Docket2003-14694



### Notes of Kevin Adams to AACA Meeting on February 13 and 14, 2013



### 1. The carriers requested a list ofouredit checks to their data. We will look into providing that check list. 2. Kevin expressed concern that carriers were "picking and choosing" which reports theywould submit on a reliable and timely basis. Specifically, the weeklyT-100 Market reportwas invariably reliable and on time because carriers recognized theywould be automatically "dinged" by USPS ifthe data were late or unreliable. However, thatwas notthe case for monthly T-100 Segment and quarterlySchedule F-1 and F-2 reporting. Nevertheless, the carriers should provide equal attention to all ofthese reports because all are used for DOT ratemaking and to gauge the reliability oftheT-100 Market reports. Also, late or bad reporting by one carrier ofany ofthese reports impinges on the integrity ofthe bypass mail program, hurting othercarriers in the cost pool as well as USPS by causing delay in the issuance ofmail rates. Kevin argued for introducingto all ofthe reports the automaticyet gradual enforcement mechanism that applies to the weeklyT-100 Market report. [Since USPS relies on an annual accumulation ofweeklyT-100 traffic data to determine carriers eligible fortender, withholding

one week at a time is gradual.] Namely, ifthe other reports ofa particular carrier were not reported orwere found to be unreliable, then the weeklyT-100 market report forthat 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 ofthe carriers' data are used for mail ratemaking, those othercarriers sufferthe consequences ofthe lack ofcompliance by a single non-compliant carrier. Another weakness of relying on enforcement proceedings is that carrier reporting which is notfully compliant is difficulttodiscourage because it may never quite rise to the threshold of requiring

an enforcement proceeding. Jennifer Rodes was concerned thatthe automatic enforcement would occurto quickly, thatthere should be some grace period provided. The length ofagrace period is, ofcourse, open to discussion. Steve Deaton felt that DOT had itwithin its authorityto withhold the weekly T-100 reporting from USPS without relying on USPS to exclude the offending carrier's weekly T-100 Market report, which does notcounteract the basic thrust ofthe proposal. 3. Kevin expressed concern when T-100 revenue block hours exactly equaled Schedule F-2

revenue+nonr.evenue block hours, and certainly when F-2 hours were shown to be LESS than T-100 block hours. It was argued that in Alaska there could be fewer non-revenue check rides than elsewhere, because the pilots often performed their check rides during revenue operations. However, that doesn't explain the absence ofANY non-revenue hours for EXTENDED periods oftimefrom a carrier's reports. Also, it should be noted that some Alaska carriers have very LARGE percentages of non-revenue block hours. 4. PenAir and PMAir, which provide significant operations outside ofAlaska, submit Alaska-only Schedule F-1 and Schedule F-2 reports. [This creates no problem with T-100 Segment or Market Reports because each entry indicates whether itwas operated inside Alaska or not.] Those two carriers would supplementthat information by emailing spreadsheets oftheir entire operations to BTS thatwould be kept internally and not published. For consistency, starting with QE 12/31/12, Seaport would begin followingthe same reporting procedures.5. DOTfully recognizes thatthe issuance ofan annual mail rate update is delayed. There is

concern thatwhen the next show cause order issues, that a lengthy period ofobjections and discussion could occur. Kevin indicated that DOT could, underthose circumstances, finalize that show cause orderon atemporary basis before resolving all ofthe comments and objections. 6. Steve Deaton wondered what caused the bad data since the carriers have been reporting that data for several years. However, that is notthe case because the Alaska Reporting Directive issued in December 2011 clarified that beginning with QE 3-31-12**revenue~** non-revenue block hours would be reported on Schedule F-2. Kevin indicated that he had not doublechecked the data as itcame in each quarter as he would have liked, especially in view ofthe

new reporting directive, because he had been too busy with Delta's drop notice at 24 communities. Also, the large variance in fuel burn per block hourforthe same aircrafttypes operated by differentcarriers suggests that revenue block hours may be understated, or, in the alternative, that gallons may be overstated. 7. The carriers asserted that ifEPA required non-leaded fuel, thatthe traffictransported by private aircraft operators would not added to the level ofcommercial airtraffic, thereby enhancing the carriers' bottom lines. Rather, because that type ofprivate flying is typically operated into nondesignatedfishing or hunting camps, thetraffic on those flights would simply disappear without contributingto the carriers' bottom lines. 8. Second Day- A great deal oftime was spent arguingthatfhe data for PenAir's Saab 340-A AllCargo operations should be excluded, contrary tothefinding 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 ataper. Kevin argued thatwhateverthe Postal Service and the Carriers unanimously desired, DOT would find very difficultto disagree with. It should be noted that Danny Seybert indicated that PenAir would no longerobjectto 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 thatthis issue was addressed in Order 2003-10-10, issues 5 and 6. 9. Kevin reminded the carriers that although a subsidy contract might expire on a specific date, that such expiration did NOT mean that a carrier could leave the subsidized community without DOT permission. Essential Air Service requires that DOT make every effortto find a replacement for a carrier being forced against its will to provide EAS. However, DOTwould still pay the carrier reasonable compensation ifheld in beyond the expiration date ofthe contract-- although nota level ofsubsidy dictated bythe carrier-- ifit could notfind a replacement carrier at the end ofthe contract. 10. Kevin reminded the carriers that the recently concluded case of Diomede, Alaska, Order 2012-9-25, Docket 2009-0260, was unique. Not only was itthe first time DOT had selected a helicopterto provide EAS in Alaska. Perhaps more importantly, Evergreen was not selected to provide Essential Air Service (49 U.S.C., Section 41731) but rather Alternative Service to Non-Eligible Places (ATNEP) under49 U.S.C. Section 41736. The Order also noted that DOT had found that we could notsubsidize any mode oftransportation otherthan aircraft. 11. Postal Service indicates that it spends $165 million ayear for intra-Alaska airtransportation of the mail, $105 million for bypass; generates$31 million of postage for bypass, and thus loses $74 million ayear on bypass mail.