Military drawdown hurts civilian carriers

   In November, two airlines that are part of the U.S. Military’s Civil Reserve Air Fleet — a group of commercial airlines that provide the Defense Department with planes for short-notice, large-scale cargo and troop deployments — announced they had weathered significant operational blows due to a curtailing of military spending on air freight capacity.
   The Defense Department, which had historically generated 20 percent of the U.S. export market, was already gearing up to reduce its commercial capacity; the two carriers — Global Aviation Holdings and Evergreen International Airlines — along with the 24 other commercial airlines in CRAF would likely be affected.
   According to Cynthia Bauer at the U.S. Transportation Command, which oversees the fleet, Defense spending on commercial airlift had dropped by $1 billion between the 2012 and 2013 fiscal years, with spending in 2013 sitting right at $2 billion.
   This current level of spending puts CRAF activity in line with the period between 2002 and 2006 when spending came to about $2.1 billion each year, according to a 2007 Congressional Budget Office report. This was an increase of four-times the average of what it spent annually during the previous five years. CBO also said at the time that even with the significant amount of money spent on airlift, the Defense Department’s contribution only accounted for 5 percent of cargo revenues in 2005. (It’s interesting to note that even in 2007, Congress anticipated a “substantial decrease in the need for commercial airlift services,” once the U.S. military extricated itself from its current conflict in the Middle East.)
   “The amount of DOD business post-2014 will inevitably shrink to pre-9/11 levels,” Bauer said. “We continue discussions with industry partners on how to manage the coming reductions in DOD business.”
   In a report this summer on CRAF, which began in 1990 to support the Gulf War effort, the Government Accountability Office quantified the pre-9/11 figure, finding that the Defense Department will see its current need for airlift drop by 66 percent. But in the end, GAO also found the military may be using its own fleet more than necessary, which it said officials called “less economical.” The agency said the military has shifted airlift workload away from military sources to prop up the civil reserve fleet.
   Bauer noted future requirements for civil airlift are, of course, hard to judge, but that the agency has to strike a proper balance between military and commercial capacity. The civil fleet could, however, add business from different customers through the Transportation Command.
   “We are bringing back those military transportation requirements we were unable to meet because of our support to U.S. forces in Afghanistan and, before that, Iraq,” she said. “We are also working with U.S. government organizations to become their transportation provider of choice.
   “We must maintain the right mix of military and commercial airlift capacity,” she continued. “We see this as a readiness issue for both military and commercial fleets.”
   Georgia-based Global Aviation Holdings — the self-pronounced “largest commercial provider of charter air services to the U.S. military” — filed for bankruptcy in November because business from the military had dried up. Officials also added they would fire 16 percent of their staff and reduce their fleet size at the company’s two airlines, World Airways and North American Airlines. Before reductions in fleet size, the airlines boasted more than 30 cargo and passenger planes; it operates MD-11s and B747-400 freighters on the cargo side.
   “The continued worldwide downturn in commercial freight markets, coupled with the military’s decision to immediately curtail its cargo expansion flying, has made it necessary for us to undertake this court-supervised reorganization,” Global Chief Executive Officer John Graber said at the time.
   A leaked internal memo from a secretary at Evergreen International Airlines notified employees that the airline would be shutting down at the end of November, a claim the airline’s CEO immediately denied. The $276.3 million March sale of Evergreen’s helicopter business, which was said to give the carrier the necessary liquidity to carry on, didn’t seem to be enough. The Oregonian reported Evergreen flew its last military flight Nov. 29 and flew a final routing a few days later.
   Transportation Command’s Bauer pointed to the drawdown of overseas troops as a major factor in the military’s decision to stop using so much capacity.
   “The military drawdown has had an impact on the amount of commercial capacity needed,” she said. “After more than a dozen years of supporting operations in Central Asia, it’s no secret demand for transportation services will decline as customer requirements decline through the end of the drawdown.”
   At the end of its June report, GAO wrote that it was “unclear” if the current civil reserve fleet could handle future military demands and the latest study of future airlift requirements is out of date. The department has been required by the 2013National Defense Authorization Act to create a new study.
   “DOD has not begun this study or finalized its ongoing reviews of the CRAF program’s ability to support future requirements,” GAO wrote. “Once they are finalized, these studies should allow DOD to better understand future requirements for CRAF and whether the CRAF program will meet future airlift requirements.”
   As for the CRAF members, the future is still uncertain. Carriers may have to reduce airlift in the market place, causing a shrinking of available capacity for cargo, or they may go under altogether. But Bauer noted the Transportation Command is taking “a hard look” at current capacity requirements. She said the military sees its commercial operators as partners that will be the beneficiaries of open communications and transparency as the agency adapts to its new requirements.
   “We must maintain the readiness of the entire Joint Deployment Distribution Enterprise, including our Civil Reserve Air Fleet partners,” she said, “to serve our nation in times of need.”