The CRAF program was created in 1951 and its importance was reaffirmed by the National Airlift Policy in 1987. The National Airlift Policy states 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. Additionally, the policy includes nine guidelines to meet airlift requirements in peacetime and wartime. These guidelines direct that policies be designed to increase participation in CRAF; enhance the mobilization base of the U.S. commercial air carrier industry; provide a framework for dialogue and cooperation with commercial promote the development of technologically advanced transport aircraft and related equipment. According to DOD officials, these guidelines serve as the objectives of the CRAF program. CRAF commitments are divided into three levels or stages—Stages I, II, and III—depending on the size of the operations or contingency in which DOD is involved. As defined in the CRAF contract between DOD and its commercial partners, Stage I activation supports expanded operations beyond DOD’s routine daily operations and provides the equivalent of 30 passenger and 30 cargo aircraft; Stage II activation is used in the event of a major regional contingency and supporting mobilization and provides the equivalent of 87 passenger aircraft and 75 cargo aircraft; and Stage III activation supports two major regional contingencies and provides the equivalent of 136 passenger aircraft and 120 cargo aircraft. When CRAF is activated, carriers have a specified time frame in which to provide aircraft, with pilots and crews, to DOD. Once activated, air carriers continue to operate and maintain the aircraft with their resources; however, AMC controls the aircraft missions. The majority of DOD passenger flights require carrier flexibility, as many DOD missions are not routine in their locations or timing. Charter passenger carriers fly the majority of DOD peacetime, contingency, and Stage I business because charter passenger carriers’ businesses are designed with the flexibility to provide airlift based on the customer’s (DOD’s) schedule. Scheduled passenger carriers operate commercial flights on regular routes and can ill afford unplanned disruptions to their airline networks. However, because of their large fleet sizes, the scheduled carriers are a critical component of the CRAF fleet. As an incentive to encourage participation in CRAF, DOD contracts exclusively with CRAF participants to fly its daily, peacetime passenger and cargo airlift business and any surge for contingencies. As articulated in an August 2008 DOD-sponsored CRAF study, carriers earn the entitlement to DOD’s peacetime business through points awarded based on their aircraft commitments to each CRAF stage. According to the study, the greater the commitment by the carrier, the greater the amount of peacetime business to which a CRAF participant is entitled. These points become the basis of a carrier’s entitlement to compete for the procurement of peacetime passenger and cargo airlift business. To maximize the value of these entitlements, CRAF participants have formed into three teaming arrangements, which are created and managed by the participants themselves. These teams comprise of a mix of passenger and cargo carriers that join together to pool their entitlements to DOD business; that is, the entitlement directly associated with a carrier’s individual commitment is combined with the entitlements earned by other carriers on their team. DOD assigns peacetime business to the team based on the team’s total entitlement and availability, not to the individual carrier. Once that business is assigned to the team, the team leader, or administrator, is responsible for accepting and distributing the business to the carriers at their discretion. DOD’s 2008 National Defense Strategy requires the military to assess, mitigate, and respond to risk that could potentially damage national security. Identifying and managing risk is also an important goal of all successful internal control programs. Internal controls include the organization, policies, and procedures used by agencies to reasonably ensure that, among other things, critical programs like CRAF achieve their intended results effectively and efficiently. Internal control standards require that management should provide for an assessment of the risks the agency faces from both external and internal sources. These standards also require that there be control activities—that is, the policies, procedures, techniques, and mechanisms that enforce management’s directives—in place to help insure that actions are taken to address risk. Although DOD depends heavily on CRAF charter passenger capability, this capability has declined substantially over the past 5 years and DOD has not established the risk that this decline may have for the CRAF program. DOD depends on the charter passenger industry to move more than 90 percent of its peacetime requirements, as well as all contingency surges. While the charter passenger capability has, historically, satisfied DOD’s requirements, there has been a 60 percent decline in this capability since 2003 due mainly to a declining demand for charter airlines in the commercial sector. Figure I shows this decline in CRAF participants’ charter passenger aircraft from a high of 66 aircraft in 2004 to 29 in 2008. Additionally, the figure shows that, even as commercial passenger carriers’ revenues from DOD peacetime business increased to historic levels after 2001, and the amount of business available to charter passenger carriers was higher than it had ever been, the charter aircraft capacity continued to decline. This decline in charter passenger capability led to a finding in the August 2008 DOD-sponsored CRAF viability study that this capability may become marginal for unexpected peacetime and contingency requirements. However, the study did not reflect that, in April 2008, CRAF’s largest charter passenger carrier ceased operations due to bankruptcy. The sudden loss of 16 charter passenger airplanes from the CRAF program left DOD with only 3 charter passenger carriers and 19 total charter passenger aircraft until May 2008, when another passenger carrier dropped its scheduled services and committed 20 charter aircraft to CRAF. However, according to industry officials and confirmed by DOD, the sudden reduction in charter aircraft after the April 2008 bankruptcy led to a situation in which the return home of some redeploying Maine National Guard troops in Iraq was delayed by about a week. Because of a limited charter aircraft capability, the Commander, U.S. Transportation Command, personally called CRAF scheduled carriers and asked them to free up aircraft to transport these troops back to the United States. The bankruptcy of DOD’s largest charter passenger carrier without notice demonstrates the volatility of the charter passenger industry and raises questions about the industry’s ability to continue to meet DOD requirements without a CRAF activation involving the larger, scheduled carriers to satisfy the requirements the charter passenger industry was filling. There is little or no excess capacity among scheduled carriers. The five scheduled passenger carriers we spoke with told us that, due to market conditions and shrinking fleets that have been tailored to meet their commercial demands more efficiently, scheduled carriers are reluctant to commit aircraft to peacetime operations, contingencies, and CRAF Stage I beyond a small, required contribution. According to airline and industry officials, pulling a single aircraft out of a scheduled passenger carrier’s daily planned service can cause major disruptions to its routes; therefore, to support any stage of CRAF activation, scheduled air carriers depend on a decrease in their commercial demands, similar to the reductions seen after September 11, 2001, that would make aircraft available. If the charter passenger industry business continues to decline, DOD will likely be forced to turn to scheduled air carriers to fulfill daily and Stage I requirements currently met by the charter carriers. However, given the scheduled carriers’ smaller fleets, DOD has not quantified the number of charter passenger aircraft it may need on a daily basis and in contingencies and Stage I, or the risk of having a smaller charter passenger capability to handle these requirements. DOD officials have told us that they have no concerns that sufficient CRAF participants will respond to a call for airlift, whether during peacetime or in an activation. Since 2005, DOD’s need to move outsized cargo to support peacetime and contingency operations has increased with the acquisition of more than 15,000 MRAP vehicles. Because there are no U.S. commercial cargo aircraft capable of moving outsized cargo such as MRAP vehicles into Iraq and Afghanistan, DOD is using foreign-owned carriers to support such movements to supplement its military airlift capability. As of April 2009, DOD had moved a total of 3,890 MRAPs by air, of which almost 80 percent were moved using foreign-owned carriers flying large Antonov-124 aircraft. We found and DOD confirmed that in the 2005 Mobility Capabilities Study, DOD planned for U.S. commercial cargo carriers participating in the CRAF program to move only bulk cargo, and did not identify a need for these carriers to move outsized cargo; however, without some supplemental capability—such as the use of foreign-owned carriers—the need for DOD to move outsized cargo into areas of crisis, and have that cargo arrive in a timely manner, could limit DOD’s ability to meet future airlift requirements. According to DOD analysts involved in the ongoing Mobility Capabilities and Requirements Study—2016, DOD will again plan for CRAF cargo participants to carry only bulk cargo. As DOD moves additional troops and equipment into land-locked Afghanistan and in similar scenarios in the future, the need to airlift MRAPs and other large equipment, like helicopters, may continue to need the use of commercial carriers to assist military airlift. However, it is not clear whether foreign-owned carriers would be able or willing to fly in certain scenarios. For example, DOD officials acknowledged that foreign- owned carriers, for security reasons, would not likely be used during a CRAF activation. Moreover, we believe the use of foreign-owned companies in support of U.S. military operations could be problematic if or when foreign-owned carriers find supporting a U.S. contingency to be inconsistent with their national interests.