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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

September 2009: 

Military Airlift: 

DOD Should Take Steps to Strengthen Management of the Civil Reserve Air 
Fleet Program: 

GAO-09-625: 

GAO Highlights: 

Highlights of GAO-09-625, a report to congressional committees. 

Why GAO Did This Study: 

To move passengers and cargo, the Department of Defense (DOD) must 
supplement its military aircraft with cargo and passenger aircraft from 
commercial carriers participating in the Civil Reserve Air Fleet (CRAF) 
program. Carriers participating in CRAF commit their aircraft to DOD to 
support a range of military operations. In the Fiscal Year 2008 
National Defense Authorization Act, Congress required DOD to sponsor an 
assessment of CRAF and required GAO to review that assessment. GAO 
briefed congressional staff on its observations. As discussed with the 
staff, GAO further analyzed some of the issues identified in its 
review. This report assesses (1) the extent to which DOD has assessed 
potential risks to the CRAF program, and (2) the extent to which DODís 
management of CRAF supports program objectives. 

For this engagement, GAO reviewed DOD-sponsored CRAF study reports and 
interviewed study leadership. GAO also interviewed over 20 of 35 CRAF 
participating carriers that responded to a request for a meeting, DOD 
officials, and industry officials. 

What GAO Found: 

DOD needs to establish the level of risk associated with declining 
charter passenger capabilities and DODís increased need to move very 
large cargo. Although DOD depends on CRAF charter passenger aircraft to 
move more than 90 percent of its peacetime needs, there has been nearly 
a 55 percent decline in this CRAF capacity since 2003. In addition, 
since 2003, DODís large cargo movement needs have increased with the 
acquisition of over 15,000 Mine Resistant Ambush Protected vehicles. 
Since there are no U.S. commercial cargo aircraft capable of moving 
cargo this size into Iraq and Afghanistan, DOD is using foreign-owned 
carriers to assist its military aircraft in such movements. However, 
there are scenarios where foreign-owned carriers may be unwilling or 
not allowed to fly. As a result, the lack of a commercial U.S. outsized 
cargo capability might restrict DODís ability to meet its large cargo 
airlift needs in a timely manner. DOD has not quantified the risks 
these challenges pose to the CRAF programís ability to meet DODís 
future transportation requirements because DOD has not completed risk 
assessments as described in the 2008 National Defense Strategy. Until 
risk assessments are conducted, DOD will not be sufficiently informed 
about potential risks in the CRAF charter passenger segment and in very 
large cargo airlift capability that could prevent DOD from managing its 
future airlift needs and the CRAF program effectively. 

DODís management of CRAF has not provided CRAF participants with a 
clear understanding, which could strengthen the programís ability to 
support its objectives, in some critical areas of the program. Although 
internal controls such as policies can help meet program objectives, 
CRAF business partners do not have a clear understanding of DODís 
expectations concerning four CRAF objectivesóan enhanced mobilization 
base, modernization, increased air carrier participation, and 
communicationóbecause DOD has not developed policies in these four 
areas. First, DOD has not developed policies regarding the enforcement 
of its business rules, such as the 60/40 rule that states that 
participants should fly only 40 percent of their total business for 
DOD. DOD does not consistently enforce this rule and this may decrease 
the mobilization base since it is difficult for carriers to size their 
fleets to meet DOD demands. Second, DOD has not developed policies or 
economic incentives that promote CRAF modernization and this may hinder 
CRAF carriers from modernizing their aircraft. Third, DOD has not 
developed policies regarding oversight of the distribution of its 
peacetime airlift business, the primary incentive to carriers for 
participating in CRAF. DOD has no involvement in this distribution, and 
the perceptions of some carriers that this process is unfair could 
ultimately reduce carrier participation in CRAF. Fourth, DOD has not 
developed policy concerning communication with the carriers on CRAF 
studies or proposed changes to the CRAF program. DOD has not always 
communicated with carriers prior to implementing changes or completing 
studies. Until DOD develops policies that provide carriers with a clear 
understanding of CRAF, DOD cannot provide reasonable assurance that 
CRAF will meet its primary objective of providing critical airlift. 

What GAO Recommends: 

GAO is recommending that DOD (1) conduct risk assessments on two CRAF 
passenger and cargo issues and (2) develop policies to strengthen its 
management of the CRAF program. In comments on a draft of this report, 
DOD disagreed with the first recommendation and agreed with the second. 

View [hyperlink, http://www.gao.gov/products/GAO-09-625] or key 
components. For more information, contact William Solis, (202) 512-
8365, solisw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

DOD Has Not Assessed the Risks That Changes in Charter Passenger 
Capabilities and DOD's Outsized Cargo Needs Might Have on the CRAF 
Program: 

DOD Has Not Issued Policies That Would Strengthen Management of the 
CRAF Program: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Recent Department of Defense Studies: 

Appendix II: Comments from the Department of Defense: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Figure: 

Figure 1: Size of CRAF Charter Passenger Fleet and DOD Peacetime 
Business (Fiscal Years 2001 through 2008): 

Abbreviations: 

AMC: Air Mobility Command: 

CRAF: Civil Reserve Air Fleet: 

DOD: Department of Defense: 

IDA: Institute for Defense Analyses: 

MRAP: Mine Resistant Ambush Protected: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

September 30, 2009: 

Congressional Committees: 

Since September 11, 2001, the U.S. Transportation Command's Air 
Mobility Command (AMC) has successfully transported more than 6.8 
million passengers and nearly 3 million tons of cargo by air. To move 
these passengers and cargo, the Department of Defense (DOD) must 
supplement its military aircraft with aircraft from commercial carriers 
participating in the Civil Reserve Air Fleet (CRAF) program. Commercial 
air carriers participating in CRAF contractually commit their aircraft 
to DOD to be called upon, or activated, for use to support a range of 
military operations. At the most demanding end of this range, DOD plans 
for CRAF to move more than 90 percent of its passengers and almost 40 
percent of its cargo requirements. As an incentive to encourage 
participation in CRAF, DOD contracts exclusively with CRAF participants 
to fly its daily peacetime passenger and cargo airlift business. 
Currently, this daily peacetime business includes airlift for 
operations in Iraq and Afghanistan, which is being handled without an 
activation of CRAF. CRAF has been activated twice--once during 
Operation Desert Shield/Storm and at the beginning of Operation Iraqi 
Freedom. The Office of the Under Secretary of Defense for Acquisition, 
Technology and Logistics (Transportation Policy) is responsible for 
establishing policies for the CRAF program. The U.S. Transportation 
Command is responsible for the daily management of the program and for 
making recommendations concerning the capability, capacity and other 
requirements for mobility assets needed to execute its mission. 

The National Airlift Policy confirms the importance and the necessity 
of CRAF by establishing that national objectives cannot be met without 
using commercial air carriers.[Footnote 1] DOD has little capability to 
meet its passenger airlift requirements in its military fleet; 
therefore, DOD relies almost entirely on CRAF commercial carriers to 
fulfill its requirements. Charter passenger carriers, operating on the 
customers' schedules, provide nearly 90 percent of all daily, peacetime 
passenger airlift for DOD, while the scheduled carriers, operating on 
set routes and timetables, provide the remainder. In contrast, DOD's 
military fleet has the capability to carry bulk, outsized, and 
oversized cargo;[Footnote 2] however, DOD relies on commercial cargo 
carriers to move bulk cargo in both peacetime and times of crisis or 
war. Although CRAF cargo carriers can fly oversized cargo when needed, 
they do not have the capability to move outsized cargo. CRAF carriers 
are not capable of loading or moving strategic outsized equipment, such 
as Mine Resistant Ambush Protected (MRAP) vehicles, tanks, and 
helicopters. 

Multiple DOD-sponsored studies have identified risks to the CRAF 
program, with some risks due to a changing business environment and 
challenges within the management of the CRAF program.[Footnote 3] For 
example, as required by the Fiscal Year 2008 National Defense 
Authorization Act, DOD sponsored an independent assessment of the 
viability of the CRAF program. DOD submitted this assessment to 
Congress in October 2008, and as required by that act, we subsequently 
conducted a review of that assessment and briefed congressional staff 
on our observations about the assessment and some issues we identified 
about the CRAF program in general. As discussed with congressional 
staff, we further analyzed some of the issues identified in that 
review. This report assesses (1) the extent to which DOD has assessed 
potential risks to the CRAF program and (2) the extent to which DOD's 
management of CRAF supports program objectives. 

To assess the extent to which DOD has assessed potential risks to the 
CRAF program and the extent to which DOD's management of CRAF supports 
program objectives, we reviewed several DOD-sponsored CRAF reports. We 
interviewed study leadership from the DOD-sponsored studies to obtain 
their perspectives and identify relevant issues relating to the CRAF 
program from their respective studies. We also conducted structured 
interviews with over 20 CRAF air carriers of the 35 participating in 
the program as of October 2008 that responded to our request for a 
meeting and interviewed airline industry officials and DOD officials at 
the Office of Secretary of Defense, U.S. Transportation Command, and 
Air Force Air Mobility Command to discuss the CRAF program. We analyzed 
this information in the context of DOD's National Airlift Policy, 2008 
National Defense Strategy, and airlift requirements to determine how 
issues we identified might affect the CRAF program. We discussed the 
management of the CRAF program with officials at the Office of 
Secretary of Defense, U.S. Transportation Command, and Air Mobility 
Command. We also reviewed the 2008 National Defense Strategy, GAO's 
Standards for Internal Control in Federal Government,[Footnote 4] DOD's 
Manager's Internal Controls, and U.S. Transportation Command's 
Manager's Internal Controls (guidance to implement DOD's internal 
controls program) to determine how programs should be managed to 
minimize the risk of program failure and to identify elements of 
effectively managed programs to determine if these elements are part of 
the CRAF program. 

We conducted this performance audit from January 2009 to July 2009 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Results in Brief: 

DOD has not assessed the level of risk that declining charter passenger 
capabilities and DOD's increased need to move outsized cargo might have 
on future airlift requirements and the CRAF program. Although DOD 
depends on CRAF charter passenger aircraft to move more than 90 percent 
of its peacetime and contingency airlift needs, there has been nearly a 
55 percent decline in this capability since 2003. In 2003, DOD relied 
on a charter air carrier capability comprised of more than 60 aircraft; 
however, although DOD passenger needs have increased significantly 
since 2003, the CRAF charter passenger air carrier capability has 
decreased, declining to as few as 19 aircraft in April 2008 before 
stabilizing at 29 aircraft in May 2008. The decline to 19 aircraft 
delayed the return home of Maine National Guard troops in Iraq by about 
a week and caused DOD to quickly find additional airlift. Because 
scheduled carriers have historically been unwilling and/or unable to 
fly the CRAF missions completed by charter carriers, this decline 
suggests that, at some point in the future, charter passenger carriers 
or aircraft participating in the CRAF program may not be able to meet 
DOD's airlift needs on a daily basis and in contingency operations. In 
addition, since 2003, DOD's need to move outsized cargo has increased 
with the acquisition of over 15,000 MRAP vehicles. As there are no U.S. 
commercial cargo aircraft capable of moving outsized cargo such as 
these high priority vehicles into Iraq and Afghanistan, DOD is using 
foreign-owned carriers to support such movements. According to DOD 
officials, using foreign-owned carriers relieves some of the stress on 
military aircraft--there are sufficient military aircraft to accomplish 
the missions--and is less expensive than military airlift. As the need 
to move outsized cargo has increased, use of foreign-owned carriers to 
move these assets has increased; however, in some scenarios foreign- 
owned carriers may be unwilling to fly, and in other scenarios, like a 
CRAF activation, foreign-owned carriers would only be used in 
exceptional circumstances. As a result, the lack of a U.S. outsized 
cargo capability might affect DOD's ability to meet its outsized cargo 
airlift needs in a timely manner. DOD has not established whether it 
will need to continue to use these foreign-owned aircraft or whether 
there is a need for a U.S. commercial capability to help relieve stress 
on the military aircraft, and has not completed risk assessments, as 
set out in the 2008 National Defense Strategy. The 2008 National 
Defense Strategy describes the need to assess, mitigate, and respond to 
risk in the execution of defense programs critical to national 
security. Until specific risk assessments are conducted and actions are 
taken to mitigate any risks that may exist in the CRAF charter 
passenger segment and in outsized cargo capability that could prevent 
DOD from managing its future airlift needs and the CRAF program 
effectively, DOD and congressional decision makers will not be fully 
informed about unmitigated risks--specifically, gaps, shortfalls, or 
redundancies. 

DOD's management of the CRAF program has not provided CRAF air carrier 
participants with a clear understanding of some critical areas of the 
program. Management internal controls help provide reasonable assurance 
that programs are focused on and can achieve their objectives by 
requiring clearly articulated policies. The National Airlift Policy 
states that federal policies governing the CRAF program should enhance 
the mobilization base,[Footnote 5] promote aircraft modernization, 
increase air carrier participation, and provide a framework for 
dialogue and cooperation with commercial air carriers; however, we 
found that CRAF business partners do not have a clear understanding of 
DOD's expectations concerning these objectives because DOD lacks 
formal, written policies in four critical areas of the program, which 
could strengthen the program's ability to support its objectives. 

* First, DOD's lack of policy regarding the enforcement of its business 
rules may negatively affect the CRAF mobilization base. DOD does not 
routinely enforce a basic CRAF business rule, outlined in the CRAF 
solicitation, allowing that no more than 40 percent of a CRAF carrier's 
revenues should come from the government. DOD has no formal policy 
describing this rule or when it will be enforced, thus leaving CRAF 
participants and those interested in becoming participants potentially 
unaware of DOD's intent. Also, CRAF carriers have stated that the 
inconsistent enforcement of this rule makes it difficult since leasing 
or buying aircraft to meet DOD needs requires long-term planning. 

* Second, DOD has not developed CRAF policies that promote 
modernization, although modernization of the CRAF fleet is an objective 
of the National Airlift Policy and has been acknowledged as a goal by 
senior Air Force officials. Despite repeated congressional testimony 
from DOD officials stressing the importance of modernization, DOD does 
not provide CRAF participants any guidelines, objectives, or economic 
incentives that would encourage modernization. Some charter passenger 
air carriers, which help fly the majority of peacetime missions for 
DOD, fly aircraft in the Federal Aviation Administration's National 
Aging Aircraft Research Program. In the absence of specific 
modernization objectives, CRAF business partners will remain unaware of 
DOD's expectations toward modernization, and might not take steps 
needed to modernize their aircraft. 

* Third, DOD's lack of policy regarding the distribution of DOD's 
peacetime airlift business may negatively affect CRAF air carrier 
participation. According to DOD officials, the process and procedures 
for distributing DOD's peacetime airlift business among carriers have 
not been defined by and are not overseen by DOD. While DOD defines how 
participants earn entitlements to peacetime airlift business, DOD 
actually distributes the entitlements to three teams of CRAF 
participants. The teams then distribute the business based on 
arrangements made by each team's members. In our discussions with 
carriers, some carriers expressed concerns that the distribution of 
DOD's peacetime business was unfair, because carriers were not getting 
the distribution they expected based on their contributions to CRAF, 
and lacked transparency. Because the distribution of this business is 
intended to incentivize CRAF participation, this perception could 
ultimately reduce carrier participation in CRAF. 

* Fourth, DOD has not developed policy that establishes a framework for 
dialogue and cooperation with commercial air carriers, which could 
involve CRAF participants in decision-making and facilitate sharing 
information with them. According to airline officials, DOD has not 
routinely involved CRAF carriers in proposed changes to the CRAF 
program in advance and it has not shared CRAF study results with the 
carriers until recently. As a result, CRAF participants told us that 
they have been unable to adjust their business plans to better address 
DOD needs and easily absorb some of the program changes that have been 
announced. DOD has told us that there are many ways in which they 
communicate with the carriers. 

By developing policies that provide commercial air carriers with a 
clear understanding of critical aspects of the CRAF program, DOD can 
strengthen its management of the CRAF program and have reasonable 
assurance that the CRAF program will meet its primary objective of 
providing critical airlift to support DOD's potential future needs. 

To provide additional assurance the CRAF program can continue to meet 
DOD airlift needs and to assist DOD in more effectively managing the 
program, we are making two recommendations. First, to help DOD identify 
and analyze risks that could assist DOD in meeting its future airlift 
requirements, we recommend that DOD conduct risk assessments that 
evaluate the declining U.S. charter passenger capability and the lack 
of a U.S. commercial outsized cargo capability and develop appropriate 
policies and procedures for mitigating any identified risks. Second, to 
facilitate effective management of the critical partnership between DOD 
and the U.S. commercial air carrier industry and to help ensure that 
CRAF can meet its program objectives, we recommend that DOD develop 
formal, written policy that establishes: enforcement guidelines for the 
basic CRAF business rules; objectives and measures of effectiveness 
required to achieve modernization of the CRAF fleets; oversight over 
how peacetime airlift business is distributed; and mechanisms by which 
DOD seeks input from CRAF participants in program issues and concerns 
and information sharing. 

In commenting on a draft of this report, DOD did not agree with our 
recommendation to conduct risk assessments that evaluate the declining 
U.S. charter passenger capability and the lack of a U.S. commercial 
outsized capability. DOD commented that the 2008 CRAF viability study 
conducted by the Institute for Defense Analyses (IDA) evaluated the 
risk of the charter passenger industry, and based on that study, they 
are examining potential mitigation strategies for the declining 
passenger charter fleet. However, during our review, we found no 
evidence that U.S. Transportation Command has conducted an up-to-date 
risk assessment or is developing policies and procedures to mitigate 
any risks associated with declining charter passenger capability. As we 
reported, the 2008 IDA study data ended in 2007. Also, the study did 
not establish a level of acceptable risk for the CRAF program. 
Additionally, DOD commented that there was no need to develop any 
mitigation strategies for an outsized cargo capability because CRAF is 
not intended to provide an outsized cargo capability. Given DOD's 
recent addition of over 15,000 MRAPs, we continue to believe that risk 
assessments, as outlined in the National Security Strategy, of both the 
charter passenger and outsized cargo issue would give DOD specific 
information that would help them shape their future strategic 
transportation requirements. DOD concurred with our recommendation to 
develop formal, written policy that establishes: enforcement guidelines 
for the basic CRAF business rules; objectives and measures of 
effectiveness required to achieve modernization of the CRAF fleets; 
oversight over how peacetime airlift business is distributed; and 
mechanisms by which DOD seeks input from CRAF participants in program 
issues and concerns and information sharing. A more detailed discussion 
of DOD's comments and our response to these comments follow the 
Recommendations for Executive Action section of this report. 

Background: 

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;[Footnote 6] 

* provide a framework for dialogue and cooperation with commercial air 
carriers; and: 

* 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.[Footnote 7] 
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.[Footnote 8] 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. 

DOD Has Not Assessed the Risks That Changes in Charter Passenger 
Capabilities and DOD's Outsized Cargo Needs Might Have on the CRAF 
Program: 

Charter Passenger Capability Has Declined: 

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. 

Figure 1: Size of CRAF Charter Passenger Fleet and DOD Peacetime 
Business (Fiscal Years 2001 through 2008): 

[Refer to PDF for image: line graph] 
	
Year: 2001; 
Total CRAF passenger business revenue per year: $500 million; 
Combined CRAF charter passenger carrier fleet size per year: 47. 

Year: 2002; 
Total CRAF passenger business revenue per year: $1,250 million; 
Combined CRAF charter passenger carrier fleet size per year: 56. 

Year: 2003; 
Total CRAF passenger business revenue per year: $2,300 million; 
Combined CRAF charter passenger carrier fleet size per year: 65. 

Year: 2004; 
Total CRAF passenger business revenue per year: $2,000 million; 
Combined CRAF charter passenger carrier fleet size per year: 66. 

Year: 2005; 
Total CRAF passenger business revenue per year: $2,500 million; 
Combined CRAF charter passenger carrier fleet size per year: 51. 

Year: 2006; 
Total CRAF passenger business revenue per year: $2,700 million; 
Combined CRAF charter passenger carrier fleet size per year: 46. 

Year: 2007; 
Total CRAF passenger business revenue per year: $2,600 million; 
Combined CRAF charter passenger carrier fleet size per year: 44. 

Year: 2008; 
Total CRAF passenger business revenue per year: $3,400 million; 
Combined CRAF charter passenger carrier fleet size per year: 29. 

Source: GAO analysis of CRAF data. 

[End of figure] 

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.[Footnote 9] 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.[Footnote 10] 
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. 

DOD's Need to Move Outsized Cargo Has Increased: 

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.[Footnote 11] 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. For 
example, in 2008, when the U.S. Transportation Command was using 
Russian-based carriers to fly outsized cargo to Iraq, Afghanistan, and 
other locations, U.S. military aircraft ferried Georgian troops from 
Iraq back to Georgia in anticipation of a potential confrontation with 
Russian troops. We believe that risk may be increased in such scenarios 
in the future. Without further analysis of DOD's options for meeting 
its outsized cargo needs, including the potential role of commercial 
carriers, the inability of DOD to meet its needs to move outsized cargo 
into areas of crisis and have that cargo arrive in a timely manner 
could increase risk for DOD operations. However, DOD officials told us 
that DOD is using the foreign-owned aircraft only to ease the high 
stress on military aircraft and because such use is less expensive than 
military aircraft, not because there is an insufficient number of 
military aircraft available to fly this outsized cargo. 

DOD Is Not Fully Aware of How Changes in Its Charter Passenger Airlift 
Capabilities and DOD's Outsized Cargo Needs Affected CRAF Because It 
Has Not Conducted Risk Assessments: 

DOD is not fully aware of the extent to which these changes may have 
affected the CRAF program's ability to meet DOD's future transportation 
requirements because DOD has not conducted risk assessments as 
described in the 2008 National Defense Strategy. In this strategy, DOD 
defines risk to the national defense in terms of the potential for 
damage to national security combined with the probability of occurrence 
and a measurement of the consequences should the underlying risk remain 
unaddressed. This strategy also states that DOD must account for future 
challenges and their associated risks[Footnote 12] to meet the 
objective of winning our nation's wars and describes the need to 
assess, mitigate, and respond to risk in the execution of defense 
programs critical to national security. In the case of the CRAF 
program, risk assessments can be used to determine if there are any 
gaps, shortfalls, or redundancies in the charter passenger or outsized 
cargo segments that could prevent DOD from meeting future airlift 
requirements. 

The most recent DOD sponsored CRAF study, issued in August 2008, 
predicted that passenger charter capability may become marginal, but 
the capabilities reviewed in the study did not include the further 
declines in this capability that occurred in 2008. The study also did 
not quantify the risk associated with the passenger charter capability 
decline that has already occurred. In accordance with both GAO and DOD 
management internal controls,[Footnote 13] a risk assessment could 
inform program managers by establishing the maximum and minimum 
acceptable risk for the CRAF program. For example, it could identify 
the numbers of charter passenger aircraft necessary to meet DOD 
requirements. Without a risk assessment, DOD will continue to be 
uncertain what the levels of required CRAF charter participation is 
necessary to fulfill requirements, and DOD and industry decisions 
makers will not be able to begin to take steps to address the risks. 

Furthermore, according to DOD officials, DOD has not conducted a risk 
assessment that examines outsized cargo movement, including the use of 
commercial air carriers to supplement its military fleet, and 
identifies any consequences of relying on foreign owned carriers to 
meet peacetime and contingency needs. As previously stated, DOD is 
using foreign-owned carriers to move MRAPs and other outsized equipment 
to Afghanistan and Iraq. However, the 2005 Mobility Capabilities 
Study[Footnote 14] predates the acquisition of more than 15,000 
outsized MRAPs. Additionally, the August 2008 CRAF study did not assess 
any CRAF outsized cargo movement. A risk assessment could determine 
whether a gap, shortfall, or redundancy exists in relation to the U.S. 
commercial and military outsized cargo capability. In addition, a risk 
assessment could provide information to decision makers regarding the 
possibility of potential damage to national security from the reliance 
on foreign-owned carriers and the probability of such damage in future 
contingencies. Without such a risk assessment, DOD may not know the 
most effective method for transporting outsized cargo, and if any 
methods present potential risk to national security. 

DOD Has Not Issued Policies That Would Strengthen Management of the 
CRAF Program: 

DOD's management of the CRAF program has not provided CRAF air carrier 
participants with a clear understanding of some critical areas of the 
program, which could strengthen the program's effectiveness and the 
ability to support its objectives. Although management internal 
controls such as clearly articulated policies can help meet program 
objectives, DOD has not developed policies related to four of the CRAF 
program objectives as outlined in the National Airlift Policy. These 
four objectives include: enhancing the mobilization base,[Footnote 15] 
promoting aircraft modernization, increasing air carrier participation, 
and providing a framework for dialogue and cooperation with commercial 
air carriers. As outlined by both GAO and DOD, management internal 
controls help provide reasonable assurance that, through effective 
management, programs can achieve their objectives. According to these 
management internal controls, one way to help assure that a program's 
objectives are met is to establish clearly articulated policies. 
Policies, a form of management control, are, according to U.S. 
Transportation Command, intended to provide guidance and procedures to 
carry out operations or achieve objectives. However, we found that CRAF 
business partners do not have a clear understanding of important 
aspects of the CRAF program because DOD lacks policies in critical 
areas of the CRAF program that could help DOD meet its program's 
objectives. U.S. Transportation Command officials have stated that the 
CRAF contract with the carriers serves as policy. However, the contract 
does not contain some elemental items of policy including objectives, 
goals, and measures of effectiveness as outlined in GAO and DOD 
management internal controls. 

DOD Has Not Developed Policies Related to Four CRAF Program Objectives: 

DOD Has Not Developed Policy Concerning 60/40 Rule Enforcement: 

DOD has not developed policy regarding the enforcement of its business 
rules, such as the 60/40 rule, that would help strengthen the CRAF 
mobilization base. More than 40 years ago, DOD established measures to 
ensure that CRAF air carriers had both commercial and DOD revenue 
streams. These measures evolved into what is now known as the 60/40 
rule, a rule defined in the CRAF solicitation allowing that no CRAF 
carrier should collect more than 40 percent of its revenues from DOD 
business. Carriers that earn more than 40 percent of their revenue from 
DOD may be penalized by reductions in their entitlement to DOD 
business. The original goals of the rule were to ensure that CRAF 
carriers maintained a strong business base, efficient operations, and 
modern fleets, all of which would prevent carriers from going out of 
business when DOD demands were low. The rule would also provide DOD 
with a surge capability to draw on if demand grew suddenly. Although 
DOD created the 60/40 rule with these intended goals, several CRAF 
carriers told us that they are unaware of the intent of the rule today 
because they are not sure if they have to follow the rule, or if it is 
even being enforced. 

Some CRAF carriers have broken the 60/40 rule by depending in large 
part on DOD for their revenue. However, because there is no written DOD 
policy describing the rule and its enforcement, no carrier could tell 
us when, or under what conditions, the rule is actually enforced. 
According to airline officials, this lack of guidance affects carriers' 
business plans because they are not sure whether to account for 60/40 
rule compliance when determining the size their fleets. Unclear 
enforcement parameters also make it difficult to plan lease or purchase 
of planes or how many to acquire. Three DOD-sponsored CRAF studies 
completed in the last 3 years have all given differing recommendations 
regarding the 60/40 rule, adding to the ambiguity as to whether or not 
the rule is or will be in effect. Additionally, it is unclear whether 
or not CRAF objectives of participation and meeting DOD surge demands 
are being met. Without policy that clearly states the guidelines and 
objectives of the 60/40 rule, CRAF carriers may not be able to properly 
size their fleets to meet DOD demands, and have the capacity for DOD to 
draw on to meet demands, which may decrease the mobilization base of 
the CRAF program. 

DOD Has Not Developed Policy Concerning CRAF Fleet Modernization: 

DOD has not developed policies that promote CRAF fleet modernization, 
although DOD officials have recognized the need for a more modern CRAF 
fleet. The National Airlift Policy directs that policies be created to 
promote the development of technologically advanced transport aircraft 
in order to ensure a commercial airlift capability. In addition, a 
December 2007 DOD-sponsored CRAF study acknowledged the importance of 
modernization and recommended that DOD develop policies to encourage 
CRAF carriers to modernize their existing fleets. Moreover, DOD 
officials have recognized the necessity of a modernized commercial air 
fleet by repeatedly testifying before Congress about its importance for 
the continued viability of the program. 

However, DOD has not provided CRAF participants with policies that 
include guidelines, objectives, or economic incentives that would 
encourage modernization. Because the charter passenger industry plays 
such a large role in moving DOD passengers, we believe it is in DOD's 
interest to ensure the commercial airlines have guidelines and 
incentives, such as a rate structure that would pay more for carriers 
to fly newer airplanes, to assist in modernizing their fleets. Two of 
DOD's largest remaining charter passenger carriers are flying large 
numbers of aircraft listed on the Federal Aviation Administration's 
Aging Aircraft List. As the December 2007 DOD-sponsored CRAF study 
warned, these planes will soon be retired as the costs of inspections, 
maintenance, and life-extension work becomes prohibitive. Since these 
aircraft are being used to fly DOD business almost exclusively, charter 
passenger carriers told us that they look to DOD to provide guidance 
and incentives to modernize. DOD officials told us that they cannot 
influence modernization or force the carriers to modernize. However, 
without DOD policy that provides specific modernization guidelines, 
CRAF carriers may not see a reason or have a business case to take 
steps needed to modernize their aircraft. 

DOD Has Not Developed Policy Concerning Oversight of Distribution of 
Peacetime Business: 

DOD has not developed policies regarding the oversight of distribution 
of its peacetime airlift business, which may negatively affect CRAF air 
carrier participation and may affect DOD's ability to manage the CRAF 
program effectively. DOD's incentive system of contracting with CRAF 
participants to fly its daily peacetime business is intended to meet 
the program objective of increasing air carrier participation in CRAF 
by providing each CRAF participant with a reasonable share of peacetime 
business. DOD policy that includes guidance, instructions, regulations, 
procedures, or rules that clarify the CRAF incentive system and some 
oversight of the distribution of peacetime business would give CRAF 
carriers a clearer understanding of this important process. 

According to DOD officials, the process and procedures for distributing 
DOD's peacetime airlift business have not been described in policy and 
are not overseen by DOD. As discussed earlier, DOD awards individual 
carriers points based on the number and type of aircraft they commit to 
CRAF. These points become the basis of a carrier's entitlement to 
compete for the procurement of peacetime passenger and cargo airlift 
business. To maximize these points, the carriers have formed themselves 
into three teams that have their own agreements on how the business 
will be distributed among the team members. U.S. Transportation Command 
officials confirmed that they distribute peacetime business to the 
teams and have no further involvement in how the teams distribute 
peacetime business among the members. The officials also said that they 
consider the existing system to be adequate in meeting program 
objectives. In the absence of DOD oversight and control, some of the 
CRAF carriers have expressed concerns that peacetime business 
distribution is not transparent and can be inequitable. Some CRAF 
participants have told us that teams distribute DOD peacetime contracts 
disproportionate to an individual air carrier's CRAF commitment. These 
carriers also told us that the result is that some CRAF participants 
receive less DOD business than their entitlement reflects. Some CRAF 
carriers told us that the execution of the incentive system discourages 
participation and, in some instances, could cause carriers to go out of 
business. We understand that U.S. Transportation Command and Air 
Mobility Command have no involvement with the formation of the teams or 
the agreements teams have reached with their members. However, without 
DOD policies and oversight over the final distribution of the peacetime 
business that flows from the incentive system established by DOD, DOD 
cannot be sure that this system is accomplishing its goal of enhancing 
carrier participation in CRAF. 

DOD Has Not Developed Policy Concerning DOD and CRAF Carrier 
Communication: 

DOD has not developed policy that establishes a framework for dialogue 
and cooperation with commercial air carriers that would invite CRAF 
participants to comment on pending program decisions and facilitate 
sharing information with them. Although facilitating an effective 
partnership between DOD and commercial carriers is a stated objective 
of the CRAF program, airline officials stated that DOD has not involved 
CRAF participants in some important program decisions that have had 
significant impact on the participants' business plans. For example, 
DOD announced a policy change that decreased the amount of money 
carriers were reimbursed for fuel, which is allowed under the CRAF 
contract. Carriers told us that they factor in fuel reimbursements in 
their yearly business plans, and are not prepared to adjust to a 
significant pricing change during the middle of a year, especially when 
they had no knowledge of the change ahead of its implementation and 
thus could not plan in advance for the effects. In addition, until 
recently, DOD had not shared information from DOD-sponsored studies on 
the CRAF program with CRAF carriers. For example, of the four DOD- 
sponsored CRAF studies completed in the past 6 years, most carriers we 
talked to told us they had neither seen nor heard of the studies until 
late 2008. Of the CRAF carriers we interviewed, only one carrier 
reported receiving a copy of any DOD-sponsored CRAF study. 

DOD officials have said that mechanisms are in place for effective CRAF 
communication between DOD and CRAF carriers, such as using trade 
associations to perform what DOD officials describe as an "industrial 
reality check" and holding industry days and conferences. However, 
according to some carriers, communication through trade associations is 
not sufficient because some carriers are not allowed a voice in 
meetings, and some carriers are not members of the associations at all. 
Several carriers stated that DOD has little communication with them 
beyond using trade associations and annual meetings. With a clearly 
described policy that establishes a framework for an effective 
partnership fostering communication, DOD could strengthen its 
management of the CRAF program and enhance its relationship with the 
carriers, thus ensuring continued participation in CRAF. 

Conclusions: 

Given the importance of CRAF in moving passengers and cargo for DOD to 
support peacetime and contingency operations and major operations 
requiring CRAF activation, it is critical for the CRAF program to be 
able to meet DOD's future needs. By policy, statute, and contract, DOD 
depends on CRAF business partners that increasingly find themselves in 
a challenging business environment. If the charter passenger industry 
continues to decline, DOD could increasingly turn to scheduled air 
carriers to fulfill the daily and Stage I requirements that are 
currently being met by the charter carriers; however, the scheduled 
carriers may not be willing or able to fly these missions and meet 
DOD's airlift needs. Additionally, the potential absence of sufficient 
outsized cargo capability could potentially jeopardize national 
security by preventing DOD from accomplishing its missions due to an 
inability to move outsized cargo into areas of crisis within the time 
frames the commanders need it to arrive. Until risk assessments are 
conducted and actions are taken to mitigate any risks that are 
identified, DOD and industry decision makers will not be fully informed 
about risks in the CRAF charter passenger segment and in outsized cargo 
capability that could prevent CRAF from meeting DOD's airlift 
requirements. Moreover, the lack of appropriate policies that address 
critical areas of the CRAF program hinders DOD's ability to meet the 
objectives of the program. Until DOD develops policies that provide 
commercial air carriers with a clear understanding of critical aspects 
of the CRAF program, such as enforcement of business rules (such as the 
60/40 rule), specific modernization guidelines, distribution of 
peacetime business, and a framework for communication, thus 
strengthening its management of the program, DOD cannot provide 
reasonable assurance that the CRAF program will meet its primary 
objective of providing critical airlift to support DOD operations. 

Recommendations for Executive Action: 

To assist DOD with management of the CRAF program, we are making the 
following two recommendations for executive action. 

First, to help DOD identify and analyze risks associated with achieving 
program objectives, we recommend that the Secretary of Defense direct 
the Commander, U.S. Transportation Command to: 

* Conduct risk assessments as outlined in DOD's National Defense 
Strategy that: 

- evaluate the declining U.S. charter passenger capability by 
establishing the maximum and minimum acceptable risk for the CRAF 
program expressed in terms of numbers of charter passenger aircraft 
necessary to meet DOD requirements; and: 

- evaluate the lack of an outsized cargo capability to supplement 
military capability and the extent to which the reliance on foreign 
owned carriers is appropriate; 

* Develop appropriate policies and procedures for mitigating any 
identified risks. 

Second, to strengthen the effectiveness of the critical partnership 
between DOD and the U.S. commercial air carrier industry and the 
management of the CRAF program to achieve its objectives, we recommend 
that the Secretary of Defense direct the Under Secretary of Defense for 
Acquisition, Technology and Logistics (Transportation Policy) to 
develop policy that: 

* establishes enforcement guidelines for the basic CRAF business rules, 
to include intent, objectives, and measures of effectiveness 
mechanisms; 

* establishes incentives, objectives and measures of effectiveness 
required to ensure modernization of the CRAF fleets; 

* establishes and describes oversight mechanisms by which DOD will 
monitor how peacetime airlift business is distributed to ensure that 
its CRAF incentive program is working as intended; and: 

* establishes and describes the mechanisms by which DOD includes CRAF 
participants to provide comments on pending program decisions and in 
information sharing, and that includes objectives and measures of 
effectiveness of these activities. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DOD did not agree with 
our first recommendation to conduct risk assessments regarding the 
declining charter passenger capability and the lack of an outsized 
cargo capability as part of the Civil Reserve Air Fleet, but partially 
agreed with that part of the recommendation to develop policies and 
procedures to mitigate any identified risks. DOD agreed with our second 
recommendation to develop policy for aspects of the CRAF program. DOD's 
comments are reprinted in appendix II. 

While DOD disagreed with our recommendation to conduct risk 
assessments, DOD agreed with the value of conducting a risk assessment 
on the declining U.S. charter passenger charter capability, stating 
that this has already been evaluated by the CRAF viability study 
conducted by IDA DOD also stated that, based on the recommendations of 
the IDA study, DOD is already examining the declining passenger charter 
fleet and potential mitigation strategies. However, as we stated in our 
report, IDA's report included data that stopped at 2007 and did not 
include data regarding the 2008 business termination of a carrier that 
provided nearly 50 percent of the charter passenger capability 
available to DOD. Also, while the IDA report stated that the charter 
passenger industry may become marginal, data analysis that supported 
this statement did not establish the maximum and minimum acceptable 
risk for the CRAF program. Therefore, we continue to believe that our 
recommendation to establish acceptable risk levels is still viable and 
important. 

DOD also disagreed with the second part of our recommendation 
concerning the need to conduct a risk assessment on the lack of a CRAF 
outsized cargo capability, stating that the CRAF program is not 
intended to provide outsized cargo capability. In their comments, DOD 
stated that its use of foreign carriers to transport outsized cargo is 
a strategy to reduce costs, save military flying hours and flight crews 
for higher priority missions, reduce military footprint, or provide 
flexible contract length/timing. DOD also stated that it is not an 
indication of a shortfall in the DOD outsize cargo capability or the 
CRAF program. However, as we reported, DOD used foreign-owned carriers 
flying AN-124 aircraft to move high priority outsized cargo (MRAPs) 
into Iraq instead of the organic fleet of C-5s and C-17s. We did not 
state that there was a shortfall in either the CRAF program or DOD 
outsized capability. Rather, we point out that, if DOD is to know 
whether there is a shortfall, gap, or redundancy in that capability, 
particularly given the addition of over 15,000 MRAPs, they would need 
to do a risk assessment. We continue to believe that a risk assessment 
of this issue would give DOD specific information that would help it 
shape future strategic transportation requirements. 

DOD partially agreed with the third part of our recommendation 
pertaining to the need to develop appropriate policies and procedures 
for mitigating any identified risks regarding the decline of charter 
passenger capability and lack of outsized cargo capability. DOD stated 
that U.S. Transportation Command is examining potential mitigation 
strategies for the declining U.S. passenger charter segment. However, 
during our review, we found no evidence that U.S. Transportation 
Command was developing policies and procedures to mitigate any risks 
associated with declining charter passenger capability and outsized 
cargo capability. DOD disagreed with the need to develop any mitigation 
strategies for an outsized cargo capability since CRAF is not intended 
to carry outsized cargo. As stated above, DOD's use of foreign-owned 
carriers to move outsized MRAPs would lead us to believe that there 
might be a future need for policies and procedures to mitigate any 
shortfall or gap. 

DOD agreed that there is a need for comprehensive policy governing all 
of the CRAF program elements identified in our draft report. However, 
DOD did not identify what, if any, specific actions it would take in 
response to our recommendation. We encourage DOD to establish 
enforcement guidelines for CRAF business rules; objectives and measures 
of effectiveness for modernization; oversight mechanisms describing how 
peacetime business should be distributed; and mechanisms for 
information sharing. 

We are sending copies of this report to interested congressional 
committees; the Secretary of Defense; and the Under Secretary of 
Defense (Acquisition, Technology and Logistics). In addition, this 
report will be available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-8365 or solisw@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors to this report are 
listed in appendix III. 

Signed by: 

William M. Solis: 
Director, Defense Capabilities and Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Ike Skelton: 
Chairman: 
The Honorable Howard McKeon: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

[End of section] 

Appendix I: Recent Department of Defense Studies: 

Sustaining the Civil Reserve Air Fleet (CRAF) Program, Institute for 
Defense Analyses, May 1, 2003. 

Economic Review of the Civil Reserve Air Fleet (CRAF) Program, 
Institute for Defense Analyses, December 15, 2007. 

Civil Reserve Air Fleet (CRAF) Study Report, Council for Logistics 
Research, July 13, 2008. 

Civil Reserve Air Fleet: Economics and Strategy, Institute for Defense 
Analyses, August 22, 2008. 

[End of section] 

Appendix II: Comments from the Department of Defense: 

Deputy Under Secretary Of Defense For Logistics And Materiel Readiness: 
3010 Defense Pentagon: 
Washington, DC 20301-3010: 

September 25, 2009: 

Mr. William M. Solis: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Solis: 

This is the Department of Defense (DoD) response to the GAO draft 
report, GAO-09-625 "Military Airlift: DoD Should Take Steps to 
Strengthen Management of the Civil Reserve Air Fleet Program," dated 
August 18, 2009 (GAO Code 351306). Detailed comments on the report 
recommendations are enclosed. 

The Department non-concurs with the first recommendation. The 
Department does not agree that the lack of outsize capability in the 
CRAF program needs to be addressed. The Department partially concurs 
with the second recommendation, agreeing that USTRANSCOM should 
continue to develop mitigating strategies for the declining passenger 
charter capability. The Department concurs with the third 
recommendation. 

My point of contact is Lt Col Michael Holmes, OADUSD(TP), at (703) 601-
4461, extension 110. 

Sincerely, 

Signed by: 

Alan F. Estevez: 
Acting: 

Enclosure: As stated: 

[End of letter] 

GAO Draft Report - Dated August 18, 2009: 
GAO Code 351306/GAO-09-625: 

"Military Airlift: DoD Should Take Steps to Strengthen Management of 
the Civil Reserve Air Fleet Program" 

Department Of Defense Comments To The Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Commander, U.S. Transportation Command to conduct risk 
assessments as outlined in DoD's National Defense Strategy that: 

* Evaluate the declining U.S. charter passenger capability by 
establishing the maximum and minimum acceptable risk for the Civil 
Reserve Air Fleet (CRAF) Program expressed in terms of numbers of 
charter passenger aircraft necessary to meet DoD requirements; and; 

* Evaluate the lack of an outsized cargo capability to supplement 
military capability and the extent to which the reliance on foreign 
owned carriers is appropriate. 

DOD Response: Non-concur. DoD agrees with the value of conducting a 
risk assessment on the declining U.S. charter passenger charter 
capability. This has already been evaluated by the Congressionally-
mandated CRAP viability study conducted by the Institute for Defense 
Analyses (IDA) for DoD. The IDA study established the likely numbers of 
aircraft which would be left in the passenger charter segment in the 
post-OIF/OEF business environment. It also clearly described the likely 
impacts of a reduction in DoD business, including a greater potential 
for more frequent CRAP activations during future contingencies unless 
DoD devises new incentives for the scheduled passenger carriers to fill 
the gap in capability. Based on the recommendations of the IDA study, 
DoD is already examining the declining passenger charter fleet and 
potential mitigation strategies. 

DoD disagrees with the recommendation to have the Commander, USTRANSCOM 
complete a risk assessment regarding the lack of outsize cargo 
capability in the CRAP program. The CRAP program is not intended to 
provide outsize cargo capability as DoD sizes its organic airlift fleet 
of C-5 and C-17 aircraft to meet anticipated peak oversize and outsize 
cargo requirements. 

Foreign aircraft are contracted to carry outsize cargo as an 
operational strategy to reduce costs, save military flying hours and 
flight crews for higher priority missions, reduce military footprint, 
or provide flexible contract length/timing. It is not an indication of 
a shortfall in the DoD outsize cargo capability or the CRAP program. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Commander, U.S. Transportation Command to develop 
appropriate policies and procedures for mitigating any identified 
risks. 

DOD Response: Partially concur. USTRANSCOM is examining potential 
mitigation strategies for the declining U.S. passenger charter segment. 
DoD disagrees with the recommendation to develop procedures for 
mitigating risks regarding the lack of outsize cargo capability in the 
CRAF program, as CRAF is not intended to provide outsize cargo 
capability, as described above. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology and 
Logistics (Transportation Policy) to develop policy that: 

* Establishes enforcement guidelines for the basic CRAF business rules, 
to include intent, objectives, and measures of effectiveness 
mechanisms; 

* Establishes incentives, objectives and measures of effectiveness 
required to ensure modernization of the CRAF fleets; 

* Establishes and describes oversight mechanisms by which DoD will 
monitor how peacetime airlift business is distributed to insure that 
its CRAF incentive program is working as intended; and; 

* Establishes and describes the mechanisms by which DoD includes CRAF 
participants to provide comments on pending program decisions and 
information sharing and includes objectives and measures of 
effectiveness of these activities. 

DOD Response: Concur. DoD agrees that there is a need for comprehensive 
policy governing all of the program elements identified in the GAO 
draft report. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

William M. Solis, (202) 512-8365 or solisw@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Ann Borseth, Assistant 
Director; Renee Brown; Jeremy Hawk; Jeffrey R. Hubbard, analyst-in- 
charge; Mae Jones; Karen Thornton; and Steve Woods made key 
contributions to this report. 

[End of section] 

Related GAO Products: 

MRAP Rapid Acquisition: Rapid Acquisition of Mine Resistant Ambush 
Protected Vehicles. [hyperlink, 
http://www.gao.gov/products/GAO-08-884R]. Washington, D.C.: July 15, 
2008. 

Airline Deregulation: Reregulating the Airline Industry Would Likely 
Reverse Consumer Benefits and Not Save Airline Pension. [hyperlink, 
http://www.gao.gov/products/GAO-06-630]. Washington, D.C.: June 9, 
2006. 

Commercial Aviation: Bankruptcy and Pension Problems Are Symptoms of 
Underlying Structural Issues. [hyperlink, 
http://www.gao.gov/products/GAO-05-945]. Washington, D.C.: September 
30, 2005. 

Commercial Aviation: Legacy Airlines Must Further Reduce Costs to 
Restore Profitability. [hyperlink, 
http://www.gao.gov/products/GAO-04-836]. Washington, D.C.: August 11, 
2004. 

Foreign Investment in U.S. Airlines: Issues Relating to Foreign 
Investment and Control of U.S. Airlines. [hyperlink, 
http://www.gao.gov/products/GAO-04-34R]. Washington, D.C.: October 30, 
2003. 

Military Readiness: Civil Reserve Air Fleet Can Respond as Planned, but 
Incentives May Need Revamping. [hyperlink, 
http://www.gao.gov/products/GAO-03-278]. Washington, D.C.: December 30, 
2002. 

[End of section] 

Footnotes: 

[1] National Security Decision Directive 280, June 24, 1987. 

[2] There are three designations of cargo types: bulk, oversized, and 
outsized. Bulk cargo is cargo that will fit on a 463L cargo system 
pallet or standard commercial airline pallet/cargo container. Oversized 
cargo is air cargo that exceeds the dimensions of a standard (463L) 
pallet, but is air transportable on military and most civilian cargo 
carriers. Outsized cargo exceeds the dimensions of oversized cargo and 
requires the use of a military C-5 or C-17 aircraft or surface 
transportation. 

[3] See appendix I for a list of the studies. 

[4] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[5] DOD defines the mobilization base as the total of all resources 
available, or that can be made available, to meet foreseeable wartime 
needs. Such resources include the manpower and materiel resources and 
services required for the support of essential military, civilian, and 
survival activities, as well as the elements affecting their state of 
readiness, such as planning with industry and modernization of 
equipment. 

[6] DOD defines the mobilization base as the total of all resources 
available, or that can be made available, to meet foreseeable wartime 
needs. Such resources include the manpower and materiel resources and 
services required for the support of essential military, civilian, and 
survival activities, as well as the elements affecting their state of 
readiness, such as planning with industry and modernization of 
equipment. 

[7] Upon commitment and acceptance to the CRAF program, the CRAF 
carrier's aircraft are assigned points based on range, payload, and 
productive utilization rate, essentially determining the value of each 
aircraft to the program. 

[8] The National Defense Strategy defined risk in terms of the 
potential for damage to national security combined with the probability 
of the occurrence and the measurement of the consequences should the 
underlying risk remain unaddressed. 

[9] It should be noted that the teaming arrangements may provide DOD 
with an additional means to enforce the contract. Under the terms and 
conditions of some of these contracts the carriers are jointly and 
severely liable and would be contractually bound to provide the 
aircraft and services required under the terms and conditions of the 
contract. 

[10] All carriers must commit at least one aircraft to Stage I to be 
eligible to commit to the later stages. 

[11] While foreign-owned carriers cannot fly CRAF missions, foreign- 
owned carriers can fly DOD (CRAF-like) chartered missions during 
peacetime operations in compliance with the Fly CRAF Act. These DOD 
chartered missions are contracted to CRAF participants, which 
subcontract these missions to foreign-owned carriers. 

[12] Future challenges risks are those associated with the department's 
capacity to execute future missions successfully against an array of 
prospective future challengers. 

[13] GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G 
(Washington, D.C.: August 2001); GAO, Standards for Internal Control in 
the Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999); and Department of Defense Instruction 5010.40, 
Managers' Internal Control Program Procedures (January 4, 2006). 

[14] The Mobility Capabilities Study which began in May 2004, 
reassessed DOD's mobility capabilities against the backdrop of a 
revised National Military Strategy. The study results were intended to 
support decisions on future strategic airlift needed to meet varying 
military requirements of combat operations and smaller military 
efforts. This study is the fourth in a series of major mobility studies 
that DOD has conducted since the end of the Cold War. 

[15] DOD defines the mobilization base as the total of all resources 
available, or that can be made available, to meet foreseeable wartime 
needs. Such resources include the manpower and materiel resources and 
services required for the support of essential military, civilian, and 
survival activities, as well as the elements affecting their state of 
readiness, such as planning with industry and modernization of 
equipment. 

[End of section] 

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