### October 5, 2011

KevinAdams Department ofTransportation Washington, DC 

# = !§LYNDEN =----='==g 

# AIRCARGO

DocketOST-2003-14695 Lynden Aw Cargo. LLC 6441 South A<rparl< Place**.~nchomge,** Alaska 99502-1809 1907) 243-61f{J fax: (907i 245-0642



### Re: Response to USPS Comments onLAC Cost Data In

### response to Docket OST-2003-14695, LyndenAirCargo, LLC, (LAC) provides data andcomments regarding the United States Postal Service's objection to theproposed mainline service rates in the Show Cause Order2011-9-6 ("the Order"). Forthe yearendedMarch 31, 2010, LAC's systemblockhours were 9,371 as reported correctly inthe attachedl0-2010-8-7 Show Cause Annual Update rather than the 11,590hours stated in the Order. LAC's systemblockhours for the yearended March 31, 2011 were 7,529 as reported inthe attached 2011-9-6 Show Cause Annual Update. The year-over-yearchange is a decrease of20%, a significant figure that impacts the rate, butis not as dramatic as the 41% figure stated in the Order. The Orderalso speculates that the resulting increase in unit costs reflects management's decisionnot to 

### trim backpersonnel and otherexpenses commensurately with the decrease inhours. This is notwholly accurate. The majority ofthe increase in LAC'snon-fuellinehaul costs is attributable to an increase of $2,819,517 in maintenance costs, ofwhich $2,120,803 was directly related torequiredheavy maintenance checks which are performedatFAA required intervals. The expense for these required checks, which are directly related to safety offlight, is recorded in the periodthe check is performed and may not always be commensurate with the hours flown for the sameperiod.

Attachments Sincerely, 1

# ~~~;,. Judy A. McKenzie President

# '

Appendix D-1 Operating Expenses. AlaskaAirlines, Northern Air Cargo, Lynden Air Cargo, and Tatonduk Outfitters. Ltd. Intra-Alaska Class Service Mail Rates--Year Ended March 31. 2010 Lynden Northern Alaska Airlines Air Cargo Air Carl;\o Tatonduk Outfitters, Ltd. (AS) (LAC) NAC (TOL) <TOL) #617 #556 #620 #218 #461 Total 8-737-400 Hercules 737-200 DC-6 Brasilia Domestic Fuel $137.427.664 $6,610,272 

# s10,809.082 $10,276.347 $431.656 Dom. N-Fuel**~297,041,586 ~35,449,897**  :1!13,843,630 :1!13,199,859 :1!1,945,030

Total $434,469,250 $42,060,169 $24.652,712 $23.476.206 $2,376,686 Intra-AK Skd. B.Hrs. 39,073 25,460 1,696 5.298 5,549 1.070 Intra-AK Adj. Fuel B.Hrs. 3,266 Domestic Total 114,606 91,813 9.371 5,822 6,492 1,108 Intra-AK Fuel $60,578,447 $38,109.073 $3.432,646 $9,836,227 $8,783,649 $416.852 Intra-AKN-Fuel $114,544.800 $82,370,457 $6,415.860 $12.597,656 $11.282,504 $1,878.323 Intra-AK Skd. ATMs 187.492,053 132,676.400 10,899,372 26,305,663 16,711,793 898.825 $/ATM. Fuel $0.323099 $0.287233 $0.314940 $0.373921 $0.525596 $0.463774 $/ATM. N-Fuel $0.610931 $0.620837 $0.588645 $0.478895 $0.675122 $2.089754 Intra-AK Mail RTMs 22.853,334 6,501,984 3,985.608 5.677.223 6,308,294 380,225 RTM% ofTotal 99.99% 28.45% 17.44% 24.84% 27.60% 1.66% S/ATM. Fuel $0.382290 $0.08172 $0.05493 $0.09288 $0.14506 $0.00770 $/ATM, N-Fuel $0.619270 $0.17663 $0.10266 $0.11896 $0.18633 $0.03469

Total AS LAC II NAC TOL Account '#6900 $15.578.850 $9,880,965 System Tons Enpl. 32,292 32,854 Intra-AK Skd. Svc. $52,295.038 $5,511,039 $14,470,210 $7,344,708 Intra-AK Skd. Svc. Tons 148,607 12,937 29,994 24.421 $/Ton Enplaned $351.90 $425.99 $482.44 $300.75 AK Mail Tons Enplaned 54,348 14,026 9,635 14.325 16.362 2/ Mail Tons% of Total 100.01% 3/ 25.81% 17.73% 26.36% 30.11% Wtd. $/Ton Enplaned $384.09 $90.83 $75.53 $127.17 $90.56 II Lynden developed its intra-Alaska costs by directly assigning all terminal costs, and then allocating the remainder

on intra-Alaska and system departures. 

### 21 Mainline aircraft only: 16,610 enplaned tons, allocated between mainline and bush on scheduled payload: 16,610 

## *49,117 mainline payload tons+ 49,861 sytem payload tons. 3/Total may not sum to I00% due to rounding.Appendix D-1 Operating Expenses, AlaskaAirlines, Northern Air Cargo, Lynden Air Cargo, and Tatonduk Outfitters, Ltd. Intra-Alaska Class Service Mail Rates--Year Ended March 31, 2011 Lynden Northern Alaska Airlines Air Cargo Air**Car~o** Tatonduk Outfitters

Domestic Fuel II Dom. N-Fuel 2/

Total Intra-AK Skd. Blk. Hrs. 3/ Domestic Total 4/ Intra-AK N-Fuel Intra-AK Skd. ATMs 3/ $/ATM, N-Fuel Intra-AK Skd. Mail RIMs 3/ RTM% ofTotal $/ATM, N-Fuel

Terminal Expense 5/ System Tons Enplaned 6/ Intra-AK Skd. Svc. 7/ Intra-AK Skd. Svc. Tons 8/ $/Ton Enplaned AK Mail Tons Enplaned 9/ Mail Tons% of Total Wtd. $/Ton Enplaned Total

45.058 133,554 $110,191,981

192,350,893

$0.572870 22,975,028 99.99% $0.623960

53,802 100.00% $368.85 CAS) #617 B-737-400 $167,613,000**~240,736,000** $408,349,000 25,504 86,310 $71,135,801 133,088,509

$0.534500 6,591,512

28.69% $0.15335 AS

$49,373,399 149,141 $331.05

14,448 26.85% $88.89 (LAC) #556 Hercules $15,609,574**~38,395,694** $54,005,268 1,585 7,529 $8,083,036 10,095,107 $0.800688 3,586,546

15.61% $0.12499 LAC

$4,613,395 11,294 $408.48

7,414 13.78% $56.29 (NAC) (TOL) #620 #218 737-200 DC-6 $15,976,963 $12,357,200**~** 16,526,027**~12,109,487** $32,502,990 $24,466,687 5,069 5,904 6,546 7,182 $12,797,194 $9,954,666 25,559,044 17,639,281 $0.500691 $0.564346 5,248,404 6,423,390

22.84% 27.96% $0.11436 $0.15779 NAC TOL $15,256,982 $10,536,057 33,361 34,682 $13,827,826 $7,989,686 30,236 26,300 $457.33 $303.79

13,803 16,775 25.66% 31.18% $117.35 $94.72 II Alaska Airlines, Schedule P5.02, #5145.1; PenAir, Schedule F2, Line #2. LAC, NAC, TOL are from P5.1, Line #40. 21 Sources have same schedules as above. For PenAir, we have excluded Passenger Liability Insurance, Line #5. CTOL) #461 Brasilia $593,440 $1 945 099 $2,538,539 1,139 1,230 $1,801,193 983,837 $1.830784

400,049

1.74% $0.03186

3/ Per T-1 00 Segment Report, except for PenAir. We relied on a special internal report ofPenAir, because the T-1 00 report does not distinguish between service with mainline and bush aircraft with any precision. 41 PerT-1 00 Segment Report. 51 Form 41, #6900 account for NAC and TOL. For PenAir, we rely on Schedule F2, Departure Related Expense and Capacity Related Expense, Line #13 and #14. 6/ PerT-I 00 Market Rep01t for NAC and TOL and PenAir. 7I For AS and LAC, the sources are special internal reports. For NAC, TOL, and PenAir, it's allocated based on the data shown. 8/ For LAC, the data is based on a special internal report. For the others, the data is from the T-100 Market Report. 91 T-I00 Market Report, with those results for TOLand PenAir adjusted by payload to estimate the mainline portion, as follows: TOL: 17,017 * 103,717,189 mainline**payload~** 105,215,289 sytem payload, T-100 Segment Report. PenAir: 6,126*32,275,I00 mainline payload+145,140,803 system payload, T-100 Segment Report. PenAir 456 Saab 340 $10,372,276**~25,** 10I,328 $35,473,604 4,918 22,989 $5,369,887 4,216,953 $1.273405

356,587

1.55% $0.01974

PenAir $13,741,212 29,972 $13,552,782 29,561 $458.47

1,362 2.53% $11.60 PenAir 459 Saab 340 $828,285**~1,977,380** $2,805,665 939 1,768 $1,050,204 768,162 $1.367165

368,540

1.60% $0.02187