```
                                                                 
Military Readiness: Civil Reserve Air Fleet Can Respond as	 
Planned, but Incentives May Need Revamping (30-DEC-02,		 
GAO-03-278).							 
                                                                 
In the event of a national emergency, the Department of Defense  
(DOD) can use commercial aircraft drawn from the Civil Reserve	 
Air Fleet to augment its own airlift capabilities. The Civil	 
Reserve Air Fleet is a fleet of aircraft owned by U.S. commercial
air carriers but committed voluntarily to DOD for use during	 
emergencies. After the terrorist attacks of September 11, 2001,  
many air carriers experienced financial difficulties. This	 
sparked concern about the fleet's ability to respond, if	 
activated, and prompted the Subcommittee to ask GAO to determine 
whether the fleet could respond to an activation with the	 
required number of aircraft and crews and in the required time	 
frame. The Subcommittee also wanted to know whether the 	 
incentives used to attract and retain participants are effective.
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-278 					        
    ACCNO:   A05770						        
  TITLE:     Military Readiness: Civil Reserve Air Fleet Can Respond  
as Planned, but Incentives May Need Revamping			 
     DATE:   12/30/2002 
  SUBJECT:   Armed forces reserves				 
	     Defense capabilities				 
	     Military aircraft					 
	     Strategic planning 				 
	     Terrorism						 
	     Air Force Civil Reserve Air Fleet			 
	     Program						 
                                                                 
	     B-747						 
	     B-747-100 Aircraft 				 
	     B-767 Aircraft					 
	     C-130 Aircraft					 
	     C-141 Aircraft					 
	     C-17 Aircraft					 
	     C-5 Aircraft					 
	     DC-10 Aircraft					 
	     Desert Shield					 
	     Desert Storm					 
	     DOD Quadrennial Defense Review			 
	     GSA City Pairs Program				 
	     KC-10 Aircraft					 
	     MD-11 Aircraft					 
	     Operation Enduring Freedom 			 

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GAO-03-278

Report to the Chairman, Subcommittee on Military Readiness, Committee on
Armed Services, House of Representatives

United States General Accounting Office

GAO

December 2002 MILITARY READINESS

Civil Reserve Air Fleet Can Respond as Planned, but Incentives May Need
Revamping

GAO- 03- 278

Civil Reserve Air Fleet participants can respond to an emergency or a war
with the required number of aircraft and crews and within the required
time frame. Currently, there are more aircraft committed to the fleet than
are needed to fill the wartime requirements identified in the DOD Mobility
Requirements Study 2005, which determined the requirements to fight and
win two major theater wars. However, Civil Reserve Air Fleet requirements
may increase the next time mobility requirements are studied. The last
mobility requirements study was limited in that it did not consider the
use of excess Civil Reserve Air Fleet capacity and the ability of some
commercial aircraft to carry larger cargo than standard- sized pallets.

The incentives currently in place to encourage participation in the
program, especially the incentive to participate in DOD*s peacetime
business, might be losing effectiveness and could become disincentives in
the future. Some participants are not able to bid on peacetime cargo
business because their fleets do not include B- 747s, the predominant
aircraft DOD uses for peacetime cargo missions. GAO found that B- 747s
carried out 94 percent of 946 missions flown by commercial aircraft in the
first 10 months of fiscal year 2002. Furthermore, over 40 percent of
recent missions did not use all available space or weight limits aboard B-
747s. These missions might have been carried out less expensively with
smaller wide- body aircraft. Using smaller aircraft would provide more
peacetime business to a greater share of program participants, thus
enhancing current incentives. However, the Air Force does not have
sufficient management information to identify options for selecting the
best available aircraft type for the mission.

Loading a B- 747 at Dover Air Force Base, Delaware

MILITARY READINESS

Civil Reserve Air Fleet Can Respond as Planned, but Incentives May Need
Revamping

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 278. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Neal Curtin at (757) 552- 8100 or curtinn@ gao. gov.
Highlights of GAO- 03- 278, a report to the

Chairman, Subcommittee on Military Readiness, Committee on Armed Services,
House of Representatives

December 2002

In the event of a national emergency, the Department of Defense (DOD) can
use commercial aircraft drawn from the Civil Reserve Air Fleet to augment
its own airlift capabilities. The Civil Reserve Air Fleet is a fleet of
aircraft owned by U. S. commercial air carriers but committed voluntarily
to DOD for use during emergencies.

After the terrorist attacks of September 11, 2001, many air carriers
experienced financial difficulties. This sparked concern about the fleet*s
ability to respond, if activated, and prompted the Subcommittee to ask GAO
to determine whether the fleet could respond to an activation with the
required number of aircraft and crews and in the required time frame. The
Subcommittee also wanted to know whether the incentives used to attract
and retain participants are effective.

GAO is recommending that the next evaluation of mobility requirements
include a more thorough study of Civil Reserve Air Fleet capabilities and
that the Air Mobility Command study whether smaller wide- body aircraft
could be used as efficiently and effectively as the larger B- 747- type
aircraft to handle DOD*s peacetime cargo business. DOD concurred with
these recommendations.

Page i GAO- 03- 278 Military Readiness Letter 1

Results in Brief 2 Background 3 Conclusions 11 Recommendations for
Executive Action 11 Agency Comments and Our Evaluation 12 Scope and
Methodology 12

Appendix I Civil Reserve Air Fleet Participants and Total Number of
Aircraft Committed at Stage III as of October 2002 14

Appendix II Department of Defense Commercial Airlift Contracts 15

Appendix III Comments from the Department of Defense 16

Appendix IV GAO Contacts and Staff Acknowledgments 18

Tables

Table 1: Aircraft Committed to the CRAF Program by Stage and Type of
Aircraft (as of October 2002) 4 Table 2: Stage III CRAF Requirements and
Commitments

(as of October 2002) 5 Table 3: Cost Comparison by Aircraft Type 10 Table
4: DOD Contracts for Commercial Airlift, Fiscal Years

1998- 2002 15

Figures

Figure 1: Loading a B- 747 at Dover Air Force Base, Delaware 6 Figure 2:
B- 747 and MD- 11 Cross- Section Views with Cargo Pallets 9 Contents

Page ii GAO- 03- 278 Military Readiness Abbreviations

AMC Air Mobility Command CRAF Civil Reserve Air Fleet DOD Department of
Defense MRS- 05 Mobility Requirements Study 2005

Page 1 GAO- 03- 278 Military Readiness

December 30, 2002 The Honorable Joel Hefley Chairman, Subcommittee on
Military Readiness Committee on Armed Services House of Representatives

Dear Mr. Chairman: In the event of a national emergency, the Department of
Defense (DOD) will face requirements for air transportation that exceed
its military airlift capabilities. 1 To meet additional requirements, DOD
can use the Civil Reserve Air Fleet, aircraft from U. S. commercial air
carriers voluntarily committed and put under contract to DOD for use
during emergencies. The commercial air carriers receive no compensation
for their participation in the Civil Reserve Air Fleet unless they are
activated, but they are given an incentive to participate by being made
eligible to bid for DOD*s peacetime airlift business. Air carriers are
paid for missions they fly at predetermined rates based on a weighted
average of their costs plus a return on investment. The Air Force*s Air
Mobility Command at Scott Air Force Base, Illinois, manages the Civil
Reserve Air Fleet program.

Commercial air carriers experienced financial difficulties after the
attacks of September 11, 2001. In your December 2001 letter, you expressed
concern over the carriers* ability to respond to the requirements of the
Civil Reserve Air Fleet program in the event of an activation for an
emergency or a war, including the ability to provide crews that do not
have National Guard or Reserve obligations. As agreed with your office, we
determined whether (1) program participants could respond to an activation
with the required number of aircraft and crews and in the required time
frame and (2) incentives used to attract and retain program participants
are effective.

To respond to your letter, we referred to the Mobility Requirements Study
2005, issued in January 2001, to determine the requirements for the Civil
Reserve Air Fleet program. This study determined the airlift required to

1 The total capacity expressed in terms of number of passengers and/ or
weight/ cubic displacement of cargo that can be carried at any one time to
a given destination by available military airlift.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 278 Military Readiness

meet the former national military strategy of fighting and winning two
major theater wars. It does not reflect the new Defense Planning Guidance,
issued in May 2002, the new national security strategy, issued in
September 2002, or the airlift needed to meet that strategy.

Civil Reserve Air Fleet participants can respond to an emergency or a war
with the required number of aircraft and crews and within the required
time frame. Currently, there are more aircraft committed to the program
than are needed to fill the wartime requirements identified in DOD*s
Mobility Requirements Study 2005. Participants stated that they would be
able to provide the required numbers of crews despite layoffs in the
industry after September 11, 2001, even though some crewmembers have
National Guard or Reserve commitments that would prevent them from flying
for the Civil Reserve Air Fleet if it were activated. However, Civil
Reserve Air Fleet requirements may increase the next time mobility
requirements are studied. The last study was limited in that it did not
consider excess Civil Reserve Air Fleet capacity and the ability of some
commercial aircraft to carry larger than standard- sized cargo pallets,
which could increase the amount of cargo the fleet is expected to carry.

The incentives currently in place to encourage participation in the
program might be losing effectiveness and could become disincentives in
the future, according to some program participants. Civil Reserve Air
Fleet participants with 62 percent of the wide- body cargo aircraft in
their fleets are not able to bid on peacetime cargo business because their
fleets do not include B- 747s, the predominant commercial aircraft DOD
uses for peacetime cargo missions. DOD usually requests aircraft with the
capacity of a B- 747 because it carries more weight and can be loaded with
a standard- sized pallet that also fits on military aircraft. We found
that B- 747s carried out 892 of 946 missions (94 percent) flown by
commercial aircraft in the first 10 months of fiscal year 2002.
Furthermore, over 40 percent of recent missions did not use all available
space or weight limits aboard B- 747s. These missions might have been
carried out less expensively with smaller wide- body aircraft. Using these
smaller wide- body aircraft would also provide more peacetime business to
a greater share of program participants. However, the Air Force does not
have sufficient management information to identify options for selecting
the most efficient and economical aircraft type for the mission.

To ensure that mobility requirements are met in the most effective and
economical manner, we are recommending that DOD fully assess Civil Reserve
Air Fleet capabilities in any new mobility requirements Results in Brief

Page 3 GAO- 03- 278 Military Readiness

studies. To enhance the effectiveness of Civil Reserve Air Fleet program
incentives, we are recommending that the Air Mobility Command study the
option of optimizing its use of aircraft other than B- 747s for peacetime
missions. DOD concurred with both recommendations and indicated that there
are already two ongoing studies that could include assessments of Civil
Reserve Air Fleet capabilities. We agree that these studies would address
our first recommendation concerning a more thorough study of Fleet
capabilities. In a subsequent discussion, a DOD official stated that DOD
intends to perform an additional study that would address the second
recommendation. See the *Agency Comments and Our Evaluation* section for
our detailed response to DOD*s comments.

The National Airlift Policy, 2 issued in June 1987, reinforced the need
for and use of the Civil Reserve Air Fleet (CRAF) program, established in
1951. 3 The policy states that military and commercial airlift resources
are equally important; that DOD should determine which resources must be
moved by the military and which can be moved by commercial air carriers;
and that commercial carriers will be relied upon to provide airlift
capability beyond the capability of the military fleet. It also states
that during peacetime, DOD requirements for passengers and/ or cargo
airlift augmentation shall be satisfied by the procurement of airlift from
commercial air carriers participating in the CRAF program.

Military airlift requirements are fulfilled by a mix of both military and
civilian aircraft. Currently, the military airlift fleet is comprised of
82 C- 17, 110 C- 5, 468 C- 130, and 69 C- 141 aircraft. The older C- 141
aircraft are being phased out and replaced by additional C- 17 aircraft.
There are also 54 KC- 10 aircraft, which perform both airlift and
refueling missions. The CRAF program includes 927 cargo and passenger
aircraft from U. S. commercial air carriers.

CRAF participants are required to respond within 24 hours of activation in
the event of stage I (a regional crisis in which the Air Mobility
Command*s (AMC) aircraft fleet cannot meet both deployment and other
traffic requirements simultaneously) or stage II (a major war that does
not warrant full national mobilization). 4 Stage III* multiple theater
wars or a

2 National Security Decision Directive 280, June 24, 1987. 3 Executive
Order No. 10219, 16 Federal Register 1983 (Feb. 28, 1951). 4 AMC
Regulation 55- 8, para. 2.18. Background

Page 4 GAO- 03- 278 Military Readiness

national mobilization* requires that total CRAF airlift capability be made
available to DOD within 48 hours of activation. Aircraft used in stages I
and II are also available in subsequent stages. In the event of
activation, AMC assumes mission control, but the carriers continue to
operate and support the aircraft (support includes fuel, spare parts, and
maintenance). Stage I was activated for the first and only time on August
17, 1990, during Operation Desert Shield. Stage II was activated on
January 17, 1991, for Operation Desert Storm. The total number of aircraft
committed to CRAF (see table 1) accounts for about 15 percent of all U.
S.- owned commercial aircraft forecasted for 2003. Appendix I lists the
carriers participating in the CRAF program as of October 2002 and the
total number of aircraft each has committed through stage III.

Table 1: Aircraft Committed to the CRAF Program by Stage and Type of
Aircraft (as of October 2002)

Cargo Passenger Aeromedical a Total

Stage I 31 47 0 78

Stage II b 95 171 25 291

Stage III b 271 610 46 927

Source: AMC data. a Aeromedical aircraft evacuate critical casualties,
transport patients under medical supervision, and

move medical crews and supplies to the theater of operations. b Includes
aircraft from previous stages.

More aircraft are committed to the CRAF program than are needed to fulfill
the wartime requirements established by the Mobility Requirements Study
2005 (MRS- 05). There was a shortage of aeromedical evacuation aircraft,
but this has been recently eliminated. Program participants stated that
they would be capable of providing the needed levels of aircraft and crews
within the necessary time frames, even with recent furloughs and with
crewmembers that have National Guard or Reserve commitments. A new
mobility requirements study could see an increase in the need for CRAF
based on a change from the two major theater war scenario to the new
strategy of planning for a range of military operations that was described
in DOD*s recent Quadrennial Defense Review Report, issued in September
2001. 5

5 Quadrennial Defense Review Report, Department of Defense, September 30,
2001. CRAF Participants Can

Respond as Required

Page 5 GAO- 03- 278 Military Readiness

Under MRS- 05*s two major war scenario, the study assumed that both
military and CRAF aircraft were needed and that CRAF would be required to
move 20.5 million ton miles a day, or 41 percent of all military bulk
cargo deliveries. CRAF would also carry 93 percent of all passengers and
provide almost all aeromedical evacuation needs. In fiscal year 2002,
there were only 31 of the 40 B- 767s required to be available for
conversion to aeromedical evacuation. However, commercial carriers
increased their commitment to 46 of these aircraft for fiscal year 2003.
Table 2 compares the requirements for a stage III CRAF activation with
commitments by program participants.

Table 2: Stage III CRAF Requirements and Commitments (as of October 2002)
Required Committed

Cargo 120 wide- body equivalents b 227 wide- body equivalents b Passenger
136 wide- body equivalents b 276 wide- body equivalents b Aeromedical a 40
B- 767 aircraft 46 B- 767 aircraft

Source: AMC data. a DOD requires only B- 767 planes for the aeromedical
evacuation mission.

b A wide- body equivalent is a relative measure of carrying capacity that
is based on the capacity of one Boeing 747- 100 aircraft, which AMC
planning factors estimate at about 90 tons of cargo or 360 passengers.

Officials from CRAF air carrier participants that we visited confirmed
that they would be able to provide the agreed levels of airlift capacity
within the necessary time frames and that the turmoil in the airline
industry after the attacks of September 11, 2001, would not affect their
ability to do so. The officials said they would also be able to provide at
least four flight crews per aircraft (crewmembers must also be U. S.
citizens), as they are required to do by AMC Regulation 55- 8. This is in
spite of the fact that some carriers have had to furlough pilots during
the recent economic downturn and that employees with National Guard or
Reserve commitments cannot be included in available crew lists. The same
regulation requires that commercial carrier personnel with military
Reserve or National Guard commitments not be considered in the cockpit
crew- to- aircraft ratio. They can, however, be used in CRAF carrier work
until their military units have alerted them of a recall to active duty.
Officials from the carriers we visited said they monitor their
crewmembers* reserve commitments carefully and usually maintain a higher
crew- to- plane ratio than DOD requires. For example, one carrier we
visited operates with a crew- to- plane ratio of 10 to 1, instead of the 4
to 1 DOD requires for CRAF carriers. DOD also inspects carriers annually,
and

Page 6 GAO- 03- 278 Military Readiness

the inspectors have been satisfied that the carriers could meet the crew-
to- plane ratio.

The MRS- 05 did not consider CRAF*s full capacity, and it set a ceiling of
20.5 million ton miles on daily CRAF airlift requirements. According to
DOD officials, the study restricted CRAF cargo capacity to 20.5 million
ton miles per day because DOD*s airfields can accommodate only a certain
number of aircraft at the same time. Also, they stated that using
additional CRAF aircraft would reduce efficiency because of the type of
cargo CRAF is modeled to carry. They said that commercial aircraft can
take longer to unload than military aircraft and require special material
handling equipment to be available at an off- loading base. Military
aircraft, on the other hand, do not need specialized loading equipment
because they are high- winged and lower to the ground.

Figure 1: Loading a B- 747 at Dover Air Force Base, Delaware

Mobility Requirements Study Limited CRAF Contribution

Page 7 GAO- 03- 278 Military Readiness

Furthermore, the MRS- 05 did not consider the ability of the commercial
industry to carry different cargo sizes. The MRS- 05 modeled CRAF aircraft
carrying only bulk cargo. 6 According to Air Force officials, the U. S.
commercial cargo fleet has limited ability to carry oversized cargo and no
ability to carry outsized cargo. 7 They stated that it is difficult, from
a planning perspective, to model CRAF aircraft carrying oversized cargo
because the models would need to distinguish between the types of
oversized cargo and the types of aircraft. They also stated that using
more CRAF capacity than the 20.5 million ton mile limit would flow more
bulk cargo into a theater instead of oversized and outsized unit equipment
brought in by the larger military aircraft.

In reality, however, commercial aircraft do carry some oversized cargo.
DOD is examining how much oversized equipment can be moved by CRAF so that
this capability can be included in future mobility studies. DOD*s Defense
Planning Guidance, issued in August 2001, requires that mobility
requirements be reevaluated by 2004, and DOD officials believe that future
requirements will be higher because of the increased number of possible
scenarios included in the guidance. We believe that a study that also
takes into consideration excess CRAF capacity and the types of cargo that
CRAF can accommodate could provide a more realistic picture of needs and
capabilities. It could also mitigate some of the concerns about airfield
capacity and flow of cargo into a theater if CRAF aircraft could move some
of the oversized cargo. This could get the larger cargo to a unit as it
was needed, instead of bulk cargo, which may not be as time- critical.

One of the key stated incentives of the CRAF program* the ability to bid
on peacetime government business* may be losing its effectiveness because
DOD uses almost exclusively one type of aircraft, the B- 747, for its
peacetime cargo missions. Over 94 percent, or 892, of 946 wide- body
missions flown by CRAF participants in the first 10 months of fiscal year
2002 were carried out by B- 747s, which accounted for only 38 percent of

6 Bulk cargo is cargo that can be loaded on a standard pallet without
exceeding any of its usable dimensions. A standard pallet is 84 inches
long by 104 inches wide by 96 inches high.

7 Outsized cargo is cargo that exceeds the capabilities of the C- 130 and
C- 141B aircraft and requires the use of a C- 5 or a C- 17 aircraft. It is
cargo that is more than 810 inches long by 117 inches wide by 105 inches
high in any direction. Oversized cargo is any single item that exceeds any
one of the dimensions of a standard pallet, but can be loaded on a C- 141,
C- 130, or KC- 10 aircraft. CRAF Incentives May Be

Losing Effectiveness

Page 8 GAO- 03- 278 Military Readiness

wide- body cargo aircraft committed to the CRAF program. Some major CRAF
participants who do not have B- 747s have suggested that they might reduce
or end their participation in the program if they do not receive any
business in return for their commitment. This could have a serious effect
on the program*s ability to meet future requirements, especially if those
requirements increase due to the change in focus from two major theater
wars to a range of military operations outlined in the recent Quadrennial
Defense Review.

Only carriers that participate in the CRAF program can bid on peacetime
mobility business. Carriers can bid on a percentage of peacetime business
in direct proportion to their commitment to the program. Participants earn
mobilization value points, which are based on the number and type of
committed aircraft. In assigning mobilization value points, DOD measures
each volunteered passenger or cargo aircraft against the capacity and
airspeed of a B- 747- 100. Participants in the aeromedical evacuation
segment of CRAF receive double the mobilization value points because of
the significant reconfiguration their aircraft (B- 767s) must undergo. The
points are used to determine how much commercial business each participant
can bid on out of the total, which in fiscal year 2002 more than doubled
to $1.28 billion from $572 million the previous year (see app. II for
annual amounts since fiscal year 1998).

Participants with 62 percent of the wide- body cargo aircraft committed to
CRAF are not able to bid on most peacetime cargo business because they do
not have B- 747s. An AMC official said that most requests for cargo
aircraft require a 90- ton capacity, the same as that of a 747- type
aircraft but slightly more than those of other wide- body aircraft such as
the MD- 11 (86 tons) or the DC- 10 (75 tons). One carrier with over 100
wide- body cargo planes smaller than B- 747s committed to the program (and
accounting for 41 percent of all total mobilization value points awarded
to cargo carriers) received only about 4 percent of peacetime cargo
business in fiscal year 2002. By contrast, a carrier committing 10 B- 747
type aircraft (7 percent of total cargo points) flew 37 percent of all
peacetime cargo business.

AMC officials claim that they must use 90- ton capacity aircraft because
they need the flexibility and capacity to clear ports as quickly as
possible. The B- 747 can carry more and larger cargo than other wide- body
aircraft because it has more capacity and larger doors. Officials also
noted that the B- 747 can carry standard- sized bulk cargo pallets that
are the same size as those used by commercial industry, the Defense
Logistics Agency, and other DOD activities and contractors. Standard
pallets also fit aboard all

Page 9 GAO- 03- 278 Military Readiness

military cargo aircraft. In order to fit aboard other wide- body aircraft
such as the DC- 10 or the MD- 11, cargo handlers at military bases must
disassemble and rebuild the standard pallets to fit the aircrafts* lower
profile (see fig. 2).

Figure 2: B- 747 and MD- 11 Cross- Section Views with Cargo Pallets

Some cargo carrier officials said they could not bid on the amount of
peacetime business they believe they are entitled to based on their CRAF
participation. Consequently, they indicated that unless this problem
improves, they might reduce or end their participation at some point in
the future. AMC officials acknowledged that the requirements from
Operation Enduring Freedom, DOD*s operation in Afghanistan, amounted to
the equivalent of a stage I activation. Activation was avoided because
CRAF participants volunteered the airlift capability needed in fiscal year
2002. Although commitments to the CRAF program currently exceed
requirements, this situation could change if some cargo carriers continue
to be left out of the peacetime business and eventually decide to reduce
or terminate their participation in the program. In our opinion, DOD
cannot afford to lose CRAF participants, particularly in view of a new
mobility requirements study and a potential increase in requirements.

Furthermore, some cargo carriers stated that the CRAF B- 747s are not
flying with full loads and claimed that it would be less expensive to use
smaller wide- body aircraft with lower per- mile costs. We obtained
mission data and found that almost half of the 892 CRAF missions flown on
B- 747s in the first 10 months of fiscal year 2002 did not use all
available space or weight capacities. These loads might have fit on
smaller wide- body

Page 10 GAO- 03- 278 Military Readiness

aircraft, which would have cost less to fly. B- 747 aircraft are more
expensive than other wide- body aircraft, such as the MD- 11, which have
lower per- mile operation costs. See table 3 for a cost comparison by
plane type for a round- trip flight from Dover Air Force Base to Ramstein
Air Force Base, Germany. 8

Table 3: Cost Comparison by Aircraft Type Aircraft type Capacity Trip cost

B- 747 90 tons $200,356 MD- 11 86 tons $191,451 DC- 10 75 tons $166,963

Source: AMC data.

Over 40 percent of these recent missions flown by B- 747s did not utilize
all the available pallet positions and carried less than 55.7 tons. In
fiscal year 2002, AMC officials used the 55. 7- ton mark as a breakeven
point* the point at which the per- pound cost that the customer pays to
have the cargo shipped equals the B- 747*s per- mile cost that AMC pays
the carrier to fly the mission. We were unable to determine whether a
smaller, more economical aircraft could have been used for these missions
because, at the time we requested the data, DOD was not obtaining data on
cargo volume. However, it has since begun to accumulate this information,
which will help determine whether aircraft are flying at full capacity.

Military port handlers assured us that DOD*s use of B- 747 aircraft during
peacetime would not decrease their capability to build and load different
types of pallets on other types of aircraft, which AMC data show account
for 62 percent of the CRAF wide- body cargo fleet, during wartime. They
stated that they *frequently* build pallets and can use available
templates for nonstandard shapes. When we questioned how effectively they
could do this in the very first and most urgent phases of a conflict, they
stated that during wartime, supplies such as ammunition and food are
delivered in pallets that can be loaded directly aboard smaller wide- body
planes. According to port officials, loading aircraft is easily
accomplished once the pallets are built.

8 CRAF participants are paid at a predetermined per- mile rate based on
the type of aircraft flying the mission. The per- mile rate is paid
regardless of the weight carried on the mission.

Page 11 GAO- 03- 278 Military Readiness

Another incentive for passenger air carriers to participate in the CRAF
program is annual government air passenger business under the General
Services Administration*s City Pairs program. General Services
Administration officials said that passenger air carriers have expressed
dissatisfaction because they believe the program is too restrictive and
does not allow them to manage aircraft capacity to generate the highest
profit. However, the 2003 contract includes some changes that program
officials believe will resolve many of the carriers* concerns.

The upcoming reevaluation of mobility requirements may increase the need
for CRAF in the future. However, the last study did not consider some
factors* such as the ability of commercial aircraft to carry different
sized cargo* that, if included, could provide more accurate and realistic
requirements. The last study also set a ceiling on the amount of cargo
carried by CRAF that provided the needed flow of cargo into a theater and
that DOD*s infrastructure could process efficiently. This figure needs to
be revalidated so that the next mobility requirements study can provide
decision makers accurate and helpful information on true needs and
capabilities.

There are strong indications that some major program participants are
dissatisfied with their share of a key CRAF incentive, the opportunity to
bid on peacetime mobility business, because DOD uses almost exclusively
only one type of aircraft for peacetime cargo missions. If they are unable
to see some benefit from the incentive program, some participants might
reduce or end their participation in the program. This could cause
difficulties in meeting requirements at a time when participation in
peacetime business or CRAF activation is crucial. DOD needs to study ways
to expand the use of smaller wide- body aircraft to ensure an equitable
distribution of the peacetime business and determine whether smaller wide-
body aircraft could carry out a higher proportion of its peacetime
missions as efficiently as, and possibly more economically as, the B- 747
does.

We recommend that the Secretary of Defense direct that  the reevaluation
of mobility requirements mandated by the Defense

Planning Guidance include a more thorough study of CRAF capabilities, to
include the types of cargo CRAF can carry and how much CRAF aircraft can
land and be unloaded and serviced at military bases, and Conclusions

Recommendations for Executive Action

Page 12 GAO- 03- 278 Military Readiness

 the Air Mobility Command determine whether smaller wide- body aircraft
could be used as efficiently and effectively as the larger B- 747- type
planes to handle the peacetime cargo business that DOD uses as an
incentive for CRAF participants.

In written comments on a draft of this report, DOD concurred with our
recommendations. However, DOD believed it would be more appropriate to
ensure that ongoing study efforts be given greater emphasis and require
that any resulting reports specifically address our issues. We agree that
these studies could address our first recommendation concerning a more
thorough study of CRAF capabilities. In a subsequent discussion, a DOD
official stated that DOD intends to perform an additional study that would
address the second recommendation.

DOD*s comments are presented in their entirety in appendix III. We used
the MRS- 5, DOD regulations, and discussions with officials at the U. S.
Transportation and U. S. Air Mobility Commands, located at Scott Air Force
Base, Illinois, to establish the aircraft and time frame requirements for
the CRAF program. We obtained and reviewed data from and interviewed
officials at the U. S. Transportation Command, U. S. Air Mobility Command,
Office of the Secretary of Defense, and representatives of six CRAF
participants, which represent about 38 percent of the total CRAF aircraft
commitment, to conclude whether the participants could respond to an
activation with the required number of aircraft and crews and in the
required time frame.

We also interviewed representatives of six CRAF participants, representing
both passenger and cargo air carriers, to determine whether the incentives
used to attract and retain program participants are effective. For
clarification on the incentives and how they are used, we referred to DOD
regulations and interviewed officials at the U. S. Transportation Command,
the U. S. Air Mobility Command, and the General Services Administration.
We analyzed AMC mission data to determine the capacity at which aircraft
were flying. We met with officials at the 436th Aerial Port Squadron at
Dover Air Force Base to discuss cargo and aircraft loading. Agency
Comments

and Our Evaluation Scope and Methodology

Page 13 GAO- 03- 278 Military Readiness

We conducted our review between January and October 2002 in accordance
with generally accepted government auditing standards.

We are sending copies of this report to the Secretary of Defense, the
appropriate congressional committees, and the Director, Office of
Management and Budget. We will also make copies available to others upon
request. In addition, the report will be available at no charge on the GAO
Web site at http:// www. gao. gov.

If you have any questions about this report, please contact me at (757)
552- 8100. See appendix III for major contributors.

Sincerely yours, Neal P. Curtin Director, Defense Capabilities

and Management

Appendix I: Civil Reserve Air Fleet Participants and Total Number of
Aircraft Committed at Stage III as of October 2002

Page 14 GAO- 03- 278 Military Readiness

Passenger carriers Number of aircraft committed at stage III as of October
2002

Alaska Air 42 America West 10 American Airlines 100 American Trans Air 62
Champion Air 7 Continental Airlines 120 Delta Air Lines 37 Frontier
Airlines 2 Hawaiian Airlines 4 Miami Air 6 Midwest Express 2 North
American Airlines 4 Northwest Airlines 55 Omni Air International 5
Southwest Airlines 22 Spirit Airlines 19 Sunworld International 1 United
Airlines 96 US Airways 9 World Airways 7

Cargo carriers

Airborne Express 3 Air Transport International 13 Arrow Air 10 Atlas Air
32 DHL Airways 16 Evergreen International 15 FEDEX Airlines 111 Gemini Air
Cargo 16 Lynden Air 3 Northern Air 2 Northwest Airlines 12 Omni Air
International 2 Polar Air Cargo 16 Southern Air 4 UPS Airlines 11 World
Airways 5

Aeromedical evacuation

Delta Air Lines 35 US Airways 11

Source: Air Mobility Command.

Appendix I: Civil Reserve Air Fleet Participants and Total Number of
Aircraft Committed at Stage III as of October 2002

Appendix II: Department of Defense Commercial Airlift Contracts

Page 15 GAO- 03- 278 Military Readiness

The Department of Defense (DOD) uses commercial carriers for two different
kinds of peacetime airlift moves: The first (called fixed buy) is a set
contract for *channel flights* made on a regular weekly schedule from U.
S. bases to fixed points across Atlantic and Pacific routes. The second
(called expansion buys) includes airlift bought after the start of the
fixed buy contract to support exercises, contingencies, special airlift
assignment missions, and growth in channel requirements. From fiscal years
1992 through 1997, DOD contracts for commercial passenger and cargo

business averaged over $611 million a year. From fiscal years 1998 through
2001, contracts increased to an average of almost $640 million a year. In
fiscal year 2002, contracts increased significantly to almost $1.3
billion, which Air Mobility Command officials attributed to missions flown
in support of Operation Enduring Freedom, the operation in Afghanistan.
(See table 4.)

Table 4: DOD Contracts for Commercial Airlift, Fiscal Years 1998- 2002
Dollars in millions Fiscal year Type of buy 1998 1999 2000 2001 2002

Fixed $158.31 $158.58 $159.89 $182.33 $339.57 Passenger Expansion 175.15
176.40 181.69 179.68 187.67 Fixed 187.28 162.08 96.23 173.5 165.31 Cargo
Expansion 111.07 204.91 192.57 36.9 587.89 Miscellaneous 14.50 17.70 Total
$646.49 $710.70 $629.38 $572.44 $1,280.45

Source: Air Mobility Command.

Appendix II: Department of Defense Commercial Airlift Contracts

Appendix III: Comments from the Department of Defense

Page 16 GAO- 03- 278 Military Readiness

Appendix III: Comments from the Department of Defense

Appendix III: Comments from the Department of Defense

Page 17 GAO- 03- 278 Military Readiness

Appendix IV: GAO Contacts and Staff Acknowledgments

Page 18 GAO- 03- 278 Military Readiness

William C. Meredith (202) 512- 4275 Ann Borseth (202) 512- 5222

In addition to those named above, Lawrence E. Dixon, Patricia Lentini,
Stefano Petrucci, and Kenneth Patton made key contributions to this
report. Appendix IV: GAO Contacts and Staff

Acknowledgments GAO Contacts Acknowledgments

(350148)

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