**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 M yers MTC P.O. Box 714 2 Bellevue, WA 98008
- 1142 (425) 830
- 4265 (office) hank@mtcworld.com September 12, 20111 **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. P OSTAL 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 mi sstatements, if unchalle nged , 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 fr om the 12 months ended June 30 each year, and once made final, appl y 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 ye ar. 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 could2

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 combin ed in a single rate, that was onl y 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 Car

riers 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 legall y vali d 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 def iciencies 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 b y 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 added3

The costs of the Metroliners obviously do not reflect the costs of carry ing mail in the forthcoming ye ar, as they have been entirel y eliminated from use. The Rural Service Improvement A ct is very clear in specify ing the policy for determining bush mail rates. Rates are to be set at a level that is compensatory for cost s incurred b y passenger service in the bush markets being served. The costs o f 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 Se rvice, b y 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 esta blished 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 an y) shown. The ideal solution would be to make mail pay records for carriers transporting mail at c lass 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 y et 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 carry ing mail in the forthcoming y ear. The Department should set a separate large aircraft Part 135 rate for aircraft having a4

maximum certificated seating capacity of at least 19 passengers. Th is 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 shou ld exclude all operations of Part 135 aircraft in markets where the Part 121 rate prevails, as it currentl y does for all bush operations in markets where mainline service is offered. This can be accomplished by requiring the Postal Service to list which m arkets are being paid at Part 121 rates, and the effective dates of service, preferabl y b y making current pay reports public.
**WHEREFORE** , The Consolidated Carriers request that the Department establish bush mail rates that reflect the costs of carryingmai l in the forthcoming period, and that this rate must exclude the costs of the Metroliners that have been eliminated from service b y Peninsula Airway s. This exclusion should be made regardless of whether a separate large aircraft Part 135 rate is establish ed as requested on the basis of cost and operational limitations. The Postal Service should support its request for separate reporting of operations b y regulation type b y making public its pay records to document which routes are being paid at which rates
. Respectfully

submitted, The Consolidated Carriers

____________________ by Hank M yers September 12, 20115 **CERTIFICATE OF SERVICE** I hereb y certify

that I have this date served a copy of the R esponse of the C onsolidated C arriers 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 M yers September 12, 2011