In the matter of the 

BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

OFF OF THE SECRETARY 

-,II 

_ ':1 

Intra-Alaska Bush 

Mail Rates 

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Docket OST -2003-14694 ./ 

ORDER 2010-12-28 

Comments on inclusion of PenAir Metros in 

the calculation for Bush 135 Rates 

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Comments regarding reclassification of PenAir Saab 340 and Metroliner 

data for calculation of Bush Mail Rates 

Communications with respect to this document should be addressed to: 

Bob Hajdukovich 

Era AlaskA 

4700 Old International Airport Road 

Anchorage, Alaska 99502 

Office (907) 266-8310 

Fax (907) 266-8401 

Email bob@frontierflying.com 

January 27, 2011 
POSITION 

PenAir's submittal and DOT's subsequent acceptance of a reclassification of the 

Saab 340 and Metro 111/23 aircraft is flawed and should not be used to calculate 

the Bush 135 rates. 

BACKGROUND 

The DOT has historically excluded bush rate expenses in Appendix E of its 

orders whereby Bush aircraft are operating over historically Mainline routes. The 

intent of this appendix was appropriate at the time, but now must reflect the 

scenario at hand whereby PenAir Bush 135 aircraft are flying over routes served 

by Bush 121 aircraft. Relative to this appendix, Bush rates were inclusive of both 

121 Bush and 135 Bush. 

The mail rate that is paid by the postal service for certain PenAir markets is set 

by the lowest rate class aircraft that is operated in a given market sometimes by 

a given carrier. For example, PenAir operates Part 121 Bush aircraft between 

Anchorage and Sandpoint but also operates Part 135 cargo aircraft in this 

market. Because PenAir transports a significant volume of mail over abnormally 

long stage lengths, the impact of where the cost data flows will naturally have a 

greater impact. The fact that PenAir elects to transport Part 121 Bush rate mail 

in a Part 135 Bush aircraft should not affect the rate paid for Bush 135 mail that 

should be set on expenses incurred in the transport of Bush 135 mail. The 

Department has always distinguished the classification on aircraft type operated 

under 135/121 rather than considered the classification based on the established 

rate in a market. 

Using Dutch Harbor as an example; PenAir flies; 

• 1.3% of their passengers in Metro III aircraft 

• 66% of its freight and mail in Metro III aircraft 

• 77% of just its mail in Metro III aircraft 
100% of this mail and freight is likely paid at the Bush 121 rate, yet now the 

associated costs are proposed as being part of the Bush 135 calculation, which 

not surprisingly increases PenAir's revenue by having the Part 121 rate increase 

and negligibly decreases their revenue because most of PenAir's mail is either 

flown at Mainline or Bush 121 rates. This reclassification may even appear to be 

consistent with DOT precedence but is clearly not in the spirit of calculating 

compensatory rates for Part 135 Bush operations. 

As of October 1, 2010 Frontier Flying Service, Inc. no longer operates any 

aircraft under Part 121. A more natural impact to the Bush 135 rate will occur 

when those aircraft are exclusively operated in traditional Part 135 Bush markets. 

One would expect the Bush rate to decrease as the increase in capacity of the 

larger aircraft comes into play and subsequently, the Part 121 Bush rate will also 

decrease because Frontier was the higher cost operator in the rate case for Bush 

121 rates. 

While Frontier has consistently argued that the Part 121 rates have not been 

compensatory, PenAir has clearly benefited from the blending of Frontier costs 

and PenAir costs. In an attempt to address the disparity of Frontier and PenAir 

stage lengths, the Department created a "Taper". We would reluctantly support a 

reintroduction of a taper for the Bush 135 rate if the department elects to accept 

the PenAir reclassification. 

CONCLUSION 

The Department should do a closer analysis of the data. PenAir Saab 340AlB 

and Metroliner cost data should not be allowed affect the Bush 135 mailrates 

unless the costs are directly related to markets that have a Bush 135 established 

rate. The expiration of specific exemptions for the B1900C and Metroliners 

obviously impacted both Frontier's and PenAir's decision to move those aircraft 

into Part 135 operations. It is time for the Department to look more closely at this 

particular impact and where those newly designated part 135 aircraft are still 

flying in markets whose rates are Part 121, then those costs should be excluded 

from any Bush 135 mailrate calculation. 
Respectfully submitted, 

Robert Hajdukovich 

Frontier Flying Service, Inc. 

Hageland Aviation Services, Inc. 

dba 

Frontier AlaskA 

5245 Airport Industrial Avenue 

Fairbanks, Alaska 99709 

907-474-1739 x233