Express It: Privatization Of Airlift CSC 1992 SUBJECT AREA Strategic Issues EXECUTIVE SUMMARY Title: EXPRESS IT: Privatization of Airlift Author: Major Dale L. DeKinder, United States Air Force Thesis: Would our nation be better served if all airlift capabilities are consolidated in the private sector of industry? Background: Some people perceive that military airlift is nothing more than civil aviation in uniform. Exploring past important airlift occurrences and a previous historic airlift debate over the role and missions of military airlift clears up incorrect perceptions. A comparative analysis of privatization, placing all our nation's airlift capability into private industry, appears to be a viable option. Then a military perspective of this analysis explains the flaws and concerns for the nation. In summation, an answer to the thesis is offered. Recommendation: Military and civilian airlift, as a partnership, provides our nation with a vital tool for supporting national objectives. Based on historic successes such as the Berlin Airlift and Desert Shield/Desert Storm operations, this cooperative capability will continue to be a source of national strength well into the Twenty-First century. EXPRESS IT: Privatization of Airlift Thesis: Would our nation be better served if all airlift capabilites are consolidated in the private sector of industry? I. Airlift as a worldwide mission A. Lend-Lease Act B. Civil carriers contracted C. Post-war military and civilian relationships D. Finletter Commission II. Airlift system crucial debate A. Cost effectiveness versus responsiveness and flexibility B. Respected airlift experts viewpoints C. Partnership and responsibilities initiated III. Comparative analysis for privatization A. Military reductions supported B. Current mobility operations are supportable C. Efficiency realized D. Domino effect of privatization E. DoD safety oversight IV. Flaws of privatization comparative analysis A. Partnership provides strength B. Peculiar requirements of military airlift aircraft C. Domino effect is irrelevant D. Military's responsiveness and flexibility proven E. Desert Shield/ Desert Storm civilian airlift risks F. Privatization political concerns G. Military airlift provides unique services to nation H. Additional airlift requirement is not satisfied EXPRESS IT: Privatization of Airlift Some service members believe that U.S. military airlift is little more than an airline. One USMC Major remarked, "Like the Berlin Airlift, Operation Desert Shield/Desert Storm (DS) was little more than Federal Express or UPS operations." This perception toward such successful airlift operations requires an introspective look at our nation's airlift power in supporting national objectives. More succinctly phrased, would our nation be better served if all airlift capabilities are consolidated in the private sector of industry? To answer this important question requires a glimpse into the previous debate about military and civilian airlift, followed by a comparative analysis of the current advantages and disadvantages of privatization, and an assessment of the results. Only months prior to the U.S. entry into World War II, the Lend-Lease Act passed congress which gave the military a modest mission of flying aircraft across the Atlantic. Eventually, however, the mission became global when President Roosevelt authorized the military to deliver planes "to such other places and in such manner as may be necessary to carry out the Lend-Lease program." (1:12) Although the military airlift establishment had authority to operate a worldwide air transportation system, it lacked the necessary resources and proposed augmenting the military with civilian contracted assets. Atlantic Airways, Ltd., a Pan American Airways subsidiary, agreed to flight-ferry missions to Africa via the South Atlantic. (1:17) This arrangement tapped Pan American's rich experience gained during the previous twelve years of operations in Latin America and inextricably linked military airlift to civilian airlines. Eventually, every major U.S. airline provided some type of contract service worldwide. Although the U.S. Army Air Forces (AAF) had envisioned a fully militarized organization as ideal, the use of contract services continued until the end of the war. The original agreements allowed the government to purchase the airlines' aircraft and equipment and then operate them using civilian pilots and support personnel. These contracts often called for specific services such as scheduled passenger and cargo service between San Francisco and Hawaii by Trans World Airways and Pan American was directed in its contract to make runway improvements and to construct housing at airfields along the routes under its jurisdiction. So, the War Department gradually adopted an "on-call" contract strategy in 1943. This type of contracting bound the airlines to render any service to the government within the general limits of the carrier's capabilities. However, by the end of 1944, a completely militarized domestic system greatly improved airlift's flexibility and responsiveness. For example, it allowed aircraft and personnel to be allocated as needed, enabled the establishment of an integrated communications system, and standardized aircraft types which enhanced training, scheduling, and maintenance operations. Also, General Hap Arnold believed that "the AAF had to provide transport operations run by military personnel, rather than by civilians under contract, on routes that enter combat areas or are likely to become combat areas." (1:19) The military's use of the civil carriers had been one of necessity, but now they became bonded. On the civilian side, post World War II airlines hired large numbers of people, ordered new airplanes and extended their routes--in short, they overextended. By the end of June, 1947, the US carriers were showing an operating loss of $22 million for the year. Their viability to respond and augment the military was questionable. In 1947, President Harry Truman established a temporary Air Policy Commission "to make an objective inquiry into national aviation policies and problems," and to assist in formulating an integrated national aviation policy. (1:64) Known as the Finletter Commission, it extensively interviewed airlift experts. The post-war AAF fortunately had some highly-placed advocates who ensured that military airlift was not completely disbanded. When General Hap Arnold was preparing to pass command of the Army Air Forces to General Carl Spaatz, he asked American Airlines executive and founder, Cyrus R. Smith, for advice on the structure. (1:57) Smith's opinion was valued, based on his civilian and military experience, since he had entered as a colonel and eventually assumed the rank of Major General. He said: "[Military airlift] should be the preeminent air line operators in the world, better than any other military establishment and better than any air line organization. This is possible, on account of lack of civil restrictions [upon the military], availability of equipment and the military necessity of always being ready on a highly skilled basis." (1:59) General Arnold strongly favored a well equipped transcontinental military airway, worldwide missions, and emphasized that civil air transport was an integral part of the United States' air power. Arnold wrote a "Dear Tooey" letter to his successor and urged Spaatz to preserve essential airlift capability for future crises, since it appeared that the nation's forces would be pulling back from overseas locations. Without airlift, Arnold reasoned, the nation could find itself in serious trouble in future confrontations. (1:59) Above all, General Arnold realized that without a rapid deployment capability, the deterring forces of the AAF were hollow. He stressed planning for emergency overseas deployment and told Spaatz, "It would appear reasonable to assume that civil air carriers should provide a large share of the required lift." (1:60) The Finletter Commission revealed that the nation's airlift would be unable to meet wartime needs and stated, "We must increase our commercial fleet." (1:65) The report also disclosed that the military planned to "take over, as they did in World War Il, as much of the civilian lines, domestic and international, as circumstances permit" and suggested the preparation of prior agreements to specify what equipment and services the airlines would furnish. (1:68) The final report, submitted in December, 1947, stated, "As potential military auxiliary, the airlines must be kept strong and healthy." The Finletter Commission added, "They are not in such a condition at the present time." (1:81) Three years after the Finletter commission, a wartime airlift requirement study called the Douglas Commission recommended establishing a three-tiered reserve of four-engine transports in the civilian airlines. The Douglas Commission admitted that the required military modifications, making the aircraft heavier, would increase the operating expense of airlines. The commission suggested that the military should pay the calculated difference. This report in 1951 became the basis for organizing the commercial carriers to augment the military airlift system--the birth of CRAF. When fully mobilized, CRAF participants would be expected to airlift 95% of the passengers and 33% of the cargo required by overseas theatres. While CRAF was never activated until Desert Shield/Desert Storm (DS), the airlines previously had always volunteered aircraft when national crises and military contingency operations required more airlift. As the airlift missions of the Korean operations wound down and the Cold War continued, the military found itself embroiled in a crucial debate with segments of the commercial aviation industry and members of Congress over the role of military air transport in peace and in war. To many critics, the military's airlift system simply appeared more appropriate for private enterprise, especially when military pilots flew the same routes used by the commercial carriers. Intense competition in the uncertain airline market had brought the issue to a climax. Moreover, the timing was favorable for the airline industry, since there was great public interest in reducing the size, as well as the expenditures, of the federal government. Initially, the debates were driven by the desire to achieve sound management practices and were consistently focused on cost-effectiveness. Nevertheless, during these disputes Air Transport Association (ATA) President Stuart Tipton presented a plan for a national airlift program. He advocated a force of military and civil aircraft capable of satisfying war requirements. His plan essentially limited the military to specialized transport for outsize, or exceptionally heavy cargo, unusual security measures, or direct support of tactical combat units. Defense Department rebuttals were centered on flexible, responsive airlift. Military air transport forces had to achieve a high state of trained readiness as well as to maintain peacetime operations to ensure an instant response capability. These forces required the means to expand operations to meet the projected wartime utilization rate. Furthermore, the military airlift system desired to reduce its peacetime airlift costs. This system viewed civil air transport resources as augmentative and planned to use them in peacetime to the maximum practical extent, as long as this policy was consistent with airlift requirements and the efficient cost effective employment of military resources. Air Force Deputy Chief of Staff Curtis Lemay candidly told Congress, "The military has core airlift needs of crucial importance at the outset of emergencies that reliance for anything but a seasoned, properly equipped, disciplined military force is a folly....Where the security of the free world is suddenly threatened, we cannot wait for the acquisition of commercial airlift.", (1:97) Each side's argument on the debate had some validity; civil carriers were motivated by profit making and the military was building an airlift empire. Congressman Holifield advised the House Defense Appropriations subcommittee to make recommendations on the basis of what would best serve national defense. These recommendations laid the groundwork for the military to concentrate on the outsize or unusual missions or "hard-core" requirements, while leaving the passenger and conventional cargo business to the commercial carrier. (1:96) The great national debate, tape for continuing, caused the military and commercial carriers to regard each other as essential for national defense. But, recent world events have the U.S. contemplating the largest recent redistribution of economic, political, and military power. Also the time may have come to determine if privatization, tne transfer of military airlift to private industry, would be best for the nation. Hypothetically, privatization of airlift could work much like the Air Force's contracting of other services and at a cost savings to the nation. Commercial aviation would competitively bid for providing unique airlift capable aircraft as well as current contract airlift for cargo and passenger movement. Perhaps private industry might even purchase existing military aircraft and infrastructure to support this large shift of capability. This hypothetical discussion is possible since the general and specific contracts for airlift were proven during World War II and currently $700 million per year is already spent on commercial augmentation, (2:23) not counting DS. Also, our nation is reducing the military, and the privatization of airlift maybe a viable option. Current reductions call for cuts of about 25%, or about 300,000 personnel, by 1995 and discussions continue on larger future cuts. For the Air Force, these cuts mean a 56,200 person reduction by 1995. Comparatively, the Military Airlift Command's (MAC) personnel strength as of April, 1991, was 70,547 with about 55,000 as direct support to the airlift operation. (11:50) Privatization of MAC, the single manager operating agency for military airlift, would avoid the burgeoning of the unemployment numbers unlike the privatization of any other Air Force line skill. Moreover, the transfer of airlift personnel to the private sector transitions experienced, skilled, and motivated military personnel into job opportunities and, in the process, may generate more jobs. In addition, civil carriers demonstrated the ability to move personnel and equipment for DS. Since no threat to the parity of U.S. military power exists, "our focus now is on regional crises and contingencies," SecDef Cheney told a Senate Panel. (11:52) Also, the Bush administration states sufficient warning exists for future conflicts. Therefore, commercial requisition can be used to fly personnel and equipment to marry-up with more cost effective and bulk outsize movement on sealift. A precedent was established during DS, "The majority of the Army's heavy equipment was moved by sealift," General H. T. Johnson, current C1NCUSTRANSCOM, explained, "as the first ships began to arrive in the [Persian] Gulf, we had to ensure the troops arrived in time by air to complete the marry-up operation....it was essential to our success." (6:13) The combination of airlift and sealift will be vital to future successes, particularly if military material is prepositioned in the few existing tension regions of the world. General Johnson said that he "expects the Pentagon to call for increases in sealift and prepositioning as well as airlift." (2: 24) Any urgently needed outsize and oversize cargo can be airlifted on C-5's and C-141's that have been auctioned to civil carriers. Integral to privatization would be competition between the carriers that would provide the lowest cost modern aircraft to meet the specific requirements of the military. McDonnell Douglas is planning the commercial sale of the C-17. (10:23) The military's versatile C-130, commercially the L-100, is in use today and Lockheed is currently modernizing its L-100 version. In addition, the French are possibly participating in the European Future Large Airlifter (FLA) program or procurement of several McDonnell Douglas C-17s. (5:57) In any event, commercial special type airlift aircraft are readily available. In addition, Public Law 97-86 authorizes the CRAF Enhancement Program (CEP), which includes subsidies for "modifications including reinforced floors, side cargo doors, and rollers and rails to accommodate palletized military cargo" in their aircraft. (7:24) CEP paves the way for privatization of airlift to work, especially when coupled to crew ratio. Civilian carriers already maintain a crew ratio of 7:1 or greater while currently the MAC ratio is around 3:1--a less efficient wartime surge profile. Carriers awarded the contracts could increase their CEP aircraft and crew ratio, if necessary. This situation would reduce the number of pilots in the Air Force, ease a current personnel reduction problem and address pilot retention difficulties. Since the Air Force would require fewer pilots, the undergraduate pilot training costs would be greatly reduced and the associated costs at C-5, C-141, and C-130 training schools would be eliminated. A domino effect could occur from privatization. Privatization dominoes into the possible acquisition or closing of Altus and Little Rock AFBs, since each base's primary mission is C-5, C-141, (soon the C-17), and the C-13O training schools, respectively. Plus, military bases such as Travis, McChord, McGuire, and Dover AFBs, used for the home station of airlift aircraft could be targeted for closure. Dual commercial and military capable airports, such as Charleston, could serve as outsize cargo aerial ports of debarkation. Also, the C-17 will bed-down first at Charleston AFB, so private industry could acquire those C-17 facilities. Civilian acquisition of all these capabilities and facilities would economically strengthen a sagging civil aviation industry, boost the U.S. economy in general, and reduce military presence. Massive humanitarian contract airlift for overseas operations could produce revenue and existing overseas military airlift infrastructure could be expanded- even into the former Soviet Union, for revenue. Economically, MAC has grown to, be a $5.2 billion per year operation, possessing $33 billion worth of equipment working at 287 locations in twenty-five nations worldwide. (11:54) In many countries, such as Korea, where the U.S. desires a less noticeable military presence, this change to civil carriers fulfills this desire. Also, most carriers that currently accept contracts to large trading countries like Korea justify those missions by delivering the contracted military cargo and then returning with higher revenue-producing goods. Civil carriers could maximize their cost efficiency more with control of all the assets. Additionally, the U.S. benefits from support for national objectives with safe airlift. For safety oversight and efficient civil compliance, the DoD already has the Air Carrier Survey and Analysis Directorate to detect safe and sound business practices of all contracted carriers, no matter how large or small. This office, working in close coordination with the Federal Aviation Administration (FAA), identifies any contracted air carrier using poor safety practices or entering weak financial operating solvency. Such identification can result in a recommendation for suspension of the air carrier's military contracted operations. Each such recommendation is presented to the military Civil Air Review Board (CARB). The CARB is an executive level review board headed by a MAC Major General. Those civil carriers placed on suspension by this process usually receive similar scrutiny from the FAA, until released from the suspension. Nevertheless, the present time is unique for the nation to formulate and redirect national policy. Military threats seem to be low, economic threats seem to be great, and citizens are caught somewhere between. With the current competitiveness between civil carriers and efficiency in operations due to deregulation, the time is ripe for the privatization of airlift. (8:71) While almost any type of contract can be negotiated, militarily unusual environments, locations, and requirements make the cost effectiveness of contracting doubtful. Many of MAC's 278 operating locations are probably not on revenue- producing routes that interest civilian carriers. Those routes that are in use by commercial carriers are usually contracted by the military. Commercial air carriers provide a necessary augmentation buffer to active core airlift aircraft that efficiently and routinely use the Air Reserves and Air National Guard in the worldwide infrastructure. This military mobility system of airlift works well with the civilian air carriers' partnership and provides about $700 million worth of contract incentive. The airlift system also saves an equal amount, if not more, each year using the military portion. Since the partnership is strong, the competition ofmilitary and civilian airlift is a source of national strength. Airlift leaders strive to efficiently operate this system while meeting customer requirements in support of national objectives. Current world threats have been reduced, but there remains much and high volatility. This situation makes quick response to anywhere, anytime, and likely transporting outsize loads, a stark possibility. These facts make contracts (particularly long-term) for commercial augmentation difficult, if not impractical, for a profit-motivated civilian carrier. Also, there are no known civilian companies wanting to purchase the military's airlift infrastructure or aircraft to transport specialized cargo requiring special military material handling equipment (MHE). National defense features for CEP aircraft require extensive aircraft modifications and make those aircraft less economical to operate. Military organic aircraft, unlike civilian aircraft, have little civilian application since they have peculiar military requirements: straight-in loading for combat throughput, self sufficiency for austere operations, box-like shapes for outsize and oversize cargo, stressing and corrosion resilience for military loads, in-flight refueling capabilities, and strengthened weight bearing landing gear and wing structure for stressful military flying. To complement this type operation requires unique, quickly deployed MHE for military operations in any environment. Commercial wide-body carriers require wide-body loaders that must be moved on outsize-capable military aircraft while organic military aircraft do not require them at all. Furthermore, commercial carriers are limited on hazardous cargo they can carry. In regards to the domino effect on military facilities, a close look at the total economic impact (TEI) and secondary jobs created (SJC) at those locations negates the idea: Altus, Little Rock, Travis, McChord, McGuire, and Dover create $144.7; $466.2; $946.8; $547.3; $1,095.7; $513.9 million TEI and 860; 3,481; 8,190; 4,291; 9,474; and 3,994 SJC, respectively. This totals $3,714.6 million and 30,290 jobs worth of public concern in this matter. (9:73) Therefore, a more important concern is national defense responsiveness rather than cost differentials. During DS, military airlift responsiveness was demonstrated by "supply-pull" operations due to the dramatic daily, often hourly, change in requested airlift by USCENTC0M-- especially in the first few weeks. During DS, to satisfy customer requirements, an express airlift operation for the most critical necessities was developed for daily guaranteed delivery. C-141's flying from Charleston to Dahran via a premium airlift system were used for 17-hour guaranteed delivery, as stated by General H.T. Johnson speaking to this years MCC&SC. The commercial carriers that could have operated this mission work on a Monday through Friday basis. Also, military airlift is the reason Patriot missile systems arrived in Israel in just 11 hours to perform counter-SCUD operations at a critical time. This further demonstrates the responsiveness of military aircraft in the operational flow, unlike commercial carriers. Commercial carriers must rely on volunteer pilots to fly into combat zones, as they did for Vietnam and in DS. But, regardless of the profit, commercial aviation might not risk diverting enroute aircraft or sitting alert for take-off to some obscure, possibly hostile location. Another risk for contract carriers are the multi-million dollar aircraft without indemnification when flying into war zones. "According to the ATA, the principal air-carrier lesson learned from the Persian Gulf War was the need to strengthen war-risk insurance." (7:28) If airlines purchase coverage, the significant cost would negate the profit. Also, with the fragmentation of world threats and the higher probability of low intensity conflict, some operations may become unpopular as compared to DS. When contracted missions were scrutinized by the public, nonperformance on contracts would be likely. Politically, many nations find hope and resolve in U.S. commitments by seeing U.S. military aircraft on their ramps with the American flag on display. But, in those nations that are adversaries, this presence may invite terrorist acts against civilian carriers or civilian missions, not knowing or caring if the target supports a military contracted mission. Military aircraft are also in the process of acquiring self- defense capabilities for military operations that further complicate a commercial airlift operation. The military airlift system provides many unique services: tactical and special assignment airlift, aeromedical evacuation by converting an inbound cargo loaded compartment to return as an aeromedical configured aircraft, some special operations, movement of all nuclear assets for the U.S., smaller than C-130 airlift by C-27's in South America and Central America, rescue missions responding in hours to downed airmen or even life- saving missions for civilians in the middle of the Pacific ocean, flying into hostilities, and transporting injured civilians and cargo on humanitarian missions. These are military capabilities to consider before inistituting privatization. In analyzing the privatization question, historical arguments pro and con can be asserted. But, an important detractor is the unhealthy status of U.S. sealift as compared to the strong civilian and military partnership of airlift. General Duane Cassidy, previous CINCUSTRANSCOM said, "At this point, defining the exact number of ships sufficient to do the job is not as critical as recognizing the continuing downward trend in ships available." He told congress that the state of the maritime industry is "the most disturbing situation I have encountered since assuming command of USTRANSCOM." (3:41) The current CINCUSTRANSCOM, General Johnson, lauded sealift but mentioned deficiencies in the sealift capability for DS. As an example, the operators' ages and lack of crews and stevedores signified a problem. For instance, one seaman in DS service was 82 years-old and the usual age was in the late 50-to-60- year-old range. Finally, transfer of airlift to the private sector does not satisfy our nation's need for additional airlift; it only transfers the capability and may eventually erode what the historical partnership has built. The April 1981 Congressionally Mandated Mobility Study cited a large airlift shortfall. Our military was directed to modernize its fleet and build to a fiscally constrained 66 million-ton-mile per day capability. To date, even with the gradual introduction of 120 modernizing C-17's, the best level of capability expected is 54 -million-ton-miles per day. Every congressional sponsored mobility study, including the most recent one authorized by the National Defense Authorization Act, released 23 Jan 92, recommends increasing our nation's responsive lift assets. Furthermore, it asserts that the need for airlift will increase as the number of prepositioned ships increases in order to match and round out the units. (4:32) The airlift lesson learned during World War II, and confirmed during Korean and DS operations was that the nation could not maintain enough airlift capability in its military to respond to wartime requirements. This shortcoming provided the catalyst for and establishment of, the Civil Reserve Air Fleet (CRAF), a partnership between military and civilian airlift. Presently, the military and civilian partnership provides a valuable national power--airlift. Each partner, regardless of the perception, adds an important dimension to U.S. airlift capability. While the previous hypothetical discussion may appear attractive initially, it is blatantly flawed. Therefore, a person committed to the best interest of our nation should answer the privatization question one way: "No, it is not in our nation's best interest to place all airlift in private industry." Throughout the Twenty-First century, military airlift must continue to provide maximum flexibility and responsiveness with a civilian backup. BIBLIOGRAPHY 1. Anything, Anywhere, Anytime. An Illustrated History of the Military Airlift Command, 1941-1991. May 1991. 2. Bond, David P. "MAC Faces widening Gap in Peacetime, Crisis Needs. "Aviation Week & Space Technology, September 20, 91 23-25. 3. Correll, John T. "The Power Projection Shortfall." Air Force Magazine. August 88 38-42 4. D'Agostino, Janet. "DoD Study Finds C-17 Essential In Post-Cold War Era." Air Force Times. March 23, 92 32. 5. Inset "French Airlifters Support Gulf War." Interavia Aerospace Review. March 91 57. 6. Johnson, Mark E. "Civilian Airlines: Partners In Defense Airlift." Airman. June 91 13-16. 7. Logistics Management Institute. Report PLO23R2. Review of Strategic Mobility Programs. Volume 2: Civil Reserve Air Fleet. May 1991. 8. Mackenzie, Richard. "More Stormy Weather for the Airlines." Air Force Magazine. March 92 70-73. 9. Military Airlift Command, Command Data Book. April 91 73. 10. Oliveri, Frank. "Aerospace World." Air Force Magazine. January 92 17-23. 11. Powell, Stewart M. "They Deliver." Air Force Magazine. August 91 50-55.
