The Civil Reserve Air Fleet - Future Credibility AUTHOR Major Jeffrey A. Porter, USAF CSC 1990 SUBJECT AREA Intelligence EXECUTIVE SUMMARY TITLE: THE CIVIL RESERVE AIR FLEET - FUTURE CREDIBILITY THESIS: In the aftermath of airline deregulation, U.S. strategic airlift capability continues to undergo significant transformation and has reached the point where increasing shortfalls exist with little hope for improvement without federal intervention. ISSUES: The importance of strategic airlift to our nation's ability to project power and execute a planned military operation has long been recognized. Our strategic airlift capability is comprised of a combination of civilian and military airlift. During a major conflict, 28 percent of the cargo and 95 percent of the passengers airlifted would be flown on commercial aircraft. The commercial augmentation is provided by airlines participating in the Civil Reserve Air Fleet (CRAF). Airlines voluntarily participate and, as a result, are eligible DOD civilian airlift contracts. In the past, the airlines have purchased aircraft and managed a system compatible with DOD interests. They invested in long-range, widebody aircraft, such as the B-747 and DC-10, which are capable of large cargo loads. Since airline deregulation, however, market changes have transformed the composition of civilian airlines. These changes have had a negative impact on the CRAF and our strategic airlift capability. Many airlines are purchasing smaller, short-range aircraft. Also, airlines are leasing many of their aircraft which makes them ineligible for CRAF participation. These and other forces have combined to deteriorate U.S. strategic airlift capability. CONCLUSIONS: The U.S. must take steps to increase its airlift capacity. There are several possible solutions, including production of a new military aircraft, federal legislation, or financial incentives for the airlines to increase their participation in the CRAF. This critical issue must be addressed if the U.S. wants to maintain an adequate strategic airlift capability in the future. THE CIVIL RESERVE AIR FLEET - FUTURE CREDIBILITY OUTLINE Thesis Statement. In the aftermath of airline deregulation, U.S. strategic airlift capability continues to undergo significant transformation and has reached the point where increasing shortfalls exist with little hope for improvement without federal intervention. I. The Importance of Strategic Airlift A. Introduction/Discussion of Strategic Airlift B. Historical Examples Illustrating Importance C. Present Strategic Airlift Requirements 1. Military Airlift Capability 2. Civilian Airlift Capability II. U.S. Strategic Airlift Policy A. Historical Changes in Policy B. Present Airlift Policy III. Civil Reserve Air Fleet (CRAF) A. Purpose of the CRAF 1. Historical Relationship of Civilian and Military Airlift 2. CRAF Participation - Requirements and Benefits B. CRAF Implementation IV. Airline Deregulation A. Reason for Deregulation and Results B. Military and Industry Perspective C. Impact on Strategic Airlift Capability V. Possible Solutions for Improving Airlift Capability A. Military Solution B. Possible Civilian Airline Solutions THE CIVIL RESERVE AIR FLEET - FUTURE CREDIBILITY The importance of logistics to any nation's ability to wage war has long been recognized. Without adequate resupply capability, no nation can expect to fight and win a conflict of any duration. Most modern armies, including U.S. forces, normally maintain only a fraction of the supplies, in any theater, which would be required in a prolonged conflict. In essence, logistics is the key to our ability to project power and execute a planned military operation. This paper will focus on the transportation portion of the logistics pipeline: specifically, the importance of strategic airlift to U.S. capability and the role of civilian airlines to our nations strategic airlift posture. In the aftermath of airline deregulation, U.S. strategic airlift capability has continued to undergo significant transformation. It has reached the point where shortfalls exist with little hope for improvement without federal intervention. Historically, our nation has recognized the importance of having adequate transportation. Shortly after the outbreak of World War I, we found ourselves with a private rail network which was unable to meet our wartime needs. (16:4-9) As a result, the national government took over the rail system and ran it until 1920. Since that time, the government has maintained an active interest in our nation's transportation capability. The importance of strategic airlift capability was recognized during World War II. At the outset, the military had very little long-range airlift and was forced to utilize available commercial transportation. During the war, the air carriers operated under the Army and Navy's Air Tranport Service, but utilized all of their own facilities, equipment, and personnel. (2:9) What began in May, 1941 as the Air Corps Ferrying Command has evolved into the Military Airlift Command (MAC), a global airlift system supported by both military and civilian aircraft which has proven itselve numerous times. The Berlin airlift, Grenada, Honduras, and Panama are just a few examples which have demonstrated the importance of strategic airlift to our nations ability to respond to a crisis and protect our national interests. Recent crises requiring airlift, however, have been limited in their scope and duration. U.S. support of Israel during the 1973 Arab-Israeli war lasted less than ten days before a cease-fire was in effect. And more recently, the U.S. invasion of Panama was made possible by both the short duration and close proximity of Panama to the U.S.. One of the key questions we must ask is, "Will our present airlift capability be adequate for future conflicts?" To answer that question, the military has conducted numerous studies over the last decade to determine the amount of airlift which would be required for a major conflict far from U.S. shores. The most comprehensive of these studies was the Congressionally Mandated Mobility Study (CMMS), completed in 1981. (13:10) This study concluded that the U.S. would need to triple its airlift capacity in order to sustain a future world conflict. The cost to accomplish this, however, would be prohibitive so a fiscally constained goal was established. Current U.S. policy is to achieve a 66 million-ton-miles per day (MTM/day) airlift capacity by the year 2000. (13:10) The MTM/day terminology represents the ability to move one ton of cargo one mile per day. For example, in a European scenario where the average intercontinental distance is approximately 2600 nautical miles, our goal would be to airlift over 25,000 tons per day. Our current airlift capacity is comprised of a combination of both military and civilian aircraft. The military strategic airlift capacity is provided by the C-141, C-5 and KC-10 aircraft. The C-5 and C-141 are operated by MAC and can generate approximately 32.7 MTM/day of airlift capability. The KC-10 (an aerial tanker/transport version of the commercial DC-10) is operated by Strategic Air Command and can generate an additional 4.5 MTM/day of airlift. (4) The workhorse of these airlifters is the C-141 with 267 of them currently in the active and reserve inventory. (7:24) It is important to note that by 1991 the average age of the C-141 will be 26 years. The C-5 provides a significant lift capability with the ability to carry outsize loads such as the M-1 tank. With the recent procurement of the C-5B, the U.S. presently has 96 of these heavy airlifters. While the KC-10 does not provide a significant airlift capability, its ability to allow fighters to self deploy is a significant enhancement. It can air-refuel fighters enroute, while airlifting support equipment and personnel. While the total military airlift capability amounts to 37.2 MTM/day, it falls well short of the CMMS goal of 66 MTM/day. To help augment military airlift, the U.S. relies heavily on the civilian airline industry. During a major conflict, 28 percent of the cargo and 95 percent of the passengers airlifted would be flown on commercial aircraft. (3) The civilian carriers provide airlift to the Department of Defense (DOD) through the CRAF, which will be discussed in more detail later. While this airlift capacity varies, it would amount to approximately 16 MTM/day. (8) Adding this to the military airlift capability, it would still fall short of the U.S. goal by 12.8 MTM/day. While the relationship between military and civilian airlift assets has evolved over the years, it is a direct result of our national airlift policy. The U.S. has mantained an airlift policy since World War II which is based on the premise that the military will not maintain the airlift capability requirement necessary in wartime. Rather, it will rely on the augmentation of civilian assets during a crisis. (15) The purpose of this policy is to prevent the military from competing with the airlines for peacetime business. Another reason for this policy is the associated cost of airlift. It would be cost prohibitive for the military to procure, operate, and maintain the necessary number of aircraft required for war during a peacetime environment. While this type of policy makes sense in a democratic society, it is not one which is adopted by other countries. In contrast to our airlift policy, the Soviet Union has 600 fixed-wing strategic airlift aircraft which are augmented by Aeroflot's 1,600 medium and long-range transports. (13:12) Unlike U.S. civilian airlines, Aeroflot is a direct supporting arm of the Soviet military. It is readily apparent that the Soviets maintain airlift assets well in excess of their peacetime airlift requirements. The relationship between the civil and military sectors for each country differs significantly and it is important to understand the unique relationship the U.S. maintains between civil and military airlift. As stated earlier, rather than investing in and maintaining the airlift resources required during a crisis, the U.S. policy has been to rely on the commercial aviation sector to augment military airlift when needed. The CRAF program was established in 1951 and resulted in civilian aircraft being identified, by tail number, and allocated for national defense through three stages of increasing need. (12:6) This incremental activation allows the government to call up only those CRAF assets needed. The following, excerpted from MAC Regulation 55-8, details the CRAF stages available. a. Stage I - Commited Expansion. This is airlift from the long-range international segment, committed to CINCMAC. It can be used to perform airlift services when MAC airlift is inadequate. b. Stage II - Defense Airlift Emergency. This is an airlift expansion identified for an airlift emergency not warranting mobilization. c. Stage III - National Emergency. This is the total CRAF capability made available during major military emergencies. While CINCMAC has the authority to implement Stage I of the CRAF, only the Secretary of Defense can implement Stages II and III. The importance of the CRAF to our strategic airlift capability has long been recognized. General Cassidy, while CINCMAC and CINCTRANSCOM, stated during an August 1989 interview that "Fifty percent of MAC's airlift resides in CRAF. It is an integral part of the airlift system. I consider it frontline and we use it everyday. It is a vital portion of the airlift equation...". There are several distinct segments which support national airlift requirements. (10:9) The Long-Range International segment supports MAC's global operations, requiring aircraft such as the B-747 or DC-10 which are capable of extended overwater operations. The Short-Range Domestic segment supports short-haul operations to near offshore locations. The B-727 and B-737 are aircraft which fall into this category. Finally, the Domestic and Alaskan segments support the CONUS supply distribution system. While aircraft in these segments make up the bulk of the CRAF program, there is another program which the DOD encourages the civilian airlines to participate in. The National Defense Features Program (NDFP) is an airlift enhancement program designed to increase our strategic airlift cargo capability. (9) The DOD modifies, at its expense, existing passenger aircraft so they can be quickly converted from passenger to cargo aircraft. The aircraft enhancement adds a side door, strengthens the floor and adds a roller system for cargo operations. The DOD pays for the modifications and reimburses the carrier for time lost on the aircraft and the additional operating expenses incurred by the increased weight of the aircraft. (9) In a National Airlift Policy Statement, signed on June 24, 1987 by President Reagan, it states "The DOD and DOT shall jointly develop policies and programs to increase participation in the CRAF and promote the incorporation of national defense features in commercial aircraft". By 1990, CRAF enhancement modifications will contribute 3.3 MTM/day to our strategic airlift capability. (9) While the CRAF remains critical to our national airlift policy, what are the incentives for participation by the civilian airlines? Participation in the CRAF by the airlines is strictly voluntary. By entering aircraft into the CRAF, airlines are eligible to compete for MAC peacetime annual airlift services contracts. According to HQ MAC/TRC, this amounted to over $300 million of airlift business in 1989 shared by the CRAF carriers. Therefore, while the DOD and civilian airlines have had an excellent longstanding relationship, the airlines are strongly motivated by profit. The U.S. has been content, in the past, to let market forces shape U.S. airline fleets. Unlike the Soviets, the U.S. does not dictate to the civilian airlines how many and what type of aircraft they will maintain in their inventory. Historically, U.S. airlines have operated aircraft which were compatible with our airlift strategy, but not necessarily our airlift operations. The widebody aircraft, such as the B-747 and DC-10, are desirable not only for their long-range capability but also their large load capacity. However, most civil aircraft are not compatible with the material handling equipment (MHE) of the U.S. military. The shipment of military cargo on civilian airlines presents a number of unique problems. Military aircraft, such as the C-141 and C-5, were specifically designed to carry cargo with their high wing design and access to the cargo bay close to the ground. This is in direct contrast to civilian aircraft. Also, military and civilian pallets are different sizes thereby further complicating loading between aircraft types. While these types of problems can be overcome by modifications in MHE, forces within the airline industry are occurring as a result of airline deregulation which are not easily overcome. The airline industry was deregulated in 1979, and has resulted in ten years of dramatic change and struggle for the industry. The purpose of deregulation was to increase competition and stimulate growth in the industry, hopefully, to the benefit of the consumer. Initially, a number of airlines sprang up or expanded to take advantage of this wide-open market. At the same time, operating costs were rising dramatically, because of rising fuel prices, and the nation's economy slowed down which resulted in fewer people traveling by air. (12:6) As a result, many of the smaller airlines, such as Braniff in 1981, quickly went out of business, while a number of airlines struggled through financial difficulties. (6:1b) To adapt to the increased competition and changing market, many airlines adopted strategies which have had a negative impact on the CRAF capability. A number of carriers - Pan American, American, and United - discontinued their all-cargo service, selling their freighter aircraft. In many cases, these aircraft were sold to foreign airlines, thus decrementing the CRAF. Also, the new "hub-and-spoke" concept came into being. Airlines utilize smaller aircraft, such as the B-737, to consolidate aircraft passenger loads before continuing on to final destinations. As a result, the number of long-range aircraft available for the CRAF has decreased during the 1980's. Although orders for larger aircraft have increased recently, other corporate strategies have had a negative impact on the CRAF airlift capability. An increasing number of airline mergers and changes in tax laws have markedly altered aircraft ownership and purchasing decisions of the airlines. Carriers are increasingly finding that short-term leasing of aircraft is a very viable alternative to ownership. Currently, thirty percent of the U.S. commercial fleet is leased, and this figure could increase to 60-70 percent during the 1990's. (11:35) The reasons for this are apparent. It gives much greater flexibility to the airlines to respond to changes in the market. They can decrease or increase their fleet size in a relatively short period of time if conditions warrant. While leasing aircraft is economical for the carriers, it is not advantageous to the CRAF and our nation's strategic airlift capability. A number of the major aircraft leasing agencies are owned by foreign investors, the largest of which is an Irish firm called GPA Group Ltd. (5:42) Since foreign-owned aircraft are excluded from participating in the CRAF, this trend in ownership has had a negative effect on our nations strategic airlift capability. Since the NDFP requires aircraft to remain in the CRAF for a number of years to make the investment worthwhile and provide stability, many of these leased aircraft are not eligible for this program. Airline deregulation and its impact has affected the passenger and cargo segments of the CRAF differently. The passenger airlift requirement established by the DOD can be achieved with the existing CRAF aircraft and any changes in the types of aircraft purchased in the future should not impact that capability. (15) A positive step in that direction was the certification of the B-757 and B-767 for extended overwater flights. These are two of the new two-engine widebody aircraft that the airlines are transitioning to for their future operations. Unfortunately, the cargo airlift shortfall is becoming more critical for many of the reasons already discussed. There are several possible solutions which would increase the current strategic cargo capability. The military solution to this shortfall has been the ongoing development of a new generation of airlift aircraft - the C-17. It is designed to carry a payload of up to 167,000 pounds for 2,400 nautical miles and land on a 3000 foot airfield. (14:16) One of the primary advantages of the C-17 over our current airlift force will be its direct delivery capability. Brigadier General Butchko Jr., C-17 system program director, stated in an August 1989 interview that: The airplane will fly directly to a rear brigade area, about 15 kilometers behind the front lines. Today we would probably take two C-141's and deliver cargo to a main operating base, then use four C-130's to ferry the load near the front. One C-17 would do the job of all six planes. The future benefit of this airlift capability is obvious. With the planned production of 210 C-17's, the increase in capability will be over 27 MTM/day. (15) Unfortunately, with shrinking defense budgets, the C-17 procurement may be reduced or even canceled. (1) The prospect of this places greater emphasis on the role of the CRAF. I have already illustrated that airline interests and defense interests do not necessarily coincide. Since the Airline Deregulation Act of 1979 made no mention of national defense, there was no incentive or control provided for the airlines to make management decisions with regard to DOD strategic airlift concerns. Rather than react to future environmental and economic conditions, the government should take a more proactive role in seeking solutions to this critical issue. One possible civilian solution would be to legislate the joint development of an aircraft for use by both the DOD and civilian airlines. Because of the long lead time required for aircraft development, this proposal would be a long-range solution. Also, airline resistance would likely prevent this type of legislation because many design features required for a military aircraft would probably not be desirabe for civilian use. Another, more feasible solution, would be to enhance all future long-range aircraft before they come off the assembly line. These would be easily convertible from passenger to cargo aircraft. This could be accomplished through legislation or direct financial incentives to the airlines. Attempts to influence the airlines to modify their future aircraft, however, may not be successful. Even though the airlines are reimbursed for the inconvenience and increased operating costs, operational considerations could prevent them from participating in this type of program. The modifications increase the weight of the aircraft and therefore decrease its operational range. In some instances this could result in an additional fuel stop on long overwater flights, thus making the airline less competitive with another airline's non-stop service. In a free-market system, this obstacle can only be overcome by increased financial incentives or direct involvement by the government. Even though these solutions would be expensive, some course of action should be taken to reverse current trends. Prior to airline deregulation, the airlines operated aircraft which supported DOD objectives through participation in the CRAF. Long-range, widebody aircraft, such as the B-747, were increasing in numbers and their large cargo capacity directly contributed to a healthy strategic airlift capability for our nation. The years following deregulation, however, have been extremely turbulent for both the airlines and the CRAF. Airline marketing decisions began to adversely affect the CRAF capability. They invested in smaller aircraft and began leasing instead of owning aircraft. Fewer aircraft in the CRAF has resulted in a decrease in our nation's airlift capability and our ability to support a major contingency. The U.S. must develop policies which reverse this trend. The continued development of a new military airlift aircraft and legislation to increase airline participation in the CRAF are essential to our nation's continued capability to project power and respond to a crisis anywhere in the world. BIBLIOGRAPHY 1. Almond, Peter, "Coveted Helicopter in Trouble," The Washinaton Times, March 20, 1990. 2. Brewer, Stanley H. and James E. Rosenzweig, Military Airlift and Its Relationship to the Commercial Air Cargo Industry, (Seattle: University of Washington, 1967). 3. "Civil Reserve Air Fleet," HQ MAX/XPW Point Paper, December, 1989. 4. "MAC's Airlift Capability," Briefing Paper, Presented by HQ MAC/XP, May 24, 1988. 5. "Market Changes Spur Leasing Trend," Aviation Week and Space Technology, October 20, 1986. 6. "Marketline," USA Today, February 24, 1989. 7. "Military Airlift Command," Defense Transportation Journal, February, 1988. 8. "Monthly Civil Reserve Air Fleet (CRAF) Capability," HQ MAC Form 312, August 1, 1989. 9. "National Defense Features Program (NDFP) for Civil Reserve Air Fleet," HQ MAC/XPW Point Paper, December 29, 1989. 10. "Operations, Civil Reserve Air Fleet (CRAF)," MAC Regulation 55-8, June 28, 1989. 11. Ott, James. "Manufacturers Offer Derivatives, Study SST," Aviation Week and Space Technology, November 21, 1988. 12. Perry, John W. "CRAF Deregulation and Fuel Costs," Defense Transportation Journal, August 1981. 13. Shellner, Capt Earl, "Giving Airlift a Boost," Airman Magazine, August 1989. 14. Shellner, Capt Earl, "Bridging the Airlift Gap," Airman Magazine, August 1989. 15. Wyant, Capt Dale, HQ MAC/XPW, Telephone Conversation, March 13, 1990. 16. White, Joseph L. Transportation and Defense, (Phil.: Univ. of Pennsylvania Press, 1941).
