Military Airlift: DOD Needs to Take Steps to Manage Workload Distributed to the Civil Reserve Air Fleet
Released: 2013-06-20T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: To move passengers and cargo, DOD supplements its military aircraft with cargo and passenger aircraft from volunteer commercial carriers participating in the CRAF program. Participating carriers commit their aircraft to support a range of military operations in exchange for peacetime business. A House Armed Services Committee mandated GAO to report on matters related to the CRAF program. GAO assessed whether DOD (1) met its military airlift training requirements while also using CRAF participants to the maximum extent practicable, (2) provided justification for restricting commercial carriers from transporting partial plane loads of cargo over certain routes, and (3) has established future requirements for CRAF and how the planned size of CRAF compares to those requirements. GAO reviewed guidance and policies pertaining to the program, flying hour data, and DOD-sponsored CRAF study reports. GAO also interviewed DOD and industry officials.

section_title: What GAO Found
paragraphs: DOD exceeded the flying hours needed to meet military training requirements for fiscal years 2002 through 2010 because of increased operational requirements associated with Afghanistan and Iraq; however it does not know whether it used Civil Reserve Air Fleet (CRAF) participants to the maximum extent practicable. DOD guidance requires it to meet training requirements and to use commercial transportation to the "maximum extent practicable." During fiscal years 2002 through 2010, DOD flew its fleet more than needed to train its crews, although its flying has more closely matched its training needs in recent years. DOD has also used CRAF participants extensively to supplement military airlift. Although DOD has taken steps to make more airlift business available to CRAF participants, officials said that overseas operations have provided enough missions to support both training and CRAF business obligations. However, with the drawdown in Afghanistan, DOD officials expect the need for airlift to decline by at least 66 percent--to pre-September 2001 levels--reducing both training hours available for DOD and business opportunities for CRAF. DOD does not use its process for monitoring flying hours to determine when it will exceed required training hours and allocate eligible airlift missions to CRAF participants. Therefore, it cannot determine whether it is using CRAF to the maximum extent practicable. As a result, DOD may be using its military fleet more than necessary--which officials say is less economical--while risking reduced CRAF participation.

DOD provided several reasons for restricting commercial carriers from transporting partial plane loads of cargo over channel routes, including the need to promote efficiency, meet its military airlift training requirements, and fulfill peacetime business obligations to CRAF participants. Channel route missions are regularly scheduled airlift missions used to transport cargo and provide aircrew training time. These missions also help DOD provide business to CRAF participants. According to U.S. Transportation Command (TRANSCOM) officials, DOD generally requires aircraft conducting channel route missions to be completely full of cargo before takeoff. The policy restricting carriers from flying partial loads over channel routes allows DOD to consolidate cargo previously flown by commercial carriers in less than full plane loads and redirect that cargo into the channel route system, where it will be transported by either commercial or military aircraft as part of a full plane load mission. According to DOD, consolidating cargo into full loads flown over the channel route system has increased both the efficiency of these missions and the availability of missions that DOD uses to train its crews and fulfill its business obligations to CRAF.

It is unclear whether the planned size of CRAF will be adequate to meet future airlift requirements. DOD last established its future requirements based on the wartime scenarios in the Mobility Capability Requirements Study 2016, issued in 2010. However, due to changing military strategy and priorities, the 2010 study does not reflect current mission needs. The National Defense Authorization Act for Fiscal Year 2013 requires DOD to conduct a new mobility capabilities and requirements study. DOD has not begun this study or finalized its ongoing reviews of the CRAF program's ability to support future requirements. Once they are finalized, these studies should allow DOD to better understand future requirements for CRAF and whether the CRAF program will meet future airlift requirements.

section_title: What GAO Recommends
paragraphs: GAO recommends that the Secretary of Defense direct the Secretary of the Air Force and the Commander, U.S. Transportation Command—in conjunction with the Commander, Air Mobility Command—to use its existing processes for monitoring training to determine when it can shift its distribution of peacetime airlift workload from military to commercial sources. In comments on a draft of this report, DOD concurred with GAO’s recommendation and stated that it believes implementing the recommendation will further improve the Civil Reserve Air Fleet program.

section_title: Letter
paragraphs: DOD augments its military cargo and passenger airlift capability with  aircraft from commercial carriers participating in the Civil Reserve Air  Fleet (CRAF) program. Participating carriers commit their aircraft to be  called upon, or activated, for use to support a range of military  operations. The U.S. government provides commercial carriers with  economic incentives to encourage their participation in CRAF, by giving  them the opportunity to transport DOD personnel and cargo in peacetime  and by reserving a number of additional airlift contracts for CRAF carriers,  such as the U.S. General Services Administration’s City Pairs program  and the U.S. Transportation Command-managed World Wide Express  program. Since 2001, CRAF participants have received nearly $30 billion  in revenue for providing peacetime airlift services to DOD. In fiscal year  2012, CRAF participants received approximately $2 billion in payments  from DOD for their peacetime participation. However, DOD projects that  by 2015, its peacetime business will decline by an estimated 66 percent  as it returns to pre-September 11, 2001 levels, raising concerns within  DOD and among CRAF participants about the effect this loss of business  will have on the carriers and their ability to continue participating in the  program. The Office of the Deputy Assistant Secretary of Defense for  Transportation Policy serves as the principal advisor for establishing  policies and providing guidance to DOD components for efficient and  effective use of government and commercial transportation resources.  DOD’s U.S. Transportation Command (TRANSCOM), headquartered at  Scott Air Force Base in Illinois, manages many aspects of the CRAF  program and makes recommendations concerning the capability,  capacity, and other requirements for mobility assets needed to execute  TRANSCOM’s mission.

According to TRANSCOM officials, CRAF benefits the nation by providing  up to half of the nation’s long-range airlift capability, allowing the  government to avoid having to buy additional aircraft, pay personnel  costs, or maintain the aircraft during peacetime. The National Airlift Policy  emphasizes the importance of CRAF to the nation by noting that military  and commercial resources are equally important and interdependent in  the fulfillment of the national defense airlift objective. Consistent with that  policy, DOD Instruction 4500.57 requires that DOD operate its fleet to  meet its training requirements while also using commercial sources of  transportation to the “maximum extent practicable.” According to Air  Mobility Command (AMC) officials, airlift missions that are not conducted  to satisfy training requirements should be performed by CRAF  participants, except when there is some other feature of the mission that  requires military airlift. Further, since DOD’s military fleet has limited  capability to meet its passenger airlift requirements, it mostly relies on  CRAF commercial carriers to fulfill these requirements. DOD’s military  fleet has the capability to carry bulk, outsized, and oversized cargo;  however, DOD relies on commercial cargo carriers to move a portion of  its bulk cargo both in peacetime and in times of crisis or war.

Over the last several years, we and others have reported on the  challenges faced by the CRAF program. In September 2009, we  recommended that DOD assess the level of risk associated with the  commercial carriers’ declining charter passenger capabilities and DOD’s  increased need to move very large cargo. DOD did not agree with our  recommendation because, it stated, an assessment of the declining  charter passenger capabilities had already been done in 2008 by the  Institute for Defense Analysis; however, as we stated in our report, the  assessment conducted by the Institute for Defense Analysis on DOD’s  behalf did not include the most current and relevant data affecting the  program; for that reason we believe our recommendation is still viable  and important. Additionally, we recommended that, given the importance  of the CRAF program in moving passengers and cargo to support  peacetime, contingency, and major operations, DOD should develop  appropriate policies and procedures for mitigating risks regarding the  CRAF program in order to maintain its viability to meet DOD’s future  needs. DOD agreed that there is a need for comprehensive policy  governing all of the CRAF program elements identified in our report;  however DOD did not identify what, if any, specific actions it would take in  response to our recommendation. However, DOD updated some of its  guidance regarding the CRAF program in 2011, and in fiscal year 2012,  AMC began a series of studies that may begin to address this  recommendation. Further, multiple DOD-sponsored studies have  identified risks to the CRAF program resulting from a changed business  environment and an expected decrease in CRAF participation—especially  in the level of charter airline participation—as DOD’s airlift workload  declines.

House Report 112-479, accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2013, mandated us to report to the  congressional defense committees on matters related to the long-term  ability of CRAF to meet DOD’s needs.  Accordingly, we assessed the  extent to which DOD has (1) met its military airlift training requirements  while also using CRAF participants to the maximum extent practicable,  (2) provided justification for restricting commercial carriers from  transporting partial plane loads of cargo over certain routes, and (3)  established future requirements for the CRAF program, and how the  planned size of CRAF compares to those requirements.

To assess the extent to which DOD has met its military airlift training  requirements while also using CRAF participants to the maximum extent  practicable, we analyzed policies, regulations and guidance pertaining to  the management of the CRAF program. We also analyzed DOD’s training  requirements for its flying hour program to determine the number of hours  DOD flew its strategic airlift fleet compared to the number of hours it was  required to fly to meet training requirements over the last 10 years. In  addition, we conducted interviews with officials from TRANSCOM, AMC,  and The Office of the Under Secretary of Defense for Acquisition,  Technology and Logistics to understand how DOD decides whether to  use the military fleet or commercial airlift. We also interviewed officials  from 21 of the 30 CRAF carriers who were participating in the program as  of October 2012, as well as representatives from the National Air Carrier  Association—an industry association representing several CRAF  participants—to understand the perspectives of commercial participants  in the CRAF program. To assess the extent to which DOD provided  justification for restricting commercial carriers from transporting partial  plane loads of cargo over certain routes, we reviewed DOD policies that  place restrictions on commercial carriers flying over certain routes. We  also reviewed data from fiscal years 2000 and 2012, and interviewed  TRANSCOM officials, to obtain information on the rationale and benefits  of these restrictions. In addition, we conducted interviews and obtained  written responses from CRAF participants to gain an understanding of  how such restrictions were affecting their business. To assess whether  DOD has established future requirements for the CRAF program and how  the planned size of CRAF compares to those requirements, we reviewed  studies assessing DOD’s strategic airlift capabilities, such as DOD’s  Mobility Capabilities and Requirements Study–2016, and the Air Mobility  Command 2012 CRAF Phase 1 study. We also reviewed data on the  number of commercial aircraft committed to DOD’s CRAF program and  compared these data with DOD’s current airlift requirements. Lastly, we  interviewed TRANSCOM and AMC officials to determine what steps are  being taken to establish future requirements and to gain their perspective  on the challenges, if any, they expect to face as they continue to manage  the CRAF program.

We conducted this performance audit from August 2012 to June 2013 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence and data obtained was sufficiently reliable for our purposes,  and provides a reasonable basis for our findings and conclusions based  on our audit objectives. More detailed information on our scope and  methodology is provided in appendix I.
subsections: section_title: Background
paragraphs: The Civil Reserve Air Fleet (CRAF) is a voluntary, contract-based  agreement between DOD and U.S. commercial air carriers that augments  DOD’s military airlift capability during times of war and national  emergency. It was created in 1951 to augment DOD airlift capability  during a national defense-related crisis. The National Airlift Policy, signed  by President Reagan in 1987 and still in effect, establishes policy that the  military will rely on the commercial air carrier industry to provide the airlift  capability required beyond that available in the military airlift fleet. The  policy includes guidelines for meeting airlift requirements in both  peacetime and wartime. These guidelines direct, among other things, that  policies be designed to increase participation in CRAF and enhance the  mobilization base of the U.S. commercial air carrier industry. In  exchange for this participation, the government provides commercial  carriers the opportunity to fly DOD peacetime missions moving  passengers and cargo and also sets aside business for CRAF  participants in the General Services Administration City Pairs passenger  program and TRANSCOM’s Worldwide Express cargo program. CRAF is  divided into three progressive stages that TRANSCOM can activate  during times of crisis, in part or in whole, with the approval of the  Secretary of Defense.

Stage I covers a minor regional contingency or other situations where  AMC cannot simultaneously meet both deployment and other airlift  requirements.

Stage II is tailored for a major theater war or a defense airlift  emergency short of a full national emergency.

Stage III would be required if the military had to fight more than one  major theater war at the same time or operate in a larger crisis,  including a national emergency declared by the President or  Congress. A stage III CRAF activation has never occurred.

DOD has activated CRAF only twice in the history of the program. Stage I  and part of stage II were activated in support of Operations Desert Shield  and Desert Storm in August 1990 and January 1991, respectively,  through May 1991. The CRAF stage I passenger segment was activated  in support of Operation Iraqi Freedom in February through June 2003.

To enter the CRAF program, an air carrier must (1) be a U.S. flagged,  Federal Aviation Administration approved Part 121 air carrier, (2) be  approved by the Commercial Airlift Review Board,  (3) have one year  prior equivalent uninterrupted service to the commercial sector, (4) meet  a minimum fleet participation level (for international carriers), (5) meet a  specified utilization rate (for international and aeromedical evacuation  fleet participants), and (6) be able to meet manning and crew  requirements. Once approved to participate, carriers commit the number  of aircraft they will make available for each of the three stages of the  CRAF program. AMC then decides the number of aircraft that will be  accepted into the CRAF program, based on DOD’s wartime requirements.  As of April 2013, a total of 64 aircraft were committed to stage I, 308 to  stage II, and 554 to stage III.

Two segments of the commercial airlift industry—scheduled service  carriers and charter carriers—comprise the CRAF wartime capability. The  scheduled service carriers—which include large passenger airlines such  as American Airlines and Delta Air Lines and cargo carriers such as  FedEx and UPS—pledge the majority of the aircraft accepted into the  CRAF program. DOD will use most of the pledged aircraft only during a  CRAF activation. In peacetime, scheduled service carriers operate  commercial flights on regular routes and cannot afford unplanned  disruptions to their airline networks. Because many DOD missions are not  routine in their locations or timing, charter carriers—which have the  flexibility to provide airlift based on their customers’ schedules—transport  the majority of DOD’s peacetime, contingency, and stage I business. For  some of the charter carriers, this peacetime business accounts for a  significant portion of their total business revenue. However, because  scheduled service carriers have large fleets, they are also a critical  component of CRAF, and they provide the bulk of the CRAF strategic  reserve in the event of a CRAF activation.

The primary incentive for commercial carriers to participate in the CRAF  program is the opportunity to obtain DOD peacetime business. DOD  distributes peacetime business to CRAF participants using an entitlement  process. CRAF carriers are awarded points based on the number of  aircraft they commit to the program, the stage to which these aircraft are  assigned, and other considerations as applicable to the individual  airline. The amount of peacetime business CRAF participants are  entitled to is determined in advance of any missions awarded. DOD  makes this business available to the CRAF carriers to fulfill its peacetime  business obligation to them, and it does so by offering the carriers the  opportunity to fly various missions (for a list of all CRAF carriers, see  appendix III).

TRANSCOM and AMC share responsibility with respect to CRAF policy.  TRANSCOM validates the requirements for the movement of personnel  and cargo, determines which transportation mode will be used for these  movements, and distributes the work to the appropriate component  command. Once TRANSCOM determines that a movement will go by air,  the mission requirement is handled by AMC. Within AMC, the Tanker  Airlift Control Center (TACC) normally handles mission planning,  assignment of airlift assets, mission control, and tracking. Mission  planning includes determining whether military or commercial aircraft will  fly a mission. CRAF carriers generally have priority over non-CRAF  carriers for movements of passengers and cargo.

The Fly CRAF Act generally requires DOD to use CRAF carriers when  contracting for airlift services, whenever the carriers are available. If no  CRAF participant is available to supply the airlift, DOD may use a non- CRAF carrier (either U.S. or foreign flagged) to fly the mission. For airlift  services between two locations outside the United States, CRAF carriers  must be used as long as they are “reasonably available.” Only foreign  carriers operate larger aircraft, such as the AN-124 and IL-76, which are  designed to carry outsized and oversized cargo that U.S. commercial  carriers normally cannot accommodate. However, according to  TRANSCOM officials, DOD uses foreign carriers through subcontracts  with CRAF participants, and only rarely contracts directly with foreign  carriers. DOD interprets the Fly CRAF Act as applying only to contracts  that are specifically for airlift services, and not to contracts for services or  supplies that may involve airlift or other transportation services. For  example, according to TRANSCOM, DOD does not require “The Fly  CRAF preference” to be applied to service or supply contracts such as  the Logistics Civil Augmentation Program or the Defense Logistics  Agency Prime Vendor Program. According to DOD officials, the current  law and related contracting provisions provide the department with the  flexibility to acquire the best value for products and services when  executing service or supply contracts.

section_title: DOD’s Process for Monitoring Flying Hours Provides Information That Could Help It Determine When to Shift Eligible Missions to CRAF Participants
paragraphs: DOD has exceeded the flying hours needed to meet military training  requirements for fiscal years 2002 through 2010 due to increased  operational requirements associated with Afghanistan and Iraq; however  it does not know whether it used CRAF participants to the maximum  extent practicable during this period. In fiscal years 2010 through 2012,  DOD’s flying hours have more closely matched its training plan. In  keeping with its policy to both provide training within the military airlift  system and use commercial sources of transportation to conduct eligible  airlift missions, DOD has taken steps to provide CRAF participants with  peacetime business. However, DOD does not use information from its  process for monitoring flying hours to determine when it will use more  hours than it has planned to meet training requirements and shift eligible  airlift missions to CRAF participants to ensure that commercial sources  are used to the maximum extent practicable, as required by DOD  guidance. Unless DOD uses its information on flying hours to determine  when it can shift eligible airlift missions to CRAF participants, it may be  flying its military fleet unnecessarily. DOD officials say that using the  military fleet to fly missions that are eligible to be shifted to CRAF  participants is more expensive than using the CRAF carriers and could  reduce these carriers’ level of participation in the CRAF program.
subsections: section_title: DOD Exceeded Its Required Military Training Hours for Fiscal Years 2002 through 2010, but Has Reduced the Percentage of Excess Hours in Recent Years
paragraphs: The National Airlift Policy states that the “Department of Defense shall  establish appropriate levels for peacetime cargo airlift augmentation in  order to promote the effectiveness of the Civil Reserve Air Fleet and  provide training within the military airlift system.” Consistent with that  policy, DOD Instruction 4500.57 requires that DOD operate its fleet to  meet its training requirements and also requires that it use commercial  sources of transportation to the “maximum extent practicable.” DOD  officials stated that they have been using military airlift beyond what was  planned, because the operations in Afghanistan and Iraq created  additional airlift requirements, many of which could not be met using U.S.  commercial sources. For example, some kinds of cargo—such as the  mine resistant ambush protected vehicles—are too large to fit inside the  aircraft operated by CRAF participants. Military aircraft, along with some  foreign aircraft such as the AN-124 and the IL-76, are able to  accommodate these kinds of cargo. Additionally, missions in Afghanistan  and Iraq often could not be flown by CRAF participants because of  airspace restrictions on U.S. carriers operating in those countries. Finally,  some missions have additional requirements that call for the use of  military airlift, such as requirements that cargo be escorted by military  personnel or that an aircraft land on an unpaved runway.

Every year, DOD develops requirements for its military aircrews that  serve as the basis for its flying hour program. The flying hour program  provides training and experience for the aircrews. These requirements  consist mainly of two types of flying hours—”currency hours” and  “experiencing hours.” Training flights conducted to log currency hours  generally do not carry cargo or passengers and therefore do not compete  with commercially-operated missions. On the other hand, experiencing, or  “time in the air,” flights typically carry cargo or passengers and compete  with commercially-operated missions. Officials told us that currency hour  flights account for roughly 20 percent of the flying hour requirement and  are funded through operations and maintenance funds, while  experiencing hour flights account for approximately 80 percent of the  requirement. We excluded currency hours from our analysis, since flights  that provide these training hours generally do not compete for cargo or  passengers with commercially-operated missions. However, flights that  provide experiencing hour training are funded through the Transportation  Working Capital Fund, because these flights carry cargo or passengers.  As a revolving fund account, the Transportation Working Capital Fund  relies on customer reimbursements in exchange for transportation  services provided. The customer that requests airlift reimburses the fund  for the mission performed, although some costs associated with  mobilization capability and readiness may be funded by the Air Force. For  the purposes of this report, “military airlift training requirements” refers to  experiencing hours, because those hours are the ones that DOD must  decide how to allocate to meet military airlift training requirements while  also using CRAF participants to the maximum extent practicable.

Figure 1 shows the percentage by which AMC has exceeded the flying  hours that it planned for experiencing requirements in fiscal years 2001  through 2012. DOD said that during these years it exceeded its flying  hours for training because of the need to fly missions to support  operations in Iraq and Afghanistan. To develop this chart, we compared  AMC’s requirements for experiencing flying hours to the actual hours  AMC flew with the primary airlift platforms—the C-5, C-17, and C-130— and expressed them as percentages of the planned flying hours. We  excluded the tanker aircraft from this analysis, since there are no  commercial aircraft in the CRAF program that are comparable to the KC- 10 or KC-135.

Recognizing the importance of the commercial carriers for meeting its  future airlift requirements, DOD has taken steps to increase the amount of  peacetime business it gives to CRAF participants. According to  TRANSCOM’s Fiscal Year 2012 Annual Report, CRAF carriers remain  essential in supplying transportation services and provide a critical part of  DOD’s warfighting deployment capability. Further, TRANSCOM and AMC  are using CRAF carriers to more directly support the forces in  Afghanistan. CRAF participants have provided the majority of passenger  movements and about a quarter or more of all cargo movements since  fiscal year 2004. Figures 2, 3, and 4 show the extent to which DOD has  relied on CRAF participants to provide airlift services.

Over the last few years, both the number of CRAF participants and the  number of aircraft pledged to the CRAF program have fluctuated, and it is  not clear what level of support CRAF participants will provide in the  future. For example, as we noted in our 2009 report on CRAF, the  number of charter aircraft enrolled in the CRAF program had declined  from more than 60 aircraft in 2003 to as few as 19 in April 2008, before  stabilizing at 29 charter aircraft in May 2008. Our analysis shows that  CRAF participation as of fiscal year 2012 was still sufficient to allow DOD  to meet its wartime requirements. However, according to some current  CRAF participants, changes to the business environment, such as the  ongoing economic down-turn, have resulted in five of the participating  carriers filing for bankruptcy over the last three years. Two of these  carriers have already completely ceased providing airlift services. Table 1  shows the level of airlift support provided by CRAF participants and  military aircraft during the last three years.

To support increasing the amount of business provided to CRAF  participants, TRANSCOM has created a new organization called the  Enterprise Readiness Center. According to an official with the Enterprise  Readiness Center, one of the goals of the center is to explore ways to  encourage DOD organizations, like the Defense Logistics Agency, to  direct more air cargo business into the DOD-managed Defense  Transportation System. Further, the center will also seek to preserve  DOD’s airlift readiness capability, given the reduction in airlift volume, and  to help DOD maintain efficiencies by ensuring that the Defense  Transportation System is the primary source used by DOD entities to  arrange transportation. To achieve this, the Enterprise Readiness Center  proposes to improve the usage process of the Defense Transportation  System, create flexible rates, minimize overhead as a way to reduce  rates, develop customer-based transportation solutions, and create an  active dialogue with CRAF participants. As a way to further strengthen  communications and the strategic relationship between DOD, the  Department of Transportation, and CRAF participants, TRANSCOM and  AMC also established an Executive Working Group in 2010. The  Executive Working Group is a discussion forum used to address general  issues related to the CRAF program. The working group’s meetings are a  forum for providing updates regarding efforts related to the CRAF  program, such as updates on various studies, the status of efforts related  to CRAF, and carrier concerns.

DOD officials also told us that they have taken additional steps over the  last few years to improve the distribution of business within the CRAF  program. TRANSCOM has revised its process for awarding points over  the last few years to award more bonus points to carriers that fly  additional peacetime missions, assume a greater risk of activation, and  operate more modern, fuel-efficient aircraft. TRANSCOM has also revised  the practice of awarding commissions. Larger carriers allow the smaller  carriers on their teams the benefit of using their points to obtain DOD  business, in exchange for commissions consisting of a percentage of the  revenue the smaller carriers earn from this business. These commissions  are one of the ways in which larger carriers earn revenue from the CRAF  program, since they do not conduct many of the actual airlift missions in  peacetime. However, according to an official at one carrier, these  commissions had risen to as high as 9 percent of the revenue earned  from the mission. TRANSCOM officials told us that they have capped the  value of these commissions at 5 percent of mission revenue, in an  attempt to ensure that smaller carriers earn enough profit from performing  peacetime airlift missions.

DOD intended for these efforts to strengthen the viability of the CRAF  program. The opinions of CRAF participants varied on the extent to which  these changes made the program more equitable, mostly depending on  whether the carrier directly benefited from the changes. All of the carriers  we spoke with indicated that they were planning to stay in the CRAF  program for the immediate future. However, some added that if the  revenue they were receiving decreased too much, they would reassess  their participation and would consider not participating in future years.  More than half of the CRAF participants we interviewed suggested that  DOD could do more to increase the peacetime business it provides to  them. Some of these carriers suggested that DOD’s use of foreign air  carriers should be curtailed. According to DOD officials, foreign carriers  primarily operate as sub-contractors to CRAF participants to move cargo  that is too large for standard U.S. commercial aircraft, and only in rare  cases would DOD contract directly with a foreign carrier. Furthermore, our  analysis indicates that the use of foreign carriers has declined since its  high point in fiscal year 2008. As shown in figure 5, payments made to  foreign carriers have declined by more than 55 percent since fiscal year  2008.

DOD does not use its process for monitoring flying hours to determine  when it will exceed its planned training hours, and it does not use the  information from this process to allocate eligible airlift missions to CRAF  participants. As previously noted, DOD guidance requires TRANSCOM to  meet its training needs while also using commercial sources of  transportation to the “maximum extent practicable.” DOD officials told us  that, consistent with this policy, meeting training needs was their priority.  However, they also told us that flights provided by CRAF participants are  less expensive than military flights, in part because commercial aircraft  are designed to be more fuel-efficient, while military aircraft are designed  to carry heavy cargo and land in austere locations. In addition, according  to AMC data, once training requirements have been met, using  commercial carriers for airlift missions can be less costly than using  military aircraft. For example, according to an April 2013 analysis  provided by AMC officials, the cost per pound to transport cargo using  commercial carriers such as the 747 and MD-11 can be between 22 and  35 percent lower than the cost of transporting the same cargo using  military aircraft such as the C-5 and C-17. Currently, airlift requests are  handled by different sections within the Tanker Airlift Command Center  (TACC), depending on the type of airlift requested. Each of these sections  has a different process for choosing whether to use commercial or military  airlift to meet the request. Some airlift missions are conducted primarily  by military airlift, while others are conducted by commercial sources.

However, while TRANSCOM performs periodic monitoring of the  distribution of missions between military and commercial sources, officials  acknowledged that this monitoring does not consider the extent to which  training requirements have already been met or will be met with planned  missions. According to DOD officials, airlift missions that are not  conducted to satisfy training requirements should be performed by CRAF  participants, except when there is some other feature of the mission that  requires military airlift. Knowing when more flying hours are going to be  used than are needed to meet training requirements—and using this  information to shift eligible airlift missions to CRAF participants—would  allow DOD to use commercial sources of transportation to the maximum  extent practicable.

DOD officials told us that operations in Iraq and Afghanistan had ensured  that there were enough airlift missions available both to support training  requirements and to provide adequate peacetime business for CRAF  participants. Further, they noted that there are a number of reasons that  DOD might exceed its flying hours, such as the need to transport  particularly large cargo, special conditions that require military aircraft  (such as unpaved runways), and restrictions on U.S. carriers operating in  Iraq and most of Afghanistan. Given such requirements, officials  questioned the utility of developing a process to monitor the balance  between satisfying flying hour training requirements and providing CRAF  participants with additional peacetime business; they said that they were  uncertain how many additional missions would be eligible to be flown by  commercial carriers. However, TRANSCOM and AMC officials have  acknowledged that they have not collected data that would allow them to  determine how many of these missions could be shifted to CRAF  participants. Furthermore, while we acknowledge that there may be a  number of legitimate reasons why military aircraft would have to be used  for missions even after training requirements have already been met, it is  not clear that such reasons are always present when military airlift is  used. For example, AMC completed a study in December that was  intended, in part, to address short-term concerns regarding the CRAF  program and its participants. This study noted that some missions were  flown on military aircraft only because the necessary load plans for  commercial aircraft had not been developed in a timely manner—not  because of any requirement that the cargo be flown on military aircraft.  The study recommended that DOD airlift customers develop commercial  load plans to facilitate scheduling of commercial aircraft in these  situations. This study acknowledges that some missions currently flown  by military airlift could instead be flown by CRAF participants without  negatively affecting training hours.

After the drawdown in Afghanistan concludes, the need for airlift is  expected to decline, which will reduce both training opportunities and the  business available for CRAF participants. In addition, as airlift needs  decrease, DOD may need to fly a higher percentage of its channel  missions in order to provide its crews with sufficient training opportunities,  which could further decrease its use of CRAF participants. DOD officials  told us that they expect peacetime business to fall significantly after fiscal  year 2015. This decrease has already begun; peacetime revenues of  CRAF participants have already dropped by nearly one third, from their  high point of approximately $3 billion in fiscal year 2010 to about $2 billion  in fiscal year 2012, as shown in figure 5. Commercial carriers are  projected to be used even less in fiscal year 2013 and beyond, until  revenues return to pre-September 11, 2001 levels of $700 million or less.  This represents a potential 66 percent decline in DOD business available  to CRAF participants, which may further exacerbate the economic  pressures under which CRAF participants are operating.

By not using the information it has on flying hours to help determine when  it can allocate eligible airlift missions to CRAF participants, DOD loses the  ability to determine whether it is using commercial sources—such as  CRAF participants—to the maximum extent practicable, as required by  DOD guidance. As a result, DOD may be using its military fleet more than  necessary thereby risking reduced participation of commercial carriers in  the CRAF program.

section_title: DOD Restricts Partial Plane Loads on Channel Routes to Promote Efficiency, Meet Training Requirements, and Fulfill Peacetime Business Obligations to CRAF
paragraphs: DOD provided several reasons for restricting commercial carriers from  transporting partial plane loads of cargo over certain routes, based on its  need to promote efficiency, meet its military airlift training requirements,  and fulfill peacetime business obligations to CRAF participants. According  to TRANSCOM officials, in 2001, DOD began restricting commercial air  carriers from transporting partial plane loads of cargo over certain  overseas channel routes in order to improve the efficiency and  effectiveness of the cargo missions flown over these routes and keep  cargo flights in the channel route system that DOD relies on to satisfy its  training requirements and business obligations to CRAF participants. In  May 2012, TRANSCOM issued a memorandum reiterating its policy of  restricting commercial aircraft—including CRAF participants—from  transporting partial plane loads of cargo over these routes. According to  TRANSCOM officials responsible for coordinating airlift for DOD, this  policy—which has been in place for over a decade—is a tool to help DOD  increase the efficiency of its cargo shipments airlifted over channel routes  and minimize costs to DOD. DOD officials reported that in the late 1990’s  and early 2000’s commercial air carriers began transporting an  increasingly larger share of DOD cargo shipments, leaving a relatively  small amount of cargo for military aircraft to transport over channel  routes. DOD officials said that before the policy was implemented, military  aircraft would often conduct channel route missions with partial loads of  cargo, instead of completely filling the aircraft with cargo, which is more  cost effective. In addition, in the late 1990’s and early 2000’s, DOD was  experiencing a shortage of flying hours for training. During this same  period, commercial carriers were flying a large number of airlift missions,  which exacerbated DOD’s flying hour shortage, because many of the  airlift missions that military aircrews could have conducted for training  purposes were being lost to commercial air carriers. Lastly, according to  TRANSCOM officials, because many of the partial planeload missions  performed by commercial carriers were negotiated under tender  contracting arrangements— which are not included in the annual amount  of peacetime business DOD guarantees to the CRAF program—DOD’s  ability to fulfill its peacetime business obligations to CRAF was being  challenged.

The National Airlift Policy states that military and commercial resources  are equally important— and interdependent—in fulfilling the national  defense airlift objective. The policy also provides that the goal of the  U.S. government is to maintain in peacetime military airlift resources that  are manned, equipped, trained, and operated to ensure the capability to  meet wartime requirements. DOD guidance also notes that TRANSCOM  may be required to maintain a readiness posture that includes operating  military airlift internationally during peacetime, and that it must conduct  such operations at the level necessary to meet operational and training  requirements. According to DOD officials who are responsible for  managing DOD’s strategic airlift requirements, TRANSCOM takes steps  to meet DOD’s flying hour training requirements while also providing  commercial carriers with peacetime business; however the flying hour  training requirement takes precedence. DOD performs a variety of types  of airlift missions that allow military aircrews to meet their flying hour  training requirements while also delivering the cargo needed to sustain  military operations to military units located overseas. These mission types  include:

Channel airlift missions: regularly scheduled airlift for movement of  sustainment cargo and/or personnel between designated aerial port of  embarkation and aerial port of debarkation over validated contingency  or distribution channel routes.

Special assignment airlift missions: airlift missions requiring  special pickup/delivery at locations other than those established within  the approved channel structure or requiring special consideration  because of the number of passengers, weight or size of the cargo,  urgency or sensitivity of movement, or other special factors.

Contingency missions: airlift for movement of cargo and/or  personnel in support of military operations directed by appropriate  authority to protect U.S. interests.

Exercise missions: airlift for movement of cargo and/or personnel in  support of a military maneuver or simulated wartime operation  involving planning, preparation, and execution that are carried out for  the purpose of training and evaluation.

Theater direct delivery: a theater-based distribution system wherein  delivery to destinations forward of major aerial ports of debarkation  can be performed by any available aircraft, including those normally  used for intertheater requirements.

Channel route missions are conducted by both military and CRAF  participants and account for a large portion of DOD’s overall airlift activity.  During the last three fiscal years, at least 30 percent of DOD’s total cargo  movement was over channel routes. See figure 6 below.

TRANSCOM officials stated that to maximize efficiency, DOD requires  aircraft conducting channel route missions—whether they are military or  commercial—to be completely full of cargo before takeoff. According to  TRANSCOM officials, the policy restricting commercial carriers from  transporting partial loads over channel routes provides DOD with a tool to  maximize the amount of cargo transported in a single mission over a  channel route. Cargo previously transported by commercial carriers in  partial loads is now consolidated at aerial ports of embarkation.  TRANSCOM officials reported that historically, commercial carriers  transporting partial loads had been conducting a large portion of DOD’s  airlift business. These commercial airlift missions involved transporting  cargo to and from locations that were also being serviced by military  aircraft conducting channel missions. DOD was not maximizing the  efficiency of its channel route missions and minimizing costs, because  aircraft were not filled to capacity. To reduce the redundancy of  transporting cargo using both modes of delivery, DOD began restricting  commercial carriers from conducting partial plane load missions over  channel routes, and it now generally requires commercial aircraft  conducting channel missions to be full of cargo before takeoff. According  to TRANSCOM officials, the policy ultimately played a role in increasing  the efficiency of DOD’s air cargo movements over channel routes.  According to a RAND report issued in 2003 that analyzed the costs  associated with transporting cargo over channel routes using commercial  airlift versus military airlift, DOD would decrease airlift cost if it reduced  the amount of cargo transported by commercial carriers conducing partial  plane load missions, and shifted that cargo to be transported in a full  plane load aircraft. Taking this step would be less expensive than  allowing military aircraft to conduct partial plane load missions over  channel routes.

In addition, DOD’s policy allows it to offer more training opportunities for  its aircrews during periods of low demand for airlift. Rather than relying on  other types of missions—such as contingency missions— to accomplish  training, AMC prefers to schedule flying hours for training on channel  route missions, which are regularly scheduled, planned in advance,  consistent, and predictable. Channel route missions are used to maintain  and upgrade pilots’ flying skills and, as part of the training, can include  transporting cargo from specific military locations within the United  States—such as McGuire Air Force Base in New Jersey—to overseas  military bases located in countries like Germany or Kuwait. These  missions are conducted on a regularly scheduled basis and include DOD  cargo, so they provide commanders with reassurance that they will  receive planned amounts of sustainment cargo within a designated time  frame.

TRANSCOM officials told us that in the late 1990’s and early 2000’s  commercial aircraft had been conducting a large portion of DOD’s airlift  business, but the overall demand for DOD airlift was relatively low; as a  result the military began experiencing a shortage of flying hours to use for  training. Many of the airlift missions flown by commercial carriers involved  transporting cargo that could have been transported by military aircraft.  DOD’s policy of restricting commercial carriers from transporting partial  loads over channel routes has allowed DOD to shift cargo into the  channel route system, increase the number of channel route missions  available for aircrews to satisfy flying hour training requirements, and  address DOD’s flying hour shortage. In 2003, the RAND Corporation  conducted a study of the peacetime tempo of DOD’s air mobility  operations and asserted that DOD needed to take steps to address its  shortage of flying hours. The report found that, during fiscal year 2000  and 2001, aircrew personnel encountered a flying hour shortage because  international military activity was relatively calm and there were fewer  U.S. missions that required airlift support. The report also pointed out that  because commercial carriers had begun conducting a large portion of  DOD’s airlift business, decreasing the amount of airlift business given to  commercial carriers would help reverse this trend and help alleviate  DOD’s flying hour shortage. The report’s conclusions supported  measures taken by DOD to implement a policy to decrease peacetime  business provided to commercial carriers when necessary, to support  training requirements. With DOD’s policy in place, more cargo was being  funneled into the channel route system, and DOD was able to increase  the number of channel route missions offered to military aircrews, thereby  helping to alleviate the shortage of flying hours.

Further, TRANSCOM officials said that DOD’s policy of restricting  commercial carriers from transporting partial planeloads of cargo over  certain channel routes was also implemented in part to help DOD fulfill its  peacetime business obligations to CRAF. Through the CRAF peacetime  airlift contract, DOD provides a certain level of airlift business to CRAF  participants; DOD negotiates a designated amount of business that it is  committed to provide to CRAF participants—as an incentive for  commercial carriers to participate in the CRAF program—and distributes  this business among the CRAF participants currently enrolled in the  program. This business consists, in part, of missions flown across  channel routes. TRANSCOM officials reported that many airlift missions  conducted by commercial carriers carrying partial loads across channel  routes were being arranged through tender-based contractual  agreements. Tender-based agreements for airlift services are offers by an  air carrier to provide transportation services at a specified rate. According  to TRANSCOM officials, business associated with tender- based  contracts falls outside of the CRAF peacetime business entitlement  obligation. TRANSCOM officials said that this practice was diminishing  the pool of peacetime business that DOD could provide to CRAF  participants under the CRAF peacetime business entitlement process.

According to TRANSCOM officials, the policy limiting the amount of  tender-related airlift business provided to commercial carriers increases  the efficiency of channel route missions, alleviates the shortage of flying  hours for training, and allows DOD to provide CRAF participants with  peacetime business to fulfill its CRAF peacetime business obligations. In  addition, TRANSCOM officials said that in periods of high demand for  airlift, such as the last several years, DOD can provide CRAF participants  with more channel route business, because military aircrews can satisfy  their training requirements for flying hours by conducting other airlift  missions, such as contingency and special assignment airlift missions.

Some CRAF participants expressed concerns to us that the original  rationale for DOD’s policy no longer exists and that the policy may  prevent DOD from using the less costly commercial airlift option to  transport partial loads of cargo over channel routes. First, according to  TRANSCOM officials, the original rationale for the policy was to ensure  that DOD could provide sufficient flying hours to train its aircrews. Two of  the CRAF participants we interviewed stated that this policy was no  longer necessary because DOD no longer faces flying hour shortages as  it did in the late 1990’s and early 2000’s. DOD officials stated that it is  important to retain this policy as a management tool, especially since  DOD’s need for airlift is projected to return to pre-September 2001 levels  by 2015. According to DOD officials, data from fiscal year 2000 illustrate  this point; in 2000, DOD needed to reserve about 57 percent of its  channel route missions for training and provided about 28 percent of the  channel route missions to CRAF participants. In contrast, during a period  of high demand for airlift, such as fiscal year 2012, DOD reserved about  31 percent of its channel route missions for training and was able to  provide more than 60 percent of its channel route missions to CRAF  participants. See figure 7 below.

Second, a CRAF participant we met with emphasized that using  commercial aircraft to transport partial loads is less costly than using  military aircraft to transport partial loads, because when using commercial  airlift, DOD pays by the pound and only for the cargo airlifted, rather than  incurring the entire cost of using a military aircraft to carry a partial load.  DOD officials acknowledge that using commercial carriers to transport  partial plane loads of cargo is less expensive than using military aircraft  for this purpose and note that the policy restricting commercial carriers  from transporting partial plane loads of cargo over certain overseas  channel routes has a provision to allow commercial carriers to conduct  such missions on a case-by-case basis, when needed to meet DOD’s  requirements. For example, if a customer requires a critical, time- sensitive item and cannot wait for it to be transported by a regularly  scheduled channel mission, commanders still may have the option to use  a commercial carrier to transport a partial load to a designated location  using a channel route. In addition, commercial carriers can transport  cargo outside the channel route system under a variety of other DOD  airlift transportation contracts. For example, TRANSCOM’s World-Wide  Express program, an airlift transportation program available only to CRAF  participants, is used to provide international commercial express package  transportation service for shipments up to and including 300 pounds. This  program provides DOD with the ability to ensure that commanders can  receive unique, time-sensitive cargo items when no channel mission is  available within a specified time frame. Over the last five years, this  program has consistently generated over $100 million dollars worth of  airlift business annually for CRAF participants.

According to TRANSCOM and AMC analysis, as the drawdown efforts in  Afghanistan proceed over the next few years, airlift demand is expected  to decline to pre-September 11, 2001 levels. It will therefore be important  for DOD to plan and ensure that military aircrews are provided with ample  opportunity to fulfill training requirements and avoid a shortage of flying  hours. In preparation for this decline in the demand for airlift, TRANSCOM  officials emphasized that DOD’s policy to restrict commercial carriers from  transporting partial loads over channel routes may continue to serve as  an important management tool and allow DOD to balance the goals of  operating its channel route system as efficiently as possible, providing  enough training opportunities to military aircrews, and fulfilling its CRAF  peacetime business obligations.

section_title: Adequacy of CRAF to Meet Future Mission Needs is Unclear until DOD Completes Several Assessments
paragraphs: DOD is conducting several interrelated studies to determine its future  airlift requirements; however it is unclear whether the planned size of  CRAF will be adequate to meet future airlift requirements. The National  Defense Authorization Act for Fiscal Year 2013 requires DOD to conduct  a study that assesses its mobility needs—referred to as the Mobility  Requirements and Capabilities Study 2018, which DOD had not begun  at the time of our review. In addition, in response to the changing  business environment, AMC is also conducting a two-phase study to  assess the readiness of CRAF participants to augment DOD’s airlift  capacity and the viability of the CRAF program. The CRAF Phase 1 study  was completed in December 2012, and according to officials the Phase 2  is scheduled to be completed in the fall of 2013. Meanwhile, DOD has  been taking steps to continue to encourage commercial carriers to  participate in the program. Until DOD finalizes these assessments, it will  be unclear whether the planned size of CRAF will be adequate to meet  future airlift requirements.
subsections: section_title: DOD’s Mission Needs for CRAF Have Changed Since its Last Assessment of Future Requirements
paragraphs: DOD reports that there are more aircraft committed to the CRAF program  than are needed to fulfill the wartime requirements established by the  Mobility Capability Requirements Study 2016 (MCRS–16), which was  issued in 2010. However, it is not clear whether the current level of CRAF  participation will provide the right number and mix of aircraft to meet  future requirements, since DOD has issued new strategic guidance that  may affect DOD’s airlift requirements.

While the number of aircraft pledged to the program has fluctuated,  DOD’s past analysis showed that the projected size and mix of the CRAF  fleet was more than adequate to satisfy all war planning scenarios  established by the MCRS–16. According to DOD data, as of March 2012,  CRAF participants had enrolled 15 percent more aircraft in the program  than would be needed to meet established airlift requirements. The  MCRS–16 assessed components of the mobility capabilities that DOD  would need for possible future strategic environments and was intended  to help DOD make investment decisions regarding mobility systems, such  as how much to invest in strategic airlift to meet wartime needs. Among  other things, the study examined how changes in the mobility system  affect the outcomes of major operations and assessed the associated  risks. The MCRS–16 determined that, with few exceptions, the mobility  capabilities projected for 2016 would be sufficient to support the most  demanding projected requirements. The study assessed the major  mobility systems required to move personnel and supplies from their point  of origin to their destination: sealift, surface transportation, and airlift  components, to include strategic airlift, aerial refueling, and CRAF  passenger and cargo. To support decisions regarding future mobility force  structure, the MCRS–16 developed three demanding cases consisting of  conflicts and natural disasters with multiple scenarios occurring over a 7- year period and requiring the use of mobility capabilities. The MCRS–16  used approved DOD planning scenarios to develop the three cases. For  example, in one case, U.S. forces might be required to conduct a large  land campaign and a long-term irregular warfare campaign while also  responding to homeland defense missions. In another case, U.S. forces  might be conducting two nearly simultaneous large-scale campaigns,  while also responding to three nearly simultaneous domestic events and  conducting other operations.

Since its last assessment of its airlift requirements in 2010, DOD has  issued new strategic guidance. Specifically, DOD’s strategic guidance  issued in January 2012 calls for, among other things, an increased focus  on the Asia-Pacific region and resizing U.S. forces, both of which may  affect airlift needs. For example, an increased focus on the Asia-Pacific  region could affect operational plans in that theater and require changes  to the number and type of forces assigned to the region, as well as the  associated airlift requirements. In addition, the resizing of DOD forces to  achieve security objectives could have implications for the choice of  commercial and military aircraft used to support future military operations.  In March 2013, the Secretary of Defense tasked DOD senior leadership  to examine the department’s strategic assumptions, following up on the  January 2012 Defense Strategic Guidance which, among other things,  called for rebalancing military forces toward the Asia-Pacific region. This  review examines the choices underlying the department’s strategy, force  posture, investments, and institutional management, as well as past and  future assumptions, systems, and practices. The results of the review will  frame the secretary’s guidance for the fiscal 2015 budget and will be the  foundation for the Quadrennial Defense Review expected to be issued in  February 2014.

section_title: DOD Is Updating Its Future Airlift Requirements to Reflect Strategy Changes and Reassess the Incentives for CRAF Participants
paragraphs: The National Defense Authorization Act (NDAA) for Fiscal Year 2013  requires DOD to conduct a new mobility capabilities requirements study— referred to as the Mobility Requirements and Capabilities Study 2018  (MRCS–18)—based in part on the new defense strategy mentioned  above. This new assessment may provide decision makers with the  analytical data needed to determine DOD’s airlift capability requirements  and the number and type of aircraft CRAF participants would need to  pledge to the program in order to support these requirements. Among  other things, the NDAA requires DOD to describe and analyze the assumptions made by the Commander of  the U.S. Transportation Command with respect to aircraft usage rates,  aircraft mission availability rates, aircraft mission capability rates,  aircrew ratios, aircrew production, and aircrew readiness rates; assess the requirements and capabilities for major combat operations,  lesser contingency operations as specified in the Baseline Security  Posture of the Department of Defense, homeland defense, defense  support to civilian authorities, other strategic missions related to  national missions, global strike, the strategic nuclear mission, and  direct support and time-sensitive airlift missions of the military  departments; and  identify mobility capability gaps, shortfalls, overlaps, or excesses and  assess the risks associated with the ability to conduct operations and  recommended mitigation strategies where possible.

Until DOD completes the MRCS–18, decision makers in DOD and  Congress may not have all of the relevant information they need to  ensure that DOD’s mobility capabilities and requirements are sized most  effectively and efficiently to support the U.S. defense strategy. DOD  acknowledges the requirements set forth in the National Defense  Authorization Act for Fiscal Year 2013 and fully intends to cooperate and  work to complete the assessment, but according to AMC and  TRANSCOM officials, no time frame has been established for when this  study will be completed.

Further, AMC has begun conducting additional studies to assess its airlift  requirements and how the CRAF program will support near-term and  long-term requirements. AMC’s CRAF study is being conducted in two  phases and will help AMC to ensure that the commercial airlift forces  associated with the CRAF program are prepared to support the  drawdown of forces in Afghanistan by the end of calendar year 2014.  Phase 1 of the CRAF study, completed in December 2012, focused on  the international long-range segment of CRAF, which will be most  affected by the decreasing demand for airlift resulting from the drawdown  of forces in Afghanistan. It identifies a series of issues facing CRAF  during the withdrawal and for the short term following the drawdown. A  number of observations are directly related to the drawdown period and  the period immediately following. These require near-term actions to  ensure that commercial airlift support will be available when it is needed  to support national interests. For example, the Phase 1 study noted that a  future study should assess the risk and reward factors that may affect  further CRAF participation due in part to the state of flux in the current  charter air industry resulting from economic pressures brought on by a  decline in commercial passenger charter opportunities.

In addition to discussing certain recommendations from the Phase 1  study, Phase 2 of the CRAF study will focus on maintaining the future  viability of the CRAF program and its readiness to augment military airlift  capability and support surge requirements. This follow-on study will  undertake an in-depth analysis of issues identified in Phase 1 that could  affect the long-term viability and reliability of the CRAF program. The  findings from the Phase 2 study will propose courses of action and  mitigation strategies to ensure CRAF readiness now and in the future,  balancing government interests and mandates with the dynamics of the  changing industry. Furthermore, the CRAF Phase 2 study will evaluate  the market, the carriers and their business base, and the existing  business models within industry and government in order to provide  insights and recommend actions to ensure that the CRAF program can  continue to meet wartime requirements in the future. AMC and  TRANSCOM expect this study to be completed by the fall of 2013.

According to AMC officials, one of the issues that will be addressed in the  Phase 2 study is the recommendation from the Phase 1 study that DOD  continue the suspension of the 60/40 rule through fiscal year 2014. The  60/40 rule was created as a safeguard for DOD. Under the 60/40 rule,  DOD business cannot provide more than 40 percent of a carrier’s  revenue and the remaining 60 percent of the carrier’s revenue must be  earned through sources other than DOD, generally referred to as  commercial sources or commercial air transportation. Carriers that earn  more than 40 percent of their revenue from DOD may be penalized by  reductions in their entitlement to DOD business. Prior to fiscal year 2010,  the rule was based on an air carrier’s revenue. However, in 2010 the rule  was modified so that it calculated the percentage of business in block  hours rather than amount of revenue. As of May 2010, the rule has  been suspended. One of the original goals of the 60/40 rule was to  ensure that CRAF carriers maintained a strong commercial business  base, efficient operations, and modern fleets to help prevent them from  going out of business when DOD demands were low. Limiting the  proportion of DOD business carriers could have would also provide DOD  with a surge capability to draw on if demand grew suddenly. According to  TRANSCOM and AMC officials, the 60/40 rule was suspended so that  commercial carriers would not be penalized for supporting increased  DOD airlift demands. If carriers continued to increase support while still  being required to observe the 60/40 rule, the rule would prove to be  counterproductive. DOD would be asking for increased support while  potentially issuing penalties to those carriers providing the increased  support. Some of the carriers we spoke with stated that the 60/40 rule  had not been strictly enforced and that the suspension of the rule had no  effect on the amount of business they received as a result of participating  in the CRAF program. However, according to DOD officials, five carriers  have gone bankrupt in the last three years and two of them have stopped  offering airlift services even though this rule has been suspended.

Based on data included in the MCRS–16, DOD counts on the CRAF  program to provide most of the passenger airlift services as well as a  significant amount of the cargo services to support wartime requirements.  Therefore, CRAF must maintain the ability to respond in order to meet  combatant commander requirements. DOD must develop accurate  requirements if CRAF is to maintain the ability to respond to these  requirements. For that reason, until DOD completes the MRCS–18 and  the CRAF Phase 2 study, it will be unable to determine the correct size  and mix of the CRAF fleet to meet future airlift requirements.

section_title: Conclusions
paragraphs: The nature of U.S. military operations in today’s global environment  requires DOD to be able to rapidly deploy personnel and cargo around  the world and sustain forward deployed forces. DOD has taken a number  of steps to strengthen the CRAF program while also ensuring that military  aircrews receive required training. However, over the last few years, DOD  has flown more hours than required to train its aircrews, thereby possibly  reducing the level of peacetime business available to CRAF participants.  The anticipated decline in DOD’s peacetime business over the next few  years, combined with continuing business pressures in a highly  competitive industry, highlight the need for a process to ensure that DOD  maximizes the use of its commercial partners. However, DOD does not  use the process it has for monitoring training hours to determine when it  can allocate eligible airlift missions to CRAF participants. If DOD does not  use the information provided by its existing process, it will be unable to  determine whether it is using commercial carriers to the maximum extent  practicable, as required by DOD guidance. Further, DOD may be using its  military fleet—which officials say is more expensive to operate than  commercial alternatives—more than necessary, while risking the CRAF  participation needed to ensure wartime readiness.

section_title: Recommendation for Executive Action
paragraphs: To balance the use of military and civilian aircraft and ensure that  commercial carriers participating in the CRAF program are used to the  maximum extent practicable, we recommend that the Secretary of  Defense direct the Secretary of the Air Force and the Commander, U.S.  Transportation Command—in conjunction with the Commander, Air  Mobility Command—to use the Air Mobility Command’s existing process  for monitoring training hours to determine when it can shift eligible  peacetime airlift workload from military to commercial sources.

section_title: Agency Comments
paragraphs: We provided a draft of this report to DOD for comment. In its written  comments, reproduced in appendix IV, DOD concurred with our  recommendation and stated that it believes implementing the  recommendation will further improve the Civil Reserve Air Fleet program.

We are sending copies of this report to appropriate congressional  committees, the Secretary of Defense, the Secretary of the Air Force, the  Under Secretary of Defense (Acquisition, Technology and Logistics), and  the Commander, Air Mobility Command. In addition, this report will be  available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-5257 or merrittz@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix V.

section_title: Appendix I: Scope and Methodology
paragraphs: To determine whether DOD has been meeting its training requirements  we reviewed Air Force guidance on the development of flying hour  requirements, as well as DOD guidance on flying hours for training. We  also spoke with officials from U.S. Transportation Command  (TRANSCOM) and Air Mobility Command (AMC) about how the training  requirements are developed. We then analyzed flying hour data from the  Reliability and Maintainability Information System (REMIS) to determine  the extent to which the airlift fleet—C-5, C-17, and C-130—was being  flown in excess of training requirements. We assessed the reliability of  these data by interviewing officials from the REMIS program office at the  Air Force Life Cycle Management Center to understand the steps that  have been taken to ensure the reliability of the database. In addition, we  reviewed documentation relating to the system and compared the data  with alternate sources. We concluded that the data from REMIS were  reliable for the purposes of this engagement. We then compared the  flying hour data from REMIS to the flying hour requirements developed by  AMC. To determine whether DOD was providing Civil Reserve Air Fleet  (CRAF) participants with peacetime business, we interviewed officials  with TRANSCOM and AMC on the management of the CRAF program,  recent changes that had been made to the program, and concerns about  the future of the program. In addition, we conducted interviews with  representatives from 21 of the 30 CRAF participants who responded to  our request for an interview in October and November 2012, to obtain  information on the CRAF program, their perspective on what elements of  the program worked and which did not, and their willingness to participate  in the program in the near future. Since that time, 2 CRAF participants— one of which we interviewed—have gone out of business and are no  longer members of the CRAF program. As of April 2013, there were 28  CRAF participants included in the CRAF program. We also analyzed  program-related documents from TRANSCOM, AMC, and CRAF  participants, as well as guidance on the use of CRAF and commercial  transportation. Furthermore, we analyzed data from fiscal years 2001  through 2012 from two systems—the Commercial Operations Integrated  System and an internal database managed by the Tanker Airlift  Command Center (TACC) within AMC—to understand the extent to which  CRAF participants are used compared with military airlift and foreign  carriers. We assessed the reliability of these sources by reviewing  documentation on to the systems, comparing these data with data from  alternate sources and conducting interviews with knowledgeable officials.  We concluded that the data from these systems were reliable for the  purposes of this engagement.

To assess the extent to which DOD has justified restricting commercial  carriers from transporting partial plane loads of cargo over channel  routes, we reviewed DOD’s policy for restricting commercial carriers from  flying over channel routes. The policy we reviewed helped us identify  which channel routes were designated as restricted. We then conducted  interviews with TRANSCOM and AMC officials to obtain information on  the rationale for creating the policy and what operational and strategic  benefits the policy provides for DOD. In addition, we reviewed fiscal year  2000 and fiscal year 2012 channel route airlift transportation data to  determine the extent to which DOD was using military aircraft rather than  CRAF participants to conduct channel route missions, and we discussed  the circumstances surrounding those decisions with TRANSCOM  officials. We also conducted interviews and obtained written responses  from CRAF participants to obtain additional perspectives on how the  policy is affecting the CRAF program. We also reviewed previously  written reports and studies conducted by the RAND Corporation and the  Council for Logistics Research Inc. that addressed DOD’s use of channel  routes, the impact of utilizing commercial carriers in lieu of military aircraft  on DOD’s aircrew training program, and the impacts the policy has had  on overall cargo management. Reviewing this historical information  provided us with additional insight into DOD’s justification for  implementing the policy.

To assess whether DOD has established future requirements for the  CRAF program and how the planned size of CRAF compares with those  requirements, we obtained and reviewed various studies conducted by  DOD to assess its strategic airlift capabilities, such as DOD’s Mobility  Requirements and Capabilities Study – 2016, and the AMC 2012 CRAF  study. We also collected fiscal year 2011 through 2013 data documenting  DOD’s current inventory of CRAF aircraft and compared these data with  DOD’s current airlift requirements. In addition, we conducted interviews  with TRANSCOM and AMC officials to determine what steps are being  taken to establish future requirements and to gain their perspective on the  challenges they expect to face as they continue to manage the CRAF  program. We also reviewed a provision in the National Defense  Authorization Act for Fiscal Year 2013 that requires DOD to conduct a  new study of mobility capabilities and requirements. We discussed the  status of the requirement with TRANSCOM and AMC officials to  determine what time frames and milestones have been established to  begin and complete this study. We also reviewed DOD’s defense  strategic guidance issued in January 2012 to assess factors that may  affect DOD’s future airlift needs.

To gather information for these objectives, we reviewed documentation  and interviewed officials from the following organizations:

The Office of the Under Secretary of Defense for Acquisition,

Office of the Deputy Assistant Secretary of Defense  (Transportation Policy)

Strategy, Policy, and Logistics (TCJ5/4)

Acquisition (TCAQ)

Office of the Staff Judge Advocate (TCJA)

Enterprise Readiness Center (ERC)

J-3 Operations and Plans, Sustainment Division (TCJ3-G)

618th Air and Space Operations Center (TACC)

Commercial Airlift Division (A3B)

See appendix III for the CRAF participants we interviewed

National Air Cargo Association (NACA)

We conducted this performance audit from August 2012 to June 2013 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence and data obtained was sufficiently reliable for our purposes,  and provides a reasonable basis for our findings and conclusions based  on our audit objectives.

section_title: Appendix II: U.S. Transportation Command Restricted Route Policy

section_title: Appendix III: List of Civil Reserve Air Fleet Participants (As of April 2013)
paragraphs: Appendix III: List of Civil Reserve Air Fleet  Participants (As of April 2013)

CRAF Carrier  1.  ABX Air, Inc.  2.  Air Transport International LLC  3.  Alaska Airlines, Inc.  4.  Allegiant Air LLC  5.  American Airlines, Inc.  6.  Atlas Air, Inc.  7.  Delta Air Lines, Inc.  8.  Evergreen International Airlines, Inc.  9.  Federal Express Corp.  10.  Hawaiian Airlines, Inc.  11.  Jet Blue Airways Corp.  12.  Kalitta Air LLC  13.  Lynden Air Cargo LLC  14.  Miami Air International, Inc.  15.  MN Airlines LLC (DBA Sun Country Airlines)  16.  National Air Cargo Group, Inc.(DBA Murray DBA National Airlines)  17.  North American Airlines, Inc.  18.  Northern Air Cargo  19.  Omni Air International, Inc.  20.  Polar Air Cargo Worldwide, Inc.  21.  Ryan International Airlines, Inc*  22.  Sky Lease 1, Inc. (DBA Trade Winds Airlines)  23.  Southern Air, Inc.  24.  Southwest Airlines Company  25.  Tatonduk Outfitters, Ltd. (DBA Everts Air Cargo)  26.  United Airlines, Inc.  27.  United Parcel Service Company  28.  US Airways, Inc.  29.  World Airways, Inc.

section_title: Appendix IV: Comments from the Department of Defense

section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Suzanne Wren, Assistant  Director; Jim Ashley; Namita Bhatia-Sabharwal; Jason Jackson; James  Lackey; Joanne Landesman; Tamiya Lunsford; Michael Shanahan; Mike  Shaughnessy; and Amie Steele made key contributions to this report.


Question-summary annotations: questions: question: Why did DOD exceed flying hours between FY2002 and FY2010?
answer: DOD exceeded the flying hours needed to meet military training requirements for fiscal years 2002 through 2010 because of increased operational requirements associated with Afghanistan and Iraq; however it does not know whether it used Civil Reserve Air Fleet (CRAF) participants to the maximum extent practicable.
child_questions: question: How does DOD's flight time compare to its training needs?
answer: During fiscal years 2002 through 2010, DOD flew its fleet more than needed to train its crews, although its flying has more closely matched its training needs in recent years.

question: Why will the need for airlift decline?
answer: However, with the drawdown in Afghanistan, DOD officials expect the need for airlift to decline by at least 66 percent--to pre-September 2001 levels--reducing both training hours available for DOD and business opportunities for CRAF. DOD does not use its process for monitoring flying hours to determine when it will exceed required training hours and allocate eligible airlift missions to CRAF participants.

question: Why may DOD be using its military fleet more than necessary?
answer: DOD does not use its process for monitoring flying hours to determine when it will exceed required training hours and allocate eligible airlift missions to CRAF participants. Therefore, it cannot determine whether it is using CRAF to the maximum extent practicable. As a result, DOD may be using its military fleet more than necessary--which officials say is less economical--while risking reduced CRAF participation.

questions: question: Why has DOD restricted commercial carriers from transporting partial plane loads?
answer: DOD provided several reasons for restricting commercial carriers from transporting partial plane loads of cargo over channel routes, including the need to promote efficiency, meet its military airlift training requirements, and fulfill peacetime business obligations to CRAF participants.
child_questions: question: What will this policy allow?
answer: The policy restricting carriers from flying partial loads over channel routes allows DOD to consolidate cargo previously flown by commercial carriers in less than full plane loads and redirect that cargo into the channel route system, where it will be transported by either commercial or military aircraft as part of a full plane load mission.

question: What is the importance of consolidating cargo into full loads?
answer: According to DOD, consolidating cargo into full loads flown over the channel route system has increased both the efficiency of these missions and the availability of missions that DOD uses to train its crews and fulfill its business obligations to CRAF.

question: Why are channel route missions important?
answer: Channel route missions are regularly scheduled airlift missions used to transport cargo and provide aircrew training time. These missions also help DOD provide business to CRAF participants.

questions: question: Why is it unclear whether the planned size of CRAF will be adequate?
answer: It is unclear whether the planned size of CRAF will be adequate to meet future airlift requirements. DOD last established its future requirements based on the wartime scenarios in the Mobility Capability Requirements Study 2016, issued in 2010.
child_questions: question: Why does the 2010 study not reflect current needs?
answer: However, due to changing military strategy and priorities, the 2010 study does not reflect current mission needs.

question: What is DOD required to do?
answer: The National Defense Authorization Act for Fiscal Year 2013 requires DOD to conduct a new mobility capabilities and requirements study.
child_questions: question: How will the study help DOD?
answer: Once they are finalized, these studies should allow DOD to better understand future requirements for CRAF and whether the CRAF program will meet future airlift requirements.

questions: question: How does DOD move passengers and cargo?
answer: To move passengers and cargo, DOD supplements its military aircraft with cargo and passenger aircraft from volunteer commercial carriers participating in the CRAF program.
child_questions: question: What do participating carriers do?
answer: Participating carriers commit their aircraft to support a range of military operations in exchange for peacetime business. A House Armed Services Committee mandated GAO to report on matters related to the CRAF program.

question: What did GAO assess with regards to the CRAF program?
answer: GAO assessed whether DOD (1) met its military airlift training requirements while also using CRAF participants to the maximum extent practicable, (2) provided justification for restricting commercial carriers from transporting partial plane loads of cargo over certain routes, and (3) has established future requirements for CRAF and how the planned size of CRAF compares to those requirements.
child_questions: question: How did GAO assess these matters?
answer: GAO reviewed guidance and policies pertaining to the program, flying hour data, and DOD-sponsored CRAF study reports. GAO also interviewed DOD and industry officials.