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OST-2003-14694

 

 

https://about.usps.com/handbooks/po508/po508_ch2_004.htm

Old Dockets:  OST-1995-405 | OST-1995-429

 

Intra-Alaska Class Service Mail Rates 

OST-2003-14694
OST-2003-14695
Issued March 14, 2003
Served March 14, 2003
Notice of Inauguration of New Dockets

Microsoft Word

Intra-Alaska Class Service Mail Rates

Notice, the Department decided for administrative convenience to inaugurate new dockets as of March 17, 2003, for Mainline Mail Rates (OST-2003-14694) and Bush Mail Rates (OST-2003-14695), respectively. Parties referring to filings in the previous dockets should state the date filed in the previous docket(s) and request incorporation. All pleadings after the above date should be filed in the new dockets.

By: Read C. Van de Water



OST-03-14694
OST-03-14695
March 11, 2003 Correspondence from United States Postal Service Re: Notice of Inauguration of New Dockets

By: John Bonafilia



OST-03-14694
OST-03-14695
March 19, 2003 Correspondence from Ken Acton Re: Notice of Inauguration of New Dockets

During the recent Alaska Air Carriers Association convention in Anchorage you presented a working draft of the data that the USPS would like to collect from carriers to verify performance of scheduled service. You also stated that you do not intend to use the data from the carrier flight reports to the Postal Service to calculate carrier market shares, but would use the T100 data released by the USDOT to calculate market shares. I am concerned that the data elements described in your handout may not be easily obtained from carriers and they may not all be necessary for the Postal Service to accomplish its stated interests.

The enclosed outline in this letter includes considerations for the design of carrier reports to the Postal Service that would demonstrate flight performance. This outline is based on the needs you have described for the Postal Service as well as a personal familiarity with the flight records and data management systems that are available to Alaska air carriers.

All responsible carriers welcome the interest of the Postal Service to verify and enforce schedule adherence. If the desired flight reports are to be successfully implemented however, it is in the best interest of the Postal Service and air carriers that the design of such reports is consistent with the records that carriers currently maintain and generate for their USDOT T100 reports. l also believe that every effort should be made to simplify the reports and require only those elements that are essential to the needs of the Postal Service to verify flight performance and transportation of the mail. The enclosed outline includes the fundamental elements and rationale of a design that would have these qualities.

By: Ken Acton



Order 98-1-25
OST-95-405
OST-03-14694
OST-03-14695
Posted April 16, 2002
Served April 21, 2003
Request for Comments Regarding Implementation of Rural Service Improvement Act

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Intra-Alaska Bush Service Mail Rates

On August 2, 2002, the Rural Service Improvement Act of 2002 became law.  The Act concerns intra-Alaska mail.  Among other things, it requires the Secretary of Transportation to implement certain provisions of the Act.  The law requires that the Secretary use show-cause procedures to conduct a bush mail rate investigation to determine new rates and review the need for such every two years.  The Department has begun that process.  Order 2002-1-4 required the carriers to submit additional data to enable the Department to conduct such an investigation.

The new law also raises several issues that would have important effects on intra-Alaska mail.  As a result, the law requires the Department to act in several new areas, and we are requesting comments before we act. 

By: Read C. Van de Water

April 25, 2003

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

Comments of Cape Smythe Air

This law is totally absurd. IF service is being provided by a "Bush 121" carrier aircraft and the aircraft is certified as a 121 type aircraft the "Bush 121 rate" should prevail. However, if the carrier that is a 121/135 certificated carrier and the service that is provided is provided in a part 135 aircraft then the "121 Bush rate" should not prevail. The 121/135 certified carrier should not be allowed to carry any mail into that airport in a 135 type aircraft or the rate should be paid at the 135 bush rate.

By: Grant Thompson



OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

April 23, 2003

Response of Era Aviation

By: Mike LeNorman



OST-03-14694: Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695: Intra-Alaska Class Service Mail Rates - Bush Mail Rates

Posted May 16, 2003 | Served May 21, 2003

Notice of Extension for Comments

On April 15, 2003, served April 21, 2003, the Department requested comments regarding the Rural Air Service Improvement Act of 2002. Comments are due on May 21, 2003. On May 14, 2003, Hank Myers, representing several Alaska bush carriers directly affected by this law, requested an extension to respond. He indicated that several carriers, had not received the Request for Comments until he had notified them of it, and requested an extension to close of business on June 2. We will grant his request, and give all interested parties until June 2 to submit comments.

In order to ensure that all parties are timely served with future documents in this proceeding, we have attached the current service list to this proceeding and ask all parties to correct, or add their full addresses, including e-mail, phone, and fax numbers within 14 days of the service date of this notice. The information should be sent to: Dockets Operations and Media Management, M-30, PL 401, U.S. Department of Transportation, 400 7th Street, SW, Washington, D.C. 20590, Dockets 2003-14694 and 14695.

Appendices - Service List

By: Randall Bennett


May 14, 2003

Comments of Tanana Air Service

Tanana Air Service appreciates the opportunity to comment on the Rural Service Improvernt Act. There have been numerous definitions of how and what the Act said when all parties are reading the same document. This action will change commercial aviation in Alaska for the next twenty years; therefore, how the Act is interrupted is critical. Although the form that you attached to the notice is simple to complete, this data is on file with the Department of Transportation, Federal Aviation Administration. Carriers are required to provide the FAA with a certificate of insurance at each renewal or whenever a change in the aircraft fleet occurs.

By: Fred Ciarlo



OST-03-14694: Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695: Intra-Alaska Class Service Mail Rates - Bush Mail Rates

May 15, 2003

Comments of Hageland Aviation

The Department's proposed report appears to be adequate for complying with the provisions of subsection (k)(4). It is not apparent however that a monthly frequency for its submission is necessary. This information is rather stable and normally changes only when a carrier renews its insurance or makes a change to its aircraft fleet; these events do not normally occur each month. We propose that the annual verification of insurance coverage that carriers already submit to the Department be modified to include any additional information that the law requires. Alternatively, carriers could submit the needed information on a quarterly basis with their F2 report. In either case, carriers can submit insurance verification more frequently if any of the information is updated.

By: L. Michael Hageland, 907-245-0119


May 16, 2003

Comments of Larry's Flying Service

The fact that the comments were invited by DOT leads us to believe that DOT is at least looking seriously at the ramifications of the proposed changes on the transportation system. DOT may very well see that changes proposed could and will devastate the system. We do need to make some changes to the point where both the Postal service and the passengers will be served in spite of 121, percentages and O&D's. The system is not yet broken but it is severely on the verge of becoming broken .... the proposed changes have been railroaded by the few looking to increase their own positions to the detriment and possibly the demise of the system itself. We cannot allow this to happen!

Appendix 1 & 2: Alaska Runway Information / Bevel Hovercraft Experiment

By: Lawrence Chenaille, 907-474-9169



OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

May 20, 2003

Correspondence of Tanana Air Service

In response to the Notice served: May 21, 2003, Tanana Air Service has the following corrections to the service list for these Docket proceedings:

Fred H. Ciarlo Tanana Air Service P.O. Box 60713 Fairbanks, AK 99706

e-mail address is correct as listed, Tanana@polarnet.com

Harold Esmailka Tanana Air Service P.O. Box 29 Ruby, AK 99768

Harold does not have an e-mail address.

I request that all documents for these proceedings be sent to both of the above named parties.

By: Fred Ciarlo



OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

May 15, 2003

Comments of Arctic Circle Air Service

By: Don Singsass



OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

Correspondence of Alaska Central Express

Before commenting on some of the implementation issues raised by the DOT in its Notice, Alaska Central wants to state for the record that the Act is an unfortunate piece of special interest legislation crafted to benefit only a select number of mainline and bush carriers, while literally legislating other carriers out of business, or at least a major portion of their business. The Act is striking in its Rube Goldberg type construction making it a very cumbersome Act to understand or, as undoubtedly the DOT and USPS will discover, to fully and faithfully implement. Disputes over the provisions of the Act will engender controversy and litigation as carriers object to what may be perceived as arbitrary decisions on the part of the DOT and USPS as they struggle to execute the complicated and inartfully drafted provisions of the Act.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300, rsilverberg@sgbdc.com


May 27, 2003

Correspondence of Arctic Transportation Services

ATS believes that the reports the Department seeks would be better used as an analysis rather than a reliability reporting issue. The flight log information reports would be a substantial burden on all carriers and would not provide a meaningful analysis to determine the scheduled reliability of a bush carrier. There are numerous non quantifiable reasons such as runway, weather and safety concerns which would make an analysis problematic. The issues that the United States Post Office has with scheduled reliability pertains primarily to the priority mail movement and should not be mixed with the non priority mail requirements. In any event, "bush passenger or bush freight carrier market forces will either expand or eliminate a majority of the carriers transporting mail solely with the State of Alaska and makes the overall management of priority mail less burdensome.

By: Wilfred P. Ryan


May 30, 2003

Correspondence of Aviation Consulting & Training

To establish the kind of stable and reliable scheduled air service that is engendered in the RSIA, it is important that all bush market share calculations be done using a rolling 12-month pool of carrier traffic statistics. Calculation of bush route market shares using a data pool of less than 12-months will invite and reward short-term, opportunistic and predatory scheduled service practices from carriers trying to capture qualified status to the passenger or freight pool without making a long-term commitment to scheduled service.

By: Ken Action


June 2, 2003

Correspondence of Consolidated Carriers | Word

The Department has begun its timely and thoughtful consideration of the provisions of the Rural Service Improvement Act of 2002. The Act specifically reserves to the Secretary the ability to set appropriate mail rates, and to collect and validate the accuracy of the T- 100 reports which will be used to determine eligibility for bypass tender. At the same time, the Act specifically excludes non-bypass carriers and markets from the selection process. The Act also adds language requiring and insuring "equitable tender" for all classes of mail in all markets. The Postal Service does not have the authority on its own to disqualify any carriers from mail tender except as described in the Act's provisions governing bypass mail. Furthermore, the Postal Service does not have the authority to impose new rules, requirements of regulations that are not required to meet the specifications of the Act.

Index of Appendices | Word

By: Hank Myers


June 1, 2003

Correspondence of Frontier Flying Service

Since there are really no restrictions as to what amount or how many seats must be insured, it seems that the requested information is somewhat meaningless. The Department of Transportation has a minimum level for liability insurance. The department could kill two birds with one stone by just mandating that they be sent a certificate of insurance for the carrier. I have attached a certificate for Frontier that in one page shows the fleet by N-Number, Type aircraft, Number of seats insured and amount of liability coverage. This form is automatically generated when an aircraft is added or subtracted and of course at insurance renewal.

By: Bob Hajdukovich


June 2, 2003

Correspondence of United States Postal Service | Word

Although it was not mentioned in this notice, the Postal Service understands that the Department is considering establishing a new report or procedure for attributing fuel costs. This would seem to have an impact on the base rate investigation and the new rate update procedures being discussed as a result of the change in the law. The Postal Service is open to discussions with concerned parties on the best way to approach the attribution of fuel costs. This would also present an opportunity for the Postal Service to introduce and get feedback on the potential for a new fuel purchasing strategy which makes fuel costs a pass-through separate and apart from the rate-making process.

By: William J. Jones


May 29, 2003

Correspondence of Village Aviation | Word

All costs data relating to the Part 121 aircraft operated on a bush route should be included in the determination of the Part 121 bush rate. In the past the Department has excluded data from the rate pool from any carrier who has operations which are not consistent with the type of service provided to which the mail rate applies.

By: Don R. King


May 30, 2003

Correspondence of Warbelow's Air Ventures

The data being requested is stable over time, but may be needed by the USPS for pay and tender purposes in real time. Therefore we would suggest that each operatcr make an initial report, and then incremental reports prior to putting an aircraft in service or taking it out.

By: Arthur Warbelow



OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

May 28, 2003

Correspondence of Inland Aviation Services

I believe a little more attention to the distinction between non-priority bypass and Alaska bypass mail and to which of the two the "Rural Service Improvement Act" refers to is necessary. In a recent conversation with Steve Deaton we learned that the USPS is considering allotting in house iionpriority mail in accordance with the Rural Service Improvement Act as well as bypass. This would increase the impact which this Act has on air carriers to the point which it would make it impossible for some of the carriers which are providing regular reliable service but not yet able to compete for more than 20% of a large passenger market because of size to continue operation.

By: Steven Hill



OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

June 2, 2003

Correspondence of Cape Smythe Air

By: Grant Thompson, 907-852-5004, grant@capesmythe.com



OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

June 11, 2003

Correspondence of Hageland Aivation Services

We are concerned that some comments recently submitted to the Docket appear to have been written by those who have forgotten the fundamental public policy issues of mail transportation in rural Alaska and the premises of the RSIA. We are also concerned that some parties would construe the RSIA to be more complex than necessary or engendered in the RSIA.

The historic and underlying public policy issues of rural Alaska transportation are still valid. Namely, it is correct for Congress and the Department to be concerned about providing reliable, scheduled air transportation for the public in places where no other transportation is practical.

The RSIA is consistent with the public interest insofar that it ensures that bypass mail transportation is no longer diverted to carriers that do not seriously compete for transportation of passengers and non-mail freight. It is commonly known by most parties, and openly admitted by some, that there are carriers who have expanded their route structure for the primary purpose of increasing mail revenues. It is not necessary to ignore this fact or to pretend otherwise.

We believe the RSIA is the best thing to happen for rural Alaska passengers, freight transportation consumers, and the Postal Service since the creation of bypass mail. We look forward to its implementation.

By: Michael Hageland, 907-245-0119



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Service Mail Rates

June 17, 2003

Reply Comments of Peninsula Airways

PenAir is a leading provider of precisely the type of high-quality rural air service which the Act seeks to promote. PenAir has provided extensive passenger, freight and mail service to rural Alaska for nearly 50 years. Indeed, PenAir has pioneered Part 121 service to many bush communities. However, in order to most efficiently and most effectively serve the needs of rural Alaska, PenAir operates scheduled service under both Part 121 and 135 (as well as Part 135 amphibious). As such, PenAir has a unique appreciation of the implementation issues that the Department is considering under the Act.

Counsel: Shaw Pittman, Robert Cohn, 202-663-8060


June 17, 2003

Reply Comments of the United States Postal Service | Word

The Postal Service would like to dispel one other myth that seems to pervade some carrier thinking. The Postal Service, as recognized by the DOT and stated clearly in its operating manual, has authority over tender decisions subject to existing regulations. As stated by the DOT in Order 2000-11-9, "the Department has long recognized that the Postal Service has both the primary authority and responsibility to determine the tender of mail under its statute and regulations." In addition, the Postal Service also has the right to remove carriers from tender. It has, in various circumstances, removed a carrier from tender for unreliable performance, without DOT intervention, and will continue to exercise its authority in that regard.

Counsel: William Jones, William.J.Jones@usps.com


June 17, 2003

Rebuttal Comments of Warbelow's Air Ventures | Word

Given the time constraints to implement before November 3, 2003, and the lack of reported excise tax as required by the RISA at this point in time, we suggest that implementation be undertaken in two steps. Initial market shares could be established using currently available data, with an order issued now to require submission of the city pair revenue or excise tax data for future reporting periods.

Carriers might be given the choice to either compile and submit this data themselves with the T-100 reports, or alternatively, coordinate with the USPS to collect this data on their Internet based data collection system now being developed. For operators with limited systems or ability to develop new systems, this would provide a simple alterative method to report the data, without incremental reporting overhead.

By: Arthur Warbelow



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Service Mail Rates

June 16, 2003

Answer of The Consolidated Carriers in response to the Comments of Other Parties Regarding Implementation of the Rural Service Improvement Act of 2002 | Word

While many of the goals are vague and contradictory, the mechanisms put in place to achieve those goals are often quite specific. These mechanisms not only tell us what needs to be done to meet the provisions of the Act, but provide some insight into the goals of the Act. These mechanisms are framework on which all subsequent actions should be built. Anything that cannot be supported by that framework must be erased from the blueprint.

One of the biggest questions raised by the Department in its Request for Comments is the discrimination between Part 121 operations and Part 135 operations as far as the payment of rates and application of preferences are involved. The Act variously uses the terms Part 121 carrier and Part 121 operations, and similarly mixes the term Part 135 carrier and Part 135 operations. Appendix A is the copy of an email from Larry Dalrymple, Manager of the Fairbanks Flight Standards District Office of the FAA. Mr. Dalrymple explains that there is no such thing as a Part 121 carrier or a Part 135 carrier in terms of certification.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com


June 16, 2003

Response of Larry's Flying Service to Comments Regarding Implementation of Rural Service Imporvement Act

We have read the comments of many ofthe carriers which were due and published as of June 2.2003. It was interesting to note that the responses of the carriers were as wide or wider than the areas they serve and types of businesses they do. It appears that DOT is in the distinct position of having the proverbial "tiger bythe tail". We would like to take the opportunity to comment on some ofthe issues raised and the responses of the carriers regarding these issues.

As we pointed out in our original submission DOT already has the information regarding what type aircraft are insured and number of seats insured for each aircraft. As we pointed out as did Frontier and many others we are required to furnish such information to DOT at insurance renewal and whenever any substantial change takes place.

By: LFS, Lawrence Chenaille, 907-474-9169



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Service Mail Rates

July 1, 2003

Reply of Consolidated Carriers in Response to the Rebuttal Comments of Other Parties and Motion for Leave to File an Otherwise Unauthorized Document | Word

The Consolidated Carriers move for leave to file an otherwise unauthorized document to respond to the filings of the U.S. Postal Service, Warbelow's Air Ventures and Peninsula Airways filed June 16, 2003. In its rebuttal filing, Warbelow's raises new issues unaddressed in its original comments. Similarly, the Postal Service reverses a position taken in its original comments in its answer. Peninsula Airways waited until the answer filing to present its initial comments. In that filing it presents its arguments for the first time.

By: Hank Myers, 425-641-8243, hank@mtcworld.com



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Service Mail Rates

June 23, 2003

Solicitation of Comments by United States Postal Service for Fairbanks-Nome/Kotzebue

By: USPS, John Bonafilia


June 23, 2003

Notice of United States Postal Service of Proposed Change in Bypass Mail Hub Points

Correspondence from John Bonafilia, United States Postal Service, to serve as an official and public notice of a proposed change in the bypass mail hub points as authorized by 39 USC Section 5402 (2002) (g)(3)(B). The Postal Service welcomes comments to this proposal.

By: USPS, John Bonafilia



OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

Served July 16, 2003

Notice | Word

Notice, the Bureau of Traffic Statistics (BTS) Website showing T-100 Segment and T-100 Market results by month for every reporting Intra-Alaska carrier starting with July 2002 is now on the web. The website is www.bts.gov. The data on this website will be the basis for the Postal Service's tender of mail and the Department's determination of mail rates in the upcoming implementation of the Rural Service Improvement Act.

By: Kevin Adams



September 12, 2003

Correspondence from Larry's Flying Service

There are several issues regarding the impending changes to be made to the Alaska transportation system which have us both bewildered and extremely concerned. While we partially understand why something needed to be done the implementation of the law as it is presently being interpreted will rape the system completely We do not believe that this is ever what Senator Stevens had in mind.

By: Jean A. Chenaille



Order 03-10-10
OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

Issued and Served October 8, 2003

Preliminary Finds and Show Cause Order

By this order, the Department makes preliminary findings in the base-rate investigation of bush mail rates required by the Rural Service Improvement Act, which became law on August 2, 2002. It follows our Request for Comments issued April 16, 2003. This order does not establish any rates, but rather addresses a number of surrounding methodological issues on the calculation of the rates and the Postal Service's tendering of the mail. A show-cause order tentatively setting rates must wait for additional data to be submitted and compiled by our Bureau of Transportation Statistics. We must act now, however, on some of the data-reporting issues, and therefore we are directing parties to comment within 15 days of the service date of this order on those issues, as discussed below and in the ordering paragraphs.

By: Michael Reynolds



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 6, 2003

Correspondence from Frontier Flying Service

Frontier Flying Service respectfully requests a waiver from the passenger ridership requirements of (h)(1) of the Rural Service Improvement Act of 2002, and requests inclusion in the 70 percent pool of the non-priority bypass mail for the following city pairs: Nome and Savoonga Nome and Gambel Kotzebue and Noatak Kotzebue and Point Hope Frontier Flying Service requests this waiver for the 12 month period immediately following the date RISA takes effect. This will enable Frontier to provide an unprecedented amount and level of service to the residents of Savoonga, Gambel, Point Hope, and Noatak, while developing the rider-ship requirements of RISA (h)(1) for the subsequent years.

Reliable all-weather Beechcraft 1900 aircraft operated in accordance with part 121 will be utilized exclusively on this flight, and Frontier is requesting equitable tender dispatch of priority, non-priority and by-pass mail.

By: Craig Kenmouth



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 17, 2003

Joint Carrier Response To Frontier Flying Request

By: Arctic Circle Air Service, Steve Anderson, Vice President / Wright Air Service
Bob Burseil / Larry's Flying Service ,Larry Chenaille, President / Tannan Air Service
Fred Ciarlo, General Manager / Hageland Aviation Services , L. Michael Hageland, Secretary/Treasurer / Village Air Cargo , Don King, President / Arctic Transportations Services
Wilfred Ryan, President / Warbelow's Air Ventures, Inc., Art Warbelow, President


October 16, 2003

Response of Hageland Aviation

Frontier's proposed passenger service of three-days-per-week with 19-seat aircraft cannot be construed to be "substantial" passenger service in the five markets where they are seeking a waiver. Frontier has yet to provide even one proposed flight to the markets of Savoonga, Gambell, Noatak and Point Hope, and all five of the proposed waiver markets are currently served at much higher levels than Frontier's proposal. These markets are served by a minimum of 3 different passenger carriers, operating a minimum of two flights per day, 6 days per week, with 9-seat aircraft. The existing carriers also provide at least one scheduled flight to each of the destinations on the 7th day of the week, and most of these carriers provide their service using multi-engine and/or turbine aircraft, which are IFR-certified.

By: Hageland, Michael Hageland


October 16, 2003

Response of Tanana Air Service

Frontier Flying Service's request is full of inaccuracies and misleading information. Frontier Flying Service was an active participant in the architecture of the RISA and has had the forewarning and opportunity to enter any market and to establish an acceptable market share for those markets that they desire to service.

By: Tanana, Fred Ciarlo



October 14, 2003

Objection of Arctic Circle Air Service

Arctic Circle Air Service, Inc. objects to the request of Frontier Flying Service for a waiver to select provisions of the Rural Service Improvement Act of 2002. To allow such a waiver to be granted virtually on the eve of the RSIA implementation makes a mockery of the entire RSIA and the reasons for its existence. Frontier Flying Service has been involved in, and is knowledgeable of the requirements of the RSIA, and like all the other carriers that will be affected by the act has had the same amount of time to strategize and prepare for it.

Obviously the free market system has been at work and unfortunately for Frontier Flying Service it did not favor them. To now grant a waiver in markets that for what ever reason they were unable to gain market share would be a complete disservice to the other carriers that have met the needs of the people as well as the requirements of the RSIA.

By: Don Singsaas


October 14, 2003

Comments of Larry's Flying Service

Our emotions progressed from interest, to humor and then to genuine disgust when we read the letter(s) from Frontier Flying requesting waiver(s) from the passenger rider-ship requirements of the Rural Service Improvement Act of 2002. Frontier is requesting relief on three fronts, two in Western Alaska and the third here at home in Fairbanks.

It is most interesting to note and probably well known that the RSIA itself was at least partially engineered by Frontier Flying and that Frontier is to date the only one to date who has requested an exemption to the law that it itself helped design. Frontier admits that this law will eliminate Frontier from Bethel and it needs the added revenue afforded by the mail in these other areas to continue to operate profitably. It also states that it left Fort Yukon in November of 2001 and finally returned there in November 2002 in an attempt to regain the market share that as a business decision it had terminated. It apparently is asking the Postal Service's help to repair a bad business decision by cutting into the pool that the carriers who have been serving Fort Yukon and who have qualified will enjoy.

It is also interesting to note that without the alleged "benefits" of this law Frontier could have initiated any of this service in a heartbeat simply by publishing a schedule 28 days in advance and then flying the routes- without needing any waiver!.

By: Jean A. Chenaille



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 20, 2003

Comments of Frontier Flying Service

Frontier could respond to each individual objection recorded in the docket, however we trust the Department of Transportation and the Postal Service to see and address this request using the intent of the Rural Service Improvement Act of 2002 as their guide: "In summary, this bill intends to reduce the Postal Service's losses on the bypass mail program while improving safety and stabilizing passenger service." (Senator Ted Stevens speaking on RSIA, Congressional Record page S7279, July 24. 2002)

Subsection (p) of RSIA authorizes DOT or the Postal Service to grant waivers for carriers that provide "substantial service". The intent is to elevate the level of safety and service, and to save the Postal Service costs. When the intent is subverted in an initial application, the waiver subsection is the mechanism whereby intent may be preserved. That is why it exists.

Frontier is requesting waivers for Fort Yukon, Gambell, Savoonga, Point Hope, and Noatak. Waivers are necessary as Frontier is in noncompliance, depending on the origin/destination, with one or two requirement of (h)(1). however, Frontier's entry or continuance serves exactly the intent of RSIA, while it's exclusion is exactly contrary to the elemental essence of RSIA. Thank you for your consideration.

By: Frontier, Craig Kenmouth, 907-450-7250


October 19, 2003

Response of Warbelow's Air Ventures | Word

Warbelow's Air Ventures, Inc. suggests that both the Department and the USPS simply count deplaning passengers (or passenger revenue generated by deplaning passengers as we argue below) in a village to establish the market shares. This will include the inter village passengers (and if revenue is used, they will be automatically weighted by their importance in the market), and will accommodate the situation where a significant amount or even the majority of the mail flows along a different routing then the passengers. Nuiqsut and Barter Island comes to mind for example, where the passengers flow from Pt. Barrow or Fairbanks, but the mail flows from Prudhoe Bay. Market share, and therefore mail tender, in such markets should be determined by the value the carrier creates for the village residents, and not just along the route that the mail flows.

We strongly disagree with the position that it is acceptable that a carrier can “construct a flight numbering system to maximize its carriage of mail.” The RSIA will fail if this is allowed to occur. The fact that “service would be displayed as requiring multiple connections for passengers…which would put that carrier at a marketing disadvantage compared to the direct service and could actually decrease the number of passengers…” is not true. Passengers in the rural Alaska village markets do not depend on computerized reservation systems for information, and would have no idea or interest in the flight numbers they are flying on. Even if it were true, market share is the heart and soul of RSIA, and the reporting of the data should not be left up the discretion of the operator to report in a way which maximizes mail tender for that operator. In addition, this interpretation appears to be contrary to the position the USPS is taking. The USPS has cautioned carriers to not report the same passenger twice along a route from the hub to the destination through intermediate stops. The USPS has indicated this would be considered double counting, and would result in penalties under the RSIA, as it should. Finally, to allow this type of self serving reporting is absolutely contrary to the spirit of the law and the letter of the law as well. If allowed, we expect there will wide spread abuse of this policy, followed be legal challenges mounted by the affected operators.

By: Art Warbelow, 907-374-6202, art@warbelow.com



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates


October 22, 2003

Re: Rebuttal of MTC | Word

Please let me briefly rebut the letter dated October 20, 2003 from Craig Kenmonth, General Manager of Frontier Flying Service. The letter adds no new evidence in support of Frontier’s waiver application, and simply raises the same arguments using different words.

The burden of supporting a request for waiver is heavy. A waiver can only be granted if “substantial” benefit is derived from the applicant, and that benefit cannot be gained in any other way than a waiver. The applicant must show a change in circumstances, or a basic flaw or deficiency in the Act itself, and must prove that it could not have achieved the benefit sought through its own actions in compliance with the Act. Frontier has failed on all counts to justify granting of a waiver.

By: Hank Myers


October 21, 2003

Comments of Tanana Air Service

After reviewing the Show Cause Order 2003-10-10, the following comments are submitted:

Issue 3: Submission of data as required on Appendix A is going to be a very difficult process. The data required are not clear, i.e., Non-Scheduled passenger and freight data Inbound. BTS has not had their system on the Internet since before this order was published and there is no guidance for the completion of this appendix. Also, the exclusion of carriers that do not expect to qualify for bypass mail will skew the data as incomplete for a given market.

Issue 5: All other qualifications for a carrier to receive bypass mail has been and is still three flights a week. For the Department to arbitrarily reduce the requirement for a 19-seat passenger Part 121 aircraft to be flown into a market once a week to qualify as a Part 121 Bush rate is unreasonable and establishes a precedence that is unwarranted.

As stated in Issue 3, the completion of Appendix A in any meaningful manner, with the instructions provided, is impossible at this time to complete by November 1, 2003. BTS does not have their website on-line concerning Alaska Data, the requirement for inbound N-Skd Pass and Freight is unclear, and the communities are assumed to be only the hubs.

By: Tanana, Fred Ciarlo, 907-474-0301



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 17, 2003

Correspondence of Senator Donald Olson | Word

By: Senator Donald Olson


October 20, 2003

Comments of Alaska House of Representatives | Word

I strongly oppose granting any waiver at this rime, and particularly to a carrier that has no history of serving the markets out of Nome. The Act was designed to provide support for passenger and freight by supporting carriers that have established a strong market position. The Act has not been implemented yet, so it is premature to be granting any waivers until there is some deficiency in the service. Both Bering Air and Cape Smythe Air Service, the two qualifyinjpasscnger carriers, have a long history of serving St. Lawrence Island and will be increasing their flights when the Act is implemented. Merit Transportation Service, the qualifying cargo carrier, also has a long history of serving the communities on St. Lawrence bland.

By: Richard Foster


October 20, 2003

Comments of Alaska House of Representatives | Word

One of the main purposes of the RSIA is to stabilize the air transportation system. The Act was also designed to provide support for passenger and freight services by supporting carriers that already have a strong market position. In the marks where Frontier wishes to be a mail tender there are already three qualifying carriers. The carriers are Bering Air Service, Cape Smythe Air Service, and Arctic Transportation Services. Each carrier is locally based and has a variety of aircraft to meet the community needs. The carriers have some thirty years of experience in the area. This experience is extremely valuable in an area like ours where the weather and climate conditions are precarious. They have all operated safe, reliable, and frequent service throughout the area in question. On the other band, Frontier has no operating experience in this area. It would be difficult if not impossible for Frontier to be able to compensate for the thirty years of experience that the other carriers already have.

By: Reggie Joule


October 23, 2003

Comments of Peninsula Airways

PenAir strongly disagrees with the preliminary finding of the Show Cause Order to abandon a uniform scheduling requirement for carriers seeking mail tender, and instead to allow carriers to gerrymander flight schedules to create artificially inflated mail tender claims. The Show Cause Order admits that without appropriate regulation, "a carrier could attempt to construct a flight numbering system to maximize its carriage of mail." The Department has a statutory obligation to assist in the implementation and enforcement of the Act. To allow such opportunistic manipulation of the mail tender system by flight numbering practices that have no other valid purpose would defeat the purpose of the Act and this proceeding.

The Order places unjustified reliance on the alleged consumer preference for through flight numbers to discipline such gamesmanship. This simply does not hold true in the Alaska bush, where there are very limited schedule options to begin with, and where consumer reliance on such CRS display nuances is slim or non-existent

Counsel: Shaw Pittman, Robert Cohn, 202-663-8060



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 23, 2003

Comments of Consolidated Carriers | Word

In Order 2003-10-10, the Department made several tentative conclusions in the matter of the Bush Service Mail Rates Case. The Order addressed many of the points raised in the Department’s request for comments and the three rounds of responses from the various parties. In general, the Consolidated Carriers agree with the findings of the Order, but there are some areas of disagreement and a number of clarifications necessary to implement the Order.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com


October 23, 2003

Reply Comments of the United States Postal Service

The Department has decided against requiring carriers to change their flight numbering systems because it believes the T-100 data provides accurate records of traffic movement. The Postal Service supports this decision and will clarify that we will use the T-100 market data to determine carrier shares and mail tender based on the originating hubs to destination pairs that match the mail tender markets. Therefore, the Postal Service believes the most accurate flight numbering sequence for the carriers is to use a single flight number away from the hub. That way, a carrier will get credit for the passengers that embark from the hub and any in-route passengers as the law allows.

We concur with the Department’s decision to allow carriers a 15-day “grace period” commencing when the Bureau of Transportation Statistics (“BTS”) posts the T-100 data on its website, with the BTS plan to communicate both with the affected carrier(s) and the Postal Service concerning suspected problems, and with BTS’ ultimate responsibility to determine whether suspect data is or is not published in the final T-100 data. However, the Postal Service is concerned that the communications necessary in that regard not unduly delay the publication of the final monthly report. Accordingly, the Postal Service requests that BTS establish a firm calendar date (e.g., the 25th of the month) on which the final data will be transferred to the Postal Service on an ongoing basis each month. Having an established schedule will provide consistency and will allow the Postal Service to plan ahead within our systems to make tender decisions in a timely manner.

Counsel: USPS, William Jones, William.J.Jones@usps.com


October 9, 2003

Comments of Warbelow's Air Ventures

By: Arthur Warbelow



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 28, 2003

Correspondence of Cape Smythe Air

Cape Smythe Air objects on the fact that Frontier Plying Service should have used the time from July of 2002 till June of 2003 to secure the markets from Nome to Savooriga and Gamble, and from Kotzebue to Pt. Hope and Noatak. Instead Frontier Flying Service continued to fly basically just mail in the Bethel market as well as in other markets.

By: Grant Thompson, 907-852-8333


October 20, 2003

Correspondence of Representative Reggie Joule, District 40

I am writing to you regarding Frontier Flying Services request for a waiver from the passenger riderships requirements of (h) (1) of the Rural Service Improvement Act of 2002. I oppose granting the waiver as I believe the request violates the spirit of the RSIA in that safe, secure and reliable air transportation already exists in these markets and services with the already qualified carriers will be increasing starting November 3, 2003, Additionally, since the act has yet to be implemented it is premature to grant a waiver when there are not yet any known deficiencies in the existing market.

By: Reggie Joule



October 30, 2003

Motion for Leave to File and Objection of the United States Postal Service to the "Answer of the Consolidated Carriers..." | Word

The Answer, of uncertain date (it is dated October 23 on its face, but dated October 28 on its last page and on its Certificate of Service), appears as document number Document OST-2003-14694-57 on the DMS.DOT listing for docket number OST-2003-14694, with a filing date of October 28. Although the Certificate of Service avers that the document was being served by email "upon all parties served by the Postal Service in its electronic distribution," inquiry has failed to identify any Postal Service party on that service list who received a copy of the Answer by that means.

The Postal Service respectfully requests that the Answer be ruled out of order, stricken from this record, and disregarded at this stage of this proceeding. If that remedy is not available, the Postal Service respectfully requests a reasonable opportunity to respond to the Consolidated Carriers' comments of October 23 and their Answer.

Counsel: USPS, William Jones, william.j.jones@usps.com



October 31, 2003

Objections of the Consolidated Carriers to the Motion of the United States Postal Service | Word

On October 30, 2003, the Postal Service filed a Motion to strike the Answer of the Consolidated Carriers. The Department's Procedural Regulations do not require a Motion for Leave to File an Unauthorized Document to respond to such filings. To the extent that there is any question about the acceptability of this document, the Consolidated Carriers request leave to file this document for good cause.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


October 31, 2003

Motion of the Consolidated Carriers for Leave to File an Otherwise Unauthorized Document | Word

The Consolidated Carriers hereby file a Motion for Leave to File an Otherwise Unauthorized Document as allowed by Rule 6 of the Department's Rules of Practice covering the Answer of Consolidated Carriers to the Comments of the U.S. Postal Service. When the Carriers filed the Answer to the Comments of the Postal Service, it did not (and still does not) believe that the Answer required a Motion for Leave to File an Otherwise Unauthorized Document. The challenge made by the Postal Service, and a conservative measure of caution lead the Carriers to file this Motion.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


October 31, 2003

Certification of the Consolidated Carriers | Word

As a result of the Motion of the Postal Service to strike on procedural grounds the Answer of the Consolidated Carriers to the Comments of the U.S. Postal Service, the Consolidated Carriers have reviewed the Department's Rules of Practice to assure that its filings comply in all aspects. Rule 4(b) requires a certification for all pleadings in the docket. While the Carriers are not alone in their oversight, the Carriers wish to remedy this situation immediately.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



November 2, 2003

Correspondence of the United States Postal Service

Although 121 certificated aircraft have been identified as preferred for service in bush markets, as discussed above, there is no comparable preference for continued 135 service, and no antici-pated savings to the USPS would accrue once class-based rates are adopted. Further, none of the service related factors appear to support these requests by Frontier. According, the waiver requests for time considerations in the above listed markets from the Aniak hub are denied. Frontier's service to date in these markets will be considered using available 1-100 data and the carrier will be placed into the appropriate tender pool at the appropriate time based on that data.

By: USPS, John Bonafila



November 6, 2003

Correspondence of Consolidated Carriers | Word

On behalf of the Consolidated Carriers, I was disappointed to read of your approval of the waiver for Frontier Flying Service allowing it to participate in the 70% passenger pool for bypass mail even though it did not qualify for tender in any of the markets requested. At Point Hope, Gambell and Savoonga, Frontier is added to qualified passenger services of Bering Air Service and Cape Smythe. At Noatak the qualified passenger carriers are Bering Air Service and Hageland Aviation. At Fort Yukon, the qualified passenger carriers are Warbelow’s Air Ventures and Wright Air Service.

The approval was procedurally deficient in that it did not make any factual findings about the grounds required for a waiver from the Act. Indeed, you state that could not define “substantial improvement” within the meaning of the Act. Moreover, your approval did not note or answer the numerous protests of the application filed by air carriers and all three legislators representing Nome and Kotzebue. These protests clearly documented that Frontier’s service is unneeded and will not provide any discernible benefit to the pubic. On the contrary, the waiver will deprive the qualifying passenger carriers of 1/3 of the rightful revenue under the Act.

By: Hank Myers, 425-641-8243, hank@mtcworld.com



OST-03-14694 - Bush Mail Rates
OST-03-14695
- Mainline Mail Rates

November 12, 2003

Reply Comments of Peninsula Airways to U.S. Postal Service

PenAir is concerned about certain ambiguities in the Postal Services comments, with respect to the number of weekly operations required to establish the (lower) Part 121 rate in bush markets. Those concerns have been exacerbated by recent comments made to carriers by representatives of the U.S. Postal Service in Alaska.

Counsel: Shaw Pittman, Robert Cohn, 202-663-8060



November XX, 2003

Reply of the United States Postal Service to Various Comments of the Consolidated Carriers

In the absence of the Department's response to the Postal Service's opposition, and given the Carriers' acquiescence in a response to its October 23 comments and its contention that "the Department has always accepted responses to filings in which new issues or arguments are raised, or [of which] the content is factually untrue," the Postal Service submits the following comments on various points raised in the Carriers' submission of October 23 and its subsequent Answer.

Counsel: USPS, William Jones, William.J.Jones@usps.com



November 19, 2003

Comments of the United States Postal Service on the Reply Comments of Peninsula Airways

On November 12, 2003, Peninsula Airways filed supplemental reply comments to is­sues raised by the Postal Service. The Postal Service believes those comments clearly untimely and inappropriate for consideration since they address issues of long standing in this docket which were raised at least as early as the Postal Service's response to the Request for Com­ments, June 2, 2003. However, since PenAir raised concerns about what it views as ambiguities in the Postal Service's comments of October 23 regarding the number of carrier operations re­quired to establish the Part 121 bush rate, the Postal Service will take this opportunity to clarify that matter briefly. In any event, the Postal Service encourages the Department to maintain its decision that one scheduled flight per week with a Part 121 bush aircraft establishes the Part 121 bush rate in that market for that week.

Counsel: USPS, William Jones, William.J.Jones@usps.com



November 21, 2003

Agenda Items for RSIA Meeting, November 21, 2003

By: Kevin Adams



OST-03-14694 - Bush Mail Rates
OST-03-14695
- Mainline Mail Rates

February 6, 2004

Re: Alaska Central Express Rate Equalization Notice

Pursuant to order 90-10-34, enclosed please find the Rate Equalization Notice of Alaska Central Express, Inc. announcing its election to equalize down to the "base charge" as defined in order 90-10-34 with respect to service between Anchorage and Dutch Harbor.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300



Order 04-2-12
OST-03-14694 - Intra-Alaska Class Service Mail Rates 

Issued and Served February 13, 2004

Order Setting Final Rule Until Further Department Action | Word

By this order, the Department is adjusting the linehaul portion of the mail rate payable to intraAlaska bush mail carriers providing service with Part 121 bush aircraft certificated by the manufacturer for 19 seats or more. This rate will be effective immediately on a final basis, not subject to retroactive adjustment, and will remain in effect until further Department action. The terminal portion of the rate will remain unchanged from that set in Order 2002-8-7. Likewise, the rate for bush carriers in markets where there is no qualifying service with Part 121 bush aircraft will remain unchanged.

By: Karan Bhatia



OST-03-14694 - Bush Mail Rates
OST-03-14695
- Mainline Mail Rates


February 14, 2004

Re: Equalization Notice of Belair | Word

Belair, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point.

By Order 2004-2-12, the Department of Transportation established a new linehaul rate for markets where Part 121 bush service is provided by aircraft certificated by the manufacturer for 19 seats or more on one flight a week or more.  The language of the Order sets the rate “for markets where a carrier scheduling and operating at least one round trip a week with Part 121 aircraft in passenger service qualifies for the carriage of mail”.  This language establishes a single lawful rate for each market, and appears to obviate the need for any sort of equalization notice.   None-the-less, with an abundance of caution, Bellair, Inc. hereby gives notice of its equalization to the lowest lawful rate in any market where it operates service.

Requests equitable tender and full tender of bypass mail pursuant to the provisions of the Rural Service Improvement Act and the practices and procedures of the Department of Transportation and the United States Postal Service.

By: Michael Spisak


February 17, 2004

Equalization Notice of Tanana Air

By Order 2004‑2‑12, the Department of Transportation established a new linehaul rate for market where Part 121 bush service is provided by aircraft certificated by the manufacturer for 19 seats or more on one flight a week or more. The language of he Order sets the rate "for markets where a carrier scheduling and operating at least one round trip a week with Part 121 aircraft in passenger service qualifies for the carriage of Mail". This language establishes a single lawful rate for each market, and appears to obviate the need for any sort of equalization notice. None‑the‑less, with an abundance of caution, Tanana Air Service hereby gives notice of its equalization to the lowest rate in any market where it operates service.

Tanana Air Service equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point.

By: Fred Ciarlo



OST-03-14694 - Bush Mail Rates
OST-03-14695
- Mainline Mail Rates


February 13, 2004

Equalization Notice of Arctic Circle Air Service

Arctic Circle Air Service, Inc. (5F) equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. 3. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Don Singaas


February 18, 2004

Equalization Notice of Baker Aviation, Inc. | Word

Baker Aviation, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. 3. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Greg Harding


February 18, 2004

Equalization Notice of Cape Smythe Air Service, Inc. | Word

Cape Smythe equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Grant Thompson


February 17, 2004

Equalization Notice of Grant Aviation, Inc. | Word

Grant Aviation, Inc. (GS), an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize between Bethel, Alaska and Chefornak, Eek, Goodnews Bay, Hooper Bay, Kongiganak, Kipnuk, Kwigillingok, Kwinhagak, Mekoryuk, Nightmute, Toksook Bay, Platinum, Scammon Bay, Tununak, Chevak, Tuntatuliak, and Newtok with the lower levels paid to other carriers or combinations of other carriers in these markets effective February 17, 2004.

Subject to the conditions below, Grant Aviation gives this notice of its election to equalize applicable rates for small aircraft in the Bethel to Chefornak, Eek, Goodnews Bay, Hooper Bay, Kongiganak, Kipnuk, Kwigillingok, Kwinhagak, Mekoryuk, Nightmute, Toksook Bay, Platinum, Scammon Bay, Tununak, Chevak, Tuntatuliak, and Newtok markets, to match, on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to ERA Aviation for each category of mail ERA Aviation transports in these markets to any lower rate or combination of rates paid in the future to any other carrier in these markets.

By: R. Bruce McGlasson


February 18, 2004

Equalization Notice of Larry's Flying Service, Inc. | Word

Larry's Flying Service, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Jean Chexaille


February 17, 2004

Equalization Notice of Wright Air Service, Inc. | Word

Wright Air Service, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Bob Bursiel



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates


February 18, 2004

Equalization Notice of Artic Transportation Services, Inc. | Word

Arctic Transportation Services, Inc. (7S), an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Bethel, Alaska and Chefornak, Eek, Goodnews Bay, Hooper Bay, Kongiganak, Kipnuk, Kwigillingok, Mekoryuk, Nightmute, Toksook Bay, Platinum, Quinhagak, Scammon Bay, Tununak, Chevak, Tuntatuliak, Newtok, between Nome Alaska and Gambell, Savoonga, between Kotzebue Alaska and Point Hope, Noatak with the lower levels paid to other carriers or combinations of other carriers in these markets effective February 18, 2004.

By: Wilfred Ryan


February 18, 2004

Equalization Notice of Hageland Aviation Services, Inc.

Hageland Aviation Services, Inc., is a certificated air carrier having the authority to transport
mail within the State of Alaska and hereby states its intent to equalize to the Part 121 bush
mail rate in those markets that are served by Hageland in its scheduled service and are also
served by Part 121 bush aircraft.

By: L. Michael Hageland



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates


February 19, 2004

Equalization Notice of Bering Air | Word

Bering Air, Inc., an Alaskan Air Carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest lawful rate in the following markets effective February 13, 2004: 1.Nome and Savoonga 2.Nome and Gambell 3. Kotzebue and Noatak 4. Kotzebue Point Hope.

By: Allen Haddadi


February 19, 2004

Equalization Notice of Inland Aviation Services | Word

Inland Aviation Services, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point.

By: Stepehn Hill



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates


February 20, 2004

Re: Letter from Cape Smythe Air to Senator Ted Stevens

I would like to first thank you for your response to my letter addressing my n concerns with the air transportation system in Alaska, and the new legislation on the carriage of the by‑pass mail. I have many times tried to explain the system to the best of my knowledge of it, and have never been able to explain it as well, and with so few as words as you did in your letter. The way that you explain the legislation is exactly the way that I have understood it to be. My concern is still the same, it is the way that the Postal Service is tendering the mail. A Part 121 bush carrier was granted a waiver that I feel was totally inappropriate to all of the rest of the carriers that had been participating in securing the markets that they wanted to operate in, whether it be in the 70, 20 or 10, percent pools, ‑the‑pad 121 bush carrier had not even been operating in the Nome/Gambel, Savooga, and Kotzebue/Pt. Hope, Noatak markets to try to gather mârketshare of the Passengers or freight, instead they partitioned for a waiver. (And the Postal Service granted it)

By: Grant Thompson


February 19, 2004

Equalization Notice of Village Aviation, Inc. d/b/a Camai Air | Word

Village equalizes its mail rates to the lowest prevailing bush rate in the markets it serves by its scheduled service. Village does not elect to equalize to the mainline rate in any of its markets. Village does not elect to equalize to the Part 121 bush rate in any markets that are not served by a Part 121 bush aircraft at least once per week. Village's intent to equalize as described in this notice is effective immediately and indefinitely and shall remain in effect until Village serves further notice to modify or rescind its intent.

By: Don King



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 24, 2004

Equalization Notice of Servant Air, Inc. | Word

Servant Air, Inc., an Alaskan carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect over all routes on its system, either directly or indirectly.

By: Beth Yalch



February 18, 2004

Quarterly Reports - Agency Information Collection | HTML

In compliance with the Paperwork Reduction Act of 1995, Public Law 104-13, the Office of the Secretary invites the general public, industry and other governmental parties to comment on the need for and usefulness of the Department's collecting three new quarterly reports from intra-Alaska air carriers required by the Rural Service Improvement Act of 2002 (RSIA) consisting of: Passenger, freight, and charter revenue by market by direction; a more detailed system income statement; and system excise taxes paid on passengers and freight. The reports would be required of all intra-Alaska carriers intending to qualify for the carriage of bush mail from the Postal Service.

Written comments should be submitted by April 26, 2004.

By: Randall Bennett



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 24, 2004

Equalization Notice of Arctic Circle Air Service, Inc. | Word

Arctic Circle Air Service, Inc. (5F), an air carrier currently authorized to transport United States mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Bethel, Alaska and Atmautluak, Chefornak, Chevak, Eek, Goodnews Bay, Hooper Bay, Kongiganak, Kipnuk, Kwigillingok, Marshall, Mekoryuk, Newtok, Nightmute, Toksook Bay, Platinum, Quinhagak, Scammon Bay, Tununak, Tuntatuliak, between Fairbanks, Alaska and Allakaket, Anaktuvuk Pass, Arctic Village, Bettles, Chalkyitsik, Eagle, Fort Yukon, Galena, Hughes, Huslia, Kaltag, Nulato, Tanana, and Venetie, with the lower levels paid to other carriers or combinations of other carriers in these markets effective February 24, 2004.

By: Don Singaas



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 26, 2004

Re: Equalization Notice of Alaska Central Express

Alaska Central Express, Inc. (KO), an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Anchorage, on the one hand, and Sand Point, Cold Bay, St. George, St. Paul, on the other, and between Bethel, Alaska, on the one hand, and Attnauthloak, Chefornak, Eek, Hooper Bay, Kongiganak, Kipnuk. Kwigillingok, Marshall, Nightmutc, Toksook Bay, Quinhagak, Scammon Bay, Tununalt, Chevak, Tuntatullaig and Newtok, on the other, and between Kotzebue, Alaska. on the one hand, and Point Hope and Noatak, on the other, with the lower levels paid to other carriers or combinations of other carriers in these markets effective February 24,  2004.

Subject to the conditions below, Alaska Central Express, Inc. gives this notice of its election to equalize its rates for small aircraft in the following markets: Anchorage, on the one hand and Sand Point, Cold Bay, St. George, St Paul on the other, between Bethel, on the one hand, and Atmauthluak, Chefomak, Eek, Hooper Bay, Kongiganak, Kipnuk, Kwigjliingok, Marshall, Nightmute, Toksook Bay, Quinhagak, Scanunon Bay, Tununak, Chevak, Tuntatulialg and Newtok, on the other:, and Kotzebue, on the one hand, and Point Hope and Noataig on the other, in each case to match, on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to Peninsula Airways, ERA Aviation and Frontier Flying Service, respectively, for each category of mail Peninsula Airways, ERA Aviation and Frontier Flying Service transports in these markets to any lower rate or combination of rates paid in the future to any other carrier in these markets.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates


February 18, 2004

Re: Ex Parte Letter to the Honorable Daniel Akaka

By: Karan Bhatia


February 27, 2004

Objection of Hageland Aviation to Order 2004-2-12 Establishing Part 121 Bush Passengers Mail Rates

According to Order 2004-2-12, the Department used T-100 and F-2 reported data from all of the identified Part 121 bush passenger aircraft operated by Penair, ERA, and Frontier. The Department made no distinction over what kind of routes these aircraft were operated. In doing so, the Department has not sufficiently identified the operations of "121 bush passenger carriers" as defined in the law, namely, to distinguish the operations of 121 bush passenger aircraft that occur on "bush routes", i.e. routes over which only a bush carrier is tendered mail.

By: Michael Hageland


February 27, 2004

Objection of Consolidated Carriers to Order 2004-2-12 and Motion to Rescind | Word

On legal and procedural grounds, the Order is deficient and must be rescinded. The rate and its rationale are contrary to Title 49 of the U.S. Code, circumvent certain requirements of Rule 701 et seq of the Department's Rule of Practice, and contradict the specific requirements of the U.S. Postal Service in its P0-508 procedures. Under its terms, carriers may freely engage in deceptive and unfair business practices as dand other laws and regulations, those contradictions cannot be used to impose rates which cannot be applied within the common meaning of all laws and regulations.efined by the Act. While there are specific legal contradictions between the R.S.I.A. and Title 49

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 3, 2004

Flight Alaska, Inc. d/b/a Yute Air Notice of Equalization | Word

Flight Alaska equalizes its mail rates to the lowest prevailing bush rate in the markets it serves by its scheduled service. Flight Alaska does not elect to equalize to the mainline rate in any of its markets. Flight Alaska does not elect to equalize to the Part 121 bush rate in any markets that are not served by a Part 121 bush aircraft at least once per week.

By: Ron Dudley



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 10, 2004

Objections of Tanana Air Service to Order 2004-2-14

The Postal Service is still tendering mail to carriers that do not publish schedules in the OAG for public dissimulation, but only for Postal Service use, even with the changes in the RS1A requiring schedules be available to the general public under a published schedule. Postal Service Official said" if a Part 121 bush aircraft carries any revenue into a markct as reported on the Postal Service Daily Service report, then the Postal Service will pay all carriers in that market the Part 121 bush rate". DOT has an old definition of calling any additional section into a market a scheduled flight. The Postal Service official insist that a Part 121 aircraft flying an extra section meets the requirement of "scheduling and operating" as defined by Order 2004‑2‑14.

If the Postal Service can, without notice, change the rate a market is paid utilizing Postal Service Daily Service report and not the Official Airline Guide that is available to the general public. Carriers, that do have published schedules, are transporting mail have no means of knowing what they will be paid. There will be no way for a carrier to question any payment received, when the rate is changed without notice by the Postal Service.

Tanana Air Servicc respectfully request the Department to immediately clarify what constitutes when a market is classified as Part 121 market.

By: Fred Ciarlo



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates


March 12, 2004

Objections of Arctic Transportation Services to Order 2004-2-12 | Word

Arctic Transportation Services, Inc., objects to the findings of Order 2004‑2‑12 establishing the rate payable to Intra‑Alaska bush mail carriers providing service with Part 121 bush passenger aircraft on two counts. Our first objection is based on the fact that the Law does not contain language directing the USPS to pay the new 121 bush passenger rate to bush nonmail freight carriers qualified on a city pair route, when a 121 bush passenger carrier enters the market. Our second objection is based on the fact that the Department derived the new 121 bush passenger rate utilizing data inconsistent with the definitions of the law. The result is a rate that does not adequately compensate 121, 135 bush passenger or nonmail freight carriers trying to fulfill requirements of the Rural Service Improvement Act.

By: Arctic Transportation, Michael Brown


March 15, 2004

Addendum to the Objections of The Consolidated Carriers to Order 2004-2-12 and Motion to Rescind | Word

The Consolidated Carriers emphatically renew their motion to rescind Order 2004‑2‑12. The rate determined in that Order is contrary to historic ratemaking standards, as well as the requirements of the Rural Service Improvement Act. The rate ordered is woefully inadequate for the class of carriers covered, and in one case is less than half the cost of service of the only carrier serving a hub. The irony of this rate is that it will discourage service in markets where the rate is inadequate. At Bethel, Era Aviation will lose 50% of its costs on every pound of mail it carries. There is no way for Era to become more efficient with its Twin Otters, and it is the sole Part 121 bush carrier at Bethel. The only incentive the new rate gives to Era is to abandon the hub. This certainly is not consistent with the goals of the R.S.I.A. or the Postal Service.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


March 15, 2004

Notice of Objections of Era Aviation to Order 2004-2-12 and Motion to Suspend Order Pending Outcome of Public Comment Period

Era respectively requests that the rate set forth in this Order be suspended pending further analysis of the comments and objections filed in response to the Order. Given the extreme under recovery of costs that Era will be forced to bear should the proposed rate of $45271 remain in place, and the fact that the Department does not intend to make any retroactive adjustments as a result of future changes in the rate, Era will be extremely prejudiced by the Department's inaction by not suspending the rate, and will be forced to take other action to remedy the situation and stem the irremediable harm.

Counsel: Era, Marcia Davis, 907-266-8325, mdavis@eraaviation.com


March 12, 2004

Motion for Leave to File and Rate Calculation of Hageland Aviation for Order 04-2-12

As stated in our filing of February 27, our objection to Order 2004‑2‑12 is based primarily on the fact that the Department did not use appropriate data when calculating the rate. Namely, the Department did not use data of 121 bush passenger carriers flying over bush routes as defined in the law. As a result, the rate found in the Department's order is not compensatory. We do not dispute the Department's ratemaking methodology, but we do contest its data selection.

By: Michael Hageland


March 13, 2004

Objections of Larry's Flying Services to Order 2004-2-12 and Request to Withdraw Order | Word

Larry's Flying Service, Inc. objects to order 2004‑2‑12 which establishes a new line‑haul rate for Alaska carriers who provide 121 service for carriage of bush mail. We request that the Order be withdrawn until such time as a reasonable rate can be established and the data which produces it confirmed to be accurate. We object to this order on several fronts and also add a few observations regarding the implementation of RSIA as it currently exists.

By: Larry's Flying Service, Jean Chenaille


March 15, 2004

Peninsula Airways Objections to and Comments on 121 Bush Rate Show Cause Order

PenAir objects to using a single weekly Part 121 operation to set the rate. PenAir reiterates its concern that allowing a single 121 operation per week to "set the rate" is too low, is inconsistent with the longstanding statutory requirement of three weekly flights for mainline mail service, will be difficult to administer, and may actually deter the deployment of 121 aircraft on developing routes.

The adoption of a single frequency requirement for rate setting purposes could have the unintended consequence of deterring carriers from deploying 121 aircraft on bush routes, which would be contrary to the purpose of the Act. Thus, if a point showed potential for transition to 121 service, a dual-certificated carrier might provide 121 service on one or two peak days, but operate the balance of its schedule with 135 aircraft. The adoption of the proposed one-weekly frequency standard for rate setting would penalize this otherwise desirable and efficient scheduling behavior, because the 135 operations would be compensated at the lower rate. Creating disincentives to the deployment of 121 aircraft in such bush markets may, in the long run, increase rates paid by the Postal Service, and is certainly not consistent with the purpose of the Act, which is to encourage, not deter, carriers from providing bush service with 121 aircraft.

Counsel: Shaw Pittman, Alexander Van der Bellen, 202-663-8060



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 15, 2004

United States Postal Service Comments on Order 04-2-13

The Order, if revised as proposed below, will reflect the mail transportation costs of Part 121 bush operations fairly and reasonably. The Postal Service believes that the Department's decision to make the new rate effective immediately, rather than subjecting it to show cause procedures, reflects a recognition that we are well past November 2, 2003, the date which the Rural Service Improvement Act established for all of the new rates to be in place. However, we also take the Department's willingness to entertain comments as an indication of its openness to consider valid revisions to the rate and we would urge the Department both to adopt the revisions explained below in this response, and to reconsider its stated decision not to make the rate retroactive.

We will first address the objections that were submitted by the Consolidated Carriers and Hageland. We are troubled both by the suggestion that Peninsula Airways' data should be excluded from the class, and that certain types of service provided by 121 bush aircraft are not relevant to the rate. There is no basis whatsoever for these positions. Because of the serious impact these issues would have on the final rate, and their direct contravention of the class rate concept, they warrant first consideration.

Counsel: USPS, William Jones, william.j.jones@usps.gov



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 9, 2004

Re: Equalization Notice of Tatonduk Outfitters Limited

Subject to the conditions below, Tatonduk Outfitters Limited d/b/a Everts Air Alaska gives notice of its election to equalize its rates for small aircraft in the Fairbanks to Anaktuvuk Pass, Beaver, Bettles, Eagle, Fort Yukon, Galena, Hughes, Huslia, Kaltag, Koyukuk, Lake Minchumina, Nulato, Ruby, Tanana and Venetie markets; and in the Galena to Huslia, Kaltag, Koyukuk, Nulato, and Ruby markets to match, on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to Frontier Flying Service for each category of mail Frontier Flying Service transports in these markets and to any lower rate or combination of rates paid in the future to any other carrier in these markets.

By: Harry Cook



Order 04-03-34
OST-03-14694 - Intra-Alaska Class Service Mail Rates

Issued March 31, 2004

Order Setting Final Rate Until Further Department Action

By this order, the Department is setting the linehaul portion of the mail rate payable by the United States Postal Service to intra-Alaska bush mail carriers providing service with amphibious aircraft certificated by the manufacturer for 3 seats or more. This rate will be effective immediately on a final basis, not subject to retroactive adjustment, and will remain in effect until further Department action. The current terminal element of intra-Alaska bush rates is unaffected by this order. Likewise, the rates for bush carriers in markets where amphibious operations are not required remain unchanged.

By: Karan Bhatia



April 2, 2004

Addendum to Notice of ERA Aviation

Counsel: ERA Aviation, Marcia Davis, 907-266-8325, mdavis@eraaviation.com



April 5, 2004

Re: Reply of the Consolidated Carriers to the Comments of the US Postal Service and Motion for Leave to File an Otherwise Unauthorized Document | Word

The Consolidated Carriers request that the Department immediately rescind Order 2004-2-12, and adopt the rate structure developed in the Addendum to Comments of the Consolidated Carriers filed March 15, 2004. Further, the Department should increase the minimum level of service for the application of the Part 121 bush rate to Monday through Saturday service, or 100% of the scheduled service operated by a 121 carrier in a market, whichever is less. The Department must specify that the term "scheduled and operated" means both that a flight is actually operated with Part 121 aircraft and that the flight is scheduled in the Official Airline Guide to be operated with a Part 121 aircraft. Aircraft substitutions or extra sections with Part 121 aircraft should only affect the mail pay of the Part 121 carrier actually operating the service. The Consolidated Carriers also request that the Department accept this otherwise unauthorized document for the reasons enunciated above.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



April 13, 2004

Motion for Leave to File and Reply of Peninsula Airways to ERA Aviation

Peninsula Airways, Inc. hereby requests leave to file this reply to the unauthorized "addendum" and issues raised by Era Aviation, Inc. in response to Order 2004-2-12. That Order did not authorize further responsive pleadings, and PenAir has refrained from filing a response until now. However, in light of Era's further addendum, PenAir's reply is required in the interest of a full and balanced record.

Era's addendum proposing a new short runway "SR Airport" rate is yet another attempt to manufacture a unique rate for itself that would be substantially higher than that paid to other Part 121 Bush carriers. PenAir strongly objects to this proposition, as well as to Era's prior suggestion of creating "variable" 121 Bush rates, which would also compensate Era at a higher rate than other carriers performing 121 bush services.

Counsel: Shaw Pittman, Alexander Van der Bellen, 202-663-8060



April 15, 2004

RSIA Quarterly Financial Reports - Comments of USPS

First, the revenue report must be submitted by the carriers to the Department and then transmitted from the Department to the Postal Service in an electronic format. Any other format is unacceptable since the time and effort required to convert paper or otherwise submitted documents into a format that is compatible with the systems used by the Department and the Postal Service would impact DOT's ability to collect and the Postal Service's ability to use the data for its intended purpose in a timely manner.

Second, the Department has proposed that the revenue report be submitted quarterly. While that submission schedule is consistent with the requirement for filing excise tax data with the Internal Revenue Service, the Postal Service would prefer that the revenue report be submitted monthly, since the Postal Service plans to recast the tender allotments each month, and having monthly revenue data to compare against T-100 traffic data would establish the system of checks and balances that the RSIA intended. The added burden of monthly reporting is minimal, is appropriate to mirror the frequency of the T-100 reports, and matches the monthly update process that the Postal Service follows to apply the T-100 data and recast the Alaska markets.

Finally, the Postal Service believes it is essential that the data elements used to file the revenue report be consistent with those used in the T-100 data filings and the Postal Service tender systems.

By: William Jones, Esq., william.j.jones@usps.gov



April 16, 2004

Re: Comments of Frontier Flying

I already see the ability to game the system is almost non existent, with the exception of maybe a carrier on the cusp of making it into the pax pool, by plugging a couple of passengers into the Tl00 to get them over the 20% hump, in which case an audit of taxes would most likely not reveal. Carriers that are plugging significant number to obtain a pool status will be able to be revealed with a simple onsite audit, but you would have gotten an indication of change by carriers notifying you.

By: Frontier, Bob Hajdukovich, bob@frontierflying.com



April 22, 2004

Petition of the Consolidated Carriers to Excluded Data of Appendix A of Order 2004-2-12 and Petition for Leave to File an Otherwise Unauthorized Document

The Consolidated Carriers petition for leave to file an otherwise unauthorized document to renew its request to have Order 2004-2-12 effectively rescinded, and replace it with a correctly computed rate for Part 121 bush service. Data recently received by the Carriers show that the analysis used to determine the rate in Order 2004-2-12 was not the result of a careful analysis of the bush service involved, and the nature of the traffic actually carried in bush service. The rate appears to be the result of simply applying system summary data to system unit costs without regard to the type of service involved, or even the area of operation. Order 2004-2-12 included neither an explanation of the rate making procedures, nor the base data used to determine the rate. The possibility that summary data were used without excluding inapplicable data came to light in the data of the recently issued bush seaplane rate. The rate clearly included service to points with a land airport, wheel aircraft serving land aircraft, and services in with no mail is transported under the class rate. Further investigation uncovered that only system summary data were also used to determine the bush Part 121 rate.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com


April 22, 2004

Hageland Aviation Comments - RSIA Quarterly Financial Reports

Hageland fundamentally believes that this requirement of the law has negligible or no value for its intended use, i.e. to verify the amount of passengers and freight that are reported on T- 100 reports. In comments filed by Hageland in OST docket 14694 on June 12, 2003, we argued that collected excise taxes do not effectively reflect passenger and freight traffic with any precision due to IRS requirements for originating carriers to collect total taxes at the time any transportation is purchased, regardless of whether transportation is ever completed and irrespective of transportation routings that may involve multiple carriers. Several carriers offered similar comments on this matter in response to the Department's request for comments. By reference to our previous filing we wish to re-state our arguments and our contention that this provision of the law is fundamentally flawed and fails to accomplish its intended purpose.

By: Hageland, James Tweto



April 22, 2004

Airport Locations and Intra-Alaska Mail Payments Comments of Hageland Aviation

Recent USPS mail payments have been made to Intra-Alaska air carriers using an alternative calculation of mileage distances over which the mail was transported. This issue came to our attention and several other carriers when actual mail payments did not match our revenue calculations for the same volumes and routing of the mail transported.

In verbal discussions with Postal Service officials, the pay discrepancies are the result of USPS adoption of an alternative airport location database. The Postal Service is apparently calculating great circle route distances using the latitude and longitude of airport locations found in the USGS GNIS database. This database has been used and is still being used by the Postal Service for some of its transportation practices outside the State of Alaska. Until recently however, Intra-Alaska mail payments have always been calculated using airport locations and distances that are consistent with the airport-to-airport mileage records maintained by the Office of Airline Information of the Department's BTS.

We are concerned that this development jeopardizes the integrity of the Department’s rate-making process. It is inherently incorrect to develop and establish mail rates assuming a given master record of airport-to-airport mileages, and then to allow mail payments to be made using a different record of these mileages. Secondarily, it confuses the accounting and traffic record keeping of carriers.

By: James Tweto


April 23, 2004

Comments of ERA Aviation - RSIA Quarterly Financial Reports

As noted above, Era objects to the posting of the Quarterly Revenue Report data on the BTS Website. In the event that the data is made available for review by the appropriate parties in a legally authorized manner, Era wants to ensure that it has a meaningful opportunity to correct any errors in the data as presented by the Department. The Department in Order 2003-10-10 suggested that once the data was submitted and compiled by the Department, the Carrier would have a 15-day grace period in which to submit corrections. Era requests that the 15 day grace period not begin to run until a carrier is provided with written notice that the Department has finalized the data for that quarterly period. That way, the carrier knows that the data is ready to be reviewed as soon as it becomes available.

Counsel: ERA, Marcia Davis, 907-266-8325, mdavis@eraaviation.com



April 27, 2004

Re: Comments of Peninsula Airways - RSIA Quarterly Financial Reports

PenAir intends to use the T1OO data filings as the basis for its RSIA reports, and strongly concurs with the Postal Service's recommendation to harmonize the data elements to make the new reports consistent with the T‑100. PenAir has no objection to the Postal Service's request that the revenue report he submitted monthly if it will assist the Postal Service in making monthly tender allotment adjustments.

Counsel: Shaw Pittman, Alexander Van der Bellen, 202-663-8060



April 28, 2004

Petition of the Consolidated Carriers for Extension of Time to File Comments on the Bush Seaplane Rate | Word

Respectfully request an extension of time to file Comments on Order 2004-3-34 until Monday, May 10, 2004.  Appendix A of Order 2004-3-34 contains substantial errors in the construction of the rate, and data included in the rate making.  The Rural Service Improvement Act requires that the rate be set for points where only a water landing is possible.  The Appendix contains data for service to points served by land airports, includes cost and traffic data for wheel (land) aircraft, and includes mail service operated under air taxi contracts and not the class mail rate.  As will be explained in the Comments, these are fatal errors in setting the mail rate. 

The Carriers have been working to verify all data and develop a correct data set and model for determining the mail rate.  Not all carriers have responded to our inquiries at this time.  We expect to have responses from all carriers by the first of next week, and will be able to file complete comments by May 10, 2004.

By: Consolidated Carriers, Hank Myers



May 4, 2004

Re: Request for Extension of Time

By Order 2004-3-34, served March 31, 2004, the Department requested comments regarding amphibious mail rates by April 30. On April 29 we received a request for extension of the deadline to May 10 by the Consolidated Carriers. We hereby grant that extension.

By: Dennis DeVany



May 10, 2004

Comments of the Consolidated Carriers and Petition for Leave to File an Otherwise Unauthorized Document and Petition to File Late | Word

In this document, the Consolidated Carriers presents its Comments on Order 2004-3-34, and requests permission to file in response to the Comments of the U.S. Postal Service filed April 30, 2004. Receiving this response will not delay the proceeding, or harm any party to this proceeding. The Postal Service Comments contain several misstatements of fact that must be corrected on the record. The Carriers have no objection to the Postal Service responding to the original Comments contained herein. These Comments were filed on April 10, 2004 as permitted by Department action, but were filed approximately two hours after the close of business of the Docket Section. This brief delay was necessitated by obtaining concurrence from carriers participating in this filing. This will not result in hardship to any party as the publication of this document in the Docket file will not be delayed, and service by email was made in a timely fashion to all parties.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


OST-03-14695 - Mainline Rates

May 10, 2004

Answer of Alaska Airlines

Respectfully answers in support of Northern Air Cargo, Inc.’s petition requesting the Department to forthwith direct the United States Postal Service to discontinue using new intra-Alaska great circle mileages in processing the mail payments due the intra-Alaska carriers and instead to recommence using the long-established intra-Alaska great circle mileages for such payments.

Counsel: Squire Sanders, Marshall Sinick, 202-626-6651, msinick@ssd.com



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

May 12, 2004

Modification of Equalization Notice of Warbelow's Air Ventures | Word

Terminates its equalization notice for priority mail tendered to its direct flights between the points named above, effective 10 days from receipt of this notice.

Continues it’s existing and long standing equalization notice non-priority mail tendered to its direct flights between the points named above for an indefinite period.  This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Arthur Warblelow



Order 04-06-03
OST-03-14694 - Bush Mail Rates

Issued and Served June 8, 2004

Order Setting Final Rate Until Further Department Action and Requesting Comments

By this order, the Department is adjusting the linehaul portion of the mail rate set by Order 2004-2-12 payable to intra-Alaska bush mail carriers providing service with Part 121 bush aircraft. These rates will be effective on the first Saturday after the service date of this order on a final basis, not subject to retroactive adjustment, and will remain in effect until further Department action. The terminal portion of the rate will remain unchanged from that set in Order 2002-8-7.

We have made three changes to the ratemaking methodology in Order 2004‑2‑12: (1) we have excluded from the rate calculation data of bush carriers operating on mainline routes, (2) we have established a separate, higher 121 rate for short‑runway airports that only STOL2 aircraft with higher operating costs, such as Era Aviation's DeHavilland Twin Otters, can operate into, and (3) we have, for the first time in the bush mail rates proceeding, established a "taper" to the payout provisions of the rate.

By: Karan Bhatia



Order 04-06-04
OST-03-14694 - Bush Mail Rates

Issued and Served June 8, 2004

Order Setting Final Rate Until Further Department Action and Requesting Comments

By this order, the Department is setting the linehaul portion of the mail rate payable by the United States Postal Service to intra-Alaska bush mail carriers providing service with Part 135 aircraft. This rate will be effective immediately on a final basis, not subject to retroactive adjustment, and will remain in effect until further Department action. The current terminal element of intra-Alaska bush rates is unaffected by this order. Likewise, the rates for Part 121 and Amphibious bush carriers remain unchanged.

This order uses a fully allocated costing methodology to determine the Part 135 linehaul rate, which is detailed in Appendix A. The data are for the year ended June 30, 2003, and are from the carriers' T‑100 traffic reports and Schedule F‑2 financial statements. As required by RSIA, 39 U.S.C. 5402 (h)(2)(B)(ii), we have not included data for aircraft certificated for less than five seats. In addition, as discussed in Order 2004‑6‑3, we have included only the data for "bush routes," which are defined as those where there is no mainline service, and thus have excluded several ineligible segments of the carriers, most significantly those of Hageland's Beech 1900s, Arctic Circle's Cessna 402s and King Airs, Grant Aviation's King Airs, and Iliamna Air Taxi's Pilatus. In determining eligible hours, revenue ton‑miles and other parameters, we have excluded, by aircraft type, individual segments that overlap mainline routes.

By: Karan Bhatia



June 14, 2004

Motion to Compel the USPS to Comply with 49 USC 41901 (f) and Rate Orders

The Consolidated Carriers hereby moves to have the Department compel the U.S. Postal Service to comply with the terms of 49 USC 41901(f), and to comply with rates orders of the Department and pay amounts due air carriers for transportation of mail by aircraft within the State of Alaska. Until the Postal Service complies with the requirements of 49 USC 41901(f), and the Department has had an opportunity to analyze the effects of Postal requirements on unit costs, the Department must refrain from making any change in the terminal charge elements of the bush rate structure. The passage of the Rural Service Improvement Act and the new Postal Service procedures imposed since the passage make it imperative that the Department and Carriers understand the full set of requirements being required for mail handling and transport.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


June 14, 2004

PO-508 Postal Service Procedures Manual | Word

Appended hereto is the PO-508 Postal Service Procedures Manual as published by the U.S. Postal Service on its website. This is the most current manual as a whole, although a new version was proposed in November, 2003, but which has not been made effective in total.

The appended copy was downloaded from http://www.usps.com/cpim/ftp/hand/po508.htm and imported to Microsoft Word 2002. No change in wording or content has been made, but the typeface was changed to Arial to be consistent with printed copies of the handbook.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



OST-03-14694 - Intra-Alaska Bush Service Mail Rates
OST-04-18078 - Third Party Complaint of Consolidated Carriers Against USPS

June 18, 2004

Request by USPS Under Rule 10(c) for Identification of Association Members and Their Authorization of the Association's Positions

That the composition of the Consolidated Carriers, which clearly is an association within the contemplation of the Department's rules, has changed over time is not unexpected. However, because the current composition of that association cannot be determined with any certainty from the identified filings, the Postal Service requests that the Department require the Consolidated Carriers to identify all of the air carriers which presently comprise the association, and that the Department request, consistent with Rule 10(c), that the carriers so identified demonstrate that they have specifically authorized the positions taken by the Consolidated Carriers in the Motion and Complaint described above.

Counsel: USPS, William Jones, william.jones.@usps.gov



June 21, 2004

Re: Letter from Grant Aviation Clarifying that They are not a Member of the Consolidated Carriers | Word

I was surprised to read in this docket that Grant Aviation, Inc. was included in the Consolidated Carriers. While Grant Aviation made use of Mr. Meyers’ services in the past, I was unaware that use of that information service resulted in having our company’s name included in the trade association presented as The Consolidated Carriers.

For the record, Grant Aviation, Inc. is not a member of the Consolidated Carriers

By: Grant Aviation, R. Bruce McGlasson



June 21, 2004

Re: Comments on The BTS Publication of Intra-Alaska Traffic Statistics

Carriers have the option, subject to Department enforcement action, to initially report their data beyond the 30-day deadline, and/or resubmit corrected data after the 15-day grace period, but when and if they do so, it is understood that delayed and erroneous data will necessarily be excluded from the BTS release of traffic statistics. In other words, the publication schedule will be maintained. It is not consistent with the Department’s Order nor fair to compliant carriers to delay the release of the aggregate data due to carriers that cannot meet the known deadlines, nor is it reasonable to expect that the data of delinquent carriers should be included in BTS data releases.

With all due respect, it’s incumbent upon the Department to meet its announced publication schedule to support the efforts of conforming carriers, to maintain Department compliance with its own directives, and to preclude any suggestion that delayed reporting is sanctioned by the Department. The integrity and implementation of the Rural Service Improvement Act is dependent on reliable and timely traffic data. Your assistance is requested and appreciated to ensure timely and accurate publication of the intra-Alaska traffic statistics for all parties who participate in intra-Alaskan mail transportation.

By: Ken Acton



June 25, 2004

Re: Motion for an Extension of Time and for a Shortened Answer Date (Peninsula)

PenAir has been working diligently to develop the economic and operational data necessary to provide a thorough and meaningful response to Order 2004-6-3. The Order established a new multi-rate system and "mileage taper" that are unprecedented for Alaska Bush operations. PenAir' s preliminary analysis indicates that the Order substantially erred in assuming that costs for providing service with Part 121 turboprop commuter aircraft decline with stage length. The proposed rate failed to consider to payload restrictions, long range fuel requirements, and other factors associated with operating relatively small turboprop aircraft over extended stage lengths in the harsh Alaskan Bush environment.

The economic considerations that hear on the proposed mileage taper and accurate rate setting methodology are complex and require additional time for study. Moreover, the Department's proposed rates would reject out‑of‑hand all of PenAir's operational data, which is among the most significant Bush operations in Alaska. PenAir's reexamination of this data since the issuance of the Show Cause Order indicates that, contrary to the Department's assumptions, PenAir' s costs may be higher than Frontier's. Further, recent changes in allowed pilot training expenses also impact the rate.

Counsel: Shaw Pittman, Alexander Van der Bellen, 202-663-8060



July 1, 2004

Re: Response to Previously Raised Issues | Word

I have been analyzing the derivation of the Part 135 wheel plane rates issued in Order 2004-6-4. Some of the issues (and others) raised by Peninsula Airways in its requests for extension of time to Comment on Order 2004-6-3 also apply to Order 2004-6-4. Because the most difficult issue of rate taper does not apply to the Part 135 rates, the time needed to complete the analysis and filing is less. I ask that the date for Comments on Order 2004-6-4 be extended until close of business, Monday, July 19, 2004. Given the minor change in the rate set in Order 2004-6-4, the short delay will not disadvantage any party except possibly the air carriers receiving the Part 135 rate.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



Issued and Served July 7, 2004

Notice of Extension of Time

Pursuant to Rule 302.11, on June 25, 2004, Peninsula Airways, Inc., requested a 30‑day extension of the procedural dates established by Order 2004‑6‑3, linehaul mail rates for Part 121 bush carriers. In its request, Peninsula noted that the order established a complex and unprecedented mileage rate taper, and that the carrier needs time to conduct additional analyses. There were no objections to this request.

We hereby grant that request. As the order was served June 8, this would extend the time for initial comments from July 8 to August 7, 2004.

By: Karan Bhatia



Order 04-07-11
OST-03-14694 - Intra-Alaska Bush Service Mail Rates

Issued and Served July 15, 2004

Order Setting Final Rate Until Further Department Action and Requesting Comments

By this order, the Department is setting the terminal portion of the mail rates payable by the United States Postal Service to intra-Alaska bush mail carriers providing service with bush aircraft. This rate will be effective immediately on a final basis, not subject to retroactive adjustment, and will remain in effect until further Department action. The current linehaul elements of intra-Alaska bush mail rates -- Part 121, Part 135, and Amphibious -- remain unchanged. The terminal rate we are setting here of $516.18 per mail ton enplaned is significantly less than the prior rate of $722.80 set by Order 2002-8-7.

We continue to endorse the multivariable regression approach for determining mail's terminal rate. As shown in Appendix A, the regression estimates a cost for each 200 pounds of mail of $38.1647, or $381.165 per ton enplaned. Because we excluded the data for 40‑Mile and LAB as unreliable in Order 2004‑6‑4, we have also excluded their data here. We have also excluded Tatonduk from the calculations of the terminal rate because its reports do not breakout terminal costs.

By: Karan Bhatia



July 16, 2004

Re: Request for a 30-Day Extension

Recently the Department approved the request of Peninsula Airways for a 30-day extension of time to file Comments on Order 2004-6-3. There were no objections to the request. Because many of the same issues and techniques applied in Order 2003-6-3 also apply to 2004-6-4, as well as the just released 2004-7-11, I ask that the 30-day extension be applied to Order 2004-6-4 as well. All Comments on Order 2004-6-4 would be due on August 9, 2004.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



Issued and Served July 22, 2004

Notice | Word

On July 7, 2004, pursuant to Rule 302.11, the Department granted Peninsula Airways an extension until August 9, 2004, to submit initial comments to Order 2004-6-3, linehaul mail rates for Part 121 carriers. On July 16, 2004, Mr. Hank Myers of the Consolidated Carriers requested that the filing deadline in response to Order 2004-6-4, linehaul mail rates for Part 135 bush carriers, be extended to August 9 as well. Mr. Myers noted that many of the issues apply to both orders, and require more time to conduct additional analyses. There were no objections to this request.

We hereby grant that request to extend the deadline for comments to August 9.

By: Karan Bhatia



July 23, 2004

Petition of Frontier Flying Service

Based on the above and evidenced by the actual increase in fuel costs during the quarter ended 3/31/04 and, of possibly even more significance, the actual to date increases and the strong indications of continued significant increases in fuel prices subsequent to 3/31/04, the Petitioner hereby requests that quarterly fuel cost adjustments be instated beginning with the quarter ending 3/31/04 and continuing for an appropriate period of time.

By: Robert Hajdukovich, 907-474-1739 x233, bob@frontierflying.com



July 26, 2004

Re: Alaska Mail Trucking Reporting Requirements | Word

The United States Post Office has authorized the trucking of non-priority mail between Anchorage and Fairbanks for subsequent transport by air. Confirming prior exchanges of correspondence and telephone conversations regarding the above referenced subject, the following understanding and comments are submitted for your approval and response.

Counsel: Garofalo Goerlich, Tina Paylor



July 29, 2004

Motion for an Extension of Time (PenAir)

Pursuant to Rule 302.11, Peninsula Airways, Inc. hereby moves for an extension of time, so as to establish August 20, 2004 as the consolidated answer date for comments on the Department's proposed Part 121 linehaul rate (Order 2004-6-3) and the proposed terminal rate (Order 2004-7-11). Answers would otherwise be due on August 9 and August 16, respectively.

The proposed consolidated answer date of August 20, 2004 will permit interested parties additional time to complete the analysis of the many complex and interrelated aspects of the Department's proposed new rate making policies, and will facilitate the issuance of a comprehensive and well-reasoned decision by the Department. The proposed rates are already in effect, and the requested extension of time will not prejudice any party. PenAir has been working diligently to develop the economic and operational data necessary to provide a thorough and meaningful response the proposed new linehaul and terminal rates, but requires additional time to complete its analysis.

Counsel: Shaw Pittman, Alexander Van der Bellen



July 12, 2004

Re: Request for a Rate Conference

Before proceeding any further, I think rate conference which includes all outstanding issues of rate making and application would be useful. Rather than exchanging documents ad nauseum on each topic of note, it would save a lot of time if the issues could be discussed verbally at one time. Even all of the issues involved in the Complaint and Motion to Compel would be relevant in a rate conference, and could lead to a simple resolution of the issues there.

This is a particularly appropriate time for calling a rate conference. All of the ratemaking issues are still in play. All three linehaul rates are still open for comment. The terminal charge cannot be accurately set until the Postal Service details the services it is requiring of the carriers, particularly requirements related to changes in the handling and reporting requirements made subsequent to the passage of the R.S.I.A. I suggest that the Department propose a rate conference, and ask all parties for agenda suggestions. The Department could determine the agenda, and I suggest that parties be asked for suggestions without comment or reply from other parties. This might be an opportunity for information requests as well, including any special studies or reports Department staff would like. Such a conference could take place in early September in your offices, which would work well with the seasonal demands of the carriers in Alaska and before the seasonal demands of the holidays for the Postal Service.

By: Hank Myers


July 12, 2004

Re: Arctic Circle Air Letter Requesting Written Reports

Furthermore, in your correspondence and order date November 2nd, 2003, the additional following criteria are specified for waiver continuance. ”Frontier will provide monthly written reports to the USPS summarizing its progress. ” Since the USPS operates at die leisure of the public, and with Frontiers waiver having a direct impact on the public, for the public good Arctic Circle Air Service, Inc. requests that all written reports submitted by Frontier (as ordered by this waiver) in regards to this waiver be made available for public review and comment.

Arctic Circle Air Service additionally requests that the USPS provide, for public review, the guidelines that it is using in regards to its determination of Frontiers progress under the rules and requirements set forth in the wavier.

By: Paul Hendrickson


July 30, 2004

Re: Letter Rejecting Request for a Rate Conference

While we have found informal mail rate conferences to be a useful tool in resolving or narrowing a variety of rate issues over the years, in this case we are very late in the formal proceeding. As you know, we are now awaiting written comments and are, thus, hesitant to introduce further delays that meetings would entail. At this late date, we are not willing to impose the burdens and delays of a meeting unless all of the parties affirmatively agree within the next two weeks that it would be useful.

By: Randall Bennett



Issued and Served August 5, 2004

Notice | Word

On July 29, 2004, Peninsula Airways requested that the filing deadline for response to all of the bush mail orders be extended to August 20. Peninsula says it needs the additional time to complete its analysis of the many complex and inter-related aspects of the Department’s proposed new rate-making policies, and such an extension will facilitate the issuance of a comprehensive and well-reasoned decision by the Department. Peninsula further notes that the proposed rates are already in effect, and the requested extension of time will not prejudice any party.

We have received no objections to Peninsula’s request. Procedurally, at this stage in the process it should be simpler to put all of the inter-related issues on the same procedural time frame. In addition, there is an informal meeting among the parties scheduled for August 19. The results of that meeting may influence parties’ positions. For these reasons, we will extend the initial filing deadline for all three linehaul rates (Part 121, Part 135 and Amphibious) and the terminal rate to September 3, 2004.

By: Karan Bhatia


August 5, 2004

Notice of a Meeting | Word

Peninsula Airways has asked for a short extension in filing time for various responses in Docket 14694, and asks that all dates be the same, Friday, August 20, 2004. I agree with the logic of the request and support coordinated filing dates.

Since that request was made, a meeting has been scheduled in Anchorage for August 19 to include the office of Senator Ted Stevens, representatives of the Postal Service and representatives of the Bureau of Transportation Statistics and Office of Aviation Analysis, and all certificated air carriers.

I anticipate that this meeting will involve some or all of the questions that have been raised by various carriers and the Postal Service affecting ratemaking for bush service. It is my hope that all parties will be forthcoming in the comments at that meeting, and that the areas of disagreement or concern will be reduced, or at least clarified. With this hope in mind, I ask that the filing date for all responses in Docket 14694 be extended until Monday, August 30, 2004.

I anticipate that the August 19 meeting could serve a function similar to an informal rate conference, in that all parties might find areas of common agreement and clarify areas of differences. A one week extension in filing is therefore justified. I also ask that, where possible, deadlines be set on Monday to allow for weekend work if necessary.

By: MTC, Hank Myers



August 30, 2004

Comments of the Consolidated Carriers (Seaplane) | Word

The linehaul rate for seaplane service set in Order 2004-3-34 is procedurally and factually deficient and does not compensate carriers for assets used and useful in the transportation of bush mail to points where only water landings are available. In addition to the errors noted in the May 10 filing of the Carriers, Order 2004-3-34 is deficient and unlawful because it miscalculates the allowance for Capacity Related Expenses and does not adjust unit costs for changes in cost level since the period on which the rate was based. The rate also includes inaccurate revenue ton mile data for Redemption, Inc. d/b/a Island Air Service from the use of the wrong point identifier for their Trident Basin seaplane base. Based on the corrections made in Appendices A-C, the Department must set a linehaul rate of $25.91126 per ton mile for mail transported to points where only water landings are available. Any fuel cost surcharge would be added to this amount.

Pursuant to title 18 United States Code section 1001, I, in my individual capacity and as the authorized representative of the Consolidated Carriers, have not in any manner knowingly and willfully falsified, concealed or covered up any material fact or made any false, fictitious, or fraudulent statement or knowingly used any documents which contain such statements in connection with the preparation, filing or prosecution of this filing. I understand that an individual who is found to have found to have violated the provisions of 18 U.S.C. section 1001 shall be fined no more than $10,000 or imprisoned not more than five years, or both.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



September 3, 2004

Re: Comments of Arctic Transportation Services

Although cargo carriers were excluded from the rate decision making process, Arctic Transportation Service, Inc., believes that RSIA qualified all cargo carriers expenses should be included. The RSIA sets aside 20% of the mail volume for qualified freight carriers, so it does make prudent sense to include qualified freight carriers in the mail rate making process.

Village agents were excluded from carriers expenses, based primarily on the premise that bush carriers were neither sophisticated and complex enough to produce good, reliable data. Arctic Transportation Services, Inc., disagrees. Bush carriers can produce reliable data. 8% of the total cost of operations for this carrier goes directly to village agents whose primary responsibility is to protect and deliver the USPS priority, non priority and bypass mail. It may hold true that village agents have other duties and responsibilities, such as reporting weather and checking runway conditions but their primary responsibility is to protect and to deliver the USPS mail. In most instances, the consignee picks up freight at the airport.

Fuel costs have risen dramatically over the last several months, an average rise of $0.61 per gallon for both AV100LL and Jet A-50 fuel, collectively. All inflationary or deflationary fuel costs must be included in the rate making process, made retroactive, reflecting either increases or decreases in fuel prices.

By: Wilfred Ryan


September 3, 2004

Re: Consolidated Carriers - Delay in Filing Comments

The Consolidated Carriers have retained the services of an expert statistician to review the findings in Order 2004-7-11. Due the press of other business, the statistical analysis will not be completed until Tuesday, September 7, 2004. The Carriers will file Comments on Order 2004-7-11 no later than Wednesday, September 8, 2004. The Carriers have filed Comments on all other elements at issue in Docket 14694. The short delay will not harm any party, and will result in a more accurate filing on behalf of the Carriers.

Counsel: Consolidated Carriers, Hank Myers, 425-641-8243, hank@mtcworld.com


September 3, 2004

Re: Consolidated Carriers - Part 121 Linehaul Rate | Word

The undersigned carriers, hereinafter “Carriers” file Comments on Order 2004-6-3, which sets the bush linehaul rate on routes where Part 121 bush aircraft are tendered bypass mail. These Comments address the correct application of the Capacity Related Expense markup and unit cost escalation to the Part 121 bush linehaul rate. On the issue of the mileage taper set in Order 2004-6-3, the Carriers have no comment.

Counsel: Consolidated Carriers, Hank Myers, 425-641-8243, hank@mtcworld.com


September 3, 2004

Re: Consolidated Carriers - Part 135 Linehaul Rate | Word

The undersigned carriers, hereinafter “Carriers” file Comments on Order 2004-6-4, which sets the bush linehaul rate on routes where Part 135 bush wheeled aircraft operate. These Comments address the correct application of the Capacity Related Expense markup and unit cost escalation to the Part 135 bush linehaul rate

Counsel: Consolidated Carriers, Hank Myers, 425-641-8243, hank@mtcworld.com


September 2, 2004

Re: Comments Regarding the Part 121 Mail Linehaul Taper Methodology (Frontier Flying Service) | Word

In particular the Linehaul taper for the Part 121 needs further discussion before implementing such a dramatic departure from prior methodology. The taper should be rescinded and direct discussion with the carriers and the Post Office could render either direct support for this concept or a better method by which the Department could ascertain the rate.

The one fact that is clear in the last ten months is that the “Bush” airlines have been the recipient of three significant decreases to the mail rate that have not only put carriers out of business but has contributed to an instability with the remaining carriers due to the additional increases in the cost of fuel. The Department is now considering a fuel rate adjustment that will come out over two years since the last rate adjustment. It does our company no good to have the Department feel “guilty” for such delayed data, when for the last six months we have seen Postal revenues drop by 50%+ percent in many cases. The carriers that remain serving the communities in the state of Alaska need things to happen predictably and slowly, especially when it concerns the single largest revenue stream.

Frontier stands by its submitted data, but does not stand by the methodology that was never really discussed with interested parties. Frontier recommended that the DOT not put out a new Terminal rate until fully considering the not only the impacts of the new rates but more importantly to take into consideration the rising cost of fuel, which was not taken into account on the prior issued Bush Linehaul rates. In light of this, we strongly feel the taper should be rescinded immediately until further discussion can take place and the fuel rate adjustment should be at least retroactive to the start of the RSIA.

By: Robert Hajdukovich


September 3, 2004

Objections of Peninsula Airways

As a consequence of the flawed linehaul and terminal regression methodologies adopted by the Department, Part 121 bush compensation to PenAir has fallen by $1 million per year (or 26 percent) since the Department first set the 121 bush rate – only six months ago. This precipitous and unjustified drop in PenAir's mail revenue threatens the economic viability of PenAir's long-haul Part 121 bush routes, and is contrary to the letter and intent of RSIA. There is no indication whatsoever that RSIA intended to alter the longstanding method of average cost based mail rate compensation. Yet, Order 2004-6-3 adopted a completely new regression methodology that is manifestly unfair to PenAir and the remote bush communities that depend on PenAir's longhaul services.

Counsel: Shaw Pittman, Robert Cohn, 202-663-8060


August 31, 2004

Re: The United States Postal Service - Letter Announcing Modifications

As a result of the ongoing evolution of our implementation of RSIA, as supplemented by comments we received from you in our discussion of data reporting in Anchorage last week at Senator Stevens’ meeting, here are several modifications to the requirements for daily reporting in SAMS-Alaska. We believe that these changes will address the concerns which various parties have raised and move us closer to our longstanding goal of making the reporting as seamless as possible to your operation.

By: John Bonafilia


September 3, 2004

Comments of The United States Postal Service on Order 2004-6-3 - Bush 121 Service Rates

In the comments which follow, the Postal Service takes exception to a number of the Department’s decisions in Order 2004-6-3 and, for the reasons explained below, urges the Department to reconsider those decisions.

Order 2004-6-3 is a complete departure from the Department’s (and its predecessor, the CAB’s) long history of adhering to class rate principles in Alaska. Rather than treating Part 121 bush aircraft operators as a class, this order confers individual treatment upon virtually every Part 121 carrier. ERA will have its own rate for Twin Otter operations; Peninsula, the most efficient 121 bush carrier in the state, which accounts for 75% of the Alaska mail carried on Part 121 bush aircraft, has its costs excluded entirely from the rate calculations; and the remaining “class” is a single carrier, Frontier. Peninsula and Frontier will both be paid on the basis of Frontier’s cost experience, which is higher than Peninsula’s.

Counsel: USPS, William Jones, william.j.jones@usps.gov


September 3, 2004

Comments of The United States Postal Service on Order 2004-6-3 - Bush 135 Service Rates

The Postal Service takes this opportunity to present comments on Order 2004-6-4, which establishes the linehaul rate for bush carriers providing service with Part 135 air-craft. We renew our objections to a number of the Department’s decisions, previously presented in response to Order 2004-2-12 and reiterated in our comments in response to Order 2004-6-3 which are being filed contemporaneously with this submission. These comments are not meant to be comprehensive with respect to these Part 121 rate is-sues, which are detailed in that response.

Counsel: USPS, William Jones, william.j.jones@usps.gov


September 3, 2004

Comments of The United States Postal Service on Order 2004-7-11 Bush Terminal Handling Rates

The Postal Service takes this opportunity to present these brief comments on Order 2004-7-11, which sets the terminal portion of the mail rates for intra-Alaska mail transportation. The Postal Service is pleased to see that the Department has decided to create one terminal handling rate for all bush rate categories. While we expect the carriers to object to the dramatic reduction in the terminal handling rate, we believe the new rate simply reflects the overstatement of costs over time resulting from the previous update methodology.

Counsel: USPS, William Jones, william.j.jones@usps.gov


September 3, 2004

Re: The United States Postal Service Response to the Comments of The Consolidated Carriers

On May 10, 2004, the Consolidated Carriers1 filed an unauthorized and late document in response to Order 2004-3-34, which established the mail rates to be paid in Alaska where only water landings are available. In these comments, the Consolidated Carriers make a number of recommendations as to how the water rates should be amended and present rebuttal comments to the earlier response of the Postal Service to Order 2004-3-34. The Postal Service takes the opportunity afforded by the Department’s August 5 Notice extending the response period for all issues related to the new rates established in accordance with the Rural Service Improvement Act.

Counsel: USPS, William Jones, william.j.jones@usps.gov



September 10, 2004

Answer of The Consolidated Carriers to Comments on DOT Orders 2004-3-34, 2004-6-3, 2004-6-4 | Word

The Postal Service has adopted a "Do as we say, not as we do" attitude toward mail ratemaking. Costs commonly considered in setting postage rates would be excluded in bush mail ratemaking if the Postal Service prevails. Provisions for cost escalation would be ignored. Federal law requires the Department to set fair and compensatory rates, and the Rural Service Improvement Act clearly defines the rates pools to be used. For the most part, Order 2004-3-34, 2004-6-3 and 2004-6-4 accomplish these goals. The Carriers objects to certain miscalculations and exclusions from historic methodology. After those corrections are made, the Department should continue to set rates using the most inclusive class rate data.

Counsel: Consolidated Carriers, Hank Myers, 425-641-8243, hank@mtcworld.com



September 14, 2004

Letter from MTC to the Honorable Ted Stevens Regarding Reporting Requirements | Word

During the August 19th meeting, three essential concerns about the Postal Service reporting requirements were brought up.

1. The format of the USPS reports is substantially different in form and content from the D.O.T. T-100 reports.
2. The USPS requires that reports be filed daily.
3. The USPS requires that reports be filed one day after the end of the period being reported.

In a response from the Postal Service, it proposes to change the reporting frequency to weekly, but still will require a unique format, and reports would be due only one day after the end of the reporting period.

I think that there is an even simpler solution that will benefit the carriers, and provide the Postal Service with the data it wants. If it is absolutely determined that the Postal Service needs to have data more frequently than monthly, allow carriers to file their reports using the D.O.T. T-100 Segment report format, but covering the time period requested by the Postal Service. Carriers should be given at least one week after the end of the reporting period to submit their data. This will increase the accuracy of the reports, and insure greater consistency with the D.O.T. reports.

By: Hank Myers, 425-641-8243, hank@mtcworld.com



September 16, 2004

Motion for Extension of Time (Era Aviation)

Pursuant to Rule 302.11, Era Aviation, Inc., hereinafter “Era”, moves for an extension of time to respond to the comments and objections filed by the other parties to this proceeding on September 3, 2004 to both Order 2004-6-3 and Order 2004-7-11. Era’s rebuttal comments are currently due on September 20, 2004.

Era is requesting that the time for filing rebuttal comments be extended 30 days. In particular, the September 3rd comments of Peninsula Airways, Inc. proposing changes to the regression equation used, and their suggestion of a two tiered approach to terminal regression methodology, together with over 50 pages of exhibits, raise challenging issues to analyze and address by way of rebuttal comments in only 15 days. The Department granted PenAir two separate one-month extensions to develop their arguments and a 30-day extension to other parties to respond to PenAir’s comments would be fair and reasonable. The proposed rates are already in effect and the requested extension of time will not prejudice any party.

Counsel: Era Aviation, Marcia Davis, 907-266-8325, mdavis@eraaviation.com



September 20, 2004

Peninsula Airways Consolidated Answer to Objections

Peninsula Airways, Inc. hereby submits this consolidated answer to the objections and comments filed by other interested parties concerning the Department's new linehaul and terminal rates for bush mail service. While the other commenters differ on the mechanics of the rate setting mechanism, it is clear that the current rates are too low and do not fully and fairly compensate PenAir for its cost of providing bush mail service, as required by the statute.

Counsel: Shaw Pittman, Alexander Van der Bellen, 202-663-8060


September 20, 2004

Rebuttal Comments of the United States Postal Service on Orders 2004-4-3, 2004-6-3, 2004-6-4; 2004-7-11 Bush Amphibious Rates; Bush 121 Service Rates; Bush 135 Service Rates; Bush Terminal Handling Rates

The class of Part 121 bush carriers is very small, consisting of only three carriers operating four types of aircraft. Not surprisingly, these carriers' equipment and route systems reflect a very wide range of cost characteristics. Making special provisions for each carrier's situation is problematic enough in the short term, as is evident from the carriers' expressed dissatisfactions with the newly established rates. As additional bush carriers equip themselves with Part 121 aircraft, they can be expected to argue that their individual nuances are entitled to similar special treatment. Continuing to accommodate such positions will eviscerate the class rate system and all of its incentives will have vanished from Alaska Part 121 bush services.

Counsel: USPS, William Jones, william.j.jones@usps.gov



Issued and Served September 22, 2004

Notice | Word

On August 5, 2004, pursuant to Rule 302.11, the Department granted the Consolidated Carriers and Peninsula Airways an additional extension until September 3, 2004, to submit initial comments to Orders 2004-3-34, 2004-6-3, 2004-6-4, and 2004-7-11, establishing bush linehaul mail rates, with rebuttals due 15 days thereafter, on September 20. On September 17, ERA Aviation requested a 30-day extension, to October 20, for rebuttals. ERA notes that the Department previously granted Peninsula two separate one-month extensions for initial comments, and Peninsula’s initial comments were extensive and challenging to analyze.

We received rebuttal comments from Peninsula and the Postal Service on September 20, but no party has objected to us granting ERA’s request for an extension. Accordingly, we will grant ERA’s request that we extend the deadline for rebuttal comments to October 20, 2004.

By: Karan Bhatia



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates


September 23, 2004

Modification of Equalization Notice of Warbelow's Air Ventures | Word

Warbelow's Air Ventures, Inc., an Alaskan carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize between Fairbanks on the one hand and Shungnak, Kobuk and Ambler on the other hand, with lower levels paid to another carrier or combination of carriers in the market effective this date.

By: Arthur Warbelow


September 23, 2004

Comments of Northern Air Cargo | Word

In comments to Order 2004-8-26 the Postal Service suggests that the Department of Transportation consider creating a new base rate for the mainline carriers as it did for the bush carriers.

We acknowledge the Postal Service’s right to request such a proceeding. Although far from clear that a proceeding is necessary, we suggest that should the Department be inclined to consider the request, that it first allows the parties the opportunity to make comment on the merits of the task and whether or not those efforts will produce results beneficial to all involved.

By: Northern Air Cargo



September 24, 2004

Comments of The Consolidated Carriers | Word

The undersigned Consolidated Carriers hereby Comment on Order 2004-7- 11, and request leave to file these Comments late. The delay in filing was due to the necessity of rerunning statistical analysis after correcting data contained in Appendix A to Order 2004-7-11, and obtaining individual permission from the various Carriers to file these Comments once the analysis was complete.

In Order 2004-7-11, the Department used a multi-variable regression analysis to determine the cost coefficient of mail terminal handling. Unlike in the Mainline terminal charge investigation, the Department did not determine the individual cost causative elements of mail handling. Instead, the Order included the regression of a representative sample of certificated carriers serving every hub in the State. The regression had good correlation, but there were some data errors and the significance measure of the mail coefficient was slightly less than statisticians generally accept as beyond random.

These Comments develop two alternatives to the analysis contained in the Order, each more accurate and statistically significant. In addition, the terminal charge has been adjusted for cost escalation and correct application of the Capacity Related expense markup. All adjustments are based on historic Department policies. After all adjustments, the minimum correct terminal charge for bush mail handling by Part 121, Part 135 wheel and seaplane operators is $594.05 per ton of mail enplaned.

By: Hank Myers, 425-641-8243, hank@mtcworld.com



October 5, 2004

Re: Comments of Ted Stevens, Alaska Chairman of US Committee on Appropriations

I am very concerned that the Department's latest bush mail rate setting actions could have the opposite effect. First, the DOT staff applied a novel new "mileage taper" formula to calculate the Part 121 linehaul rate, which is unprecedented in the history of Alaska mail rates. The current mileage taper formula disproportionately and unfairly penalizes long-haul operations, such as those operated by Peninsula Airways. Second, the Department's terminal rate underpays carriers that serve larger airports, with a windfall subsidy to carriers serving only remote air strips with little or no overhead.

The combined effect of these changes is having a detrimental effect on PenAir, which is one of the largest and most important providers of high-quality Part 121 bush service in Alaska. I am familiar with PenAir's Objections, filed on September 3, and urge you to give serious and favorable consideration to PenAir's proposed modifications to the linehaul and terminal rates. It appears that the DOT's current rates do not provide PenAir with sufficient mail compensation. Indeed, under the current system, PenAir is receiving $1 million annually (26 percent) less than when the Department first calculated the RSIA rates in February using traditional methods.

Unless the bush mail rates are corrected to restore a more appropriate level of compensation, PenAir has advised that it may be faced with the highly undesirable choice of either significantly increasing air fares, or reducing or eliminating flights to its Part 121 bush communities. This is exactly the opposite of what was intended by RSIA, and I strongly urge you to amend the mail rates to prevent this result.

By: Ted Stevens



October 6, 2004

Further Comments on Bush Terminal Handling Rates in Response to the Consolidated Carriers (United States Postal Service)

On September 24, 2004, an unidentified group of Alaskan air carriers denominated as the Consolidated Carriers filed late comments in response to Order 2004-7-11, which set terminal handling rates for Alaskan bush mail service. Although these comments were filed past the deadline, for what appear to be less than "clearly shown" "good cause" (Rule 9(b)(2), since the comments presented objections to new issues, the Postal Service must respond to the erroneous assertions and suggested rate revisions presented therein so that the record may be complete.

The Postal Service objects to the Carriers’ request for the Department to "ascertain the unique costs of mail terminal handling, including reporting, associated with the specific and extensive requirements imposed by the Postal Service." (Comments, page 3, emphasis added.) The Postal Service has in fact complied with the requirements to provide a comprehensive list of all services it requires of air carriers in the published PO-508 Handbook. The Postal Service has not imposed any new service requirements that raise the handling costs of mail alone. To the contrary, the Postal Service has endeavored to make the reporting relating to transportation of mail easier for the carriers. Further, the Postal Service has responded to these accusations once before in our August 2, 2004 Answer to the Carriers’ Third Party Complaint (Docket OST-2004-18078), and will not reiterate that response here. Finally, as the Department and the carriers who attended the joint meeting held September 15, 2004 are aware, the Postal Service and the Department are in the process of developing a “pilot program” for carrier data reporting. This should reduce the extent of duplication involved in meeting the needs of the Postal Service and the Department and should, when fully implemented, alleviate carriers’ objections concerning reporting costs.

Counsel: USPS, William Jones, william.j.jones@usps.gov


Order 04-10-02

Issued and Served October 6, 2004

Order Establishing Ad Hoc Fuel Adjustment and Quarterly Fuel Cost Adjustments

By this order the Department grants the petition of Frontier Flying Service to make an ad hoc adjustment for fuel to the final linehaul mail rates set by Orders 2004-3-34, (Amphibious), 2004-6-3, (Part 121 Regular and Part 121 Short Runway), and 2004-6-4 (Part 135). This order also establishes a routine, quarterly-update procedure for the fuel portion of the mail rate’s linehaul element, until further notice. It also directs the carriers to closely review their data submissions.

By: Karan Bhatia



October 8, 2004

Reply of The Consolidated Carriers to the September 20, 2004 Filing of The US Postal Service | Word

The Consolidated Carriers request that the Department add cost escalation factors to all bush mail rates to allow for changes in unit cost levels between the data collection period and the application period of the rate. The recent decision to update fuel costs is a partial step, but it does not address the remaining 85% of operating expense.  Second, the Department must maintain the current rate of return, interest and taxes allowance until a new base study is performed covering these items. The Department must also correct the application of the Capacity Related expense markup to provide a full allocation of Capacity Related expense to mail traffic. Third, the established technique of excluding operations not related to mail carriage is historically correct and consistent with the new rate structures ordered by the Rural Service Improvement Act. Fourth, the circuity factor accurately adjusts for the difference between T-100 market data and T-100 segment data, and bases mail rates on actual costs of transporting and handling mail. The Carriers asked that this filing be accepted as relevant and meaningful to the issues under consideration.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com



October 12, 2004

Reply of The Consolidated Carriers to the Further Comments of the US Postal Service | Word

The Postal Services says that while it does not routinely use charters to move mail over scheduled routes, it does have “air taxi” contracts over non-scheduled routes that allow use of surplus capacity to carry passengers and freight on a space available basis. Such air taxi service is reported by carriers on the T-100 reports as non-scheduled carriage.

This confirms the Carriers’ contention that traffic originally categorized as mail on non-scheduled flights is actually mail and not freight, as the Department recategorized it. The Carriers are not asking that other traffic on those flights be categorized as mail, but only that the mail volume is correctly classified for purposes of establishing regression lines. The Postal Service comments in this regard confirm that the data used by the Carriers to adjust the regression statistics is correct and should be adopted.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com



October 6, 2004

Notice

At a September 15, 2004, joint meeting, representative Alaskan air carriers, the United States Postal Service, and the Department of Transportation's Bureau of Transportation Statistics and Office of Secretary, agreed to develop a pilot program for collecting weekly T-100 data, in an effort to reduce air carrier reporting burden.

Currently, air carriers transporting non-priority bypass mail pursuant to the Rural service Improvement act (RSIA) are required to submit monthly T-100 traffic reports to BTS and daily activity reports to USPS, which uses the daily report to monitor air carrier compliance with RSIA's requirements that air carriers provide service at least three days a week and exhibit adherence to those scheduled flights. Some carriers hired additional staff to complete the daily activity reports. If BTS adds two new data elements to the T-100 report and requires weekly submissions (due within 7 days after weeks end), both DOT's and USPS' data needs can be met. The two new data elements are: 1) Actual Day of Flight: the numeric day of the month in which the flight was flown: and 2) Aircraft Certification: A code to identify the type of mail operation, i.e., Bush Part 121, Bush Part 135, Bush Amphibious or Mainline.

The pilot program will start on November 1, 2004. The carriers that participate in the pilot program will be relieved of the requirement to submit daily activity reports to USPS. If all parties are satisfied with the new data reporting, the pilot program will end with respect to data for December 31, 2004, and thereafter all Alaskan air carriers will be required to submit the weekly T-101) reports in lieu of the USPS daily activity reports.

By: Donald Bright



October 11, 2004

Re: Waivers Granted to Frontier Flying Service and United States Postal Service

In granting the waiver, the Postal Service established conditions required to be met in order for Frontier to remain in those markets. Among them was that Frontier must demonstrate that they would meet the 20 percent passenger market requirement within one year. Additionally, the waiver stated that should Frontier fail to demonstrate adequate progress towards qualifying for the 70 percent mail pool, the waiver would be withdrawn for those markets prior to the end of 12 months.

This waiver has already done irreparable damage to locally based carriers that had qualified for the 70 percent mail share pool as established by RSIA. Therefore, I respectfully submit that the waiver for the markets of Gambell, Savoonga and Noatak be withdrawn immediately. Additionally, I respectfully request that the data submitted showing Frontier Flying Service, Inc. qualification into the two markets of Fort Yukon and Point Hope undergo an audit by the USDOT as soon as is practical to ascertain the accuracy and applicability of the passengers counted toward gaining market share as required by RSIA.

By: Cape Smythe Air, Tom Nicolos



October 20, 2004

Rebuttal Comments of Era Aviation

Counsel: Era, Marcia Davis, 907-266-8325, mdavis@eraaviation.com



October 21, 2004

Re: Comments of Hageland Aviation

When we examine the Rural Service Improvement Act, it appears to us that the fundamental principle for bush carriers is that mail shall be tendered preferentially to carriers that perform non-mail service, namely passenger and freight service at minimum market share levels. In less than a year, this principle and mechanism to encourage non-mail service has proven to be highly effective in making the passenger and freight service, along with the fares and tariffs for that service, very competitive. It has been so effective that it has brought about the intended attrition of carriers that do not perform significant passenger and non-mail freight service while carrying bypass mail.

Our primary concern accrues from the fact that the Frontier waiver was granted in very competitive passenger and freight markets that were being served by multiple carriers with modern IFR equipment. This was the case when the waiver was granted and continues to be the case nearly 12 months after the waiver went into effect. Attached to this letter is an illustrative example of those service levels.

Frankly, our concern over the future status of the existing Frontier waiver and the prospect of future waivers would not represent such a continuing point of contention had the Frontier waiver been granted to bush destinations with a clear service need. We can imagine that a waiver would be appropriately granted, for example, to bush points with infrequent, diminished or non-existent capacity of flights, unfair or deceptive business practices of existing carriers in the market, or unsafe flight operations of existing service. Instead, the Frontier waiver was granted to points that were already being served at exceptional levels of passenger and freight service. This is inconsistent with the waiver criteria found in RSIA.

By: Jim Nawrot



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

October 22, 2004

Re: Equalization Notice of Frontier Flying Service

Frontier Flying Service, Inc. (2F), an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rate legally in effect between Anchorage and Dillingham with the lower levels paid to other carriers or combinations of other carriers in these markets effective immediate.

  1. Order 90-10-34 provides that an air carrier may elect to establish a reduced charge equal to the charge prescribed for mail transportation actually being performed between the same origin and destination points by any other certificated air carrier or combination of carriers, regardless of routing.
  2. Subject to conditions below, Frontier Flying Service, Inc. gives notice of its election to equalize its otherwise applicable rates for small aircraft between Anchorage and Dillingham on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to Alaska Airlines, Lyndon, Northern Air Cargo, Tatonduk Outfitters Limited, d/b/a Everts for each category of mail and further elects to equalize to any lower rate or combination of rates paid in the future to any other carrier in these markets,
  3. Equalization under this notice is effective for an indefinite period and will remain in effect until terminated by written notice filed at least ten days in advance. However, the equalization ceases to be effective when and so long as a lower rated service, including a combination of services, is not offered in the market, or is not utilized by the Postal Service for mail transportation.

WHEREFORE, Frontier Flying Service, Inc. gives this notice of equalization of its mail rates and requests equitable tender of mail in these markets pursuant to the practices and procedures of the Department of Transportation and the United States Postal Service.

By: Craig Kenmonth



November 1, 2004

Re: Postal Service Response to Comments on Its Comments

In our September 20 Rebuttal Comments we urged the Department to reconsider its decision to carve out special rates for individual situations at the expense of the class rate system. There is literally no limit to the individual circumstances for which parties could argue for special treatment. In establishing the precedent for such special treatment as the Department did in Order 2004‑6‑3, the Department will be hard‑pressed to resist new pleas for similar preferential consideration in the future. More importantly, the Department's actions effectively discard the benefits of a class rate system, despite the Department's own long history of advocating class rate principles in Alaska.

Counsel: USPS, William Jones, wiliam.j.jones@usps.gov



November 1, 2004

Re: Comments of Bering Air

By: James Rowe



November 3, 2004

Reply of The Consolidated Carriers to the Postal Service Response Dated November 1, 2004 and Request for Leave to File an Otherwise Unauthorized Document | Word

The major difference between the Postal Service and the Carriers is that the Postal Service would prohibit traditional ratesetting methodologies unless specifically approved by the R.S.I.A. The Carriers contends the R.S.I.A. was written with an understanding of the ratesetting process already in place for mainline carriers, and it allows the Department to use discretion to set rates in an appropriate manner.  Cost escalation has always been an element in prospective (rather than retroactive) ratesetting.  A full rate of return with additional allowance for taxes and interest has always been an element of mail rate.  As a result of these responsive filings, the Carriers and the Postal Service have reduced the areas of disagreement and clarified their positions in relation to the arguments. The department can specify the meanings of the disputed terms in future orders.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



November 5, 2004

Re: Comments of Hank Myers | Word

The Department has been deluged with comments on the ratesetting order by the R.S.I.A., and your comments about the deficiencies of the 121 linehaul rate are well taken. Rather than adopt changes beneficial to only Penair and detrimental to its competitors, there are better and more equitable solutions for the Department. Thanks again for your efforts to see proper implementation of the R.S.I.A.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



November 8, 2004

Re: Comments of Era Aviation

We read with great interest your letter dated October 5, 2004 regarding points raised by our competitor, PenAir in their brief on the matter now pending before the DOT in Administrative Docket Number 14694. Era filed its own brief in response to the points raised by PenAir and we would like to share our views directly with you to ensure that you have received the benefit of all of the views of your Part 121 constituents.

We believe the Department of Transportation is doing its part by working hard to create measures that will provide the Part 121 operators with reimbursement formulas which will create a best fit between the operator's costs and USPS's reimbursement, while at the same time creating incentives for operators to improve the efficiency of their operations where possible. The DOT's rate making process will be an iterative one and at each step, we are hopeful that the ratemaking tools and results will improve.

By: Paul Landis


November 8, 2004

Re: Notice of United States Postal Service - Frontier Flying Service T-100 Waiver

In order to prevent a lapse in service pending receipt of the latest T-100 data, the USPS has determined to allow the waiver to remain in effect for one full year until the T-100 data is available from the Department. At that point, the waiver will expire, and Frontier's eligibility for tender in those markets will be based on its reported performance, unless it is requested and the USPS grant a further waiver.

By: USPS, John C. Bonafilia, Manager, Commercial Air Operations



November 22, 2004

Era Aviation Notice of Equalization

Hereby states its intent to equalize to the lower, Part 135 mail rates in the following markets: Bethel to Tuntutuliak Bethel to Eek

By: Era Aviation, Mike Le Norman



November 24, 2004

Peninsula Airways Notice of Equalization

Counsel: Shaw Pittman, Alexander Van der Bellen, 202-663-8060



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

November 29, 2004

Equalization Notice of Arctic Circle Air Service

By: Paul Hendrickson



January 17, 2005

Re: Emergency Rate Increase for Bush 121 Rate (Frontier Flying Service)

Frontier Flying Service, Inc. requests that the Department take immediate action to increase the Bush 121 (121 line haul for airports greater than 4,000ft) rate by 40% on the line haul element. This increase should commence immediately and continue for a period of twelve months. In the event the Postal Service withdraws its support of such an action, the Department should immediately respond by withdrawing the rate premium. Frontier Flying Service, Inc. will not give specific reasons as to why, or the basis as to how to calculate the premium as this request is specifically based on the simple fact that rate is not sustainable and has today forced us into actions directly contrary to one of the primary directives of RSIA.

By: Robert Hajdukovich, 907-474-1739 x233, bob@frontierflying.com



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates


January 19, 2005

Re: Answer of Cape Smythe Air Service to Emergency Rate Increase Request by Frontier Flying Service | Word

Cape Smythe agrees with the implicit justification of Frontier’s request, and that is that Part 121 linehaul rates are simply too low to support service with Part 121 aircraft. Cape Smythe has had interest at one time in transitioning to Part 121 operations, and has operated twin turbine aircraft with a maximum seating capacity of greater than ten passengers capable of Part 121 operations. Cape Smythe went so far as to enter into preliminary agreements with aircraft manufacturers to purchase larger Part 121 aircraft. The basic problem with all of our attempts is that the current Part 121 mail rates are simply too low to support the use of Part 121 aircraft. Cape Smythe can't agree with some of the conditions Frontier wishes to apply to the 40% increase, but subject to the conditions outlined below, Cape Smythe supports the request of Frontier.

By: Grant Thompson, 907-852-8333, grant.thompson@capesmythe.com


January 19, 2005

Equalization Notice of Alaska Central Express

Alaska Central Express, Inc., an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Anchorage, Alaska, on the one hand, and Sitka and Ketchikan, on the other, and between Ketchikan, Alaska. on the one hand, and Wrangell and Petersburg, on the other, and between Juneau and Sitka, Alaska with the lower levels paid or to be paid to other carriers or combinations of other carriers in these markets effective January 29, 2005.

Counsel: Silverberg Goldman, Robert Silverberg


January 19, 2005

Re: Request to Remove Frontier Flying Service from Tender of Bypass Mail | Word

Frontier was also supposed file monthly progress reports relating to your requirement of attaining a qualifying market share. These reports would have allowed you to determine Frontier’s qualifications within a few days after the end of October, 2004. After D.O.T. data for the nine months showed Frontier’s failure to qualify in these three markets, you changed the process saying the Frontier’s reports were not sufficiently accurate to determine the final shares. You determined that Frontier’s qualification would be based entirely on the T-100 reports for the 12 months ended October, 2004. This action has served to extend Frontier’s presence in the markets for over three months now.

The Bureau of Transportation Statistics has released the data for the 12 months ended October 31, 2004. The data show that Frontier’s share in the Nome-Gambell passenger market is only 10.3% after 12 months, a 48% shortfall. In the Nome-Savoonga market their passenger share is only 13%, a 35% shortfall of your requirement. In the Kotzebue-Noatak market, Frontier garnered only 7.81% of the passenger market, a 60% shortfall.

As you know, all three of the incumbent carriers serving these points have aircraft which fall under the requirements of F.A.R. 121 if operated to their full seating capacity. All three carriers are pursuing the requirements of converting to Part 121 as necessary. The revenue given to Frontier came directly from the pockets of the incumbent carriers, and has reduced and delayed their ability to meet Part 121 standards.

While it has been clear for six months that Frontier would not meet your 20% requirement, the B.T.S. data release has now eliminated any doubt. Frontier has not only failed to meet your requirements, but it has diverted revenue from the carriers that had qualified for tender and disrupted the markets involved. I respectfully request that you immediately remove Frontier from tender of bypass mail in the three markets mentioned. I also request that in the future you give some consideration to the effects of waivers on incumbent carriers and the markets, as well as the probability that the carrier receiving the waiver will be able to achieve a qualifying share.

By: MTC, Hank Myers


January 21, 2005

Re: Response of The United States Postal Service to Frontier Flying Service

Frontier has proposed a rate premium of 40% to the linehaul-only portion of the rate, to be in effect for a one-year term unless the Postal Service sooner withdraws its support for the premium. Given the financial data concerning its operations which Frontier has presented to the Postal Service, and subject to further audit and review, the Postal Service accepts Frontier’s representations of the urgency of its current financial situation, and that Frontier cannot sustain its 121 bush service (passenger, freight, and mail) at the current 121 bush rate and the reasonableness of the rate premium which it has proposed.

If Frontier downgrades its operations to Part 135, there will be no Part 121 service left to the numerous bush points it serves. This will raise the cost of operations for the Postal Service since the prevailing mail rate in Frontier’s markets will rise to Part 135 levels. Further, the absence of a Part 121 carrier in these markets will remove the existing impetus for other carriers to convert from Part 135 service to Part 121 service. Given these circumstances, the Postal Service concludes that the requested emergency increase is more palatable to it than the alternative of Frontier’s withdrawal of Part 121 service from its markets, and on that basis is prepared to accede to the carrier’s request.

The Postal Service expects Frontier to provide it and the Department continuing monthly updates to allow them to assess its ongoing financial capability, and reserves the right, should it conclude on the basis of that data that the emergency no longer exists, to withdraw its support for the emergency increase. The Postal Service also reserves the right to withdraw its support for the increase should it determine for any other reason that that support is no longer in its interest.

Counsel: USPS, William Jones, william.j.jones@usps.gov


Order 05-01-18

Issued and Served January 21, 2005

Order | Word

The Rural Service Improvement Act of 2002, signed into law August 5, 2002, made significant changes to the intra-Alaska mail system for the carriers transporting the mail, the United States Postal Service and the Department of Transportation. By a series of orders the Department set final intra-Alaska bush mail rates until further notice for all the classes of mail carriage (a single terminal rate and four separate linehaul rates for Amphibious, Part 135, and Part 121 regular and short-runway operations) and directed parties to show cause why those findings should not be made final through the next annual update. In response to requests by several carriers, we granted extensions to the comment period, the latest through October 20, 2004. All parties have now commented, we have reviewed those comments, and are setting new final rates through December 31, 2004, or until further Department action, whichever comes later.

By: Karan Bhatia



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates


January 24, 2005

Answer Bering Air Service and Wright Air Service to Emergency Rate Increase Request by Frontier Flying Service and Motion to Dismiss | Word

The basic problem that Frontier has is operating its Beech 1900 aircraft in such an uneconomic way that it can never make a profit. It is overall lack of revenue that is the problem, not deficient mail rates. The problem goes back to its original introduction of the Beech 1900 into the Fairbanks‑Fort Yukon market. Despite its best efforts, Frontier was not able to make a profit in the market. This failure led to Frontier CEO Bob Hajudukvich sending a letter to the community threatening to pull the Beech 1900 service unless more passengers chose the service. (Appendix A) The market did not respond, and Frontier eliminated its Beech 1900 service to Fort Yukon. It must be remembered that at that time Frontier's Beech 1900 service received the same mail rate as was paid to its competitors using much smaller, Part 135 aircraft. It was not until the Rural Service Improvement Act reduced the number of competing carriers in the market that Frontier sought to accomplish by waiver what it could not achieve in the marketplace.

The suddenness of Frontier's request, the size of the premium requested, and its assertion that the data supporting the relief by kept confidential raises serious questions about Frontier's financial fitness. The relief sought would add hundreds of thousands of dollars to the revenue of Frontier. If this infusion of cash, on such short notice is really justified, there is valid concern for the ability of Frontier to continue its service without risk to the traveling public. The Carriers request that before any relief is granted to Frontier, the Air Carrier Fitness Division perform a review of Frontier's financial fitness and issue an opinion that it is financially fit.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


January 24, 2005

Equalization Notice of Alaska Central Express

Hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Anchorage, Alaska, on the one hand, and Wrangell and Petersburg, on the other, with the lower levels paid or to be paid to other carriers or combinations of other carriers in these markets effective January 29, 2005.

Counsel: Silverberg Goldman, Robert Silverberg



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates


January 26, 2005

Equalization Notice of Alaska Central Express

Alaska Central Express, Inc., an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Anchorage and Yakutat, Alaska with the lower levels paid or to be paid to other carriers or combinations of other carriers in these markets effective January 29, 2005.

Counsel: Silverberg Goldman, Robert Silverberg


January 26, 2005

Equalization Notice of Frontier Flying Service

Frontier Flying Service, Inc., an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rate legally in effect between Galena and Nulato with the lower levels paid to other carriers or combinations of other carriers in these markets effective January 24, 2005.

By: Craig Kenmonth


OST-03-14694 - Intra-Alaska Bush Service Mail Rates


January 27, 2005

Clarification of Issues Raised - Frontier Flying Service

Frontier Flying Service, Inc. would like to clarify two issues that have been raised by Alaska Central Express and the Carriers – Bering Air and Wright Air Service. In its petition dated January 18, Frontier recommended that mileages be limited to service longer than 50 and shorter than 530 miles. That limitation reflects the boundaries of Frontier’s operations, and so we expressed no opinion on what the Department should do for operations outside those bounds. To clarify, we do not oppose the Department adjusting regular Part 121 rates outside those parameters, i.e., we believe the markup should apply to all carriers being paid the regular Part 121 rate. There was also the Short Runway Part 121 rates. We raised that issue only to make clear that we were not concerned with that, since that rate does not directly affect us.

By: Frontier Flying Service, Robert Hajdukovich, 907-474-1739 x 233, bob@frontierflying.com


January 27, 2005

Peninsula Airways Answer of Frontier Flying Service

While the Department may be justified in concluding that the current Part 121 bush linehaul rate is not fully compensatory, and should be increased, there no basis for Frontier's self‑serving proposal to increase compensation only on the routes and stage lengths it serves. All Part 121 bush carriers depend on mail revenue to support their passenger service operations. It would be unfair to PenAir and the Part 121 bush communities PenAir serves to provide a special 40 percent subsidy payment to Frontier ‑‑ which would only exacerbate the rate disparity already caused by the Department's mileage taper. Why should the communities of Cold Bay, Dutch Harbor, Sand Point and St. George passengers have to pay more for airline service, while the communities served by Frontier receive both a higher rate under the mileage taper and a 40 percent additional subsidy payment to offset the cost of their service?

Counsel: Shaw Pittman, Robert Cohn, 202-663-8060



Order 05-01-18
OST-03-14694 - Intra-Alaska Class Service Mail Rates

Issued and Served February 1, 2005

Erratum to Order

Erratum to Order 2005-1-18, ordering paragraph 3 is amended to read: 3. We extend the Part 135 rate as determined in Order 2004-10-2 of $12.1962, as final until further Department action; and Ordering paragraph 4 is amended to read: 4. We terminate the Amphibious rate determined in Order 2004-10-2, and make final the rate of $22.4926 per RTM, as determined in Appendix D, effective on the first Saturday after the service date of this order, until further Department action; and Ordering paragraph 5 is amended to read: 5. We terminate the terminal rate determined in Order 2004-7-11, and make final the rate of $625.85 per ton enplaned, as determined in Appendix C, effective on the first Saturday after the service date of this order, until further Department action.

By: Karan Bhatia



January 31, 2005

Re: Senator Ted Stevens Letter in Support of Frontier Flying Service's Petition for Rate Increase

The reduction in the Part 121 rate has resulted in cost savings for USPS. However, the current rate methodology does not appear to generate a rate that is sustainable for part 121 carriers in bush Alaska. Frontier Flying Service, the greatest driver of cost savings for USPS, has come to the conclusion that if the Part 121 rate is not increased they will have to convert to Part 135. Effectively, this will cut in half the cost savings that RSIA has provided the USPS.

Frontier has petitioned the Department of Transportation for an emergency 40% increase to the Part 121 bush rate, hi an effort to secure the savings provided by RSIA the USPS has responded by giving their full support for the rate increase. I strongly urge you to grant their, petitions and immediately enact a 40% emergency rate increase to the entire Part 121 rate that was effective on January 17, 2005. Your prompt attention to this matter is greatly appreciated.

By: Senator Ted Stevens



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

February 7, 2005

Withdrawal of Equalization Notices of Alaska Central Express

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300, rsilverberg@sgbdc.com



January 27, 2005

Re: Ex Parte Correspondence with The Honorable Ted Stevens

By: Norman Mineta



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates


January 27, 2005

Re: Senator Donald Olsen Letter Opposing Emergency Rate Increase | Word

By: Donald Olsen


Order 05-02-07

Issued and Served February 11, 2005

Bush Quarterly Fuel Cost Adjustments

By this order the Department is making its quarterly adjustments to the Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs, effective the first Saturday after this order issues, and reflecting fuel expenses for the quarter ended September 30, 2004.

By: Karan Bhatia



February 15, 2005

Re: Letter from the USPS Waiving Requirements for Frontier Flying Service

RSIA favors 121 operations, finding that the safety aspects of 121 certificated service represents a desirable result for passengers. The USPS notes that prior to Frontier's entry into the market, the passenger service in the market was provided only by 135 certificated carriers. Frontier's new 121 certificated service in these markets is substantial (6 flights per week, 114 passenger seats per week) and creates a new level of passenger service. The USPS further notes that upon Frontier's entry into this market, it has been accorded passenger promoted status as the second highest mail eligible passenger carrier in the market.

Another specific goal of RSIA is savings to the USPS, accomplished by encouraging more efficient, lower cost per ton-mile, 121 certificated service. The rates set by the Department of Transportation reflect that goal and therefore, it is consistent with the Act to encourage 121 operations in all markets capable of supporting those operations.

The USPS has noted concern on the part of several carriers, most recently Wright Air Service and Bering Air Service, that past granted waivers have occasioned aggressive passenger rate structures. The USPS agrees that such a result is not desirable and has determined to remove one possible impetus for such rate structures by removing an artificial time frame within which 20 percent compliance must be achieved. This should cause entry into the market to follow a more normal course.

By: John Bonefillia



February 28, 2005

Further Comments of Cape Smythe Air Service to Emergency Rate Increase Request by Frontier Flying Service | Word

Cape Smythe Air Service, Inc. hereby withdraws its support for a 40% premium on Part 121 bush linehaul rates as requested by Frontier Flying Service on January 18, 2005. As with other carriers serving markets where Frontier has entered via waiver authority, Cape Smythe has suffered devastating financial losses due to the significant reductions in mail rates and extreme fare cutting by Frontier. Making this situation worse is the action of the Postal Service to continue to tender mail to Frontier even after its waivers have expired and the carrier does not qualify for tender in the 70% passenger bypass mail pool.

By: Grant Thompson, 907-852-8333, grant.thompson@capesmythe.com



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

March 1, 2005

Re: Comments of The United States Postal Service

This has reference to the undated letter addressed to Secretary Mineta, subject: Opposition to Emergency Rate Increase to Part 121 Bush Rate from Alaska State Senator Donald C. Olson, District T, filed February 10, 2005, in DOT Dockets 14694 and 14695 as item numbers OST-2003-14695-198 and OST-2003-14695-88, respectively. The letter relates to the petition of Frontier Flying Service, Inc., item number OST-2003-14694-181 in Docket 14694.

This letter will allow the docket to reflect, as the letter does not, that the Senator is, inter alia, the President/CEO of Olson Air Service, Inc., Nome, AK, an air carrier in direct competition with Frontier Flying Service, Inc.

Counsel: USPS, William Jones, 202-268-5329, william.j.jones@usps.com



March 1, 2005

Re: Comments of Hank Myers | Word

Mr. Jones' statement is false and its implications libelous. Examination of the T‑100 market reports and historic mail tender records of the Postal Service itself show that Olson Air has not served Gambell or Savoonga (markets served by Frontier pursuant to a waiver granted by the Postal Service) since November, 2003. When Frontier entered the market through waiver, it was included in the 70% passenger pool, while Olson was in the 10% Other pool for the few weeks it served the market. In fact, Olson had provided 28‑days notice of its intent to delete service to Gambell and Savoonga before the Postal Service granted Frontier wavier authority. Frontier's wavier had no effect on Olson's mail tender in any manner.

More disturbing than the shabby attack by Mr. Jones is the fact that the Postal Service knows full well that its charges are completely false. Postal dispatch reports show that Olson never competed with Frontier for mail tender in any market, and that no tender of mail from any pool in these markets was dispatched to Olson after November, 2003. Olson Air does not now and never has competed with Frontier for mail in any market.

It must be remembered that Senator Olson, along with State Representatives Reggie Joule and Richard Foster opposed the waiver to Frontier in the first place, predicting the financial disruption that would take place in the markets. Rather than libeling Senator Olson, the Postal Service would have been better served to listen to the advice he and his legislative colleagues submitted.

By: Hank Myers



February 24, 2005

Re: Letter from Cape Smythe Air on USPS Issuance of Waivers

Sadly, I find myself writing you this letter to inform you I feel the RSIA is destined to fail. The USPS in concert with Frontier Flying Service is methodically and systematically dismantling the by-pass mail system, and ultimately the passenger transportation system within rural Alaska. Today, I learned that the USPS is continuing to grant biased and preferential treatment for Frontier Flying Service by granting waivers that do not meet the requirements of the Rural Service Improvement Act. I implore you to do everything within your power to remove the authority of the USPS to grant these illegal waivers, and that all waivers previously granted be immediately withdrawn. Frontier continues to attempt to force Bush 121 operations into markets that will not support them. If the markets indeed merit Bush 121 service, then I submit that a 121 Bush carrier should be able to provide the service without a waiver. As Frontier scurries around the State selecting only the most desirable markets throughout the by-pass mail system, you will eventually see the system come apart at the seams, just as I suspect that some would like to see it do. At the very least I see Frontier being supported by the USPS for a government-sanctioned monopoly.

By: Cape Smythe Air, Tom Nicolos



March 8, 2005

Objections to Petition of Frontier Flying Service and Motion to Dismiss | Word

Frontier Flying Service claims that it is in serious financial trouble, but has provided no proof of its assertion.  It asks for extra-regulatory action to provide it with a 40% premium on the established Part 121 linehaul rate.  It makes no claim that the existing linehaul rate is inadequate or inconsistent with established rate making procedures.  Frontier even offers a most reasonable alternative to the 40% premium, and that is conversion of its Beechcraft 1900 aircraft to Part 135 configuration.  The undersigned Carriers concur with the content of the previously filed comments filed on January 24, 2005.  In addition, the Carriers argue that Frontier and the Postal Service have completely failed to meet their burden of proof to justify this exemptive action.  Any information or data provided by Frontier must be placed in the pubic docket as it would be the only information on which any decision could be made.  Granting the petition is contrary to law and established regulatory standards.  Granting the petition is also inconsistent with the terms of the Rural Service Improvement Act which only encourages Part 121 bush service “where such operations are supported by the needs of the community;”. 

The obvious cause of Frontier’s financial problems is that is operating Part 121 service where such service is not supported by the needs of the community.  A simple, viable and proper alternative was raised by Frontier itself; convert its Part 121 aircraft to Part 135 configuration.  Clearly no rate premium is either justified or necessary.  Finally, the carriers request the Department clarify that the appropriate rate to be paid to Part 135 carriers competing with a Part 121 carrier receiving mail tender pursuant to a waiver is the Part 135 wheel rate.  This rate would continue in force for the Part 135 operators until the waiver carrier achieves the market share necessary to qualify for the pool into which it has been waivered.  In case the waivered carrier achieves its required market share, all service would convert to the Part 121 rate.  In case the waivered carrier does not achieve a qualifying share, damage to the incumbent carriers would be limited to the loss of mail tender associated with the extra tender share.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com - Smokey Bay Air, LAB Flying Service, Skagway Air Service, Alaska Seaplane Service, Larry’s Flying Service, Baker Aviation, Island Air Service, Iliamna Air Taxi, Servant Air



March 10, 2005

Comments of Venture Travel d/b/a Taquan Air

By being organized as a Limited Liability Company the owners or members are compensated in the form of draws rather than being run through payroll. This compensation is accounted in the form of a debit to equity on the balance sheet rather than an expense on the income statement.

In recent discovery, I became aware that compensation for myself as reported on our F-2 reports is excluded and essentially zero. This amount is not equitable and not reflective of the time and effort I put into running a successful small airline. Because the management expense has been previously reported as zero Venture Travel, LLC d/b/a Taquan Air's DOT filings have indicated expenses lower than actual and, therefore, have a negative effect on the mail rates.

I do not want to discuss my salary in a public forum, however, I would ask that the Department of Transportation consider allowing my actual salary or an equitable salary be included our reports as an expense item. This approach would give the department our actual expenses rather than the lower costs that we have been historically reporting.

By: Gerald O'Brien



OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

March 11, 2005

Equalization Notice of Arctic Circle Air Service

By: Phil Hendrickson



Order 2005-3-27
OST-2003-14694

Issued and Served March 18, 2005

Order Granting Exemption

By this order, the Department is granting sua sponte a limited exemption from sections 41901, 41902 and 41903 of Subtitle VII of Title 49 U.S.C. and its regulations and mail rate orders thereunder, to the extent necessary to permit the United States Postal Service and any or all bush carriers subject to any of the bush mail rates established by Order 2005-1-18 to agree to pay and accept rates of compensation for bush mail service that are higher in any market or markets than the rates established in that order or any subsequent final bush rate order during the effectiveness of the exemption.  The exemption is limited in duration to a maximum of twelve months, unless we issue a subsequent order extending the exemption, and is subject to other conditions.  The exemption will take effect upon the first Saturday after the service date of this order, and may be modified or terminated by DOT at any time, without notice.

What is clear is that Frontier’s petition does not meet the requirements in our statute and regulations for opening any of the established bush class mail rates, and therefore it must be dismissed.  At most, it requests only a partial opening of the regular Part 121 rate.  Moreover, it makes no attempt to provide cost justification for opening any rate, for the level of relief requested, or for the scope of the relief requested.  Indeed, it explicitly declines to do so.  Frontier’s petition is essentially an unsupported request for individual rate relief.  The fact that the USPS has agreed to support the linehaul “premium” requested by Frontier for a limited period and under certain conditions for the sole purpose of helping Frontier maintain its Part 121 service does not cure the defects in Frontier’s petition.  It is DOT that is responsible for setting mail rates, and given the pleadings in this case, there is no evidentiary basis for DOT to open or modify any class rate.  Nor is there any evidentiary basis for granting individual rate relief to Frontier, even on a limited “emergency” basis.

By: Karan Bhatia



March 30, 2005

Agreement between The United States Postal Service and Frontier Flying Service

Counsel: USPS, William Jones, 202-268-5329, william.j.jones@usps.com



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 30, 2005

Equalization Notice of Grant Aviation

Grant Aviation, Inc., an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize between Dillingham and Togiak Alaska with the lower levels paid to other carriers or combinations of other carriers in these markets effective April 9, 2005.

By: Grant Aviation, R. Bruce McGlasson



Order 2005-4-1
OST-2003-14695 - Mainline Service Mail Rates

Issued April 1, 2005 and Served April 1, 2005

Mainline Quarterly Fuel Cost Adjustments

By this order the Department is making its regular quarterly adjustments to the Intra‑Alaska mainline mail rates to reflect the most recent quarterly fuel costs, effective the first Saturday after the order issues, and reflecting fuel expenses for the quarter ended December 31, 2004.

By: Karan Bhatia



April 4, 2005

Rate Equalization Notice of Hageland Aviation Services

Hageland Aviation Services, Inc. (H6), an Alaskan incorporated air carrier currently authorized to transport United States Mail, here by gives notice of its intent to equalize to the rates paid to Part 121 carriers or combinations of other carriers pursuant to Order 2005-3-27 in Docket OST-2003-14694 for the following markets:

Kotzebue - Noatak
Kotzebue - Point Hope
Nome - Gambell
Nome – Savoonga

By: Hageland, Bruce Tweto

http://www.hageland.com/


April 4, 2005

Re: Clarification from Hank Myers

Out of consideration for all parties involved in Intra-Alaska Bush Service Mail Rates, I ask for a clarification of Order 2005-3-37 insofar as the Order addresses the topic of rate equalization in terms entirely different from previous Department Orders and the Rural Service Improvement Act. The topic of equalization was addressed in Order 2005-3-37 because of the unique aspect of the Postal Service request to pay rates higher than those set by the Department, and how carriers would broadcast their intention to be covered by any agreement.

One unfortunate interpretation of the Order would be to allow any carrier to prevent the higher payments by simply refusing to equalize to the higher rate, and then take action to exclude all the carriers that had equalized or agreed to the higher rate from mail tender. Similarly, there have been examples of Postal Service action to exclude carriers from tender where there was any question in the minds of Postal managers about the effect or intent of equalization notices. Such gamesmanship is contrary to the terms of the Rural Service Improvement Act and the Orders issued in this docket.

By: Hank Myers



OST-2003-14694 - Bush Mail Rates
OST-2003-14695 - Mainline Mail Rates

March 18, 2005

Bering Air Notice to Equalize Mail Rates

Bering Air, Inc., an Alaskan Air Carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized or agreed rates in the following markets effective March 18, 2005:

By: Bering Air, Allen Haddadi



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 18, 2005

Cape Smythe Air Service Notice to Equalize Mail Rates

Cape Smythe Air Service, Inc., an Alaskan Air Carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized or agreed rates in the following markets effective March 18, 2005: 1. Nome and Savoonga 2. Nome and Gambell 3. Kotzebue and Noatak 4. Kotzebue and Point Hope 5. Barrow and Nuiqsut 6. Deadhorse and Nuiqsut 7. Deadhorse and Barter Island

By: Cape Smythe Air, Grant Thompson



Order 2005-4-12
OST-2003-14694

Issued and Served April 12, 2005

Bush Quarterly Fuel Cost Adjustments

By this order the Department is making its quarterly adjustment to the Intra‑Alaska bush mail rates to reflect the most recent quarterly fuel costs, effective the first Saturday after this order issues, and reflecting fuel expenses for the quarter ended December 31, 2004, the most recent data available.

By: Karan Bhatia



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates


April 12, 2005

Equalization Notice of Alaska Central Express

Alaska Central Express, Inc. an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the highest authorized bush mail rates legally in effect, by agreement or otherwise, between Anchorage, Alaska, on the one hand, and Bethel, Dillingharn and Aniak, on the other, and between Dillingham and Togiak to be paid to other carriers or combinations of other carriers in these markets effective April 12, 2005.

Counsel: Silverberg Goldman, Robert Silverberg

http://www.aceaircargo.com/


April 12, 2005

Notice of Warbelow's Air Ventures

Notice to equalize in markets served from the Galena hub.

By: Warbelow's Air Ventures, Art Warbelow, 3758 University Avenue South Fairbank AK 99709

http://www.warbelows.com/



OST-2003-14694 - Bush Mail Rates
OST-2003-14695 - Mainline Mail Rates

April 8, 2005

Equalization Notice of Frontier Flying Service

Hereby gives notice of its' intent to equalize its' mail rates to the lowest authorized or agreed rates legally in effect between Galena and Ruby, Alaska and Kotzebue and Noatak, Alaska with the lower levels paid or to be paid to other carriers or combinations of other carriers in these markets effective April 9, 2005.

By: Frontier Flying Service, Craig Kenmouth



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

April 19, 2005

Equalization Notice of Alaska Central Express

Hereby gives notice of its intent to equalize its mail rates to the lowest authorized bush mail rates legally in effect, by agreement or otherwise, between Anchorage, Alaska, on the one hand, and Bethel, Dillingham and Aniak, on the other; between Dillingham and Togiak; and between Anchorage and Port Heiden to be paid to other carriers or combinations of other carriers in these markets effective April 19, 2005.

Counsel: Silverberg Goldman, Robert Silverberg



May 3, 2005

Re: Agreement Between Frontier Flying Service and the United States Postal Service

Counsel: USPS, William Jones, william.j.jones@usps.gov

The intent of this Agreement, which, as it recites, replaces the earlier Agreement of March 30 which was effective April 9, is to establish Frontier's compensation at a rate which will provide for a total payment over the term of the agreement (May 7, 2005 to March 19, 2006) constent with the amount contemplated in Frontier's original petition of January 18, 2005, notwithstanding the shorter term.


May 3, 2005

Postal Service Comments on the April 4 Request of Hank Myers for Clarification of Order 2005-3-27

The Postal Service differs. While the RSIA did stipulate the use of equalizations for two specific circumstances, its lack of discussion regarding equalizations in bush markets cannot be construed as precluding the use of rate equalization notices there. The practice of filing equalization notices is still useful to ensure that carriers are willing to accept a rate different than what they would normally receive. This is the case in markets where the Postal Service is exercising its exemption authority, conferred in Order 20053‑27, to authorize a Part 121 rate premium, just as it is in other markets. The Postal Service's interpretation is consistent with the Department's directive in 2005‑3‑27 that the increased rate supersedes the previous Part 121 rate for the duration of the exempted agreement.

Counsel: USPS, William Jones, william.j.jones@usps.gov



OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

April 29, 2005

Equalization Notice of Arctic Circle Air Service

Hereby gives notice of its intent to ecualize its non-priorfrv mail rates to the lowest authorized rates legally 'in effect between Anchorage, on onc hanc., and Sand Point on the other hand, with lower levels paid to another carrier, or combination of carriers in the market effective May 13th, 2005.

By: Arctic Circle, Paul Hendrickson

http://www.arctic-circle-air.com/



May 16, 2005

Petition for Review

hereby petitions this Court for review of U.S. Department of Transportation Order 2005-3-27, issued on March 18, 2005, in the INTRA-ALASKA BUSH SERVICE MAIL RATES proceeding (DOT Docket OST-2003-14694). The Order exempted the U.S. Postal Service from the requirement to adhere to the intra-Alaska mail rates established by DOT for Part 121 Bush air carriers. Upon review, Petitioner seeks that the exemption granted by the Order be vacated. A copy of the Order is attached hereto as Exhibit A.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999, recohn@hhlaw.com



OST-2003-14694 - Bush Mail Rates
OST-2003-14695 - Mainline Mail Rates 

May 19, 2005

Equalization Notice of Alaska Central Express

Hereby gives notice of its intent to equalize its mail rates to the lowest authorized mail rates legally in effect, by agreement or otherwise, between Anchorage, Alaska, on the one hand, and Bethel and Dillingham, on the other to be paid to other carriers in these markets effective May 19, 2005

Counsel: Silverberg, Goldman, Robert Silverberg



Order 2005-6-6
OST-2003-14694

Issued and Served June 7, 2005

Show-Cause Order Proposing Updated Mail Rates

By this show‑cause order, the Department proposes to establish new intra‑Alaska bush service mail rates. The rates that are currently in effect were established by Order 2005‑1‑18, based on data for year ended June 30, 2003, adjusted for more recent quarterly fuel expenses by Order 2005‑4‑12. Order 2005‑1‑18 was made effective until further Department action, recognizing that the rate would be updated for subsequent quarterly fuel adjustments and for year ended June 30, 2004, data.1 Those rates will remain in effect until a final order is issued with respect to the rates tentatively proposed here.

By: Karan Bhatia



June 16, 2005

Motion of Peninsula Airways for an Extension of Time

Hereby moves for a 15 day extension of the Answer date established by Show Cause Order 2005-6-6, so that comments and objections would be due on July 22, 2005, rather than July 7.

PenAir has been working diligently to evaluate the proposed rates and underlying data, but PenAir requires additional time to complete its analysis and formulate a response. PenAir's experience does not comport with the proposed 18 percent cost decrease, which the Department has imputed to all 121 carriers, based on a single carrier's (Frontier) data. Moreover, in a recent emergency petition Frontier asserted that the existing (higher) DOT rates were non‑compensatory, and Frontier received permission from the Department to enter into special higher contract rates with the Postal Service.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-8382



OST-03-14694: Intra-Alaska Class Service Mail Rates - Bush Mail Rates
OST-03-14695: Intra-Alaska Class Service Mail Rates - Mainline Mail Rates

July 13, 2005

Equalization Notice of Frontier Flying Service | Word

Hereby gives notice of its’ intent to equalize its’ mail rates to the lowest authorized or agreed rates legally in effect between Anchorage and Galena, Alaska with the lower levels paid or to be paid to other carriers or combinations of other carriers in these markets effective July 18, 2005.

By: Frontier Flying, Craig Kenmonth


OST-03-14694: Intra-Alaska Class Service Mail Rates - Bush Mail Rates

July 13, 2005

Comments of The United States Postal Service on Order 2005-6-6 Bush Ratemaking Issues

As the Postal Service has argued in prior filings to this docket, we continue to believe that the multiple Part 121 rate structure that the Department has implemented was not what the Rural Service Improvement Act intended. Further, it will have a detrimental impact on the Alaska mail transportation system in the long run because it deviates from the long established class rate structure.

Counsel: USPS, William Jones, william.j.jones@usps.gov



July 22, 2005

Objections to Penair to Order 2005-6-6

PenAir objects to the proposed rates set forth in Order 2005-6-6, which are unfair, unreasonable and based on artificially reduced costs due to skewed operating results of a single carrier, caused by non-marketplace subsidy distortions. The current rates should be frozen, pending a detailed review of the Department's ratesetting practices, elimination of the multiple sub-class rates not authorized by law, and establishment of a new uniform rate to be paid to all Part 121 carriers.

Counsel: Hogan & Hartson, Robert Cohn, 202.637.8382



July 7, 2005

Re: Response of United States Postal Service to Era Aviation

Another specific goal of RSIA is savings to the USPS, accomplished by encouraging more efficient, lower cost per ton-mile, 121 certificated service. However, savings to the USPS from the carrierspecific rates set by the Department of Transportation for Era Aviation, Inc. (which do not demonstrate the class rate principle inclusive of all 121 class rate operations) are minimal. In fact, the new rates proposed by DOT, if made final as proposed, result in 135 operations actually being less costly to the USPS. As there is no reason to suspect that the rates will not be made final as proposed, Era's presence in the market does not offer a cost incentive to the USPS.

By: USPS, John Bonafilia



July 25, 2005

Re: Consolidated Carriers Intend to Respond to Pen Air and USPS

This is to inform the Docket that the Consolidated Carriers will file timely responses to the Comments of the U.S. Postal Service and Peninsula Airways.  While neither party includes “all proposed adjustments and backup data” as requested, the proposed adjustments to the calculation and payment of bush mail rates must be examined.  As has been brought to the Department’s attention, the Postal Service has previously ignored the Department’s orders by paying carriers at rates or using methods at odds with the set rates.  The Postal Service’s filing again raises the possibility of one more “end run” around the rate order.  The implications of the Postal Service comments must be understood in setting a final rate.

The frustration of Peninsula Airways is well documented and understandable, but the procedural changes proposed could have a significant effect on all classes of bush mail, some of which are clearly unintended.  The goal of the Rural Service Improvement Act is not being met if the rate being paid to Penair is not adequate to cover the costs of mail transportation and handling, or is paid in an unjust or discriminatory fashion.

By: Hank Myers



July 29, 2005

Reply of Consolidated Carriers | Word

The Consolidated Carriers oppose the requests of the Postal Service and Penair to set a single Part 121 rate, and also oppose the request of the Postal Service to include non-mail service in constructing mail service rates, and to reconsider the rate of return element previously set by the Department. Further, the Carriers request review of Order 2005-3-27 to extent necessary to include all carriers and routes covered by the standard Part 121 rate (or covered by any other rate subject to future negotiated rates) upon application by the carrier. The Carriers oppose any change in bush ratemaking methodology until two years after the Postal Service has issued a new P0-508 Procedures Manual documenting the requirements it imposes on participating carriers. Finally, the Carriers request the Department set to Part 135 wheel plane linehaul rate at $1,125,735 per ton mile, the Part 135 seaplane rate at $2,419,596 per ton mile, and the terminal charge applicable to all bush service at $950.54 per ton enplaned, and that these rates shall remain in effect until December 31, 2005, or further notice. The bush carriers should not be paid inadequate rates due simply to administrative delay.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



August 23, 2005

Amended Reply of the Consolidated Carriers to the Comments of the US Postal Service and Peninsula Airways, Inc. and Petition for Reconsideration of Order 2005-3-27 - Bookmarked | Word

On July 29, 2005, the Consolidated Carriers filed a Reply to the Comments of the U.S. Postal Service and Peninsula Airways in re Order 2005-6-6. Included in the Reply was a calculation of the correct linehaul charges for Part 135 wheel and seaplane aircraft as well as the industry terminal charge based on data for the 12 months ended March 31, 2005. The Carriers used the AKREL data issued for that period by the Bureau of Transportation Statistics. This database does not include the non-scheduled operations for intra-Alaskan operations, and thus understated the system operating units to be used in computing the linehaul and terminal charges for the carriers.

Attachment A recalculates the linehaul rate for Part 135 wheel aircraft; Attachment B recalculates the rate for Part 123 seaplanes; and Attachment C recalculates the terminal charge for all bush carriers. These calculations are based on the final AKIN data provided by the B.T.S for the 12 months ended March 31, 2005. The AKIN data are the raw data submitted by carriers, and include some non-commercial operations. These data were designed to assist the Postal Service in determining the reliability of mail service by carriers. The previously used Postal Service reports required carriers to report all operations, including flights that had the return to the origin without completing any commercial service. That report also provided a way to explain the turn-back operation such as Weather, Mechanical Failure, No Agent, etc.

The Consolidated Carriers respectfully request that mail rates for bush mail transportation be set as follows: Part 135 wheel plane linehaul rate = $11.25935/r.t.m.; Part 135 seaplane linehaul rate = $24.688852 per r.t.m.; Bush Terminal Charge = $778.75 per ton enplaned ($0.38937 per pound). The Carriers also ask that this amended Reply be accepted if determined to be otherwise unauthorized.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



September 2, 2005

USPS Response to Submissions on Order 2005-6-6 by Consolidated Carriers and Peninsula Airways

The United States Postal Service offers this rebuttal to the Reply of the Consolidated Carriers to the Comments of the U.S. Postal Service and Peninsula Airway, Inc.,[Concerning Order 2005-6-6] and Petition for Reconsideration of Order 2005-3-27, the Carriers’ subsequent Amended Reply, and the Objections of PenAir to Order 2005-6-6.

The Postal Service requests that the Department require the Carriers to identify all of the air carriers which presently comprise the association, and that the Department request, consistent with Rule 10(c), that the carriers so identified demonstrate that they have specifically authorized the positions taken by the Carriers in the Reply and Petition and Amended Reply described above.

Further, so that it may exercise its rights pursuant to Rule 10(c), the Postal Service requests that the Department include in these dockets the results of its inquiries, including specifically the identification of any matters as to which “significant divergence of interest or position” appears to exist within the Carrier’s association.

By: USPS, William Jones, william.j.jones@usps.gov



Order 2005-9-17
OST-2003-14694

Issued and Served September 26, 2005

Bush Quarterly Fuel Cost Adjustments

For the Regular Part 121 rate, the B- 1900 fuel costs of Frontier Flying Service, the only carrier and aircraft currently in that class, increased by 17.39 percent from the quarter ended December 31, 2004, to the quarter ended June 30, 2005, which produces a 4.181 percent increase in the total linehaul rate. For the Short Runway Part 121 rate, the Twin Otter fuel costs of Era Aviation, the only carrier and aircraft currently in that class, increased by 20.88 percent from the quarter ended December 31, 2004, to the quarter ended June 30, 2005, which produces a 4432 percent increase in the overall linehaul rate.

As discussed in Order 2004-10-2, we used changes in Era's fuel costs for its Twin Otters to estimate changes in fuel costs for the Part 135 and Seaplane rates. We will continue to do that here. For the Part 135 rate, applying Era's 20.88 percent increase to the prior Part 135 quarterly fuel costs produces a 6.02 percent increase in the overall linehaul rate. For the Seaplane rate, the 20.88 percent increase produces a 3.86 percent increase in the overall linehaul rate.

The terminal portion of the mail rate is unaffected by our update of the linehaul for quarterly fuel costs. The next anticipated quarterly adjustment for fuel costs for the carriers would be based on fuel data for the quarter ended September 30, 2005, and would be effective on or about January 1, 2006.

By: Karan Bhatia



October 20, 2005

Letter of Hageland Aviation Services to US Senator Ted Stevens | Word

On September 29, 2005, we wrote a letter to you and to Mr. Jim Nawrot welcoming the Postal Service invitation for dialog regarding needed legislative changes to Title 39 §5402 and submitted an alternative proposal for language changes to the law, both of which are attached to this letter. We also circulated our proposal by email to carriers throughout Alaska in the same manner in which the detailed version of the USPS proposal was circulated to carriers.

In our letter of September 29th, we explain several weaknesses of the USPS proposal and we offer reasonable alternatives to resolve them. The Postal Service has expressed an interest in exploring some of our suggestions but we need your assistance. We want to reiterate our interest to work cooperatively with your office and the Postal Service to craft a proposal that is in the best interest of all parties and the public. The USPS proposal has not received any greater exposure among the carriers than the Hageland proposal and both proposals have elicited carrier comments. It is clear that the USPS proposal does not have broad support in its present form among carriers that carry the majority of passengers, freight and mail in rural Alaska.

Unless the USPS proposal is significantly revised, Hageland Aviation cannot support it and we feel strongly that it would be better to not make any changes at all if it remains the only viable alternative for legislative change at this time. It is likely that there will still be an interest among carriers and even the Postal Service for future legislative changes if their proposal is adopted without further support.

We urge you to consider our proposal and the comments of other carriers. We remain available and interested in cooperating with your office and the Postal Service about their proposal.

By: Hageland Aviation, Michael Hageland



Order 2005-10-29
OST-2003-14694

Issued and Served October 28, 2005

Order to Show Cause and Establishing Informal Mail Rate Conference | Word

By this order, we are (1) vacating Order 2005-6-6 because it has been overtaken by events, (2) directing the parties to show cause why we should not modify the exemption provided for in Order 2005-3-27 by requiring that any higher rate paid by the Postal Service to a single carrier in Alaska must be paid on a state-wide basis to all carriers serving regular Part 121 bush city-pair markets, and (3) requesting the parties to meet with the Department in Washington, D.C. on November 29 and 30.

We direct all parties to show cause within seven (7) calendar days of the service date of this order why we should not amend the authority granted to the Postal Service by Order 2005-3-27 to require that, if the Postal Service pays any carrier an amount above the regular Part 121 rate established by DOT, the Postal Service must pay that amount on a state-wide basis to all carriers serving regular Part 121 bush city-pair markets with Part 121 equipment or carriers serving with Part 135 equipment that maintain notices of equalization to the effective Part 121 rate.

By: Michael Reynolds



Issued and Served November 3, 2005

Notice | Word

By Order 2005-10-29, October 28, 2005, the Department set the dates of November 29 and 30, 2005, for the carriers and the United States Postal Service to meet, in Washington, D.C., to discuss the Part 121 rates. Since that time, several parties have indicated November 30 and December 1 would be more convenient. Staff requested input from all of the parties, and none objected to the later date.

We hereby grant that request to move the meeting dates to November 30 and December 1, 2005. We remind each party to indicate how many persons will be attending.

By: Todd Homan



November 7, 2005

Comments of PenAir

Peninsula Airways, Inc. supports the tentative decision announced by the Department in Show Cause Order 2005-10-29 and urges the Department to make final the state-wide condition of any exemption from the DOT established mail rates. PenAir also supports the Department's announced intention to convene a rate conference on November 30 and December 1 to consider the establishment of a single consolidated Part 121 bush rate.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-8382

http://www.penair.com/


November 4, 2005

Comments of United States Postal Service

The Postal Service takes the opportunity to respond to Show Cause Order 2005-10-29 in which the Department of Transportation proposes to vacate Order 2005-6-6 and modify the exemption granted in Order 2005-3-27. The Postal Service strongly disagrees with the suggestion to vacate the most current rate updates presented in Order 2005-6-6, but supports the decision to modify the exemption of Order 2005-3-27 to require that any rate premium paid to a Part 121 carrier under that order is also paid to all other carriers providing regular Part 121 service.

Counsel: USPS, William Jones, william.j.jones@usps.gov



November 14, 2005

Data and Evidence Submission of Peninsula Airways - Bookmarked

PenAir urges the establishment of a single new part 121 linehaul rate and a single new Part 121 terminal rate compiled from the weighted average of Part 121 carrier operating costs on eligible bush routes. KS-101, 102, 103. Two of the three Part 121 bush carriers (Frontier and PenAir) would receive somewhat higher pay than provided under the R-121 rate, and the remaining Part 121 carrier, ERA, would received only slightly less than it currently receives under the highly discriminatory SR-121 rate. KS-103.

PenAir's class rate proposal incorporates all three class members (PenAir, Frontier, and ERA) and only those three. In this fashion, PenAir's proposal is a pure, unmanipulated formula.

A critical feature of PenAir's Part 121 bush single class rate is the establishment of separate Part 121 bush terminal cost class rate. Under the current system, in determining the bush terminal rate to be paid to Part 121 carriers, not only has the Department included the three Part 121 bush carriers - it has also incorporated 23 part 135 carriers in the terminal cost pool (Exhibit KS-117. and DOT Order 2005-6-6, Appendix E). This is wrong and it violates all principles of class rate determination. As shown in Exhibit KS-117, the Department's 26carrier pool produces an unreasonably low terminal cost of $631.73 per ton which does not reflect the true costs of Part 121 bush operators. PenAir's cost is $1092.11 per ton and Frontier's is still higher -$1140.33 per ton.

PenAir strongly objects to any continuation of mileage taper in the linehaul portion of the total rate structure. No party, including the Postal Service, has supported the Department's use of the new and novel mileage taper regression in calculating Alaska mail rates. The Department has not applied linehaul taper in any other mail rate-making exercise -- whether in Alaska, or in calculating the international mail rates. Exhibit KS-111.

The proper measurement of the linehaul component is average cost. This cost is an average for the entire class of carriers, for all their relevant route operations, and for all the aircraft they operate. There is no economic justification to further the taper that already exists by the very nature of a fixed cost/variable cost formula. To taper the variable cost component is to taper the taper! This is illogical, unprecedented, and highly discriminatory against the long haul carrier. Exhibit KS-104 shows the significant taper that exists in PenAir's proposed rate formula. PenAir's proposal contains sufficient taper to reflect the variance in total cost per ton-mile at different lengths of haul. KS-105, 106.

The use of average costs for the entire class of carriers does not reflect the diseconomy of long stage lengths. However, PenAir will accept the use of average cost per RTM but it cannot accept a downwardly tapered linehaul rate.

Counsel: Hogan & Hartson, Alexander Van der Bellen, 202-637-8382



Order 2005-11-15
OST-2003-14694

Issued and Served November 21, 2005

Final Order

We make final our tentative decision in Order 2005-10-29 to modify the authority granted to the Postal Service by Order 2005-3-27 to require that, if the Postal Service pays any carrier an amount above the regular Part 121 rate established by DOT, the Postal Service must pay that amount on a state-wide basis to all carriers serving regular Part 121 bush city-pair markets with Part 121 equipment or carriers serving with Part 135 equipment that maintain notices of equalization to the effective Part 121 rate, effective within ten days of the service date of this order

By: Michael Reynolds



November 21, 2005

Reply of Consolidated Carriers to November 4 Filing of the USPS and November 7 Filing of PenAir | Word

The Postal Service dismisses the arguments raised by the Consolidated Carriers, claiming that the comments were filed “out of time”.  The comments of the Carriers filed on July 29, 2005 and modified on August 23, 2005 were accompanied by motions for leave to file an otherwise unauthorized document or alternatively be accepted although filed late.  The August 23 document simply corrected the July 29 filing to exclude non-revenue operations.  All arguments concerning the outdated information used in Order 2005-6-6 were raised in the July 29 comments overlooked by the Postal Service.  Both filings were accepted by the Department and duly docketed.  While the Postal Service may disagree with the Carriers’ comments, it cannot argue that the comments have no standing.

The filing of the Carriers clearly proves that the rates proposed in Order 2005-6-6 were out of data, inaccurate and not compensatory as required by law.  Even with the temporary but significant downturn in fuel costs during the first quarter of 2005, the rates based on the year ended March 31, 2005 were higher than those based on the year ended in June, 2004.  As noted by the Carriers’ comments, the rated proposed in 2005-6-6 were over nine months out of date when first proposed.

The Postal Service is wrong when it states in its footnote 1 that the rates developed by the Carriers were based on “…unaudited data that would not have provided a basis for the revisions sought.”  The Carriers never used the word “unaudited”, but simply stated that the data were the raw filings made by the carriers, i.e. submitted originally before the B.T.S. made adjustments and exclusions to create the AKREL file.  The AKREL data excludes all nonscheduled operations, even those are included in the terminal charge element of the mail rate.  Further, the AKREL files have be modified to include intervillage passenger and freight traffic over longer itineraries between the bush hub and the ultimate destination of the traffic.  This adjustment creates inaccurate revenue ton mile totals, and consequently unit costs.  The AKIN files have always been used to determine mail rates, and are the appropriate database to be used in this case.

The Carriers take no position on current or proposed Part 121 rate levels except that the rates must be accurate and compensatory.  Both Penair and Frontier Flying Service have complained about the losses associated with the new Part 121 mail rates, but only Penair has proposed specific changes or quantified the results of their arguments.  No party has met its burden of proof as required by Department regulations.  It is incumbent on any party proposing changes in rates or procedure to provide the data upon which it relies, and to show that there is a causal effect between the services it provides and the mail rate.

The theory of a class rate is that it will encourage higher cost operators to become more efficient and subsequently lower mail rates.  Penair has simply shown that it and Frontier are higher cost bush carriers.  There is no reason that higher costs carriers should be rewarded or lower cost carriers be penalized through rate setting.  Penair has not provided any evidence why its operations (or those of Frontier) should cost more at the same hubs as its Part 135 competitors.

The Department and its predecessor agencies have a collective 65 years of mail rate making experience, and the Department is required by law to set rates that are compensatory for the particular service provided.  Over the years the Department has used a variety of data and techniques to set mail rates in different jurisdictions.  Given the collective experience and precedent of the Department in mail rate making matters, and the requirement that it set compensatory rates for the service provided, the Department should be granted wide latitude in setting rates.  Department procedure should not be subordinated to the limited pecuniary interests of individual parties.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



November 28, 2005

Re: Comments of MTC | Word

My clients and I appreciate the efforts of the Department in setting an informal rate conference for bush mail rates in Docket 14694.  I hope a meeting of the parties will assist in setting future rates and establishing ongoing procedures.  Of particular interest is the position of the Postal Service on ways of reducing mail rates through reduction in costs of transporting and handling mail. In 1992, the Consolidated Carriers presented a number of cost saving ideas, some of which were adopted in part.  Subsequently the Postal Service investigated other cost saving ideas such as contracting for fuel to be provided to mail carriers.  I look forward to a broad examination of rate making issues.

At the same time, by issuing Order 2005-11-15, the Department has satisfied any obligation it had in regard to the lawsuit of Peninsula Airways in federal district court.  By extending negotiated rates to all service covered by a class rate, the Department has eliminated the basis of Penair’s suit.  Penair no longer suffers unlawful discrimination, and the rates it is paid are compensatory according to its theory of the case.  While Penair and other parties may differ with the Department on rate setting methodology, there is no imperative or external requirement to change the method of determining bush mail rates.

By: Hank Myers, 425-641-8243, hank@mtcworld.com



November 29, 2005

Correspondence of USPS

Final Order 2005-11-15, served November 21 conditioned the exemption in Order 2005-3-27 allowing premiums paid by the Postal Service in excess of regular Part 121 rates on their being paid "on a state-wide basis to all carriers serving regular Part 121 bush city-pair markets with Part 121 equipment or carriers serving with Part 135 equipment that maintain notices of equalization to the effective Part 121 rate, effective within ten days of the service date of [the Final Order], and advised that "[t]he Postal Service should file any new premiums that it chooses to offer on a state-wide basis."

The Postal Service wishes to advise the Department and affected carriers that it does not wish to offer any new premiums pursuant to the authority of the Final Order, but that it does intend to continue the premiums previously established by agreement between the Postal Service and Frontier Flying Service, Inc., as reflected in the agreement dated May 3, 2005, which can be found in Docket 14694 at document number OST-2003-14694. Accordingly, effective December 1, the Postal Service will pay the rate for the line-haul transportation of mail set out in the May 3 agreement statewide to Part 121 carriers serving regular Part 121 bush city pair markets with Part 121 equipment and carriers serving those markets with Part 135 equipment that maintain notices of equalization to the effective Part 121 rate as long as the May 3 agreement remains In effect (March 18, 2006, unless it is sooner terminated by the Postal Service).

Order 2005-10-29, served October 28, 2005, established, Inter ails, an informal postal rate conference... in Washington, DC to discuss the Issues with the objective of considering the establishment of a revised regular Part 121 bush rate by March 18, 2006 (footnote omitted). The order states that the rate conference was part of a settlement agreement in a lawsuit filed by Peninsula Airways, Inc. against the Department which similarly recited the objective of the rate conference.

A letter dated November 28, from Mr. Hank Myers of MTC addressed to Mr. Kevin Adams of the Office of Aviation Analysis, which has been filed in docket 14694, relates to this forthcoming conference. Mr. Myers' letter substantially misstates the purpose of this conference and the circumstances under which it has been called. Specifically, Mr. Myers characterizes this as "an informal rate conference for bush mail rates in Docket 14694" and repeats that plural formulation of "mail rates" else where in his letter, whereas both the settlement agreement and Order 2005-10-29 are clear in indicating that only the Part 121 bush rate is at issue.

Further, Mr. Myers errs in contending that "by Issuing Order 2005-11-15, the Department has satisfied any obligation it had with regard to [PenAir's] Iawsuit"; and that "there is no imperative or external requirement to change the method of determining bush mail rates." To the contrary, in the settlement agreement the Department undertook to use Its best efforts to conclude the process to establish a revised Part 121 bush rate by March 18, 2006.

Given the time constraint under which the Department is proceeding, the Postal Service respectfully suggests that it is fully appropriate for the forthcoming conference be limited to the single subject identified for it in Order 2005-10-29.

By: USPS, John Bonafilia

http://www.usps.com/


November 29, 2005

Reply of Era Aviation to November 4, 2005 Filing of the USPS and the November 7, 2005 Filing of PenAir

Era believes that the current rates should not be changed as they are fair to all air carriers and further the dual purposes of RSIA, namely they are cost efficient and encourage Part 121 operations throughout Alaska. Era has previously provided factual data demonstrating that the Twin Otter's unique operating characteristics set it apart from the other Part 121 Bush aircraft (Frontier's Beech 1900, and PenAir's Saab 340 and Metro III.) The unique characteristics and differences in the cost to move mail by these two groups of aircraft led to the DOT's logical conclusion that there needed to be a separate Part 121 By Pass mail rate for locations that could only be served by STOL aircraft.

Era requests that the rate structure set forth in the current Order for Part 121 By Pass mail carriage not be modified through consolidation into a single rate.

Counsel: Era, Marcia Davis, 907-278-4422, mdavis@eraaviation.com

http://www.era-aviation.com/



Issued and Served December 1, 2005

Notice Requesting Comments

Order 2005-10-29 scheduled an informal mail rate conference under Part 302.708 of our regulations for November 30, 2005, to allow the parties and the Department staff to discuss Part 121 bush mail rate issues. In attendance were the Postal Service, Peninsula Airways, Frontier Flying Service, Era Aviation, Grant Aviation, and representatives of Hageland Aviation and Alaska Seaplane Service. A brief summary of the discussion will be placed in the docket.

As a result of the detailed and informative discussion at the conference, the Department believes that the decisional record will benefit from further written comments and evidentiary submissions. Because we intend, consistent with Order 2005-10-29, to finalize prospective rates by March 18, 2006, all comments must be filed in this docket by December 14. Rebuttals or replies are not authorized. We urge concise comments that clarify and support parties' positions with factual information, without repetitious arguments already on the record. Parties will, of course, have an opportunity to comment on the Department's order to show cause proposing revised rates.

By: Todd Homan



December 2, 2005

Rate Equalization Notice of Bering Air

Bering Air, Inc., an Alaskan Air Carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized or agreed rates in the following markets effective December 2, 2006:

By: Bering Air, Allen Haddadi



Issued and Served December 8, 2005

Notice - Summary of Informal Mail Rate Conference

Pursuant to Order 2005-10-29, the US Department of Transportation held an informal mail rate conference at the Department’s headquarters, in Washington, on November 30, 2005, to discuss the establishment of a revised regular Part 121 bush rate for Alaska Mail Carriers by March 18, 2006 Attendees included representatives from the Department, the United States Postal Service, and various bush mail carriers, or their designated representatives, including Warbelow Air Ventures, MTC, Peninsula Airways, ERA Aviation, Frontier Flying Service, Grant Aviation, Inc , Arctic Transportation Services, Inc , and Hageland Aviation.

The carriers and the Postal Service were provided an opportunity to make opening statements, followed by more detailed discussion on the agenda items, including (1) single linehaul rate, (2) linehaul mileage taper, (3) terminal rate for Part 121 operations, (4) whether to exclude bush service on mainline routes, ( 5 ) rate of return on investment, and (6) third party liability insurance In addition to these agenda items, the conference included discussion of a rate proposal offered by Peninsula Airways, and data provided by the Department A copy of the agenda and the Department’s handout were distributed, and are included as Attachments A and B, respectively, to this Notice. A decision is expected by March 18, 2006.

By: Todd Homan



December 14, 2005

Post Rate Conference Comments of the USPS

During the rate conference, the parties raised several concerns with the current rate structure, two of which in the Postal Service’s opinion are paramount: The establishment of multiple Part 121 rates and the selective exclusion of data. The Postal Service believes that these deficiencies, viewed in the framework outlined above, diminish rather than enhance the goals of the RSIA. And, importantly, the Department’s abandonment of class rate principles in favor of multiple rates has eroded both goals. Further, its exclusion of certain data from the rate base renders the rates unrepresentative of the industry’s true cost experience.

It is the Postal Service’s belief that a single Part 121 rate, eliminating the current STOL rate and the need for a rate premium, is the best solution to the problems discussed above. This solution would be consistent with the Department’s long-standing policy of implementing class rates in Alaska and with the language and intent of the RSIA.

it is the Postal Service’s position that the circumstances surrounding the introduction of the Part 121 STOL rate are distinctly different from those that drove the CAB’s decision to create a separate mail rate for Reeve. Notwithstanding the RSIA goal of promoting Part 121 bush operations because of their relatively superior attractiveness for passenger travel, the law’s duality of objectives requires that weight be given to the additional cost burden that the rate imposes on the Postal Service, as well as the acceptability of available options. Stated differently, we disagree that Reeve is a validly anomalous precedent for the establishment of a separate STOL rate for Part 121 bush operations and we believe that cost/efficiency considerations need to be balanced with other considerations both in the short and the longer term. On balance, the strong case for a single Part 121 bush aircraft mail rate, reflecting maximum incentives both for efficiency and for conversion to Part 121 equipment, outweighs any short-term benefits of singling out the Twin Otter services for preferential rate treatment.

As the Postal Service has argued repeatedly, we are fundamentally opposed to the use of a circuity markup. We believe the routings carriers choose to operate are business decisions driven by the desired movement of passengers and freight. This markup should be eliminated completely.

In addition, the Postal Service also repeats its argument to have freight given the same weight, one, as the other components in that part of the rate calculation that weights unit costs by RTMs. As we have argued many times, freight often boards the aircraft before mail since the majority of the mail is bypass mail which is moved on a space available basis. Freight is an equally important part of the transportation system in Alaska and should not be discounted to .75 in the rate calculation. There was some brief discussion at the Rate Conference that passengers should also have a decreased weighting since they in essence board themselves. The Postal Service strongly disagrees with such a suggestion and requests that all forms of traffic have an equal weighting of one since anything other than that is an arbitrary manipulation of the data.

The Postal Service strongly believes that future rates should not be calculated with updates to the base year, but rather should simply be recalculated every year. This type of methodology is possible without an undue lag after the reporting period now that T-100 data is available relatively promptly.

Counsel: USPS, William Jones, william.j.jones@usps.gov

http://www.usps.com/


December 14, 2005

Comments of Frontier Flying Service, Inc.

Frontier strongly feels that should the DOT adopt a single Bush 121 class rate that includes the Linehaul and Terminal costs of part 121 operations. It is fundamental that a true class rate include ERA as well as other Part 121 carriers. The DOT must establish a rate that is sufficient to sustain current and future Part 121 Bush operations without the need for ongoing payments outside of the rate base. The PenAir proposal provides such compensation, which is fair and reasonable to all parties and to the Postal Service. Frontier urges this methodology be adopted.

Counsel: Frontier Flying, Bob Hajdukovich, 907-474-1739, bob@frontierflying.com

http://www.frontierflying.com/



December 14, 2005

Comments of the Consolidated Carriers Following the Informal Rate Conference | Word

The undersigned carriers respectfully request that the Department make no changes in the makeup of rate structures.  The Department’s ability to determine rates in relation to unique operational requirements should not be limited artificially or in order to give other carriers a higher rate.  Similarly, a single terminal charge covering all bush operations is the only statistically valid method of setting a terminal charge and is allowed by law.  While perhaps there is not sufficient time to consider cost saving methods before March 18, the Department should encourage carriers and the Postal Service to determine methods of carrier cost reduction associated with mail.  The Department must require the Postal Service to meet its obligations under 49 USC 41901(F).  Three years is a long enough period to establish carrier requirements under the R.S.I.A. The Postal Service has, in fact, added requirements for carriers.  It just has not reduced these to writing in manual form.  Finally, the Department should consider the effects of regulatory limitations on Part 121 aircraft as it affects ability to carry mail and the costs associated with that carriage.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


December 14, 2005

Supplemental Comments of Era Aviation to Informal Rate Hearing

Era requests that the rate structure set forth in the current Order for Part 121 By Pass mail carriage not be modified through consolidation into a single rate.

A single rate as proposed by Penair and the USPS provides no savings for the Postal Service over the existing rate structure. By simply combining the STOL and Regular Part 121 costs, Penair and Frontier are over compensated for their costs of providing service while Era is under compensated. Due to the automation of the SAMSAK system, the added expense of administering two rates is minimal. Thus, consolidating the current STOL and non-STOL rates provides no cost savings to the USPS.

Counsel: Era, Mike LeNorman, 907-266-8484, mlenorman@eraaviation.com

http://www.era-aviation.com/


December 14, 2005

Comments of Hageland Aviation Services

Without further comment, Hageland Aviation supports establishing a single Part 121 bush mail rate because we believe the law did not contemplate more than one type of bush 121 rate.

There is a sound rationale and supporting data to support the taper feature of the existing 121 bush linehaul rate. This feature is appropriately unique to the bush 121 linehaul mail rate, unlike other mail class rates, because bush 121 equipment does not consistently operate at its peak performance in the air transportation environment of rural Alaska. This is true for both short and long origin and destination segments.

We find it difficult to argue against establishing separate terminal rates for all 3 classes of bush mail specified in 39 USC 5402(h)(6), but we don't agree with the methodology suggested by Penair in their filing of November 14, 2005.

By: Hageland Aviation

http://www.hageland.com/


December 14, 2005

Penair Post-Conference Reply Submission - Bookmarked

PenAir appreciates the opportunity to offer this additional data and evidence in support its rate conference proposal. PenAir's proposal is fair and reasonable, and no carrier, nor the Department has offered any better, more rational alternative, or one with greater general acceptance. Conversely, it is clear that neither the Postal Service nor any Part 121 carrier favors continuation of the mileage taper, which is unjustified and unsubstantiated for the reasons set forth above. In these circumstances, PenAir strongly urges the Department to adopt PenAir's Part 121 class rate proposal.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999

http://www.penair.com/


December 14, 2005

Affidavit of Bryan Carricaburu - Bookmarked

By: PenAir, Bryan Carricaburu



December 23, 2005

Reply of Consolidated Carriers and Request for Leave to File an Otherwise Unauthorized Document | Word

The undersigned carriers hereby file the included Comments and request leave to file an otherwise unauthorized document.  While replies to comments have historically been allowed in this docket for the sake of completeness and accuracy, reply comments were not specifically addressed during the Informal Rate Conference held on November 30, 2005.  Some parties have raised and discussed issues not included in the Informal Rate Conference, and some Comments contain factual errors that must be corrected. The Carriers have no objection to replies from any party addressing adverse issues.  This Reply will not slow the process or burden the record, and needs to be included to correct errors.

It is the height of irony that the Postal Service spent nearly half of its Comments addressing issues it objected to discussing during the Informal Rate Conference.  Before the Conference, the Carriers suggested inclusion of a wider list of issues including methods of reducing the costs of transporting mail.  The Postal Service opposed expanding the topics for discussion.  At the Conference, the Postal Service objected to discussion of topics not uniquely related to Part 121 mail rates.  In its Comments, the Postal Services addresses the following topics that apply to all bush rates and rate making methodology.

The undersigned carriers respectfully request that this Reply be accepted in order to correct factual misstatements made in the Comments of other parties.  Both the R.S.I.A. and 49 USC 41901 et seq. assign the authority and responsibility to set service mail rates within Alaska to the Department.  Once fair and compensatory rates are set, the Department has previously granted the authority to negotiate higher rates to the Postal Service and carriers.  Parties wishing to specify rates and methodology are free to do so within the constraints and requirements of Subpart G of the Rules of Practice in Proceedings.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



December 30, 2005

Re: United States Postal Service Comments on Letter from The Consolidated Carriers

The Postal Service notes that on December 26, 2005, a document from Mr. Hank Myers of MTC entitled "Reply of the Consolidated Carriers and Request for Leave to File an Otherwise Unauthorized Document," dated December. It offered those carriers' "comments" or "reply comments" to comments earlier filed by other parties, including the Postal Service, pursuant to your December 1 notice soliciting "further written comments and evidentiary submissions" subsequent to the November 30 informal rate conference concerning Part 121 service in Alaska.

Given the Notice's advice that submissions such as this of the 26th are both untimely and unauthorized, the Postal Service does not seek to respond to it. However, should the Department revise its view and undertake to consider this filing, the Postal Service respectfully requests that it and all affected carriers have a reasonable opportunity to reply to the submission.

Counsel: USPS, William Jones



Issued and Served January 12, 2006

Procedural Notice

By notice issued December 1, 2005, the Department authorized parties in this docket to file additional comments on current Part 121 bush service mail rates by December 14, 2005. The Department stated that no rebuttals or replies were authorized.

A representative of various Part 135 bush aircraft operators filed comments and, by motion dated December 23, 2005, then requested leave to file an otherwise unauthorized document, a "reply" to comments filed by other parties. The asserted justification for the motion was the need to correct "factual errors" in the comments. By letter filed in the docket on December 30, 2005, the United States Postal Service indicated that if the Department were to grant the motion and consider the reply on the record, it would want the opportunity to respond.

Granting such motions is a matter of our discretion. In this instance, in the interest of a more complete and accurate record, we have determined that the Department's review of the rates will not be unduly hindered by granting the motion to file, and granting other parties until January 19, 2006, to file any responses to the reply. Parties availing themselves of this opportunity should limit their responses to any new matters contained in the reply, and should not repeat arguments already on the record.

By: Todd Homan



December 14, 2005

Comments of the USPS Responding to the Consolidated Carriers' Unauthorized Submission of 12/23

The Postal Service maintains our position that a multiple rate structure as now exists as to Part 121 carriers eliminates the efficiency incentives inherent in a class rate system. The Postal Service strongly disagrees with the Carriers’ contention that “a class rate always encourages more efficient service, even if there is only one member of the class, because of the premium rate being paid relative to costs (even temporarily) if a system becomes more efficient.” (Page 3) While it is true that efficiencies gained are rewarded by an increased rate relative to costs in the short term, the other side of that situation would also hold true. If there is only one member of the class, and that carrier becomes less efficient, its increase in costs will ultimately be compensated for in the rate. In any case, if all carriers are included in a single class rate structure, the competition helps carriers to control costs and make strides towards efficiency.

Counsel: USPS, William Jones, william.j.jones@usps.gov


January 19, 2006

PenAir Supplemental Reply Comments - Bookmarked

PenAir is the only carrier that submitted a ratemaking proposal, and the results are demonstrably fair to all Part 121 bush carriers regardless of runway length, stage length, weather environment or any of the other numerous factors that carriers claim are "unique" to their operations. All of the current regular Part 121 bush carriers and the Postal Service agree that PenAir's method is, in concept, acceptable. While PenAir and the Postal Service differ on the appropriate method of isolating Part 121 terminal costs (given the limitations of the data), it appears that a workable solution is readily achievable within the framework outlined by PenAir. Importantly, as discussed below, PenAir has identified an arithmetic mistake in Postal Service's adjusted Part 121 Terminal Handling Rate submitted with its December 14, 2005 Comments. Once corrected for this error, the Postal Service's Part 121 terminal rate calculation produces a result that is very close to PenAir's. In the interest of reaching a ratemaking consensus, PenAir would not object to a corrected version of the Postal Service's proposed terminal rate method.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-8382



Order 2006-1-18
OST-2003-14694

Issued and Served January 24, 2006

Bush Quarterly Fuel Cost Adjustments

  1. We increase the final Regular Part 121 linehaul mail rate by 1.40 percent from that in Order 2005-9-17, to $4.6498 per mail ton-mile plus a fixed charge of $324.42 per ton enplaned, to be effective for the period beginning the first Saturday after the issue date of this order, until further Department action.
  2. We decrease the final Short Runway Part 121 linehaul mail rate by 7.20 percent from that in Order 2005-9-17, to $8.4643 per mail ton-mile plus a fixed charge of $197.89 per ton enplaned, to be effective for the period beginning the first Saturday after the issue date of this order, until further Department action.
  3. We decrease the final P-135 linehaul mail rate by 9.64 percent to $12.2566 per mail revenue ton mile, to be effective for the period beginning the first Saturday after the issue date of this order, until further Department action.
  4. We decrease the final Seaplane linehaul mail rate by 6.31 percent to $22.5629 per mail revenue ton mile, to be effective for the period beginning the first Saturday after the issue date of this order, until further Department action.
  5. We are issuing the quarterly fuel updates on a final basis. Consistent with our rules, parties will have twenty days from the date of service of this order to petition the Department for reconsideration of the quarterly fuel update.

By: Michael Reynolds



OST-2003-14694 - Bush Mail Rates
OST-2003-14695 - Mainline Mail Rates

February 3, 2006

Equalization Notice of Alaska Central Express, Inc.

Alaska Central Express, Inc. gives this notice of its election to equalize its rates for small aircraft in the following markets: Anchorage, Alaska, on the one hand, and Sitka and Ketchikan, on the other; in each case to match, on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to any other air carrier for each category of mail transported by such carriers in these markets and to match any lower rate or combination of rates paid in the future to any other carrier in these markets.

Equalization under this notice is effective as of February 11, 2006 and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance of such termination.

Counsel: Silverberg Goldman, Robert Silverberg



Order 2006-3-5
OST-2003-14694

Issued and Served March 7, 2006

Show Cause Order Proposing Updated Mail Rates - Bookmarked

By this order, the Department directs the parties to show cause why the proposed Intra-Alaska bush service mail rates in Appendices A, B, C, and F should not be made final. The rates that are currently in effect were established by Order 2005-1-18, based on data for year ended June 30, 2003, adjusted for more recent quarterly fuel expenses. The rates that we are proposing, summarized below, are based on data for year ended June 30, 2005. This order also directs the parties to show cause why the exemption granted to the United States Postal Service by Orders 2005-3-27 and 2005-11-15 should not be extended beyond its expiration date of March 18, 2006, through November 30, 2008, to preserve rate flexibility until the transition contemplated by the Rural Service Improvement Act , P.L. 107-206, $3002, is complete.

Rate Comparisons:

R-121/RTM SR-121/RTM P-135/RTM Seaplane/RTM Terminal/Ton Enpl.
DOT Proposed $4.4143 $12.6448 $10.8011 $22.6659 $599.75
Current $6.560 $11.0014 $12.2566 $22.5629 $625.85

By: Michael Reynolds



March 14, 2006

USPS Notice Concerning Payment of Premium Rates

By Order 2006-3-5, March 7, 2006, the Department proposed updated bush mail rates and took various other actions with respect to matters in the subject docket. One of those matters was to extend, beyond March 18, 2006, the authority first granted the Postal Service in Order 2005-3-27, March 18, 2005, as amended by Order 2005-10-29, October 28, 2005, made final by Order 2005-11-15, November 21, 2005, to pay a premium in excess of the established Part 121 rate.

The Postal Service has not changed its views in this regard. Accordingly, upon the lapsing of the May 3, 2005, agreement, rates paid by the Postal Service to Part 121 carriers will revert to the rates currently established pursuant to DOT order.

Counsel: USPS, William Jones, william.j.jones@usps.gov



March 15, 2006

USPS Notice Concerning Payment of Premium Rates - Errata

Counsel: USPS, William Jones, william.j.jones@usps.gov



March 22, 2006

Motion of Peninsula Airways for an Extension of Time

PenAir hereby moves for a 30 day extension of the March 27, 2006 objection date established by Show Cause Order 2006-3-5. The new Part 121 bush mail rates, which are the subject of the Show Cause Order would, if finalized, have a profound negative effect on Part 121 bush carriers. The significant rate reductions proposed by the Order, combined with the Postal Service's March 14, 2006 announcement that it will cease paying the "rate premium" have serious and troubling implications for the bypass mail system and the future of 121 bush service under RSIA.

PenAir has been working diligently to evaluate the proposed rates and underlying data, but requires additional time to complete its analysis and formulate its response. In view of the extreme importance of new proposed rates to Part 121 bush service, a 30 day extension of the comment period is clearly warranted.

Counsel for the Postal Service has authorized PenAir to state that the Postal Service has no objection to the proposed 30 day extension.

Counsel: Hogan & Hartson, Alexander Van der Bellen, 202-637-8382



March 23, 2006

Re: MTC World Support for an Extension to File Answers to Order 2006-3-5

I have represented a group including the majority of bush certificated air carriers in mail rates since the beginning of the proceeding in 1981.  I am currently working with a group of carriers to determine if an Answer to Order 2006-3-5 will be filed, although the makeup of the group is not final at this time.  I have received a copy of the Motion for an Extension of Time from Peninsula Airways, and understand that the Postal Service has no objection to such an extension.

Order 2006-3-5 proposes significant rate reductions.  When combined with the Postal Service’s decision not to extend the negotiated rates they have been paying by exemption, Peninsula Airways is one of the most adversely affected carriers.  I also would appreciate some additional time to assure the most effective filing on behalf of my clients.  At the same time, the Order and its supporting exhibits were clear and definitive, and the data on which the Order is based have been available for many weeks.  In any case, if the Consolidated Carriers choose to Answer, it will be filed on or before April 10, 2006.  I have commitments for the last three weeks of April that preclude my active participation in anything else.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


Issued and Served March 23, 2006

Procedural Notice | Word

Order 2006-3-5, March 7, 2006, directed parties to show cause by March 27, 2006, why the bush mail rates in that order should not be finalized.  On March 22, Peninsula Airways, Inc., filed a motion under 14 CFR 302.11, to extend the deadline for comments by 30 days.  PenAir stated that we should grant its request because it needs additional time to evaluate the data behind the proposed rates and to formulate a response, and because the order tentatively decreased the rates by a significant amount.  PenAir states that the Postal Service would not object to the 30-day extension.  On March 23, the Consolidated Carriers stated that, although “the Order and its supporting exhibits were clear and definitive, and the data on which the Order is based have been available for many weeks,” it supports an extension until at least April 10, 2006.

Given the overlap between deadlines for answers to PenAir’s motion, which is March 28, and comments to Order 2006-3-5, which is March 27, and given the responses of the parties already filed we believe that it is in the public interest to act before answers to the motion are due.  We therefore grant PenAir’s motion to extend the date for comments to Order 2006-3-5 until April 26, 2006.

By: Todd Homan



Order 2006-3-25
OST-2003-14694

Issued and Served March 27, 2006

Bush Quaterly Fuel Cost Adjustments

The Department has stated that we would continue this quarterly update for fuel until further notice. Since the carriers' traffic and financial data are reported 45 days after the end of the quarterly accounting period, we will continue to make quarterly adjustments with a one‑quarter lag from the end of one quarter until the beginning of the next quarter. The data in Appendix A show that fuel costs per block hour for Frontier Flying Service (Frontier), the only carrier currently in the Regular Part 121 (R‑1211) class, have increased by 5741 percent and for Era Aviation (ERA), the only carrier in the Short Runway (SR121) class, fuel costs per block hour have increased by 33.852 percent. Linehaul rates, overall ‑‑ which include pilots, maintenance, and depreciation, as well as fuel ‑‑ increase by 1.61 percent for the R‑121 rate, and by 6.33 percent for the SR‑121 rate, as shown in Appendices A and B.

As expected, ERA's increase in fuel expense from the prior period of 33.85 percent far exceeds Frontier's 5.74 percent increase. As we discussed in Order 2006‑1‑18, in the prior period ERA's fuel expense had decreased significantly because of anomalous out‑of‑period adjustments, and ERA's 33.85 percent increase reflects recovery from those anomalous results.

By: Todd Harmon



April 26, 2006

Objections of Peninsula Airways to Show Cause Order - Bookmarked

PenAir objects to the Show Cause Order to the extent that it fails to include ERA's linehaul costs in the R-121 bush mail rate, inconsistently includes ERA's terminal costs in the R-121 mail rate, includes Part 135 terminal costs in the R-121 mail rate, and fails to use the most recent cost data for the calendar year 2005. The Department's proposed R-121 rate structure fails to provide adequate and reasonable levels of compensation to R-121 bush carriers, by its failure to include all Part 121 bush carrier linehaul costs in the Part 121 rate base as required by the Rural Service Improvement Act of 2002, by arbitrarily gerrymanding terminal and linehaul rate "classes" contrary to RSIA, and by using outdated FY June 2005 data when more recent CY 2005 data are available.

PenAir urges the Department to issue a Final Order consistent with PenAir's recommendations set forth in these Objections.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999


April 26, 2006

Answer of the Consolidated Carriers to Order 2006-3-5 - Bookmarked | Word

The undersigned carriers respectfully Answer to the service mail rates set for transportation of U.S. Mail on bush aircraft between two points in the State of Alaska in Order 2006-3-5. This Answer presents several corrections or changes to the data and methodology used to set linehaul rates for transportation on Part 135 wheel aircraft and Seaplane aircraft, as well as the single terminal charge to be used for all bush carriage. Additionally, the Consolidated Carriers petition the Department to set mail rates as specified below, and to adopt the rate making methodology detailed in this filing. Since the passage of the Rural Service Improvement Act of 2002 and subsequent amendments, the Department has attempted to establish new rates and methodology for bush carriers consistent with the terms of the Act. At the same time, The Department has improved the methodology of establishing mainline mail rates for intra-Alaskan service to make the rate easier to calculate and more relevant to the system on which mail is actually transported.

The Consolidated Carriers propose adoption of standards as close as possible to those used for mainline carriers. In this Answer and Petition, the Consolidated Carriers propose specific standards using easily verifiable data to compute rates that are clear, accurate and relevant to the carriage of mail in the effective period of the rate.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



April 26, 2006

Answer of Era Aviation to Order 2006-3-5

In Order 2006-3-5, the Department directed the parties to show cause why the proposed Intra-Alaska bush service mail rates in Appendices A, B, C, and F should not be made final. In arriving at these rates, the Department worked through the following principal issues in step wise fashion:

To avoid its silence being mistaken for ambivalence, Era files this brief answer in support of the DOT's analysis on all of the above issues at they relate to Part 121 carriers transporting U.S. Mail on bush aircraft in the State of Alaska. Order 2006-3-5 is well reasoned, and reveals a commendable blend of legal compliance and common sense.

By: Era Aviation, Marcia Davis, 907-266-8325, mdavis@eraaviation.com


April 25, 2006

Objections of Frontier Flying Service to Show Cause Order - Bookmarked

The Department has effectively given the Postal Service all of its savings on the front end of RSIA by standing by its 1980s methodology. It has ignored the long term viability of the industry. The most critical phase of RSIA is now at our doorstep. The Department must layout guidelines by which carriers must follow. Ironically, carriers will argue that the conversion process is being forced on them and communities will not be able to support 121 operations, but the Department will say that “it does not control the business decisions of the carriers, but rather it just sets rates that are fair and reasonable”. A 121 rate under the context of the current RSIA language must not only be “fair and reasonable” but necessarily sustainable. Unfortunately the Department has backed itself into a corner by stating that the inclusion of ERAs costs into a single rate would “corrupt the ratemaking standards,” though by its exclusion the Department has “corrupted” the 121 Rate intent in RSIA. Where do we go from here?

By: Frontier Flying, Rob Hajdukovich, 907-474-1739., bob@frontierflying.com


April 26, 2006

Comments of The United States Postal Service on Show Cause Order 2006-3-5 Proposing Intra-Alaska Bush Service Mail Rates

The Postal Service has no objections to the tentative decisions set forth by the Department in Order 2006-3-5, but takes the opportunity to provide comments on and clarifications to the issues presented therein. For the record, the Postal Service continues to disagree with a number of the Department's conclusions, and reserves the right to express its position anew as appropriate circumstances warrant.

Counsel: USPS, William Jones, william.j.jones@usps.gov



May 15, 2006

Reply of the Consolidated Carriers and Request for Leave to File an Otherwise Unauthorized Document - Bookmarked | Word

The Consolidated Carriers believe that the rates and charges it presents in the attached Appendices are the best and most accurate values for Part 135 wheel and Seaplane linehaul rates and bush terminal charge (depending on the validity of the Frontier corrections), and should be adopted. These Appendices also include corrections provided by Warbelow’s Air Ventures, as well as correction of data entry errors in the original Answer of the Consolidated Carriers. Setting different Part 121 rates for distinctly different and non-competitive operations is a correct and legal use of the discretion the Department has under 49 USC 41901, and does not conflict with the requirements of the R.S.I.A.. Setting a single bush industry terminal charge is consistent with the R.S.I.A. and the only reasonable alternative given the current reporting limitations. A single terminal charge benefits the Postal Service by bringing competitive pressures to bear on the terminal charge element. As demonstrated by Peninsula Airways, any system that uses distance carried to allocate Departure Related Expense is fatally flawed. The proponents of “sustainable rates” have failed to meet their burden under 14 CFR 302.702, and those arguments must be dismissed. On the other hand, the Consolidated Carriers have met their burden under 14 CFR 302.702, and the rates and charges proposed in the Appendices, hereto, should be put into effect as soon as possible.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



May 17, 2006

Surreply of Peninsula Airways and Motion for Leave to File

PenAir hereby submits this Surreply to the late and unauthorized Reply of the so-called Consolidated Carriers. The Show Cause Order did not authorize the filing of Replies to Objections and therefore the Consolidated Carriers' Reply should be rejected. However, if the Department accepts the Reply of the Consolidated Carriers, which is not only unauthorized but late, PenAir requests leave to file this Surreply to correct errors and mischaracterizations in the Consolidated Carriers' unauthorized filing.

The Consolidated Carriers urge the Department to exclude Frontier's revised reports while in the same breath they inconsistently urge the Department to include revised data submitted by Warbelow. As PenAir pointed out in its Objections, the Department should, indeed must, use the most recent data available, which is data for calendar year 2005, including all updated reports filed by affected airlines.

The Consolidated Carriers erroneously assert that "there is no way...for the Department to establish accurate, separate terminal charges for Part 121, Part 135 and Seaplane carriers." PenAir's Objections provided an accurate and reasonable methodology for allocating Part 121 terminal costs using the same methodology the Department used to factor out ERA's costs in Order 2005-6-6 and Order 2006-5-3. The Consolidated Carriers' criticism of PenAir's approach has no merit.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999



May 25, 2006

Clarification of The Consolidated Carriers

The Consolidated Carriers wish to clarify the two points made in its Reply that Peninsula Airways addressed in its Sur-Reply:

  1. Data of Frontier Flying Service
  2. Inclusion of Mileage Factor in Terminal Cost Calculations

The Consolidated Carriers file this clarification to its Reply. The Carriers do not object to the inclusion of any data found to be true and correct by the Bureau of Transportation Statistics, but do object to the use of any Terminal Charge related division of costs which employs flight distance as a factor. It prays that the rates proposed in its Reply of May 15, 2006 be implemented as soon as possible.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com



Order 2006-8-27
OST-2003-14694

Issued and Served August 30, 2006

Order Setting Final Bush Mail Rates

Order 2006-3-5, March 7, 2006, tentatively set final intra-Alaska bush mail rates, with objections due 20 days after that date. On April 23, we granted the petitions of Peninsula Airways. Inc. and the Consolidated Carriers, and extended the deadline for comments to April 26, 2006. Timely-tiled comments were received from PenAir, CC, Era Aviation, Inc., Frontier Flying Service, Inc. and the United States Postal Service, and the issues are ripe for decision.

Order 2006-8-27 is making several technical adjustments to certain tentative rates. The final rates for the four linehaul classes per mail revenue ton mile are as follows: Regular Part 121, $4.6382; Short Runway Part 121, $12.9458; Part 135, $11.1835; and Seaplane, $24.3476. We also set a common terminal rate for all classes of service at $602.17 per mail revenue ton enplaned.

By: Michael Reynolds



Issued and Served September 6, 2006

Notice

By Order 2006-8-27, August 30, 2006, the Department indicated that we would meet soon with the parties in Alaska regarding bush terminal costs and various other bush issues raised by the carriers late in the rate-making cycle. We are hereby setting the dates for the meeting as September 19 and 20 in Anchorage.

By: Todd Homan



Issued and Served September 11, 2006

Notice

By Notice served September 6, 2006, the Department indicated that we would meet with the parties in Alaska on September 19 and 20. Since that time, several parties have indicated they could not come on the 19th, the critical first day. We have contacted the parties informally, and only one carrier indicated a problem with meeting on the 20th and 21st, so we will move the meeting to those dates.

In addition, at the request of several parties, the start of the meeting on the first day, September 20, will be moved back to 12:30, so that some parties may be able to avoid staying the night in Anchorage. Parties should anticipate the meeting on the first day, September 20, will extend past 5:00 pm, especially if such extension would obviate the need for meeting the second day. The Alaska Air Carriers Association is working on securing a meeting site, and will advise everyone as to the location when that is finalized.

By: Todd Harmon



October 18, 2006

Handout by DOT Staff at the Meeting on September 29, 2006

By: DOT



October 20, 2006

Discussion in Anchorage Among Carrier Representatives, Postal Service, and Department Staff

By: Kevin Adams, EAS and Domestic Analysis



October 25, 2006

Support of Frontier Flying Service for the Inclusion of SR-121 Expense Data into the Regular 121 Rate Collection

By: Frontier Flying, Bob Hajdukovich, 907-474-1739 x233, bob@frontierflying.com



October 27, 2006

Comments of the USPS on the Issues Raised in Discussion Subsequent to Order 2006-8-27

The Postal Service takes this opportunity to comment briefly on the Department’s summary of the meeting held September 20 in Anchorage, AK, in which representatives of various carriers and the Postal Service discussed a variety of issues previously identified in Order 2006-8-27, and specifically to include its views on how the costs of previous STOL Part 121 operations should be integrated into the structure of Alaskan linehaul rates.

As the summary reflects, carriers differed on the necessity of requiring additional detail on the data supporting terminal costs. While, as the summary reflects, “the Postal Service endorsed imposing additional reporting requirements,” the context of that endorsement was not supplied. The Postal Service supports the additional reporting that would be required in the event that DOT decides to separate the terminal handling rates for Part 121 and Part 135. However, considering, as Order 2006-8-27 reflects, that there is neither any legal requirement nor obvious purpose for separate rates, it remains the Postal Service’s view that a single bush terminal handling rate is appropriate, and does not require additional data collection in that case.

Under this heading, the summary also reflects discussion supporting the attribution to mail of the special one-time costs of converting to Part 121 “because the carriers would not be converting to Part 121, except for the incentives provided by RSIA.” In the course of the Anchorage discussions, some current Part 121 carriers indicated that there were factors other than RSIA that occasioned their conversion to Part 121. The Postal Service does not agree that conversion costs should be attributed to mail operations, since the conversion also benefits the carriers’ other forms of traffic.

Counsel: USPS, William Jones, william.j.jones@usps.gov



November 5, 2006

Petition to Amend Order 2006-8-27 and Response of Peninsula Airways to Comments of the USPS

In prior submissions in this Docket, PenAir, Frontier and the USPS unanimously urged the Department to establish a single Part 121 bush mail rate, rather than a bifurcated R-121 rate for PenAir and Frontier, and a separate SR-121 rate for Era's Part 121 STOL operations. PenAir argued that multiple Part 121 class rates are inconsistent with both the letter and spirit of RSIA which PenAir submits requires a single Part 121 bush class rate. In addition, PenAir has asserted that wholly apart from the requirements of RSIA, it makes no sense to establish an SR-121 rate because, as the Department itself noted, the SR-121 rate was "moot", because all flights must equalized down to the lower Part 135 rate.

Following the issuance of Order 2006-8-27, a changed circumstance occurred which PenAir believes now warrants the Department revisiting this issue and establishing a single R-121 bush mail rate. That changed circumstance is the cessation of all SR-121 operations by Era, the only eligible SR-121 carrier. Thus, PenAir agrees with USPS's position that the SR-121 rate "should be eliminated since Era Aviation, the only carrier currently included in that rate, had ceased operations with rate-eligible aircraft in the affected markets."

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999



Order 2006-11-15
OST-2003-14694

Issued and Served November 16, 2006

Show Cause Order Merging Part 121 Mail Rates - Bookmarked

By this order, the Department directs the parties to show cause why the Department should not merge the lower-cost Regular Part 121 linehaul mail rate (R-121) with the higher-cost, short-runway Part 121 linehaul mail rate (SR-121). The current rates, set by Order 2006-8-27, were based on data for the year ended June 30, 2005, while the proposed single, merged rate would be based on data for the year ended June 30, 2006. (The Part 135 rate is not affected; we show it only for comparison purposes.)

Comparison of Linehaul Rates per Mail Revenue Ton Mile:

R-121 SR-121 Part 135 Merged 121 (Proposed)
Order 2006-8-27 $4.6382 $12.6448 $11.1835 $5.8199

By: Andrew Steinberg



December 27, 2006

Rate Equalization Notice of Artici Transportation

Subject to the conditions below, Arctic Transportation Services, Inc., gives this notice of its election to equalize its rates for small aircraft in the Nome, Alaska to Shismaref Alaska on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to Frontier Flying Service for each category of mail Frontier Flying Service transports in these markets to any lower rate or combination of rates paid in the future to any other carrier in these markets.

By: ATS, Wilfred Ryan



December 28, 2006

Rate Equalization Notice of Hageland Aviation Services

Hageland Aviation Services, Inc., gives this notice of its election to equalize its rates for small aircraft in the Nome, Alaska (OME) to Shismaref, Alaska (SHH), on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to Frontier Flying Service for each category of mail Frontier Flying Service transports in these markets to any lower rate or combination of rates paid in the future to any other carrier in these markets.

By: Hageland, Michael Hageland



Order 2007-1-6
OST-2003-14694

Issued and Served January 9, 2007

Show Cause Order Proposing Updated Mail Rates - Bookmarked

By this order, the Department proposes to establish new intra-Alaska bush-service mail rates. Order 2006-8-27, August 30, 2006, updated the short runway Part 121 (SR-121) and regular runway Part 121 (R-121) rates, as well as Part 135, Seaplane, and terminal rates. Most recently, Order 2006-11-15, November 16, 2006, merged the SR-121 and R-121 rates. Those orders were based on data for the year ended June 30, 2005, and June 30, 2006, respectively. The rates we are proposing here reflect the same costing methodology used in recent orders, but merely use more recent data. The rates currently in effect will remain in effect until a final order is issued with respect to the rates tentatively proposed here.

We also tentatively dismiss the methodological costing issues first raised by the parties in response to Order 2006-3-5, except for imputing a minimum salary for certain carriers' owners/managers.

We direct all interested persons to show cause within 20 days why the Department should not fix, determine and publish final rates, as follows: Part 121, $5.7186 per mail revenue ton mile; Part 135, $11.3034 per mail revenue ton mile; Seaplane, $269896 per mail revenue ton mile; and Terminal, $649.55 per mail ton enplaned. These rates would be effective after the issuance of a final Department order, until further Department action.

By: Andrew Steinberg



January 25, 2007

Answer of the Consolidated Seaplane Carriers to Order 2007-1-6 | Word

The undersigned Consolidated Seaplane Carriers hereby answer Order 2007-1-6 as far as the Order incorrectly and inconsistently sets the linehaul rate for transportation of mail in markets where only seaplane service is available.  The rate is not compensatory as required by law, and the methodology used predictably creates inaccurate and inadequate mail rates.  The Seaplane Carriers request that a rate of $30.2223 plus fuel cost adjustment be set as a linehaul rate for transportation of mail in seaplane markets.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



January 25, 2007

Answer of the Consolidated Carriers to Order 2007-1-6 - Bookmarked | Word

The undersigned carriers respectfully request that the Department adjust its database to exclude identifiable non-revenue segments, include all passenger carriers and aircraft currently operating in scheduled mail service in setting mail rates, and use cost projection to adjust historic unit costs to the rate application period.  The Department has already ruled than non-revenue segments must be excluded from the ratemaking base.  Use of the 1% sample technique creates a biased and inaccurate sample, and use of automated spreadsheet techniques eliminates most of the manual calculation required to set rates.  Sufficient data and statistical tools exist for the Department to apply a reasonable and accurate projection technique consistent with the findings of Order 1997-9-37.  Once these three corrections are made, calculation of bush mail rates will be identical in technique and procedure to mainline mail rates.  By using the non-controversial mainline rate procedures, the Department will be able to set rates more quickly and without debate on rate setting standards.  Additionally, the Carriers request permission to file this Answer one day late due to the logistical problem of receiving all authorizations.

By: MTC, Hank Myers, 425-641-8423, hank@mtcworld.com



January 29, 2007

Comments of USPS on Show Cause Order 2007-1-6

The Postal Service takes the opportunity to object to one of the proposed changes to the rate-making methodology in Show Cause Order 2007-1-6. The Postal Service opposes the inclusion in the Seaplane rate at this time of management costs associated with LLC air carriers because this operational expense should not be included in the rate until entitlement therefor is fully documented by the affected carriers.

While the order recites, appropriately, that any factor to be included in the rate to fully compensate LLC carriers will be based on reported data and subject to an appropriate cap, the Department has strayed from that approach by including in the Seaplane rate here proposed the maximum allocable amount before any data has been received. While we have stated our objection to the inclusion of these management costs herein, should the Department choose to include them, the Postal Service believes that the carriers should be required to demonstrate these costs and claim the actual costs for that component (up to $12,500/quarter). Only to the extent that 1) the carriers do make such claims on their Schedule F-2, and 2) DOT establishes that the claims are reasonable and auditable, should the figures be included in the rates.

The Postal Service has no objection to the manner in which the Department has responded to the other issues raised in the Show Cause Order. However, it reserve the right to submit comments on the submissions of other parties should they address those issues.

By: USPS, William Jones, william.j.jones@usps.gov



February 2, 2007

Request of MTC to Extend Answer Period | Word

Order 2007-1-6 bifurcated response periods for the rate setting. The 20 day period for challenges to the mathematical integrity of the proposed rates has past. The Answers of the Consolidated Seaplane Carriers and the Postal Service addressed rate making policy or procedure and not the mathematics of the Order. In its Reply filed today in the docket, the Seaplane Carriers note that as there has been no challenge to the mathematics, the proposed rates should be put into effect ASAP.

The 30 day response period is for challenges to rate making procedural or philosophy questions. The seaplane carriers filed because there was unanimity on the topics and there was no need to hold back. I have been working with the Part 135 wheel plane carriers as well.  While there is strong interest in filing a procedural response by the carriers I have contacted, I still have not heard from over 70% of the carriers I have addressed. The primary reason is that many of the key decision makers at the carriers take vacation (usually outside of Alaska) at this time of year.

As you know, the Alaska Air Carriers Association Convention begin on February 13 with seminars by the U.S. Postal Service and the B.T.S. This is the single event of the year when nearly all airline managers are in one place at one time.  I request that the response date for procedural issues be extended until Monday, February 19, 2007. This is an 11 day extension of the current deadline.  The 15 day response period would continue in place. I could accept Friday, February 16, which would be an 8 day extension, but I use the weekend to do error checking at leisure and make last minute contacts as needed.

By: MTC, Hank Myers, 425-641-8423, hank@mtcworld.com


February 2, 2007

Reply of the Consolidated Seaplane Carriers to the Answer of USPS | Word

The Consolidated Seaplane Carriers respectfully request that management labor valuations proposed in its Answer of January 25 be used in final ratemaking based on costs for the year ended June 30, 2006.  These compensation values are consistent with the request of the U.S. Postal Service, and are a conservative estimate of the value of management services in the area where the carriers operate.  Furthermore, the Seaplane Carriers request that the rates proposed in Order 2007-1-6 be made effective as soon as possible.

By: MTC, Hank Myers, 425-641-8423, hank@mtcworld.com



February 2, 2007

Objection of Hageland Aviation to Extension

I do object to Hank Myers' request.

By: Mike Hageland, mikeh@pobox.alaska.net



Order 2007-2-7
OST-2003-14694

Issued and Served February 5, 2007

Order Setting Final Bush Mail Rates Until Further Department Action

By this order, the Department is finalizing the mail rates tentatively set by Order 2007-1-6. The rates currently in effect were based on data for the year ended June 30, 2005, and were set by Orders 2006-8-27 and 2006-11-15. Order 2006-8-27 set the currently effective Part 135, Seaplane, and terminal rates, and Order 2006-11-15 the Part 121 rate. The rates proposed by Order 2007-1-6 were based on data for the year ended June 30, 2006, and fuel expenses for the quarter ended September 30, 2006, the most recent quarter available.

We received objections to a number of methodological issues, which we will address in the coming months. The management cost issue raised by both the Postal Service and the Consolidated Carriers will be considered as we continue to review all other methodological comments. The increase in the rate caused by the Department's treatment of this issue is small. We estimate this adjustment makes the seaplane linehaul rate 1.2 percent higher than otherwise, and that rate applies to fewer mail revenue ton miles than any of the other classes of service paid by the Postal Service for carriage of intra-Alaska mail.

Also, because of our long standing policy of having final rates in place at all times, we do not believe it is appropriate to wait until this issue can be fully discussed by the carriers and supporting data filed before we make the small adjustment we are making here. We will consider the comments that parties file before deciding how to deal with this issue in future orders.

By: Andrew Steinberg



Issued and Served February 7, 2007

Notice of Extension of Comment Period | Word

By Order 2007-1-6, January 9, 2007, the Department directed all parties having objections to the several costing methodologies discussed in that order to file objections within 30 days (February 8), with rebuttals due 15 days after that.

On February 2 the Consolidated Carriers indicated that date would conflict with the annual Alaska Air Carriers Association Convention, and requested an extension to February 19, 2007, with rebuttals due 15 days after that.  On February 2, Hageland Aviation objected to the extension, but merely stated it objected to the extension and provided no basis for its objection.

We do not believe the additional time requested by the Consolidated Carriers is unreasonable, and Hageland did not make a case for rejecting the request for extension.  Therefore, we will extend the dates for objections to those requested by the Consolidated Carriers.

By: Todd Homan



February 20, 2007

Rate Equalization Notice of Arctic Transportation Services | Word

Arctic Transportation Services, Inc., (7S), an Alaskan incorporated air carrier currently authorized to transport United States mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between:

By: ATS, Wilfred Ryan



February 28, 2007

Rate Equalization Notice of Bering Air

Hereby gives notice of its intent to equalize its mail rates to the lowest authorized or agreed rates in the following markets effective immediately:

Bering Air, Inc. requests equitable tender of mail in the above markets pursuant to the provisions of the rural Service Improvement Act and the practices and procedures of the Department of Transportation and the United States Postal Service.

By: Bering Air, Allen Haddadi



February 27, 2007

Rate Equalization Notice of Hageland Aviation Services

Hageland Aviation Services, Inc., (H6), an Alaskan incorporated air carrier currently authorized to transport United States mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between:

With the lower levels paid to other carriers or combinations of other carriers in these markets effective March 1, 2007.

By: Hageland, Michael Hageland



March 6, 2007

Postal Service Response to Comments on Show Cause Order 2007-1-6

The Postal Service believes that it is appropriate for costs associated with carriers which withdraw from service to remain in the rate base until their eligibility ceases. The Department has done so with respect to one 121 carrier, ERA, and should do so consistently. The Postal Service has no objection to the exclusion of turnback data from the rate calculation if the Department can establish the reliability of that data.

With regard to the calculation of a purported salary figure for the management of LLC carriers, consistent with the view expressed in our initial comments, the Postal Service strongly disagrees with the assertion that the Department of Labor and Workforce Development’s CEO salary calculation should have any role in the calculation of seaplane service rates. Further, the Postal Service notes that the Seaplane Carriers’ comments confirm its understanding, previously expressed, that there is no legal constraint on LLCs assigning their managing members salaries appropriate to the services they perform for to the LLCs, noting that two of their members do so.

Similarly, the Postal Service does not believe that “projection” is appropriate in the application of bush rates; the Department has correctly eschewed the use of such an approach for bush rates in Order 2005-6-6 “because the necessary long-term data are not available." Further, we agree with the Departments position in that Order that year-over-year projections are not be a viable alternative because of the likelihood of volatile swings in rates. The Postal Service continues to support the current methodology of using actual operational costs for a predetermined time frame.

Counsel: USPS, William Jones, william.j.jones@usps.gov



March 7, 2007

Motion for Leave to File Response of Peninsula Airways

The Consolidated Carriers are Part 135 operators and address Part 135 issues. To the extent the Consolidated Carriers suggest that the Department depart from its methodology as set forth in Order 2007-1-6, those changes should not be applicable to Part 121 issues.

The Consolidated Carriers urge the Department to adopt a long term trend to project rates to the current period. See, for example Appendix D to the Consolidated Carriers' Answer. While in theory that might seem sound, in practice, there is not yet a long enough history under RSIA to establish consistent and predictable patterns. For example, the bush terminal PenAir requests leave to file this Response which will provide for a more complete record and assist the Department's decision.

In calculating the circuity markup, it appears that the Consolidated Carriers used all scheduled RTMs rather than scheduled mail RTMs. The Department has historically, and correctly, used scheduled mail RTMs, because these are more relevant to the cost of transporting a ton of mail.

The Consolidated Carriers urge the Department to include in the rate base only costs of airlines that will be providing service after the analysis period. It is PenAir's position that costs should be included in the calculations based on eligibility, not current service. That is what the Department has done with respect to including ERA's costs in the R-121 rate and there is no basis for changing that approach. The approach also makes sense because carrier service is dynamic and subject to frequent changes.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999, recohn@hhlaw.com



March 9, 2007

Rebuttal of the Consolidated Carriers to the Response of USPS | Word

The Postal Service misquotes the Reply of the Consolidated Carriers when it says that two LLC carriers currently treat their owner managers as employees. Neither Venture Travel nor PM Air treat their owner/managers as employees. Both carriers allow the owner/managers to draw against expected dividends, and both declare dividends on a regular basis.

These rather trivial arguments overlook the primary point of the question. Owner/managers are compensated both for their managerial expertise and their capital contribution. If total dividend payments were used to determine mail rates, then there would be double counting in the rate of return allowance. All dividends would be treated as G&A markup, and the carrier would still get the return and tax markup. While no party disputes that owner/managers should be compensated, the question is how to remove compensation for return on investment from total compensation.

No respondent supports the idea of a flat rate allowance unrelated to the management functions of the owner/managers or the number of owner/managers involved. The Carriers oppose the Postal Service solution in that it forces the LLC’s to give up the legal and organizational advantages they enjoy without resolving the basic question of how to value the managerial efforts of owners. Using officially noticeable data specifically applicable by area and professional position is the best way to identify and separate the expenses of management regardless of the actual level of total dividends. If one accepts the idea of using unbiased third party data, one could not ask for a more unbiased or better qualified authority than the State of Alaska.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com



Order 2007-3-19
OST-2003-14694

Issued and Served March 22, 2007

Bush Quarterly Fuel Cost Adjustments

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska Bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to he effective on March 31, 2007, and reflect fuel expenses or the quarter ended December 31, 2006.

Service Class Linehaul
YE 6-30-06
Fuel
YE 9-30-06
Fuel
QE 9-30-06
Current Linehaul Fuel
QE 12-31-06
New Linehaul
Part 121 $5.7896 $1.3160 $1.2432 $5.7168 $1.2086 $5.6822
Part 135 $10.9367 $2.5328 $2.8995 $11.3034 $2.8175 $11.2214
Seaplane $26.4177 $4.4710 $5.0429 $26.9896 $5.2095 $27.1562

By: Todd Homan



Order 2007-4-25
OST-2003-14694

Issued and Served April 23, 2007

Order Setting Final Bush Mail Rates Until Further Department Action

By this order, the Department is extending through the end of this year the bush mail rates tentatively set by Order 2007-1-6, and made final until further Department action by Order 2007-2-7.

By: Andrew Steinberg



May 3, 2007

Petition of The Consolidated Carriers for Reconsideration of Order 2007-4-25 and Motion for Leave to File an Otherwise Unauthorized Document

Department regulations and federal law require a careful consideration of all facts raised in a proceeding before conclusion. At the same time, the Department recognizes that there needs to be substance behind arguments. Regulations and Orders state that vague or unsupported arguments will not be considered. Such arguments should be given no decisional weight in the process. Unfortunately, analysis of the positions filed by the U.S. Postal Service and Peninsula Airways finds no data, no analysis and only vague arguments about what might happen, or might need to be the case. The result is a decision that values form over function and hypothesis over reality.

The undersigned carriers respectfully request the Department to reconsider Order 2007-4-25 as the Order fails to provide the legally required compensatory mail rate. While the Order addresses without analysis the various changes proposed by the Consolidated Carriers, it is entirely silent on the primary question which is how should a compensatory mail rate be set. Furthermore, the Order accepts at face value the vague and unsupported arguments of the Postal Service and Penair. In the end, the rate that is set is inadequate, inaccurate, convoluted and statistically dubious. To the extent a petition for reconsideration was not specifically authorized in Order 2007-4-25, the Carriers request leave to file an otherwise unauthorized document.

Counsel: MTC, Hank Myers, 425-641-8243



May 10, 2007

Answer of the Consolidated Seaplane Carriers to Order 2007-4-25 | Word

In Order 2007-4-25, the Department tentatively concluded that contrary to previous findings and agreements, the imputed value of owner/managers of limited liability companies should be excluded from rate making consideration.  The Order provides the opportunity for carriers to respond to this tentative finding, which directly contradicts the previous tentative finding on the issue.  It must be stressed that no party, including the Postal Service, opposes imputation of management related value for LLC owners.  No party even opposes including the compensation of more than one manager, as is done for Promech and Alaska Seaplane Service.  The idea of imputing management value was raised and approved by all parties at the informal rate conference held in Anchorage on September 29, 2006, as duly reported by staff and included in this docket.

The Postal Service, in a passive-aggressive fashion, supports the concept of imputing the value of management labor, but cannot support any compensation plan other than grossly undervaluing the management labor of the owners.  Faced with the prospect of a simple, consistently documented, relevant and governmentally accepted measure of management value, the Department seems to have reversed course.  The arbitrary $50,000 total compensation per carrier value has no factual support or basis in current application.

The undersigned carriers respectfully request that the Department re-reverse its position on the exclusion of imputed value for owner/managers of LLC’s and use the impartial and entirely relevant standards of the State of Alaska Department of Labor.  As an alternative, the Department can state what data or proofs would be acceptable to support the claims of the Carriers, or adopt the top step GS rating comparable to the responsibility levels held by the owner/managers (with Alaska premium and tax allowance), recognizing the some of the officers involved would be rated above the GS scales.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


May 10, 2007

Motion for Leave to File and Response of Peninsula Airways

In their Petition, the Consolidated Carriers do not make any new points, nor do they present any new evidence which was not available earlier to warrant any change in the Department's Final Order. Instead, the Consolidated Carriers merely repeat the points made in their February 21, 2007 submission - each of which the Department has previously considered and rejected.

The Consolidated Carriers once again urge the Department to exclude an airline's costs if that airline has ceased operations. As PenAir previously urged, it believes that costs should be included on the basis of eligibility. The Department correctly recognized that the marketplace in Alaska is highly dynamic and carriers may cease operations one day only to resume operations another. In any event, to the extent the Department departs from the position set forth in DOT Order 2007-4-25, the changes suggested by Consolidated Carriers, which comprise Part 135 operators, should not disturb the Department's decision to include ERA's costs in the Part 121 Bush rate.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999/5659, recohn@hhlaw.com



May 15, 2007

Reply of the Consolidated Carriers to the Petition of PenAir | Word

In its Petition for Leave to File an Otherwise Unauthorized Document, Peninsula Airways responds to the Petition for Reconsideration of the Consolidated Carriers by claiming that no new data or arguments were raised in the Carriers’ Petition, and then Peninsula repeats its own arguments filed earlier.  The claim that the Carriers failed to raise issues not previously addressed is groundless and false.  The Carriers’ Petition is based on new decisional elements raised by the Department, each of which was patently incorrect.  Penair also claims that Era’s terminal charge data should be included in the class rate based on the Era’s eligibility to transport mail.  Penair claims that the bush market is volatile, and Era should be included on the basis of eligibility.  This claim will be handled separately.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com


May 15, 2007

Postal Service Motion for Leave to File and Response to Request for Reconsideration of Order 2007-4-25

The Postal Service supports the Department’s final decisions presented in Order 2007-4-25 and suggests that the petition for reconsideration be rejected. The Consolidated Carriers have submitted comments on these issues repeatedly this year. The Department has reviewed the points presented by the Consolidated Carriers and other parties and has come to the final decisions presented in Order 2007-4-25 after careful consideration. This most recent petition presents no new information that would necessitate these issues being reopened for discussion. The Postal Service urges the Department to reject the petition and uphold the final decisions in Order 2007-4-25.

By: USPS, William Jones, william.j.jones@usps.gov



May 25, 2007

Postal Service Response to Issue of Imputed Salaries Left Unresolved in Order 2007-4-25

As previously stated, the Postal Service opposes the inclusion of arbitrary or unsubstantiated values for management costs associated with LLC air carriers. It is essential to the Postal Service that elements of cost must be based on information reported by carriers in their financial statements that the Department establishes are reasonable and auditable.

For precisely that reason, the Postal Service is opposed to the use of the State of Alaska Department of Labor salary data as the Consolidated Carriers initially proposed and to their later proposal that government labor rates might also be used. Neither figure has any relation to the unique operating characteristics of a seaplane carrier in southeast Alaska. Since, as the Postal Service has previously demonstrated, and the Consolidated Carriers appear to have conceded, there is no legal constraint preventing operators organized as LLCs from assigning salaries to their managing members and reporting those salaries to the Department, only such salaries as are so reported should be included in the mail rate calculation.

Finally, the Postal Service objects to the statement of the Consolidated Carriers’ submission of May 10, 2007 that all parties approved the inclusion of management salaries at the rate conference in Alaska last fall. The Postal Service recollection is that this matter was discussed only briefly at the very end of the conference and it was concluded that further discussion and investigation into how those values would be determined was needed before anything could be included in the rate.

Counsel: USPS, William Jones, william.j.jones@usps.gov



Order 2007-6-7
OST-2003-14694

Issued and Served June 8, 2007

Bush Quarterly Fuel Cost Adjustments

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska Bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on June 30, 2007, and reflect fuel expenses for the quarter ended March 31, 2007.

Service Class Linehaul, YE 6-30-06 Fuel, YE 6-30-06 Fuel, QE 12-31-06 Fuel, QE 3-31-07 Current Linehaul New Linehaul
Part 121 $5.7896 $1.3160 $1.2086 $1.1865 $5.6822 $5.6601
Part 135 $10.9367 $2.5328 $2.8175 $2.8979 $11.2214 $11.3018
Seaplane $26.4177 $4.4710 $5.2095 $4.9244 $27.1562 $26.8711

By: Todd Homan



Order 2007-7-17
OST-2003-14694

Issued and Served June 18, 2007

Order on Petition for Reconsideration

Order 2007-4-25, April 23, 2007, set final Intra-Alaska bush mail rates. Among other things, the order: 1. included the costs of Wings of Alaska’s seaplane aircraft, even though it had ceased operating that aircraft type; 2. excluded the data of carriers/aircraft types that transported less than 1-percent of the mail; and 3. deferred until the next annual update applying an inflation factor to historical costs.

On May 3, 2007, the Consolidated Carriers filed a petition for reconsideration of Order 2007-4-25, and a motion for leave to file an otherwise unauthorized document, dealing with the three issues above. On May 10, 2007, PenAir filed comments urging the Department to dismiss CC’s petition for reconsideration because CC had not made any new arguments. On May 15, 2007, CC replied to PenAir that it had in fact made new arguments. On May 15, 2007, the United States Postal Service moved for the Department to dismiss CC’s petition because it had not raised any new information.

We grant the motion of the Consolidated to submit an unauthorized document, and upon review, we deny their petition for reconsideration.

By: Andrew Steinberg



Order 2007-9-9
OST-2003-14694

Issued and Served September 12, 2007

Bush Quarterly Fuel Cost Adjustments

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on September 29, 2007, and reflect fuel expenses for the quarter ended June 30, 2007.

Service Class Linehaul YE 6-30-06 Fuel YE 6-30-06 Fuel QE 3-31-07 Fuel QE 6-30-07 Current Linehaul New Linehaul
Part 121 $5.7896 $1.3160 $1.1865 $1.2621 $5.6601 $5.7357
Part 135 $10.9367 $2.5328 $2.8978 $2.9186 $11.3018 $11.3225
Seaplane $26.4177 $4.4710 $4.9244 $5.3045 $26.8711 $27.2512

By: Todd Homan



November 16, 2007

Petition of Pacific Airways, PM Air d/b/a Promech and Venture Travel d/b/a Taquan Air Service for Enforcement of Mail Rate Provisions | Word

The undersigned carriers respectfully request that the Department reiterate its rate application standards and order the Postal Service to pay the correct rates for transportation of mail by seaplane effective on the dates at each point where only water landings were available..  Air carriers have met their burden of proof in showing both the applicable laws and orders, as well as attempts to work with the Postal Service to obtain the correct rate.  The Department has repeatedly ordered the Postal Service to pay the applicable rate.  The Postal Service should pay the appropriate rate automatically.  Competitive pressure or duress should not affect the rate paid for mail transportation.  Indeed, it is the burden of the Postal Service to assure that it is paying the correct rate, and not the burden of the carriers to continuously monitor Postal Service practice for compliance.

Counsel: Steve Maontanus and Mike Rhoads for Pacific Airways / Marcus Sessons for PM Air / Brian Salazar for Venture Travel



Order 2007-12-3
OST-2003-14694

Issued and Served December 7, 2007

Bush Quarterly Fuel Cost Adjustments

The new rates are to be effective on December 29, 2007, and reflect fuel expenses for the quarter ended September 30, 2007.

Service Class Linehaul, YE 6-30-06 Fuel, YE 6-30-06 Fuel, QE 6-30-07 Fuel, QE 9-30-07 Current Linehaul New Linehaul
Part 121 $5.7896 $1.3160 $1.2621 $1.1911 $5.7357 $5.6647
Part 135 $10.9367 $2.5328 $2.9186 $2.9922 $11.3225 $11.3961
Seaplane $26.4177 $4.4710 $5.3045 $4.7198 $27.2512 $26.6665

By: Todd Homan



December 17, 2007

USPS Response to Petition for Enforcement of Mail Rate Provisions

The Postal Service respectfully submits that section 5402(h)(6)(d) does not require the paying of the seaplane rate with regard to seaplane service at Craig because the condition that "only water landings are available" as to Craig is not met by reason of the availability of the nearby Klawock Airport, and requests that the seaplane carrier's petition be dismissed.

Counsel: USPS, William Jones, william.j.jones@usps.gov



December 18, 2007

Reply of Pacific Airways, PM Air d/b/a Promech and Venture Travel d/b/a Taquan Air Service to the Response of USPS | Word

It is the responsibility of the Postal Service, under 39 U.S.C. 5402, to pay the accurate and appropriate rate for transportation of mail.  If there is a question about what the rate should be, particularly after a change in type of air service, it is the responsibility of the Postal Service to inquire of the rate making authority.  In this case, at the instigation of air carriers, the rate making authority provided specific interpretation and direction to the Postal Service.  Despite that, the Postal Service continues to pay the improper rate for transportation of mail to a point where only water landings are available.  The Postal Service should not be playing “catch me if you can” with its vendors; waiting until the carriers catch the errors themselves and complain to the Department.  This is not a new or unique practice of the Postal Service, and the Department has had to remind it several times before about the clearly stated standards of the rates.  At this point something stronger than a reminder is probably appropriate, but the Ketchikan Carriers simply want to be made whole for their actual costs incurred since the termination of wheel plane service to Klawock in 2006.

The Ketchikan Carriers respectfully request the Department to order the Postal Service to pay the designated seaplane rates for transportation of all mail to airports (seaplane bases) where only water landings are available.  Clearly the point Craig, AK falls four-square within that definition.  Payment of the seaplane rate must be effective the first day after L.A.B. discontinued its wheel plane service to Prince of Wales Island.  Furthermore, the Postal Service mentions but does not dispute the fact that all mail tender to seaplane carriers at Ketchikan is dispatched from the in-town Ketchikan Post Office and not on Gravina Island.  The appropriate mileage for all waterfront Ketchikan service should be computed from the point “WFB."

By: MTC, Hank Myers



Order 2007-12-19
OST-2003-14694

Issued and Served December 20, 2007

Show Cause Order Proposing Updated Mail Rates

By this order, the Department directs the parties to show cause why the proposed Intra-Alaska bush service mail rates set forth below should not be made final. The rates that are currently in effect were tentatively set by Order 2007-1-6, made final by Order 2007-2-7, and extended until the next annual update by Order 2007-4-25.

Until Order 2000-4-1 found there to be serious flaws with the update methodology then in effect, we used regression analysis to determine a long-term inflation trend in unit costs and applied that trend to the most recent year's actual unit costs to determine prospective bush mail rates. As discussed in Order 2007-6-17, Petition for Reconsideration, we deferred reinstituting a long-term inflation update at that time when we had only four years of data, but indicated that we would look closely at the issue when we next updated the rate. The rates developed in Attachments A, B, C, and D tentatively apply a long-term trend based on five years of data to the Part 121, Part 135, Seaplane, and Terminal rates, respectively, using the years ended June 30, 2003, through June 30, 2007. The costs for the year ended June 30, 2007, which we have developed here, reflect the same costing methodology used in recent orders, but merely use more recent data, except as noted below. All of the regressions exclude changes in fuel costs, which are accounted for separately on a quarterly basis.

By: Michael Reynolds



Order 2008-1-10
OST-2003-14694

Issued and Served January 15, 2008

Final Order

It has also come to our attention that there was a minor technical error in the Seaplane linehaul rate. Order 2007-12-19, Appendix B projected 3.70 percent annual increase in non-fuel linehaul costs, but Appendix A used 3.79 percent. We will correct the rates accordingly.

P-121, Per TRM P-135, Per RTM Seaplane, Per RTM Terminal, Per ton Enplaned
Order 2007-12-19 $4.9596 $11.1151 $29.3356 $678.36
Less Fuel, Order 2007-9-9 $1.2621 $2.9186 $5.3045 NA
Plus Fuel, Order 2007-12-3 $1.911 $2.9922 $4.7198 NA
Less Technical Adjustment NA NA $0.0318 NA
Final $4.8886 $11.1887 $28.7191 $678.36

By: Michael Reynolds



Order 2008-3-28
OST-2003-14694

Issued and Served March 26, 2008

Bush Quarterly Fuel Cost Adjustments

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on March 29, 2008, and reflect fuel expenses for the quarter ended December 31, 2007.

By: Todd Homan



Order 2008-4-1
OST-2003-14694

Issued and Served April 1, 2008

Declaratory Order

By this order the Department accepts the joint petition of three Ketchikan-based carriers – Pacific Airways, Inc., PM Air, LLC, d/b/a Promech, and Venture Travel, LLC, d/b/a Taquan Air Service – that we decide whether the Postal Service should pay the seaplane rate for service at Craig, Alaska (None of the three carriers operate wheeled aircraft). The order states our view of the statute that only water landings are available at Craig. We expect this Declaratory Order to enable the parties to resolve similar disputes without appeals to the Department.

By: Michael Reynolds



May 16, 2008

Re: Letter from Senator Ted Stevens on Behalf of Pacific Airways, Promech and Taquan Air Service

I have received a request for assistance from the three Ketchikan-based air carriers, Pacific Airways, Inc., PM Air, LLC, d/b/a Promech, and Venture Travel, LLC, d/b/a Taquan Air Service, who were parties to the joint petition resulting in D.O.T. Order 2008-4-1. The carriers seek clarification of whether
there is an intended applicable date of D.O.T. Order 2008-4-1. The carriers also seek further gUidance on how the payment would be affected by the differing points of operation for the types of service being offered.

For you information, I have attached a copy of a letter from Steven Deaton, U.S. Postal Service, to Ken Dole, PM Air, LLC. I would appreciate any information that you can provide me so that I may respond to the carriers on this issue. Please direct any questions you may have in regard to this inquiry to Scott Leathard on my staff.

By: Senator Ted Stevens



May 20, 2008

Re: Letter from Michael Reynolds to Senator Ted Stevens

Thank you for your May 16 letter regarding applicability of the seaplane rate for three Ketchikan-based carriers and the opportunity to explain the meaning of Order 2008-4-1. A copy of this letter will be served upon Postal Service managers and the three carriers so that everyone has a clear understanding of the Order.

All parties, including the Postal Service, are required to be in continuous compliance with Department rules, regulations and orders. As we said in that order, in markets "where only seaplane service is possible... the Postal Service must pay the seaplane rate." Since LAB Flying Service, Inc. discontinued its wheel plane service on October 13, 2006, the correct rate for the transportation of mail to Craig and Kiawock from Ketchikan has been the seaplane rate because only water landings have been available. There is no question that October 13, 2006, is the effective date of the seaplane rate, or that the Postal Service's requirement is to pay the seaplane rate from that date forward. Historically the Postal Service has made required retroactive payments promptly.

The calculation of distances used to determine the linehaul portion of the bush rate is equally clear. At a number of communities, there is more than one airport. In such cases, the correct distance is nonstop great circle miles from the point where the mail is actually loaded onto the scheduled flight to the point where the mail is unloaded. In the case of an equalized rate, the rate and distance are those of the rate and distance to which the carrier is equalizing. We compute mail rates based on the origin and destination of the mail flight. If the mail is loaded at the waterfront base (WFB), then that is the point we use to calculate and set rates. The Postal Service must use the same methodology to ensure that the carriers are accurately compensated. This method of determining distances has been used consistently since the intra-Alaska bush mail rate case was, initiated in 1982.

By: Michael Reynolds



June 9, 2008

Email Message - Clarification Letter from Hank Myers

I have reviewed the Campbell letter and want to let you know what the carriers have heard. Steve Deaton apparently was out of town until the end of last week, and requests for information by email and writing had gone unanswered. Mr. Deaton has promised to provide a written answer to the carriers inquiries. According the principal owner of Promech, who spoke to Steve at length, Mr. Deaton says that carriers will be paid for mail between Ketchikan and Craig at the seaplane rate. Steve continued to insist the Klawock has an airport available so is properly to be paid at the wheel rate. Steve also says that it is the Postal Service that determines where the mail is to be dispatched, and he insists that the mail should be loaded at KTN on Gravina Island. He did not mention the incorrect use of the wheel rate to Meyers Chuck (WMK) which does not have a runway. Most disturbing is the statement that the payment will be made "sometime in July". Given that the carriers presented full claims forms with payments specified and correct rates listed weeks ago, there is no reason for further delay.

In one way, the Postal Service seems to be admitting now issues from 2005. My. Deaton's agreement that mail at Craig should be paid at the seaplane rate, but not Klawock, is in accordance with Order 2005-1-18 in which the Department stated that the Postal Service could route mail for both Craig and Klawock to Klawock as long as the Postal Service provided surface transportation to Craig. Alternatively, if mail is dispatched to Craig (a point where only water landings were available), then the Postal Service must pay the seaplane rate (page 17 of Order, last sentence under Issue 4). Once a written explanation from Mr. Deaton is received, a more specific response will be undertaken.

By: Hank Myers



June 6, 2008

Email Message - USPS Letter to DOT

The Postal Service has already made initial pay adjustments for the postal system errors involving this market since April 1, 2008. The remaining pay adjustments are being reviewed and it is estimated that payments to the air carriers will occur during the month of July due to programming requirements needed for processing.

Another matter touched on in the response to Senator Stevens was the appropriate mileage distances in the Ketchikan - Craig market. While the Postal Service does not dispute the mileages identified by the Department for the Ketchikan waterfront base and the airport, we don't believe that payment is due from the waterfront base for that prior service. Contrary to representations as to the service point in the recent proceeding, each carrier had consistently represented in its filings with the OAG and the Postal Service that its service was from KTN. Those filings are a component of "scheduled service" (39 USC 5402(b)(16)) which provides each carrier's entitlement to the tender of mail under the statutory scheme. Accordingly, the Postal Service believes it wholly appropriate for the purpose of the retroactive payments that the carriers seek that the payment be measured from KTN, the point of origin reflected in the carriers' filings, and also the designated postal origin for Ketchikan as provided in the 508 Handbook.

By: USPS, Tina Pruitt Campbell


OST-2003-14694
OST-2003-14695

June 23, 2008

Rate Equalization Notice of Grant Aviation

Grant Aviation, Inc., an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect for other air carriers or combination of other air carriers between BETHEL, ALASKA and QUINHAGAK, ALASKA, effective June 17, 2008.

Grant Aviation, Inc. requests equitable tender of mail in this market pursuant to the practices and procedures of the Department of Transportation and the United States Postal Service.

By: Grant Aviation, Bruce McGlasson



July 2, 2008

Re: DOT Position on Seaplane Rates

As you know, the Department first established a seaplane rate under RSIA by Order 2004-3-34, March 31, 2004. Order 2008-4-1 does not prescribe a retroactive rate for service to Craig and Klawock; rather the Postal Service simply paid the wrong rates here when only water landings were available.

At this point I believe the position of the Department on the application of seaplane rates and the correct calculation of linehaul distances, as reflected in Order 2008-4-1 and the Department's letter to Senator Stevens dated May 21, 2008, is abundantly clear. I believe Ms. Campbell's email reflects acceptance of the Department's position, as well as its sole authority to set intra-Alaska mail rates. Given this commitment by the Postal Service to correct past underpayments, there is nothing more the Department can do administratively.

By: Dennis DeVany



July 9, 2008

Equalization Notice of Frontier Flying Service | Word

Arctic Transportation Services Inc. (7S), an Alaskan incorporated carrier currently authorized to transport United States Mail, hereby gives notice of its’ intent to equalize its’ mail rates to the lowest authorized or agreed rates legally in effect between Unalakleet and St. Michael, Alaska with the lower levels paid or to be paid to other carriers or combinations of other carriers in these markets effective July 9, 2008.

By: Arctic Transportation Services, Michael Brown



July 17, 2008

Support of Frontier Flying Service and Hageland Aviation Services for Mainline Carrier's Petition to Have Fuel Rate Adjustments on a Monthly Basis Rather than a Quarterly Basis

Frontier Flying Service, Inc and Hageland Aviation Services, Inc., both doing business as Frontier AlaskA, wholeheartedly support the request by the mainline carriers to do monthly cost adjustments to the mainline mail rate effective July 1st, 2008. More specifically we feel the arguments presented by the mainline carriers apply equally to the Part 121 rate and even more dramatically to the Bush rate.

Frontier AlaskA respectfully requests that fuel updates for the Bush 121 and Bush rates be made monthly to the intra-Alaska fuel rates effective July 1, 2008.

By: Frontier Alaska, Bob Hajdukovich


OST-2003-14694 - Mainline Rates


July 9, 2008

Petition of Alaska Airlines, Everts Air Cargo, Lynden Air Cargo and Northern Air Cargo

Alaska Airlines, Everts Air Cargo, Lynden Air Cargo and Northern Air Cargo respectfully PETITION the Department of Transportation to increase the frequency of fuel cost updates, as applied to the mainline mail rates applicable to intra-Alaska mainline mail carriage, from quarterly to monthly beginning with July 2008 data.

Even though administratively burdensome, due to the hyper-inflationary cost of fuel, the Petitioners hereby commit to filing data pertinent to the fuel updates by the 15th day following the end of the month so that the resulting rate can be applied to the next following month (shortening the 45 day lag to 15 days), i.e. July's data reported by August 15 (or next business day if the 15th falls on a weekend or a holiday) and the resulting rate applied to October's mail (the first Saturday of the month to coincide with the Postal Service's pay week). This means that the Department will then have approximately 45 days to calculate the new fuel portion of the rate before they are made effective. The other half of the administrative burden falls on the Postal Service's need to input rates into their payment system. Since there is a four week lag from the effective date of a rate to the actual first payment date, we must assume that that is sufficient time for the Postal Service to update their data base.

By: Joint Carriers


July 18, 2008

United States Postal Service Response to Mainline Carriers Petition to Increase Frequency of Fuel Cost Updates

While the Postal Service is not in a position to evaluate future trends in the oil market, there is at least some possibility that current rates may be a temporary phenomenon. Since that possibility exists, the Department needs to take care that any accommodation may be appropriately reversible if and when market conditions change, in a manner such that the Postal Service and its rate-payers are not harmed in the process.

Given these concerns and considering the Carriers' financial strain, the Postal Service would understand if the Department felt a temporary adjustment to the current fuel update schedule was necessary. However, the Postal Service does not believe this schedule could be viable in the long run as it places additional burdens on the Department and the Postal Service to maintain monthly updates.

Counsel: USPS, William Jones



OST-2003-14695 - Mainline
OST-2003-14694 - Bush

July 23, 2008

Answer and Petition of Peninsula Airways

It is beyond dispute that the cost of oil and aircraft fuel has increased exponentially. The Mainline Carrier Petition and Answer of Frontier describe the extraordinary increase in the cost of aircraft fuel. PenAir points out that the cost of fuel is even higher in Alaska than in the lower-48 and higher yet at most Bush locations. PenAir - Alaska's largest commuter airline providing scheduled service to dozens of communities throughout Southwest Alaska and the Aleutian Islands - and other Bush operators are certainly affected by the high cost of aircraft fuel as much as, if not more than, mainline carriers. The impact on PenAir of this unprecedented escalation in aircraft fuel costs over the last several months has been tremendous. The current quarterly adjustment as a practical matter results in a six-month lag in the adjustment of fuel costs. This is unacceptable under the circumstances in which fuel costs are so volatile and substantially exacerbates the burden on PenAir and other Bush operators of these ever-escalating fuel costs. More closely aligning the rates to current available cost data and market conditions is an important regulatory step the Department should take immediately to help mitigate this cost burden.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999



OST-2003-14695 - Mainline
OST-2003-14694 - Bush

August 26, 2008

Response of Peninsula Airways to Objection

PenAir strongly believes that fuel cost adjustments should be adopted. PenAir would prefer accelerated on‑going fuel cost adjustments to a one‑time update, because on‑going adjustments would more closely align the mail rates to prevailing fuel costs and market conditions. PenAir recommends that the Department make the fuel costs adjustments bi‑monthly instead of quarterly. Making the adjustment every two months instead of quarterly would reduce the time period between adjustments but mitigate the administrative burden that might otherwise result from having monthly adjustments. 

However, if the Department is not prepared to increase the frequency of fuel cost adjustments, an one‑time update is better than no adjustment at all. Accordingly, although PenAir would prefer bi‑monthly adjustments, in the alternative, PenAir urges the Department to make an ad hoc adjustment based on the difference between the average fuel costs for the first quarter of 2008 and the average fuel costs for the second quarter of 2008 (i.e. including April and May data).

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999



OST-2003-14694
OST-2003-14695

August 27, 2008

Re: Postal Service Response to Penninsula Air's Response to Order 2008-8-2

First, the Postal Service must strongly disagree with Pen Air's statement that the "underlying principle behind ... the petitions ...was not disputed by the Postal Service." In fact, from the beginning, the Postal Service has objected to the mainline carriers' proposed methodology, which eliminated April and May 2008 data from the calculation of the adjustment. It is correct to state, however, that the Postal Service was supportive of increasing the frequency of fuel adjustments based on the full chronological dataset.

Second, in this response, PenAir proposes a bimonthly frequency for fuel adjustments, but offers the "next-best" alternative of a one-time adjustment that includes the April and May 2008 data. The Postal Service is pleased that PenAir has acknowledged that all data should be included - "the average fuel costs for the second quarter of 2008 (i.e. including April and May data)". It is clearly the intention of both the Postal Service and PenAir to maintain the integrity of the fuel adjustment calculation .. However, if the Department were to accept PenAir's proposal of bimonthly adjustments, the Postal Service will be adamant that no data be excluded from the adjustment calculation so that the integrity of the adjustment process is maintained.

Therefore, the Postal Service feels it necessary to reiterate our willingness to accommodate any update frequency the Department wishes to establish, whether that be monthly or bimonthly, but we will insist that any fuel adjustment is inclusive of all the carriers' relevant data for the interval selected.

Counsel: USPS, William Jones



Order 2008-9-2
OST-2003-14695 - Mainline
OST-2003-14694 - Bush

Issued and Served September 2, 2008

Final Quarterly Mainline and Bush Fuel Update Order

Upon review of the public comments, the Department will not make final its fuel-update proposal in Order 2008-8-2. That order tentatively made a one-time adjustment to mainline' Alaska mail rates to reflect fuel costs for the month of June 2008, the most recent monthly fuel costs at that time. Instead, we will continue and expedite our regular quarterly fuel updates, with the first update to be effective September 6.

The Postal Service has stated that it is not opposing increasing the update frequency for mail rates, so long as no periods of data are excluded, i.e., April and May, the two months of relatively low monthly fuel costs. Both PenAir and the Postal Service have said that bimonthly updates that accelerate the adjustment process are acceptable. However, bimonthly adjustment(s) are not practical. Fuel costs were relatively low in April and May, and spiked in June through mid-July; ad hoc bi-monthly adjustments would have the dual problems of actually delaying the recognition of June's high fuel costs, and imposing a special reporting burden on the carriers.

However, we can accommodate the goals of both the Postal Service and the carriers. Our procedures typically provide for a one-quarter lag between the end of the quarterly reporting period and the effectiveness of the next quarterly update. This one-quarter lag recognizes the time the carriers need to compile and submit the data,'* and the Department's need to review the data, and write and issue an order. In order to meet the needs of the Postal Service, i.e., not to exclude any months of data, and the carriers' needs to have more responsive recognition of changes in fuel costs, we have decided, until further notice, to shorten the lag-time between the reporting of the data and the new rates' effectiveness from three months to two. Thus, the second quarter fuel adjustment will be effective on September 6 instead of on or about October 1. We note that this shortened procedural timeline makes it all the more important that carriers' submit accurate data on a very timely basis. Order 2008-8-2 indicated we would use the mainline fuel-surcharge methodology as a template for the bush, and we will do that here.

Based on all of the above, we will not make final the proposal in the show cause order. However, we will make quarterly mainline and bush fuel adjustments, based on data submitted by the carriers for the quarter ended June 30, 2008, effective September 6.

By: Michael Reynolds



Order 2008-10-14
OST-2003-14695 - Mainline
OST-2003-14694 - Bush

Issued and Served October 16, 2008

Show Cause Order Proposing Updated Mail Rates

By this order, the Department directs the parties to show cause why the proposed Intra-Alaska bush service mail rates set forth below should not be made final. The rates that are currently in effect were tentatively set by Order 2007-12-19, made final by Order 2008-1-10, and updated for changes in quarterly fuel prices most recently by Order 2008-9-2.

P-121, Per RTM
P-135, per RTM
Seaplane, per RTM
Terminal, Per Ton Enplaned
DOT Proposed $6.1295 $11.6658 $33.8780 $707.84
Current, Order 2008-9-2 $5.5519 $11.5131 $30.0222 $678.36
Percentage Change 10.40 1.33 12.84 4.35

Based on average eligible stage lengths of 344 miles for the Part 121 operators, 71 for the Part 135 operators, and 37 miles for the Seaplane operators, these changes would produce average changes in mail rate for each class as follows: Part 121, 8.82 percent; Part 135, 2.70 percent; and Seaplane, 9.62 percent.

By: Michael Reynolds



OST-2003-14695 - Mainline
OST-2003-14694 - Bush

November 3, 2008

Email Message - Request for Extension to File Answers

I request an extension for the time to file Answers to Order 2008-10-14, a Show Cause Order submitting mail rates. Due to the complexity of the analysis and a number of other cases which require filings on or about November 5, 2008, I ask that the response date be moved to November 12, 2008. This one week extension will not harm any party, nor interfere with the timely processing of the pending rates in this docket. Fuel expenses for the third quarter of 2008 are not due until November 10, and the numbers will require internal analysis before being released for use in the mail rates.

Counsel: MTC, Hank Myers



November 5, 2008

Re: DOT Granting Extension

By Order 2008-10-14, served October 16, 2008, the Department requested comments regarding bush mail rates by November 5. On November 3 we received a request for a one-week extension of the deadline, to November 12, by the Consolidated Carriers. We hereby grant that extension.

By: Dennis DeVany



November 10, 2008

Objection of Peninsula Airways to Show Cause Order 2008-10-14 - Bookmarked

PenAir agrees with the Department's conclusion to continue its policy of applying an inflation factor to reflect increases in airline costs of providing mail service. However, PenAir respectfully disagrees with the time-frame used in the Show Cause Order to compute the inflation factor. The Department used FY June 30, 2003 as the "base-year" from which the inflation factor is projected going forward. However, FY 2003 is neither a reasonable nor rational base year from which to calculate inflation of bush carrier costs, due to significant statutory, regulatory and market changes that occurred after 2003, which were reflected in bush carrier costs beginning in 2005.

In conclusion, the Department should use 2005 as the base year, and exclude data for 2003 and 2004 from the calculation of the intra-Alaska bush mail rates. If it determines to use 2003 as the base year, then the Department should revise its regression model from an exponential function to a quadratic function, which as shown above, more accurately takes into account the real-world conditions that currently exist.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999


November 12, 2008

Comments of The United States Postal Service on Show Cause Order 2008-10-14 Proposing Updated Mail Rates

As to the substance of the rates proposed, the Postal Service has no comment other than to note that the footnote to the rate comparison chart on page one of the Order recites the same information contained in the last bush rate update, Order 2007-12-19. The Postal Service appreciates that the Department has requested comments regarding our request that the minimum period between the service of rates and their effective date be seven days instead of three. An extension will allow new rates to be input into our payment system with enough lead time that the rates will be active when the mail transportation to which they apply first occurs.

The Postal Service would prefer for the period for objections to be maintained at 20 days. The 20-day period provides sufficient time for the Postal Service to evaluate the new rates and craft necessary responses. In order to maintain a 20-day time for objections, while not unnecessarily delaying the effective date for the new rates, we now propose that period between service of the final rate order and its effectiveness be set at five days, rather than seven. If rates are to become effective on a Saturday, as the Postal Service prefers, given a minimum seven-day period between their issuance and their effectiveness, Department would be required to issue the rates on the previous Friday, eight days before their effectiveness. Under our new proposal for a five-day period, rates to be effective on a given Saturday could be issued the immediately preceding Monday. That should allow the Department to maintain the current 20 day objection period with minimal effect on the overall schedule. We encourage the Department to adopt our new proposal for a five-day period between issuance and effectiveness while retaining the 20-day option period. The Postal Service will respond to the objection filed September 10 and any other objections received in a subsequent filing. These comments are being submitted for inclusion on both the mainline and bush dockets, and copies are being provided to the affected carriers.

Counsel: USPS, William Jones



November 12, 2008

Answer of the Consolidated Carriers to Order 2008-10-14

The Consolidated Carriers request that the Department modify two ratemaking standards to improve the accuracy of the bush mail rates and assure that the rate structure is compensatory over time. These changes increase the correlation between traffic and cost data and the resulting rate, and assure that current cost levels are estimated to the greatest accuracy possible.

To correct inherent errors in the use of the twelve months ended June 30, 2003 as the starting point for the cost trend line used to project future costs, the Carriers request the Department use a twelve month period ending no sooner than June 30, 2005. There are legal, regulatory and mathematical reasons why the use of data from the twelve months ended June 30, 2003 are entirely inappropriate to anchor a cost trend line for transportation under the Rural Service Improvement Act.

A basic tenet of insuring compensatory rate setting is to compare the rates set prospectively with the experienced costs for the applicable year. We find that the current ratemaking methodology is deficient as it inaccurately predicts cost trends for non-fuel expenses because it uses a base year which shares no cost or tender characteristics with the periods after full implementation of the Rural Service Improvement Act. While the mainline carriers were unaffected by tender changes, and have had a consistent set of eligible carriers for many years, both the tender methodology and the number of eligible carriers has changed radically for bush carriers since 2004. The full implementation of the R.S.I.A. took place at the very end of 2004, and calendar year 2005 represents the first twelve month period under all provisions of the Act. The efficiency results solely from the application of the Act continued until the end of 2005, but nearly all of the improvement had occurred by the end of June, 2005. Given that the Department uses periods ending on June 30 to set bush mail rates, the most accurate period to reflect the implementation of the terms of the R.S.I.A. is the twelve months ended no sooner than June 30, 2005.

Counsel: MTC, Hank Myers, 425-641-8243



OST-2003-14694 - Bush Rates
OST-2003-14695 - Mainline Rates

November 18, 2008

Comments of United States Postal Service

The Postal Service does not support any of the proposals offered in these submissions and encourages the Department to deny these requests to change the bush mail rate update methodology.

PenAir - Its first proposal would eliminate from the trend analysis data from years-ended June 30, 2003 and 2004 on the argument that those years reflect pre-RSIA conditions as opposed to the current industry trend which resulted from the legislative change. The Postal Service objects to this proposal.

PenAir's second proposal is presented as an alternative in which the functional form of the regression would be changed to better fit the data. The premise of this suggestion is unsupportable because the purpose of regression analysis is not to fit a curve to a data set, but to let the data itself establish what the relationship is between variables.

Consolidated Carriers - The Carriers also proposed two changes to the Department's update methodology. The first seems to be a replication of PenAir's proposal, in which they use PenAir's proposed inflation rates in their final rate calculation. The Postal Service objects to this proposal for the same reasons as described above.

The second proposal would change the fuel update methodology from the current quarterly update based on the most recent available data to instituting a new regression to develop a fuel trend using the most recent nine quarters of data to predict future fuel costs. Such an approach is problematic because fuel costs are inherently unpredictable.

Counsel: USPS, William Jones



OST-2003-14694 - Bush Rates
OST-2003-14695 - Mainline Rates

November 19, 2008

Motion for Leave to File and Response of Peninsula Airways

USPS's opposition to PenAir's position, while entirely predictable, fails to address, much less refute, PenAir's position that use of FY 2003 as a base factor makes no sense in light of the fundamental regulatory and economic changes that took place beginning in 2005‑changes which make use of FY 2003 irrational and unreasonable.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999



Order 2008-11-15
OST-2003-14694

Issued and Served November 20, 2008

Bush Quarterly Fuel Adjustment

Order 2008-1-10 established final annual rates for Part 121, Part 135, and Seaplane classes of service, but provided for the regular quarterly update of the rates for changes in fuel costs. This order is updating those rates to reflect fuel costs for the quarter ended September 30, 2008, the most recent data available. 

Order 2008-9-2 expedited (by one month) the recognition of quarterly fuel expenses in view of the spike in fuel prices at the time. The rate in that order was based on data for quarter ended June 30, 2008, and was effective September 6. That order indicated we would continue to expedite the quarterly fuel adjustment until further notice. We anticipate reverting to our regular one-quarter lag between the end of the reporting period and the effective date of the rate.' In other words, the next quarterly fuel update, based on data for the quarter ended December 31, 2008, would be effective on or about April 1, 2009. The table below shows the current and new fuel rates and overall linehaul rates and costs. 

Order 2008-9-2 noted that the then customary one-quarter lag between the end of the reporting period recognized the 40-days provided the carriers to compile and submit data, and the Department's need to review those data, and write and issue an order. It also noted that there was almost always at least one carrier that was either late in submitting its data or that had submitted erroneous data that needed to be corrected.

By: Todd Homan



Order 2008-12-28
OST-2003-14694

Issued and Served December 29, 2008

Order Setting Final Intra-Alaska Bush Mail Rates

By this order, we adjust the annual bush mail rates tentatively set by Order 2008-10-14, October 16, 2008, by excluding the first year, i.e., the year ended June 30, 2003, from the calculation of the long-term trend. Data from that year are anomalous because the Rural Service Improvement Act did not permit the United States Postal Service to inaugurate changes in mail tender contemplated by RSIA until the following year. The table below shows the final rates we are setting, as well as the percentage increases from the rates tentatively set by Order 2008-10-14, as adjusted by intervening quarterly fuel updates.

Order 2008-10-14 included fuel costs for the quarter ended June 30, 2008, as detailed in Order 2008-9-2. This order includes fuel costs for the quarter ended September 30, 2008, as detailed in Order 2008-11-15. To high light the effect of the methodological change from Order 2008-10-14, we have adjusted the rates in that order for the more recent fuel update.

Service Class
Fuel Adjusted
Order 2008-10-14
Final Rates
Percentage Change
Part 121 $5.9555 $6.0623 1.79
Part 135 $12.2554 $12.3700 0.94
Seaplane $34.3287 $35.4752 3.34
Terminal $678.36 $730.57 7.70

By: Michael Reynolds



Order 2009-3-17
OST-2003-14694

Issued and Served March 23, 2009

Bush Quarterly Fuel Adjustment

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on March 28, 2009, and reflect fuel expenses for the quarter ended December 31, 2008.

Service Class
Current Rates, Order 2008-12-28
Fuel, QE 9-30-08, Order 2008-11-15
Fuel, QE 12-31-08, New Data
New Rates
Part 121 $6.0623 $1.6804 $1.4811 $5.8630
Part 135 $12.3700 $3.9062 $3.4316 $11.8954
Seaplane $35.4752 $6.4736 $7.2735 $36.2751
Terminal $730.57 NA NA $730.57

By: Todd Homan



Order 2009-6-12
OST-2003-14694

Issued and Served June 12, 2009

Bush Quarterly Fuel Adjustment

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on July 4, 2009, and reflect fuel expenses for the quarter ended March 31, 2009.

Order 2008-12-28 established final annual rates for Part 121, Part 135, and Seaplane classes of service, but provided for the regular quarterly update of the rates for changes in fuel costs. This order is updating those rates to reflect fuel costs for the quarter ended March 31, 2009, the most recent data available.

Order 2008-9-2 expedited (by one month) the recognition of quarterly fuel expenses in view of the spike in fuel prices at the time. The rate in that order was based on data for the quarter ended June 30, 2008, and was effective September 6. That order indicated we would continue to expedite the quarterly fuel adjustment until further notice. Order 2009-3-17 reverted to our regular one-quarter lag between the end of the reporting period and the effective date of the rate. Thus, the next quarterly fuel update, based on data for the quarter ended June 30, 2009, will be effective on or about October 1, 2009. The terminal portion of the mail rate is unchanged from that in Order 2008-12-28, but we have included those numbers for the sake of convenience.

Service Class
Current Rates, Order 2009-3-17
Fuel, QE 12-31-08 Order 2009-3-17
Fuel, QE 3-31-09 New Data
New Rates
Part 121 $5.8630 $1.4811 $1.3154 $5.6973
Part 135 $11.8954 $3.4316 $3.3879 $11.8517
Seaplane $36.2751 $7.2735 $6.6695 $35.6711
Terminal $730.57 NA NA $730.57

By: Todd Homan



Order 2009-9-12
OST-2003-14694

Issued and Served September 21, 2009

Bush Quarterly Fuel Adjustment

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on September 26, 2009, and reflect fuel expenses for the quarter ended June 30, 2009.

Service Class
Current Rates, Order 2009-6-12
Fuel, QE 3-31-09, Order 2009-6-12
Fuel, QE 6-30-09, New Data
New Rates
Part 121 $5.6973 $1.3154 $1.2506 $5.6325
Part 135 $11.8517 $3.3879 $3.4865 $11.9503
Seaplane $35.6711 $6.6695 $5.0959 $34.0975
Terminal $730.57 N/A N/A $730.57

By: Todd Homan



Order 2009-11-2
OST-2003-14694

Issued and Served November 3, 2009

Show Cause Order Proposing Updated Mail Rates

By this order, the Department directs all interested parties to show cause why the proposed Intra-Alaska bush service mail rates set forth below should not be made final. The rates that are currently in effect were tentatively set by Order 2008-10-14, adjusted and made final by Order 2008-12-28, and updated for changes in quarterly fuel prices most recently by Order 2009-9-12.

P-121, per RTM P-135, per RTM Seaplane, per RTM Terminal, per Ton Enplaned
DOT Proposed $5.6465 $13.1535 $34.5014 $745.01
Current,
Order 2009-9-12
$5.6325 $11.9503 $34.0975 $730.57
Percentage Increase 0.25 10.07 1.18 1.98

Based on average eligible stage lengths of 327 miles for the Part 121 operators, 70 for the Part 135 operators, and 37 miles for the Seaplane operators, these changes would produce increases in mails rate for each class as follows: Part 121, 0.74 percent; Part 135, 6.30 percent; and Seaplane, 1.47 percent.

By: Susan Kurland



Order 2009-11-19
OST-2003-14694

Issued and Served November 24, 2009

Final Order

By Order 2009-11-2, November 3, 2009, we directed all interested persons to show cause within 20 days of that order’s service date why we should not make the terminal and non-fuel line-haul rates tentatively set by that order final. We received no objections and by this order we make those rates final, to be effective when we issue the next quarterly fuel update order, on or about December 31, 2009.

By: Todd Homan



Order 2009-12-13
OST-2003-14694

Issued and Served December 17, 2009

Bush Quarterly Fuel Adjustment

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on January 2, 2010, and reflect fuel expenses for the quarter ended September 30, 2009.

Service Class Order 2009-11-2 Fuel, QE 6-30-09 Order 2009-9-12 Fuel, QE 9-30-09 New Data New Rates
Part 121 $5.6465 $1.2506 $1.2494 $5.6453
Part 135 $13.1535 $3.4865 $3.1374 $12.8044
Seaplane $34.5014 $5.0959 $5.7500 $35.1555
Terminal $745.01 NA NA $745.01

By: Todd Homan



Order 2010-3-18
OST-2003-14694

Issued and Served March 15, 2010

Bush Quarterly Fuel Adjustment

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on April 3, 2010, and reflect fuel expenses for the quarter ended December 31, 2009:

Service Class Order 2009-11-2 Fuel, QE 9-30-09
Order 2009-12-13
Fuel, QE 12-31-09
New Data
New Rates
Part 121 $5.6465 $1.2494 $1.2101 $5.6072
Part 135 $13.1535 $3.1374 $3.4621 $13.4782
Seaplane $34.5014 $5.7500 $5.3258 $34.0772
Terminal $745.01 N/A N/A $745.01

By: Todd Homan



Order 2010-7-3
OST-2003-14694

Issued and Served July 2, 2010

Bush Quarterly Fuel Adjustment

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on July 10, 2010, and reflect fuel expenses for the quarter ended March 31, 2010.

Service Class
Order 2009-11-2
Fuel, QE 12-31-09 Order 2010-3-18
Fuel, QE 3-31-10 New Data
New Rates
Part 121 $5.6465 $1.2101 $1.1326 $5.5690
Part 135 $13.1535 $3.4621 $3.2007 $12.8921
Seaplane $34.5014 $5.3528 $6.6279 $35.8035
Terminal $745.01 NA NA $745.01

By: Todd Homan



Order 2010-9-24
OST-2003-14694

Issued and Served September 22, 2010

Bush Quarterly Fuel Adjustment

By this order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates to reflect the most recent quarterly fuel costs. The new rates are to be effective on October 2, 2010, and reflect fuel expenses for the quarter ended June 30, 2010.

Service Class Order 2009-11-2 Fuel, QE 3-31-09 Order 2010-7-3 Fuel, QE 6-30-10 New Data New Rates
Part 121 $5.6465 $1.1326 $1.3854 $5.8993
Part 135 $13.1535 $3.2007 $3.3031 $13.2559
Seaplane $34.5014 $6.6279 $5.5450 $33.4185
Terminal $745.01 NA NA NA

By: Todd Homan



September 29, 2010

USPS Petition for Review of Revised Bush Service Mail Rates

The Postal Service has reviewed Show Cause Order 2010-9-24 and hereby petitions for its review. The occasion for this request is the significant variance in PenAir's reported freight RTMs as compared to those of the previous quarter, (50,600 vice 163,562). That difference drives a 22.32% increase in the fuel adjustment set to be effective October 2. When contacted, PenAir claimed unfamiliarity with the discrepancy, which further suggests that the figure is incorrect. All of this clearly warrants a brief postponement of the Order's effective date until the Department can resolve the matter of the data's accuracy with the carrier, since otherwise there is no mechanism by which an erroneous windfall can be recouped.

By: USPS, William Jones



October 7, 2010

Answer of Peninsula Airways to Petition for Review of USPS

The USPS Petition is misguided, and its request for review and postponement should be denied.

In its Petition, the USPS alleges that there is a "significant variance in PenAir's reported freight RTMs as compared to those of the previous quarter," and that variance led to a "22.32% increase in the fuel adjustment to be effective October 2." The data submitted by PenAir is accurate. The alleged "significant variance" claimed by the USPS reflects the seasonal nature of the traffic in certain Alaska markets, particularly the Dutch Harbor market. In this case, the higher RTMs were the result of the substantially increased amount of freight traffic that PenAir transports for the fishing and processing industries in Dutch Harbor during January each year. When those industries slow down in the second quarter of the year, there is a corresponding (and unsurprising) drop-off in such freight, resulting in a substantial reduction in PenAir's RTMs for that quarter. Indeed, PenAir's data for 2009 show a similar drop-off between the first and second quarters of that year. Accordingly, the USPS is wrong to question the validity of PenAir's data.

The USPS also requested that the Department postpone the effectiveness of the Order pending resolution of its Petition. This request also has no merit. First, PenAir respectfully submits that this Answer should provide the Department with sufficient information to reject the Petition expeditiously. Second, the Department's Order also made clear that the "filing of a petition for review shall not stay its effectiveness." The USPS has offered no reasonable basis to set aside the Order's clear statement on the Order's effectiveness.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999



Order 2010-10-16
OST-2003-14694

Issued and Served October 22, 2010

Order Denying Petition for Review of Staff Action

By this order, the Department is denying the Postal Service’s petition to stay the effectiveness of Order 2010-9-24, September 22, 2010, which made the regular quarterly fuel adjustment for Intra Alaska bush mail rates for Part 121, Part 135, and Seaplane classes of service.

The record substantiates PenAir’s claim that its freight RTMs regularly experience very large decreases between the first and second quarter of each year, due to the very seasonal nature of the Dutch Harbor to Anchorage market. Appendix A, which is drawn from the T-100 Segment report, shows that the individual Dutch Harbor to Anchorage market made up between 58.28 and 67.33 percent of PenAir’s scheduled freight RTMs during the first quarter in each of the last four years. Moreover, that same market is extremely seasonal, decreasing between 92.32 and 92.84 percent for the first and second quarter for each of those same four years.

The Postal Service correctly notes that it was the big decrease in PenAir’s Eligible Freight RTMs between the first and second quarter of 2010, as shown in Order 2010-9-24, which drove the 22.3 percent increase in fuel expenses. As reflected in that order, it appears anomalous that unit fuel expenses would increase so significantly between those two time periods when fuel prices were relatively stable, increasing only 4.5 percent between the first and second quarter, from $2.91 to $3.04 per gallon.

However, the annual mail rates for all linehaul elements – pilot, maintenance, aircraft, and insurance, as well as fuel -- are constructed on a rate per revenue ton mile. Similarly, the quarterly fuel updates are updated on the basis of fuel expense per RTM rather than on simple changes in fuel price per gallon. This recognizes the great deal of seasonality in Alaska operations from one quarter to the next, and the effect overall load factor – passenger, freight and mail RTMs combined divided by available ton miles -- has upon average fuel expenses. Updating the annual rate simply on fuel prices would not recognize this reality and would therefore be less accurate.

We will therefore deny the Postal Service’s petition on the merits.

By: Susan Kurland



OST-2003-14694
OST-2003-14695

November 9, 2010

Notice of Equalization of Peninsula Airways

PenAir, a certificated air carrier with authority to transport US mail within the State of Alaska, hereby provides notice of its intent to equalize its otherwise applicable rate for small aircraft between Anchorage and St. Paul to match on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter prescribed and paid to Northern Air Cargo for each category of mail it transports in this market, effective November 18, 2010.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999



Order 2010-12-28
OST-2003-14694

Issued and Served December 23, 2010

Show Cause Order Proposing Updated Mail Rates

By this order, the Department directs all interested parties to show-cause why the proposed Intra-Alaska bush service mail rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2009-11-2, made final by Order 2009-11-19, and updated for changes in quarterly fuel prices most recently by Order 2010-9-24.

Part 121, per RTM Part 135, per RTM Seaplane, per RTM Terminal, per Ton Enplaned
Proposed $6.3395 $11.8758 $32.8944 $716.16
Current, Order 2010-9-24 $5.8993 $13.2559 $33.4185 $745.01
Percentage Increase 7.46 <10.41> <1.57> <3.87>

By: Susan Kurland



Issued and Served January 11, 2011

Notice of Extension

On December 23, 2010, we directed parties to show cause why we should not make final the rates tentatively set by Order 2010-12-28, with objections due no later than 20 days (January 12) after the issuance of the order. On January 11 Mr. Hank Myers requested that we extend the deadline for objections by 15 days, i.e., through January 27.

We have decided to grant the request, as the additional amount of time is not unreasonable. All parties should file their comments no later than January 27, 2010.

By: Dennis DeVany



January 25, 2011

Comments of Ryan Air, Inc. (formerly Arctic Transportation Services)

Ryan Air, Inc., requests reconsideration for updated mail rates expressed in Order 2010-12-28 for several sound reasons. The aircraft certification for the Metro III, (Beechcraft 1900, Saab 340 or Dash 8-100, whenever considered) allows either Part 121 bush passenger or mainline operations as well as Part 135 operations, based on the sole discretion of the operator. When operational discretion is allowed, at stage lengths of 340 miles or greater for Part 121 bush or mainline operations, the data does not accurately reflect the true and real costs for Part 135 operators because higher costs exist in “Bush” hubs, rather than costs reflected in Anchorage or points served all year by water transport. Furthermore, the Anchorage to Dutch Harbor route has significant Part 121 bush passenger or (mainline service) and should be deemed an ineligible route because this operation is an anomaly from the “true” Part 135 bush operations with average stage lengths of only 72 miles, almost 5 times less than the average stage length for Part 121 operations. The high level of service provided by a Part 121 bush passenger or mainline carrier over a single route with Part 121 average stage lengths should be considered significant service and must be given special consideration.

We further ask that the Metro III, Beechcraft 1900, Dash 8-100 and Saab 340, when operated under Part 135 all cargo operations, be excluded from the mail rate making process. There is already a precedent for this, in that data for Part 135 all cargo operations of other carriers is excluded from the rate making process.

By: Ryan Air, Wilfred Ryan, 907-771-2314




January 27, 2011

Response of Consolidated Carriers to Order 2010-12-28

The Consolidated Carriers, hereby object to the mail rates set in Order 2010-12-28. The rate includes adjustments inconsistent with the clear intent of the Rural Service Improvement Act. The rates are not compensatory for the carriage of mail based on the costs of aircraft with a maximum certificated passenger capacity or nine or less (referred to in the RSIA as Part 135), or for the carriage of mail in aircraft with a maximum certificated passenger capacity of 19 or more (referred to in the RSIA as Part 121). In addition to being inconsistent with the intent of the RSIA, and not being compensatory for mail transported, the rate is inconsistent with the Department’s long established practice of establishing class rates related to the economics of operation of a particular case of carrier or aircraft. Most particularly offensive is the methodology of rate calculation with allows carriers to gain unfair competitive advantage by manipulating the operating rules of flight for particular markets. In this way, the basic economic structure of mail transportation in bush Alaska is undermined, with the effect of threatening mail service at smaller rural Alaskan villages which are entirely dependent on mail service for the delivery of life’s necessities.

By: MTC, Hank Myers, 425-830-4265


January 27, 2011

Comments of ERA Alaska

The Department should do a closer analysis of the data. PenAir Saab 340A/B and Metroliner cost data should not be allowed affect the Bush 135 mail rates unless the costs are directly related to markets that have a Bush 135 established rate. The expiration of specific exemptions for the B1900C and Metroliners obviously impacted both Frontier's and PenAir's decision to move those aircraft into Part 135 operations. It is time for the Department to look more closely at this particular impact and where those newly designated part 135 aircraft are still flying in markets whose rates are Part 121, then those costs should be excluded from any Bush 135 mail rate calculation.

By: Bob Hajdukovich, 907-266-8310


January 27, 2011

Comments of US Postal Service on Show Cause Order 2010-12-28

The Postal Service wishes to comment that it supports the reporting by air carrier(s) to the Department of mail class costs that are segmented by actual equipment used to perform service. The Postal Service also supports the Department’s use of such equipment-segmented cost data to calculate operational costs accordingly. Equipment-segmented cost data is an improved method for calculating accurate and reliable operational costs for air carriers that operate multiple types of equipment. Therefore, the Postal Service believes that such segmented reporting by carriers and the Department’s methodology should be the imposed standard practice for all air carriers with multiple equipment types, such as Frontier Alaska.

The Postal Service does not support Ryan Air, Inc.’s position of excluding specific equipment from the rate class that it legally operates within. All equipment operating under Part 121 or Part 135 bush operations should be included in the appropriate rate class established in the Department’s rate making methodology.

By: USPS, Joseph Anzalone



February 4, 2011

Motion of Peninsula Airways for an Extension of Time

Peninsula Airways, Inc. hereby requests an extension until February 22, 2011 in which to file a response to the comments submitted regarding the Department's Show Cause Order 2010-12-28.

The Consolidated Carriers, Ryan Air, Inc., and ERA/Frontier Flying Service, Inc. filed comments in opposition to the mail rates proposed in Order 2010-12-28, based in large part on the assignment of certain expenses among the different rates classes as a result of reconfigurations of certain PenAir aircraft and the corresponding expense allocations. As a carner transporting intra-Alaska mail and being the focus of the Objectors' criticisms, PenAir clearly has a substantial interest in replying to those comments, and the Department should afford PenAir adequate time to prepare an appropriate response.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999


February 7, 2011

USPS Petition for Additional Time to Review and Respond

The Postal Service requests additional time to review and potentially respond to comments to Show Cause Order 2010-12-28. The comments in opposition to the proposed bush mail rates are extensive and require additional time for an adequate review. The Postal Service requests a reasonable extension of time to review these objections and prepare a response.

The Postal Service concurs with the February 22, 2011 extension deadline proposed by Peninsula Airways, Inc. in its February 4, 2011 filing.

By: USPS, Joseph Anzalone



Issued and Served February 11, 2011

Notice of Extension

On December 23, 2010, we directed parties to show cause why we should not make final the rates tentatively set by Order 2010-12-28, with objections due no later than 20 days (January 12) after the issuance of the order. On January 11 Mr. Hank Myers requested that we extend the deadline for objections by 15 days, i.e., through January 27.

We received timely filed objections from the United States Postal Service, Ryan Air, Inc., The Consolidated Carriers, and from three commonly owned carriers - Frontier Flying Service, Inc., Hageland Aviation Services, Inc., and Era Aviation, Inc. On February 4, 2011, Peninsula Airways, Inc. filed a motion to extend the comment period to February 22, 2011. On February 7, 2011, the Postal Service concurred with PenAir's motion.

We have decided to grant the request. All parties should file their comments no later than February 22, 2011. As this is the second extension, we do not anticipate granting any further extensions.

By: Dennis DeVany




February 22, 2011

Reply of Peninsula Airways

Peninsula Airways, Inc. hereby responds to the comments on Order 2010-12-28 submitted by the Consolidated Carriers, Ryan Air, Inc. and ERA/Frontier Flying Service, Inc. In general, the Objectors oppose the Department's inclusion of certain of PenAir's Metro III and Saab 340 operations in the 135 bush mail rate structure and compensation of PenAir for those operations at the 135 bush mail rate. The Objectors' position is fundamentally flawed and should be rejected. The Department long ago rejected the Objectors' position in Order 2003-10-10, and the Objectors have submitted nothing to justify reconsidering that decision.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999


February 22, 2011

Comnents of United States Postal Service

The Postal Service reiterates that it objects to the notion of excluding specific equipment from the rate class that it legally operates within. All equipment operating under Part 121 or Part 135 bush operations should be included in the appropriate rate class established in the Department’s ratemaking methodology. The Department’s methodology was put in place with the acceptance of the industry and the Postal Service and there is no reasonable basis on which to change the methodology at this time.

By: USPS, Joseph Anzalone



March 1, 2011

Reply of the Consolidated Carriers to the USPS and Peninsula Airways Comments

Peninsula Airways distorts the actual meaning of the RSIA, and Order 2003-10-10 in order to support an action it had previously opposed. The Postal Service misquotes the language of the Rural Service Improvement Act in order to support including large aircraft in the 135 bush mail rate. This response is necessary to expose the gross fallacies in both filings, and will not delay the setting of the mail rate at a lawful level, while providing a more solid basis for the decision.

We must reiterate the impact of the Penair ploy on the carriers providing service to the 170 small bush markets using aircraft certificated with 9 or fewer aircraft. These carriers will be substantially under-compensated for service. These carriers do not have the option of using larger, more efficient aircraft because the size of the markets or the length of runways at these points. There will be no incentive to become more efficient, rather the incentive will be to reduce or even eliminate service. As such this creates a predatory practice by Penair. None of these actions was the intent of the RSIA, and the Department has the power, and has used it before, to set compensatory mail rates for a class.

The Postal Service also demonstrates the confusion between aircraft certification and the bush rates set by the Department. When the RSIA was drafted, all aircraft with a certificated passenger capacity of at least 19 were operated under Part 121 regulations. Part 135 carriers were considering operating Beech 1900’s with fewer than 10 seats in competition with existing Part 121 service. A primary reason for the RSIA was to create special preferences for Part 121 service. There is no distinction between aircraft certificated under FAR Part 23 when related to operating rules. In the RSIA, the term “Part 121” was applied to aircraft having a certificated seating capacity of at least 19, while “Part 135” was used to describe aircraft with a certificated seating capacity of less than 10 seats. This created confusion about what to do with aircraft with 10-18 seats which were operated under Part 121, but were excluded for all purposes from the Part 121 application of rates and preference rights.

The Consolidated Carriers respectfully request that all aircraft with a maximum certificated passenger capacity of at least 19 seats be assigned to the 121 pool only, and that all aircraft with a seating capacity less than 19 seats be assigned to the 135 pool as they are today regardless of operating rules. This is the intent of the RSIA, and was carefully considered in Order 2003-10-10 with the full support of Peninsula Airways. While Penair and any other air carrier may be free to downgrade the service with their larger aircraft, there should be no reward or incentive to do so. The real incentive for Penair to downgrade its service is to save money by avoiding the more costly Part 121 operating and personnel requirements. Paying for large aircraft service at small aircraft rates eliminates the incentives for greater efficiency for Penair while failing to pay compensatory mail rates for the vast majority of bush mail service. To suggest that it is the rest of the industry that is gaming the system, as Penair has, is beyond silly.

By: MTC, Hank Myers, 425-830-4265


March 2, 2011

Note Concerning Document Filed by Consolidated Carriers

The Postal Service notes that on March 1, 2011, a document from Mr. Hank Myers entitled “Reply of the Consolidated Carriers to the USPS and Peninsula Airways Comments,” dated March 1, 2011, was allegedly added to Docket OST-2003-14694. It offers a “response” to comments earlier filed by other parties, including the Postal Service, pursuant to the Department’s February 11, 2011 notice allowing parties to respond to comments filed by the Consolidated Carriers on January 27, 2011, in response to Show Cause Order 2010-12-28.

In the Department’s February 11, 2011 notice, the Department stipulated that because the February 11 notice was the second extension for comments associated with Show Cause Order 2010-12-28, the Department did “not anticipate granting any further extensions.”

Accordingly, given that Mr. Myers’ submission is unauthorized, the Postal Service does not seek to respond to it. However, should the Department revise its view and undertake to consider this filing, the Postal Service respectfully requests that it and all affected carriers have a reasonable opportunity to reply to the submission.

By: USPS, Joseph Anzalone


March 3, 2011

Comments of Condolidated Carriers Regarding Extension of Time

The Consolidated Carriers have no objection to granting an extension of time to respond to the Reply of the Consolidated Carriers filed February 28, 2011. The proposal of Penair is the most significant change in mail rate structure since 2003. The proposal also raises the policy issue of providing economic incentive to downgrade large aircraft operations from Part 121. That incentive is contrary to the intent of the Rural Service Improvement Act.

We must be careful to understand the impact of reduced mail pay on carriers who do not have any ability to alter their operations. When the D.O.T. eliminated the Part 121 STOL rate because it became higher than the Part 135 Wheel rate, ERA could not operate its Bethel bush service more efficiently and subsequently eliminated all bush service at that hub.

By: MTC, Hank Myers



March 10, 2011

Motion for Leave to File and Response of Peninsula Airways

The Consolidated Carriers' February 28, 2011 Reply and March 3, 2011 Letter are unauthorized submissions. The Department has already provided interested parties more than sufficient opportunity to comment on the proposed mail rates order. The Department should reject the Consolidated Carriers' submissions and finalize the bush mail rates as proposed in Order 2010-12-28. However, if the Department accepts the Consolidated Carriers' Reply, Peninsula Airways, Inc. requests leave to file this short response.

The Consolidated Carriers make a last-ditch effort to recast the debate about the proposed bush mail rates by claiming that the "proposal of Penair is the most significant change in mail rate structure since 2003." That claim mischaracterizes the relatively straightforward bush mail rate order under consideration. PenAir is proposing no "significant change in mail rate structure." PenAir is simply urging the Department to continue the mail rates policy it adopted in 2003. In fact, it is the Consolidated Carriers that are seeking to undo the long-established regime by which aircraft and operations are classified for purposes of bush mail rates.

The Consolidated Carriers claim that PenAir's actions are inconsistent with RSIA policy. Nothing could be further from the truth. The accusation against PenAir is ironic given that PenAir was among the first, if not the first, Alaska commuter carrier to convert to Part 121 status. There is nothing in RSIA or FAA law or policy that prevents PenAir from recertifying aircraft to enable it to operate such aircraft under Part 135. PenAir's operations of the recertified Saab 340 and Metroliner under Part 135 are neither unsafe nor unreliable.

Counsel: Hovan Lovells, Robert Cohn, 202-637-4999



March 14, 2011

Reply of Consolidated Carriers

Peninsula Airways misapprehends our position in its latest filing. We do not oppose a compensatory rate for Penair’s Saab and Metroliners operating under Part 135. The Carriers don’t seek to require Penair to operate aircraft with fewer than ten passenger seats under Part 121. The Carriers believe that the current rate structure can provide compensatory mail rates without the requested additional reporting requirements.

In practicality, the Department does not need to create a separate fourth rate. The Department has wide latitude in setting rates, so a rate based on all bush aircraft certificated for 19 or more passengers could computed, and designated as the rate for Part 121 operations and Part 135 Large Aircraft markets. These rates were computed by the Consolidated Carriers in its January 31, 2011 Answer. This would eliminate the need for dual authority carriers to break out reports between Part 121 and Part 135 service. All affected carriers have equalization notices filed, so the Postal Service would always get the lowest applicable rate for all markets and carriers. This simple solution satisfies Penair’s need for a clearly applicable rate, while maintaining the historic basis of setting class rates according to clearly distinguishable cost or capacity delineations.

By: MTC, Hank Myers, 425-830-4265



OST-2003-14694
OST-2003-14695

March 21, 2011

Request of Postal Service/Air Carrier Workgroup for Calculation Assistance

The workgroup would like to request your assistance in the calculation of a comparison rate, utilizing the current existing costs and methodology structure, with a change in that methodology where all elements attributable to any passenger or freight costs that the airlines incur are removed from the mail rate setting process. The intent is to understand the impact that those costs which are not attributable to the transportation of mail have on the current rate setting process, and ultimately, on the final published rates.

In addition, we would like to request that we be provided with the tabular cost data that Ryan Air reports to the DOT. We understand that this data is not currently utilized in the existing rate setting methodology.

By: Bob Hajdukovich



Order 2011-6-14
OST-2003-14694

Issued and Served June 10, 2011

Show Cause Order Proposing Updated Mail Rates

By this order, the Department directs all interested parties to show-cause why the proposed Intra-Alaska bush service mail rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2009-11-2, made final by Order 2009-11-19, and updated for changes in quarterly fuel prices most recently by Order 2010-9-24. This order tentatively modifies the findings of show cause Order 2010-12-28. In response to those objections, we propose making significant changes to the structure of the Part 135 rate, and so we are issuing this order on a show-cause basis as well. The rates include quarterly fuel costs for the QE June 30, 2010, but we anticipate updating fuel costs with more recent data after the final order is issued.

Part 121, per RTM Part 135, per RTM Seaplane, per RTM Terminal Per Ton Enplaned
Proposed $6.0052 $11.1215 $32.8944 $716.16
Current, Order 2010-9-24 $5.8993 $13.2559 $33.4185 $745.01
Percentage Increase 1.80 <16.10> <1.57> <3.87>

By: Susan Kurland



Served June 16, 2011

Notice of Extension

On June 10, 2010, we directed parties to show cause why we should not make final the rates tentatively set by Order 2010-6-14, with objections due no later than 10 days (June 20) after the issuance of the order. On June 14 Peninsula Airways, Inc. requested that we extend the deadline for objections by 16 days, i.e., through July 7.

We have decided to grant the request. All parties should file their comments no later than July 7, 2011.

By: Dennis DeVany



June 17, 2011

Motion of Peninsula Airways for an Extension of Time

Peninsula Airways, Inc. hereby requests an extension until July 7, 2011, in which to file a response to the Department's Show Cause Order proposing updated mail rates, DOT Order 2011-6-14.

The Department issued a detailed 10-page order with multiple attachments involving complex calculations, regression analyses, and trends analyses. The 10-day comment period does not provide sufficient time to permit PenAir and other interested parties to assess the data and corresponding calculations, review the proposed significant changes in detail, consult with relevant experts, and prepare comprehensive comments in response to the SC Order. Accordingly, PenAir requests this brief extension to the current 10-day comment period.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999



Order 2011-6-26
OST-2003-14694

Issued and Served June 24, 2011

Seaplane Quarterly Fuel Adjustment

By this order the Department is updating the Seaplane linehaul rate to reflect the most recent quarterly fuel costs. The new rate is to be effective the second Saturday after the service date of this order, and reflects fuel expenses for the quarter ended March 31, 2011.

Service Class Current Rate Fuel, YE 6-30-10 Fuel, QE 3-31-11 New Rate
Seaplane $32.8944 $5.7866 $7.4330 $34.5408

By: Todd Homan



June 29, 2011

Extension Request of Consolidated Carriers

On behalf of the Consolidated Carriers, I request an extension of the time to file responses to Order 2011-6-14 until Monday, July 18, 2011. The Carriers are working with a statistician to develop models that may have a better correlation than the 72% rate of the current rate. A 72% correlation explains less than half of the variation from the mean, and does not account for known variances such as aircraft capacity. The long holiday weekend makes it impossible to complete the analysis before July 7.

This short extension will not affect the rights or position of any party, and will develop a more complete record

By: MTC, Hany Myers


July 5, 2011

Notice of Extension

On June 10, 2011, we directed parties to show cause why we should not make final the rates tentatively set by Order 2011-6-14, with objections due no later than 10 days (June 20) after the issuance of the order. On June 14 Peninsula Airways, Inc. requested that we extend the deadline for objections by 16 days, i.e., through July 7. By notice dated June 16, we granted the request. On June 29, Mr. Hank Myers, on the behalf of the Consolidated Carriers, requested an extension to July 18.

We have decided to grant the request. All parties should file their comments no later than July 18, 2011. We note that this is the second extension we have granted, and we anticipate not granting any additional extensions.

By: Dennis DeVany



July 18, 2011

Answer of The Consolidated Carriers

The Consolidated Carriers hereby submit its Answer to Order 2011-6-14. This Answer was filed before midnight, July 18 PDT, but was filed after 5:00 PM EDT. The delay was caused when it was discovered in comparing the outcome of all proposed and considered rates as applied to the mail market traffic as reported by the carriers T-100 market reports for YE March 31, 2011 that the rate proposed in Order 2011-6-14 appears to underpay the industry by a significant amount. Additional research was need to confirm this fact, and recheck all calculations. The discrepancy in the Ordered rate is explained below. Submitter has not read any other submission in this docket, and all material is original by the submitter. The Consolidated Carriers pray that its answer be accepted as filed.

Examination of Penair’s linehaul costs for its 19 seat or greater capacity aircraft shows that there is no significant difference between the operations under Part 121 and Part 135. Simply put, there is no reason to differentiate between the two operations based on costs.

This was one of the options suggested by the Consolidated Carriers in its Answer to Order 2010-12-28. The Department found that combining costs for the same aircraft and carrier from Parts 121 and 135 is contrary to the Rural Service Improvement Act. That led to the current Order which seeks to redress the undeserved windfall that would be reaped by Penair under a single Part 135 rate.

While the regression model has failed in its primary goal, it has served as a clear example of the difference in aircraft operating costs, and the difficulty of setting a rate with such disparate aircraft types and operations.

This recalls a second option offered by the Consolidated Carriers in its previous Answer when it proposed to have two Part 135 rates. The first rate, which is the historic Part 135 rate adjusted for current costs, includes all aircraft certificated for 9 or fewer passenger seats. This was attached as Attachment B, Appendices C-1 and C-2, which are duplicated in this filing. It would set the Part 135 Small Aircraft linehaul rate at $12.2338 for non-fuel expenses and $3.1987 for fuel related expenses. The fuel expenses would need to updated as no quarterly updates have been issued on that rate. All of the aircraft included in the Part 135 Small Aircraft rate have a maximum certificated seating capacity of 9 or fewer seats. All aircraft included in the Part 135 Small Aircraft rate can takeoff and land at runways shorter than 3,000’ with a maximum takeoff or landing weight as appropriate.

The Part 135 Large Aircraft linehaul rate may best be set using the regression methodology proposed by the Department in Order 2011-6-14. For large aircraft operations the number of aircraft used is only three, and only five carriers in total operate them. A total of SEVEN aircraft/carrier combinations need to be analyzed in a Large Aircraft regression.

Counsel: MTC, Hank Myers, 425-830-4265


July 18, 2011

Objections of Peninsula Airways to Show Cause Order Proposing Updated Mail Rates

Peninsula Airways, Inc. objects to the "significant changes" to the long-established structure and methodology for the Part 135 bush service mail rate proposed in the Department's Show Cause Order, DOT Order 2011-6-14. There is no sound basis in law, regulation, statistics or regression/trend analysis for the adoption of the proposed taper to calculate Part 135 bush service mail rates. On the contrary, there are several important reasons for rejecting the use of a taper and maintaining the current Part 135 bush mail rate methodology

The Form 41 and T-100 data collection programs require the Department's standard aircraft capacities to be used. However, these values cannot be used to model true linehaul cost functions because, as explained above, available capacity varies substantially by route, alternate airport requirements, fuel requirements, and other factors. Put another way, the Department's average-based analysis fails to take these critical cost factors into account; it is based upon standard reported aircraft capacities that are theoretical maximum values that do not consider actual distance, prevailing winds, and reserve fuel requirements, among other factors.

Nor does the Department have the data (Le., the substantial evidence) necessary to support a decision to impose the Proposed Taper. The data needed to derive a taper do not exist because the Department does not (nor should it because of the enormous burdens that would be imposed) require bush carriers to report direct operating costs on individual routes. In fact, the Department's model assumes that the cost-per-block-hour is constant over all distances and specific segments. There is no basis for this assumption, and, as explained above, PenAir's experience clearly shows that it is not true. The Department's tortured use of regression analysis here is therefore wholly inappropriate. Based on the lack of substantial evidence in the record, it would be unlawful, arbitrary, and capricious to impose the Proposed Taper to calculate the Part 135 bush mail rate.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999



August 3, 2011

Motion for Leave to File and Reply of Peninsula Airways to Answer of the Consolidated Carriers

The Consolidated Carriers and PenAir agree on one important point: that the Department's proposed regression-based taper to calculate the Part 135 bush mail rate is fundamentally flawed and, in the words of the Consolidated Carriers, "doomed to fail." Unlike PenAir, however, the Consolidated Carriers do not urge the Department to calculate the Part 135 bush mail rate using all Part 135 operations without any taper, as has been consistently done in the past and as the Department proposed in DOT Order 2010-12-28. Rather, the Consolidated Carriers compound the flaws of the Department's proposed taper by advocating that (i) two distinct Part 135 bush mail rates be established based on aircraft "size" and (ii) the bush mail rate for the larger aircraft sub-class be based on either the Department's or the Consolidated Carriers' flawed regression-based tapers.

PenAir strongly opposes, and urges the Department to reject, the Consolidated Carriers' proposal to establish separate "Large Aircraft" and "Small Aircraft" Part 135 bush mail rates and to base the "Part 135 Large Aircraft Bush Rate" on either the Department's proposed taper regression or the Consolidated Carriers' proposed taper regression. PenAir urges the Department to finalize the rates as proposed in DOT Order 2010-12-28.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999



August 11, 2011

Response of the Consolidated Carriers to the August 3, 2011 Filing of Peninsula Airways

Ironically, Penair claims that the Carriers overstate the impact of the SAAB and Metroliner aircraft on mail rates, and then goes on to say that the compensatory rates proposed by the Carriers would cost the Postal Service substantially more. The rates proposed in Order 2011-6-14 are not compensatory, and Penair agrees. Certainly it is possible to imagine a rate that is less costly to the Postal Service if it is not compensatory. Federal law and regulation require the Department to establish compensatory rates, however. Penair cannot argue that inclusion of its long runway aircraft is not a big deal while at the same time arguing that excluding those aircraft increase Postal costs significantly.

Counsel: MTC, Hank Myers, 425-830-4265



August 26, 2011

Motion of the Consolidated Carriers to Exclude Data of Peninsula Airways

Penair has specifically filed data so that its large aircraft that are operated under Part 135 are excluded from the ratemaking base for Part 121 aircraft. These data should be likewise excluded from the calculation of the Part 135 bush mail rate. This exclusion is not only consistent with existing practice for Mainline and Seaplane rates, but is consistent with the treatment of Part 121 bush aircraft operating in mainline markets. The operations of costs of these aircraft are excluded not only from the Part 121 mail rate, but also the Mainline rate. Therefore, excluding these operations entirely from the calculation of intra-Alaskan mail rates is consistent with all precedent and methodology in this docket. Including these data in any mail class would be contrary to the direction of the Rural Service Improvement Act and all policy decisions in this docket.

Counsel: MTC, Hank Myers, 425-830-4265


 

August 30, 2011

Answer of Peninsula Airways to Motion of the Consolidated Carriers

It is no answer to say that the Consolidated Carriers are seeking to exclude only PenAir's costs. It would not be appropriate to carve-out just one carrier's costs for certain equipment/operations from its proper rate class, and the Consolidated Carriers provide no justification for doing so, to the exclusion of all other carriers operating Part 135 aircraft on routes that are equalized with lower mail rates. After all, that same carrier might alter its operations in the future such that it only operates aircraft under Part 135 on a particular route, but the Consolidated Carriers' blanket proposal does not account for that possibility. In any event, if such a change were contemplated, it would need to be considered across-the-board (which the Department did and rejected), not just as to individual carriers on a piecemeal, case-by-case basis.

In sum, the data necessary to implement such an unfounded carve-out are not readily available and would be unduly burdensome and costly to compile. The statute itself does not require any such carve-out from the Part 135 bush mail rate calculation. And, the Part 135 bush mail rate (and costs to the Postal Service) would increase if the proposed carve-out (often affecting the most efficient aircraft and operations) was implemented.

The Motion (and its accompanying proposal for excluding certain cost, traffic, and operational data from the Part 135 bush mail rate calculus) should be denied.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999



September 8, 2011

Reply of the United States Postal Service

As to the substance of the rates proposed in the Order, the Postal Service has no objection. The Postal Service requests that the Department make the mail rates from the Order effective for a period of 12 months from when the Department finalizes the rates.

The Postal Service also supports the Department’s proposed adoption of a Taper as proposed in the Order. The Postal Service believes it is the right time to reintroduce the Taper in the Bush 135 rate, and agrees that a Taper provides a closer fit to actual costs. However, the Postal Service highly objects to the proposals contained in the July 19, 2011 Answer of the Consolidated Carriers.

The Postal Service also objects to the August 26, 2011 Motion of the Consolidated Carriers proposing the exclusion from the Part 135 bush mail rate of PenAir’s Saab and Metroliner costs and data. The Postal Service has vehemently objected in the past to similar proposals by the Consolidated Carriers, and such similar proposals have been uniformly rejected by the Department for good reason. There is no reasonable basis to reverse course and entertain the Consolidated Carriers’ proposal.

Counsel: USPS, Joseph Anzalone



Order 2011-10-3
OST-2003-14694

Issued and Served October 11, 2011

Order Setting Final Bush Mail Rates

By this order, the Department makes final the rates tentatively set by Order 2011-6-14, and extends those rates and the Seaplane and terminal rates made final by Order 2011-6-14 for one year beyond the effective date of this order.

We are concerned with the delay in finalizing these rates. As a result of the delays, the current Part 135 rate (about ten percent higher than the rates we are setting here) will have been in place for about a year and nine months rather than the typical one-year period. The delay in setting a final rate in this case due to the numerous pleadings has cost the Postal Service a significant amount of money. The Department's policy is to make all rates final and not provide for retroactive adjustment to rates, and we find that that continues to be the appropriate policy. However, we cannot ignore the losses incurred by the Postal Service due to the delay in setting a final rate.

As is clear from the issues raised by the carriers in this order, significant changes to our rate structure need to be examined - a taper may not be necessary in future rates because PenAir has since disposed of most of its Metro aircraft that operated under Part 135 during the period at issue, the year ended June 30, 2010. In addition, parties have raised the issue of our setting Part 121, Part 135, and Seaplane rates based only on operations where the Postal Service pays the Part 121, Part 135, and Seaplane rates. These are significant departures from our current methodology, and unless they are resolved before we issue another show-cause order, we anticipate there would be delay in finalizing the next annual update corresponding to what has occurred here, and we therefore will have our staff meet with the parties to resolve these issues.

By: Susan Kurland



Order 2011-10-4
OST-2003-14694

Issued and Served October 12, 2011

Order Implementing Final Rates and Making Quarterly Fuel Adjustment

By this order the Department is implementing the final Part 121 and Part 135 mail rates set by Order 2011-10-3. As determined in that order, those two rates, as well as the Seaplane and terminal rates, will be effective beginning on the second Saturday after the issuance of this order, and reflect fuel expenses for the quarter ended June 30, 2011.

Class Rate Current Rate Excise Old Fuel Add New Fuel Final
Terminal $716.16 per Ton NA NA $716.16
Part 135, Fixed $371.45 per Ton NA NA $380.92
Part 121 6.0052 per RTM $1.2913 $1.2616 $5.9755
Seaplane $34.5408 per RTM $7.4330 $7.4118 $34.5196

By: Todd Homan



OST-2003-14694
OST-2003-14695

Issued and Served November 10, 2011

Notice of Mail Rate Meeting in Anchorage

By Order 2011-10-3 the Department indicated in ordering paragraph three that there would be informal meetings with the parties regarding mail rate issues in general, and specifically those discussed in that order.

Based upon preliminary discussions with the parties, the meetings in Anchorage will be on December 1 and December 2 of this year. Joy Journeay has indicated that the Alaska Air Carriers Association will provide the room, and has suggested the meetings be held from 9 am to 4 pm each day.

By: Dennis DeVany



December 8, 2011

Response of United States Postal Service to Order 2011-10-4

The Postal Service wishes to communicate its efforts and the difficulty it has faced in applying the fuel adjustments from DOT Order 2011-10-4. It has become apparent to the Postal Service that further guidance by the Department is necessary to effectively apply the Department’s latest fuel adjustment.

In accordance with DOT Order 2011-10-4, the Postal Service has begun the systemic incorporation of the fuel adjustments. However, the Postal Service is unable at this time to resolve a conflict between incorporating a “taper” while also applying the separate “Fixed” and “Flex” class rates. The separate Fixed and Flex rates had not previously been applicable to the Part 135 rate. The Postal Service now must assess the DOT formula utilized for the “taper” and apply systemic changes to enable rate implementation for both Fixed and Flex rates.

With this in mind, the Postal Service requests that the Department provide the following additional guidance so that the Postal Service may move forward in implementing the fuel adjustment as ordered:

  1. Design the formula to be used for the new taper rate;
  2. Determine if this taper rate is to replace the C Rate (Bush 121 rate), D rate (Bush 135), and/or G rate (Float);
  3. Depending on the Department’s response to Request #2, determine whether the Surface Air Management Systems - Alaska should continue using the C Rate or D Rate in its current format; and
  4. Determine how the CME Exemption Law Process fits into the introduction of the new taper rate.

Counsel: USPS, Joseph Anzalone



December 1 and 2, 2011

Notes of Kevin Adams to the Meeting in Anchorage

By: DOT, Kevin Adams


 

Order 2012-2-6
OST-2003-14694

Issued and Served February 6, 2012

Bush Quarterly Fuel Adjustment

By this Order, the Department is making its regular quarterly adjustments to the three classes of Intra-Alaska bush mail rates (Part 121, Part 135, and Seaplane) to reflect the most recent quarterly fuel costs. The new rates are to be effective on the first Saturday after the issuance of this order, and reflect fuel expenses for the quarter ended September 30, 2011.

By: Todd Homan


 

Order 2012-4-25
OST-2003-14694

Issued and Served April 19, 2012

Bush Quarterly Fuel Adjustment

By this Order, the Department is making its regular quarterly adjustments to the Intra-Alaska bush mail rates, Part 121 and Part 135, to reflect the most recent quarterly fuel costs. The new rates are to be effective on the first Saturday after the issuance of this Order, and reflect fuel expenses for the quarter ended December 31, 2011. We will update the Seaplane rate at a later time when we have reliable data from Taquan.

Class Rate Current Rate Order 2012-2-6 Old Fuel QE 9-30-11 New Fuel QE 12-31-11 New Rate Rate New Rate
Terminal $716.16 NA NA $716.16 NA
Part 121 $5.9756/RTM $1.2617/RTM $1.2597/RTM $5.9736/RTM -0.03%
Part 135, Fixed $380.27/Ton 0 0 $403.12/Ton 6.01%
Part 135, Flexed $7.6395/RTM 0 0 $8.0986/RTM 6.01%

By: Todd Homan


 

Order 2012-5-27
OST-2003-14694

Issued and Served May 29, 2012

Bush Quarterly Fuel Adjustment, Seaplane Only

By this Order, the Department is making its regular quarterly adjustments to the Intra-Alaska bush mail rates for the Seaplane class to reflect the most recent quarterly fuel costs. The new rate is to be effective on the second Saturday after the issuance of this Order, and reflects fuel expenses for the quarter ended December 31, 2011.

Class Rate Current Rate Order 2012-2-6 Old Fuel QE 9-30-11 New Fuel QE 12-31-11 New Rate Rate Change
Terminal $716.16/Ton Enpl. NA NA $716.16/Ton Enpl. NA
Seaplane $34.6143/RTM $7.4945/RTMs $6.6227/RTMs $33.7425 -2.52%

By: Todd Homan



Order 2012-8-35
OST-2003-14694

Issued and Served August 29, 2012

Bush Quarterly Fuel Adjustment

Class Rate Current Rates: Order 2012-4-25 & Order 2012-5-27 Old Fuel QE 12-31-11 New Fuel QE 3-31-12 New Rate Percentage Change in Rate
Terminal $716.16/Ton NA NA $716.16/Ton NA
Part 121 $5.9736/RTM $1.2597/RTM $1.3608/RTM $6.0747/RTM 1.69%
Part 135, Fixed $403.12/Ton 0 0 $403.32/Ton 0.05%
Part 135, Flexed $8.0986/RTM 0 0 $8.1026/RTM 0.05%
Seaplane $33.7425/RTM $6.6227/RTM $10.1097/RTM $37.2295/RTM 10.33%

By: Todd Homan


 

December 26, 2012

Re: Question from Steven Deaton

As I am sure you are aware, the current bush rate has been in place for more than a year now. The past practices of DOT in establishing an annual rate update were altered on the last bush rate update due to the prolonged time frame that was allowed for comments/responses to the docketed order. When the last rate update was finally ordered in place, October 22, 2011, it was the DOT's decision to extend the time frame period for the new rate to be effective for one year, at which time the DOT would review the data and adjust the next bush rate accordingly. As with their prior orders, we would expect the DOT to continue in the same vein when it's next update comes out. Will it be your intention to continue the one year effective period on the next rate?

By: Steven Deaton

 

December 28, 2012

Re: Response of DOT to Steven Deaton

Mail updates depend on good data being provided by the carriers and at times by the Postal Service, and we are always looking to improve the accuracy and reliability ofthe T-100 traffic and Schedule F-2 expense data reported by the carriers. As most of the carriers are aware, we have recently worked intensively with the Department's Bureau of Transportation Statistics and the bush carriers to improve both the accuracy, reliability and timeliness of the catTier's data, especially their repmied expenses on Schedule F-2. As a result, the caniers have implemented web-based reporting of Schedule F-2 that they intend to continue to employ. Web-based reporting automatically conects several encoding problems which some of the carriers had been making. Those mistakes delayed the mail rate review by OST staff I am pleased to indicate that the immediate issues have been resolved, and we are beginning our review.

By: Kevin Adams


 

February 14, 2013

Notes of Kevin Adams to AACA Meeting on February 13-14, 2013

Kevin expressed concern that carriers were "picking and choosing" which reports they would submit on a reliable and timely basis. Specifically, the weekly T-100 Market report was invariably reliable and on time because carriers recognized they would be automatically "dinged" by USPS if the data were late or unreliable. However, that was not the case for monthly T-100 Segment and quarterly Schedule F-1 and F-2 reporting. Nevertheless, the carriers should provide equal attention to all of these reports because all are used for DOT rate making and to gauge the reliability of the T-100 Market reports. Also, late or bad reporting by one carrier of any of these reports impinges on the integrity of the bypass mail program, hurting other carriers in the cost pool as well as USPS by causing delay in the issuance of mail rates. Kevin argued for introducing to all of the reports the automatic yet gradual enforcement mechanism that applies to the weekly T-100 Market report. [Since USPS relies on an annual accumulation of weekly T-100 traffic data to determine carriers eligible for tender, withholding one week at a time is gradual.] Namely, if the other reports of a particular carrier were not reported or were found to be unreliable, then the weekly T-100 market report for that carrier would be withheld until that data was reported appropriately. The alternative mechanism to ensure data quality and timeliness- an enforcement proceeding --is costly, burdensome, and delayed. Because all of the carriers' data are used for mail ratemaking, those other carriers suffer the consequences of the lack of compliance by a single non-compliant carrier. Another weakness of relying on enforcement proceedings is that carrier reporting which is not fully compliant is difficult to discourage because it may never quite rise to the threshold of requiring an enforcement proceeding.

A great deal of time was spent arguing that the data for PenAir's Saab 340-A All-Cargo operations should be excluded, contrary to the finding in Order 2011-10-3. The arguments largely reiterated those found in that Order and in Order 2011-6-14, which led to DOT re-introducing a taper. Kevin argued that whatever the Postal Service and the Carriers unanimously desired, DOT would find very difficult to disagree with. It should be noted that Danny Seybert indicated that PenAir would no longer object to the Part 135 Taper. A new consideration was brought up by Mike Brown of ERA, who indicated that because PenAir no longer conducted any Part 135 operations in scheduled passenger service, its data should be excluded. It appears that this issue was addressed in Order 2003-10-10, issues 5 and 6.

By: Kevin Adams


 


March 2, 2013

Comments of Era Alaska

Comments regarding removing ALL PenAir data from the calculation of the Bush 135 Line haul rate:

PenAir no longer transports any passengers on Bush 135 Passenger aircraft and therefore should be excluded from the rate pool for Bush 135 linehaul calculations.

The urgency of this consideration is that the DOT has had a rate in place since October 2011 under the premise that it would issue a new rate in October 2012. This has not been done for a variety of reasons stated by Kevin Adams in his Notes regarding the Air Carriers Convention February 2013. Era Aviation believes it is critical that the DOT issue a new rate and set issuance of compensatory rate updates as a high priority. It is also critical as well that the rate be fashioned and calculated in accordance with the guidelines set out in RSIA (39 USC 5402), which clearly and consistently state that only Bush 135 carrier data that meets the requirements as spelled out for inclusion, is what is used to calculate Bush 135 linehaul mail rates. Therefore we trust that the DOT shall issue a rate utilizing current market realities and conditions utilizing the current data and following required statutory logic.

The environment in Alaska "Post RSIA" has changed dramatically and the exit of PenAir from flying passengers under Part 135 is a major development that must be taken into consideration (exclusion, per RSIA) when calculating a compensatory linehaul rate for Part 135 Bush carriers.

By: Era Alaska, Bob Hajdukovich, 907-266-8310


 

Order 2013-6-5
OST-2003-14694

Issued and Served June 6, 2013

Show Cause Order Proposing Updated Mail Rates

By this Order, the Department directs all interested parties to show-cause why the proposed Intra-Alaska bush service mail rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2011-6-14, made final by Order 2011-10-3, and updated for changes in quarterly fuel prices most recently by Order 2012-8-35.

  Part 121, per RTM Part 135, per RTM Seaplane, per RTM Terminal, per ton enplaned
Proposed $5.7792 $14.8403 $33.4689 $850.03
Current, Order 2012-8-35 $6.0747 $12.0763 $37.2295 $716.16
Percentage Increase <4.86> 22.89 <10.10> 18.69

By: Susan Kurland


 

OST-2003-14694
OST-2003-14695

June 12, 2013

Notice of Equalization of Peninsula Airways

Pursuant to a request by the United States Postal Service, Peninsula Airways, Inc., a certificated air carrier with authority to transport US mail within the State of Alaska, hereby provides notice of its intent to equalize and match, on a total rate per pound basis, the lower rates or combination of rates now in effect or hereafter prescribed and paid to Everts and Northern Air Cargo for each category of mail it transports between Anchorage and Aniak, effective immediately.

Although PenAir is a mainline carrier on the Anchorage – Aniak route, PenAir is filing this notice at the request of the USPS.

By: PenAir, Scott Bloomquist


 

June 20, 2013

Notice of Equalization of Era Aviation

Era Aviation d/b/a Era Alaska, a certificated air carrier with authority to transport US mail within the State of Alaska, hereby provides notice of it intent and match, on a total rate per pound, the lower rates or combination of rates now in effect or hereafter prescribed and paid to Everts, Northern Air Cargo and PenAir for each category of mail it transports between Anchorage and Aniak, effective immediately.

By: Era Aviation, Bob Hajdukovich


 

Order 2013-7-25
OST-2003-14694

Issued and Served July 31, 2013

Order Finalizing Show Cause Order

By this Order, the Department makes final the rates tentatively set by Order 2013-6-5, June 6, 2013, until on or about April 1, 2014.

The Postal Service argued and Order 2011-6-14 agreed that we should include PenAir’s data in that rate period because all available operating carrier data should be included. The Postal Service again makes that argument, as follows:

“The common desire for all participants in this process is fair and adequate compensation for the transportation of mail in Alaska. ….With this in mind, the Postal Service insists that in order to properly gauge the true cost of any particular lane [i.e., class rate], the Department ought to consider all movement and all associated data [such as PenAir’s] in determining mail rates.”

However, the facts are different from those that applied when we issued Order 2011-10-3, the currently effective rate. At that time, we could see no basis for excluding PenAir’s data – the data were reliable, PenAir had operated during the entire base period, and it continued operating as a Bush Part 135 passenger carrier through the issue date of that Order. We included PenAir’s data even though we recognized that its operations did not fit well with those of the other carriers in its class. Now that PenAir is no longer operating, we are no longer under any obligation to include its data.

Finally, while we agree with the Postal Service’s goal, cited above, of establishing fair and adequate compensation for the transportation of mail in Alaska, we disagree that our shared goal would be met by including PenAir’s data. PenAir’s data were anomalous two years ago and they are anomalous now. It is clear that adding that data would worsen the match between the prospective rate we are setting here and the actual expenses the carriers will experience until our next update.

By: Susan Kurland





Order 2013-7-26
OST-2003-14694

Issued and Served July 31, 2013

Order Implementing Final Rates and with Quarterly Fuel Adjustments

Order 2013-6-5, June 6, 2013, directed the parties to show cause why we should not make final the rates tentatively set by that Order. On June 26, 2013, the Postal Service objected. By Order 2013-7-25, July 31, 2013, we denied the Postal Service's objections, and made final the conclusions of Order 2013-6-5 along with the nonfuel-linehaul and terminal rates therein. Order 2013-7-25 also delegated to the Director, Office of Aviation Analysis, the authority to determine the tinal rates contemplated in Order 2013-7-25, adjusted for the most recent quarterly fuel expenses. The table below summarizes those results. Final rates, shown in the last column, are per Mail Revenue Ton Mile for the Part 121, Part 135 and Seaplane class rates, and per Mail Ton Enplaned for the Terminal.

Class Rate Rate per Order 2013-6-5 Less Old Fuel in Order 2013-6-5 Add Fuel per the Appendices to this Order Final Rate
Part 121 $5.7792 $1.5192 $1.4466 $5.7066
Part 135 $14.8403 $4.4253 $4.4089 $14.8239
Seaplane $33.4689 $7.2211 $6.8613 $33.1091
Terminal $850.03 NA NA $850.03

For the Terminal Rate, there is no quarterly fuel adjustment, so the rate is the same as that tentatively set in Order 2013-6-5.

By: Todd Homan


 

December 5, 2013

Data Reliability Letter

The Office of Airline Information has received several inquiries regarding our August 6 letter about improving both the timeliness and reliability of the carriers' financial reporting, specifically Schedules F-1 and F-2. The challenge oflate or inaccurate F-1 and F-2 filings affects all carriers through delayed or inaccurate mail rates, and also creates a burden for OAI staff that must then follow up on these late or inaccurate filings. Our goal is to encourage the carriers to give the same priority to reporting the critical financial reports that they have displayed in filing their T-100 Market reports.

In brief, while late or inaccurate reports typically involve only a few carriers, but have an adverse impact on the entire industry. These straightforward incentives will encourage compliant reporting, but the alternative of taking enforcement action will remain.

By: William Chadwick


 

Order 2013-12-9
OST-2003-14694

Issued and Served December 19, 2013

Bush Quarterly Fuel Adjustment

By this Order, the Department is making its regular quarterly adjustments to the Intra-Alaska bush mail rates, Part 121, Part 135, and Seaplane, to reflect the most recent quarterly fuel costs. The new rates are to be effective on the second Saturday after the issuance of this Order, and reflect fuel expenses for the quarter ended June 30, 2013.

Class Rate Rate per Order 2013-7-26 Less Old Fuel in Order 2013-7-26 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $5.7066 $1.4466 $1.4876 $4.7476 0.72%
Part 135 $14.8239 $4.4089 $4.5191 $14.9341 0.74%
Seaplane $33.1091 $6.8613 $6.3505 $850.03 -1.54%
Terminal $850.03 NA NA $850.03 0.00%

By: Todd Homan


 

OST-2003-14694
OST-2003-14695

December 26, 2013

Withdrawal of Equalization Notices of Alaska Central Express

On February 3, 2006 Alaska Central Express, Inc. filed an equalization notice in these Dockets in accordance with the provisions of Order 1990-10-34 in connection with the mail service provided by Alaska Central in the Anchorage-Ketchikan and Anchorage-Sitka markets. In the Equalization Notice and pursuant to the provisions of Order 1990-10-34, Alaska Central indicated that the Equalization Notice would be effective on February 11, 2006 and would remain so "until terminated by written notice filed at least ten days in advance of such termination". Equalization Notice, page 1. Alaska Central hereby gives notice of termination of the effectiveness of the Equalization Notice for the Anchorage-Ketchikan market only effective as of January 11, 2014

Counsel: Silverberg Goldman, Robert Silverberg


 

Order 2014-4-11
OST-2003-14694

Issued and Served April 10, 2014

Show Cause Proposing Updated Mail Rates

By this Order, the Department directs all interested parties to show-cause why the proposed Intra-Alaska bush service mail rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2013-6-5, made final by Order 2013-7-25, and updated for changes in quarterly fuel prices most recently by Order 2013-12-9. The table below shows the current and proposed rates.

    Current, Order 2013-12-9     Proposed     Percentage Change  
  Fuel Nonfuel Total Fuel Nonfuel Total Fuel Nonfuel Total
Part 121 $1.4876 $4.2600 $5.7476 $1.3092 $3.8900 $5.1992 -11.99% -8.69% -9.54%
Part 135 $4.5191 $10.4150 $14.9341 $4.4950 $10.8464 $15.3414 -0.53% 4.14% 2.73%
Seaplane $6.3505 $26.2478 $32.5983 $6.8840 $24.1305 $31.0145 8.40% -8.07% -4.86%
Terminal NA NA $850.03 NA NA $878.26 NA NA 3.32%

By: Susan Kurland


 

Order 2014-5-16
OST-2003-14694

Issued and Served May 30, 2014

Final Order

By Order 2014-4-11, issued on April 10, 2014, we directed all interested persons to show cause within 20 days of that Order’s service date why we should not make final the terminal and line-haul rates tentatively set by that Order final. That Order also delegated authority to the Director, Office of Aviation Analysis, to make the above rates final if we received no objections. The deadline for objections has passed and we received none. Therefore, by this Order we make those rates final.

By: Todd Homan




May 30, 2014

Notice of Taquan Air of Intent to Equalize

Venture Travel, LLC dba Taquan Air operates scheduled USPS Mail, passenger, and cargo service from Ketchikan, Alaska to approximately fifteen outlying communities in Southeast Alaska. Our company has been providing this service as a scheduled commuter airline withe 401 Certificate for over 15 years. We have been transporting the USPS Mail with eight float equipped Dehavilland Beavers at the Bush Seaplane (E) Rate.

Our company recently purchased an IFR Equipped Cessna 208 Caravan which has been certified by the FAA and has been added to our FAA Part 135 Commuter Air Carrier Certificate. This aircraft will be used primarily between Ketchikan, Craig and Klawock, Alaska where we will continue to provide regularly scheduled mail, passenger, and cargo service.

Effective June 1, 2014 we would like equalize to the Bush 135 (D) Rate for the Ketchikan to Craig and Klawock market segments only.

By: Brien Salazar

 


 

Order 2014-6-5
OST-2003-14694

Issued and Served June 11, 2014

Order Establishing Effective Dates

By Order 2014-5-16, issued on May 30, 2014, the Department made final the terminal and line-haul rates tentatively set by Order 2014-4-11, issued on April 10, 2014. However, we neglected to set an effective date, which is typically the second Saturday after the issuance of the Order. Therefore, by this Order, we are setting the effective dates as June 7, 2014.

By: Todd Homan


 

Order 2014-10-7
OST-2003-14694

Issued and Served October 14, 2014

Bush Quarterly Fuel Adjustment

By this Order, the Department is making its regular quarterly adjustments to the Intra-Alaska bush mail rates, Part 121, Part 135, and Seaplane, to reflect the most recent quarterly fuel costs. The new rates are to be effective on the second Saturday after the issuance of this Order, and reflect fuel expenses for the quarter ended June 30, 2014.

Class Rate Rate Per Order 2013-12-9 Less Old Fuel in Order 2013-12-9 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $5.7480 $1.4876 $1.2093 $5.4697 -4.84%
Part 135 $14.9341 $4.5191 $4.3297 $14.7447 -1.27%
Seaplane $32.5983 $5.3505 $6.5156 $32.7634 0.51%
Terminal $850.03 NA NA $850.03 0.00%

By: Todd Homan


 

February 4, 2015

Withdrawal of Equalization Notices of Corvus Airlines

On June 20, 2013, Corvus Airlines, Inc., hereby "Corvus Airlines' (previously Era Aviation), carrier code 7H, filed an equalization notice in these Dockets in accordance with the provisions of Order 90-10-34 in connection with mail service provided by Corvus Airlines in the Anchorage-Aniak market.

In the Notice of Equalization and pursuant to the provisions in Order 1990-10-34, Corvus Airlines indicated the Notice of Equalization would be effective on immediately (June 20, 2013) and would remain so "until written notice filed at least ten days in advance of such termination", Notice of Equalization, page 1.

Corvus Airlines hereby gives notice of termination of the effectiveness of the Notice of Equalization for the Anchorage-Aniak market only effective February 21, 2015.

By: Robert Hajdukovich


 

Order 2015-9-17
OST-2003-14694

Issued and Served September 21, 2015

Show Cause Order Proposing Updated Mail Rates

By this Order, the Department directs all interested parties to show cause why the proposed Intra-Alaska bush service mail rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2014-4-11, made final by Order 2014-6-5 with an effective date of June 7, 2014, and updated for changes in quarterly fuel prices most recently by Order 2014-10-7. The table below shows the current and proposed rates:

Current       Proposed     Percentage Chage    
  Fuel Nonfuel Total Fuel Nonfuel Total Fuel Nonfuel Total
Part 121 $1.2093 $3.8900 $5.0993 $1.2317 $4.1644 $5.3961 1.85% 7.05% 5.82%
Part 135 $4.3297 $10.8464 $15.1761 $4.3560 $11.1711 $15.5271 0.61% 2.99% 2.31%
Seaplane $6.5156 $24.1305 $30.6461 $6.2204 $23.6853 $29.9057 -4.53% -1.84% -2.42%
Terminal NA NA $878.26 NA NA $1023.64 NA NA 16.55%

By: Brandon Belford


 

Order 2015-10-22
OST-2003-14694

Issued and Served October 28, 2015

Finalizing Annual Update and Making Quarterly Fuel Adjustment

By Order 2015-9-17, issued September 21, 2015, the Department directed the parties to show cause within ten days of the service date of that Order why we should not make final the annual rates tentatively set forth by that Order.

Class Rates Rate Per Order 2015-9-17 Less Old Fuel in Order 2015-9-17 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $5.3961 $1.2317 $1.1998 $5.3642 -0.59%
Part 135 $15.5271 $4.3560 $4.2582 $15.4293 -0.63%
Seaplane $29.9057 $6.2204 $4.9692 $28.6545 -4.18%
Terminal $1026.21 NA NA $1024.95 -0.12%

By: Brandon Belford


 

January 29, 2016

Withdrawal of Equalization Notice of Alaska Central Express

On February 24, 2004 Alaska Central Express, Inc. filed an Equalization Notice in these Dockets in accordance with the provisions of Order 1990-10-34 in connection with the mail service provided by Alaska Central in, among other markets, the Anchorage-St. George and Anchorage-St. Paul markets.

In the Equalization Notice, and pursuant to the provisions of Order 1990-10-34, Alaska Central indicated that the Equalization Notice would be effective immediately upon filing and would remain "in effect until terminated by written notice filed at least ten days in advance of such termination." Equalization Notice, page 1.

Alaska Central hereby gives notice of termination of the effectiveness of the Equalization Notice for the Anchorage-St. George and Anchorage-St. Paul markets effective as of February 8, 2016. The other markets listed in the Alaska Central Equalization Notice dated February 24, 2004 remain subject to the equalization provisions of Order 1990-10-34.

Alaska Central Express, Inc. gives this notice of its withdrawal of the previously filed Equalization Notice but only with respect to the Anchorage-St. George and Anchorage-St. Paul markets effective February 8, 2016.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300




Order 2016-2-17
OST-2003-14694

Issued and Served February 19, 2016

Bush Quarterly Fuel Adjustment

By this Order, the Department is making its regular quarterly adjustments to the Intra-Alaska bush mail rates, Part 121, Part 135, and Seaplane, to reflect the most recent linehaul portion of quarterly fuel costs. The new rates are to be effective on February 27, 2016, the second Saturday after the issuance of this Order, and reflect fuel expenses for the quarter ended September 30, 2015.

Class Rate Rate Per Order 2015-10-22 Less Old Fuel in Order 2015-10-22 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $5.3642 $1.1998 $0.7496 $4.9140 -8.39%
Part 135 $15.4293 $4.2582 $3.9327 $15.1038 -2.11%
Seaplane $28.6545 $4.9692 $4.3882 $28.0735 -2.03%
Terminal $1024.95 NA NA $1024.95 0.00%

By: Susan Kurland


 

April 4, 2016

Notice of Alaska Bush Air of Intent to Equalize

This Letter is a notification of Intent to Equalize. Jason Sturgis Owner of Alaska Air, Inc. (DBA, Alaska Bush Air). scheduled, and nonscheduled service from Talkeetna, Alaska to the Alaska's bush communities including Skwentna, Alaska for 12 years under a part 135 FAA certificate. Alaska Bush Air will soon be conducting scheduled flight operations from Anchorage, Alaska to Skwentna, Alaska as passenger, and cargo services to the Alaska bush communities. This Letter of Intent to Equalize to conduct air mail services to and from PANC and PASW for the USPS.

Effective July 1, 2016 we would like a equalize to the bush 135 rate for the Anchorage to Skwentna market segment only.

By: Jason Sturgis


 

Order 2016-5-11
OST-2003-14694

Issued and Served May 20, 2016

Bush Quarterly Fuel Adjustment

By this Order, the Department is making its regular quarterly adjustments to the Intra-Alaska bush mail rates, Part 121, Part 135 and Seaplane, to reflect the most recent linehaul portion of quarterly fuel costs. The new rates are to be effective on May 21, 2016, the second Saturday after the issuance of this Order, and reflect fuel expenses for the quarter ended December 31, 2015.

Class Rate Rate per Order 2016-2-17 Less Old Fuel in Order 2016-2-17 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $4.9140 $0.7496 $0.8802 $5.0446 2.66%
Part 135 $15.1038 $3.9327 $4.0889 $15.2600 1.03%
Seaplane $28.0735 $4.3882 $5.8922 $29.5775 5.36%
Terminal $1024.95 NA NA $1024.95 0.00%

By: Jenny Rosenberg


 

OST-2003-14694
OST-2003-14695

November 16, 2016

Withdrawal of Equalization of Notice of Alaska Central Express

On February 3, 2006 Alaska Central Express, Inc. filed an equalization notice in these Dockets in accordance with the provisions of Order 1990-10-34 in connection with the mail service provided by Alaska Central in the Anchorage-Ketchikan and Anchorage-Sitka markets. Subsequently by its Notice of Withdrawal dated December 26, 2013 Alaska Central withdrew its request for payment for the movement of mail at the equalized rate in the Anchorage-Ketchikan market.

In the Equalization Notice and pursuant to the provisions of Order 1990-10-34, Alaska Central indicated that the Equalization Notice would be effective on February 11, 2006 and would remain so "until terminated by written notice filed at least ten days in advance of such termination."

Alaska Central hereby gives notice of termination of the effectiveness of the Equalization Notice for the Anchorage-Sitka market effective as of November 26, 2016.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300


 

Order 2017-8-4
OST-2003-14694

Issued and Served August 2, 2017

Show Cause Order Proposing Updated Bypass Mail Rates

By this Order, the Department directs all interested parties to show cause why the proposed Intra-Alaska bush bypass mail rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2015-9-17, made final by Order 2015-10-22 with an effective date of November 7, 2015, and updated for changes in quarterly fuel prices most recently by Order 2016-12-20. The table below shows the current and proposed rates:

  Current     Proposed     Percentage Change    
  Fuel Nonfuel Total Fuel Nonfuel Total Fuel Nonfuel Total
Part 121 $0.8806 $4.1644 $5.0450 $1.0700 $4.9340 $6.0040 21.51% 18.48% 19.01%
Part 135 $3.7283 $11.1711 $14.8994 $3.8383 $11.0167 $14.8450 2.68% -1.38% -0.37%
Seaplane $5.6842 $23.6853 $29.3695 $4.3156 $26.0891 $30.4047 -24.08% 10.15% 3.52%
Terminal NA NA $1024.95 NA NA $1234.43 NA NA 20.44%

By: Susan McDermott


 

August 10, 2017

Objection of Hank Myers

The language and subject of the Show Cause Order in this docket is legally incorrect. The rates apply (or should to be consistent with the Airline Deregulation Act and subsequent laws) to all mail transported by certificated carriers on scheduled service intra-Alaska, not simply bypass mail. For example the file in DOT-OST-2003-14694-0001 establishing this docket is entitled “Intra-Alaska Bush Service Mail Rates”. The Order and Docket title should be revised to read “Intra-Alaska Bush Service Mail Rates”. An example of the internal inconstancy between the revised docket title and the content of the Order is that the Order proposes rates for intra-Alaska mail transported on seaplanes. In fact, no bypass mail is transported on seaplanes as none of the designated bypass routes are served by seaplanes.

By: Hank Myers


 

Order 2018-1-18
OST-2003-14694

Issued and Served February 6, 2018

Bush Quarterly Fuel Adjustment

By this Order, the Department is making its regular quarterly adjustments to the Intra-Alaska bush mail rates, Part 121, Part 135, and Seaplane, to adjust the linehaul portion for the most recent quarterly fuel costs. The new rates are to be effective on February XX, 2018, the second Saturday after the issuance of this Order, and reflect fuel expenses for the quarter ended June 30, 2017.

This Order is updating the Part 121, Part 135, and Seaplane bush mail class rates to reflect fuel expenses for the quarter ended June 30, 2017. The Department has stated that it would continue quarterly fuel updates until further notice. Since the carriers’ traffic and financial data are reported 45 days after the end of each quarter, our intent and practice has been to make quarterly adjustments with a one-quarter lag from the end of the reporting period until the beginning of the next quarter. The table below shows both the current and new mail rates.

By: Todd Homan


 

Order 2018-4-10
OST-2003-14694

Issued and Served April 12, 2018

Bush Quaterly Fuel Adjustment

Class Rate Rate per Order 2018-1-18 Less Old Fuel in Order 2018-1-18 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $5.8548 $0.9208 $0.7676 $5.7016 -2.62%
Part 135 $13.7551 $2.7384 $2.6803 $13.6970 -0.42%
Seaplane $30.5529 $4.4638 $3.5857 $29.6748 -2.87%
Terminal $1234.43 n/a n/a $1234.43 0.00%

By: Todd Homan


 

Order 2018-8-17
OST-2003-14694

Issued and Served August 21, 2018

Show Cause Order Proposing Updated Service Mail Rates

By this Order, the Department directs all interested parties to show cause why the proposed Intra-Alaska bush service mail rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2017-8-4, made final by Order 2017-8-20 with an effective date of September 2, 2017, and updated for changes in quarterly fuel prices most recently by Order 2018-4-10. The table below shows the current and proposed rates.

Current Order 2018-4-10       Proposed     Percentage Change    
  Fuel Nonfuel Total Fuel Nonfuel Total Fuel Nonfuel Total
Part 121 $0.7676 $4.9340 $5.7016 $0.9837 $5.2961 $6.2798 28.15% 7.34% 10.14%
Part 135 $2.6803 $11.0167 $13.6970 $3.0410 $14.6171 $17.6580 13.46% 32.68% 28.92%
Seaplane $3.5857 $26.0891 $29.6748 $4.2947 $27.3517 $31.6464 19.77% 4.84% 6.64%
Terminal NA NA $1234.43 NA NA $1269.66 NA NA 2.85%

By: Joel Szabat




Order 2018-9-13
OST-2003-14694

Issued and Served September 25, 2018

Finalizing Annual Update and Making Quarterly Fuel Adjustment

By Order 2018-8-17, issued August 21, 2018, the Department directed the parties to show cause within ten days of the service date of that Order why we should not make final the annual rates tentatively set forth by that Order. The deadline for objections has expired, and the Department received no comments.

Class Rate Rate Per Order 2018-8-17 Less Old Fuel in Order 2018-8-7 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $6.2798 $0.9837 $2.0298 $7.3259 16.66%
Part 135 $17.6580 $3.0410 $3.0410 $17.6580 0.00%
Seaplane $31.6464 $4.2947 $5.5732 $32.9249 4.04%
Terminal $1269.66 NA NA $1269.66 0.00%

By: Todd Homan




Order 2019-4-11
OST-2003-14694

Issued and Served April 15, 2019

Quarterly Fuel Adjustment

By this Order, the US Department of Transportation is making its regular quarterly adjustments to the Intra-Alaska bush mail rates, Part 121, Part 135, and Seaplane, to adjust the linehaul portion for the most recent quarterly fuel costs. The new rates are to be effective on April 27, 2019, the second Saturday after the issuance of this Order, and reflect fuel expenses for the quarter ended June 30, 2018.

Class Rate Rate per Order 2018-9-13 Less Old Fuel in Order 2018-9-13 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $7.3259 $2.0298 $1.9408 $7.2369 -1.21%
Part 135 $17.6580 $3.0410 $3.0248 $17.6418 -0.09%
Seaplane $32.9249 $5.5732 $5.8654 $33.2171 0.89%
Terminal $1269.66 n/a n/a $1269.66 0.00%

By: Todd Homan


 

Order 2019-5-17
OST-2003-14694

Issued and Served May 21, 2019

Bush Quarterly Fuel Adjustment

By this Order, the US Department of Transportation is making its regular quarterly adjustments to the Intra-Alaska bush mail rates, Part 121, Part 135, and Seaplane, to adjust the linehaul portion for the most recent quarterly fuel costs. The new rates are to be effective on June 1, 2019, the second Saturday after the issuance of this Order, and reflect fuel expenses for the quarter ended September 30, 2018.

Class Rate Rate per Order 2019-4-11 Less Old Fuel in Order 2019-4-11 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $7.2369 $1.9408 $1.1776 $6.4737 -10.55%
Part 135 $17.6418 $3.0248 $3.3093 $17.9263 1.61%
Seaplane $33.2171 $5.8654 $4.5048 $31.8565 -4.10%
Terminal $1269.66 n/a n/a $1269.66 0%

By: Todd Homan


 

OST-2003-14694
OST-2003-14695

September 10, 2019

Withdrawal of Equalization Notice of Alaska Central Express

On May 19, 2005, Alaska Central Express, Inc. filed an Equalization Notice in the above-referenced Dockets in accordance with the provisions of Order 1990-10-34 and Order 2005-3-27 in connection with the mail service provided by Alaska Central in the Anchorage-Bethel and Anchorage-Dillingham markets.

In the Equalization Notice and pursuant to the provisions of Order 1990-10-34 and Order 2005-3-27, Alaska Central indicated that the Equalization Notice would be effective upon filing and would remain so "until terminated by written notice filed at least ten days in advance of such termination."

Alaska Central hereby gives notice of termination of the Equalization Notice for the Anchorage-Bethel market effective as of September 20, 2019. The Anchorage-Dillingham market, which was also included in the Equalization Notice, dated May 19, 2005, is not included in this withdrawal.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300


 

OST-2003-14694
OST-2003-14695

September 23, 2019

Notice of Equalization of RavnAir

Pursuant to Department of Transportation Order 1990-10-34, Corvus Airlines, Inc. d/b/a RavnAir Alaska and Hageland Aviation Services, Inc. d/b/a RavnAir Connect, certificated air carriers currently authorized to transport US mail within the State of Alaska, hereby provide notice of intent to equalize and match, on a total rate per pound basis, the lower rates or combination of rates now in effect or hereafter prescribed and paid to Everts Air and Wright Air Service for each category of mail RavnAir transports between Fairbanks, Alaska and Galena, Alaska, effective immediately.

RavnAir Connect is a Part 135 bush carrier on the Fairbanks-Galena route. Mail tendered for carriage on RavnAir Connect flights is tendered under the *7H designator code of RavnAir Alaska, a Part 121 carrier. RavnAir Connect and RavnAir Alaska are wholly-owned subsidiaries of RavnAir Group, Inc.

By: RavnAir, Deke Abbott, 907-248-4422


 

OST-2003-14694
OST-2003-14695

October 23, 2019

Withdrawal of Equalization Notice of Alaska Central Express

On April 19, 2005, Alaska Central Express, Inc. filed an Equalization Notice in the above-referenced Dockets in accordance with the provisions of Order 1990-10-34 and Order 2005-3-27 in connection with the mail service provided by Alaska Central in the following markets-Anchorage, on the one hand, and Bethel, Dillingham and Aniak, on the other, between Dillingham and Togiak, and between Anchorage and Port Heiden.

In the Equalization Notice and pursuant to the provisions of Order 1990-10-34 and Order 2005-3-27, Alaska Central indicated that the Equalization Notice would be effective upon filing and would remain so "until terminated by written notice filed at least ten days in advance of such termination."

Alaska Central hereby gives notice of termination of the Equalization Notice for the Anchorage-Aniak and Port Heiden markets and the Dillingham-Togiak market effective as of November 4, 2019. Alaska Central withdrew its previously filed equalization notice for the Anchorage-Bethel market by its withdrawal notice dated September 10, 2019. The April 19, 2005 equalization notice regarding the Anchorage-Dillingham market remains in effect.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300


 

OST-2003-14694 - Bush Mail Rates
OST-2003-14695 - Mainline Mail Rates

January 31, 2020

Notice of Equalization of RavnAir Alaska

DOT Order 1990-10-34 provides that a certificated air carrier may elect to establish a reduced charge equal to the charge prescribed for mail transportation actually being performed between the same origin and destination points by any other certificated carrier or combination of carriers, regardless of routing.

RavnAir gives this notice of election to equalize and match on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter prescribed and paid to Alaska Airlines for each category of mail RavnAir transports between Anchorage and Kodiak. RavnAir elects to equalize in this market to any lower rate or combination of rates prescribed and paid in the future to any other carrier or carriers.

By: Don Graves, 907-865-8569


 

Order 2020-2-18
OST-2003-14694

Issued and Served February 26, 2020

Show Cause Order Proposing Updated Service Mail Rates

By this Order, the US Department of Transportation directs all interested parties to show cause why the proposed Intra-Alaska Bush Service Mail Rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2018-8-17, made final by Order 2018-9-13 with an effective date of October 6, 2018, and updated for changes in quarterly fuel prices most recently by Order 2019-5-17.

  Current, Order 2019-5-17     Proposed     Percentage Change    
  Fuel Nonfuel Total Fuel Nonfuel Total Fuel Nonfuel Total
Part 121 $1.1776 $5.2961 $6.4737 $1.8086 $8.7847 $10.5933 53.58% 65.87% 63.64%
Part 135 $3.3093 $14.6170 $17.9263 $3.3237 $15.5284 $18.8521 0.44% 6.24% 5.16%
Seaplane $4.5048 $27.3517 $31.8565 $5.7403 $29.1835 $34.9238 27.43% 6.70% 9.63%
Terminal NA NA $1269.66 NA NA $1420.80 NA NA 11.90%

By: David Short




March 6, 2020

Petition of Kalinin Aviation d/b/a Alaska Seaplanes d/b/a Air Excursions to Extend Responses to Order 2020-2-18 to March 30, 2020

Kalinin proposes an extension of approximately three weeks so that carriers may review their data, including those for periods subsequent to the data included in the rate calculations, to determine if the proposed rates accurately reflect the costs of operation. At the end of the extension, carriers will either propose alternate rates, or request a further extension until data for the twelve months ended September 30, 2019 are available. That would correspond more accurately with historic ratemaking. Order 2020-2-18 states that the previous Show Cause Order in this docket was issued in August, 2018, just 18 months ago.

In Order 2020-2-18, the Department includes language questioning the accuracy of some of the data used to compute the rate. Involved carriers have been instructed to correct their data. It would seem more accurate to use data submitted since the corrections were made.

Finally, Kalinin is in the unique circumstance of operating both Part 135 wheel aircraft and Part 135 seaplane aircraft. It has seen significant changes in operating costs in both types of aircraft over the last 12 months. Kalinin believes it can update its own data within the extension period requested.

Counsel: Hank Myers





March 6, 2020

Re: DOT Partially Granting Extension Request of Kalinin Aviation d/b/a Alaska Seaplanes d/b/a Air Excursions

The Department received a request to extend the due date for the comment period regarding Show Cause Order 2020-2-18. The Department has decided to grant that request and the due date for comments is now Friday, March 13, 2020.

By: Michael Martin, 202-366-6494


 

Order 2020-3-6
OST-2003-14694

Issued and Served March 24, 2020

Order Finalizing Annual Update and Making Quarterly Fuel Adjustment

The first comment received was from Hank Myers, consultant to Kalinin Aviation, LLC d/b/a Alaska Seaplanes, d/b/a Air Excursions. The comment requested an extension to the comment period to March 30, 2020, and states in part that “Overall, the rates projected to be paid to carriers for the next two years may not be compensatory for the non-fuel expenses that make up the majority of expenses.”

The second comment, submitted by John J. Mannion, Chief Financial Officer of Ravn Air Group, asks the Department to use data for the 12-month period ending September 30, 2019 due to increased direct expenses not realized in the 12-month period ending September 30, 2018.

These comments are similar in nature, however, the data period that the Department used in Order 2020-2-18 is not outdated. The Department uses a prospective rate calculation in order to account for lags in data. As has been stated before, we take 10 years of data periods, and use a regression analysis to determine the trend in rates (see Appendices C, G, and L). We then determine the time between the midpoint of the data reporting period to the midpoint of the prospective rate, and use a multiplicative factor to in effect continue the trend of the rates (see Appendices B, F, and K). In Order 2020-2-18, as stated in footnote 3 of Appendices B, F, and K, the midpoint of the data reporting period (April 1, 2018) to the midpoint of the prospective rate (April 1, 2020) is two years. We then took the average annual change and multiplied it by itself.

The Department intends to issue another Show Cause Order using data for the year ended September 30, 2019 in five months, with the effective date tentatively set for October 3, 2020. This will ensure that the rates finalized by this order will not extend past their prospective period.

Class Rate Rate Per Order 2020-2-18 Less Old Fuel in Order 2020-2-18 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $10.5933 NA NA $10.5933 0.00%
Part 135 $18.8521 $3.3237 $3.7178 $19.2462 2.09%
Seaplane $34.9238 $5.7403 $4.6307 $33.8142 -3.18%
Terminal $1420.80 NA NA $1420.80 0.00%

By: Todd Homan


 

April 13 2020

Petition of Consolidated Carriers for Reconsideration of Order 2020-3-6
40-Air, Air Excursions, Alaska Air Transport, Alaska Seaplanes, Bering Air, Tanana Air Service, Taquan Air Service, Tatonduk Outfitters, Warbelow's Air Ventures, Wright Air Service, Yute Alaska

As will be proven below, Order 2020-2-18 contains significant errors that result much lower rates than what would be in effect had the data been analyzed and computed correctly. Some of this underpayment has been going on for years, but no carrier caught the errors previously. Other errors are new in this year. As a result, the Postal Service has paid millions of dollars less than a compensatory rate for transportation of mail in Alaska. There is no way for the carriers to recover this underpayment, but the continuation of the underpayment can stop now.

By: MTC, Hank Myers, 425-830-4265

 

April 20, 2020

Amended Petition of Consolidated Carriers for Reconsideration of Order 2020-3-6

Bush Mail Pay Rate Calculations - Year-End 9/30/2019 - Excel File

Terminal Charge Calculations - Excel File

Regression Analysis - Excel File

On April 13, the Consolidated filed a timely Petition for Reconsideration of Order 2020-2-18, pointing out several significant errors in the calculation of the rates in that Order. The filing included all data necessary to determine a mail rate, but did not include the ancillary data included on the complete spreadsheet historically included with the Show Cause Orders. As noted previously, there were several errors in describing the data calculations in Order 2020-2-18, and these have all been corrected in the attached exhibits. The data with column numbers highlighted in blue are necessary for calculating the mail rates and fuel charge adjustments. The column numbers highlighted in yellow are ancillary data not used in the calculation of the rate. While the addition data are not required for the computation of the rate, they have been part of the complete historical presentation format and provide accuracy checks, so the Carriers want to assure the Department has all the data historically included.

By: MTC, Hank Myers, 425-830-4265


 

June 11, 2020

Petition of Alaska Carriers for Immediate Action on Adoption of Mail Rates

The record in this case is ripe for decision. The choice is between making additional adjustments to data that are out of date and do not reflect the current cost increases for pilots, mechanics and insurance, or using the most recent data for the traditional period of year ending September 30. Unfortunately, using periods with different ending dates to perform a regression analysis leads to an inaccurate estimate. The ten-year period is adopted without analysis and is longer than used for other mainstream economic forecasts. For all these reasons, the Department should immediately adopt the rates proposed above. Without passengers during this period, the need for a compensatory mail rate has never been more vital.

It is not necessary to repeat the many errors and deviations from Department precedent and procedure in Order 2020-2-18. Each of the corrections made herein and in the preceding Petition are carefully documented. The bush air carriers in Alaska are being underpaid for their services, and further delay simply adds to the irreparable harm.

To gild the lily, while Part 135 and Part 121 bush carriers may equalize to and serve mainline markets, wheelplane operators of any size cannot equalize to or safely operate in seaplane markets. Exclusion of wheelplane operations from the seaplane rates is consistent with all other policies of ratemaking, as well as being required specifically by the Rural Service Improvement Act.

The effect of wheelplane operations on seaplane rates is no longer de minimus. All wheelplane markets, and consequently the carriers operating in them, must be eliminated.

Counsel: Hank Myers


 

June 17, 2020

Petition of Alaska Carriers for Immediate Action on Adoption of Mail Rates - Updated

The record in this case is ripe for decision. The choice is between making additional adjustments to data that are out of date and do not reflect the current cost increases for pilots, mechanics and insurance, or using the most recent data for the traditional period of year ending September 30. Unfortunately, using periods with different ending dates to perform a regression analysis leads to an inaccurate estimate. The ten-year period is adopted without analysis and is longer than used for other mainstream economic forecasts. For all these reasons, the Department should immediately adopt the rates proposed above. Without passengers during this period, the need for a compensatory mail rate has never been more vital.

It is not necessary to repeat the many errors and deviations from Department precedent and procedure in Order 2020-2-18. Each of the corrections made herein and in the preceding Petition are carefully documented. The bush air carriers in Alaska are being underpaid for their services, and further delay simply adds to the irreparable harm.

To gild the lily, while Part 135 and Part 121 bush carriers may equalize to and serve mainline markets, wheelplane operators of any size cannot equalize to or safely operate in seaplane markets. Exclusion of wheelplane operations from the seaplane rates is consistent with all other policies of ratemaking, as well as being required specifically by the Rural Service Improvement Act.

The effect of wheelplane operations on seaplane rates is no longer de minimus. All wheelplane markets, and consequently the carriers operating in them, must be eliminated.

Counsel: Hank Myers


 

Order 2020-6-15
OST-2003-14694

Issued and Served June 26, 2020

Bush Quarterly Fuel Adjustment

By this Order, the US Department of Transportation is making its regular quarterly adjustments to the Intra-Alaska bush mail rates, Part 135, and Seaplane, to adjust the linehaul portion for the most recent quarterly fuel costs. The new rates are to be effective on July 4, 2020, the second Saturday after the issuance of this Order, and reflect fuel expenses for the quarter ended September 30, 2019.

Class Rate Rate per Order 2020-3-6 Less Old Fuel in Order 2020-3-6 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $10.5933 NA NA $10.5933 0.00%
Part 135 $19.2462 $3.7178 $3.1009 $18.6383 -3.16%
Seaplane $33.8142 $4.6307 $3.5564 $32.7399 -3.18%
Terminal $1420.80 NA NA $1420.80 0.00%

By: Todd Homan


 

Order 2020-8-11
OST-2003-14694

Issued and Served August 31, 2020

Order Denying Petitions for Reconsideration

By this Order, the US Department of Transportation denies the four petitions filed on behalf of 40-Mile Air, Ltd., Air Excursions, Alaska Air Transit, Alaska Seaplanes, Bering Air, Inc., Tanana Air Service, Taquan Air, Tatonduk Outfitters, Warbelow’s Air Ventures, Wright Air Service, and Yute Alaska.

  1. The Department denies the petition titled “Petition for Reconsideration of Order 2020-3-6” received on April 14, 2020;
  2. The Department denies the petition titled “Amended Petition for Reconsideration of Order 2020-3-6 and Leave to File an Otherwise Unauthorized Document” received on April 21, 2020;
  3. The Department denies the petition titled “Petition for Immediate Action and Leave to File an Otherwise Unauthorized Document” received on June 11, 2020;
  4. The Department denies the petition titled “Petition for Immediate Action and Leave to File an Otherwise Unauthorized Document” received on June 17, 2020;

We will deny all of these petitions as not timely filed. The matters raised should have been presented in response to the Show Cause Order. To do so in response to an order finalizing a show cause order that was not itself contested is particularly inappropriate.

The next annual update based on data for the year-ended September 30, 2019 will be issued in Fall 2020. Should the Petitioner continue to have concerns, that show cause order will provide an opportunity to raise issues then.

By: David Short


 

Order 2020-10-7
OST-2003-14694

Issued and Served October 13, 2020

Show Cause Order Proposing Updated Service Mail Rates

By this Order, the US Department of Transportation directs all interested parties to show cause why the proposed Intra-Alaska Bush Service Mail Rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2020-2-18, made final by Order 2020-3-6 with an effective date of March 24, 2020, and updated for changes in quarterly fuel prices most recently by Order 2020-6-15.

  Current Order 2020-6-15     Proposed     Percentage Change    
  Fuel Nonfuel Total Fuel Nonfuel Total Fuel Nonfuel Total
Part 121 $1.8086 $8.7847 $10.5933 $1.8086 $8.7847 $10.5933 0.00% 0.00% 0.00%
Part 135 $3.1099 $15.5284 $18.6383 $3.6025 $19.4605 $23.0630 15.84% 25.32% 23.74%
Seaplane $3.5564 $29.1835 $32.7399 $4.0328 $35.0357 $39.0685 13.40% 20.05% 19.33%
Terminal NA NA $1420.80 NA NA $1532.27 NA NA 7.85%

By: Jared Smith


 

Order 2020-11-3
OST-2003-14694

Issued and Served November 6, 2020

Finalizing Annual Update and Making Quarterly Fuel Adjustment

Class Rate Rate Per Order 2020-10-7 Less Old Fuel in Order 2020-10-7 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 121 $10.5933 NA NA $10.5933 0.00%
Part 135 $19.9885 $3.6025 $3.0990 $19.4850 -2.52%
Seaplane $35.0357 $4.0328 $5.7670 $36.7699 4.95%
Terminal $1532.27 NA NA $1532.27 0.00%

By: Todd Homan


 

Order 2021-1-14
OST-2003-14694

Issued and Served January 29, 2021

Bush Quarterly Fuel Adjustment

By this Order, the US Department of Transportation is making its regular quarterly adjustments to the Intra-Alaska bush mail rates - Part 135, and Seaplane, and, to adjust the linehaul portion for the most recent quarterly fuel costs. The new rates reflect fuel expenses for the quarter ended March 31, 2020, and are to be effective February 6, 2021, the second Saturday after the issuance of this Order.

This Order updates Order 2020-11-3, which finalized the terminal and linehaul charges, and updated the fuel adjustment for the quarter ended December 31, 2019.

Class Rate Rate Per Order 2020-11-3 Less Old Fuel in Order 2020-11-3 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 135 $19.4850 $3.0990 $3.3269 $19.7129 1.17%
Seaplane $40.8027 $5.7670 $6.1610 $41.1967 0.97%
Terminal $1532.27 n/a n/a $1532.27 0.00%

By: Todd Homan


 

Order 2021-5-2
OST-2003-14694

Issued and Served May 4, 2021

Bush Quarterly Fuel Adjustment

By this Order, the US Department of Transportation is making its regular quarterly adjustments to the Intra-Alaska bush mail rates - Part 135, and Seaplane, and, to adjust the linehaul portion for the most recent quarterly fuel costs. The new rates reflect fuel expenses for the quarter ended June 30, 2020, and are to be effective May 15, 2021, the second Saturday after the issuance of this Order

This Order updates Order 2021-1-14, which updated the fuel adjustment for the quarter ended March 31, 2020.

Class Rate Rate Per Order 2021-1-14 Less Old Fuel in Order 2021-1-14 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 135 $19.7129 $3.3269 $3.4742 $19.8602 0.75%
Seaplane $41.1967 $6.1610 $5.4738 $40.5095 -1.67%
Terminal $1532.27 n/a n/a $1532.27 0.00%

By: Todd Homan


 

Order 2021-8-1
OST-2003-14694

Issued and Served August 6, 2021

Bush Quarterly Fuel Adjustment

By this Order, the US Department of Transportation is making its regular quarterly adjustments to the Intra-Alaska bush mail rates - Part 135, and Seaplane, and, to adjust the linehaul portion for the most recent quarterly fuel costs. The new rates reflect fuel expenses for the quarter ended September 30, 2020, and are to be effective August 14, 2021, the second Saturday after the issuance of this Order.

Class Rate Rate Per Order 2021-5-2 Less Old Fuel in Order 2021-5-2 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 135 $19.8602 $3.4742 $3.1377 $19.5237 -1.69%
Seaplane $40.5095 $5.4738 $4.6072 $39.6429 -2.14%
Terminal $1532.27 n/a n/a $1532.27 0.00%

By: Todd Homan


 

Order 2021-11-5
OST-2003-14694

Issued and Served November 10, 2021

Show Cause Order Proposing Updated Service Mail Rates

By this Order, the US Department of Transportation directs all interested parties to show cause why the proposed Intra-Alaska Bush Service Mail Rates set forth below should not be made final. The rates currently in effect were tentatively set by Order 2020-10-7 and made final by Order 2020-11-3 with an effective date of November 14, 2020. That Order was updated for changes in quarterly fuel prices most recently by Order 2021-8-1.

Based on average eligible stage lengths of haul of 81 miles for the Part 135 operators, and 45 miles for Seaplane operators, the proposed changes to Linehaul rates would have a net effect on each rate class as follows: Part 135, +1.46 percent, and Seaplane, +126.95 percent. Terminal charges would decrease 12.04 percent.

By: Joel Szabat


 

November 18, 2021

Re: Extension of Comment Due Date

The Department has received a request to extend the due date for comments to Show Cause Order 2021-11-5. The Department grants this request, and comments will be due Monday, November 29, 2021, at 11:59PM Eastern Time.

By: Mark Raggio


 

November 29, 2021

Re: Taquan Air Response to Show Cause Order Request to Review Financials

Upon reviewing the data, it was clear that our reduced tourism operations as a result of the COVID-19 Pandemic and the nonexistence of cruise ship traffic to Alaska in 2020 had a dramatic effect on our total flight hours. In the years 2020 and 2021 Taquan operated a total of 3 aircraft, 1 DHC-3T and 2 DHC-2’s. This is in stark contrast to a pre COVID 2019 year when we operated 12-14 aircraft. For 2019 quarters 1-3 we flew 5,349 block hours compared to 2020 quarters 1-3 with block hours of 2,003. This is a 63% reduction in flight hours year-over-year due to the pandemic and zero cruise ship passengers in 2020. Tourism revenue was over 60% of our total revenue in 2019 and zero in 2020.

To survive the pandemic we were able to substantially reduce our operating costs and consolidate our operations lowering our operating expenses by 36% for the first three quarters in 2020 compared to the same period in 2019. Despite lowering our operating costs our hourly expense per block hour increased from 2019 cost per block hour of $1153/hr. to $1966/hr., a 71% increase due to less aircraft utilization.

The reduction in flight hours because of COVID-19’s impact on our tourism business has decreased the number of flight hours to amortize our fixed costs resulting in a dramatic increase in our costs per block hour. I would like to point out that this is a temporary increase subject to the pandemic subsiding and tourists getting back on-board cruise ships in 2022. It is also clear how much our tourism business supports our scheduled flight costs.

I would like to make special note that we are very concerned that the temporary increase in seaplane mail rates could have an impact on the USPS dispatch procedures for seaplanes and be very harmful and detrimental to our business at a time when we need the USPS the most to survive our losses from the pandemic. I am confident that as our flight hours increase our block hours costs will decrease substantially and the seaplane rate will become more normalized over the upcoming quarters.

By: Brian Salazar


 

Order 2021-12-15
OST-2003-14694

Issued and Served December 28, 2021

Finalizing Annual Update and Making Quarterly Fuel Adjustment

Class Rate Rate per Order 2021-11-5 Less Old Fuel in Order 2021-11-5 Add Fuel per the Appendices to this Order Final Rate Percentage Change
Part 135 $19.8089 $3.3236 $3.1300 $19.6153 -0.98%
Seaplane $89.9698 $5.0673 $5.3798 $90.2823 0.35%
Terminal $1347.77 n/a n/a $1347.77 0.00%

By: Todd Homan

 

 

 

 

 

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