BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

OFFICE OF THE SECRETARY 

__________________________________________ 

 ) 

In the matter of the ) 

 ) 

Intra-Alaska Bush Mail Rates ) Docket OST-03-14694 

 ) 

Response of the Consolidated Carriers to the ) 

U.S.P.S. and Peninsula Airways Comments ) 

__________________________________________) 

REPLY OF THE CONSOLIDATED CARRIERS TO THE 

U.S.P.S. AND PENINSULA AIRWAYS COMMENTS 

Communications with respect to this document should be addressed to: 

Hank Myers 

MTC 

P.O. Box 7142 

Bellevue, WA 98008-1142 

Office (425) 830-4265 

Email hank@mtcworld.com

March 1, 2011 
BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

OFFICE OF THE SECRETARY 

__________________________________________ 

 ) 

In the matter of the ) 

 ) 

Intra-Alaska Bush Mail Rates ) Docket OST-03-14694 

 ) 

Response of the Consolidated Carriers to the ) 

U.S.P.S. and Peninsula Airways Comments ) 

__________________________________________) 

REPLY OF THE CONSOLIDATED CARRIERS TO THE 

U.S.P.S. AND PENINSULA AIRWAYS COMMENTS 

The undersigned Consolidated Carriers petition for leave to file an otherwise 

unauthorized document to respond to the Reply of Peninsula Airways and the Comments 

of the U.S. Postal Service. Peninsula Airways distorts the actual meaning of the R.S.I.A., 

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. 

U.S. Postal Service 

In its request for additional time to respond to Order 2010-12-28, the Postal Service said, 

“The comments in opposition are extensive and require additional time for an adequate 
review.” It one page Comments simply say that the R.S.I.A. provides “incentives for 

bush carriers to convert to Part 121 operations to benefit passengers and shippers.” The 

irony of its position is that it is actually encouraging conversion of Part 121 service to 

Part 135 operations. In the preamble language of the R.S.I.A., the Act noted the increase 

safety and reliability of Part 121 operations compared to Part 135. By converting Part 

121 operations to Part 135 rules, Penair is running directly contrary to the clearly 

established goal of the R.S.I.A. Furthermore, the R.S.I.A. goal of converting to Part 121 

operations was not unqualified. The Act encouraged such a conversion only when the 

market supported 121 service. Clearly the action of Peninsula Airways to downgrade 

their Metroliner and Saab 340 services to Part 135 is contrary to the intent of the R.S.I.A. 

The Postal Service also demonstrates the confusion between aircraft certification and the 

bush rates set by the Department. When the R.S.I.A. 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 R.S.I.A. was to 

create special preferences for Part 121 service. There is no distinction between aircraft 

certificated under F.A.R. Part 23 when related to operating rules. In the R.S.I.A., 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. As will be explained below, 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. 
By referring to the incentives for Part 121 service, the Postal Service is stating the 

preference for larger aircraft with lower unit costs per revenue ton mile, hence its 

argument for minimizing costs. The Postal Service is asserting a preference for larger 

aircraft as opposed to the more expensive operating rules under which they are flown. 

The Postal Service claims that only by creating a single class will carriers be incentivized 

[sic] to control costs and make strides toward efficiency. This claim is ludicrous when 

one examines the record of service. There are 170 bush markets served by wheeled 

aircraft where only nine seat or less aircraft (135) are used for mail transportation. There 

are 16 non-mainline markets served with aircraft with 19 or more seat certificated 

capacity aircraft (121). The number of markets served by each aircraft type has been 

unchanged for several years, so there seems to be no incentive to convert to the larger 

aircraft in the 170 Part 135 markets 

The main reason for the stability is that the 170 “135” markets are significantly different 

from the 16 “121” markets. According to the T-100 segment reports for the year ended 

June 30, 2010, service to and from the 170 points served only with aircraft of nine or 

fewer seats had an average payload capacity of 1,815 lbs, while the 16 “121” markets 

averaged 6,527 lbs of capacity per segment. On segments where mail was carried (all 

zero mail segments excluded), the average mail load on the 135 service was 213 lbs., 

while on the 19 or more seat aircraft it was 796 lbs.. The average hop (stage length) for 

the 135 aircraft was 56 miles, and for the 19 seat or greater aircraft it was 389 miles. 
Clearly the operations for small aircraft are significantly different from those of the larger 

aircraft. The average payload in 135 operations is less than a third of that for the 19 or 

greater seat aircraft. Similarly, the average 135 mail load is about 30% of the average 

mail load on the larger aircraft. The average stage length for the 19 seat or greater 

aircraft was six times the average stage length for the Part 135 aircraft. The 19 seat or 

greater aircraft are operated over longer segments with much higher mail loads. The 

larger aircraft are only used in larger markets and over longer stage lengths. 

The difference in operations between the Part 135 carriers and the 19+ seat aircraft has 

been documented throughout the mail rate case, but the most significant point which 

undermines the Postal Service argument is the average mail volume per point. The 

average mail volume to the 170 points receiving only Part 135 service is 270,000 lbs. per 

year (869 lbs. per day assuming 312 service days). For the 16 non-mainline points served 

with aircraft with 19+ seat capacity aircraft, the average volume per year is 808,000 lbs 

(2,590 lbs. per day). It is ludicrous to suggest that adding high capacity aircraft to the 

Part 135 mail rate will provide any sort of incentive to the carriers serving the 170 very 

small points, most of which do not even have a runway long enough to support the larger 

aircraft. Lower mail rates will provide the incentive to reduce service and/or increase 

subsidy need. 

Given that the goal of the mail rate is to cover all mail related expenses incurred by the 

carriers, and no service is actually changing as a result of the Penair request, there should 

be no change in the total mail payments by the Postal Service. If the rate system is 
working correctly, the argument that this scheme will save the Postal Service money 

should be false. 

Peninsula Airways

The Carriers demonstrated that the inclusion of aircraft certificated with 19+ seats in the 

bush 135 rate was contrary to the intent of the R.S.I.A. in its January 31, 2011 filing, and 

quoted the Departments findings related to Issue 6 about inclusion of aircraft in the three 

bush rate cost pools designated by the R.S.I.A. Ironically, Penair refers to this same 

section to try to support its argument for including Metroliners and Saab 340’s in the 135 

pool. 

It is clear from the Department’s language that it was speaking only of the aircraft 

capacity in setting the rate pools, and not the operating rules applicable. The discussion 

was limited to how to deal with aircraft with a certificated capacity of ten or more, which 

would be operated under Part 121. The first issue was what was meant by the 19 seat 

requirement for inclusion in the 121 rate pool. Here Penair was absolutely clear. It was 

the certificated capacity and not the actual number of seats that should determine which 

pool an aircraft was placed in. Penair asserted that it operated its Metroliner aircraft with 

fewer than the 19 certificated seats even when in an all-passenger configuration. Nonethe-less, Penair insisted that these aircraft belonged in the 121 rate pool. The next 

question was what to do with aircraft operated under Part 121 but having 10-18 

certificated seats. The issue addressed aircraft such as the Beech 99 or the stretch 
Beechcraft King Airs, not aircraft certificated for 19 or more seats, which was decided 

above. The Department posed three options, put all Part 121 into the Part 121 pool, put 

the 121 aircraft with less than 19 certificated seats in the 135 pool, or simply ignore the 

costs of those smaller Part 121 aircraft. In the end, the Department grouped all aircraft 

with fewer than 19 certificated seats in the 135 pool, regardless of the operating rules 

they were flown under. It was aircraft size and not operating rules that determined the 

rate pool. It was at this point that the Department decided that 19 seats meant all aircraft 

with 19 certificated seats regardless of speed or STOL capability. Subsequently the 

Department created a Part 121 STOL rate for the Twin Otter, stating that aircraft with 

different operating characteristics and distinctly different unit costs should not be 

grouped together. It established a separate Part 121 for the Twin Otter, with the full 

knowledge that Era regularly operated those aircraft with fewer than 19 seats. There was 

never any question as to where the costs for those aircraft should be considered. 

Since 1982 when the C.A.B. first took up the question of mail rates to bush villages, the 

policy has been to differentiate rates based on the capacity of aircraft. First it was simply 

mainline and bush with the dividing line at 7,500 lbs payload. After the F.A.A redefined 

its operating regulations so that aircraft with 10 or more seats had to be operated under 

Part 121, there was a push by operators of those aircraft (including Penair) for special 

preferences and rates. While the distinction was categorized by operating rules, the 

actual distinction was for aircraft with a certificated capacity of 19 seats or more, or 

fewer than 19 seats. An aircraft might be operated under Part 121, but if it had a 
certificated passenger capacity of less than 19 seats it was treated as a Part 135 aircraft 

for ratemaking and mail tender purposes. 

The clear intent of the R.S.I.A. was to encourage safer and more reliable operations under 

Part 121 rules using aircraft certificated with 19 or more passengers. The Department has 

honored this intent, while adjusting rate pools to differentiate between aircraft types of 

different capacities and capacities. First Penair downgrades its service from Part 121 to 

Part 135 rules, then it expects to be paid at the higher rate for the downgraded service. 

Finally, 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 R.S.I.A., and the 

Department has the power, and has used it before, to set compensatory mail rates for a 

class. 

WHEREFORE, 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 R.S.I.A., 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. 

Respectfully submitted, 

The Consolidated Carriers 

Air Excursions, Inc. 

Bering Air, Inc. 

Bidzy Ta Hot ‘Aana, Inc. d/b/a Tanana Air Service 

Flight Alaska, Inc. d/b/a Yute Air 

Grant Aviation, Inc. 

Iliamna Air Taxi, Inc. 

Redemption, Inc. d/b/a Island Air 

SeaPort Airlines, Inc. d/b/a Wings of Alaska 

Servant Air, Inc. 

____________________ 

By Hank Myers 

March 1, 2011 
CERTIFICATE OF SERVICE 

I hereby certify that I have this day served a copy of the foregoing Replay of the 

Consolidated Carriers upon all parties to this docket through electronic mail. 

____________________ 

Hank Myers 

March 1, 2011