http://www.nytimes.com/2003/12/26/business/26AIR.html?th

December 26, 2003

Pentagon's War Needs Are a Lifeline for Airlines
By MICHELINE MAYNARD

The Pentagon spent more than $1.2 billion this year to fly troops and supplies to Iraq on commercial aircraft, giving airlines a financial lifeline as they struggled with the weak economy, the emergence of SARS and travelers' reluctance to fly because of the war in Iraq.

According to a military report that outlined the use of passenger and cargo airlines in the Iraq conflict, the government paid $636.2 million to 10 airlines that flew troops overseas during a 131-day emergency mobilization from February through June. It also paid $574 million to 14 cargo carriers to deliver equipment to Iraq and neighboring countries in that period.

The payments were made as part of the Pentagon's Civil Reserve Air Fleet program, in which airlines contract to transport troops and supplies on domestic and international flights in peacetime, and agree to participate in a mobilization during war. They must provide planes and crews for 30 days at a time, often with as little as 24 hours' notice.

This was only the second time the government has used the program in wartime since President Harry S. Truman created it in 1951. The first time was a decade ago, when the Pentagon spent $1.35 billion, the equivalent of about $1.7 billion today, preparing to eject Iraq's army from Kuwait in the Persian Gulf war. That mobilization, which involved four times as many troops, lasted much longer ﾑ 402 days ﾑ and involved far more flights and aircraft.

All of the nation's major airlines, air delivery companies and cargo carriers joined in the recent mobilization, though the amount of business each handled varied widely. Two companies, World Airways and Omni Air International, transported both troops and cargo. While the emergency mobilization for Iraq is long over, airlines and cargo companies are still making regular flights, to rotate troops and provide fresh mat屍iel.

In all, the airlines have flown nearly 500,000 troops to and from the war zone this year, while the cargo companies have carried more than 161,000 tons of equipment, the Pentagon report said. In addition to the money they earned during the buildup in Iraq, passenger airlines have been paid $1.2 billion in 2003 for moving soldiers, sailors, airmen and marines elsewhere around the world, work they have done for years. Cargo carriers were paid $1.2 billion as well, and the Pentagon has budgeted similar amounts for the air fleet next year.

Robert W. Mann Jr., an airline consultant in Port Washington, N.Y., said the mobilization was a lifeline for the beleaguered industry. The Pentagon's business "couldn't have come at a better time," he said. "You had a not-yet-recovered economy, you had SARS going on and the war, which was very disruptive."

Dale J. Huegen, chief of the contract airlift division at the Pentagon's Air Mobility Command, which oversees the air fleet program, said in an interview last week that the timing was coincidental but lucky for both the Pentagon and the airlines. "Our tempo was going up and their tempo was going down," he said.

Most flights under the program were between military bases in the United States and Kuwait, according to the Pentagon's report, which was presented recently to carriers taking part in the air fleet program.

Passenger planes flew to Kuwait loaded with troops and their gear, but generally returned to the United States empty, with only airline crew members on board.

The cost of a typical flight between Dover Air Force Base in Delaware and Kuwait City was $379,965, according to the report. That was for a 13,546-mile, round-trip flight for a McDonnell Douglas DC10 with 330 seats. The Pentagon paid the airlines 8.5 cents a seat for each mile flown, a spokesman said.

In some cases, that was better than the revenue per seat mile that the airlines collected on trans-Atlantic flights this year, which analysts said provided the best comparison with the revenue airlines received from the government.

The Air Transport Association, the airlines' trade group, said airlines brought in an average of 6.4 cents a seat mile in trans-Atlantic revenue during the first quarter, when travel was hurt the most by economic and war concerns. That improved to 8 cents in the second quarter, and averaged 8.52 cents in the third quarter, slightly more than what the Pentagon paid, the association said.

The passenger airline that handled the most business in the Iraq mobilization was ATA Airlines, formerly American Trans Air, which is best known in the United States as a low-fare airline that flies some international routes. It earned $123.2 million transporting troops to the Gulf, as well as more than $145 million for other work for the Pentagon in 2003, more than any other carrier. A spokeswoman for ATA, which is based in Indianapolis, said the airline was "honored" to participate in the military program, but declined to comment further.

The other airlines that received the most business during the Iraq conflict, in order of payments received, were World Airways, United Airlines, Delta Air Lines and Continental Airlines. Officials at each of those airlines declined to discuss the air fleet program on the record.

However, executives at several airlines, who would speak only if they were not named, said that while they valued the Pentagon's business, the industry as a whole would have fared much better without the disruption the war caused to the business climate and to the psyche of passengers.

Indeed, Mr. Mann, the consultant, said the airlines participate in the program under less than ideal circumstances. "You fly empty legs, you do fly in a war zone, and you have to have spare airplanes, because it's pretty disruptive to your normal commercial network," he said.

Airlines did encounter some unexpected problems. Initially, Pentagon planners anticipated that some flights would land in Turkey, which would have cut hundreds of miles off of each trip. But the Turkish government decided not to allow the Pentagon to use its bases, which meant the airlines could not use them either, said Merle L. Lyman, chief of the Defense Department's commercial airlift division.

Airlines also had to double the crew members on each flight because the planes had to leave immediately after dropping off troops, rather than stop overnight as might be the case for commercial flights. Airports were too dangerous to have the crews spend the night.

But doubling crews was easier said than done because the airlines laid off thousands of pilots and flight attendants in the last few years. Crew shortages caused some delays in troop movements last winter, Mr. Lyman said in an interview last week.

Despite such hitches, the close ties between the Pentagon and the airlines ﾑ which have filled their cockpits with former military pilots for generations ﾑ ultimately helped the Iraq mobilization proceed smoothly.

The relationships built during peacetime also help, said Mr. Lyman. "We have adapted to each others' environment," he said.

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