Military Aircraft: DOD Needs to Determine Its Aerial Refueling	 
Aircraft Requirements (04-JUN-04, GAO-04-349).			 
                                                                 
With the heavy pace of operations in support of the war on	 
terrorism, the Department of Defense (DOD) and the Air Force have
become increasingly concerned about their aging aerial refueling 
aircraft. We last reviewed the aerial refueling fleet in 1996 and
found that KC-135 aircraft were aging and becoming increasingly  
costly to maintain and operate. In December 2001, we began new	 
work on the Air Force's requirements for refueling aircraft.	 
However, we suspended our work several times to provide testimony
and other products on the condition of the current fleet and Air 
Force plans to accelerate replacement. We were asked to review	 
(1) the extent to which the current fleet has met aerial	 
refueling needs, and the cost and effort to operate and sustain  
the fleet, (2) DOD's current refueling requirements, and (3)	 
options to meet future aerial refueling needs.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-349 					        
    ACCNO:   A10364						        
  TITLE:     Military Aircraft: DOD Needs to Determine Its Aerial     
Refueling Aircraft Requirements 				 
     DATE:   06/04/2004 
  SUBJECT:   Cost analysis					 
	     Maintenance costs					 
	     Military aircraft					 
	     Aircraft maintenance				 
	     Combat readiness					 
	     Defense capabilities				 
	     Defense contingency planning			 
	     Boeing 767 Aircraft				 
	     KC-135 Aircraft					 
	     KC-135E Aircraft					 
	     KC-767A Aircraft					 
	     KC-10 Aircraft					 

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GAO-04-349

United States General Accounting Office

GAO

                       Report to Congressional Requesters

June 2004

MILITARY AIRCRAFT

       DOD Needs to Determine Its Aerial Refueling Aircraft Requirements

GAO-04-349

Highlights of GAO-04-349, a report to congressional requesters

With the heavy pace of operations in support of the war on terrorism, the
Department of Defense (DOD) and the Air Force have become increasingly
concerned about their aging aerial refueling aircraft. We last reviewed
the aerial refueling fleet in 1996 and found that KC-135 aircraft were
aging and becoming increasingly costly to maintain and operate. In
December 2001, we began new work on the Air Force's requirements for
refueling aircraft. However, we suspended our work several times to
provide testimony and other products on the condition of the current fleet
and Air Force plans to accelerate replacement. We were asked to review (1)
the extent to which the current fleet has met aerial refueling needs, and
the cost and effort to operate and sustain the fleet, (2) DOD's current
refueling requirements, and (3) options to meet future aerial refueling
needs.

We recommend that the Secretary of Defense (1) conduct a study to
determine the current and projected aerial refueling requirements, and (2)
direct that the planned analysis of alternatives be a comprehensive study
of all reasonably available options or options currently being tested,
including using contractorprovided aerial refueling services. DOD
concurred with each recommendation and had begun the studies at the time
of this report.

June 2004

MILITARY AIRCRAFT

DOD Needs to Determine Its Aerial Refueling Aircraft Requirements

The current refueling force has successfully supported the needs of U.S.
combat and mobility air forces during peacetime and wartime operations but
future support costs will continue to rise as the fleet continues to age,
according to the Air Force. Congress authorized the Air Force to acquire
100 KC-767A aerial refueling aircraft in November 2003 as the first step
in replacing the 538-plane KC-135 fleet but it could take up to 30 years
to replace the rest based on the estimated production rate for the first
100 aircraft. Thus, the Air Force will need to continue maintaining and
modernizing some of the remaining aircraft for up to 3 decades. Some of
those aircraft could be 70 to 80 years old when they are eventually
replaced.

DOD does not know how many or what type of aircraft are needed to meet
future refueling needs because its requirements study is out of date. The
most recent study, Tanker Requirements Study-05, was done in 2001 and
identified the number of aircraft needed to carry out a
two-major-theaterwar strategy. However, that strategy has been superceded
by a new capabilities-based approach contained in the 2001 Quadrennial
Defense Review. In addition, significant changes taking place in
operational concepts and force structure could substantially affect future
refueling requirements. As a result, the Air Force does not have a clear
picture of future needs that could guide its replacement and investment
decisions.

GAO outlines three broad options (see table below) to meet the Air Force's
long-term aerial refueling requirements. DOD could adopt one or a
combination of these approaches. GAO is not taking a position on which
option(s) would be most suitable. The Air Force was recently directed by
DOD to conduct and complete by August 2005 an analysis of alternatives for
replacing the current capability. However, at the time of our audit work,
the Air Force did not plan to study the option of using
contractor-provided aerial refueling services as part of its analysis of
alternatives.

Options for Meeting Aerial Refueling Requirements

Option Considerations

This could be a commercial derivative or new development; could consider
various types and sizes of aircraft, including Acquire new aircraft
potential unmanned aircraft of the future.

Numerous types of used commercial aircraft are available, Acquire used
aircraft and convert to but the condition and age of the planes, along
with the cost tankers to convert them to tankers, would need careful
study.

The Navy uses contracting on a limited basis. Contracting Contract for
refueling services could meet some portion of refueling needs.

                                  Source: GAO.

www.gao.gov/cgi-bin/getrpt?GAO-04-349.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Neal Curtin at (757)
552-8100 or [email protected]..

Contents

  Letter

Results in Brief
Background
Current Force Has Met Refueling Needs but at Increasing Cost and

Effort Air Force's Aerial Refueling Requirements Are Outdated Three
Options Exist to Meeting the Air Force's Future Aerial

Refueling Requirements Conclusions Recommendations for Executive Action
Agency Comments and Our Evaluation 1

3 4

9 17

24 29 29 30

Appendix I Scope and Methodology

Appendix II Comments from the Department of Defense

Appendix III GAO Contact and Staff Acknowledgments

Related GAO Products

  Tables

Table 1: Air Force Aerial Refueling Statistics for Major Conflicts Since
1991 10 Table 2: Distribution of Flying Hours for the KC-135 Fleet (Fiscal
Years 1996-2002) 10 Table 3: KC-135 Operating and Support Costs (Fiscal
Years 1996-2002) 13 Table 4: Number of Air Force Aerial Refueling Aircraft
in the Fleet Expressed as KC-135R Aircraft Equivalents 19

Table 5: Changes to National Strategies and Operational Concepts That
Could Lead to Changed Aerial Refueling Requirements 21

  Figures

Figure 1: KC-10 Aerial Refueling Aircraft Preparing to Refuel an

F-16 Fighter 5 Figure 2: KC-135 Aerial Refueling Aircraft 6 Figure 3:
Removal and Replacement of KC-135 Fuselage Skin 12 Figure 4: Example of a
Cracked Frame Component That Was

Replaced During Programmed Depot Maintenance 14 Figure 5: Trend in the
Number of Depot Flow Days for

Programmed Depot Maintenance Per KC-135 Aircraft

(Fiscal Years 1991-2000) 16

Abbreviation

                           DOD Department of Defense

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separately.

United States General Accounting Office Washington, DC 20548

June 4, 2004

The Honorable Duncan Hunter
Chairman
Committee on Armed Services
House of Representatives

The Honorable Joel Hefley
Chairman
Subcommittee on Readiness
Committee on Armed Services
House of Representatives

Aerial refueling is critical to U.S. national security strategy, allowing
bomber, fighter, and transport aircraft to rapidly deploy and operate
globally, stay airborne longer, and carry more weapons, equipment, and
supplies. The Air Force has most of the Department of Defense's (DOD)
refueling capability in 59 large KC-10 and 538 KC-135 aerial refueling
aircraft. The KC-135 aircraft averages about 43 years of age-the oldest
aircraft in the military inventory. Following the terrorist attacks of
September 11, 2001, and the start of the global war on terrorism, DOD and
the Air Force have become increasingly concerned about possible age
related problems that could ground the refueling fleet. The Air Force
believes the national security strategy cannot be executed without aerial
refueling.

We last reviewed the aerial refueling fleet in 19961 and concluded that
the
KC-135 aircraft were aging and becoming increasingly costly to maintain
and operate. We also pointed out that DOD had a need for more mobility
aircraft to transport troops and equipment to theaters of operations.
Consequently, we recommended that when DOD considers a replacement
for the KC-135 aircraft, it develop a multi-role aircraft that could do
aerial
refueling or airlift operations. DOD responded that it could operate the
KC-135 aircraft for another 35 years, to approximately 2030, when they
would be 70 to 80 years old. However, since 2001, DOD and the Air Force
have accelerated plans to begin replacing the KC-135 aircraft. They will
be
expensive to replace and will likely require many years of effort given
the
number of aircraft to be replaced and the high cost of military aircraft.
In

1 U.S. General Accounting Office, U.S. Combat Air Power: Aging Refueling
Aircraft Are Costly to Maintain and Operate, GAO/NSIAD-96-160 (Washington,
D.C.: Aug. 8, 1996).

December 2001, we were requested to review the Air Force's requirements
for aerial refueling aircraft and options to meet those requirements. We
received the request and began the work before the Air Force announced
that it planned to lease Boeing 767 aircraft modified for aerial
refueling. We suspended this work several times to provide testimony and
other products related to the condition of the current refueling fleet and
the specific terms of the proposed lease in 2002 and 2003 (see p. 35 of
this report for a list of GAO aerial refueling aircraft-related products,
including our testimony statements). We have now completed our work on the
original request and this report is the result. As requested, we examined,
(1) the extent to which DOD's current aerial refueling force has met
refueling needs, and the cost and effort associated with operating and
sustaining the current fleet; (2) the most recent aerial refueling
requirements; and (3) options to enable DOD to meet future aerial
refueling requirements. Subsequent to this request, in 2002, Congress
authorized the Secretary of the Air Force to initiate a multi-year pilot
program to lease up to 100 Boeing 767 aircraft for use as aerial refueling
aircraft. Subsequent to the hearings, Congress amended the authorization
to permit the Air Force to lease 20 and purchase 80 aerial refueling
aircraft.

To examine the extent to which DOD's current aerial refueling force has
met mission requirements, the cost of maintenance, and efforts to sustain
the fleet, we interviewed DOD and Air Force officials and reviewed key
documents, comparing mission requirements and aerial refueling aircraft
availability rates; and obtained a variety of data documenting maintenance
costs. We did not independently verify the reliability of the cost and
maintenance data, but we discussed cost estimates with certain internal
and external organizations knowledgeable about aircraft operating and
maintenance costs to determine the reasonableness of the data, and we
determined that the estimates were reasonable. To examine current aerial
refueling aircraft requirements, we interviewed key DOD and Air Force
officials and reviewed key requirements documents, including a joint
instruction calling for a requirements determination study and
recommending an analysis of alternatives to meeting the requirements, a
briefing on Tanker Requirements Study-05, and the complete Mobility
Requirements Study-05. To identify options to enable DOD to meet the
requirements, we interviewed officials and obtained documents outlining
three different approaches to meeting refueling requirements that are
generally considered to be reasonably available in the near term. We
describe our scope and methodology in appendix I. We conducted this work
from December 2001 to April 2004 in accordance with generally accepted
government auditing standards.

  Results in Brief

The current refueling force has met the needs of U.S. forces in peacetime
and wartime; however, future costs and efforts needed to operate and
support the existing refueling fleet, especially the KC-135s, will likely
continue to rise as these aircraft age. Although Congress has authorized
the Air Force to lease 20 and purchase 80 KC-767A aerial refueling
aircraft to start replacing the 538-plane KC-135 fleet, the Air Force will
likely need another 20 to 30 years to replace the rest based on the
planned production rate of the first 100 aircraft and the likely cost of
the planes. Consequently, the Air Force will need to maintain and possibly
modernize at least some of the remaining aircraft for up to 3 decades.
Some of those aircraft could be between 70 to 80 years old when replaced.
Operations and support costs for the KC-135 fleet are estimated to grow
from about $2.2 billion in fiscal year 2003 to $5.1 billion (fiscal year
2003 dollars) in fiscal year 2017, an increase of $2.9 billion, or over
130 percent, which represents an annual growth rate of about 6.2 percent.

Currently, the Air Force does not know how many aircraft or the type of
aircraft needed for the future refueling mission because no up-to-date
studies exist to validate the number or type needed. Tanker Requirements
Study-05 is the most recent study, but it specifies the number of
refueling aircraft needed to support operations contemplated in the
outdated two-major-theater-war strategy. The current strategy is the 2001
Quadrennial Defense Review approach to (1) defend the homeland, (2) deter
aggression by maintaining regionally tailored forces, (3) swiftly defeat
aggression in two overlapping major conflicts, and (4) decisively defeat
the adversary in one of two major conflicts. The current strategy,
combined with the global war on terrorism, and DOD reassessments of
operational concepts and the force structure may lead to still more
changes in planned operations and by extension, in refueling support that
will be required, although no requirements study was planned to replace
Tanker Requirements Study-05 at the time of our audit work. DOD guidance
also specifies that an analysis of alternatives is required to identify
options for meeting requirements.2 The Fiscal Year 2004 National Defense
Authorization Act required an analysis of alternatives to identify options
best suited to meeting current and projected refueling needs by no later
than March 1, 2004. To comply with the mandated requirement, DOD has
completed an interim report memorandum dated February 24, 2004,

2 An analysis of alternatives evaluates the operational effectiveness,
suitability, and estimated costs of alternative systems to meet a mission
capability. It assesses the advantages and disadvantages of the
alternatives being considered, including the sensitivity of each
alternative to possible changes in key assumptions.

outlining the framework and parameters it proposes for the Air Force to
use in an overview study of various options for replacing its aging fleet
of KC-135 aircraft. However, DOD and the Air Force recognize that the
February 2004 guidance letter is not an analysis of alternatives. DOD
plans to issue a separate analysis and report studying the material
condition of its fleet of KC-135 aerial refueling aircraft by September
2004, followed by the analysis of alternatives study to be issued in
August 2005.

At least three options exist to meet future refueling needs. The Air Force
could (1) directly acquire new aircraft to replace the KC-135 fleet, (2)
obtain excess commercial aircraft configured for refueling, or (3) augment
its fleet with contractor-provided refueling. Except for the option to
directly acquire new aircraft, these options or some combination could
enable DOD to meet refueling needs without incurring the full cost to
acquire, operate, and support a new refueling fleet and develop required
associated infrastructure. DOD's planned analysis of alternatives will
review options related to buying new or commercially similar aircraft as
well as acquiring and modifying used aircraft but was not planned to
evaluate the potential for contractor-provided refueling, according to the
memorandum from the Office of the Secretary of Defense to the Air Force
directing that an analysis of alternatives be done. We are not taking a
position on which option(s) would be more suitable.

To provide a current, comprehensive roadmap to guide long-term replacement
of the current tanker fleet, we recommend that the Secretary of Defense
(1) conduct a new, validated requirements study to determine current and
projected aerial refueling requirements and (2) expand the planned
analysis of alternatives to include all viable options for providing
aerial refueling including the potential for the use of contractors. DOD
concurred with each recommendation and had begun the studies at the time
of this report.

Background 	Aerial refueling is critical to carrying out U.S. national
security strategy because it allows other aircraft to fly further, stay
airborne longer, and carry more weapons, equipment, and supplies. The Air
Force has stated that without aerial refueling, U.S. national security
strategy could not be executed. While numerous military aircraft are used
for refueling, most of the U.S. refueling capability is in the Air Force's
59 KC-10 and 538 KC-135 aircraft. These large, long-range aircraft are
based on commercial aircraft modified for aerial refueling. The KC-10
aircraft is based on the DC-10 commercial aircraft, was built in the 1980s
and averages about 20 years in age. Figure 1 displays a KC-10 aircraft
refueling an F-16 fighter aircraft.

Figure 1: KC-10 Aerial Refueling Aircraft Preparing to Refuel an F-16
Fighter

Source: Air Force.

In addition to its refueling capability, the KC-10 is a multi-role
aircraft and can be used to transport air cargo, known as airlift.

The KC-135 aircraft, similar to the Boeing 707 commercial airliner, was
built in the 1950s and 1960s, and aircraft still in the fleet average
about 43 years in age. Figure 2 displays a KC-135 refueling aircraft.

Figure 2: KC-135 Aerial Refueling Aircraft

Source: Air Force.

In terms of refueling capacity, the KC-135 aircraft comprise about 90
percent of the refueling fleet and consequently are the mainstay of the
U.S. aerial refueling capability.3 However, their ability to meet current
and future refueling mission requirements will depend on continued
maintenance, support, and operations for years to come.

3 There are two basic versions of the KC-135 aircraft today-the KC-135R
and the KC-135E-both of which were derived from the original KC-135As
produced in the 1950s and 1960s. The Air Force undertook a two-pronged
engine replacement program in the mid-1980s to improve the performance of
its then 20- to 30-year-old KC-135A refueling fleet. First, over 155 Air
National Guard and Air Force Reserve tankers were modified with used
commercial airline engines, which improved their fuel offload capability
by 20 percent, and their fuel efficiency by 14 percent. These aircraft
were redesignated as KC-135Es. During this same period, active duty
aircraft received new, more powerful, efficient CFM-56 commercial engines
plus about 25 other improvements (such as reinforced floors and wing
structures and strengthened landing gear), which enabled the modified
aircraft- redesignated as KC-135Rs-to offload 50 percent more fuel, reduce
fuel consumption by 25 percent, and operate 96 percent quieter than the
KC-135As. Subsequently, some of the KC-135Es were also modified to
KC-135Rs, so that as of March 1, 2004, there were 417 KC-135Rs and 121
KC-135Es. All active duty Air Force units only operate the KC-135Rs, as do
some Air National Guard and Air Force Reserve units, while all of the
KC-135Es are assigned to Air National Guard and Air Force Reserve units.
Over half of the total 538-plane KC-135 fleet is assigned to Air National
Guard and Air Force Reserve units.

    Prior to 2001 neither DOD nor the Air Force Expressed an Urgent Need for a
    New Refueling Aircraft

Between 1996 and November 2001, DOD and the Air Force expressed little
urgency to replace KC-135 aircraft even though the aircraft were
experiencing age-related problems. For example, the Air Force was
addressing corrosion, increased operating and support costs, and reduced
aircraft availability in the mid-1990s, when we last reviewed aerial
refueling issues.4 In our 1996 report, we stated that (1) the KC-135
aircraft was becoming increasingly costly to maintain and operate, (2)
procurement of a commercial-derivative aircraft could take 4 to 6 years
and development of a new aircraft could take up to 12 years, and (3) the
Air Force would need to quickly initiate studies to develop a replacement
strategy for mobility aircraft used in aerial refueling and airlift. DOD
responded that "while the KC-135 is an average of 35 years old, its
airframe hours and cycles are relatively low. With proper maintenance and
upgrades, we believe the aircraft may be sustainable for another 35
years." Thus, DOD planned to continue operating the aircraft until about
2030, when they would be about 70 to 80 years old.

At that same time, the Air Mobility Command deferred the start of KC-135
replacement from fiscal year 2007 to fiscal year 2013. Moreover, in
November 2001, the commander of the Air Mobility Command stated that the
"Air Mobility Command's priority is to continue with C-17 acquisition and
C-5 modernization in the near term. As the airlift priority is met, AMC
will begin to shift resources to address the next air refueling platform
in the mid-to-long-term. Air Mobility Strategic Plan 2000 envisions KC-135
aircraft retirement beginning in 2013 with the concurrent fielding of a
replacement air refueling platform."

In January 2002,5 Congress authorized a pilot program to lease 100 Boeing
767 aircraft modified for aerial refueling, subsequently designated the
KC-767A aircraft. At about the time that Congress authorized the proposed
lease, the Air Force position on when it wanted to begin retiring KC-135s
and introducing replacement aircraft shifted from around 2013 to 2006. The
Air Force stated that the urgency was due to growing operating and support
costs, declining aircraft availability, and an increasing possibility that
a fleetwide grounding event would prevent continued operation of the

4 U.S. General Accounting Office, U.S. Combat Air Power: Aging Refueling
Aircraft Are Costly to Maintain and Operate, GAO/NSIAD-96-160 (Washington,
D.C.: Aug. 8, 1996).

5 Department of Defense and Emergency Supplemental Appropriations for
Recovery from and Response to Terrorist Attacks on the United States Act,
2002, Pub. L. No. 107-117, S: 8159, 115 Stat. 2230, 2284-85 (2002).

KC-135 aircraft and thus cripple refueling support to U.S. combat air
forces. In mid-2003, the Air Force introduced a plan to retire 61
KC-135Es, to reduce the support costs while increasing the number of
crews, flying hours, and utilization rates for the remaining aircraft.6
The fiscal year 2004 defense authorization act limited the number of
KC-135Es to be retired in that fiscal year to 12 aircraft.

Despite the recently stated urgency of replacing the KC-135 aircraft, the
Air Force has not requested funds in the fiscal year 2005 budget to buy or
lease new refueling aircraft. In a traditional procurement, the Air Force
would need to have programmed any funding to buy the new aircraft. On the
other hand, a key claimed advantage of the proposed lease was that the Air
Force could immediately order the KC-767A aircraft for delivery beginning
in 2006 but would only have to make annual payments to the aircraft owner
rather than paying the full purchase price. Conversely, if the Air Force
replaced the refueling aircraft through a purchase, it would have had to
program sufficient funds to pay the full purchase price by 2006 for
delivery beginning in 2009. However, neither DOD nor the Air Force wanted
to reprogram funds from other acquisition programs to accelerate refueling
aircraft procurement because such action was thought to have the potential
to disrupt other programs and affect military capability.

    Status of KC-767A Aircraft Acquisition

In 2003, the House and Senate Armed Services Committees held hearings on
the condition of the KC-135 fleet and proposed leasing of 100 KC-767A
aircraft. Subsequent to the hearings and in the National Defense
Authorization Act for Fiscal Year 2004, Congress amended the original
lease provision and authorized the Air Force to lease 20 new KC-767A
aircraft and purchase 80. A key advantage of this plan is that it offered
savings of about $5 billion in current dollars over the plan to lease all
100 aircraft but also requires the Air Force to pay for the 80 aircraft
sooner than if they were leased. However, at the time of this report, the
combined lease and purchase had not yet been initiated. DOD has placed the
final contract signing for the combined lease and purchase on hold until
the DOD Inspector General completes a review of the actions of Air Force
and Boeing officials during negotiations, and until the Defense Science
Board

6 Seven additional KC-135E aircraft will be moved to back-up aircraft
inventory, which allows the Air Force to conduct scheduled and
non-scheduled maintenance, modifications, inspections, and repair on these
aircraft without a corresponding reduction of aircraft available for
operational missions.

  Current Force Has Met Refueling Needs but at Increasing Cost and Effort

completes a review of the condition of the KC-135 fleet, expected in
September 2004.

DOD's aerial refueling force has met the needs of U.S. combat and mobility
air forces since 1991.7 However, as the fleet ages, the costs and the
efforts to keep it operating safely are likely to grow. Although the Air
Force has begun the process to replace all 121 KC-135E aircraft with 100
KC-767A aircraft pending final approval, the effort is planned for
completion in 2011 or later. Moreover, this plan does not lead to
replacement of any of the 417 KC-135R aircraft, a process that could last
another 20 to 30 years. As a result, U.S. combat and mobility air forces
are likely to continue to rely on some KC-135R aircraft for aerial
refueling through at least the 2020 to 2030 time frame.

    DOD's Aerial Refueling Force Has Met Refueling Fleet Needs in Combat and
    Peacetime Operations

Since 1991, U.S. airpower has been used in combat in the Middle East, the
Balkans, Afghanistan, and in the United States on homeland defense
missions. Aerial refueling has played a vital supporting role in these
operations due to the long distances between bases in the United States
and elsewhere and the combat theaters, the distances within the theaters
between bases and operating areas; the need to keep combat aircraft aloft
for extended periods of time or maintain operations around the clock; and
the relatively short operating ranges of many combat and support aircraft.
Nearly every mission flown by combat and support aircraft during these
conflicts required at least one, and often multiple refuelings from U.S.
refueling aircraft. Table 1 depicts aerial refueling activity in the last
four major conflicts.

7 We did not review aerial refueling mission accomplishment for missions
prior to 1991; however, we are not aware of any shortcomings prior to that
date.

 Table 1: Air Force Aerial Refueling Statistics for Major Conflicts Since 1991

                          Iraq (1991) Kosovo (1999) Afghanistan     Iraq 2003 
                                      2001-02                   
    Number of refueling           306                    175 80 
          aircraft                                              
          Sorties              16,865              5,215 15,468         6,193 
        Flight hours           66,238            52,390 115,417 Not available 
Average sortie length          3.9                  10.0 7.5 Not available 
           (hrs)                                                
     Receiver aircraft         51,696             23,095 50,585        28,899 
Fuel off-loaded (lbs)       800.7M             253.8M 1,166M        376.4M 
    Avg. fuel per sortie        47.5K               48.7K 75.4K         60.8K 
           (lbs)                                                

Source: GAO analysis of Air Force data.

According to the Air Force, since the terrorist attacks of
September 11, 2001, the refueling fleet has been increasingly stressed due
to operational requirements. Table 2 depicts the percentages of the KC-135
fleet that flew within various ranges of flight hours each year from
fiscal
years 1996 through 2002.

    Table 2: Distribution of Flying Hours for the KC-135 Fleet (Fiscal Years
                     1996-2002) Percentage of KC-135 fleet

    Hours per aircraft    1996    1997    1998    1999    2000   2001    2002 
             0             3.1     4.2     4.2     5.8    8.3    7.1      4.2 
           1-99            3.4     5.3     5.4     9.8    11.6   11.3  
          100-199         11.9     8.3     8.3     9.3    11.3   9.6   
          200-299         16.3    13.4    16.7    18.1    20.1   18.7  
          300-399         28.6    34.2    28.1    21.6    22.0   22.0  
          400-499         23.1    20.5    21.6    12.9    13.6   18.5  

500-599 7.6 9.4 10.3 7.4 7.8 8.4 15.5 600-699 4.9 4.2 4.2 6.0 3.6 3.5 8.7
700-799 1.1 0.5 0.9 4.7 0.9 0.5 3.5 800-899 0 0 0 2.0 0.7 0.4 1.5 900-999
0 0 0.2 1.1 0 0 1.5 >1000 0 0 01.3 0 01.3

Source: GAO analysis.

The cumulative lifetime fleetwide average was about 16,000 hours per
KC-135 aircraft at the time of our review, less than half of the projected
limit of 36,000-39,000 hours per aircraft, according to Air Force data. In
2001, the Air Force projected that the fatigue life for nearly all of the

KC-135 aircraft should permit their usage until 2040. However, since 2001,
the Air Force has become concerned that unknown future problems could
arise and lead to the grounding of the KC-135 fleet, thereby undermining
refueling capability.

    KC-135 Aircraft Has Undergone Significant Improvements to Remain Combat
    Ready

While the KC-135 fleet was delivered between 1957 and 1965, significant
portions of the aircraft have been upgraded or modified since. Thus, while
the aircraft are considered old, significant improvements have been
incorporated into the aircraft since, including capability-enhancing
modifications and replacement of major structural components. For example,
between 1975 and 1988, the Air Force replaced about 1,500 square feet of
the aluminum skin on the underside of the wings of most KC-135 aircraft
with an improved aluminum alloy that was less susceptible to fatigue.
Engine strut fittings were also replaced.

In addition to such specific large-scale, fleetwide upgrade programs, most
aircraft have had some other major structural components replaced as
necessary, and some major components have been replaced on all aircraft.
Examples of some of these major structural repairs include replacement of
segments of fuselage skins, floor beams, fuselage bulkheads, and upper
wing skins. Figure 3 shows replacement of fuselage skin underway on a
KC-135 aircraft.

           Figure 3: Removal and Replacement of KC-135 Fuselage Skin

                            Source: U.S. Air Force.

As components such as these are replaced, the use of new and improved
materials, fabrication, and corrosion prevention techniques are being used
to prevent corrosion and allow for increased service life of the parts.

KC-135 Operating and KC-135 operations and support costs have risen
significantly since 1996. Support Costs Have As shown in table 3, the
actual average cost per flying hour, adjusted to Increased Significantly
constant 2002 dollars, increased from $8,476 per hour in 1996 to $10,955

                  per hour in 2002, an increase of 29 percent.

      Table 3: KC-135 Operating and Support Costs (Fiscal Years 1996-2002)

                 Constant fiscal year 2002 dollars in millions

     Cost category       1996  1997    1998    1999    2000    2001      2002 
Mission personnel   $693.6 $671.3  $641.1  $792.9  $780.2  $793.0   $778.2 
       Unit level       475.4  473.9   514.8   525.7   388.1   485.0    633.8 
      consumption                                                     
Depot maintenance    292.0  306.5   417.8   460.8   390.2   423.9    647.3 
         total                                                        
Contractor support     6.0     4.6     8.3    10.8     5.8    13.3 
         total                                                        
Sustaining support    30.1    18.8    23.1    22.9    24.5    24.5 
         total                                                        
    Indirect support    111.6  134.7   130.9   220.2   211.9   211.6    298.7 
         total                                                        
         Total        1,608.7 1,609.8 1,736.0 2,033.3 1,800.7 1,951.3 2,400.6 

a

Annual flying hours 189,827 188,579 189,236 195,851 157,786 165,574
219,136

       Cost per flying hour 8,476 8,536 9,173 10,382 11,412 11,785 10,955

KC-135 Depot Maintenance Trends Change

Source: GAO analysis of Air Force data.

aExcludes hours for four KC-135D aircraft that are scheduled for
retirement in fiscal year 2005.

The Air Force's 15-year cost estimates project further significant growth
through fiscal year 2017. For example, operations and support costs for
the KC-135 fleet are estimated to grow from about $2.2 billion in fiscal
year 2003 to $5.1 billion (2003 dollars) in fiscal year 2017, an increase
of $2.9 billion, or over 130 percent, which represents an annual growth
rate of about 6.2 percent.

To maintain serviceability, each KC-135 aircraft periodically undergoes
programmed depot maintenance. During this maintenance, crews inspect the
aircraft, repair or replace structural components and systems, make
modifications, and strip and reapply paint. Figure 4 shows the location
and damage to a component of a refueling aircraft's frame that was
discovered during program depot maintenance. The part was replaced.

    Figure 4: Example of a Cracked Frame Component That Was Replaced During
                          Programmed Depot Maintenance

                            Source: U.S. Air Force.

Most KC-135 aircraft are scheduled for depot maintenance every 5 years,
although aircraft based in locations subject to humid air and/or a salt
air environment are generally scheduled every 4 years.8

Between mid-1994 and mid-1998, an average of about 100 KC-135 aircraft
were at a depot at any given time. However, by mid-2000, that number had
risen to 166 aircraft, about 30 percent of the fleet, due in part to
modernization programs and the need for more extensive maintenance
attributed to the aircraft aging. As shown in figure 5, the average number
of days that each KC-135 spent in depot maintenance, known as "depot flow
days," rose sharply during the 1990s but declined significantly in fiscal
year 2000, due to a variety of short-term initiatives.

8 KC-135 depot maintenance is performed at the Oklahoma City Air Logistics
Center at Tinker Air Force Base, Oklahoma; the Boeing Aircraft Support
Center in San Antonio, Texas; and at PEMCO Inc. in Birmingham, Alabama.

Figure 5: Trend in the Number of Depot Flow Days for Programmed Depot
Maintenance Per KC-135 Aircraft (Fiscal Years 1991-2000)

Depot flow days

400

350

300

250

200

150

100

50

0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Years

Source: Air Force.

Between 1991 and 2000, the Air Force doubled the basic depot maintenance
package, accounting for a significant portion of the increased depot flow
days. The change increased maintenance time from 16,000 hours to 32,000
hours9 on average per aircraft. Moreover, other factors also increased
maintenance time including:

o  the removal and replacement of major portions of wiring systems

(5,200 hours per plane);  o  one-time structural changes to prevent
corrosion (2,100 hours per plane); and

o  	unplanned major structural repairs, including replacement of floor
beams, fuselage bulkheads, and fuselage skins (increased by 6,000 hours
per plane).

Depot flow days began to decline in fiscal year 1999 but recognizing the
need to try to further reduce depot flow days and despite the doubling of

9 These hours are calculated by tallying the total number of hours that
each maintainer worked on an aircraft.

the maintenance package, in 2001, the Air Force made improvements to depot
operations. These changes included:

o  	deferring maintenance if warranted based on an inspection of the
aircraft;

o  increasing the number of maintenance personnel;

o  	moving engineers to production to shorten decision-making time on
whether to remove, repair, or replace a damaged or worn aircraft
component;

o  and increasing second shift operations.

As a result, the number of aircraft in the depot decreased from 176 to 89
between September 2000 and September 2002 with no known degradation in
aircraft safety and readiness. The Air Force expects the number of KC-135s
in depot maintenance to continue to decline to 73 aircraft in fiscal year
2005, followed by a gradual increase to 89 aircraft in fiscal year 2020.

The Air Force plans to embark on a program to replace the KC-135 fleet
without a current study to identify the number or type of aircraft needed
for the future refueling mission. The most recent study is Tanker
Requirements Study-05. However, it specifies the number of refueling
aircraft needed for the outdated two-major-theater-war strategy, which was
replaced by the 2001 Quadrennial Defense Review. Moreover, refueling
requirements could change still more due to force transformation
initiatives, projected changes in operational concepts, the advent of new
technologies such as unmanned aerial vehicles, and force structure
changes. Finally, the Air Force also has not conducted a recommended
analysis of alternatives to identify the approach best suited to meeting
refueling mission requirements prior to committing to a specific approach.
Consequently, the Air Force may embark on an expensive program to invest
in new aircraft without knowing how many it needs and may miss an
opportunity to meet its needs using the most cost-effective approach.

  Air Force's Aerial Refueling Requirements Are Outdated

    Current Refueling Force Is a Cold War Legacy

The KC-135 aircraft design and fleet size has evolved from
post-World War II requirements to that needed to carry out the
U.S. strategy of containment of the former Soviet Union. The Air Force
acquired more than 700 KC-135 aircraft between 1957 and 1965, principally
to refuel bombers that would have carried out the strategic nuclear war
plan. Thus, the KC-135 aircraft was equipped with a boom to provide high
refueling rates that strategic bombers needed. In that role, the refueling
aircraft spent 30 percent of their time on nuclear alert ready for takeoff

but were not actually flown much. In the post-Cold War era, the aerial
refueling aircraft mission has changed to the support of global operations
of all strike and cargo aircraft, but the KC-135 fleet was reduced to 538
aircraft from over 700.

    Most Recent Study Reflects Now Outdated Two-Major-Theater-War Strategy

The most recent study effort addressing Air Force aerial refueling
requirements is Tanker Requirements Study-05, which was issued in February
2001. According to Air Force officials, the purpose of the study was to
determine the number of tanker aircraft and aircrews needed to support the
National Military Strategy of conducting two nearly simultaneous major
theater wars in Korea and in Southwest Asia. The study also included the
refueling requirements to support the strategic nuclear plan, certain
special operations, and smaller-scale contingencies. The study identified
shortages of both aircrews and aircraft in certain scenarios.

Tanker Requirements Study-05 concluded that up to 1,033 aircrews were
needed, depending on the scenario. When we applied the KC-10 and KC-135
crew ratios to the number of aircraft in the inventory, we derived a total
of over 840 aircrews, a shortage of about 190 crews. The KC-10 crew ratio
is 2.0 crews per active duty aircraft and 1.5 crews per reserve component
aircraft while the KC-135 crew ratio is 1.36 crews per active duty
aircraft and 1.27 crews per reserve component aircraft. However, even this
level was insufficient in Operation Desert Storm when the Air Force needed
1.5 crews per KC-135 aircraft, and in Operation Allied Force when it
needed 1.8 crews per KC-135 aircraft. To meet the immediate mission
requirements of these operations, the Air Force deployed more crews from
their home bases without their aircraft. While this permitted the Air
Force to meet the immediate needs of the specific operation, it also
significantly undermined the refueling capability that would normally be
available for other concurrent contingencies.

Tanker Requirements Study-0510 also concluded that, depending on the
scenario, the Air Force needed up to 607 KC-135R-equivalent11 aircraft to

10 We did not evaluate the validity of the study's analysis.

meet aerial refueling requirements in 2005 and uses such equivalencies to
evaluate its refueling capacity. When we applied the equivalencies to the
fleet in March 2004, acknowledging that some aircraft will not be
available due to aircraft needed for training (24) and aircraft in depot
maintenance (98), the Air Force had the equivalent of 507 KC-135R
available aircraft, as shown in table 4.

Table 4: Number of Air Force Aerial Refueling Aircraft in the Fleet
Expressed as KC-135R Aircraft Equivalents

                                                                    Number in 
                                                                     fleet in 
            Number                                                 2004 as an 
              in                                               
             the                         Number in                            
            fleet   Used in                 the                
              in                In depot           Equivalency    equivalency
Aircraft March  traininga maintenance   fleet        factor of the KC-135R 
             2004                      a available             
KC-135E     121                    20       101        0.84 
KC-135R     417        24          70       323        1.00 
    KC-10       59                     8        51        1.95 
    Total      597        24          98       475          na 

Source: Air Force.

aEstimated number of aircraft expected to be unavailable for operations in
2004. As we pointed out previously in this report, the Air Force expects
the number of KC-135 aircraft in depot to decrease to 73 by fiscal year
2005 and gradually increase to 89 in fiscal year 2020. Thus between 335
and 351 KC-135 aircraft could be available for operations between 2005 and
2020.

    New Strategies and Changing Operational Concepts Could Affect Aerial
    Refueling Requirements

2001 Quadrennial Defense Review Promulgated New Defense Strategy

Major changes in U.S. national security strategy and changes in
operational concepts could have a significant effect on the type and
number of aerial refueling aircraft needed.

Prior to 2001, U.S. national security strategy was based on the
longstanding two major theater war threat-based model, which focused on
specific adversaries and geographic locations. Tanker Requirements
Study-05 is based on this approach. In 2001, the Quadrennial Defense
Review shifted defense planning to a "capabilities-based" construct based

11"Tanker equivalents" reduces the differing capabilities of various
refueling aircraft to a common standard. Tanker Requirements Study-05
established the range and offload capability of the KC-135R as the
standard, thus its equivalency is one. A KC-135E can offload less fuel
than can a KC-135R because the E model carries less fuel and its engines
are not as fuel-efficient. Therefore, its equivalency to a KC-135R is 0.84
to 1.00. The KC-10, on the other hand, has a greater fuel capacity than
the KC-135R. Thus, its equivalency is 1.95 to 1.00.

on the assumption that the United States cannot know which specific nation
or group may pose a future threat, although defense planners can
anticipate the range of capabilities an adversary might employ.

Under the strategy articulated in the Quadrennial Defense Review, U.S.
forces must:

o  	defend the U.S. domestic population, territory, and critical
defenserelated infrastructure against attacks from outside U.S. borders;

o  	deter aggression and coercion by maintaining regionally tailored
forces forward stationed and deployed in Europe, Northeast Asia, the East
Asian littoral, and the Middle East/Southwest Asia;

o  	swiftly defeat aggression against U.S. allies and friends in two
overlapping major conflicts; and

o  	decisively defeat the adversary in one of two major conflicts by
imposing U.S. will and removing any future threat from that adversary.

The revised strategy significantly broadens the scope of potential
theaters of operations. Moreover, Air Force officials believe that the
Quadrennial Defense Review approach represents a significant increase in
potential mission requirements and carries with it a concomitant increase
in refueling requirements. At the same time, increasing domestic
operations in defense of the U.S. homeland may also impose substantial
aerial refueling requirements not previously contemplated. As shown in
table 5, in addition to changes in U.S. national security strategy,
changes in (1) overseas basing rights, (2) operational concepts, (3) the
extent of use of precision-guided munitions, (4) joint operations, and (5)
technology could also change refueling requirements.

Table 5: Changes to National Strategies and Operational Concepts That
Could Lead to Changed Aerial Refueling Requirements

Change Discussion

Changes in strategyIf changes to U.S. national security strategies occur,
including the 2005 Quadrennial Defense Review, refueling requirements
could also change. For example, "anti-access environments" may exist
whereby both the tanker and receiver aircraft would be required to fly
longer distances, causing the tanker to have less fuel to offload and the
receiver aircraft to require more fuel.

Overseas basing The potential loss of overseas basing rights without a
concomitant increase in basing rights elsewhere or contemplated overseas
force realignments could force U.S. combat and support aircraft to operate
from bases at greater distances from theaters of operations and
consequently require additional aerial refueling to meet combat and
support mission requirements.

Operational concepts Refueling requirements could change if individual
aircraft in the new refueling fleet can remain longer at aerial refueling
rendezvous points and themselves be aerially refueled.

Precision-guided munitions Increased reliance on precision-guided
munitions could change refueling requirements if standoff distances
increase for combat aircraft, thereby decreasing distances from the
operational base to the munitions' launch location, and if precision
munitions' success rate increases sufficiently to reduce the number of
sorties needed to bring the same effects on target.

Mixed receivers on joint operations The Air Force uses one type of
refueling system known as a "boom and receptacle," while Navy, Marine
Corps, and many allied aircraft use another system, known as "hose and
drogue." Consequently, increasing reliance on joint operations leads to
increased requirements for both boom and receptacle, and hose and drogue
off load capabilities. If the refueling fleet can operate either type of
offload mechanism on a single mission, refueling requirements could be
still different.

Emerging technologies Some emerging technologies such as unmanned aerial
vehicles have much longer ranges than manned systems and may lead to
changed refueling requirements.

Other Factors Could Impact Requirements

Source: GAO analysis.

Other aircraft acquisition and modification programs may also affect
future aerial refueling requirements. For example, Air Force officials
believe that newer aircraft will be increasingly fuel efficient, possibly
increasing their ranges and potentially reducing the number of refueling
aircraft needed. In its 2003 report on re-engining the B-52 bomber fleet,
the Defense Science Board examined the effect of more fuel-efficient
engines on missions flown from Diego Garcia during Operation Enduring
Freedom. Assuming that more efficient engines would increase the B-52s
range by at least 25 percent, the Board found that the Air Force could
reduce the size of the refueling fleet on Diego Garcia by one-third.12

12 Department of Defense, Office of the Under Secretary of Defense for
Acquisition, Technology and Logistics; Defense Science Board Task Force on
B-52H Re-Engining (Washington, D.C.: Dec. 2002).

Greater Efficiencies of a Modern Refueling Aircraft Could Lead to Reduced
Requirements

In addition, the Air Force may be expected to refuel fewer aircraft in the
future potentially leading to a reduction in refueling aircraft
requirements. For example, in its fiscal year 2004 budget submission, the
Navy proposed a new Navy-Marine Corps Tactical Air Integration plan that
is to more fully integrate the Navy and Marine Corps strike fighter forces
between fiscal years 2003 and 2012. If implemented, Navy and Marine Corps
strike fighter forces would be reduced from 872 to 562 aircraft,
significantly reducing the number of aircraft needing aerial refueling.

Initially, the Air Force plans to begin replacing its KC-135E aircraft,
about 130 planes, with 100 new KC-767A aircraft. The KC-767A, like most
modern aircraft, will have advantages and capabilities not found on the
KC-135s. In theory, these capabilities permit recapitalization of the
refueling fleet with fewer but more efficient aircraft without degrading
refueling capability. These capabilities could be added to new aircraft
during construction or during refurbishment and conversion of used
aircraft.

o  	New aircraft can be equipped with engines that are considerably more
powerful, yet more fuel efficient, maintainable, and less costly than
those powering the KC-135Es. This enables larger aircraft to operate from
shorter runways and to carry a greater payload (fuel, cargo, and/or
passengers) longer distances than the KC-135R aircraft. This would allow
new aircraft with characteristics similar to the KC-767A, to operate from
four times as many runways and offload up to 20 percent more fuel than the
KC-135E aircraft.

o  	Refueling aircraft that are equipped to refuel both hose and drogue
and boom and receptacle-type receiver aircraft on the same flight would
enhance joint operations because a single refueling aircraft could refuel
both Air Force and Navy aircraft without first landing and changing
equipment or requiring two differently equipped aircraft to operate
simultaneously. All of the KC-10 and 20 of the KC-135 refueling aircraft
currently have this capability.

o  	Refueling aircraft that can be aerially refueled themselves serve as
force multipliers in the sense that they can remain airborne for much
longer missions than the KC-135s and potentially support many more
receiver aircraft.

o  	Refueling aircraft that are equipped with wing-mounted refueling pods
could refuel two Navy-allied receiver aircraft simultaneously.

o  	Refueling aircraft derived from commercial aircraft designs can be
maintained according to commercial maintenance practices, which generally
results in the aircraft spending less time in maintenance at any given
time and consequently, being available for missions more often than the
KC-135 aircraft.

    Updated requirements study and analysis of alternatives were not planned at
    the time of our work

The national security strategy and defense planning guidance have changed
considerably since Tanker Requirements Study 05 was completed. In
addition, DOD Instruction 5000.2,13 which governs defense acquisition
programs, identifies the basic process acquisition programs should follow,
beginning with and based upon the overarching national security strategy,
any existing national military strategies, and joint concepts of
operations. Generally, a series of analyses should be conducted to
identify: what is needed to achieve military objectives; current
capabilities; gaps or shortcomings; and potential solutions. However, at
the time of our work, DOD did not plan to conduct a new requirements study
or replace Tanker Requirements Study 05. The guidance also recommends that
DOD conduct an analysis of alternatives to evaluate the operational
effectiveness, operational suitability, and estimated costs of alternative
approaches to meet a mission capability. The analysis assesses the
advantages and disadvantages of alternatives being considered to satisfy
capabilities, including the sensitivity of each alternative to possible
changes in key assumptions or variables.

The Air Force did not comprehensively reassess aerial refueling
requirements following the most recent Quadrennial Defense Review, nor did
it conduct a comprehensive analysis of alternatives before it proposed to
lease 100 KC-767A aerial refueling aircraft in 2003. Consequently, as a
result of congressional concerns about this matter, the National Defense
Authorization Act for Fiscal Year 2004 required that DOD complete an
analysis of alternatives by March 2004. DOD issued a memorandum dated
February 24, 2004, containing a preliminary report and outlining the
framework and parameters for the Air Force overview study of various
options for replacing its aging fleet of KC-135 refueling aircraft. In
addition, DOD has contracted for a study of the material condition of its

13 DOD Instruction 5000.2, "Operation of the Defense Acquisition System,"
May 12, 2003, implements DOD Directive 5000.1, "The Defense Acquisition
System," dated May 12, 2003. One of the stated purposes of 5000.2 is to
"establish a simplified and flexible management framework for
translating...approved mission needs and requirements, into stable,
affordable, and well-managed acquisition programs that include weapon
systems."

  Three Options Exist to Meeting the Air Force's Future Aerial Refueling
  Requirements

fleet of KC-135 aerial refueling aircraft with a report due by September
2004. Finally, to fully comply with the congressional reporting
requirement and the DOD February 2004 memorandum, the Air Force plans to
issue an analysis of alternatives in August 2005.

Replacing over 500 KC-135s will likely cost tens of billions of dollars,
and the time period over which this will be done could last several
decades, a period in which aircraft technology and aerial refueling needs,
as well as U.S. national security and military strategies and operational
concepts could change significantly. Just as conditions in the first
decade of the 21st century are dramatically different than they were in
the mid-1950s when the KC-135s were introduced, so too will conditions be
far different 30 to 40 years from now. As the Air Force begins to
modernize its aerial refueling fleet, it has three alternatives available
that have either been used previously or were being tested at the time of
our report. The most obvious alternative is to acquire one or more
variants of new commercial aircraft and convert them to refueling
aircraft. A second option is to acquire used commercial aircraft and
convert them into refueling aircraft. Thirdly, the Air Force could
contract for a portion of its aerial refueling needs as a service. The
most cost-effective solution may be a combination of these or other
options that would be closely examined in a comprehensive analysis of
alternatives, although the Air Force's analysis of alternatives was not
planned to review the option of contractorprovided aerial refueling.

    Acquiring New Aircraft

The Air Force could acquire one or more variants of new production
aircraft and convert them to refueling aircraft either through purchase,
lease, or a combination of the two.14 These new aircraft could consist of
a mixed force comprised of small, medium, and large aircraft suitable for
supporting a wide range of refueling operations. For example, in some
instances, U.S. airpower may be needed in parts of the world where there
are few suitable overseas airfields from which to operate large refueling
aircraft. In such cases, smaller tactical refueling aircraft capable of
operating from short, unimproved airfields close to the battlefield may be
desirable. In other instances, U.S. aircraft may be denied access to
airfields close to the battlefield, requiring combat aircraft to fly
extremely long distances with multiple aerial refuelings and large amounts
of fuel. In these instances, large strategic refueling aircraft capable of
offloading large amounts of fuel may be desirable. Regardless of the
ultimate aircraft mix, the overall cost to procure these planes could be
extremely expensive. If the Air Force could buy new refueling aircraft at
the $131 million price negotiated with the Boeing Company in 2003, it
would spend about $71 billion (in 2003 dollars), excluding support and
other costs, to replace all of the KC-135 fleet on a one-for-one aircraft
basis. On the other hand, if the Air Force leased some of these aircraft
over a long period of time-10 years for example-its cost per aircraft
could be about $80 million to $125 million.15 While purchasing costs less
than leasing if the aircraft is retained for its full service life of 20
to 30 years, leasing could have merit in some instances-for example to
temporarily fill a known capability gap before a significantly improved
technologically-advanced new aircraft can be produced.

Currently, the aircraft most discussed as the initial replacement for some
of the KC-135 fleet is the Boeing KC-767A. Section 8159 of the Department
of Defense Appropriations Act for Fiscal Year 200216 authorized the Air

14 In 1996, we recommended that the Air Force consider a multi-role
aircraft that could conduct either aerial refueling or airlift operations
as a replacement for the KC-135. See U.S. General Accounting Office, U.S.
Combat Air Power: Aging Refueling Aircraft Are Costly to Maintain and
Operate, GAO/NSIAD-96-160 (Washington, D.C.: Aug. 8, 1996).

15 Based on a lease rate for wide-body aircraft of one-half to
eight-tenths of 1 percent per month of the estimated purchase price,
multiplied by duration of the lease. This formula was presented by an
expert in commercial leasing at a July 23, 2003, hearing held by the
Committee on Armed Services, House of Representatives.

16 Department of Defense and Emergency Supplemental Appropriations for
Recovery from and Response to Terrorist Attacks on the United States Act,
2002, Pub. L. No. 107-117, S: 8159, 115 Stat. 2230, 2284-85 (2002).

Force to lease up to 100 aerial refueling aircraft, which the Air Force
tried to do in 2003 when it sought congressional approval of its leasing
plan. Subsequent to the hearings and in the National Defense Authorization
Act for Fiscal Year 2004, Congress amended the original lease provision
and authorized the Air Force to lease 20 new KC-767A aircraft and purchase
80.17 The KC-767A has about the same fuel capacity as the KC-135R and is
larger and heavier, but more fuel-efficient. Another current aerial
refueling aircraft candidate is the Airbus A330 aircraft. The A330 is
considerably larger than the KC-767A and has about 20 percent greater fuel
capacity. It was being considered as the replacement refueling aircraft in
the United Kingdom at the time of this report. Another Airbus model, the
A310 is being operated with five international air forces, with the first
aerial refueling version expected to be operational with the German Air
Force in the first half of this year. In addition, two other aircraft are
being developed that could potentially serve as future refuelers. Airbus
is developing the A380, which is somewhat larger than the Boeing 747 and
is expected to enter passenger service in 2006. Airbus claims the A380
will burn 13 percent less fuel but carry about 35 percent more passengers.
Boeing has begun developing the 7E7, which will be closer in size to the
A330. Boeing claims the 7E7 will be 20 percent more efficient than current
aircraft.

Also, future unmanned aerial refueling vehicles may be another acquisition
option to be considered by the Air Force and is denoted as a possible
option to study in DOD's February 2004 guidance to the Air Force. The
Unmanned Aerial Vehicles Roadmap released by DOD in March 2003 suggests
the possibility of such unmanned aerial refueling vehicles being in the
Air Force's inventory in the 2015-2020 time period.18 The development and
deployment of such vehicles would permit their remaining at an aerial
refueling rendezvous point for long durations without entering a combat
zone. In addition, such a collection of unmanned aerial refueling vehicles
may be smaller in size than the aerial refueling aircraft now being
considered and may better meet the needs of the Air Force in certain
unique operations.

17 National Defense Authorization Act for Fiscal Year 2004, Pub.L. No.
108-136, S: 135, 117 Stat. 1392, 1413-14 (2003).

18 U.S. Department of Defense, Unmanned Aerial Vehicles Roadmap, 2002-2027
(Washington, D.C.: December 2002).

    Acquire Used Aircraft

The Air Force could augment its refueling fleet by acquiring some used
aircraft from among the over 1,500 commercial airliners in storage at the
time of our report.19 Under this approach, the Air Force would convert
them to aerial refueling aircraft. Some of these aircraft are relatively
new or have not been used extensively, while others are older and have
been used extensively. However, with extensive refurbishment and
conversion into a refueling and cargo-capable aircraft, these aircraft
could be suitable, given the relatively few hours refueling aircraft fly
each year when compared to commercial aircraft. Possible limitations are
that it is not known whether the owners would sell the aircraft, the cost
to convert them could be high, and introduction of differing aircraft
types into the fleet could complicate maintenance and logistics because
different spare parts would need to be stockpiled and maintenance crews
would need different types of training.

    Obtain Refueling Services from a Contractor

Under this concept the Air Force would maintain a core aerial refueling
capability and augment it with contractor-provided refueling services that
could be activated on short notice-an aerial refueling Civil Reserve Air
Fleet-to meet additional anticipated aerial refueling demands that may
exceed its own capacity. We envision that this approach could be similar
to the Civil Reserve Air Fleet program in which commercial airlines agree
in advance to make some of their aircraft and crews available to DOD when
needed to transport troops to a theater of operations in wartime. In
addition, contractor refuelers could be used to meet some of the noncombat
aerial refueling demands such as proficiency training for receiver
aircraft aircrews, supporting the deployment of aircraft during periodic
Air Force Air Expeditionary Force rotations, and other planned aircraft
movements. Currently, these types of support missions can add a
considerable amount of additional time that active duty and reserve
component refueling aircrews must spend away from their home bases.

Before joining the program's pool of eligible aircraft, the aircraft would
be structurally modified, and basic aerial refueling equipment including
additional fuel tanks, lines, and pumps, would be installed, most likely
at government expense. Some of this equipment, such as external refueling
booms and pods, and militarily-unique avionics could be designed so that

19 Speednews.com, a commercial aviation Web site, reported that there were
475 wide-body jets in storage in December 2003 and 1,147 narrow-body jets.
Of the wide-body aircraft, there were 119 B-747s, 71 B-767s, 81 DC-10s,
and 26 MD-11s.

it can be quickly added or removed depending on whether the aircraft is to
be operated in a military or civilian capacity. The aircraft owners would
most likely operate these aircraft for commercial airfreight business when
not needed for aerial refueling.

Contractor-owned aircraft would not necessarily have to be used in the
combat theater, but could nevertheless provide significant refueling
support, and free up military refueling aircraft to be used in combat
areas. For example, these aircraft could be used to provide the "air
bridge" refueling to support the movement of fighters, bombers, and
transport aircraft from home bases in the United States or elsewhere to
the combat theater of operations but never enter the theater.20 DOD and
the Air Force did not plan to include the option of contractor-provided
aerial refueling in its analysis of alternatives, at the time of our
review.

The Navy is conducting a pilot program to examine the feasibility of using
contractor-provided aerial refueling services to meet some of its aerial
refueling needs. The Navy refueling aircraft is a Boeing 707, the same
aircraft on which the Air Force's current workhorse KC-135 is based. At
times, Air Force refueling aircraft have not been available to support
Navy training due to the lower priority placed on Navy training by the Air
Force, and sometimes training plans changed on relatively short-notice;
hence, the Navy sought alternatives and developed the pilot program.
According to a Center for Naval Analyses study, the Navy's contractor has
enhanced aircraft carrier training. The study reported that having an
aerial refueling aircraft controlled by and dedicated to the Navy provided
flexibility during periods of high-operational tempo, and saved time and
fuel as Navy aircraft flew coast to coast to conduct training. Moreover,
Navy officials have stated that at least in the early stages of its pilot
program, mission availability rates have been excellent for operations
performed in the continental United States and in supporting training
exercises in Puerto Rico. The presence of a large dedicated refueling
aircraft during training has also enabled Navy aircraft to rely less on
their own refuelingcapability, currently S-3B and F/A-18F fighter aircraft
that can refuel other fighters, and allow those aircraft, especially the
F/A-18D/Es to focus on their primary combat missions. While Navy officials
expressed positive views about their experience to date with
contractor-provided aerial refueling, they also said that landing
privileges at military bases, peacetime

20 The Air Force used 100 refueling aircraft during Operations Desert
Shield and Desert Storm to support the Atlantic and Pacific "air bridges."

Conclusions

Recommendations for Executive Action

and wartime communication requirements, reliability, and other issues
would need to be worked out if this approach were used on a large scale.

The Air Force is embarking on a program that could cost billions of
dollars to replace the existing KC-135 fleet without knowing how many or
what types of replacement aircraft it needs, because it does not have a
current requirements study. Consequently, the Air Force could miss
opportunities to meet its refueling needs in the most cost-effective
manner; it does not have a roadmap to guide it as it makes investment
decisions about tanker replacement. The Air Force could begin its tanker
replacement program along the lines of the lease-buy program approved by
Congress last year without such a roadmap, but we believe that long-term
replacement decisions for the remainder of the tanker fleet should be
based on a sound, comprehensive requirements study reflecting the most
up-to-date analysis possible of the future environment.

Also, at least three options exist for meeting DOD's aerial refueling
needs, but without a comprehensive analysis of alternatives, the Air Force
would not know what option or combination of options are best suited to
meeting the requirements. As a result, the Air Force would not have a
sufficient basis on which to make its investment decision. Thus, we agree
with the February 2004 DOD initiative for the Air Force to conduct an
analysis of alternatives study for meeting the aerial refueling
requirements. We believe, however, that the planned analysis of
alternatives would be more effective and useful if it included all
potential options, especially the possibility of meeting at least a
portion of tanker needs through the use of contractor-provided refueling.

To provide a current, comprehensive roadmap to guide long-term replacement
of the current tanker fleet, we recommend that the Secretary of Defense
conduct a new, validated requirements study to determine the current and
projected aerial refueling requirements.

We also recommend that the Secretary of Defense direct that the Air
Force's planned analysis of alternatives be a comprehensive study of all
reasonable options, including using contractor-provided aerial refueling
services to meet some portion of its aerial refueling needs.

  Agency Comments
  and Our Evaluation

We received written comments on a draft of this report from the Director
of Defense Systems in the Office of the Undersecretary of Defense for
Acquisition, Technology, and Logistics. In its comments, DOD concurred
with each of our recommendations. First, DOD indicated that a Mobility
Capabilities Study was underway at the time of our report to determine
aerial refueling requirements. Second, DOD indicated that the analysis of
alternatives would include consideration of contractor-provided aerial
refueling as a potential alternative. DOD's comments are printed in their
entirety in appendix II.

In addition, DOD provided technical comments which we incorporated in our
report where appropriate.

We are sending copies of this report to other appropriate congressional
committees, the Secretary of Defense, the Secretary of the Air Force, and
the Director, Office of Management and Budget, and it will be available at
no charge on GAO's Web site at http://www.gao.gov. If you or your staff
have any questions about this report, please contact me at (202) 512-4914.
Key contributors to this report are listed in appendix III.

Neal P. Curtin Director, Defense Capabilities and Management

                       Appendix I: Scope and Methodology

Our objectives were to examine (1) the extent to which DOD's current
aerial refueling force has met aerial refueling needs, and the cost and
effort associated with operating and sustaining the current aircraft
fleet; (2) the most recent aerial refueling requirements; and (3) options
to enable DOD to meet future aerial refueling requirements.

To examine the extent to which DOD's current aerial refueling force has
met refueling needs, we conducted interviews with DOD and Air Force
officials and obtained documents showing the services' refueling needs in
recent operations and the mission capable rates achieved of the current
refueling fleet. In addition, to examine the cost and effort to operate
and maintain the existing aerial refueling fleet, we interviewed officials
and obtained documents from the Office of the Chief of Air Force
Acquisition, Global Reach Program. We also visited the Air Force's Air
Mobility Command at Scott Air Force Base, Illinois, and the Air Force's
Oklahoma Air Logistics Center at Tinker Air Force Base and interviewed key
aerial refueling aircraft operations, maintenance, and program analysis
officials. At both locations, we reviewed cost and maintenance documents.
We did not independently verify the reliability of the cost and
maintenance data provided to us however, we discussed cost estimates with
certain external organizations, including the Institute of Defense
Analyses, the American Transport Association, and other organizations and
determined the data that we had obtained was reasonable. We also reviewed
testimony by DOD, Air Force, and other officials before a variety of
congressional committees considering the proposed lease of 100 KC-767A
aerial refueling aircraft.

To examine the most recent aerial refueling requirements, we met with
officials from the Office of the Secretary of the Air Force, and U.S.
Transportation Command officials responsible for determining refueling
requirements and operating costs and obtained key requirements documents
including DOD Instruction 5000.2, "Operation of the Defense Acquisition
System," Chairman of the Joint Chiefs of Staff Instruction 3170.01C,
"Joint Capabilities Integration and Development System," June 24, 2003,
and other documents showing the characteristics, missions, requirements,
employment concepts, and costs of operation of the refueling aircraft. We
also reviewed a briefing on Tanker Requirements Study-05 and the complete
Mobility Requirements Study-05, and other Air Force briefings, and related
documents. To gain a better perspective of air refueling operations and
requirements, we discussed with appropriate Air Force and DOD officials
the services' policies, priorities, and procedures for using, modernizing,
and maintaining their refueling aircraft inventory. Moreover, we obtained
information documenting required KC-135

Appendix I: Scope and Methodology

maintenance and planned modifications to the aircraft. We also reviewed
several studies and reports addressing various aerial refueling fleet
topics, including those developed in recent major combat operations. We
also reviewed a report from the Congressional Budget Office that estimates
refueling aircraft maintenance and replacement costs. In addition, we
discussed aerial refueling issues with representatives of several research
organizations including the Institute of Defense Analyses and The Rand
Corporation, and major military aircraft manufacturers including The
Boeing Company and Lockheed-Martin. When analyzing the problems of
maintaining aging aircraft, we concentrated on the Air Force's KC-135
aircraft because it makes up the bulk of the DOD's aerial refueling
inventory.

Finally, to examine options to enable DOD to meet its aerial refueling
requirements, we met with officials from the Office of the Secretary of
Defense (Comptroller); Office of Air Force Acquisition, Global Reach
Programs; the Air Force's Air Logistics Center at Tinker Air Force Base; a
contractor who was providing refueling services to the Navy at the time of
our review; the Office of Management and Budget; the Air Transport
Association; several major U.S. commercial airlines; and the United
Kingdom's Ministry of Defense, which was preparing to lease aerial
refueling aircraft at the time of our review. We used our 1996 report on
aging refueling aircraft and related accelerating operation and
maintenance cost problems to suggest ways for DOD to consider
recapitalizing its aerial refueling fleet. Moreover, we reviewed documents
and briefings from many of these same organizations to identify options
available to the Air Force and DOD to meet current and projected aerial
refueling requirements.

We performed our work from December 2001 through April 2004 in accordance
with generally accepted government auditing standards.

Appendix II: Comments from the Department of Defense

Appendix II: Comments from the Department of Defense

Appendix III: GAO Contact and Staff Acknowledgments

Contact Brian J. Lepore (202) 512-4523

Acknowledgments 	In addition to the person named above, William C.
Meredith; Kenneth W. Newell; Joseph J. Faley; Tim F. Stone; Fred S.
Harrison; Norman L. Jessup, Jr.; James K. Mahaffey; Ann M. Dubois; Charles
Perdue; and Kenneth E. Patton also made major contributions to this
report.

Related GAO Products

Military Aircraft: Observations on DOD's Aerial Refueling Aircraft
Acquisition Options. GAO-04-169R. Washington, D.C.: October 14, 2003.

Military Aircraft: Institute for Defense Analysis Purchase Price Estimate
for the Air Force's Aerial Refueling Aircraft Leasing Proposal.
GAO-04-164R. Washington, D.C.: October 14, 2003.

Military Aircraft: Observations on the Proposed Lease of Aerial Refueling
Aircraft by the Air Force. GAO-03-923T. Washington, D.C.: September 4,
2003.

Military Aircraft: Observations on the Air Force Plan to Lease Aerial
Refueling Aircraft. GAO-03-1143T. Washington, D.C.: September 3, 2003.

Military Aircraft: Considerations in Reviewing the Air Force Proposal to
Lease Aerial Refueling Aircraft. GAO-03-1048T. Washington, D.C.: July 23,
2003.

Military Aircraft: Information on Air Force Aerial Refueling Tankers.
GAO-03-938T. Washington, D.C.: June 24, 2003.

Air Force Aircraft: Preliminary Information on Air Force Tanker Leasing.
GAO-02-724R. Washington, D.C.: May 15, 2002.

U.S. Combat Air Power: Aging Refueling Aircraft Are Costly to Maintain and
Operate. GAO/NSIAD-96-160. Washington, D.C.: August 8, 1996.

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