, but rather followed the discovery of 

a problem with stabilizer trim brakes/actuators installed after 

September 1999. A similar problem could occur to any aircraft at any 

time. So, although grounding is possible, the task force assesses the 

probability as no more likely than that of any other aircraft in the 

inventory of the Services. As with other maintenance programs, 

when an area of concern arises, concerted efforts have provided 

effective remediation. Such has been the case with the KC-135E 

engine strut (pylon) problem. The Air Force identified an interim 

repair and an ultimate solution, which is representative of their 

professional approach to the entire corrosion and aging aircraft 

challenge. Within the Services, fleet-wide maintenance issues 

traditionally receive careful management to avoid grounding. The

maintenance problem is aggressively remediated. Quick, temporary 

repairs often address the grounding issue, while a permanent fix 

awaits a depot period. Commanders sometimes employ short-term 

operational restrictions, while still accomplishing the mission. And, 

in time of conflict, some additional risk may be accepted. None of 

these actions are unique or limited to the KC-135. 

MODIFICATION PROGRAM FINDINGS

Nonetheless, aging remains a concern, primarily due to the sheer 

number of aircraft that will eventually be replaced. The Air Force has 

18 ____________________________________________________________ DSB REPORT ON
_______________________________________ KC-135 AGING, CORROSION, AND DEPOT COSTS

already spent a considerable amount of the money for improvement 

of the tanker force the GAO identified in their 1996 study on 

refueling aircraft. The report discussed reengining KC-135Es; 

replacing structural components; and adding multi-point refueling; 

the Pacer Compass, Radar, and Global positioning system (CRAG) 

modification; and ground collision avoidance systems. Although 

further reengining of KC-135E aircraft is still possible, the Pacer 

CRAG mod and considerable structural work have been completed 

since the report. Also, the Air Force has undertaken a significant 

rewiring program. As such, much of this cost avoidance opportunity 

has been foregone. Furthermore, in another area of cost avoidance, 

the task force was not presented with any evidence that the Air Force 

has actively examined the modification of used aircraft for the tanker 

mission as a cost avoidance strategy. 

The driving issue here is the extremely low utilization rates of 

tanker aircraft. Given the nature of operations (i.e., the low 

utilization rates), any modern aircraft, new or used, will be able to 

remain in inventory for a very long time. Of course, newly 

manufactured airframes have the potential to last the longest; 

however, task force discussions with aerospace structures experts 

pointed out that early widebody aircraft (early 747s, DC-10s, A300s, 

etc.) benefit from far superior construction and maintenance practices 

related to corrosion than those associated with first generation 

transports.5 Furthermore, these airframes can be operated for an 

indefinite period of time given the typically low operational tempo of 

tanker forces. 

As these airframes can be purchased and modified to tanker 

configuration at significant savings over new procurement, the task 

force believes this option needs a thorough vetting by the Air Force, 

particularly in light of the fact that the aircraft fulfills an essential,

though not advanced technology dependent, support mission and 

that there are several examples of successful aircraft conversions 

using early widebody aircraft. Notable among these is the Federal

Express Corp. conversion of DC-10 aircraft to MD-10 aircraft. This 

 

5 Evidenced by the Air Force’s KC-10 briefing, which noted “the KC-10 does not have 

corrosion issues beyond normal wear and tear at this time.”

AERIAL REFUELING REQUIREMENTS _______________________________________________ 19
CHAPTER 2 __________________________________________________________________

conversion, performed by The Boeing Company, fully modified an 

early widebody aircraft with an entirely new cockpit (digital 

electronic equipment; modern communications, navigation, and 

surveillance equipment; fully integrated flight management system; 

improved pneumatic and fuel management system; new wiring; etc.); 

refurbished engines; reliability improvements (systems 

refurbishments or replacements and new design equipment for 

certain high failure rate items); and structural improvements. FedEx 

expects a long service life from the aircraft and operates the aircraft 

on a common type rating with the MD-11, a current generation 

aircraft. Both aircraft are fully capable of operating in any foreseeable 

air traffic system. Although the exact number is proprietary, FedEx 

noted the program costs were easily half that of new procurement 

and that they undertook the program because of the savings involved 

over new procurement, given their low utilization rates driven by 

their system form (these utilization rates are significantly lower than 

that of commercial passenger operators, but at least three times 

greater than that of the tanker fleet). Another successful conversion 

involved two DC-10s to KDC-10 tanker configuration for the Royal 

Netherlands Air Force (at a unit cost of $45M each). These are boomequipped aircraft without hose and drogue capability. They also 

incorporate the video Remote Aerial Refueling Operation system, 

which is planned for use on the Boeing KC-767. 

As early widebody and current generation aircraft can be 

modified and modernized and then flown over long years of service, 

the task force believes this option must be seriously considered. This 

option can meet the mission need at considerably lower cost, thereby 

freeing up dollars for procurement in other areas that have a pressing 

requirement for more expensive advanced technology. 

The Air Force has expressed an additional concern in reports and 

briefing material over continuing to have such a large percentage of 

the tanker fleet vested in the KC-135. A modification program would 

have an additional benefit of reducing the large dependence on a 

single type aircraft. Should a DC-10 to KC-10 modification program 

be undertaken, the benefits would be similar to that of adding a new 

type of aircraft, simply because the KC-135 portion of the force is so

very large and adding any different type reduces the dependency. 

20 ____________________________________________________________ DSB REPORT ON
_______________________________________ KC-135 AGING, CORROSION, AND DEPOT COSTS

The option to modify DC-10 aircraft also has the advantage of 

modifying to a known configuration currently in use in the Air Force. 

This will reduce non-recurring engineering expense and deliver a 

familiar platform with proven capability. It can also serve as a pilot 

program for subsequent programs that may convert other aircraft to 

medium tanker configurations at a time when the availability of those 

platforms makes the purchase price attractive. 

Finally, a modification program can be structured to economically 

address both reliability issues and new capability requirements. 

Modified aircraft benefit from improvements in reliability 

engendered by new equipment. The airframe structure can be 

strengthened or refurbished as necessary. Digital communications 

and additional military features can be incorporated. The task force 

believes that for aircraft that have a basic support mission such as 

tanking, the alternative of modifying existing aircraft to achieve 

economic efficiencies must be thoroughly examined. 

There are alternatives at the other end of the spectrum. While 

older aircraft may well serve as tankers in a traditional role in 

uncontested airspace, new strategic concepts may encompass a need 

to operate tankers in a more threatening environment. New 

operating concepts may require a more agile tanker with advanced

protective features. Another alternative could incorporate a tanker

within a fleet of aircraft with a common airframe performing several 

essential missions. In this case, working with manufacturers to 

develop options incorporating advanced technologies, for example, 

blended wing body aircraft with the ability to perform surveillance, 

reconnaissance, and intelligence gathering missions, as well as 

tanking, may be productive. However, the recapitalization issue 

cannot wait for the typical development cycle to provide a solution. 

An interim solution involving either the conversion of used aircraft or 

acquisition of new aircraft based on an existing airframe, among 

other options, will be required. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 21
CHAPTER 2 __________________________________________________________________

OPERATING AND SUPPORT COSTS

One of the Air Force’s major arguments for beginning 

replacement of the KC-135 in the near term is that the “cost” of depot 

maintenance grew dramatically from FY1991 through FY2003 and 

can be expected to continue to grow at the same rate. The argument 

contains an implicit assertion that uncontrolled corrosion is the major 

factor in the cost growth. The task force investigated the major 

causes of cost and price growth in order to determine the best 

available basis for making projections. 

Basis for the Air Force’s Concern 

The Air Force’s argument is based on growth in the weighted 

average unit sales price for KC-135 airframe depot maintenance. 

That price rose from about $0.8 million in FY91 to about $7.3 million 

in FY04 (in then-year dollars) or about 18.5 percent compounded 

annually. The unit sales price (USP) for any given year is the price 

charged to the customer for an aircraft inducted into the depot in that 

year, although the customer is billed in the year the work is finished. 

USP is the product of a budgeted number of labor hours per aircraft 

and a budgeted price per hour. The latter is sometimes called the 

labor rate, but it is more properly called the sales rate since it includes 

labor, materials, and various overhead charges. 

Prices versus Costs in a Working Capital Fund 

The USP for any given year and the sales rate that goes into it are 

established during development of the budget and are fixed nine to 

twelve months before the budget year begins. At the time they are 

developed, prices have to be based on the results of operations in the 

year just completed and the budget estimate for the budget before 

Congress at the time. In a working capital fund, rates/prices are set 

so that projected revenue equals projected expenses (costs). Prices 

are adjusted, however, to recover unplanned prior year losses or 

return unplanned prior year gains. For gains or losses in year N, 

these adjustments usually occur in year N+2. Rates also are adjusted 

to maintain adequate cash reserves. 

22 ____________________________________________________________ DSB REPORT ON
_______________________________________ KC-135 AGING, CORROSION, AND DEPOT COSTS

Why Costs and Prices Grew 

During FY98 through FY00, the number of days an aircraft is in 

the depot (flow days) and backlog of aircraft in depot increased 

significantly. The Air Force attributes this to the unpredictability of

major structural repairs and the depot’s inability to identify them 

early in the process, increases in corrosion work, and the addition of 

two major modifications to the PDM process. In FY00 and FY01, the 

number of aircraft inducted was reduced from planned levels, the 

work flow was reengineered and improvements made on the shop 

floor, direct and engineering manpower was added, material support 

was enhanced, and the Pacer CRAG modification was eliminated 

from PDM work. These actions successfully eliminated the backlog 

and cut flow days almost in half. 

Costs increased with the addition of labor and investments made. 

Paying for these increases while billing for fewer aircraft at 

previously established rates also caused large losses in FY00 through 

FY02. Table 1 shows unit sales prices, sales rates, cost rates, and 

profits or losses. (The cost rate for a year is the total costs for labor, 

materials, and overhead divided by total direct labor hours.) Data for 

FY04 and FY05 are budget numbers. 

Table 1.

Unit Sales

Price ($M) Sales Rate ($) Cost Rate ($) 

Profit or Loss 

($M) 

FY91 0.8

FY92 1.5

FY93 1.8

FY94 1.7

FY95 2.0 86.44

FY96 2.2 96.74 88.56 -6.3

FY97 3.0 105.91 92.86 2.6

FY98 3.5 94.59 95.10 0.8

FY99 3.7 106.20 99.90 -2.5

FY00 3.5 94.34 127.13 -29.4

FY01 3.8 111.20 140.02 -62.1

AERIAL REFUELING REQUIREMENTS _______________________________________________ 23
CHAPTER 2 __________________________________________________________________

FY02 6.0 162.91 131.41 -14.5

FY03 6.1 199.81 148.56 33.2

FY04 7.4 210.87 187.58

FY05 191.50 199.35

As the data in the table show, the cost rate jumped 27 percent 

from FY99 to FY00 and increased another 10 percent to FY01. As 

would be expected given lead times for setting USP and sales rates, 

sales rates in FY02 and FY03 reflected the cost increases in FY00 and 

FY01. Sales rates jumped even more sharply than cost rates, 

however, increasing 47 percent and 23 percent in FY02 and FY03, 

respectively. Some of this additional increase can be attributed to 

adjustments for prior year losses and the need to maintain adequate 

cash in the Air Force Working Capital Fund. If the entire $29 million 

lost in FY00 were included in the sales rate for FY02, the sales rate for 

those aircraft would have included about $25 per hour for loss 

recovery. 

Costs Are a Better Basis than Prices for Projections 

Because changes in prices lag changes in costs and because prices 

include adjustments for prior year losses and gains and to ensure 

adequate cash, these prices were artificially low before FY02 and 

artificially high thereafter. Therefore, the task force believes some 

measure of costs would provide a better basis for projections. Ideally, 

the task force would like to see the actual cost per aircraft over time. 

Computing that would require data that are not available in any 

automated system, however; so the task force inquiry focused on cost 

rates. 

What Was Learned About Cost Rates 

Table 2 shows the components of the cost rate (excluding a 

category called “other direct,” which makes a trivial contribution to 

the total). Cost rates increased sharply in every category from FY99 

to FY00. Production overhead shows the largest absolute and 

percentage increase thereafter. 

24 ____________________________________________________________ DSB REPORT ON
_______________________________________ KC-135 AGING, CORROSION, AND DEPOT COSTS

Table 2.

Cost Rates (dollars per hour) 

Direct Labor

Direct 

Material 

Production 

Overhead 

General & 

Administrative

FY96 27.59 17.30 32.11 11.56

FY97 27.52 17.38 34.31 13.64

FY98 29.54 19.65 33.50 10.83

FY99 31.00 20.77 36.78 11.36

FY00 38.19 29.05 44.25 15.63

FY01 37.78 29.75 53.91 14.58

FY02 34.84 31.25 50.32 14.99

FY03 35.50 34.37 59.53 19.06

As the name suggests, direct labor6 and direct material are 

directly related to the amount and difficulty of work on the airframe. 

The changes in the manpower component of cost rates are consistent 

with the permanent addition of manpower to reduce flow days and a 

temporary addition to eliminate the backlog. Enhanced material 

support for the shop floor likely contributed to the initial increase in 

the direct material component of the cost rate. The Air Force also 

attributes increases to major structural repairs, replacement of 

stabilizer trim actuators and stress panels in vertical and horizontal 

stabilizers, and major modifications. 

Both production overhead and general and administrative (G&A) 

include costs that are not directly related to aging aircraft such as 

charges for services provided by Defense Finance and Accounting 

Service (DFAS) and Defense Information Systems Agency (DISA), 

information technology costs, and a share of various overhead costs 

not related to a specific depot product. These costs grew from $20

million in FY00 to a projected $67 million in FY05. G&A costs are 

entirely in this category, while production overhead includes costs of 

both types. For example, it includes the engineering manpower that 

was added and the investments that were made to reduce flow days 

as well as some overtime costs. The Air Force answered three sets of 

questions regarding airframe depot maintenance costs. 

 

6 For a fixed number of flow days 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 25
CHAPTER 2 __________________________________________________________________

Unfortunately, the task force has not been able to divide the 

production overhead component of cost rates between costs related 

and unrelated to aging aircraft when the inquiry was terminated. 

A Projection of Cost Rate Increases 

The Air Force determined that USP data from FY91 through FY03 

fit a compound growth curve better than it fit a linear growth curve. 

Nothing that the task force learned about the reasons for cost growth 

suggests that growth is non-linear. Additionally, the change in depot 

maintenance process in FY00 argues for using only data from FY00 

onward. Therefore, the task force believes a linear projection using 

cost data (not price data) from FY00 through FY05 provides the best 

estimate of future cost rates. Such a projection shows growth of 

$14.88 per hour per year (with an R2 value of 0.838).

26 ____________________________________________________________ DSB REPORT ON
_______________________________________ FUTURE NEEDS FOR AERIAL REFUELING TANKERS

CHAPTER 3. FUTURE NEEDS FOR AERIAL REFUELING 

TANKERS

The major driver for future aerial refueling needs is the number 

and type of nearly simultaneous “major” operations. Demands on 

aerial refueling are particularly stressed when time is of the essence 

for the mission (to respond and stop the dying, stop the killing, stop 

the aggression, stop the use of WMD, etc.) and when local 

infrastructure is immature. There are a myriad of other factors that 

have second order effects on fleet characteristics. These include 

capabilities to operate on short runways, to refuel multiple aircraft 

simultaneously, to receive as well as offload fuel, and to refuel 

unmanned platforms. 

The scenario-based Tanker Requirements Study 2005 found that a 

fleet of 500–600 aircraft (KC-135R equivalents) and an increased crew 

to aircraft ratio would be needed to support the SIOP mission and 

one major theater war (MTW). The study examined the sensitivity of 

fleet size to number and type of nearly simultaneous missions —it 

did not, however, explore how these missions might change in the 

future. It has not been updated to reflect the transition from a two 

MTW sizing strategy to a 1-4-2-1 strategy. Current plans are to 

update the requirements in the Mobility Capabilities Study, which is 

to be initiated in May 2004. 

The 500 - 600 fleet size finding, also the current fleet size, is not 

inconsistent with OIF experience. The number of tanker aircraft 

supporting OIF directly and indirectly peaked at 319 out of the 

available 389 fully mission capable aircraft, with 182 of these tankers 

forward deployed to CENTAF. While there were other fully mission 

capable aircraft not in depot maintenance that could have been made 

available, one can envision major theater campaigns of greater scale 

and intensity than OIF. The tanker force employed in OIF could have 

been capable of a greater intensity fight (i.e., more sorties, more 

offloads, more receivers) but it is difficult to gauge OIF intensity from 

available data. Further, the task force did not examine whether OIF 

could have been executed with fewer tanker aircraft. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 27
CHAPTER 3 __________________________________________________________________

Table 3. Tanker Tasking during OIF (Snapshot on 27 March ’03) 

Total Active

Inventory Possessed FMC Tasked 

Total KC-10s 59 50 45 48 

Total KC135s 480* 400 344 271**

Totals 539 450 389 319

* This data was obtained from the Air Force and it is uncertain why the Total Active Inventory of KC-135s is 

listed as 480 versus the base inventory level of 541. 

** 14 of these missions were in support of homeland defense Noble Eagle requirements. 

There are new missions, new modes of operations, and changing 

operational situations that could increase the demand for and nature 

of aerial refueling. One is homeland defense in which sizeable 

number of interceptor aircraft may need to be airborne over major 

cities for extended periods. Up to 122 KC-135 equivalent tankers 

could be needed for this mission depending on the number of patrol 

aircraft aloft. The shedding of organic firepower by U.S. ground 

forces and concomitant increased dependence on responsive 

firepower delivered from loitering attack aircraft is another source of 

increased demand for aerial refueling. Other possibilities that could 

influence the size of the tanker fleet are more U.S. reliance on seabased operations over long distances, reduced overseas basing 

infrastructure, and a transition to smaller but more flexible tactical 

tankers in-theater in order to avoid large concentrations of KC-135 

and KC-10 tankers at the few airbases that have sufficient runway 

lengths for large tankers. The ability to leverage the design of the 

F/A-22 and F-35 to require only one tanking on either mission 

ingress or egress could also be significant. Finally, if the remaining B52s are reengined with more modern, fuel efficient engines, the fuel 

savings could substantially reduce strategic and tactical force 

demands on tanker assets. As an example, a reengined B-52 on a 

10,000 mile mission from CONUS to Afghanistan and back would 

require only one tanker on the return leg versus current requirements 

for a tanker on both legs. The fuel offload demand would be reduced 

from 276,000 pounds to 118,000 pounds. 

28 ____________________________________________________________ DSB REPORT ON
_______________________________________ FUTURE NEEDS FOR AERIAL REFUELING TANKERS

REVIEW OF DOCUMENTS AND FUTURE STUDY GUIDANCE

Tanker Requirement Study 05 

The last major study on aerial refueling tankers was the Tanker 

Requirements Study 2005 (TRS-05) that was completed in March 2001 

but was never officially promulgated due to questions about the 

methodology used to aggregate the numbers of tanker needed for 

each of the missions. It was conducted by the Air Mobility 

Command (AMC). The TRS-05 had the participation of the major 

Combatant Commanders and Joint staff but neither the Navy and 

Marine Corps nor the Army. It considered major theater wars in 

southwest Asia and northeast Asia as well as needs during strategic 

nuclear alerts and employment. Small-scale contingencies and 

Special Operations Forces were also considered. The tanker 

requirement for each phase was calculated to meet both receiver fuel 

offload and aircraft/boom availability demands. The tanker 

requirement for a given scenario was phased upon the peak day plus 

operations withholds. It was modeled in accordance with the 

Mobility Requirements Study warfight solution, which is no longer 

extant. 

Deployment requirements were determined in accordance with

Mobility Requirements Study (MRS)-05 Time Phased Deployment 

Data. 

According to an unclassified briefing provided by OSD (PA&E) 

for the DSB Task Force on Aerial Refueling Requirements, TRS-05

identified the need for approximately 500 –600 KC-135R equivalents 

and approximately 900–1000 aircrews. None of the scenarios 

examined identified excess tanker capability. There were identified 

shortfalls for both aircraft and crews, with work-arounds available to 

mitigate some of the shortfalls. 

The study also identified other tanker shortfalls, driven in large 

part by the high number of KC-135s in the depot, a situation that has 

been rectified by good management of the depot workloads at the 

Oklahoma City Air Logistics Center and the two commercial depots. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 29
CHAPTER 3 __________________________________________________________________

In May 2004, a Mobility Capabilities Study will be initiated by the 

Joint Staff and OSD (PA&E); the study is scheduled for completion in 

March 2005. It will use as a baseline the 1-4-2-1 sizing strategy vice

the 2 MTW scenario of TRS-05. 

Tanker Recapitalization: Aging Aircraft Challenges paper from the 

Air Mobility Command (AMC), 2003 

This paper asserts that “AMC must begin recapitalization of its 

aging tanker fleet now ... that the average age of the KC-135s are 42+ 

years.” The paper expresses concern over the “unknown 

unknowns,” which might occur with a fleet of aircraft of this age. 

The paper also expresses concern over increased depot costs (+59 

percent) and increased contractor costs (+113 percent). Replacing a 

541-aircraft tanker fleet will take decades, according to the paper. 

“Operating 70+ year old fleet is unprecedented.” 

The paper further highlights KC-767 improvements in 

comparison to the KC-135 in the following metrics: 

1. Cargo/Pax benefit 

2. Aero Medical Evacuation capable 

3. ISR capability 

4. Boom and drogue capable 

Mission Need Statement (MNS) AMC 004-01 Future Air Refueling 

Aircraft, 1 November 2001 

This MNS uses as its basis the TRS-05 referenced above. It is 

designed to support the FY 2002-2007 Defense Planning Guidance, 

the National Security Strategy, and the National Military Strategy 

across the entire spectrum of conflict to a MTW. It states that “air 

refueling allows airpower forces to increase levels of mass, surprise, 

economy of force, flexibility versatility, and maneuverability and can 

concentrate more assets for offensive operations.” It further states 

that “the air refueling aircraft should have sufficient range and 

offload capability to support both inter- and intra-theater missions, be 

able to refuel the full range of receiver aircraft within a safe operation 

envelope, and be capable of carrying and offloading a fuel type other 

than the primary fuel used by the new aircraft. The aircraft should be 

30 ____________________________________________________________ DSB REPORT ON
_______________________________________ FUTURE NEEDS FOR AERIAL REFUELING TANKERS

capable of refueling receptacle and probe-equipped receiver aircraft 

on the same mission, as well as refueling multiple aircraft 

simultaneously.” 

Operational Requirements Document (ORD), AMC 004-01-B, Air 

Refueling Aircraft Program, 22 October 2002 

The ORD states that the system will support the Defense Planning 

Guidance FY 2003-2007. “The proposed replacement system is a 

specially modified, commercially available aircraft able to offload fuel 

via boom and drogue as well as on-load fuel from a boom-equipped 

tanker.” The ORD goes on to state that the TRS-05 determined the 

number of tanker and aircrews needed for a variety of war planning 

scenarios.” 

Analysis of Alternatives (AoA) Guidance for KC-135 

recapitalization tasking dated 24 February 2004 

The acting Undersecretary of Defense for Acquisition, Technology 

and Logistics tasked the Secretary of the Air Force to conduct an AoA 

to analyze potential courses of action for recapitalizing the tanker 

fleet. The AoA is due to complete August 2005. The MNS for Future 

Air Refueling aircraft, AMC-004-01, described above, will be used as 

the beginning point for evaluating alternatives as well as the Defense 

Planning Scenarios, and the FY 2006-2011 Strategic Planning 

Guidance (SPG). The tasking states, “the AoA will define alternative 

tanker capabilities and critical parameters such as speed, range, 

ground footprint, fuel offload capabilities, maximum landing weight, 

cargo payload, passenger payload, fuel burn rate, multipoint 

capability, multi-fuel capability, tanker-receiver capability (including 

the capability to refuel UAVs), receiver envelope, special mission 

requirements, ground turn times, mission capable rates, depot (or 

inversely, availability) rates, sortie rates, etc.” 

The AoA further tasks the U.S. Air Force to consider a broad 

range of platform alternatives. As its baseline, the AoA states that it 

“defers any action on recapitalizing the tanker fleet. Operates the 

FY05 programmed fleet as is (59 KC-10, 417 KC-135R and 73 (sic) KC135E) until 2045. An alternate baseline includes initial KC-767A 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 31
CHAPTER 3 __________________________________________________________________

profile and associated KC-135E retirement schedule. Defers any 

additional recapitalization action. Operates the fleet until 2045.” 

The AoA then suggests a series of options: 

1. Retaining and reengining the KC-135Es to KC-135Rs 

2. Retire the remaining KC-135Es 

3. Purchase a commercial Derivative Aircraft. Consider B-767, B7E7, B-737, Airbus 310 and 330, and legacy tanker aircraft lines 

4. Purchase a military derivative aircraft, considering C-130J and 

C-17 

5. Acquire and modify used aircraft, for example, modify used B767, B-747, DC 10, MD11, A310, or A330 aircraft 

6. Develop and procure a new military tanker 

7. Develop and procure an unmanned aerial tanker 

The Boeing 767 production line is nearing the end of its run. 

Unless new sales of the 767 emerge soon, it may be necessary to shut 

down the line in the summer of 2005. In order to keep the Boeing 767 

as a viable alternative, the completion of the tanker AoA and the 

MCS must be accelerated to the fall of 2004. 

In addition, if DoD believes the 767 is a viable candidate as a 

replacement tanker, then DoD should commence negotiating a smart 

shutdown of the Boeing 767 production line to minimize restart costs. 

The 1993 RAND Corporation Report Reconstituting a Production 

Capability: Past Experience, Restart Criteria, and Suggested Policies7

provides significant detail on all aspects of a smart shutdown 

including economic and time response advantages. A shutdown as 

short as one year can be economically advantageous; other options 

such as maintaining the production line in a warm status should also 

be explored. 

 

7 The report can be ordered from the RAND Corporation (MR-273-ACQ) or viewed at

http://stinet.dtic.mil/cgibin/fulcrum_main.pl?database=ft_u2&searchid=108370311628823&keyfieldvalue=ADA2

88463&filename=%2Ffulcrum%2FTR_fulltext%2Fdoc%2FADA288463.pdf

32 ____________________________________________________________ DSB REPORT ON
_______________________________________ FUTURE NEEDS FOR AERIAL REFUELING TANKERS

The smart shutdown needs to be commenced soon enough, 

approximately eighteen months before line termination, to capture 

the production tools and processes of subcontractors. Photos and 

videotapes of the manufacturing process and detailed interviews of 

the manufacturing team greatly assist in the rapid and economic 

restart of a production line. DoD should view investment in the 

smart shutdown as an insurance policy in case the tanker AoA and 

MCS validate the Boeing 767 as the replacement tanker aircraft. 

Without a small, upfront investment in a smart shutdown the restart 

cost could be high enough to prevent the 767 from being a viable 

candidate or significantly raise the overall cost of the tanker 

recapitalization program. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 33
CHAPTER 3 __________________________________________________________________

34 ____________________________________________________________ DSB REPORT ON
________________________________________________________________CONCLUSIONS

CHAPTER 4. CONCLUSIONS

As a result of its findings and deliberations, the task force believes 

that prior to embarking on a major tanker recapitalization effort, the 

tanker AoA and the MCS should be completed to allow informed 

decision making. The task force saw convincing evidence that the 

KC-135 Operating and Support (O&S) costs are not growing at the

rate observed in the 2001–2003 timeframe which may have 

contributed to the decision to accelerate the tanker recapitalization. 

The task force observed an excellent USAF corrosion control 

program for the KC-135s in both the depot and in the field. There 

may be additional improvements that could increase the effectiveness 

of the field corrosion control efforts. The government aeronautical 

structural experts, academic researchers, and commercial entities 

with whom the task force consulted all concluded that KC-135 

corrosion is manageable. Additionally, the task force found no 

evidence that there is a real, near-term danger of fleet-wide 

grounding due to corrosion problems. 

The tanker requirement documents need to be updated to reflect 

changing concepts of operations and the current 1-4-2-1 force sizing 

strategy. Such an update is planned to begin in May 2004 (the MCS), 

with a completion date of March 2005. The task force recommends 

the completion date of both the tanker AoA and the MCS be 

accelerated to the fall of 2004. The MCS should recognize the impact 

of other potential program changes such as reengining the B-52. The 

use of commercial tanking is another possibility to relieve pressure 

on the organic tanker force for CONUS training and homeland 

defense missions. 

The size of the KC-135 fleet demands that recapitalization start in 

a reasonable timeframe, but not necessarily before the completion of 

the AoA and the MCS. Replacing a fleet that was procured at rates 

from 75 to 100 aircraft per year with the current forecast of future 

defense funding levels will require a sustained and long-term 

procurement. However, such a recapitalization effort doesn’t 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 35
CHAPTER 4 __________________________________________________________________

necessarily mean new aircraft for this support mission. The task 

force suggests serious consideration be given to:

 Purchasing and converting used aircraft for aerial 

refueling. The task force focused on one option, 

converting some number of available DC-10-30s to 

KC-10s. Future recapitalization could also involve 

the conversion of used Boeing 767 or 737 aircraft as 

they become available. The results of the tanker 

AoA and MCS should guide DoD as to the proper 

mix and number of tanker aircraft. 

 Arranging for contractors to provide some of the 

aerial refueling needs —especially applicable, but 

not limited to the homeland defense mission. The 

Navy currently uses a commercial 707 rigged for 

drogue refueling. This aircraft is operated by the 

Omega Aerial Refueling Service, Inc., which has 

expressed interest in purchasing retired KC-135Es so 

it could offer this service for Air Force aircraft as 

well. 

 Working with manufacturers of large airframes to 

determine the potential to configure new 

commercial aircraft for the aerial refueling role. It 

is important not to preclude future opportunities 

from new generation aircraft that might be lost 

through a commitment to major recapitalization 

within the next two years. 

36 ____________________________________________________________ DSB REPORT ON
__________________________________________________________ TERMS OF REFERENCE

APPENDIX I. TERMS OF REFERENCE

AERIAL REFUELING REQUIREMENTS _______________________________________________ 37
APPENDIX I __________________________________________________________________

This page is intentionally blank. 

38 ____________________________________________________________ DSB REPORT ON
DEPUTY SECRETARY OF DEFENSE

1010 DEFENSE PENTAGON

WASHINGTON, DC 20301-1010

FEB 13X)J

MEMORANDUM FOR CHAIRMAN, DEFENSE SCIENCE BOARD

Terms of Reference - Defense Science Board Task Force on Aerial

Refueling Requirements

SUBJECT:

I am requesting you fonD a Defense Science Board (PSB) Task Force to evaluate

current aerial refueling capability and future Department of Defense (DoD) aerial

refueling requirements. The Task Force's evaluation should include recommendations for

meeting future aerial refueling requirements.

Most legacy and projoctea-DOU aii"craffie<:iuire aerial refueling to conduct

operations across the entire spectrum of DoD missions. As the Departmentransforms

itself to meet the challenges of the 21 st century, existing aerial refueling capabilities may

or may not meet future needs. New systems and capabilities are being developed (e.g.

F/A-22, the Joint Strike Fighter, Small Diameter Bomb, unmanned aerial vehicles,

proposed strategic strike capabilities, etc.) which may drastically alter future requirements

for aerial refueling. Current long range air mobility and strike aircraft represent a

significant and pervasive demand on aerial refueling assets. In addition, it is quite

possible that opponents have identified refueling assets as a necessary component of U.S.

success and will target these assets in future conflicts, representing an attrition of aerial

refueling capability that we have not experienced in the past.

The Task Force should assess current and future requirements with respect to both

legacy systems and missions, and take into account proposed future systems and

capabilities. The Task Force shall have access to the historic reviews of the Air Force,

General Accounting Office, and other DoD departments, and request any data collection,

or data development required to fill in analytical gaps. Using best estimates of

requirements for 2010,2020, and 2030, the Task Force should assess the following

options with respect to DoD aerial refueling capability:

a. Retain the requisite number of assets to maintain current capability. The Task

Force should identify any issues which may affect the ability of the current aerial refueling

fleet to continue to operate, to include potential affects of corrosion, the estimated length

of service existing for current assets, means to mitigate these issues, and estimated costs

of maintaining these assets as the fleet ages.

b. Perfonn a service life extension on the requisite number of existing aircraft.

The Task Force should identify the expected lifetime of refurbished aircraft to

OSD
bound -the potential cost of this option.

c. Acquire new refueling capabilities. As a minimum, the Task Force should

assess the acquisition of new aircraft, modification of used aircraft to perform the aerial

refueling mission, and development of unmanned aerial vehicles as an aerial refueling

tanker. The Task Force should include an estimate of costs and quantify an acquisition

rate for any new capabilities. '

d. Evaluate other methods to address refueling needs. For example, there may be

sufficient fInancial incentive to re-engine existing fleets of aircraft with more fuel efficient

engines which would lower overall demand. Development of suitable doctrine to employ

Small Diameter Bombs or other future precision weapons may reduce the number of

required sorties and similarly lower future demand. The Task Force should attempt to

quantify these trends and estimate costs of these capabilities for comparison to the costs of

other refueling options.

In arriving at their conclusions, the Task Force should not be bo1lnd by anyone

option and may explore options not discussed above.

The Task Force should provide a final report by April 30, 2004. The Task Force

should provide their report directly to the Secretary of Defense.

Administrative support and funding will be provided by Mr. Michael W. Wynne,

Acting USD(AT&L)and Dr. Glenn Lamartin, Director, Defense Systems. Admiral Don

Pilling, USN (Ret) and Dr. Ted Gold will serve as Co-Chainnen of the Task Force.

Colonel Bill Story, Defense Systems (Air Warfare), will serve as Executive Secretary; and

Lieutenant Colonel David Robertson, USAF, will serve as the DSB Secretariat

Representative.

The Task Force shall have access to any classified information needed to develop

its assessment and recommendations.

The Task Force will be operated in accordance with the provisions ofP .L. 92463:

the "Federal Advisory Committee Act," and DoD Directive 5105.4, "The DoD Federal

Advisory Committee Management Program." It is not anticipated that this Task Force

will need to, ge- into any "particular matters" within the meaning of Section 208 of Title

18, U.S. Code, nor will it cause any member to be placed in the position of acting as a

procurement official.

~

j

l>
__________________________________________________________________ BRIEFINGS

APPENDIX II. TASK FORCE MEMBERSHIP

CHAIRMAN

ADM Don Pilling, USN (Ret.) Logistics Management Institute 

TASK FORCE MEMBERS

Mr. Irv Blickstein RAND 

Ms. Deborah Christie Institute for Defense Analyses 

Dr. Robert Howard Private Consultant 

Mr. Robert Rachor Federal Express Corp. 

EXECUTIVE SECRETARY

Col William Story, USAF OUSD(AT&L)/DS-AW 

DSB REPRESENTATIVE

Lt Col David Robertson, USAF DSB Secretariat 

GOVERNMENT ADVISORS

Ms. Kathleen Conley PA&E 

Mr. Kal Leikach NAVAIR 

Mr. David Merrill AMC 

Dr. Alan Somoroff NAVAIR 

STAFF

Ms. Stacie Smith Strategic Analysis, Inc. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 41
APPENDIX II _________________________________________________________________

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42 ____________________________________________________________ DSB REPORT ON
__________________________________________________________________ BRIEFINGS

APPENDIX III. BRIEFINGS

February 3, 2004: Arlington, VA 

BRIEFER TOPIC

Maj Bill Uptmor (AF/XOR) 

Maj Bob Keirstead (AF/XPP) 

Tanker Force Overview: Operational 

Capabilities/ Force Structure and 

Recapitalization 

LtCol Tom Jackson (AF/ILM) Tanker Corrosion Issues

Dr. Laura Williams, PA&E 

Ms. Kathleen Conley, PA&E 

Tanker Requirements Briefing 

February 17-18, 2004: Arlington, VA

Mr. Mike Kennedy 

Mr. Dave Orletsky 

Dr. John Stillion 

RAND Tanker Recapitalization 

Alternatives Study 

Mr. Dyke Weatherington UAV Capabilities and Requirements 

Mr. Daniel Thompson, AFRL Joint Automatic Aerial Refueling 

Program 

Mr. Chris Bolkcom 

Mr. Ron O’Rourke 

Congressional Research Service Tanker 

Perspectives 

Mr. Dale Moore NAVAIR Aircraft Corrosion Control 

and Prevention Program 

Mr. Chris Holder, NAVAIR KC-130 Corrosion Management 

CAPT Michael Fralen, USN 

Maj Steve Primm, USMC 

USMC KC-130 Requirements 

Mr. Robert Rachor, Federal 

Express 

FedEx Aging Airplane Safety 

Purchase and refurbishment of used

MD-10s 

Mr. Gale Matthews, Omega Aerial 

Refueling Services, Inc 

Omega’s Tanker Modification Program 

March 9-10, 2004: Tinker Air Force Base, Oklahoma City, OK 

Mr. Jack Srnec KC-135 Aging Aircraft 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 43
APPENDIX III_________________________________________________________________

Mr. Tom Ramsey Maintenance Program Review 

C/KC-135 ASIP & FSIP Briefing 

Col Ron Blickley, USAF KC-135 Depot Maintenance Tour 

Mr. Sam Champlin KC-10 Program Update 

DC-10 Conversion 

Lt Col John Graham, USAF AMC Tanker Allocation and Scheduling 

Lt Col Gerardo Inumerable, Jr., 

USAF AMC

AMC KC-135 Maintenance Program 

Lt Col Spike Halton, USAF AMC AMC Tanker Recapitalization 

March 24, 2004: Arlington, VA

LtGen James Cartwright, USMC J-8 Perspective 

Col (sel) Michael Cassidy, USAF Tanker Programming and Budgeting 

Mr. Sam Kleinman 

Mr. Brent Boning 

Mr. Peter Francis 

CNA KC-135 Study 

Mr. Charles Nemfakos National Defense Sealift Fund 

Dr. James Woolsey 

Dr. Steve Balut 

IDA KC-767 Pricing Study 

April 6, 2004: Arlington, VA 

Mr. William Abbott Battelle Study on Corrosion Monitoring 

at USAF Sites 

44 ____________________________________________________________ DSB REPORT ON
_____________________________________________________________COST OF GROWTH

APPENDIX IV. COST GROWTH

One of the Air Force’s major arguments for beginning 

replacement of the KC-135 in the near term is that the “cost” of depot 

maintenance grew dramatically from FY1991 through FY2004 and 

can be expected to continue to grow at the same rate. The first part of 

that statement is true, although for reasons described below, it is 

somewhat misleading. The DSB task force investigated the major 

causes of cost and price growth to determine the best available basis 

for making projections. 

RELEVANT AIR FORCE STUDIES 

The Air Force’s KC-135 Economic Service Life Study (ESLS) released 

in February 2001 projected airframe depot maintenance and total 

operating and support (O&S) costs for retaining as much as possible 

of the KC-135 fleet from FY01 through FY40. Costs are shown in 

FY00 dollars. The study observed that the depot hourly labor rate 

was anticipated to grow from $111.20 in FY01 to $160.00 in FY02 due 

to a narrowing of the depot’s overhead base. It assumed that this rate 

would grow at 1 percent annually (simple escalation) thereafter. This 

assumption along with assumptions about growth in hours per 

aircraft led to a projection of airframe depot maintenance costs that 

shows a growth rate of 3.2 percent compounded annually. Total O&S 

costs, which include engine depot maintenance, unit manpower, and 

other unit costs, show growth of only 0.9 percent compounded 

annually. (The study’s number of 6 percent for growth in depot costs 

appears to use a different definition of growth rate.) 

The Air Force’s KC-135E Business Case Analysis (BCA) released in 

May 2003 also projected airframe depot maintenance and total O&S 

costs. Unlike the ESLS, the BCA looked at the FY04 President’s 

budget proposal to procure 100 KC-X and replace all KC-135Es. It 

shows costs from FY03 through FY17 in then-year and FY03 dollars. 

The BCA observed that the weighted average unit sales price (USP) 

for KC-135 airframe depot maintenance rose from about $0.8 million 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 45
APPENDIX IV _________________________________________________________________

in FY91 to about $7.3 million in FY04 (in then-year dollars) or about 

18.5 percent compounded annually. (In FY04 constant dollars, this 

growth rate is about 16.8 percent.) The BCA revised the ESLS’ cost 

estimate for airframe depot maintenance on the assumption that costs 

would continue to grow at that rate, updated the ESLS estimate for 

personnel and modifications to reflect the FY04 budget, and added 

KC-X O&S costs. (The study does not discuss the basis for KC-X 

costs.) The result showed growth in total O&S of 6.5 percent 

compounded annually in constant dollars. 

DATA PROVIDED TO THE DSB TASK FORCE

The table below shows data on the USP from the BCA. It also 

shows a variety of price and cost data related to KC-135 airframe 

depot maintenance that were provided by the Air Force to the DSB in 

April 2004. The FY05 data was not available when the BCA work 

was done in 2003 

Unit Sales

Price 

($M) 

Sales 

Rate 

($) 

Sales 

Rate less

G&A 

Revenue 

Rate 

($) 

Cost 

Rate 

($) 

Profit or 

Loss 

($M) 

FY91 0.8

FY92 1.5

FY93 1.8

FY94 1.7

FY95 2.0 86.44 68.74

FY96 2.2 96.74 77.41 83.32 88.56 -6.3

FY97 3.0 105.91 90.68 94.75 92.86 2.6

FY98 3.5 94.59 83.62 95.63 95.10 0.8

FY99 3.7 106.20 92.63 98.14 99.90 -2.5

FY00 3.5 94.34 84.11 101.75 127.13 -29.4

FY01 3.8 111.20 100.35 91.44 140.02 -62.1

FY02 6.0 162.91 142.42 121.96 131.41 -14.5

FY03 6.1 199.81 175.11 171.22 148.56 33.2

FY04 7.4 210.87 159.06 204.45 187.58

FY05 191.50 169.91 190.32 199.35

46 ____________________________________________________________ DSB REPORT ON
_____________________________________________________________COST OF GROWTH

The USP for any given year is the price charged the customer for 

an aircraft inducted into the depot in that year; it is charged in the 

year the work is finished. USP is the product of a budgeted number 

of labor hours per aircraft and a budgeted price per hour. The latter 

is sometimes called the labor rate (as in the ESLS), but it is more 

properly called the hourly sales rate since it includes labor, materials, 

and various overhead charges. 

The revenue rate for any given year is the weighted average sales 

rate for aircraft produced (i.e., completed) in that year. The cost rate 

for any given year is the total cost of airframe depot maintenance 

(including labor, materials, and overhead) divided by the total direct 

labor hours worked that year, whether these hours were worked on 

aircraft carried in from the previous year or on those inducted during 

that year. Both of these rates are after-the-fact reflections of the 

results of operations, except in FY04 and FY05 where they are budget 

numbers. 

Data for FY04 are the basis for the budget now being executed. 

Data for FY05 are the most recent projections. Data on sales rates 

provided by the Air Force to the USD(C) and DPA&E in February 

2004 showed a projection of $237.28 for FY05. The decision to slip the 

overhaul of the engine struts on the E model to FY06 resulted in the

lower projection of $190.32 shown in the table. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 47
APPENDIX IV _________________________________________________________________

The figure below plots sales rate and cost rate data. 

Sales and Cost Rates 

0

50

100

150

200

250

FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05

Sales Rate

Cost Rate

During FY98 through FY00, the number of days an aircraft is in the

depot (flow days) and backlog of aircraft in depot increased 

significantly. The Air Force attributes this to the unpredictability of

major structural repairs and the depot’s inability to identify them 

early in the process, increases in corrosion work, and the addition of 

two major modifications to the PDM process. In FY00 and FY01, the 

number of aircraft inducted was reduced from planned levels, the 

work flow was reengineered and improvements made on the shop 

floor, direct and engineering manpower was added, material support 

was enhanced, and the Pacer CRAG modification was eliminated 

from PDM work. These actions have been successful in eliminating 

the backlog and cutting flow days almost in half. 

The addition of labor and the investments increased costs. As the 

data in the table and figure show, the cost rate jumped 27 percent 

48 ____________________________________________________________ DSB REPORT ON
_____________________________________________________________COST OF GROWTH

from FY99 to FY00 and increased another 10 percent to FY01. Paying 

for these increases while billing for fewer aircraft also caused large 

losses in FY00 through FY02. 

The USP for any given year and the sales rate that goes into it are 

established during development of the budget and are fixed about 9-

12 months before the budget year begins. At the point they are 

developed, they have to be based on the results of operations in the 

year just completed (probably preliminary results) and the budget 

estimate for the budget then before Congress. In working capital 

fund theory, rates/prices are set so that projected revenue equals 

projected expenses (costs). Also in theory, they are adjusted to 

recover unplanned prior year losses or return unplanned prior year 

gains. For gains or losses in year N, these adjustments usually occur 

in year N+2. For several years before FY02, however, sales rates did 

not include this adjustment. Rates also may be adjusted to maintain 

adequate cash reserves. 

As would be expected given lead times for setting USP and sales 

rates, sales rates in FY02 and FY03 reflected the cost increases in FY00 

and FY01. Sales rates jumped even more sharply than cost rates, 

however, increasing 47 percent and 23 percent in FY02 and FY03, 

respectively. Some of this additional increase can be attributed to 

adjustments for prior year losses or gains and the need to maintain 

adequate cash in the AF WCF. 

As the table shows, losses in FY99 through FY02 totaled $108.5M. 

The task force does not know how much loss was recovered in any 

single year, but an example will demonstrate the potential 

magnitude. In FY02, 38 aircraft were planned for induction at about 

31,000 hours per aircraft. If the entire $29 million lost in FY00 were 

included in the sales rate for FY02, the sales rate for those aircraft 

would have included about $25 per hour for loss recovery. Whatever 

the amount, the return to normal WCF policy with regard to cost 

recovery undoubtedly makes comparisons of prices before and after 

FY02 misleading. 

Other data provided by the Air Force show the magnitude of 

recent gain/loss and cash adjustments. The table below shows sales 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 49
APPENDIX IV _________________________________________________________________

rates for FY04 and FY05 exclusive of any such adjustments and the 

magnitude of adjustments in those years. 

Composition of Sales Rates 

FY04 FY05

Direct and Production Overhead 159.06 169.91 

G&A (excluding adjustments) 29.55 29.44 

 Sub-Total 188.61 199.35 

Carry Over Adjustment* 15.72 -16.14 

Other Adjustments 6.52 8.29 

 Total Sales Rate 210.87 191.50 

* Carry over adjustments correct for anticipated losses or profits on aircraft that are carried over from the 

previous year. 

Because changes in USP and sales rates lag changes in costs and 

because they include adjustments for prior year losses and gains and 

to ensure adequate cash, these “prices” were artificially low before 

FY02 and artificially high thereafter. Therefore, the task force 

believes some measure of costs would provide a better basis for 

projections. Ideally, the task force would like to see the actual cost 

per aircraft over time. Computing that would require data on the 

number of hours worked on each aircraft in each year it was in depot. 

Unfortunately, it is understood that such data are not available in any 

automated system. Therefore, the following discussion focuses on 

cost rates. 

WHAT WAS LEARNED ABOUT COST RATES

The table below shows the components of the cost rate (excluding 

a category called “other direct,” which make a trivial contribution to 

the total). Every category grew significantly from FY99 to FY00, and 

production overhead had the largest percentage and absolute growth 

thereafter. 

50 ____________________________________________________________ DSB REPORT ON
_____________________________________________________________COST OF GROWTH

Cost Rates (dollars per hour) 

Direct Labor Direct

Material 

Production 

Overhead 

General & 

Administrative 

FY96 27.59 17.30 32.11 11.56

FY97 27.52 17.38 34.31 13.64

FY98 29.54 19.65 33.50 10.83

FY99 31.00 20.77 36.78 11.36

FY00 38.19 29.05 44.25 15.63

FY01 37.78 29.75 53.91 14.58

FY02 34.84 31.25 50.32 14.99

FY03 35.50 34.37 59.53 19.06

As the name suggests, direct labor8 and direct material are 

directly related to the amount and difficulty of work on the airframe. 

The changes in the manpower component of cost rates are consistent 

with the permanent addition of manpower to reduce flow days and a 

temporary addition to eliminate the backlog. Enhanced material 

support for the shop floor likely contributed to the initial increase in 

the direct material component of the cost rate. The Air Force also 

attributes increases to major structural repairs, replacement of 

stabilizer trim actuators and stress panels in vertical and horizontal 

stabilizers, and major modifications. 

Both production overhead and G&A include costs that are not 

directly related to aging aircraft such as charges for services provided 

by DFAS and DISA, information technology costs, and a share of 

various overhead costs not related to a specific depot product. These 

costs grew from $20M in FY00 to a projected $67M in FY05. In that 

year, they contributed $48.21 to the cost rate of $199.35. G&A costs 

are entirely in this category, while production overhead includes 

costs of both types. For example, it includes the engineering 

manpower that was added and the investments that were made to 

reduce flow days as well as some overtime costs. The Air Force 

answered three sets of questions regarding airframe depot 

maintenance costs. Unfortunately, the task force had not been able to 

divide the production overhead component of cost rates between 

 

8 For a fixed number of flow days 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 51
APPENDIX IV _________________________________________________________________

costs related and unrelated to aging aircraft when the inquiry was 

terminated. 

WHAT THIS SUGGESTS ABOUT FUTURE RATES 

The Air Force determined that USP data from FY91 through FY03 

fit a compound growth curve better than it fit a linear growth curve. 

The task force already has explained why it believes some measure of 

costs is a better basis for projections than these measures of “price.” 

One must determine, however, which years to use in making a 

projection and what type of curve best fits the data. 

The first figure shows two linear growth curves for cost rates, one 

using all the data and one using just data from FY00 through FY05. 

In the first case, costs grow by $12.33 per year; in the second case, 

they grow by $14.88 (with an R2 value of 0.838). 

0

50

100

150

200

250

FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06

Cost Rate

Linear 1

Linear 2

The final figure shows the cost rate and two compound growth 

curves, one using all the data and one using just data from FY99 

52 ____________________________________________________________ DSB REPORT ON
_____________________________________________________________COST OF GROWTH

through FY05. The curves coincide and cost rates double every 7-8 

years. 

0

50

100

150

200

250

FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06

Cost Rate

Compound 1

Compound 2

Nothing that has been learned about the reasons for cost growth 

suggests that growth is non-linear. The change in depot maintenance 

process in FY00 argues for using data from FY00 through FY05. 

Therefore, the task force believes the linear projection using data 

from FY00 through FY05 provides the best estimate. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 53
APPENDIX IV _________________________________________________________________

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54 ____________________________________________________________ DSB REPORT ON
________________________________________ OUTSOURCING SOME AERIAL REFUELING NEEDS

APPENDIX V. OUTSOURCING SOME AERIAL REFUELING 

NEEDS

COMMERCIAL AIRCRAFT ARE MEETING SOME REFUELING 

REQUIREMENTS

The task force knew of the Navy’s limited use of commercial 

assets for its aerial refueling needs and examined the feasibility of 

outsourcing tanking requirements on a larger scale. As noted in 

Chapter 3, emerging missions, such as homeland defense, could 

increase the demand for, and nature of, aerial refueling. The 

availability of commercial tankers to meet such requirements may be 

an attractive alternative, particularly in consideration of the inherent 

cost advantage. The use of commercial tankers may also enable the 

Air Force and Navy to meet more of the critical training requests that 

do not now compete well against higher priority requirements. 

Omega Air, Inc. (Omega) briefed the Task force on their aerial 

refueling tanker, the tanking services they provide the Navy, and the 

potential to meet additional requirements. The Omega KC-707 is a 

FAA-certified aircraft, modified to a tanker configuration under a 

Supplemental Type Certificate. It has a hose and drogue system 

similar to that in use on KC-130 aircraft. Under contract to the Naval 

Air Systems Command, it was used successfully in 2002 and 2003 to 

support exercises, airwing workups, aircraft deployments, and 

general training. It clearly demonstrated the compatibility of 

commercial tanking with military training and deployment 

operations. The 2003 CNA study “Commercial Inflight Refueling” 

was very complimentary of the Omega KC-707 availability, 

reliability, flexibility, responsiveness, and, particularly, cost 

effectiveness. The report recommended the continued use of this 

service and the exploration “of using commercial tankers to decrease 

qualifications requirements with KC-10 and KC-135 tankers.” 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 55
APPENDIX V__________________________________________________________________

THERE ARE COST ADVANTAGES IN USING COMMERCIAL

ASSETS

The cost advantage associated with the use of commercial assets 

derives mainly from substantially lower costs that are typically found 

in relatively small, lean commercial applications. The infrastructure 

and manpower tail associated with large-scale military activities is a 

significant cost driver that is largely absent in a small commercial 

activity. This provides a significant cost savings for the particular 

utilization. However, unless there is a commensurate reduction of 

assets on the military side, there are no net savings to DoD. The 

current tanking application simply meets an essential requirement 

(demonstrated by the Navy’s willingness to pay) in a cost effective 

manner. To the extent that requirements grow due to homeland 

defense initiatives or due to a realization that additional training 

evolutions are hard requirements that must be met, the use of 

commercial assets can provide cost savings to DoD. Therefore, 

additional commercial outsourcing applications should be seriously 

considered. 

There are several examples of successful commercial outsourcing 

of operational or training activities within DoD in addition to the 

Omega tanker contract. These include a variety of air assets that are 

used to provide services for the Navy and the Air Force throughout 

the world in the areas of electronic warfare (EW), air intercept control 

(AIC), aerial target towing, air to air combat training, and basic flight 

training evaluation. Examples include Learjets that carry threat 

simulator and jamming pods for EW training, provide tracking 

information for AIC services, and tow aerial targets; tactical aircraft, 

such as F-21 Kfir and F-35 Draken, that provide Dissimilar Air 

Combat Training; and the G-1 Gulfstream that provides EW standoff 

jamming and threat simulation and other electronic combat 

services.Should the Department desire to pursue commercial 

alternatives for certain tanking missions there are several options for 

sourcing aircraft. The homeland defense mission would, of course, 

be primarily conducted with aircraft equipped for boom tanking. As 

noted elsewhere in this report, the Royal Netherlands Air Force 

modified two aircraft to a tanker with boom configuration. The task 

56 ____________________________________________________________ DSB REPORT ON
________________________________________ OUTSOURCING SOME AERIAL REFUELING NEEDS

force expects that a commercial entity could be encouraged to 

undertake a similar conversion program, given the opportunity for 

sufficient business to recover costs and turn a profit. Alternatively, 

the entity could utilize excess Air Force aircraft that are already boom 

equipped. 

The efficacy of utilizing commercial assets to meet tanker 

requirements has been established. The task force recommends the 

DoD study this concept of operations for additional application, as it 

appears to have the capability to meet certain requirements at 

significantly lower cost. 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 57
APPENDIX V__________________________________________________________________

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58 ____________________________________________________________ DSB REPORT ON
__________________________________________________________________ GLOSSARY

APPENDIX VI. GLOSSARY

DEFINITIONS, ACRONYMS, AND ABBREVIATIONS

DEFINITIONS

1-4-2-1 1-Defend the United States and Territories, 4- Deter forward 

in four critical regions, 2- Swiftly defeat the effort in 

overlapping major conflicts, 1- Upon the President’s 

direction, win decisively one of the conflicts. 

ACRONYMS AND ABBREVIATIONS

AoA Analysis of Alternatives

ALC Air Logistics Center 

AMC Air Mobility Command

CENTAF U.S. Central Command Air Forces 

CRAG Compass, radar, and global positioning system 

CONUS Continental United States

DFAS Defense Finance and Accounting Service 

DISA Defense Information Systems Agency 

DoD Department of Defense 

DSB Defense Science Board 

ESLS KC-135 Economic Service Life Study 

FedEx Federal Express Corporation 

FY Fiscal year

G&A General and administrative 

MNS Mission Need Statement

MSR Major structural repair

MTW Major theater war 

OEF Operation Enduring Freedom 

OIF Operation Iraqi Freedom 

ORD Operational Requirements Document 

O&S Operation and support 

AERIAL REFUELING REQUIREMENTS _______________________________________________ 59
APPENDIX VI _________________________________________________________________

OSD (PA&E) Office of the Secretary of Defense (Program Analysis and 

Evaluation) 

PDM Programmed depot maintenance 

POM Program Objective Memorandum 

SIOP Strategic Integrated Operations Plan

SPG Strategic Planning Guidance 

TRANSCOM U.S. Transportation Command 

TRS-05 Tanker Requirements Study 2005 

UAV Unmanned aerial vehicle

U.S. United States

USAF United States Air Force 

USP Unit sales price 

WMD Weapons of mass destruction 

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__________________________________________________________________ GLOSSARY

AERIAL REFUELING REQUIREMENTS _______________________________________________ 61