## 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 ) __________________________________________)

ANSWER OF THE CONSOLIDATED CARRIERS

TO ORDER 2011 - 6- 14

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 July 18, 2011

## 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 ) __________________________________________)

ANSWER OF THE CONSOLIDATED CARRIERS

TO ORDER 2011 - 6- 14

The Consolidated Carriers hereb y submit its Answer to Order 2011 - 6 - 14. This Answer was filed before midnight, July 18 PDT, but was filed after 5:00 PM EDT. The delay was caused when it was discovered in comparing the outcome of all proposed and considered rates as applied to the mail market traffic as reported b y the carriers T - 100 market reports for YE March 31, 2011 that the rate proposed in Order 2011 - 6 - 14 appears to underpay

the industry

by a significant amount. Additional research was need to confirm this fact, and recheck all calculations. The discrepancy in the Ordered rate is explained below. Submitter has not read any other submission in this docket, and all material is original by

the submitter. The Consolidated Carriers pray that its answer be accepted as filed.

## The Problems with the Proposed Regression Based Mail Rate

In Order 2011 - 6 - 14, the Department tried a new technique to accommodate the practice of Peninsula Airways to operate large aircraft under FAR 135. While this practice will be analyz ed more thoroughly below, the result of Order 2010 - 12 - 28 was an undeserved windfall for Penair b y including its large aircraft, long haul service with the small aircraft, short haul operations of historic part 135 operations. The regression based rate structure (Order 2011 - 6 - 14) has the salutary benefit of reducing Penair’s windfall substantially . At the same time it greatly distorts the pay

rates for the remaining 135 operators across Alaska. For example, in the shortest bush mail market (Bethel Napaskiak, 6 miles) the Order 2011 - 6 - 14 rate is $0.188365 per pound compared to $0.039768 per pound in Order 2010 - 12 - 28. The new rate increases the previous rate b y 430% . For the long haul Anchorage -Dutch Harbor market, the rate is reduced 41%. The pivot point where increases from Order 12 - 28 go to decreases is between 63 and 64 miles. Interestingly, this is substantially lower than the average mail haul for bush mail. The most significant fact about the 6 - 14 rate is that is would pay the bush industry $10,299,152 less for linehaul costs alone compared to Order 201 0 - 12 - 28.

## Table 1 Change in Revenue b y C arrier CARR $ TOTAL 2E $11,785.45 3Z -$86,421.02 4E $17,056.89 4W -$601,333.02 4Y -$35,423.52 7H -$2,698,431.75 7S -$625,303.17 8E -$776,752.77 8V -$543,458.86 ELL -$2,587.44 GV -$286,512.73 HB $11,744.63 K5 $2,243.87 KO -$1,142,766.74 KS -$4,739,224.28 Q5 -$740.36 SNK -$243.02 V8 $43,327.69 X4 $11,121.91 TOTAL -$10,299,151.51 

## The amounts for each carrier compare the revenue for linehaul charges for bush mail carried in Order 2011 - 6 - 14 to the rates in Order 2010 - 12 - 28. When all carriers, including the most minor carriers, are included the total reduction in revenue is $10,971,719.65 (a reduction from $50,218,917.25 to $39,247,197.60 ) , or a 21.9 % decrease. Clearly the rate proposed in Order 2011 - 6 - 14 is not compensatory for the industry as a whole, a requirement of law. Because developing a segment based regression requires using T - 100 segment data, loads are weighted toward the entry segment, and do not reflect the split between actual markets. While the regression is good for establishing cost trends related to length of

## segment distance, it must be compared to the actual market traffic carried over the

various segments as a whole. The comparison of the results from the regression based rate in 6 - 14 not only show that carrier are unequally

affected in the relation to their size, different hubs are affect unequally depending on the average market distance. Table 2 Affect of 6 - 14 Rates b y Hub Mail L bs. Outbound from Hub Only ORI CITY MAIL $ TOTAL WTD $ per lb AN IA K 3043503 $80,339.22 $0.026397 BETHEL 14478279 -$1,701,995.11 -$0.117555 BARROW 2310741 -$277,385.14 -$0.120042 CORDOVA 52627 -$1,249.34 -$0.023739 DILLINGHAM 3189142 $83,822.80 $0.026284 EMMONA K 2083131 $253,647.58 $0. 121763 FAIRBANKS 4332095 -$1,931,995.82 -$0.445973 GA LENA 671941 $2,446.78 $0.003641 HOM ER 160547 $20,063.30 $0.124968 ILIAMNA 367170 $40,814.85 $0.111161 JUNEAU 1047662 -$2,631.68 -$0.002512 ST. M ARY'S 2414464 $341,433.93 $0.141412 MC GRA TH 167317 $ 16,313.10 $0.097498 NOM E 6490852 -$1,193,041.18 -$0.183803 KOTZEBUE 9030370 -$724,733.43 -$0.080255 DEADHORSE 994335 -$49,687.00 -$0.049970 UNALA KLEET 2921681 $96,638.55 $0.033076 

## If a rate were truly compensatory and equitable, we would not see variations of from +$0.141412 per pound (St. Mary ’s) to - $0.445973 per pound (Fairbanks). Even nearby hubs in the same area served by the same carriers show markedly different results. Nome markets go down b y an average of $0.183803 per pound while Kotzebue goes down b y less than half that amount.

## The primary reason why any

regression based rate or even an all - inclusive rate based on historic standards is doomed to fail is because of the distinct difference in aircraft ty pes and market conditions affecting what had previously been categorized as Part 135 and Part 121 operations. The table below shows the length of haul for the 20 markets currently served b y aircraft certificated for at least 19 passenger seats; those aircraft previously

categorized under Part 121 ratemaking (minimum of 500 lbs. per day) . Table 3 Large Aircraft Bush Markets ORIGIN DESTINA TION DISTANCE AN CHORAGE COLD BA Y 620 AN CHORAGE DUTCH HARBOR 792 AN CHORAGE SANDPOINT 557 AN CHORAGE ST. PAUL 767 BARROW WAINWRIGHT 87 BARROW NUIQSUT 151 BETHEL HOOPER BA Y 153 DEADHORSE BARTER ISL AN D 115 DEADHORSE NUIQSUT 60 DILLINGHAM ST. PAUL 448 DILLINGHAM ST. GEORGE ISL AND 441 DUTCH HARBOR AT KA 340 FAIRBA NKS BARTER ISL AN D 386 FAIRBA NKS FORT YUKON 144 FAIRBA NKS GA LENA 268 KING SA LMON DUTCH HARBOR 503 KOTZEBUE POINT HOPE 150 NOM E GAMBELL 197 NOM E SHISHM AR EF 122 NOM E SA VOONG A 162 

## The distances range from 60 miles to nearly 800 miles. Three aircraft ty pes are used in the scheduled passenger service, the Beechcraft 1900, the Swearingen M etroliner, and the SAAB 340. Scheduled passenger service with large aircraft is offered b y only five air

## carriers, Penair, ERA (the Frontier group), Bering Air, Grant Aviation and Warbelow’s.

In comparison, small aircraft (less than 9 certificated passenger seats) service is provided by 20 carriers using 14 different aircraft types. Small aircraft markets range in distance from 6 miles (Bethel -Napaskiak) to 325 miles (Fairbanks to Kaltag). The r2 of less than 75% explains about half of the cost variance in relation to the average cost line, and is indicative of the difficulties faced in the analys is. A multi - linear regression using both distance and aircraft payload created an r2 of 99% with a standard error of less than a quarter of the distance only regression. Such a regression, while presenting the ultimate in correlation cannot be used here because it sets different rates in the same market depending on aircraft ty pe. For small aircraft operations, there has to be a different answer. While the regression model fails to meet the basic requirements for a mail rate, it is very illustrative of the problems associated with using such a disparate group of carriers, aircraft and markets. The Intent of the Rural Service Improvement Act The RSIA had one major goal for service, and that was to encourage the use of aircraft certificated for at least 19 passenger seats. These aircraft were operated under Part 121, and were considered safer and more reliable. As far as rates were concerned, the RSIA require d a seaplane rate to compensate the operators adequately . It required rates for Part

## 121 operations; again stressing passenger service with 19 seat or great aircraft by

including only those aircraft in the rate making pool. Finally, Part 135 operations operated under Part 135 to points that could accommodate wheeled aircraft had a separate rate. At the time the RSIA was first written, all aircraft having a maximum certificated seating capacity of at least 19 were operated by three carriers, ERA, Peninsul a Airways, and Frontier Flying Service. All service with these aircraft by these carriers was operated under Part 121 rules. Ultimately, the Department established four different bush rates. The Part 135 Wheel Rater and the Part 134 Seaplane rate included all operations by aircraft operated under Part 135 with wheels or floats. Separate rates were set for Part 121 operators of aircraft capable of landing on runways less than 4,000’ long (STOL), and those that required the longer runways. The STOLaircraft had significantly higher costs per ton mile. The Department concluded that if it did not set a compensatory rate for these aircraft (which operated primarily

at Bethel), the RSIA goal of encouraging Part 121 service could not be met. Despite this logic, Peninsula Airways opposed the separate rates and tried to have ERA’s higher costs included with its own Metroliner and SAAB 340 aircraft. The separate Part 121 rates are important today because it established the legal precedent to set more than one mail rate for carrier operating under the same FAR’s based on distinct operating costs and capabilities. The division of the two Part 121 rates used a

## balanced runway length requirement of 4 ,000’ at Maximum Takeoff or Landing Gross Weight as the distinction between the two classes. Recent Actions by Peninsula Airways and Frontier Flying Group (Era) About two years ago, both Peninsula Airways and Frontier Flying Group began to operate the 19+ seat aircraft with fewer than 10 seats in some markets. In that time, Penair has pursued inclusion of its large aircraft operated with 9 or fewer installed seats in the 135 Wheel rate pool. At the same time, it has bifurcated its operation in two. It has reduced operations with is Metroliners, and operates the vast majority of segments using these aircraft in al all cargo configuration. For the Metro I’s (Ty pe 455) in the 12 months ended March 31, 2011 (latest data available), Penair operated 56% of its segments with ZERO passenger seats installed. For its Metro II’s, it operated 88.7% of its segments with ZERO passengers seats installed, 7.4% of its segments with 9 seats installed, and only

3.9% of its segments with the full seating compliment. It operated its SAAB 340 aircraft (30 seat maximum) in every bush market it serves, as well as a number of mainline markets where it provides monopoly passenger service. For the SAAB’s, it operated 207 segments (1.5%) with no seats installed, and 13,365 segments (98.5%) with 20 or more seats installed.

## This bifurcations allows Penair to carry the majority

of its mail on its all - cargo aircraft. While 14.2 % of its capacity (ATM’s) was on 0 - 9 seat aircraft, 60% of its mail was carried over bush segment on these aircraft. The table below summarizes the data Table 4 Mail Traffic b y Aircraft Capacity DEPS SEA

TS/DEP MAIL

RTM's RTM % AT M's AT M % MAIL LF 1290 0 483215.442 58.28% 1613696 14.17% 29.94% 177 9 11493.473 1.39% 117801.4 1.03% 9.76% 5690 19+ 334460.29 40.34% 9660586 84.80% 3.46% TOTAL 829169.204 11392083 

## While on the 0 - seat aircraft, mail took up 29.9% of the capacity, on the Part 121 aircraft mail represented only

a 3.46% of the capacity. In other words, on the all - cargo aircraft, mail takes up 9 times as much of the capacity as it does on the Part 121 aircraft. By bifurcating its operation between passenger and cargo service, Penair fills its scheduled aircraft with passengers and baggage first. Of the 5,690 Part 121 departures in bush markets, only

73 had fewer than 27 of the maximum 30 seats installed. It fills up the remaining space with cargo as available. All remaining cargo is transported on Part 135 operations using exactly the same aircraft typ es as it uses in its Part 121 service in these markets. Essentially Penair runs an all - cargo operation along side its passenger service. While the Frontier group has not sought 135 listing for its Beechcraft 1900’s in previous rate making cases, it has announced that it will also bifurcate its service in the future.

## The Clear Solution

Examination of Penair’s linehaul costs for its 19 seat or greater capacity aircraft shows that there is no significant difference between the operations under Part 121 and Part 135. Simply put, there is no reason to differentiate between the two operations based on costs. This was one of the options suggested b y the Consolidated Carriers in its Answer to Order 2010 - 12 - 28. The Department found that combining costs for the same aircraft and carrier from Parts 121 and 135 is contrary to the Rural Service Improvement Act . That led to the current Order which seeks to redress the undeserved windfall that would be reaped b y Penair under a single Part 135 rate. While the regression model has failed in its primary goal, it has served as a clear example of the difference in aircraft operating costs, and the difficulty of setting a rate with such disparate aircraft ty

pes and operations. This recalls a second option offered b y the Consolidated Carriers in its previous Answer when it proposed to have two Part 135 rates. The first rate, which is the historic Part 135 rate adjusted for current costs, includes all aircraft certificated for 9 or fewer passenger seats. This was attached as Attachment B, Appendices C - 1 and C - 2, which are duplicated in this filing. It would set the P art 135 Small Aircraft linehaul rate at $12.2338 for non- fuel expenses and $3.1987 for fuel related expenses. The fuel expenses would need to updated as no quarterly updates have been issued on that rate. All of the

## aircraft included in the Part 135 Small Aircraft rate have a maximum certificated seating

capacity of 9 or fewer seats. All aircraft included in the Part 135 Small Aircraft rate can takeoff and land at runways shorter than 3 ,000’ with a maximum takeoff or landing weight as appropriate. The P art 135 Large Aircraft linehaul rate may best be set using the regression methodology

proposed by

the Department in Order 2011 - 6 - 14. For large aircraft operations the number of aircraft used is only three, and only five carriers in total operate them. A total of SEVEN aircraft/carrier combinations need to be analyz ed in a Large Aircraft regression. Using the data in Appendix B of Order 2011 - 6 - 14, a regression of 33 distinct entries was performed. The table below shows the particulars.

## Table 5 Large Aircraft Cost Regression SUMMARY OUTPUT Regression Statistics Multiple R 0.92535 R Square 0.856273 Adjusted R Square 0.851636 Standard Error 384.4973 Observations 33 ANOVA df SS MS F Significance F Regression 1 27303695 27303695 184.6863 1.34E - 14 Residual 31 4582984 147838.2 Total 32 31886680

Coefficients Standard Error t Stat P- value Intercept 954.5335 102.9102 9.275407 1.87E - 10 X Variable 1 4.258594 0.313364 13.58993 1.34E - 1 4 

## As an alternative, the Part 135 Large Aircraft rate could be set using only the cost data for the aircraft with a certificated seating capacity of 19 or more. This would be a subset of the data shown in the Consolidated Carriers Answer to Order 201 0 - 12 - 28 to exclude the Part 121 operations. Summary The regression proposed to set Part 135 mail rates fails to set a compensatory level for the industry, and to provide equitable treatment for carriers individually or service hubs.

## Even if the rate were to compensate the industry as a whole adequately, inequities among operations and hubs would disqualify the rate. A different solution must be found. The only fair, equitable and compensatory mail rate methodology

is two set two Part 135 rates, and the Department did previously for Part 121 operations. The demarcation between Small Aircraft and Large Aircraft is distinct not only in certificated seating capacity, but also for runway length requirements. All aircraft herein defined as Part 135 Small Aircraft have a maximum certificated seating capacity of 9 or less and can operate into and out of runways of 3,000’ or less with a full payload. All aircraft defined herein as Part 135 Large Aircraft have a maximum certificated seating capacity of 19 or more, and require runways longer than 3,000’ for full payload operations. This solution is the only

one based on rate making precedent, and does not create new operating problems for the carriers or the Postal Service. For those markets where Part 121 service is scheduled at the minimum frequency, all operations in that market would be paid at the 121 rate. For all markets where Part 135 Large Aircraft are scheduled, all service would be paid at the Large Aircraft Rate. For all other service the Part 135 Small Aircraft rate would apply. The bifurcation of 135 rates would be applied exactly the same as the bifurcated 121 rate was. If a STOL aircraft was used to serve a market with a runway of 4,000’ or more, it was paid at the standard Part 121 rate. If a standard Part 121 aircraft was used at a STOL airport, the wreckage could be retrieved at the end of the runway.

## WHEREFORE , the Consolidated Carriers respectfully request that the Part 135 rate structure be divided into Large Aircraft and Small Aircraft service. Large Aircraft operations are those scheduled with aircraft having a maximum certificated seating capacity of 19 or more seats. Small aircraft are all other aircraft operated under Part 135. The Consolidated Carriers further request that the Part 135 Small Aircraft linehaul rate be set at $12.2338 for non- fuel expenses plus a fuel related expenses level of $3.1987 adjusted for the most current fuel costs. The Large Aircraft linehaul rate could be set on the basis of a regression for those aircraft using data relied upon b y the Department in Order 2011 - 6 - 14 ($954.5335/enplaned ton + $4.258594/revenue ton mile), or through use of the reports for the five carrier/aircraft combinations used for Large Aircraft in Part 134 service updated for the most current fuel related expenses. Respectfully

submitted, The Consolidated Carriers By

____________________ Hank Myers July 18, 2011

## CERTIFICATE OF SERVICE

I hereb y certify

that I have this date served a copy of the Answer of the Consolidated Carriers to Order 2011 - 6 - 14 upon all parties to Dockett DOT - OST - 2003 - 14694 by electronic mail.

____________________ Hank Myers July 18, 2011Attachment B Linehaul, Part 135 Appendix C - 1 Page 1 of 7 System Parameters for Each C arrier "Actual" 1 . Capacity Related Expense (CR) 2 . Direct Expense, I nclude Fuel 3 . Indirect Expense 4 . CR Markup 5 . Return and Tax Markup 6 . T- 100 Mail RTMs, Segment, F & G 7 . T- 100 Mail RTMs, Mkt., F&G 8 . Circuity Markup Aircraft Type Aircraft Code 9 . Direct Expenses, I ncludes Fuel 10 . Less Passenger Liability I nsurance 11 . Linehaul Expense Allocable to Mail 12 . Cost per Block Hour (R11÷R18) 13 . Marked Up Costs (R11*R4*R5*R8) 14 . Eligib le Expense (R13*R32÷R18) 15 . Cost per RTM (R14÷R36) "Trend" 16a . Percentage of Eligible Mail RTMs 17a Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16a) "Actual" 16b Percentage of Eligible Mail RTMs 99.99% 17b . Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16b) 

## $12.2325 Scheduled + Nonscheduled 18 . System Blk. Hrs., T- 100 Segment 19 . Pax. RTMs 20 . Freight RTMs Wtd. @ 0.75 21 . Mail RTMs 22 . Total RTMs 23 . Aircraft Miles 24 . Available Ton Mile s (ATMs) 25 . Departures Performed 26 . Wtd. Departures (GTOW) 27 . Ton Load Factor 28 . Stage Length 29 . ATMs per Mile 30 . RTMs per Mile 31 . RTMs per Hour 32 . Eligible Block Hours 33 Pax. RTM 34 . Freight RTM, Wtd. @ .75 35 . Eligible Mail RTM 1,909,462 36 . Total RTM 37 . Aircraft Miles 38 . Available Ton Miles (ATMs) 39 . Departures Performed 40 Wtd. Departures (GTOW) 41 . Ton Load Factor 42 . Avg. Stage Length 43 . ATMs per Mile44 RTMs per Mile 45 RTMs per HourAttachment B Linehaul, Part 135 Appendix C - 1 Page 2 of 7 System Parameters for Each Carrier Bering Bering 1 . Capacity Related Expense (CR) $1,349,823 2 . Direct Expense, I nclude Fuel $34,18 6,727 3 . Indirect Expense $5,189,612 4 . CR Markup 103.55% 103.55% 5 . Return and Tax Markup 109.46% 109.46% 6 . T- 100 Mail RTMs, Segment, F & G 375,332 7 . T- 100 Mail RTMs, Mkt., F&G 357,158 8 . Circuity Markup 105.09% 105.09% Aircraft Ty

pe Navajo Caravan Aircraft Code 194 416 9 . Direct Expenses, I ncludes Fuel $2,723,914 $6,690,454 10 . Less Passenger Liability I nsurance $54,442 $127,464 11 . Linehaul Expense Allocable to Mail $2,669,472 $6,562,990 12 . Cost per Block Hour (R11÷R1 8) $621.39 $827.20 13 . Marked Up Costs (R11*R4*R5*R8) $3,179,745 $7,817,514 14 . Eligible Expense (R13*R32÷R18) $2,124,271 $6,662,721 15 . Cost per RTM (R14÷R36) $11.5646 $11.9485 "Trend" 16a . Percentage of Eligible Mail RTMs 2.229% 10.60 3% 17a Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16a) $0.2578 $1.2669 "Actual" 16b Percentage of Eligible Mail RTMs 2.255% 10.730% 17b . Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16b) $0.2608 $1.2821 Scheduled + Nonscheduled 18 . System Blk. Hrs., T- 100 Segment 4,296 7,934 19 . Pax. RTMs 200,101 375,786 20 . Freight RTMs Wtd. @ 0.75 9,532 34,812 21 . Mail RTMs 43,164 205,086 22 . Total RTMs 252,797 615,684 23 . Aircraft Miles 674,302 1,144,983 24 . Available Ton Miles (ATMs) 590, 014 1,662,691 25 . Departures Performed 8,385 16,142 26 . Wtd. Departures (GTOW) 62,049 143,664 27 . Ton Load Factor 42.85% 37.03% 28 . Stage Length 80 71 29 . ATMs per Mile 0.87 1.45 30 . RTMs per Mile 0.37 0.54 31 . RTMs per Hour 58.84 77.60 32 . Eligible Block Hours 2,870 6,762 33 Pax. RTM 133,556 324,406 34 . Freight RTM, Wtd. @ .75 7,065 28,337 35 . Eligible Mail RTM 43,067 204,879 36 . Total RTM 183,688 557,622 37 . Aircraft Miles 442,801 967,579 38 . Available Ton Miles (ATMs) 387 ,451 1,404,815 39 . Departures Performed 6,163 14,553 40 Wtd. Departures (GTOW) 45,606 129,522 41 . Ton Load Factor 47.41% 39.69% 42 . Avg. Stage Length 72 66 43 . ATMs per Mile 0.88 1.4544 RTMs per Mile 0.41 0.58 45 RTMs per Hour 64.00 82.46Attachment B Linehaul, Part 135 Appendix C - 1 Page 3 of 7 System Parameters for Each Carrier Frontier Grant Grant 1 . Capacity Related Expense (CR) $1,621,209 $2,794,865 2 . Direct Expense, I nclude Fuel $32,954,543 $32,165,83 0 3 . Indirect Expense $6,100,819 $6,634,803 4 . CR Markup 104.33% 107.76% 107.76% 5 . Return and Tax Markup 109.46% 109.46% 109.46% 6 . T- 100 Mail RTMs, Segment, F & G 374,607 275,755 7 . T- 100 Mail RTMs, Mkt., F&G 356,583 259,325 8 . Circuity Markup 105.05% 106.34% 106.34% Aircraft Type Navajo C - 206 Navajo Aircraft Code 194 35 194 9 . Direct Expenses, I ncludes Fuel $1,441,814 $4,993,058 $4,168,544 10 . Less Passenger Liability I nsurance $56,589 $210,812 $112,896 11 . Linehaul Expense Allocable to Mail $1,385,225 $4,782,246 $4,055,648 12 . Cost per Block Hour (R11÷R18) $932.18 $460.94 $728.91 13 . Marked Up Costs (R11*R4*R5*R8) $1,661,809 $5,998,485 $5,087,096 14 . Eligible Expense (R13*R32÷R18) $1,535,440 $5,053,182 $4,013,722 15 . Cost per RTM (R14÷R36) $18.9828 $19.4391 $10.7938 "Trend" 16a . Percentage of Eligible Mail RTMs 1.560% 4.189% 3.279% 17a Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16a) $0.2961 $0.8143 $0.3539 "Actual" 16b Percentage of Eligible Mail RTMs 1.579% 4.239% 3.318% 17b . Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16b) $0.2997 $0.8240 $0.3581 Scheduled + Nonscheduled 18 . System Blk. Hrs., T- 100 Segment 1,486 10,375 5,564 19 . Pax. RTMs 52,384 197,974 372,637 20 . Freight RTMs Wtd. @ 0.75 3,500 6,817 7,758 21 . Mail RTMs 30,171 82,400 64,340 22 . Total RTMs 86,055 287,191 444,735 23 . Aircraft Miles 202,884 1,144,105 964,289 24 . Available Ton Miles (ATMs) 134,929 686,547 867,864 25 . Departures Performed 1,510 24,970 10,107 26 . Wtd. Departures (GTOW) 11,174 92,389 74,792 27 . Ton Load Factor 63.78% 41.83% 51.24% 28 . Stage Length 134 46 95 29 . ATMs per Mile 0.67 0.60 0.90 30 . RTMs per Mile 0.42 0.25 0.46 31 . RTMs per Hour 57.91 27.68 79.93 32 . Eligible Blo ck Hours 1,373 8,740 4,390 33 Pax. RTM 48,127 172,599 301,449 34 . Freight RTM, Wtd. @ .75 2,614 6,411 7,043 35 . Eligible Mail RTM 30,145 80,940 63,361 36 . Total RTM 80,886 259,950 371,853 37 . Aircraft Miles 186,797 985,968 756,300 38 . Avai lable Ton Miles (ATMs) 125,634 591,664 680,674 39 . Departures Performed 1,397 21,216 7,987 40 Wtd. Departures (GTOW) 10,338 78,499 59,104 41 . Ton Load Factor 64.38% 43.94% 54.63% 42 . Avg. Stage Length 134 46 95 43 . ATMs per Mile 0.67 0.60 0.9044 RTMs per Mile 0.43 0.26 0.49 45 RTMs per Hour 58.91 29.74 84.70Attachment B Linehaul, Part 135 Appendix C - 1 Page 4 of 7 System Parameters for Each Carrier Grant Hageland Hageland 1 . Capacity Related Expense (CR) $2,2 64,323 2 . Direct Expense, I nclude Fuel $63,938,147 3 . Indirect Expense $12,294,723 4 . CR Markup 107.76% 103.06% 103.06% 5 . Return and Tax Markup 109.46% 109.46% 109.46% 6 . T- 100 Mail RTMs, Segment, F & G 1,067,309 7 . T- 100 Mail RTMs, Mkt., F&G 1,009,922 8 . Circuity Markup 106.34% 105.68% 105.68% Aircraft Type Caravan C - 206 Navajo Aircraft Code 416 35 194 9 . Direct Expenses, I ncludes Fuel $6,217,262 $6,162,243 $3,149,200 10 . Less Passenger Liability I nsurance $180,719 $352 ,867 $118,018 11 . Linehaul Expense Allocable to Mail $6,036,543 $5,809,376 $3,031,182 12 . Cost per Block Hour (R11÷R18) $636.03 $243.49 $562.89 13 . Marked Up Costs (R11*R4*R5*R8) $7,571,780 $6,925,767 $3,613,686 14 . Eligible Expense (R13*R32÷R18) $3,786,289 $5,412,833 $3,194,270 15 . Cost per RTM (R14÷R36) $11.5366 $14.9474 $13.5496 "Trend" 16a . Percentage of Eligible Mail RTMs 6.793% 5.631% 3.959% 17a Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16a) $0.7837 $0.8417 $0.5364 " Actual" 16b Percentage of Eligible Mail RTMs 6.874% 5.698% 4.006% 17b . Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16b) $0.7930 $0.8517 $0.5428 Scheduled + Nonscheduled 18 . System Blk. Hrs., T- 100 Segment 9,491 23,859 5,385 19 . Pax. RTMs 484,016 307,294 175,728 20 . Freight RTMs Wtd. @ 0.75 11,492 13,252 6,979 21 . Mail RTMs 133,410 108,808 76,634 22 . Total RTMs 628,918 429,354 259,341 23 . Aircraft Miles 1,231,716 1,836,099 672,069 24 . Available Ton Miles (ATMs) 1,724,402 1,038,899 455,606 25 . Departures Performed 18,427 38,936 7,446 26 . Wtd. Departures (GTOW) 164,000 144,063 55,100 27 . Ton Load Factor 36.47% 41.33% 56.92% 28 . Stage Length 67 47 90 29 . ATMs per Mile 1.40 0.57 0.68 30 . RTMs per Mile 0.51 0.23 0.39 31 . RTMs per Hour 66.26 18.00 48.16 32 . Eligible Block Hours 4,746 18,647 4,760 33 Pax. RTM 187,513 244,580 152,785 34 . Freight RTM, Wtd. @ .75 9,438 8,738 6,462 35 . Eligible Mail RTM 131,248 108,808 76,499 36 . Total RTM 328,199 362,126 235,746 37 . Aircraft Miles 617,052 1,413,544 582,278 38 . Available Ton Miles (ATMs) 863,873 795,357 396,102 39 . Departures Performed 9,386 31,403 6,685 40 Wtd. Departures (GTOW) 83,535 116,191 49,469 41 . Ton Load Factor 37.99% 45.53% 59.52% 42 . Avg. Stage Length 66 45 87 43 . ATMs per Mile 1.40 0.56 0.6844 RTMs per Mile 0.53 0.26 0.40 45 RTMs per Hour 69.15 19.42 49.53Attachment B Linehaul, Part 135 Appendix C - 1 Page 5 of 7 System Parameters for Each Carrier Hageland Hageland PenAir 1 . Capacity Related Expense (CR) $6,301,705 2 . Direct Expense, I nclude Fuel $97,788,036 3 . Indirect Expense $21,300,124 4 . CR Markup 103.06% 103.06% 105.59% 5 . Return and Tax Markup 109.46% 109.46% 109.46% 6 . T- 100 Mail RTMs, Segment, F & G 2,088,410 7 . T- 100 Mail RTMs, Mkt., F&G 1,915,429 8 . Circuity Markup 105.68% 105.68% 109.03% Aircraft Type Caravan C -406 PA- 32 Aircraft Code 416 417 79 9 . Direct Expenses, I ncludes Fuel $15,202,127 $5,183,706 $2,475,2 29 10 . Less Passenger Liability I nsurance $400,117 $110,143 $138,401 11 . Linehaul Expense Allocable to Mail $14,802,010 $5,073,563 $2,336,828 12 . Cost per Block Hour (R11÷R18) $572.21 $951.89 $470.66 13 . Marked Up Costs (R11*R4*R5*R8) $17,646,520 $6,048,552 $2,944,767 14 . Eligible Expense (R13*R32÷R18) $15,737,110 $4,963,671 $2,600,173 15 . Cost per RTM (R14÷R36) $10.4458 $14.9436 $24.6989 "Trend" 16a . Percentage of Eligible Mail RTMs 28.881% 6.634% 1.658% 17a Cost, Wtd. by Mai l RTMs, I ncludes Fuel (R15*R16a) $3.0169 $0.9914 $0.4095 "Actual" 16b Percentage of Eligible Mail RTMs 29.225% 6.713% 1.677% 17b . Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16b) $3.0528 $1.0032 $0.4142 Scheduled + Nonscheduled 18 . System Blk. Hrs., T- 100 Segment 25,868 5,330 4,965 19 . Pax. RTMs 996,629 259,585 76,039 20 . Freight RTMs Wtd. @ 0.75 70,487 9,283 7,071 21 . Mail RTMs 558,142 128,196 32,240 22 . Total RTMs 1,625,258 397,064 115,350 23 . Aircraft Miles 2,918,802 812,841 527,392 24 . Available Ton Miles (ATMs) 3,748,851 1,195,977 288,220 25 . Departures Performed 375,556 7,898 12,216 26 . Wtd. Departures (GTOW) 334,248 78,190 43,978 27 . Ton Load Factor 43.35% 33.20% 40.02% 28 . Stage Length 8 103 43 29 . ATMs per Mi le 1.28 1.47 0.55 30 . RTMs per Mile 0.56 0.49 0.22 31 . RTMs per Hour 62.83 74.50 23.23 32 . Eligible Block Hours 23,069 4,374 4,384 33 Pax. RTM 888,031 195,169 66,664 34 . Freight RTM, Wtd. @ .75 60,481 8,806 6,581 35 . Eligible Mail RTM 558,040 1 28,186 32,030 36 . Total RTM 1,506,552 332,161 105,275 37 . Aircraft Miles 2,593,487 653,929 464,998 38 . Available Ton Miles (ATMs) 3,330,781 963,222 254,121 39 . Departures Performed 33,849 6,404 11,193 40 Wtd. Departures (GTOW) 301,256 63,400 40,295 41 . Ton Load Factor 45.23% 34.48% 41.43% 42 . Avg. Stage Length 77 102 42 43 . ATMs per Mile 1.28 1.47 0.5544 RTMs per Mile 0.58 0.51 0.23 45 RTMs per Hour 65.31 75.94 24.01Attachment B Linehaul, Part

135 Appendix C - 1 Page 6 of 7 System Parameters for Each Carrier PenAir Warbelow Warbelow 1 . Capacity Related Expense (CR) $781,563 2 . Direct Expense, I nclude Fuel $17,041,166 3 . Indirect Expense $2,207,318 4 . CR Markup 105.59% 104.23% 104.23% 5 . Return and Tax Markup 109.46% 109.46% 109.46% 6 . T- 100 Mail RTMs, Segment, F & G 157,868 7 . T- 100 Mail RTMs, Mkt., F&G 141,598 8 . Circuity Markup 109.03% 111.49% 111.49% Aircraft Type Caravan Navajo Caravan Aircraft Code 416 194 416 9 . Direct Expenses, I ncludes Fuel $3,920,642 $5,410,155 $894,229 10 . Less Passenger Liability I nsurance $135,392 $90,468 $11,700 11 . Linehaul Expense Allocable to Mail $3,785,250 $5,319,687 $882,529 12 . Cost per Block Hour (R11÷R18) $936.25 $460.10 $6 18.02 13 . Marked Up Costs (R11*R4*R5*R8) $4,770,005 $6,766,595 $1,122,569 14 . Eligible Expense (R13*R32÷R18) $4,267,402 $6,491,530 $1,072,258 15 . Cost per RTM (R14÷R36) $13.3817 $9.7595 $10.4520 "Trend" 16a . Percentage of Eligible Mai l RTMs 6.311% 4.936% 1.178% 17a Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16a) $0.8445 $0.4817 $0.1231 "Actual" 16b Percentage of Eligible Mail RTMs 6.386% 4.995% 17b . Cost, Wtd. by Mail RTMs, I ncludes Fuel (R15*R16b) $0.8546 $0.4875 S cheduled + Nonscheduled 18 . System Blk. Hrs., T- 100 Segment 4,043 11,562 1,428 19 . Pax. RTMs 198,492 550,177 75,677 20 . Freight RTMs Wtd. @ 0.75 22,027 35,583 7,698 21 . Mail RTMs 122,117 95,382 22,763 22 . Total RTMs 342,636 681,142 106,138 23 . Aircraft Miles 530,648 1,657,555 204,844 24 . Available Ton Miles (ATMs) 954,904 1,388,184 240,270 25 . Departures Performed 7,255 13,076 1,530 26 . Wtd. Departures (GTOW) 64,570 96,762 13,617 27 . Ton Load Factor 35.88% 49.07% 44.17% 28 . Stage Length 73 127 134 29 . ATMs per Mile 1.80 0.84 1.17 30 . RTMs per Mile 0.65 0.41 0.52 31 . RTMs per Hour 84.75 58.91 74.33 32 . Eligible Block Hours 3,617 11,092 1,364 33 Pax. RTM 176,822 535,304 73,156 34 . Freight RTM, Wtd. @ .75 20,142 34,461 6,670 35 . Eligible Mail RTM 121,935 95,382 22,763 36 . Total RTM 318,899 665,147 102,589 37 . Aircraft Miles 473,756 1,596,013 195,345 38 . Available Ton Miles (ATMs) 851,170 1,338,270 228,265 39 . Departures Performed 6,696 12,636 1,465 40 Wtd. Departures (GTOW) 59,594 93,506 13,039 41 . Ton Load Factor 37.47% 49.70% 44.94% 42 . Avg. Stage Length 71 126 133 43 . ATMs per Mile 1.80 0.84 1.1744 RTMs per Mile 0.67 0.42 0.53 45 RTMs per Hour 88.17 59.97 75.21Attachment B Linehaul, Part 135 Appendix C - 1 Page 7 of 7 Wings Wright Yute $2,182,560 $757,426 $452,094 $24,121,552 $12,553,940 $8,199,900 $5,805,234 $2,111,525 $1,667,873 107.87% 105.45% 104.80% 109.46% 109.46% 109.46% 38,223 126,188 83,374 37,311 116,397 78,471 102.44% 108.41% 106.25% C - 208 Caravan C - 206 416 416 35 $1,921,863 $4,422,505 $4,099,950 $21,425 $133,863 $120,749 $1,900,438 $4,288,642 $3,979,201 $610.09 $441.99 $299.53 $2,298,685 $5,366,50 0 $4,849,998 $2,151,097 $4,583,897 $4,450,973 $10.3852 $6.6441 $14.3108 1.486% 6.351% 4.315% $0.1543 $0.4220 $0.6175 1.504% 6.427% 4.366% $0.1562 $0.4270 $0.6248 3,115 9,703 13,285 170,541 493, 235 219,836 16,252 159,081 22,145 28,983 123,090 83,374 215,776 775,406 325,355 376,641 1,436,615 1,243,082 564,962 2,155,122 734,424 6,282 10,389 33,201 55,910 92,462 122,844 38.19% 35.98% 44.30% 60 138 37 1.50 1.50 0.59 0.57 0.54 0.26 69.27 79.91 24.49 2,915 8,288 12,192 163,961 453,917 206,615 14,461 113,284 21,032 28,710 122,718 83,374 207,132 689,919 311,021 354,998 1,221,608 1,149,753 532,497 1,832,611 683,037 5,836 9,225 30,295 51,940 82,102 112,092 38.90% 37.65% 45.54% 61 132 38 1.50 1.50 0.590.58 0.56 0.27 71.06 83.24 25.51Attachment B Linehaul, Part 135 Appendix C - 2 Page 1 of 4 Carrier Bering B ering Frontier Aircraft Code Navajo Caravan Navajo Scheduled + Nonscheduled "Actual" Total 1/ "Trend" Total 1/ 194 416 194 1 . Total Fuel Expense $1,089,271 $2,167,648 $292,184 2 . Total Gallons Issued 185,289 442,537 70,872 3 . Total Block Hours 4,296 7,934 1,486 4 Eligible Block Hours 2,870 6,762 1,373 5 . Eligible Mail RTMs 1,909,322 1,932,085 43,067 204,879 30,145 6 . Total Eligible RTMs 183,688 557,622 80,886 7 . Price per Gallon $5.88 $4.90 $4.12 8 . Burn per Hour 43. 1 55.8 47.7 9 . Costs per Block Hour $253.55 $273.21 $196.62 10 Eligible Fuel Expense $727,702 $1,847,446 $269,965 11 . Cost per Eligible RTM $3.9616 $3.3131 $3.3376

"Trend" 12a Mail RTMs Percentage 100.00% 2.229% 10.604% 1 .560% 13a . Cost/RTM, Wtd. By Mail RTMs $3.1825 $0.0883 $0.3513 $0.0521

"Actual" 12b Mail RTMs Percentage 100.02% 2.26% 10.73% 1.58% 13b . Cost/RTM, Wtd. By Mail RTMs 

## $3.1987 $0.0895 $0.3555 $0.0527 Bering Bering Frontier Aircraft Name Navajo Caravan Navajo Aircraft Code 194 416 194 1 . Total Fuel Expense $309,913 $454,678 $3,896 2 . Total Gallons Issued 52,097 105,235 1,188 3 . Total Block Hours 1,231 2,026 21 4 Eligible Block Hours 821 1,729 7 5 . Eligible Mail RTMs 12,914 52,730 111 6 . Total Eligible RTMs 52,550 143,275 351 7 . Price per Gallon $5.95 $4.32 $3.28 8 . Burn per Hour 42 52 57 9 . Costs per Block Hour $251.76 $224.42 $185.52 10 Eligible Fuel Expense $2 06,693 $388,025 $1,299 11 . Cost per Eligible RTM $3.9333 $2.7083 $3.7009Attachment B Linehaul, Part 135 Appendix C - 2 Page 2 of 4 Carrier Grant Grant Grant Hageland Hageland Hageland Aircraft Code C - 206 Navajo Caravan C - 206 Navajo Caravan Scheduled + Nonscheduled 35 194 416 35 194 416 1 . Total Fuel Expense $1,180,639 $1,702,463 $2,185,009 $1,647,696 $978,731 $5,440,824 2 . Total Gallons Issued 219,232 309,529 390,547 295,754 176,952 1,040,53 4 3 . Total Block Hours 10,375 5,564 9,491 23,859 5,385 25,868 4 Eligible Block Hours 8,740 4,390 4,746 18,647 4,760 23,069 5 . Eligible Mail RTMs 80,940 63,361 131,248 108,808 76,499 558,040 6 . Total Eligible RTMs 259,950 371,853 328,199 362,126 235 ,746 1,506,551 7 . Price per Gallon $5.39 $5.50 $5.59 $5.57 $5.53 $5.23 8 . Burn per Hour 21.1 55.6 41.1 12.4 32.9 40.2 9 . Costs per Block Hour $113.80 $305.98 $230.22 $69.06 $181.75 $210.33 10 Eligible Fuel Expense $994,582 $1,343,245 $1,092,620 $1,287,757 $865,136 $4,852,110 11 . Cost per Eligible RTM $3.8261 $3.6123 $3.3291 $3.5561 $3.6698 $3.2207

"Trend" 12a Mail RTMs Percentage 4.189% 3.279% 6.793% 5.632% 3.959% 28.883% 13a . Cost/RTM, Wtd. By Mail RTMs $0.1603 $0.1184 $0.2261 $0.2003 $0.1453 $0.9302

"Actual" 12b Mail RTMs Percentage 4.24% 3.32% 6.87% 5.70% 4.01% 29.23% 13b . Cost/RTM, Wtd. By Mail RTMs $0.1622 $0.1199 $0.2287 $0.2027 $0.1472 $0.9414 Grant Grant Grant Hageland Hageland Hageland Aircraft Name C - 206 Navajo Caravan C - 206 Navajo Caravan Aircraft Code 35 194 416 35 194 416 1 . Total Fuel Expense $330,115 $494,476 $564,120 $489,692 $293,977 $1,641,796 2 . Total Gallons Issued 65,069 79,739 85,797 78,900 49,160 274,329 3 . Total Block Hours 2,930 1,369 2,348 6,429 1,474 7,155 4 Eligible Block Hours 2,385 1,049 1,521 5,128 1,269 6,473 5 . Eligible Mail RTMs 19,174 14,760 28,368 27,792 21,311 149,672 6 . Total Eligible RTMs 71,277 85,093 95,026 99,698 61,819 4 19,759 7 . Price per Gallon $5.07 $6.20 $6.58 $6.21 $5.98 $5.98 8 . Burn per Hour 22 58 37 12 33 38 9 . Costs per Block Hour $112.67 $361.20 $240.26 $76.17 $199.44 $229.46 10 Eligible Fuel Expense $268,711 $378,894 $365,429 $390,596 $253,091 $1,485 ,303 11 . Cost per Eligible RTM $3.7700 $4.4527 $3.8456 $3.9178 $4.0941 $3.5385Attachment B Linehaul, Part 135 Appendix C - 2 Page 3 of 4 Carrier Hageland PenAir PenAir Warbelow Warbelow Wings Wright Aircraft Code C -406 PA- 32 Caravan Navajo Caravan C - 208 Caravan Scheduled + Nonscheduled 417 79 416 194 416 416 416 1 . Total Fuel Expense $1,794,539 $464,514 $824,745 $1,705,947 $200,224 $364,419 $1,231,643 2 . Total Gallons Issued 380,524 87,79 2 222,555 448,763 72,282 139,019 491,800 3 . Total Block Hours 5,330 4,965 4,043 11,562 1,428 3,115 9,703 4 Eligible Block Hours 4,374 4,384 3,617 11,092 1,364 2,915 8,288 5 . Eligible Mail RTMs 128,186 32,030 121,935 95,382 22,763 28,710 122,718 6 . Total Eligible RTMs 332,162 105,275 318,899 665,146 102,588 207,132 689,919 7 . Price per Gallon $4.72 $5.29 $3.71 $3.80 $2.77 $2.62 $2.50 8 . Burn per Hour 71.4 17.7 55.0 38.8 50.6 44.6 50.7 9 . Costs per Block Hour $336.69 $93.56 $203.99 $147.55 $1 40.21 $116.99 $126.93 10 Eligible Fuel Expense $1,472,667 $410,157 $737,844 $1,636,600 $191,250 $341,021 $1,052,031 11 . Cost per Eligible RTM $4.4336 $3.8961 $2.3137 $2.4605 $1.8643 $1.6464 $1.5249

"Trend" 12a Mail RTMs Percentage 6.635% 1.658% 6.311% 4.937% 1.178% 1.486% 6.352% 13a . Cost/RTM, Wtd. By Mail RTMs $0.2942 $0.0646 $0.1460 $0.1215 $0.0220 $0.0245 $0.0969

"Actual" 12b Mail RTMs Percentage 6.71% 1.68% 6.39% 5.00% 1.50% 6.43% 13b . Cost/RTM, W td. By Mail RTMs $0.2975 $0.0655 $0.1478 $0.1230 $0.0247 $0.0981

Hageland PenAir PenAir Warbelow Wings Wright Aircraft Name C -406 PA- 32 Caravan Navajo C - 208 Caravan Aircraft Code 417 79 416 194 416 416 1 . Total Fuel Expen se $397,247 $130,920 $243,556 $461,998 $135,446 $353,217 2 . Total Gallons Issued 83,568 24,825 70,586 119,807 44,896 131,750 3 . Total Block Hours 1,240 1,378 1,261 2,974 985 2,596 4 Eligible Block Hours 1,065 1,179 1,107 2,727 911 2,085 5 . Eli gible Mail RTMs 31,129 8,498 33,876 22,593 5,909 30,000 6 . Total Eligible RTMs 80,507 27,726 96,619 163,831 64,262 174,280 7 . Price per Gallon $4.75 $5.27 $3.45 $3.86 $3.02 $2.68 8 . Burn per Hour 67 18 56 40 46 51 9 . Costs per Block Hour $32 0.36 $95.01 $193.15 $155.35 $137.51 $136.06 10 Eligible Fuel Expense $341,184 $112,014 $213,812 $423,628 $125,270 $283,689 11 . Cost per Eligible RTM $4.2379 $4.0400 $2.2129 $2.5858 $1.9494 $1.6278Attachment B Linehaul, Part

135 Appendix C - 2 Page 4 of 4 Carrier Yute Aircraft Code C - 206 Scheduled + Nonscheduled 35 1 . Total Fuel Expense $1,103,194 2 . Total Gallons Issued 176,872 3 . Total Block Hours 13,285 4 Eligible Block Hours 12,192 5 . Eligible Mail RTMs 83,374 6 . Total Eligible RTMs 311,021 7 . Price per Gallon $6.24 8 . Burn per Hour 13.3 9 . Costs per Block Hour $83.04 10 Eligible Fuel Expense $1,012,431 11 . Cost per Eligible RTM $3.2552

"Trend" 12a Mail RTMs Percentage 4.315% 13a . Cost/RTM, Wtd. By Mail RTMs $0.1405

"Actual" 12b Mail RTMs Percentage 4.37% 13b . Cost/RTM, Wtd. By Mail RTMs $0.1423 Yute Aircraft Name C - 207 Aircraft Code 35 1 . Total Fuel Expense $284,324 2 . Total Gallons Issued 45,768 3 . Total Block Hours 3,518 4 Eligible Block Hours 3,154 5 . Eligible Mail RTMs 23,655 6 . Total Eligible RTMs 78,491 7 . Price per Gallon $6.21 8 . Burn per Hour 13 9 . Costs per Block Hour $80.82 10 Eligible Fuel Expense $254,9 06 11 . Cost per Eligible RTM $3.2476