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Pentagon Seeks to Use Foreign Airlines


The Pentagon is asking Congress for the authority to award contracts to foreign airlines to move troops and equipment, a business that has always been limited to -- and been lucrative for -- American-based carriers.

The proposal, in the Defense Department's budget request for fiscal year 2005, could have its greatest impact on the Civil Reserve Air Fleet, a group of 24 passenger and cargo carriers that sign contracts with the Pentagon each year. These airlines were instrumental in transporting military personnel and equipment to the Middle East last year before and during the Iraq war.

In all, American passenger and cargo carriers were paid $1.2 billion to fly nearly 500,000 troops to and from the war zone during the formal Iraq conflict. The cargo companies carried more than 161,000 tons of equipment, according to a Pentagon report last fall.

But they may not have a lock on the Pentagon's business for long. In its 2005 appropriations request, submitted last month, the Pentagon asked Congress to repeal a law that bars foreign-owned airlines from bidding on its contracts.

Specifically, the Defense Department is seeking to repeal Section 2710 of the Emergency Wartime Supplemental Appropriations Act of 2003. That section requires that contracts be awarded to air carriers with American ownership of 50 percent or more. That is the level that is required for airlines to be certified as domestic carriers by the Transportation Department.

In an analysis that accompanied its appropriations bill, the Defense Department said the limit, ''while laudable in intent,'' presents significant difficulties in practice. Before awarding contracts, the analysis said, Defense Department officials must determine whether 50 percent of an air carrier's operating revenue came from American or foreign-based interests.

''To determine an air carrier's controlling interest is questionable since detailed data regarding source of operating revenues is usually not available. Such information is not readily available or transparent, so contracting officers are forced to assume the risk of unknowingly violating the law,'' the analysis said.

The analysis did not mention the reserve fleet, but industry officials said the request, if approved by Congress, could lead to competition from foreign carriers.

Word of the request was first disclosed yesterday in an Internet newsletter, Inside the Air Force. A spokesman for the Air Force's Transportation Command, based at Scott Air Force Base in Illinois, confirmed the request.

Participants in the reserve fleet sign up for government contracts to transport troops around the world in peacetime. In return, they agree to turn over their planes on short notice, for 30 days at a time, to move soldiers and gear during emergency wartime mobilizations.

Two such mobilizations have been declared since President Harry S. Truman authorized the program in 1951. The first occurred in 1991, during the Persian Gulf war, and the second in 2003 when war began in Iraq.

Last year's mobilization proved a lifeline for participating airlines, which had been battered by a drop in traffic because of fears over the outbreak of war, a weakened economy and the SARS virus. The $1.2 billion paid to the airlines during the mobilization, which lasted from February to June, was part of an overall budget of $2.4 billion in 2003 for the reserve fleet. The same amount has been allocated for 2004.
The biggest passenger carriers participating in the reserve fleet last year were ATA Airlines, United Airlines, Delta Air Lines, Continental Airlines, and the charter airline World Airways, according to the Pentagon. The biggest cargo carriers taking part were Atlas, Evergreen, Polar, Gemini and World, which handled cargo as well as passengers.

Officials at the Air Transport Association, which represents domestic airlines, did not return calls seeking comment.

By allowing foreign carriers to bid against domestic rivals for contracts, the Pentagon could benefit in two ways, said Robert W. Mann Jr., an industry consultant based in Port Washington, N.Y.Competition could bring down the price that the military pays to transport troops, he said. American carriers transport soldiers and equipment from bases in the United States, like Dover, Del., to military installations overseas. The planes do not fly to conflict zones.

The Pentagon pays a flat 8.5 cents a seat mile for a round-trip flight. The cost of a typical flight between Dover Air Force Base and Kuwait City was $379,965, according to the Pentagon report last year. That was for a 13,546-mile, round-trip flight using a McDonnell Douglas DC-10 with 330 seats.

But Mr. Mann said foreign airlines, especially charter companies, have been known to seek as little as 5 cents a seat mile for equivalent trips. The Pentagon ''may feel they can get better pricing from other suppliers,'' he said. It was not clear which foreign airlines would participate. But industry experts noted that competition in Europe between low-fare carriers and major airlines has led to excess capacity there. Meanwhile, a decline in flights to the Middle East because of the Iraq conflict could cause carriers based there to become interested in bidding for Pentagon contracts.

The Pentagon already has the ability to grant contracts to foreign airlines case by case if no American carrier is willing to assume the risk of a flight. In the past, the Pentagon has chartered flights by Volga Dnepr Airlines of Russia and Ukrainian Cargo Airways.

Mr. Mann said foreign airlines could provide the Pentagon with a wider supply of planes. This winter, the Pentagon encountered some reluctance by American companies to bid on individual trips that were needed to begin the rotation of troops to and from Iraq, the largest such movement since World War II.

The rotation requests came as airlines were adding flights to their schedule in anticipation of stronger spring and summer traffic, which can yield more in revenue than what the Pentagon pays.

In addition, reserve flight planes must carry double crews, because the aircraft touch down to deposit troops and equipment and take off quickly afterwards once they are repaired and refueled, not allowing enough rest time for one crew.

There was speculation in aviation circles that the Pentagon might have to resort to another emergency mobilization. But after contacting each participant in the reserve fleet, Air Force officials were able to find enough volunteers to transport troops and equipment during the rotation period.

But that was before comments this week by Defense Secretary Donald H. Rumsfeld that the Pentagon might send more troops to Iraq. The participation of foreign airlines in the reserve fleet could provide the military with more leeway, should that be necessary, Mr. Mann said.

(New York Times vom 10.04.2004)