Moving U.S. Forces: Options for Strategic Mobility Section 10 of 12
February 1997

Appendix B

Participation in the
Civil Reserve Air Fleet

Of the United States had to fight one or two major regional conflicts today, the Civil Reserve Air Fleet (CRAF) would provide as much as 40 percent of the U.S. military's capacity to airlift cargo. Commercial air carriers would also transport most military personnel to those conflicts. Participants in CRAF agree to make a certain number of their planes available to the Department of Defense (DoD) in the event of a crisis in return for preference in bidding on the government's air transportation business. Keeping U.S. carriers involved in CRAF is vitally important because otherwise DoD would need to purchase additional aircraft itself and incur the cost of operating them during peacetime.

CRAF was activated for the first time in the Persian Gulf War. Although considered a success, that activation was not without difficulties.(1) Government-sponsored liability insurance presented one problem: some air carriers feared that gaps in DoD's War Risk Insurance would leave them without coverage for their planes and aircrews. There was also some question about whether, in the event of a wartime accident, DoD's indemnification program would cover CRAF participants for the value of the lost use of their planes. Some carriers feared potential delays in collecting claims against the federal government. Other problems included complications in transporting hazardous materials, delays associated with too few elevator loaders and other equipment to handle cargo, incompatible civil and military communication systems, and lack of chemical-protection gear for civilian aircrews.

Collectively, those issues caused dissatisfaction among some carriers, who withdrew from the program temporarily. CRAF participation has fluctuated since then, but DoD is taking measures to address concerns of the air carriers and provide stronger incentives for them to commit planes to the program.


Incentives to Participate in CRAF

How do commercial air carriers decide how many of their planes to enroll in CRAF? The answer depends to a large degree on the amount of peacetime business that a carrier might win from the federal government in exchange for participating. But in recent years, DoD has had to look for other incentives as well.

Since the end of the Cold War, the amount of business DoD has offered to CRAF participants has been considerable but has fluctuated over time. Contracts for the Air Force's cargo and passenger business totaled $466 million in 1989 and $659 million in 1990. That value shot up to nearly $1.9 billion in 1991 because of contracts associated with the Gulf War deployment (see Table B-1). Over the next five years, Air Force contracts averaged nearly $620 million annually.

In recent years, the Air Force has chosen to expand peacetime contracts when its airlift needs increased rather than activating a CRAF stage. (See Box 3 on page 15 for details of the various stages of CRAF.) The larger amount of peacetime contracts was perhaps most apparent in 1994, when demand for airlift services was high because of U.S. operations in Somalia, Rwanda, the Persian Gulf, and elsewhere. At the same time, many of the Air Force's C-141s were unavailable because they were undergoing repairs.

In an attempt to broaden the number of carriers in the program, the Air Force has begun working with the General Services Administration (GSA) to tie additional government business to CRAF. In 1995, GSA began requiring eligible carriers to participate in the CRAF program in order to obtain passenger business associated with its City Pairs program. Under City Pairs, GSA awards annual contracts for air passenger transportation services between specific points of origin and destination. The program has an estimated annual value of $1.0 billion to $1.2 billion, substantially more than DoD's peacetime business. Although City Pairs has boosted participation in CRAF, some carriers have complained that the requirement is coercive and have protested various provisions of the program from year to year.

Some smaller airlines participate in City Pairs, but larger scheduled passenger carriers are the main beneficiaries of GSA's business. In contrast, smaller carriers, who tend to run charter operations, rely more heavily on peacetime contracts with the Air Force. Small carriers are also more likely to benefit financially when CRAF is activated, whereas larger scheduled carriers are apt to be more concerned about losing market share to foreign competitors and rivals who are not in the program. Since small carriers often do not operate scheduled routes, CRAF activation represents additional business for them and is not as disruptive as it may be to larger scheduled carriers.

DoD has taken other measures as well to appeal to a larger number of carriers. For example, under certain circumstances, commercial companies can use military airfields. By obtaining a CRAF Alternate Permit, carriers can specify military airfields as alternate landing sites (the locations where they would land in the event of an emergency). Since many of those alternative airfields are closer than the civil ones that carriers would otherwise designate, their planes can carry less fuel and thus incur lower operating costs.

An incentive targeted toward cargo carriers would allow those who participate in CRAF to use military



 
Table B-1.
Value of Air Force Passenger and Cargo Contracts Associated with the Civil Reserve Air Fleet 
(In millions of dollars)
1991 a 1992 1993 1994 1995 1996 1997 b
Passenger 1,090.3 375.3 395.5 386.8 300.7 271.7 196.5
Cargo 807.2 158.5 138.8 306.2 295.7 462.5 246.2
Total 1,897.5 533.8 534.3 693.0 596.4 734.2 442.7
SOURCE: U.S. Air Force, Air Mobility Command.
a. Includes contracts associated with Operations Desert Shield and Desert Storm.
b. Actual as of January 30, 1997.


bases in the continental United States on a rental basis. Although cargo carriers have expressed some interest, industry officials argue that DoD has been slow to implement the program.



Amount of Participation in CRAF

The Persian Gulf War was the only time that CRAF has been officially activated, but civil carriers who participate in the program have provided airlift services in support of many other military operations (see Table B-2). During the Vietnam War, for example, CRAF carriers transported more than 11 million passengers and 1.3 million tons of cargo over a 10-year period. During the Persian Gulf War, CRAF planes carried more than 400,000 personnel and 171,000 tons of cargo on more than 3,600 missions. More recently, civil carriers have supported numerous smaller operations on a charter basis.



 
Table B-2.
Participation of Commercial Air Carriers in Military Contingencies, 1964-1996
Year Flights by Commercial Carriers
Operation Number of Cargo Delivered Passengers
Location/Operation Began Flights (In tons) Delivered
Vietnam War a 1,964 n.a. 1,313,776 11,436,165
Panama (Just Cause) 1,989 12 346 2,929
Persian Gulf (Desert Shield/Desert Storm) 1,990 3,604 171,170 405,448
Philippines (Fiery Vigil) 1,991 68 2,412 16,882
Northern Iraq (Provide Comfort)b 1,991 172 2,898 18,294
Former Soviet Union (Provide Hope) b 1,992 82 4,895 100
Bosnia (Provide Promise) 1,992 36 145 2,345
Somalia (Restore Hope) 1,992 234 463 52,136
Rwanda (Support Hope) 1,994 65 2,138 548
Cuba (Sea Signal V) 1,994 214 848 29,524
Panama (Panama Haven/South Haven) 1,994 24 n.a. 4,647
Haiti (Phoenix Shark) 1,994 141 1,823 33,546
Cuba (Safe Haven/Safe Passage) 1,994 27 0 4,050
Persian Gulf (Vigilant Warrior) 1,994 119 1,389 12,010
Bosnia (Joint Endeavor) c 1,995 534 7,332 41,333
SOURCE: Congressional Budget Office based on information from the U.S. Air Force, Air Mobility Command.
NOTE: n.a. = not available.
a. Figures for cargo and passenger transport during the Vietnam War are approximate.
b. As of August 1995.
c. As of January 1997.


Passenger Air Carriers

Immediately after the Gulf War, CRAF's passenger airlift capacity declined only modestly because most carriers had signed a nearly three-year contract with the Air Force in 1990 (see Figure B-1). After that contract ran out at the end of 1992, the Air Force was able to secure only a nine-month contract. However, that agreement resulted in nearly a 50 percent increase in Stage I capability, allowing it to provide the same amount of airlift as was used in the Persian Gulf War. Thereafter, the Air Force and CRAF participants signed contracts annually on a fiscal year basis.

Today, all of the major passenger airlines and several smaller regional carriers participate in CRAF (or


Figure B-1.
Participation of Long-Range International Passenger Aircraft in the Civil Reserve Air Fleet, Fiscal Years 1990-1997

SOURCE: Congressional Budget Office based on data from the U.S. Air Force, Air Mobility Command.

NOTE: Passenger planes owned by civil carriers who participate in the Civil Reserve Air Fleet would be called into service in three stages. Defense Department officials would call up the planes enrolled in Stage I first, whereas those in Stage III would be activated only in the event of a national emergency.


receive certificates of technical ineligibility). But that was not the case in the past few years. At the start of fiscal year 1994, United Airlines decided to stop participating in CRAF, which removed 77 out of a total of 253 wide-body passenger planes from Stage III of the program. The following year, after CRAF was tied to the City Pairs program, United recommitted 46 aircraft to Stage III. American Airlines, which also withdrew in 1994, recommitted 39 aircraft in 1995. In fiscal year 1997, American sharply expanded the number of planes included in Stage III to 86 and doubled the number in Stage II.

Although major airlines such as United, Northwest, and American provide most of the wide-body passenger aircraft now committed to Stages II and III of CRAF, smaller carriers provide most of the wide-body passenger planes for Stage I. For example, American Trans Air and Tower Air, both charter and scheduled passenger air carriers, each have seven wide-body passenger planes committed to Stage I. American Airlines is the only major carrier with as many planes enrolled in Stage I.

Cargo Air Carriers

As with passenger airlift, CRAF's long-range cargo capacity remained at relatively constant levels during the contract period from January 1990 through December 1992 (see Figure B-2). In fiscal year 1993, several carriers committed more planes to the program, increasing capacity in all three stages. Federal Express accounted for much of the increase in Stage II by committing an additional 12 cargo aircraft to the program. That trend continued in 1994 as well.

At the start of fiscal year 1997, commitments by Federal Express, one of the nation's largest cargo carriers, represented around 45 percent of the total number of long-range, wide-body cargo aircraft committed to Stage III. By contrast, United Parcel Service (UPS), another leader in the cargo industry, commits just six of its long-range, wide-body fleet to the program. The main reason UPS cites for its more limited participation is that it specializes in delivering small packages rather than heavy or bulk cargo.

Industry officials, particularly those of cargo carriers, have voiced concern about the allocation of the Air


Figure B-2.
Participation of Long-Range International Cargo Aircraft in the Civil Reserve Air Fleet, Fiscal Years 1990-1997

SOURCE: Congressional Budget Office based on data from the U.S. Air Force, Air Mobility Command.

NOTE: Cargo planes owned by civil carriers who participate in the Civil Reserve Air Fleet would be called into service in three stages. Defense Department officials would call up the planes enrolled in Stage I first, whereas those in Stage III would be activated only in the event of a national emergency.


Force's peacetime business. In the past, for example, one carrier has complained of a mismatch between its level of commitment to the CRAF program and the share of total peacetime business it receives. Other carriers are also concerned about losing market share during a CRAF activation. That could occur if a carrier's competitors had a lower CRAF commitment or, in the case of international and some domestic carriers, no commitment at all.

In an effort to encourage broader participation among cargo carriers, DoD has expanded the amount of peacetime business associated with CRAF. Under the City Pairs program, GSA now requires a minimum level of participation in CRAF in order for carriers to win delivery contracts for express small packages, third-business-day packages, and express cargo. As of 1996, companies must take part in CRAF to bid on those contracts, which total about $100 million annually. As a condition of award, contractors must increase their commitment to CRAF by at least 15 percent of their long-range international aircraft capacity. By tying new federal business to CRAF, the Air Force hopes to increase the incentives for carriers to commit larger portions of their fleet to the program.



The Effect of DoD's Aircraft Purchases on CRAF Participation

A few CRAF participants became involved during the Administration's 1995 review of how many C-17s to buy for the Air Force. One trade association comprising mainly smaller cargo and passenger air carriers argued that if DoD purchased C-33s, the amount of business available to CRAF participants during peacetime could decline. Their line of reasoning was that the Air Force could easily modify C-33s to include passenger seats, which would make them similar to the commercial planes those carriers operate.

Typically, the military would primarily use C-33s for training during peacetime. But with modifications, they could also transport loads that are now delivered by carriers on contract to DoD. If CRAF carriers anticipated less peacetime business from the military, they might reduce the number of planes in their inventory and ultimately lower participation in CRAF.

During the fall of 1995, then Commander in Chief of the U.S. Transportation Command, Gen. Robert Rutherford, noted that if the Air Force purchased C-33s, it would fly each plane only around 600 hours per year--too little to significantly affect DoD's demand for commercial air transportation during peacetime.(2) Moreover, some defense officials argued that since the C-141 fleet will be replaced by a smaller number of planes (with or without C-33s), the Air Force's demand for commercial airlift contracts may even grow over time. Nevertheless, DoD officials cited concern among civil air carriers as one issue that affected their decision to buy C-17s rather than C-33s.

Since the Civil Reserve Air Fleet allows DoD to avoid the cost of buying planes, defense officials asked the Air Force to study whether it might be able to expand the program. The analysis examined whether DoD can provide incentives for commercial carriers to purchase Boeing 747-400 freighters--the most efficient civil-style plane for hauling military cargo during a major conflict. Based on market projections over the next decade, the Air Force found that no carriers plan to buy 747-400s, typically because the plane's extensive range and payload capabilities do not fit into the route system and business strategy of those firms. Eight CRAF participants expressed interest in an enhancement program if DoD covered the added costs of buying 747-400s that are modified to carry military cargo. Since modified 747-400 freighters are heavier than their civil counterpart, commercial carriers could also seek compensation for higher operating costs because the military planes would be less fuel-efficient.

In the late 1980s, the Air Force modified 24 commercial planes that belonged to CRAF carriers at a cost of more than $600 million so those aircraft could accommodate military equipment. DoD also provided operating subsidies to pay for the additional fuel those planes required. But the experience was not considered a success. Pan Am, the carrier with the largest number of planes modified under the program, went bankrupt in 1991, and ultimately the Air Force lost access to many of those aircraft. For that reason, some analysts believe that a similar enhancement program today would be risky. And in the fall of 1995, the Air Force Chief of Staff, Gen. Ronald Fogleman, told reporters that the service would not reenter the business of providing operating subsidies to U.S. air carriers.(3)


1. Mary Chenoweth, The Civil Reserve Air Fleet and Operation Desert Shield/Desert Storm: Issues for the Future, MR-298-AF (Santa Monica, Calif.: RAND, 1993).

2. "NDAA Buy Wouldn't Affect CRAF Use, Rutherford Says," Aerospace Daily, September 15, 1995, p. 411B.

3. "USAF Chief Sees Advantages to Low C-17 Buy Rate," Aerospace Daily, November 30, 1995, p. 334.


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