UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

__________________________________________

)

In the matter of the )

)

INTRA-ALASKA BUSH MAIL RATES ) Docket OST-2003-14694

)

__________________________________________)

RESPONSE OF THE CONSOLIDATED CARRIERS

TO THE SEPTEMBER 8, 2011 FILING OF

THE U.S. POSTAL SERVICE

Communications with respect to this document should be addressed to:

Hank Myers

MTC

P.O. Box 7142

Bellevue, WA 98008-1142

(425) 830-4265 (office)

hank@mtcworld.com

September 12, 2011
1

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

__________________________________________

)

In the matter of the )

)

INTRA-ALASKA BUSH MAIL RATES ) Docket OST-2003-14694

)

__________________________________________)

RESPONSE OF THE CONSOLIDATED CARRIERS

TO THE SEPTEMBER 8, 2011 FILING OF

THE U.S. POSTAL SERVICE

In its filing dated September 8, 2011, the Postal Service succinctly misstates the historic 

ratemaking policies and decisions of the Department in setting intra-Alaskan class mail 

rates. To the extent that these misstatements, if unchallenged, would be detrimental to a 

fair and compensatory mail rate structure, the Consolidated Carriers request leave to 

respond to the Reply of the Postal Service.

Pursuant to the well developed procedures for ratemaking, rates are based on the costs 

from the 12 months ended June 30 each year, and once made final, apply until a rate 

based on the next data set are made final. Examination of the mail rate order show that 

the term of the annual rates range from a few months to well over a year. The important 

issue in this case is how to treat the large aircraft operated under Part 135, and how to 

deal in this case with the Metroliner aircraft which are no longer operated. The 

Department has in hand all data for the 12 months ended June 30, 2011, and could 
2

compute the most current rate levels once the policy issues related to large aircraft are 

decided.

While the Department determined, under the provisions of 39 USC 5402(h)(2)(B), that 

aircraft operated under different operating regulations could not be combined in a single 

rate, that was only one of the solutions proposed to deal with large aircraft. The 

important point is that the Department has sufficient discretion to adopt any of the other 

solutions proposed, and each proposal made by the Consolidated Carriers is based on 

previous Department action in this docket.

There is no valid basis to compute a taper rate for Part 135 rates. Experience with both 

the Part 121 rates and the mainline rates have shown that the most accurate, consistent 

and legally valid method for setting rates is the use of a combination of terminal and 

linehaul rates, with the linehaul rate set at a consistent rate per ton mile. The point of the 

Consolidated Carriers alternative to the Department’s taper was to show the essential 

deficiencies in the taper rate, not to propose a different taper solution.

On the issue of exclusion of data, the Department has noted that it decides the matter on a 

case by case basis. “Our goal is to set reasonable rates that reflect the cost of carrying

mail in the forthcoming year while at the same time providing increased certainty to the 

parties as to what rates they will pay or receive at any given time.” Order 2007-4-25, p3, 

emphasis added
3

The costs of the Metroliners obviously do not reflect the costs of carrying mail in the 

forthcoming year, as they have been entirely eliminated from use. The Rural Service 

Improvement Act is very clear in specifying the policy for determining bush mail rates. 

Rates are to be set at a level that is compensatory for costs incurred by passenger service 

in the bush markets being served. The costs of service in mainline markets are excluded, 

as well as the costs of all-cargo carriers. The Act recognizes that this will not result in 

the lowest rate for the Postal Service, by the lowest rate consistent with the provision of 

passenger service.

The carriers have no objection to the reporting of data to include the operating rule 

classification, but that is only half of the equation. Just as the Postal Service has 

established routes over which mainline rates are paid, it should report which routes are 

being paid at Part 121 rates, with the beginning and ending dates (if any) shown. The 

ideal solution would be to make mail pay records for carriers transporting mail at class 

rates public. This would not only report which markets are being paid at the various pay

rates, but would more easily document when an incorrect rate is being paid as is the case 

for seaplane carriers today. The Postal Service has yet to implement the most recent 

seaplane fuel adjustment that became effective on July 2, 2011.

While the Postal Service may not like the outcome, the best solution for setting bush mail 

rates in the current environment is to exclude the costs of operating the Metroliners from 

the proposed rate as they do not reflect the costs of carrying mail in the forthcoming year. 

The Department should set a separate large aircraft Part 135 rate for aircraft having a 
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maximum certificated seating capacity of at least 19 passengers. This must be done not 

simply because of the significantly different cost levels, but because these larger aircraft 

are incapable of serving the vast majority of bush airports where the Part 135 rate applies. 

Third, in future ratesetting, the Department should exclude all operations of Part 135 

aircraft in markets where the Part 121 rate prevails, as it currently does for all bush 

operations in markets where mainline service is offered. This can be accomplished by

requiring the Postal Service to list which markets are being paid at Part 121 rates, and the 

effective dates of service, preferably by making current pay reports public.

WHEREFORE, The Consolidated Carriers request that the Department establish bush 

mail rates that reflect the costs of carrying mail in the forthcoming period, and that this 

rate must exclude the costs of the Metroliners that have been eliminated from service by 

Peninsula Airways. This exclusion should be made regardless of whether a separate large 

aircraft Part 135 rate is established as requested on the basis of cost and operational 

limitations. The Postal Service should support its request for separate reporting of 

operations by regulation type by making public its pay records to document which routes 

are being paid at which rates.

Respectfully submitted,

The Consolidated Carriers

____________________

by Hank Myers

September 12, 2011
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CERTIFICATE OF SERVICE

I hereby certify that I have this date served a copy of the Response of the Consolidated

Carriers to the September 8, 2011 Reply of the U.S. Postal Service upon all parties to 

Docket DOT-OST-2003-14694 by electronic mail.

____________________

Hank Myers

September 12, 2011