The Value of the Civil Reserve Air Fleet: How Much Could the DoD Spend on Incentives?
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This study evaluated the value of the CRAF program to the DOD and explored the amount that could be spent to remove potential obstacles to participation with aviation insurance and lost market share. In comparing the value of the CRAF and the cost of current incentives, it was determined that up to $1.4 million could be spent on additional incentives, annually. For multiple aircraft losses and liability claims, the Air Force would need to tap into the Defense Business Operating Fund. Therefore, a sensitivity analysis was conducted and found that for low valued aircraft, such as the DC8, the co...
This study evaluated the value of the CRAF program to the DOD and explored the amount that could be spent to remove potential obstacles to participation with aviation insurance and lost market share. In comparing the value of the CRAF and the cost of current incentives, it was determined that up to $1.4 million could be spent on additional incentives, annually. For multiple aircraft losses and liability claims, the Air Force would need to tap into the Defense Business Operating Fund. Therefore, a sensitivity analysis was conducted and found that for low valued aircraft, such as the DC8, the cost due to loss would exceed the cost of commercial insurance at relatively low incident rates. Thus, it may be appropriate for the DOD to absorb the cost of commercial war-risk insurance for certain missions, thereby eliminating the expense resulting from a large claim. The cost due to lost market share was measured by the minimum cost required to re-enter a city pair market.
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