REDUCING THE DEFICIT: SPENDING AND REVENUE OPTIONS
Congressional Budget Office - March 1997


DEF-14 DEFER MODERNIZATION OF TACTICAL AIRLIFT


Annual Savings							Five-Year
Savings from			(Millions of dollars)		Cumulative
the 1997 Plan		1998	1999	2000	2001	2002	Total

Budget Authority	117	114	119	114	117	581

Outlays			7	35	73	98	107	320

NOTE: Savings relative to the Administration's 1998 plan appear in Appendix A.

The C-130 Hercules is an airlift plane that the Air Force uses to transport cargo and supplies within a theater of operations. The C-130 is much smaller than strategic airlifters like the C-17 or C-5, which can carry an average of at least three times more weight over much longer distances. Nor is it big enough to carry the largest pieces of equipment such as Apache helicopters or Patriot missile batteries.

Nevertheless, the C-130 remains a critical element of the Air Force's tactical airlift fleet. Lockheed Martin has produced more than 2,100 of those aircraft over the past 40 years, and the C-130's airframe has proved highly effective and versatile. Its turboprop engines do not ingest loose dirt and materials from unpaved runways, thus giving the C-130 better access to austere airfields than the turbofan engines used in most strategic airlifters. The turboprop engine also permits more rapid changes in thrust than most turbofans, which contributes to the C-130's ability to take off and land on short runways and descend quickly into airfields that are hard to reach. And since the average unit procurement cost of the J version is about $55 million, the Air Force could purchase at least three C-130Js for the price of one C-17, which some defense analysts would like to use for tactical airlift operations.

To produce the J version, which the Air Force is now buying, Lockheed Martin has taken the basic airframe of the C-130 and upgraded a number of the plane's systems. For example, the C-130J includes an integrated avionics system that eliminates the need for a flight engineer and incorporates a new engine that is more powerful and fuel-efficient. The plane can be modified for in-flight refueling, although the Air Force did not request that capability in the basic C-130Js that it is purchasing.

The Air Force maintains a primary mission aircraft inventory of more than 450 C-130s for tactical airlift. For 1997, the Congress continued a pattern of au-thorizing a larger purchase of C-130s than the Administration requested--five C-130Js were authorized instead of the one aircraft requested. In its 1997 plan, the Administration proposed buying two C-130Js per year throughout the 1998-2002 period to begin replacing the Air Force's E version aircraft in the active-duty forces. Although the C-130Es are the oldest of those aircraft, until recently the Air Force had no plans to begin retiring them until the middle of the next decade. In its budget request for 1998, however, the Administration reduced the number of C-130Js that it proposes to buy to just three planes rather than 10 over the 1998-2002 period.

Identifying a clear numerical requirement for the C-130J, however, is difficult. The Air Force sent only 149 of its large inventory of C-130 aircraft to the conflict in the Persian Gulf. Since they move equipment and supplies from main operating bases closer to the battlefront, a substantial number of C-130s may be needed during two major regional contingencies that occurred at nearly the same time. But predicting the type and number of intratheater airlift movements that would be needed is difficult, and other modes of transportation such as trucks, trains, and watercraft can substitute for some airlift deliveries.

This option would postpone procurement of C-130Js until well into the next decade. Relative to the Administration's 1997 plan, deferring modernization of the C-130 would save about $115 million in budget authority per year, resulting in a total of $320 million in outlay savings over the 1998-2002 period. Since the Administration has cut back purchases of C-130Js in its 1998 plan, savings from this option would be far smaller--$222 million in budget authority and $58 mil-lion in outlays over the five-year period.

As with all cuts in weapons programs, this option would eventually have negative repercussions on the defense industrial base. Following in a long tradition of export sales to more than 60 countries, Lockheed Martin is currently building a stretch model of the C-130J for Britain and Australia and may sell others to replace the C-130s it sold abroad years ago. The manufacturer used its own financial resources to develop the upgrade program, which it hopes to recoup with the first 120 planes it sells. If the U.S. Air Force purchased the J version today, that might also help to secure export sales in the world market.

Critics of this option might also argue that it would leave the Air Force with a less capable fleet of intra-theater airlift planes. In recent years, the Congress appropriated funds to purchase new C-130s for the Air National Guard and Air Force Reserve, but many of the older E version remain in the Air Force's inventory.

Ultimately, an older fleet might prove more expensive to operate and support. Lockheed Martin contends that since the J version uses a smaller crew and will be easier to maintain, the annual cost of operating and supporting a squadron of C-130Js will be significantly lower than that of the C-130s already in the Air Force's inventory.

But although the average E-model plane is about 30 years old, the fleet has flown an average of about 21,000 hours--well below the aircraft's planned 40,000-hour service life. Since the Air Force flies its C-130Es an average of 600 hours per year for active-duty forces and 375 hours to 450 hours per year for those flown by Guard and Reserve crews, it might be able to retain most of those planes until the latter part of the next decade.

An Air Force analysis has suggested that the costs of the ambitious upgrade might be higher than expected or that the program's schedule might be delayed. Furthermore, no one knows whether operation and support costs for the J version will be as low as the producer has advertised. Since Lockheed Martin has been developing the C-130s for its export customers, the Air Force might avoid technical and cost uncertainties associated with the program by waiting to modernize its forces until the development phase is complete.