There are some threads on this but the answer to the initial poster's question goes like this:
(1) It is expensive to maintain the infastructure necessary to service the military on a regular basis. But, if there were sufficient money in it, presumably the majors would do it. But they make money a different, better way from the military business.
(2) All the majors and most minor carriers "commit" a certain array of aircraft to a government program called the Civil Reserve Air Fleet. They actually do it by registering aircraft by tail number with the CRAF. By doing so, they promise that the government can, in an emergency, call up those aircraft to provide lift to the military. Hundreds of aircraft are committed to the program. In an emergency, the program is activated in stages, I, II
and III. In each stage, the military can order the airline to provide a certain percentage of its committed aircraft to run certain routes. The Air Mobility Command will "activate" certain aircraft after declaring a Stage I, etc., emergency. When an aircraft is activated, it and a specified number of crews must be available to undertake certain gov't missions on (I think), 4 hours' notice. Activation of any stage is rare -- it happened in the second gulf war for a period of time -- and only takes place when the regular charter carriers, supplemented by VOLUNTARY offers of aircraft for charter by the majors, is insufficient to meet the military's needs. Activations are disruptive to a carrier's business, so when the need exceeds the ability of the charter guys, the majors usually work with the military to accept a few charters, lest they be forced to do it. When you see AA
flying a military mission, it means that World, Omni, North American, Ryan, and ATA are fully committed on that day and couldn't take the mission. Right now, after the holidays and leading to the election in Iraq, you'll see several charters by NW
, but not a massive amount.
(3) In return for committing aircraft to the Long Range International portion of the CRAF, the goverment offers all committing airlines a proportionate right (based on the number of seats available for military use aboard the committed aircraft) to peacetime military charter work. So, in theory, AA
could commit all its appropriate aircraft to the CRAF, and would in return be entitled to a certain number of charters in peacetime. However, it doesn't really want that business, so the government has a nifty system to compensate AA
, etc. for their commitment of aircraft without them actually having to fly very often. It's called a "teaming arrangement". Airline's form teams to pool their charter entitlements. One is called the Alliance Contractor team, another is called the FedEx team, and this year, there is a UPS team. Some other carriers go it alone, but virtually all majors belong to a team. The government adds up the seats (and tonnage for cargo aircraft) committed to the team and translates those into what it calls "Mobilization Value Points". Those points (and the rights to charter work that they represent) belong to the TEAM. Each team has an agreement among its members that designates a certain member (or members) to do the cargo flying for that team and another to do the passenger flying. When it comes to passenger flying, ATA does the flying for the FedEx team, World does the flying for the Alliance Team, Omni does flying for one of those, and North American does the flying for the UPS Team. The airline that does the flying then pays cash "commissions" back to the team members for the right to do the flying. So the members get cash from the designated flying carriers in return for the rights to the charter work represented by the aircraft they have committed. (In an activation, no commissions are paid. When there is no activation but AA
does a charter, it still gets its commissions from the team members plus payment for the charters, so there is an incentive to do those charters when requested without an activation; that way it still gets it commissions from the team as well as reimbursement for the charters that it voluntarily flies with its own aircraft.)
(4) Changes in the cost of fuel are cushioned by the military. It doesn't actually buy the fuel, but it adjusts its per mile reimbursements based upon differences between actual average fuel prices and the fuel prices used in its reimbursement methodology.
(5) Here's an interesting fact: the reimbursement rate is based upon the average cost to fly a mile for all large and all small pax or cargo aircraft committed to the fleet. (There are only a couple of categories into which the aircraft fall.) So, if AA
, etc. all have new large aircraft that have a high capital cost and have high crew wages, those high costs get factored into the average cost upon which the military bases its reimbursements.
As those high costs of the majors (excepting fuel) are driven downwards, the average reimbursement to the flying carriers will actually FALL in the following year when the new rates are calculated. It has traditionally been the case that carriers like World, Omni, North American, and ATA can do these charters at a lower cost than can the majors, so they can make money based upon the spread between the reimbursement rate and their actual (lower) cost. Of course, part of this profit goes towards commissions to the major carriers on their teams. It is interesting to see that it is actually to ATA's advantage, for example, for UA
, etc. to be paying much higher wages and flying much more expensive metal.
(6) The allocation of flying actually works like this: each month, the military looks at its expected requirements and allocates them proportionally to each team. If one flying carrier on that can't do a particular flight, then it goes to another flying member of that team, and then to another team that has unused entitlements and if they can't do it then to any team; the military tries to give the guy who couldn't fly another opportunity later in the month so that at the end of the month, each team gets its proportionate share. If by the end of the month there is a wide discrepancy between what a team was entitled to and what it actually could do, they are stuck; the slate gets wiped clean at the beginning of the next month. If no flying member can do the charter, then it goes to any CRAF participant who can do the mission. How much of its entitlements a given flying carrier can actually do affects how much the rest of the team gets in commissions, so there is pressure on that carrier to get those missions done; otherwise, its team members may go somewhere else the next year, and there have been shifts over the years. ATA's team will likely be happy that they're getting their aircraft serviced and back in the air and are refocusing on accomodating the military; I'm guessing that they had more entitlements over the past several months than they could fly, with various aircraft down for C and D checks.
So, in short, NW
doesn't really want those charters unless it has available aircraft and crew; it makes money by letting its team members do the actual flying at a lower cost than it can do the charters, and the reimbursement that it would get to do the flying itself is the same as its team members get. However, it will do its share of charters when the flying team members can't, because it wants to prevent an activation which would then make the charters INvoluntary rather than voluntary, and would cut off its commission stream during the activation.
Hope this helps.