## BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

OFFICE OF THE SECRETARY

__________________________________________ )

In the matter of the )

)

INTRA ALASKA BUSH SERVICE )

MAIL RATES CASE ) Docket DOT

- OST 2003

- 14694

__________________________________________)

RESPONSE OF THE

CONSOLIDATED CARRIERS

TO ORDER 201

- 12

- 28

Communications with Respect to This Document Should Be Addressed to:

Hank Myers

MTC

P.O. Box 7142

Bellevue, WA 98008

(425) 830

- 4265

hank@mtcworld.com

January 27, 2011

BEFORE THE

DEPARTMENT OF TRANSPORTATION

## 2 WASHINGTON, D.C.

OFFICE OF THE SECRETARY

__________________________________________ )

In the matter of the )

)

INTRA ALASK A BUSH SERVICE )

MAIL RATES CASE ) Docket DOT

- OST 2003

- 14694

__________________________________________)

RESPONSE OF THE

CONSOLIDATED CARRIERS

TO ORDER 201

- 12

- 28

The undersig ned carriers, collectively filing as the Consolidated Carriers, hereb y object

to the mail rates set in Order 2010

- 12

- 28. The rate includes adjustments inconsistent

with the clear intent of the Rural Service Improvement Act. The rates are not

c ompensatory for the carriage of mail based on the costs of aircraft with a maxim um

certificated passenger capacity or nine or less (referred to in the RSIA as Part 135), or for

the carriage of mail in aircraft with a maximum certificated passenger capacity of 19 or

more (referred to in the RSIA as Part 121). In addition to being inco nsistent with the

intent of the RSIA, and not being compensatory for mail transported, the rate is

inconsistent with the Department’s long established practice of establishing class rates

related to the economics of operation of a parti cular case of carrie r or aircraft . Most

particularly offensive is the methodology of rate calculation with allows carriers to gain

unfair competitive advantage by manipulating the operating rules of flight for particular

markets. In this way, the basic economic structure of mail transportation in bush Alaska

is undermined, with the effect of threatening mail service at smaller rural Alaskan

villages which are entirely dependent on mail service for the delivery of life’s necessities.

## 3

THE CLASS RATE SYSTEM

The class rate the ory has been used by the Department, and the Civil Aeronautics Board

before it

, to establish fair rates of compensa tion for a particular class of carrier or aircraft

.

Perhaps the most famous class rate was established by the Domestic Passenger Fare

Invest igation in the 1970’s in which a single formula was established for passenger fares

in domestic transportation for all certificated

, scheduled carriers. Subsequently, the

Domestic Air Freight Rate Investigation established the standards for freight rates in

domestic transportation. In both cases, compensation rates applied to all members of a

clearly identified class, and the rates were set to encourage efficiency of operation with in

that class. A specific load factor standard was established for a full rate of return on

investment, and carriers were free to operate their systems in accordance with the fares

and rate s established and applicable to a ll in the class. Carriers that operated more

efficiently than the class average were rewarded with higher p rofit levels, and the less

efficient carriers suffered. The constant incentive was to improve the efficiency of the

operation and reduce unit costs. In turn, the overall goal of this incentive was to reduce

industry costs and lower passenger fares and fr eight rates. In the end, the primary

beneficiary of the system was to be the consumer.

At the same time those class rates were set, the C.A.B. recognized that there were two

distinct classes of carrier within the certificated, scheduled industry, and the economics of

operation were significantly different. Trunk carriers served primarily longer haul routes

and major cities using larger jet equipment, while Local Service Carriers served short

haul routes serving smaller communities using piston, turboprop and the smallest pure jet

## 4

aircraft then in production. The equalizing factor used to recognize the inherent

differences in operating costs was the class rate subsidy system. Local Service carriers

were required to serve smaller points, using smaller air craft with higher unit costs. While

the industry standard fares and rates applied to those routes, Local Service carriers

received additional compensation based on their higher costs of service throu gh direct

subsidy payments according to their actual ope rations. Again, the class rate theory was

used to establish standard subsidy rates, and in turn to encourage efficient operation. To

avoid subsidizing service by Local Service Carriers in competition with Trunk carriers,

only Local Service routes were su bsidy eligible. If a Local Service Carrier did compete

with on a route with a Trunk Carrier, those routes were ineligible for subsidy, and the

costs of operating those routes were not considered in establishing the subsidy class rate.

The three definin g principles of a class rate are: the primary beneficiary of the class rate

is the consumer in the long run; the divisions between compensation level s are equipment

based and not route or regulation based; and the rate differentials cannot be taken

advanta ge of by individual carriers to gain localized competitive advantage.

The commercial aviation industry is dynamic, and industry costs levels will vary

depending on a variety of factors. Regardless of short term changes, however, the

constant incentive for all carriers is to improve efficiency and reduce unit costs. This

single, simple incentive stresses the reduction of operating costs even at the risk of

service reduction. The sine qua non of the class rate structure is lowered costs for the

consumer

. Maintaining clear and consistent standards is the single most important

element in establishing class rates.

## 5

The second consistent element is recognition of equipment size as the primary indicator

of operating efficiency. In the 1970’s the Boeing 707’ s, 727’s and 747’ s used by Trunk

carriers had much lower unit costs per available ton mile than the F

- 27’s and Convair

580’s used by Local Service carriers on their subsidy eligible routes. While Trunk

carriers had to rely solely on commercial revenue for their operations, the higher unit

costs of the smaller Local Service aircraft were recognized through additional subsidy

compensation . The subsidies were not specific route or carrier based, and were

calculated solely on the basis of the operating costs of the smaller, eligible aircraft for the

industry as a whole.

Finally, there was no way for individual carriers to take advantage of the different cost

levels to gain competitive advantage. If a Local Service carrier operated its smaller

aircraft agains t larger Truck aircraft, those operations were subsidy ineligible and the

Local Service carrier had to compete at the same rates as the Trunk carrier. On

subsidized routes, operations by larger aircraft were not subsidy eligible. If a larger

aircraft was used, it did not receive the higher compensation reserved for the smaller

Local Service aircraft.

THE IMPACT OF AIRLINE DEREGULATION

The primary mission statement of the Airline Deregulation Act of 1978 was that the

airline industry i s to rely, to the m aximum exten t possible, upon market forces to

determine level of service and pricing. As with the class rate, the primary beneficiary

## 6

was to be the consumer of airline services. Inherent in the Act was the recognition that

different types of services cou ld be most efficiently provided by different types of

aircraft. Rather than establishing industry standard s based on assumed load factors, price

deregulation allowed carriers to determine the most efficient aircraft for the route. Again,

rates in the ope n market are differentiated based on aircraft size. For example, the 408

mile distance from Grand Rapids to Minneapolis

- St. Paul ($398 roundtrip, $4.88 per

Revenue Ton Mile) on an Embraer 170 compared to the 404 mile distance from Chicago

Midway to Kansas City on a Boeing 737 ($128 roundtrip, $1.58 per RTM) illustrates the

economy of the larger aircraft. Pricing over comparable distances clearly shows the cost

differential of larger aircraft. This difference is increased when it is considered that

larger aircraft are typically operated over longer segments and smaller aircraft are

operated over shorter distances. For example, the roundtrip fare between Grand Rapids

and Chicago

- O’Hare on an Embraer 170 is $362 ($15.08 per rtm), while the roundtrip

fare be tween O’Hare and Miami on a Boeing 757

- 200 is $208 ($0.88 per rtm).

Whether set by regulation or the free market, all evidence shows there is a significant

difference in operating costs depending on the size of aircraft used.

A second element of the Airl ine Deregulation Act was the requirement that intra

- Alaska

mail rates be set by the C.A.B. and then Department of Transportation. Mail is such a

vital commodity in Alaska that Congress wanted to assure that a compens atory rate was

enacted to maintain adeq uate and consistent service. Beginning in 1982 the C.A.B.

reviewed mail rates and in 1988 set two service mail rates based on the capacity of the

aircraft. Mainline rates were based on industry costs for aircraft with payload of 7,500 or

## 7

greater, while b ush rates were for aircraft with less than 7,500 payload. Low density

markets (e.g. McGrath, Unalakleet and Aniak) were served by smaller aircraft and with

fewer competitors. Simlarly, higher cost operations (Barrow, seaplane service) received

less servi ce than the bigger or lower cost hubs such as Bethel, Fairbanks and Nome.

Service level and load factor were used to adjust for different cost characteristics.

THE G OALS OF THE RURAL SERVICE IMPROVEMENT ACT

There are three essential g oals of the Rural S ervice Act which remain in effect today.

First, mail service at the lowest possible cost to the U.S. Postal Service was encouraged

through the use mail rates related to the comparativ e cost levels of different classes of

aircraft. This was accomplished b y reducing the number of mail splits at the bush hubs,

limiting entry of new carriers by requiring a qualifying market share for bypass ma il

tender

. As a result, average mail tender per day to qualified bush carriers more than

tripled within two years.

T he second goal was to favor passenger service over all

- cargo service in bush markets.

Four strong directives were applied. One, three times as much mail was assigned to the

passenger pool as to the freight pool of carriers. Two, the qualifying market sh are for the

freight pool was 25% higher than the qualifying share for the passenger pool. This

inherently limited the number of potential freight carriers. Three, there was no guarantee

that tender from the freight pool would go to an all

- cargo carrier. If a passenger carrier

had the qualifying share of freight, and did not also qualify for tender from the passenger

pool, then the passenger carrier received the tender from the freight pool. On the other

## 8

hand, all

- cargo carriers could never receive tende r from the passenger pool. Four, the

Act required that all mail tender in subsidized Essential Air Service markets was assigned

to the designated E.A.S. carrier. Only passenger carriers qualify for designation as

E.A.S. carriers in subsidized markets.

T hird the safety benefits of larger, modern turbine powered aircraft operated under FAR

Part 121 were recognized and strongly encouraged. Very strong incentives were

provided to initiate Part 121 service, and to convert to Part 121 operations in markets

wh ere other carriers were already operating Part 121 service. The more stringent

operating requirements, personnel and training requirements, and route planning and

continuous flight following of Part 121 operations compared to Part 135 service were

noted. Airports for Part 121 service had higher require ments. At the time the R.S.I.A.

was drafted , only carriers certificated under Part 121 were operating aircraft with

maximum certificated passenger capacity of 19 or more, and conversely, all aircraft with

p assenger capacity of 19 or more were operated only by Part 121 carriers. In the Act, the

definition of Part 121 and Part 135 service was directly linked to the capacity of the

aircraft then actually being used.

THE EFFECT OF THE RSIA ON BUSH MAIL RATES

The three goals of the RSIA were reiterated in the mail rate making standards in the Act.

Mail rate minimization was directed through the use of class rates, and the exclusion of

costs unrelated to the carriage of mail. Support of passenger service was e nhanced by

only including the industry costs of passenger carrying airlines. T he costs of all

- cargo

## 9

airlines were specifically excluded. Part 121 service with modern turbine powered

passenger aircraft was strongly encouraged by considering only the costs of aircraft with

a certificated passenger capacity of 19 or more.

What the Act did not do was alter to sole authority of the Department to set mail rates, to

alter traditional class rate goals and standards, or to inhibit the ability of the Department

to interpret the intent of the Act with regard to specific pro visions within the Act, or

when different parts of the Act were in conflict.

There are four excellent examples of where the Department specifically ignored the clear

language of the Act in settin g up tender qualifications and mail rate application . In the

original wording of the Act, qualification for bypass mail tender was not based simply on

actual traffic transported in a market, but on the share of federal excise tax collected by

the carrier. Subparagraph k required filing of these data by stating, “ (5) Not later than 30

days after the last day of each calendar month, carriers qualified or attempting to be

qualified to be tendered nonpriority bypass mail shall report to the Secretary the exci se

taxes paid by city pair to the Department of the Treasury and the weight of and revenue

earned by the carriage of nonmail freight. Final compiled data shall be made available to

carriers providing service in the hub. ”

This specifically worded provisi on created an onerous reporting requirement.

Furthermore, it actually encouoraged higher air fares, which resulted in higher excise

taxes, as well as multistop inti neraries where segment taxes were in effect. After asking

for comments on this provsion, a nd with the agreement of all parties, this provision was

## 10

simply ignored and qualifying shares are based on the reported T

- 100 market traffic. In

Order 2003

- 10

- 10, the Department noted, “We have discussed this issue with the BTS

and the Postal Service. So me carriers have informally stated that quantifying excise taxes

by market would prove difficult, if not impossible. It is not clear from the legislative

history what the purpose is of reporting excise taxes by route. We thus request comments

on the best method to meet the requirements of the law. (at page 4, emphasis added) The

best method chosen to meet the requirement s of the law b y the Department was to i gnore

the provision.

A second section was also ignored after strong objections from Peninsula Ai rways. In

issue 5 (page 8), the Postal Service argued that mail rates should be applied not on the

basis of the aircraft used to provide passenger service , but on the operating certificate

held by the operator an d the airport certification of the point se rved . Specifically, the

Postal Service argued that if a carrier holding a Part 121 certificate served an airport that

was approved for Part 121 operations, the applicable mail rate was the Part 121 rate

“ ...regardless of the aircraft type that any carrier uses to serve the market. ” In this case as

well the Department, using its sole discretion to decide the issue, determined that the rate

was related to the aircraft used and not the operating authority or ground facilities.

In reaching its proposed (and subsequently adopted) position, the Departme nt said that

the aircraft based rate was consistent with historical ratemaking methodology. “The

Postal Service refers to its proposal as a class

- rate, and it dismisses using the three cost

pools based on aircra ft type/size as “aircraft” based rates. However a fundamental tenet

of class rates is that members of the class share certain characteristics, which would not

## 11

be the case with the Postal Service’s proposal. The “aircraft” based rate that the Postal

Servi ce dismisses actually is most reflective of the current class

- rate methodology. ” (at

page 10, emphasis added)

In discussing Issue 6 (page 11, et seq ), the application of the Part 121 rate was considered

in relation to the capacity of the aircraft actuall y used. The Consolidated Carriers argued

t hat the 121 rate “should apply where aircraft exceeding 19 i n sured and available seats

operate. ” By contrast, Peninsula Airways argued “...that the focus must be on

certificated seats rather than seats insured or available fo r sale.” Penair stated that it

operated aircraft certificated for 19 seats but operated with fewer seats to accommodate a

lavatory. It argued that even in the case where fewer seats than maximum capacity are

installed that the 121 rate should continue to apply.

The a ssertion that the class rates are aircraft related and not regulation related was also

raised by Hageland Aviation. Hageland argued that the the deHavilland Twin Otter of

Era Aviation should not be included in the 121 mail rate even though it was certificated

for 19 seats and operated only under Part 121. Hageland proposed that the Twin Otter

should be excluded because it was slower than Metroliners or Beech 1900’s , and

therefore had different operating costs . Consequently, th e Department established a

separate 121 rate for STOL aircraft used at airports that could not accommodate ot her

Part 121 aircraft

. In that case Penair wanted the higher STOL costs included with the

other Part 121 aircraft in order to increase the rate it would be paid for its Metroliner and

SAAB service. The Department ruled that the operating characteristics and economies

## 12

were different enough to justify separate rates although the aircraft were operated under

the same rules.

Retu rning to Issue 5, the c lear wording of the Act says, “(B) The Secretary shall establish

a bush rate based on data collected under subsection (k) from 121 bush passenger

carriers

. Such rates shall be paid to all bush passenger carriers operating on city pair

routes in the State o f Alaska where a 121 bush passenger carrier is tendered nonpriority

bypass mail. ” (at page 8, emphasis added) A 121 bush passenger carrier “means a bush

passenger carrier providing passenger service on bush routes under part 121;” Pursuant

to the sp ecific wording of the provision and the definition of a 121 bush passenger

carrier, the Postal Service “said that it would pay the 121 rate ra te whereever a Part 121

carrier operates, regardless of the actual aircraft type that any carrier uses to serve th e

market .” Peninsula Airways opposed that argument and prevailed. The Department,

using its regulatory discretion, noted that the Postal Service’s interpretation would

undermine the goal of promoting service of larger, more efficient aircraft. Again, th e

deciding issue was the size and efficiency of the aircraft actually used to provide the

service.

Based on all of these findings, it is clear that the applicable operating costs of all aircraft

certificated for 19 or more passengers, regardless of the nu mber of seats available or

insured, and operated by a 121 bush passenger carrier can be included in setting only the

121 mail rate.

## 13

SHOULD MAIL BE TENDERED TO 121 BUSH PASSENGER CARRIERS

OPERATING 121 CERTIFICATED AIRCRAFT UNDER PART 135 ?

Tender of mail to 121 bush passenger carriers operating aircraft with certificated

passenger capacity of 19 or more under Part 135 is directly contrary to the three goals of

the R.S.I.A. First, these operations result in dramatically higher mail rates being paid by

the Postal Service. Regardless of the impact of including these operations in the Part 135

rate, it costs the Postal Service significantly more money for the same service,

particularly over the longer stage lengths operated by the 121 aircraft. Over the 400 mile

average segment operated by Penair’s Part 121 qualified aircraft, the 135 mail rate is

twice the 121 mail rate ($3.68648 to $1.84733 ), doubling the Postal Service payments in

relation to costs of service.

The R.S.I.A. specifically promotes the use of higher capacity aircraft in passenge r

service. By removing up to 100 % of the approved seats in their aircraft, Penair is

contradicting the expressed purpose of the R.S.I.A. of promoting high capcity passenger

service in modern turbine aircraft . In fac t, the removal of passenger seats increases the

cargo capacity. In any case, these aircraft have more weight capacity for cargo than for

passengers, another contradi ction of the intent of the R.S.I.A.

The third stated goal of the R.S.I.A. is to encoura ge the higher safety levels associated

with operations under Part 121. Part 121 operations require pilots with a higher level of

experience and training than are required for Part 135 service. Additionally, ground

services such as dispatch and flight fol lowing require certified personnel and continuous

## 14

communications contact. Part 121 carriers have greater management personnel

requirements both relating to the number required positions and the experience to qualify.

Under Part 135, many of these op erati ng requirements are less stringent or inapplicable.

Operating Part 121 aircraft under Part 135 regulations eliminates the basic safety

advantage envisioned by the R.S.I.A..

Peninsula Airways is operating contrary to the specific goals of the Rural Servic e

Improvement Act. Any passenger or freight traffic carried on its Pa rt 121 certificated

aircraft while operated under Part 135 should be excluded from consideration in

determining mail tender.

THE RATES PROPOSED IN ORDER 2010

- 12

- 28 ARE CONTRARY TO THE

P ROVISIONS OF THE R.S.I.A. AND CLASS RATE TENETS

Until the issuance of Order 2010

- 12

- 28, the Department has consistently interpretted the

R.S.I.A. in accordance with the intent of the Act and historical class rate principles. The

big change, as explained by the Order, is that Peninsula Airways seeks to have the costs

of Metroliner and SAAB 340 aircraft operated with fewer than 10 installed passenger

seats included in the 135 mail rate structure, and th ose operations paid at the 135 mail

rate. This action is is contrary to the goals of the Rural Service Improvement Act, and

reverses years of rate making practice in this docket as well as class rate making in

general. The Order deprives carriers operating true Part 135 aircraft (aircraft certificated

to carry no more than 9 passengers and having a payload of less than 7,500 lbs.) of a

compensatory mail rate as required by law. These changes represent an unecessary and

## 15

undue burden on the Department, the B.T.S., and competing carriers attempting to

validate the report s and cost structure of Penair. The Order not only contradicts historical

practices in mail rate making, it contradicts the previously stated (and adopted) positions

of Penair iteself. Finally, the Order allows Peninsula Airways and any other like minded

and authorized carriers to pervert the class rate system to gain individual competitive

advantage against specific c ompeting carriers or in targetted markets. As such, this

amounts to an unfair and deceptive business practice.

The aircraft ca pacity based class distinction used by the Department is clear, and creates

classes markedly different from one another. In the year ended June, 2010, the average

segment payload for aircraft certificated for nine or fewer passengers used in bush service

was 1,859 lbs., while the average payload of aircraft certificated for 19 or more

passengers (all operators) was 5,454 lbs., and the average payload of Penair aircraft

certificated for 19 or more seats was 6,452 lbs.. The differences between these two

cla sses of aircraft go far beyond simple payload comparisons. The average nonstop

segment length (hop) for the nine or fewer aircraft was 63. 6 miles, for the 19 or more seat

aircraft is was 233.9 miles, and Penair’s large aircraft averaged 400.5 miles per ho p. The

average segment block time was 33 minutes for nine or fewer certificated seat aircraft, 70

minutes for 19 or more certificated seat aircraft (all carriers) and 104 minutes for Penair

aircraft certificated for 19 or more passengers. The average blo ck speed for the 135

aircraft group was 120 statute miles per hour. For the 19 or more passenger aircraft it

was 217 miles per hour and for Penair’s large aircraft 241 miles per hour.

## 16

For each of the metrics used by the Department and air carriers to d efine the rate classes,

aircraft approved for nine or fewer passengers are clearly distinct from aircraft

certificated to carry 19 or more passengers, regardless of the operating rules used. There

is no logical or rate making basis to include aircraft wit h three times the payload, six

times the average hop and twice the block speed of the rest of the aircraft in the class.

Regardless of operating rules, aircraft certificated for 19 or more passengers have

significantly different operating economies and must not be included in the 135 class rate.

The impact of including the larger, more efficient 19 or greater seat aircraft in the 135

cost pool is to reduce mail rates significantly. While most bush mail is transported in

markets with competitive passeng er service and often all

- cargo service, there are over 50

bush point where only one carrier provides all the passenger service and most frequently

all scheduled air service. Whether or not these points receive EAS subsidy, the

predominant source of revenu e supporting the service is from passenger fares and mail

rates. Reduced revenue for transporting the same mail, and without any real reducti o n in

expenses for the carriers operating the service increases the subsidy need for subsidized

points, and reduce s the viability for all services. Simply put, the proposed mail rates

directly transfer mail pay from small, individual carriers providing Essential Air Service

to low traffic points to large carriers, serving competitive markets with the largest aircraft

qualifying for bush rates. This is not only contrary to rate making principles and the

R.S.I.A. goals, it directly threatens basic delivery of life’s essentials to remote villages.

Maintaining separate B.T.S. and F.A.A. records for operation of the same aircraft under

different operating rules creates a reporting nightmare for the carrier and the regulatory

## 17

agencies. It creates additional complications for ratemaking as the different categories

have to be checked, analyzed and compared for accuracy. F. A.A. requirements for Part

121 operation are significantly different in virtually all categories of organization and

operation. The R.S.I.A. recognized these more stringent requirements and created

specific incentives to support expended Part 121 service. Maintaining separate records

for the same aircraft creates additional auditing burdens on B.T.S., as well as the need to

develop specific standards to assure that operating costs for 121 service are not mixed

with 135 service and vice versa.

THE CORRECT METHOD OF DETERMING BUSH MAIL RATES IS BASED

ON THE CERTIFICATED MAXIMUM PASSENGER CAPACITY OF THE

AIRCRAFT BEING USED

In looking at the legislative history of the R.S.I.A., when the Act was first proposed only

Era Aviation, Frontier Flying Service and P eninsula Airways operated aircraft approved

for 19 or more passengers. All of this service was operated under Part 121 rules. There

was a definitive identity between Part 121 operations and aircraft having a capacity of 19

or more passengers. About the time the R.S.I.A. was signed into law, Hageland Aviation

began operating Beech 1900 aircraft under Part 135, but in long haul mainline markets

where bush rates did not apply and no mail was tendered to Hageland. At the time the

Act was written, operations with 19 seat or more aircraft meant operation under Part 121,

and all aircraft with nine or fewer approved seats were operated under Part 135. This is

the basis for the essentially identical definitions of operations and aircraft used to

determine tender of mail under the R.S.I.A..

## 18

Moreover the Act differentiated between the definitions used to determine mail tender

and the definitions used to determine mail rates . While Part 121 rules governed operation

of commuter aircraft with 10 or more passenger seats, only aircraft with 19 or more

passengers seats were used to determine the 121 bush rate. The 19 seat requirement was

inserted to encourage use of more modern Metroliners, Beech 1900’s and SAAB 340

aircraft. Aircraft with 10

- 18 passenger seats woul d receive 121 preferences and would be

used to designate 121 markets, but would not be used to set 121 mail rates.

Even with the introduction of Beech 1900 service to bush villages, the difference between

the operating capability and economies of size of the 9 approved seat or fewer aircraft

and the 19 or more approved seat aircraft remains huge. The operating statistic

differences are shown above and do not need to be repeated. The block hour weighted

cost for Penair’s Metroliners in Appendix C

- 1 of the 135 rate attachment to Order 2010

-

12

- 28 is $7.6461 per revenue ton mile ($7.1795 X 82.6% of total hours plus $9.861 X

17.4% of total hours). The average 135 cost per ton mile excluding 19 seat aircraft is

$12.2338 per ton mile (see attached Appendix C

- 1 for 135 mail rates), and is 60% higher

than the Metroliner linehaul cost.

The only methodology of computing bush mail rates that is consistent with the intent and

legislative history of the R.S.I.A. and long established class rate structure is to assign a ll

aircraft certificated with a maximum of 19 or more passenger seats to the 121 rate pool,

and all aircraft certificated with a maximum of 3

- 9 passenger seats to the 135 wheel rate

pool. The R.S.I.A. specifically excludes passe nger operations with 10

- 18 seat aircraft,

## 19

and all costs for all

- cargo operators (Alaska Central and Ryan Air). There are no ai rcraft

with 10

- 18 seat maximum capacity in the current mail rate cost poo ls , regardless of

operating rules. In the past, Peninsula Airways has supported in clusion of all its

Metroliner service (and by extension its SAAB service) in the 121 cost pool regardless of

actual seating configuration.

The rate structure proposed by the Consolidated Carriers raises the relatively insignificant

issue of adding 19 seat aircraft operated by Part 135 only operators in bush service to the

121 rate pool. To begin with, the vast majority of operations with 19+ seat bush aircraft

are over mainline routes and thus automatically excluded from mail rate making

consideration. W hen the Department set the first Part 135 wheel rate in 2004 (four years

after the proposal of the R.S.I.A. and two years after its enactment) less than 0.5% of the

mail ton miles assigned to the 135 cost pool were carried on 19 seat capacity aircraft.

Ev en today less than 2% of mail ton miles are carried on 19 seat capacity aircraft by Part

135 only carriers where there isn’t already a Part 121 carrier operating in direct

competition. It is illogical to assign costs for identical aircraft serving the sam e market

but under different certificate rules to different costs pools.

THE DEPARTMENT HAS THE AUTHORITY AND DISCRETION TO ADOPT

THE PROPOSED CHANGES

In weighing the methodology of the rate structure, the Department considers the wording

of appropriate law and regulations, as well as the legislative history of an act and the

stated intent and purpose of the law. Where there have been difference or even conflicts,

## 20

it is the Department that has the discretion to make the decision. As shown above, when

es tablishing mail rates pursuant to the R.S.I.A. there were several conflicts between

history and goals on the one hand and the specific wording of the Act on the other, or

conflicts between established rate making policy and the wording of the Act. In each

case the Department used is judgment to determine the correct answer. On several points

the R.S.I.A. was subsequently amended to reflect the points decided by the Department.

The proposed Consolidated Carriers rate structure is clearly consistent with t he authority

and discretion of the Department and should be adopted.

THE DEPARTMENT MUST ELIMINATE COMPETITIVE GAMESMANSHIP

AS AN ELEMENT OF RATE MAKING

The rates proposed in Order 2010

- 12

- 28 do not meet the goals of the R.S.I.A. or

established class rat e making. It results in the Postal Service paying 135 mail rates in

more markets and for even more volume. It requires extensive and complex reporting,

auditing and analysis with no benefit to the Postal Service or the vast majority of bush

carriers. It directly transfers compensation for carriers serving small or high cost villages

with the smallest aircraft to carriers operating the lowest cost aircraft in the highest

volume markets. As noted earlier, there is a subtle difference between the tender

re quirements and the rate making requirements concerning the difference between Part

121 service and Part 135 service. Penair is seeking to exploit this subtle difference, and

to gain a very large undeserved subsidy for the large aircraft to compete with sm aller,

true 135 aircraft. If Penair is successful, it will encourage further gamesmanship

designed to maximize individual carrier revenue regardless of the consequences to

## 21

overall service of Postal Service expenses. This gamesmanship can be halted by ado pting

the rates and rate structure proposed by the Consolidated Carriers.

WHAT THE CONSOLIDATED CARRIERS ARE PROPOSING

The Consolidated Carriers’ wheel plane rates are far simpler and reflective of actual costs

structures than the rates in 2010

- 12

- 28, an d simpler and more clear than the previous rate

structures as well. No change in methodology or level is being proposed for either the

terminal charge or the seaplane rate. The methodology for determining the 135 wheel

rate shall remain the same, but the aircraft to be used to determine the rate shall be true

135 aircraft with a certificated seating capacity of three to nine passengers and meeting

the Department’s selection criteria. The 121 rate would be computed using only aircraft

with certificated se ating capacity of 19 or more and meeting the selection criteria.

The resulting input rate levels are shown in Attachment A Appendices C

- 1A and C

- 2A

for the 121 mail rates and Attachment B Appendices C

- 1 and C

- 2 for the 135 mail rates.

For the 121 lineh aul rate, the unescalated cos t per revenue ton mile for the y ear ended

June 30, 2010 is $ 7.5172 , and the non

- fuel cost per ton mile used to determine the cost

change regression line is $ 5.827 . For the 135 linehaul rate, the unescal a ted cost per

revenue ton mile for the year ended June 30, 2010 is $12.2338, and the non

- fuel cost per

ton mile used to determine the cost change regression line is $9.0351.

The Consolidated Carriers have not proposed a specific cost escalation rate for 2004

-

2010. After exami ning the worksheets for the year ended June 39, 2009, it was

## 22

determined that application of the proposed methodology created a small but statistically

significant difference in the 121 and 135 linehaul costs and non

- fuel costs. The

Consolidated Carriers r espectfully request the Department recalculate the long term cost

escalation regression line by applying the proposed standards to the previous two years of

costs (YE 6

- 2008 and YE 6

- 2009). Regression lines are most affected by recent data, and

going back two years is far less burdensome that recalculating the input data for all years.

This need for adjustment particularly applies to the 121 linehaul rate because of the

difference in cost structure between Anchorage and Fairbanks based service and the rur al

bush hubs. The Consolidated Carriers will be happy to recalculate the regression line if

the YE 6

- 30

- 2008 worksheets are provided. Obviously such a recalculation will not

result in any retroactive payments in either direction.

SUMMARY

Adopting the p roposed standards of linehaul rates is a significa nt improvement over the

methodology proposed in Order 2010

- 12

- 28 , and is consistent with the intent and

meaning of the R.S.I.A. when written. The appropriate operating characteristics of the

two classes o f service will be recognized wherever the aircraft are operated and

regardless of the operati ng rules followed. The Consolidated Carriers rates are based on

simple and clear criteria, and eliminate the need for detailed and convoluted reports.

Mail reven ue will not be transferred from small carriers and markets to large carriers in

large markets. The Consolidated Carriers proposal will reduce total mail payments by the

Postal Service by increasing the number of markets and amount of mail paid at 121

line haul rates. The Consolidated Carrier rates will significantly decrease the ability of

## 23

individual carriers to distort the system by playing games with operating rules and STC’s,

while maintaining the incentive to use the most efficient aircraft available f or each

market.

WHEREFORE, The Consolidated Carriers respectfully request that the methodology,

standards and rates proposed herein be adopted for the 125 linehaul element and the 121

linehaul element.

Respectfully submitted,

The Consolidated Carriers

____________________ by Hank Myers

January 27, 2011

## 24 Certificate of Service

I hereby certify that I have this day service a copy of the foregoing Response of the

Consolidated Carriers upon all parties of record in this docket by electronic mail or

Pr iority U.S. Mail if the email address is unknown.

Respectfully submitted,

Hank Myers

January 27, 2011

## 25 Attachment A

Linehaul, Part 121

Appendix C

- 1A

Page 1 of 3

System Total A.Circle Bering Bering

1

. Ca

pacity Related Expense (CR) $334,712

2

. Direct Expense, Includes Fuel $4,663,861

3

. Indirect Expense $456,836

4

. CR Markup 106.99% 106.99% 106.99%

5

. Return and Tax Markup 109.46% 109.46% 109.46%

6

. T

- 100 Seg. Skd. Mail RTMs 5 6,397

7

. T

- 100 Mkt. Skd. Mail RTMs 54,229

8

. Circuity Markup 104.00% 104.00% 104.00%

Shorts 330 B

- 1900 Casa 212

By Aircraft Type Total 487 405 412

9

. Direct Expenses, Includes Fuel $58,902,298 $1,850,567 $2,878,335 $954, 251

10

. Less Passenger Liability Insurance $1,467,708 $13,815 $63,259 $18,310

11

. Linehaul Expense Allocable to Mail $57,434,590 $1,836,752 $2,815,076 $935,941

12

. Cost per Block Hour (R11÷R18) $1,364.50 $2,336.83 $1,859.36 $1,742.91

13

. Marked Up Costs (R11*R4*R5*R8) $1,727,761 $2,237,085 $3,428,642 $1,139,936

14

. Eligible Expense (R13*R32÷R18) $952,912 $2,037,854 $2,063,073 $602,871

15

. Cost per RTM (R14÷R36) $0.1274 $17.5426 $12.3086 $13.8400

16

. Percentage of Eligible Mail RTMs 100.00% 4 .291% 6.739% 3.195%

17

. Cost, Wtd. by Mail RTMs, Includes Fuel $7.5172 $0.7528 $0.8295 $0.4422

Scheduled + Nonscheduled

18

. Block Hours 42,092 786 1,514 537

19

. Pax. RTMs 10,880,187 0 189,653 723

20

. Freight RTMs @ 0.75 307,514 76,955 10 ,391 28,620

21

. Mail RTMs 2,189,891 48,156 73,849 35,008

22

. Total RTMs 13,377,592 125,111 273,893 64,351

23

. Aircraft Miles 9,519,833 129,965 352,282 86,754

24

. Available Ton Miles 26,005,635 454,878 880,705 227,729

25

. Departures Performed 31,0 53 695 2,085 681

26

. Weighted Departures (GTOW) 679,939 15,916 35,028 11,577

27

. Ton Load Factor 51.44% 27.50% 31.10% 28.26%

28

. Stage Length 306.6 187 169 127

29

. ATMs per Mile 2.73 3.50 2.50 2.62

30

. RTMs per Mile 1.41 0.96 0.78 0.74

31

. RTMs per Hour 317.82 159.17 180.91 119.83

Eligible (See Appendix E

32

. Block Hours 23,215 716 911 284

33

. Pax. RTMs 6,180,492 0 86,150 0

34

. Freight RTMs @ 0.75 201,174 69,147 7,616 8,552

35

. Mail RTMs 1,095,867 47,019 73,847 35,008

36

. To tal RTMs 7,477,533 116,166 167,613 43,560

37

. Aircraft Miles 5,229,052 118,400 205,182 45,877

38

. Available Ton Miles 13,874,470 414,400 512,955 120,427

39

. Departures Performed 17,974 633 1,497 398

40

. Weighted Departures (GTOW) 370,777 14,496 25, 150 6,766

41

. Ton Load Factor 53.89% 28.03% 32.68% 36.17%

42

. Stage Length 290.9 187 137 115

43

. ATMs per Mile 2.65 3.50 2.50 2.62

44

. RTMs per Mile 1.43 0.98 0.82 0.95

45

. RTMs per Hour 322.10 162.24 183.99 153.38

## 26 Attachment A

L inehaul, Part 121

Appendix C

- 1A

Page 2 of 3

"Actual"

Frontier Hageland PenAir PenAir PenAir PenAir PenAir

$1,621,209 $6,301,705

$32,954,543 $97,788,036

$6,100,819 $21,300,124

104.33% 106. 99% 105.59% 105.59% 105.59% 105.59% 105.59%

109.46% 109.46% 109.46% 109.46% 109.46% 109.46% 109.46%

374,607 2,088,410

356,583 1,915,429

105.05% 104.00% 109.03% 109.03% 109.03% 109.03% 109.03%

Beech 1900 B

- 1900 Metro 23 Metro 23 Sa ab 340 Saab 340 Metro III

405 405 455

- 1 455

- 2 456

- 1 459

- 1 467

- 2

$15,035,457 $2,239,132 $717,159 $703,597 $26,958,882 $3,101,076 $3,066,749

$457,053 $37,514 $48,355 $0 $716,127 $87,251 $0

$14,578,404 $2,201,618 $668,804 $703,597 $26,242,755 $3,013,825 $ 3,066,749

$1,410.59 $1,396.97 $839.15 $795.92 $1,347.72 $1,471.59 $1,050.26

$17,489,230 $2,681,476 $842,797 $886,642 $33,069,960 $3,797,889 $3,864,582

$11,774,559 $852,424 $324,641 $855,549 $18,516,936 $1,196,113 $129,702

$8.9321 $13.6903 $3.9808 $4.36 72 $3.6621 $4.3658 $6.5829

28.954% 4.116% 1.485% 17.876% 26.686% 1.585% 1.798%

$2.5862 $0.5635 $0.0591 $0.7807 $0.9773 $0.0692 $0.1184

10,335 1,576 797 884 19,472 2,048 2,920

1,622,352 9,728 179,473 0 7,978,394 785,424 80

94,676 49,434 673 0 29,919 2,945 0

344,436 195,528 28,504 205,816 640,610 32,549 549,537

2,061,464 254,690 208,650 205,816 8,648,923 820,918 549,617

2,082,419 311,892 198,273 223,305 4,741,971 461,886 708,218

3,764,494 586,414 401,830 423,196 16,047,268 1,474,436 1,343,59 2

9,717 1,347 483 443 11,363 1,365 1,417

163,246 22,630 7,970 7,310 329,527 39,585 22,672

54.76% 43.43% 51.92% 48.63% 53.90% 55.68% 40.91%

214.3 232 410.5 504.1 417.3 338.4 499.8

1.81 1.88 2.03 1.90 3.38 3.19 1.90

0.99 0.82 1.05 0.92 1.82 1.78 0.78

199.46 161.61 261.79 232.82 444.17 400.84 188.23

6,958 501 307 853 10,903 645 98

925,251 9,252 65,030 0 4,746,177 255,645 0

75,684 7,912 244 0 17,798 959 0

317,294 45,101 16,278 195,902 292,446 17,371 19,703

1,318,229 62,265 81,552 195,902 5, 056,421 273,975 19,703

1,336,302 86,260 80,101 216,785 2,777,743 152,699 24,240

2,474,049 153,321 151,751 410,699 8,823,826 433,089 45,923

7,531 658 162 422 4,995 340 49

126,521 11,054 2,673 6,963 144,855 9,860 784

53.28% 40.61% 53.74% 47.70% 57.30% 6 3.26% 42.90%

177.4 131 494.5 513.7 556.1 449.1 494.7

1.85 1.78 1.89 1.89 3.18 2.84 1.89

0.99 0.72 1.02 0.90 1.82 1.79 0.81

189.46 124.28 265.64 229.66 463.76 424.77 201.05

## 27 Attachment A

Linehaul, Part 121

Appendix C

- 1A

Page 3 of 3

Warbe low System

Capacity Related Expense (CR)

Direct Expense, Includes Fuel

Indirect Expense

105.59% CR Markup

109.46% Return and Tax Markup

T

- 100 Seg. Skd. Mail RTMs

T

- 100 Mkt. Skd. Mail RTMs

109.03% Circuity Markup

B

- 1900

405 By Ai rcraft Type

$1,397,093 Direct Expenses, Includes Fuel

$26,024 Less Passenger Liability Insurance

$1,371,069 Linehaul Expense Allocable to Mail

$1,121.07 Cost per Block Hour (R11÷R18)

$1,727,761 Marked Up Costs (R11*R4*R5*R8)

$1,467,820 Eligible Expe nse (R13*R32÷R18)

$10.3261 Cost per RTM (R14÷R36)

3.276% Percentage of Eligible Mail RTMs

$0.3383 Cost, Wtd. by Mail RTMs, Includes Fuel

Scheduled + Nonscheduled

1,223 Block Hours

114,360 Pax. RTMs

13,901 Freight RTMs @ 0.75

35,898 Mail RTMs

1 64,159 Total RTMs

222,868 Aircraft Miles

401,093 Available Ton Miles

1,457 Departures Performed

24,478 Weighted Departures (GTOW)

40.93% Ton Load Factor

153 Stage Length

1.80 ATMs per Mile

0.74 RTMs per Mile

134.23 RTMs per Hour

Eligible (See A ppendix E

1,039 Block Hours

92,987 Pax. RTMs

13,262 Freight RTMs @ 0.75

35,898 Mail RTMs

142,147 Total RTMs

185,463 Aircraft Miles

334,030 Available Ton Miles

1,289 Departures Performed

21,655 Weighted Departures (GTOW)

42.56% Ton Load Factor

1 44 Stage Length

1.80 ATMs per Mile

0.77 RTMs per Mile

136.81 RTMs per Hour

## 28 Attachment A

Linehaul, Part 121

Appendix C

- 2A

Page 1of 2

Year Ended June 30, 2010, Fuel Expense ("Actual")

Carrier Ar. C ircle Frontier Bering

1 Aircraft Name SD

- 330 Beech 1900 B

- 1900

2 Aircraft Code Total 487 405 405

3 Total Fuel Expense $14,886,777 $341,674 $3,871,013 $1,090,047

4 Total Gallons Issued 4,939,735 134,501 1,389,139 221,129

5 Total Block Hours 40,5 16 786 10,335 1,514

6 Eligible Block Hours 22,714 716 6,958 911

7 Eligible Mail RTMs 1,050,766 47,019 317,294 73,847

8 Total Eligible RTMs 7,419,805 116,166 1,318,229 167,613

9 Price per Gallon $3.01 $2.54 $2.79 $4.93

10 Burn per Hour 121.9 171 .1 134.4 146.1

11 Costs per Block Hour $367.43 $434.70 $374.55 $719.98

12 Eligible Fuel Expense $8,465,290 $311,245 $2,606,145 $655,900

13 Cost per Eligible RTM $1.1409 $2.6793 $1.9770 $3.9132

. Mail RTMs Percentage 100.00% 4.475% 30.196% 7.028%

. Cost/RTM, Wtd. By Mail RTMs $1.6902 $0.1199 $0.5970 $0.2750

.

## 29 Attachment A

Linehaul, Part 121

Appendix C

- 2A

Page 2 of 2

Bering PenAir PenAir PenAir PenAir PenAir Warbelow

Casa 212 Me tro 23 Metro 23 Saab 340B Saab 340A Metro III B

- 1900

412 455

- 1 455

- 2 456

- 1 459

- 1 467

- 2 405

$346,002 $244,175 $248,625 $6,854,904 $754,852 $815,718 $319,767

70,244 70,714 79,431 2,328,451 270,069 260,357 115,700

537 797 884 19,472 2,048 2,920 1,223

284 307 853 10,903 645 98 1,039

35,008 16,278 195,902 292,446 17,371 19,703 35,898

43,560 81,552 195,902 5,056,421 273,975 24,240 142,147

$4.93 $3.45 $3.13 $2.94 $2.80 $3.13 $2.76

130.8 88.7 89.9 119.6 131.9 89.2 94.6

$644.32 $306.37 $281.25 $352.04 $368 .58 $279.36 $261.46

$182,988 $94,055 $239,906 $3,838,282 $237,734 $27,377 $271,658

$4.2008 $1.1533 $1.2246 $0.7591 $0.8677 $1.1294 $1.9111

3.332% 1.549% 18.644% 27.832% 1.653% 1.875% 3.416%

$0.1400 $0.0179 $0.2283 $0.2113 $0.0143 $0.0212 $0.0653Attachment B

Linehaul, Part 135

Appendix C

- 1

Page 1 of 5

System Parameters for Each Carrier "Actual"

1

. Capacity Related Expense (CR)

2

. Direct Expense, Include Fuel

3

. Indirect Expense

4

. CR Markup

5

. Retur

n 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, Includes Fuel

10

. Less Passenger Liability Insurance

11

. Linehaul Expen se Allocable to Mail

12

. Cost per Block Hour (R11÷R18)

13

. Marked Up Costs (R11*R4*R5*R8)

14

. Eligible Expense (R13*R32÷R18)

15

. Cost per RTM (R14÷R36)

"Trend"

16a

. Percentage of Eligible Mail RTMs

17a Cost, Wtd. by Mai l RTMs, Includes Fuel (R15*R16a)

"Actual"

16b Percentage of Eligible Mail RTMs 100.00%

17b

. Cost, Wtd. by Mail RTMs, Includes Fuel (R15*R16b) 

## $12.2338

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 Miles (ATMs)

25

. Departures Performed

26

. Wtd. Departures (GTOW)

27

. Ton Load Factor

28

. Stage Length

29

. ATMs per Mile

30

. R TMs per Mile

31

. RTMs per Hour

32

. Eligible Block Hours

33 Pax. RTM

34

. Freight RTM, Wtd. @ .75

35

. Eligible Mail RTM 1,909,322

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 Mile

44 RTMs per Mile

45 RTMs per Hour

## 1 Attachment B

Linehaul, Part 135

Appendix C

- 1

Page 2 of 5

"Trend" Bering Bering Fr ontier Grant Grant

$1,349,823 $1,621,209 $2,794,865

$34,186,727 $32,954,543 $32,165,830

$5,189,612 $6,100,819 $6,634,803

103.55% 103.55% 104.33% 107.76% 107.76%

109.46% 109.46% 109.46% 109.46% 109.46%

375,332 374,607 275,755

357,158 356,583 259,325

105.09% 105.09% 105.05% 106.34% 106.34%

Navajo Caravan Navajo C

- 206 Navajo

194 416 194 35 194

$2,723,914 $6,690,454 $1,441,814 $4,993,058 $4,168,544

$54,442 $127,464 $56,589 $210,812 $112,896

$2,669,472 $6,562,990 $1,385,225 $4 ,782,246 $4,055,648

$621.39 $827.20 $932.18 $460.94 $728.91

$3,179,745 $7,817,514 $1,661,809 $5,998,485 $5,087,096

$2,124,271 $6,662,721 $1,535,440 $5,053,182 $4,013,722

$11.5646 $11.9485 $18.9828 $19.4391 $10.7938

100.00% 2.229% 10. 604% 1.560% 4.189% 3.279%

$12.2123 $0.2578 $1.2670 $0.2961 $0.8143 $0.3539

2.256% 10.730% 1.579% 4.239% 3.319%

$0.2609 $1.2821 $0.2997 $0.8240 $0.3582

4,296 7,934 1,486 10,375 5,564

200,101 375,786 52,384 197,974 372,637

9,532 34, 812 3,500 6,817 7,758

43,164 205,086 30,171 82,400 64,340

252,797 615,684 86,055 287,191 444,735

674,302 1,144,983 202,884 1,144,105 964,289

590,014 1,662,691 134,929 686,547 867,864

8,385 16,142 1,510 24,970 10,107

62,049 143,664 11,174 92,389 74,792

42.85% 37.03% 63.78% 41.83% 51.24%

80 71 134 46 95

0.87 1.45 0.67 0.60 0.90

0.37 0.54 0.42 0.25 0.46

58.84 77.60 57.91 27.68 79.93

2,870 6,762 1,373 8,740 4,390

133,556 324,406 48,127 172,599 301,449

7,065 28,337 2,614 6,411 7,043

1,932,085 43,067 204,879 30,145 80,940 63,361

183,688 557,622 80,886 259,950 371,853

442,801 967,579 186,797 985,968 756,300

387,451 1,404,815 125,634 591,664 680,674

6,163 14,553 1,397 21,216 7,987

45,606 129,522 10,338 78,499 59,104

47.41% 39 .69% 64.38% 43.94% 54.63%

72 66 134 46 95

0.88 1.45 0.67 0.60 0.90

0.41 0.58 0.43 0.26 0.49

64.00 82.46 58.91 29.74 84.70

## 2 Attachment B

Linehaul, Part 135

Appendix C

- 1

Page 3 of 5

Grant Hageland Hageland Hageland Hageland PenAir

$2,264,323 $6,301,705

$63,938,147 $97,788,036

$12,294,723 $21,300,124

107.76% 103.06% 103.06% 103.06% 103.06% 105.59%

109.46% 109.46% 109.46% 109.46% 109.46% 109.46%

1,067,309 2,088,410

1,009,922 1,915,429

106.34% 105.68 % 105.68% 105.68% 105.68% 109.03%

Caravan C

- 206 Navajo Caravan C

- 406 PA

- 32

416 35 194 416 417 79

$6,217,262 $6,162,243 $3,149,200 $15,202,127 $5,183,706 $2,475,229

$180,719 $352,867 $118,018 $400,117 $110,143 $138,401

$6,036,543 $5,809,376 $3,031,182 $14,802,010 $5,073,563 $2,336,828

$636.03 $243.49 $562.89 $572.21 $951.89 $470.66

$7,571,780 $6,925,767 $3,613,686 $17,646,520 $6,048,552 $2,944,767

$3,786,289 $5,412,833 $3,194,270 $15,737,110 $4,963,671 $2,600,173

$11.5366 $14.9474 $13.5496 $10.4458 $14.9436 $24.6989

6.793% 5.632% 3.959% 28.883% 6.635% 1.658%

$0.7837 $0.8418 $0.5364 $3.0171 $0.9915 $0.4095

6.874% 5.699% 4.007% 29.227% 6.714% 1.678%

$0.7930 $0.8519 $0.5429 $3.0530 $1.0033 $0.4144

9,491 23,859 5,385 25,8 68 5,330 4,965

484,016 307,294 175,728 996,629 259,585 76,039

11,492 13,252 6,979 70,487 9,283 7,071

133,410 108,808 76,634 558,142 128,196 32,240

628,918 429,354 259,341 1,625,258 397,064 115,350

1,231,716 1,836,099 672,069 2,918,802 812,841 527,392

1,724,402 1,038,899 455,606 3,748,851 1,195,977 288,220

18,427 38,936 7,446 375,556 7,898 12,216

164,000 144,063 55,100 334,248 78,190 43,978

36.47% 41.33% 56.92% 43.35% 33.20% 40.02%

67 47 90 8 103 43

1.40 0.57 0.68 1.28 1.47 0.55

0.51 0.23 0.39 0. 56 0.49 0.22

66.26 18.00 48.16 62.83 74.50 23.23

4,746 18,647 4,760 23,069 4,374 4,384

187,513 244,580 152,785 888,031 195,169 66,664

9,438 8,738 6,462 60,481 8,806 6,581

131,248 108,808 76,499 558,040 128,186 32,030

328,199 362,126 235,746 1,506,552 332,161 105,275

617,052 1,413,544 582,278 2,593,487 653,929 464,998

863,873 795,357 396,102 3,330,781 963,222 254,121

9,386 31,403 6,685 33,849 6,404 11,193

83,535 116,191 49,469 301,256 63,400 40,295

37.99% 45.53% 59.52% 45.23% 34.48% 41.43%

66 45 87 77 102 42

1.40 0.56 0.68 1.28 1.47 0.55

0.53 0.26 0.40 0.58 0.51 0.23

69.15 19.42 49.53 65.31 75.94 24.01

## 3 Attachment B

Linehaul, Part 135

Appendix C

- 1

Page 5 of 5

PenAir Warbelow Warbelow Wings Wright Yute

$781,563 $2,18 2,560 $757,426 $452,094

$17,041,166 $24,121,552 $12,553,940 $8,199,900

$2,207,318 $5,805,234 $2,111,525 $1,667,873

105.59% 104.23% 104.23% 107.87% 105.45% 104.80%

109.46% 109.46% 109.46% 109.46% 109.46% 109.46%

157,868 38,223 126,188 83,374

14 1,598 37,311 116,397 78,471

109.03% 111.49% 111.49% 102.44% 108.41% 106.25%

Caravan Navajo Caravan C

- 208 Caravan C

- 206

416 194 416 416 416 35

$3,920,642 $5,410,155 $894,229 $1,921,863 $4,422,505 $4,099,950

$135,392 $90,468 $11,700 $21,425 $133,863 $1 20,749

$3,785,250 $5,319,687 $882,529 $1,900,438 $4,288,642 $3,979,201

$936.25 $460.10 $618.02 $610.09 $441.99 $299.53

$4,770,005 $6,766,595 $1,122,569 $2,298,685 $5,366,500 $4,849,998

$4,267,402 $6,491,530 $1,072,258 $2,151,097 $4,583,897 $4,450,973

$13.3817 $9.7595 $10.4520 $10.3852 $6.6441 $14.3108

6.311% 4.937% 1.178% 1.486% 6.352% 4.315%

$0.8445 $0.4818 $0.1231 $0.1543 $0.4220 $0.6175

6.386% 4.996% 1.504% 6.427% 4.367%

$0.8546 $0.4876 $0.1562 $0.4270 $0.6250

4,0 43 11,562 1,428 3,115 9,703 13,285

198,492 550,177 75,677 170,541 493,235 219,836

22,027 35,583 7,698 16,252 159,081 22,145

122,117 95,382 22,763 28,983 123,090 83,374

342,636 681,142 106,138 215,776 775,406 325,355

530,648 1,657,555 204,844 376,641 1 ,436,615 1,243,082

954,904 1,388,184 240,270 564,962 2,155,122 734,424

7,255 13,076 1,530 6,282 10,389 33,201

64,570 96,762 13,617 55,910 92,462 122,844

35.88% 49.07% 44.17% 38.19% 35.98% 44.30%

73 127 134 60 138 37

1.80 0.84 1.17 1.50 1.50 0.59

0.6 5 0.41 0.52 0.57 0.54 0.26

84.75 58.91 74.33 69.27 79.91 24.49

3,617 11,092 1,364 2,915 8,288 12,192

176,822 535,304 73,156 163,961 453,917 206,615

20,142 34,461 6,670 14,461 113,284 21,032

121,935 95,382 22,763 28,710 122,718 83,374

318,899 665,147 102,589 207,132 689,919 311,021

473,756 1,596,013 195,345 354,998 1,221,608 1,149,753

851,170 1,338,270 228,265 532,497 1,832,611 683,037

6,696 12,636 1,465 5,836 9,225 30,295

59,594 93,506 13,039 51,940 82,102 112,092

37.47% 49.70% 44.94% 38.90% 37.6 5% 45.54%

71 126 133 61 132 38

1.80 0.84 1.17 1.50 1.50 0.59

0.67 0.42 0.53 0.58 0.56 0.27

88.17 59.97 75.21 71.06 83.24 25.51

## 4 Attachment B

Linehaul, Part 135

Appendix C

- 2

Page 1 of 4

Carrier Bering Beri ng 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 Ho urs 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 5 5.8 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% 1.56 0%

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 1,7 29 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 $206, 693 $388,025 $1,299

11

. Cost per Eligible RTM $3.9333 $2.7083 $3.7009

## 5 Attachment B

Linehaul, Part 135

Appendix C

- 2

Page 2 of 4

Grant Grant Grant Hageland Hageland Hageland

C

- 206 Navajo Caravan C

- 206 Navajo Caravan

35 194 416 35 194 416

$1,180,639 $1,702,463 $2,185,009 $1,647,696 $978,731 $5,440,824

219,232 309,529 390,547 295,754 176,952 1,040,534

10,375 5,564 9,491 23,859 5,385 25,868

8,740 4,390 4,746 18,647 4,760 23,069

80,940 63,361 131,248 108,808 76,499 5 58,040

259,950 371,853 328,199 362,126 235,746 1,506,551

$5.39 $5.50 $5.59 $5.57 $5.53 $5.23

21.1 55.6 41.1 12.4 32.9 40.2

$113.80 $305.98 $230.22 $69.06 $181.75 $210.33

$994,582 $1,343,245 $1,092,620 $1,287,757 $865,136 $4,852,110

$3.8261 $3.6123 $3 .3291 $3.5561 $3.6698 $3.2207

4.189% 3.279% 6.793% 5.632% 3.959% 28.883%

$0.1603 $0.1184 $0.2261 $0.2003 $0.1453 $0.9302

4.24% 3.32% 6.87% 5.70% 4.01% 29.23%

$0.1622 $0.1199 $0.2287 $0.2027 $0.1472 $0.9414

Gran t Grant Grant Hageland Hageland Hageland

C

- 206 Navajo Caravan C

- 206 Navajo Caravan

35 194 416 35 194 416

$330,115 $494,476 $564,120 $489,692 $293,977 $1,641,796

65,069 79,739 85,797 78,900 49,160 274,329

2,930 1,369 2,348 6,429 1,474 7,155

2,385 1,04 9 1,521 5,128 1,269 6,473

19,174 14,760 28,368 27,792 21,311 149,672

71,277 85,093 95,026 99,698 61,819 419,759

$5.07 $6.20 $6.58 $6.21 $5.98 $5.98

22 58 37 12 33 38

$112.67 $361.20 $240.26 $76.17 $199.44 $229.46

$268,711 $378,894 $365,429 $390,596 $ 253,091 $1,485,303

$3.7700 $4.4527 $3.8456 $3.9178 $4.0941 $3.5385

## 6 Attachment B

Linehaul, Part 135

Appendix C

- 2

Page 3 of 4

Hageland PenAir PenAir Warbelow Warbelow Wings Wright

C

- 406 PA

- 32 Caravan Navajo Caravan C

- 208 Caravan

417 79 416 194 416 416 416

$1,794,539 $464,514 $824,745 $1,705,947 $200,224 $364,419 $1,231,643

380,524 87,792 222,555 448,763 72,282 139,019 491,800

5,330 4,965 4,043 11,562 1,428 3,115 9,703

4,374 4,384 3,617 11,092 1,364 2,915 8,288

128,186 32,030 121,935 95,382 22,763 28,710 122,718

332,162 105,275 318,899 665,146 102,588 207,132 689,919

$4.72 $5.29 $3.71 $3.80 $2.77 $2.62 $2.50

71.4 17.7 55.0 38.8 50.6 44.6 50.7

$336.69 $93.56 $203.99 $147.55 $140.21 $116.99 $126.93

$1,472,667 $410,157 $737,844 $1,636,600 $191,250 $341,021 $1,052,031

$4.4336 $3.8961 $2.3137 $2.4605 $1.8643 $1.6464 $1.5249

6.635% 1.658% 6.311% 4.937% 1.178% 1.486% 6.352%

$0.2942 $0.0646 $0.1460 $0.1215 $0.0220 $0.0245 $0.0969

6 .71% 1.68% 6.39% 5.00% 1.50% 6.43%

$0.2975 $0.0655 $0.1478 $0.1230 $0.0247 $0.0981

Hageland PenAir PenAir Warbelow Wings Wright

C

- 406 PA

- 32 Caravan Navajo C

- 208 Caravan

417 79 416 194 416 416

$397,247 $130,920 $243,556 $461,998 $135,446 $353,217

83,568 24,825 70,586 119,807 44,896 131,750

1,240 1,378 1,261 2,974 985 2,596

1,065 1,179 1,107 2,727 911 2,085

31,129 8,498 33,876 22,593 5,909 30,000

80,507 27,726 96,619 163,831 64,262 174,280

$4.75 $5.27 $3.45 $3.86 $3.02 $2.68

67 18 56 40 46 51

$320.36 $95.01 $193.15 $155.35 $137.51 $136.06

$341,184 $112,014 $213,812 $423,628 $125,270 $283,689

$4.2379 $4.0400 $2.2129 $2.5858 $1.9494 $1.6278

## 7 Attachment B

Linehaul, Part 135

Appendix C

- 2

Page 4 of 4

Yu te

C

- 206

35

$1,103,194

176,872

13,285

12,192

83,374

311,021

$6.24

13.3

$83.04

$1,012,431

$3.2552

4.315%

$0.1405

4.37%

$0.1423

Yute

C

- 207

35

$284,324

45,768

3,518

3,154

23,655

78,491

$ 6.21

13

$80.82

$254,906

$3.2476

## 8

## 9