### Orde r 2011-9- 6 Served : Septembe r

13 , 201 1 UNITE D STATE S O FAMERIC A DEPARTMEN T O FTRANSPORTATIO N OFFIC E O FTH E SECRETAR Y WASHINGTON , D.C

. Issue db y th e Departmen t o f Transportatio n o n th e 13 * o f

September , 201 1

INTRA-ALASK A MAINLIN E SERVIC E M4I L RATE S Docke t OST-2003-1469 5 (Docke t OST-95-429 )

ORDE RT O SHO W CAUS E ESTABLISHIN G NE W MAINLIN E SERVIC E MAI L RATE S Summar y B y thi s order , th e Departmen t propose s t o establis h ne w intra-Alask amainlin e mai l rate s for th e nex t annua l period , beginnin g o n o r abou t Octobe r 1 , 2011

. Th e rate s tha t

ar e currentl y i n effec t

wer e establishe db y Orde r 2010-9-7 , mos t

recentl y adjuste db y Orde r 2011|6-2 1 for

firs t quarte r 201 1 fuel costs
. Th e cos t poo l comprise s th e bul k

o f mainlin e cairie r

operation s i n Alaska , an dconsist s o f Alask aAirline s (AS) , Lynde n Ai r Carg o (LAG) , Norther n Ai r Carg o (NAC) , an dTatondu k Outfitters , Ltd. , d/b/ aEvert s Ai r Carg o (TOL). l I n addition , w e propos e addin g Peninsul aAirways , Inc

. (KS) 2 t o th e mainlin e cos t

pool

. Also , w e propos e usin g Schedul e P1 2 t o calculat e fue l expense , wher e feasible

. Backgroun d Becaus e mali

l rate s ar e mad e effectiv e o n afinal , prospectiv e basis , bu t ar e base do n historica l costs , w e ad dan inflatio n facto r basedo n aten-year

tren dt o thos e historica l costs
. Unti ^ issuin g Orde r 2004-8-26 , w e ha destimate dth e long-termcos t tren dbasedo n a ten-year metin g averag e that

include donl y NA C an dAS , th e onl y tw o carrier s for whic h we , a t that time , ha dte n year s o f

data. 3 Orde r

2004-8-2 6 change dthat

b y calculatin g th e

^ Er aAviation , Ltd. , als o provide s servic e witi i mainlin e equipment , bu t i s exclude dfromth e cos t poo l becaus e i t transporte dles s tha n 1 percen t o f th e tota l mai l volumes

. 2 Mainlin e aircraf

t ar e define da s thos e havin g mor e tha n 7,50 0 pound s payload

. K S ha s operate dSaab 340 aircraf t for anumbe r

o f years , an dth e payloa do f thos e aircraf

t ha s alway s bee n ver

y clos e t o 7,50 0 pounds

. I n som e segment s thos e aircraf t hav e mor e than 7,50 0 pound s payload , an di n other s less

. PenAi r ha s provide du s d^t ashowin g whic h segment s it s Saab 340 s operat e a s mainlin e aircraft ; th e Posta l Servic e ha s begu n tenderiii g PenAi r

mainlin e mai l to thos e aircraft ; an dw e wil l treat the maccordingly

. 3 Althoug h PefiAir

woul db e ane w carrie r

i n th e cos t

pool , w e propos e t o no t

develo p aseparat e ten-year tren dbase do n dat aexcludin g PenAir , a s w e di dwhe n w e adde dLA C an dTOL , becaus e PenAi r transport s suc h asmal l portio n o f

intra-Alask amainlin e mail , aroun dthre e percen t o f bot h th e linehau l an dtermina l elements , tha t

it s effect s woul db e d e minimis

.

### -2
-

long-ter mtren dbase do n th e mos t recen t perio dfo r

whic h w e ha ddat afor

al l o f th e mainlin e carriers , whic h wa s afive-yea r perio da t th e time

. Sinc e then , si x additiona l year s o f dat ahavf c becom e available , so , a s contemplate db y Orde r 2004-8-26 , w e propos e t o dro p th e dat afo r

th e year ende dMarc h 31 , 2001 , an dus e th e mos t recen t te n year s o f

dat a t o determin e th e long-ter mtrend

. Th e propose drates , containe di n Appendi x A , reflec t th e applicatio n o f

cos t adjustmen t factors , develope di n Appendi x B , t o th e basi c mai l rat e structur e establishe db y th e Civi l Aeronautic s Boar di n Orde r 82-11-23

. W e hav e use dth e carriers ' reporte doperatin g expense s ari dtraffi c for

th e yea r ende dMarc h 31 , 2011 , an dfuel cost s fo r th e quarte r

ende d Marc h 31 , 2011 , an dhav e increase dthei r non-fue l uni t

costs , both termina l an dlinehaul , t o th e mid-poin t

o f th e ne w rat e perio dbase do n th e long-term(ten-year ) average aimua l change s i n ^i t

cost s for al l o f th e carrier s . ^ Result s o f

th e Update dDat a Th e propose drates , includin g fuel , differ fro mth e rate s currentl y i n effec t b y th e amount s show n i n th e followin g table :

Lin e haul , $/RT M 6

Terminal , $/P0un dEnplane d

\ Priorit y

Nonpriority Priority Nonpriority Orde r

2011-6-2 1 $3.467 4 $2.099 2 $.361 7 $.310 8 Propose d

$3.435 1 $2.079 6 $.345 6 $.297 0 Percentas e Increas e ^ -0.9 3 -0.9 3 -4.4 5 -4.4 4 

### Thes e rate s Reflec

t acombinatio n o f

change s i n mos t

recen t uni t costs , an dappUcatio n o f th e long-terp i tren dt o thos e uni t costs
. A s show n i n th e table , ther e wa s asligh t decreas e i n th e lin e haul , whic h include s fuel , but alarge r decreas e i n th e termina l rate
. Th e combinatio n o f

thos e change s i n th e rate s produce s propose drate s tha t ar e 2.0 9 percen t lowe r tha n thos e i n effec t

for th e curren t

perio dfor

a427-mil e ^ averag e length o f haul

. Genera l Matter s A s indicated , whe n Orde r 2004-8-2 6 issue dw e onl y ha dfiv e year s o f dat afo r al l four carriers , bu t

w e anticipate daddin g additiona l year s t o th e tren dlin e unti l w e ha dte n year s o f data

. Th e prio r

armua l update wa s th e firs t

with afull te n year s o f

data , an ds o goin g forwar dw e mus t

begi n droppin g of

f th e dat afor

th e oldes t

yea r a s w e ad dth e newes t

year for determinin g th e long-ter mtrend

. I n th e pas t year , si x carrier s operate dmainlin e aircraf t i n Alask a- AS , KS , LAC , NAC , an dTO L tha t w e hav e include di n th e cos t poo l - an d Er aAviation , Inc

. Appendi x E show s al l o f th e mai l transporte db y th e si x carrier s currentl y operatin g mainlin e equipmen t i n Alaska

. W e hav e tentativel y exclude dfro mth e 4 W e have continuedou

r practic e o f updating fue

l expense s o

n aquarterl

y basis , an dhave reliedo

n fiie l expense s fo

r th e quarte r endedMarc

h 31,20II , the mos

t recen t quarterl y dataavailable

. W

e wil l updat e the rat e final rat e fo r Q E 6/30/1 1 fue

l dat awhe n thos e becom

e available

. ^ An y differenc e betwee

n Priorit y an dNonpriorit

y i s due t o rounding

. " The proposedline hau

l rate s above ar

e the su mo f non-fue l lin e hau l expense , wit

h alO-yea r averag e inflatio n facto r applied , plu s th

e most recen t fue l expens e unadjuste

dfo r inflation

. " 7 22,975,02 8 RTM s o

f mai l dividedb y 53,80 2 ton s enplane

do f mai l fromAppendi

x D-1

.

### -3
-

linehau l calculatio n th e dat ao f thos e aircraf

t type s transportin g les s tha n on e percen t o f revenu e to n mile s of

mail , an dfro mth e termina l calculatio n th e dat ao f thos e carrier s enplanin g Ijess tha n on e pe r cen t o f mai l ton s enplaned

. Becaus e Er aAviatio n di dnot mee t th e on e perjcen

t threshol di n eithe r

case , i t i s not part o f th e cos t poo l for eithe r th e lin e hau l o r terminal

. T o determin e th e long-ter mtren di n non-fue l lin e hau l an dtermina l expenses , w e propos e t o continu e ou r

practic e o f

separatel y regressin g thos e expense s agams t tim e ~ i n thi s instance , th e te n aimual period s fro mth e year s ende dMarc h 31 , 2002 , throug h Marc h 31 , 2011

. Th e result s o f

bot h regression s ar e show n i n Appendi x C

. Nonfue l Lin e Hau l Result s A s show n i n Appendi x C (Lin e Haul) , th e regressio n calculate dan averag e annua l increas e o f 2.7 6 percen t

i n uni t cost s ove r

th e ten-year

period , with astron g T-Valu e o f 4.49 , indicatin g tha t

ther e i s aconsisten t

upwar dtren di n th e non-fiie l lin e hau l costs
. Thos e uni t cost s increase dfro m$0.6192 7 pe r availabl e to n mil e for

th e yea r ende dMarc h 31 , 2010 , t o $0.6239 6 for

th e yea r ende dMarc h 31 , 2011 , o r 0.7 6 percent
. Th e average annua l increas e i n th e long-ter mtren dha s increase dfro m2.5 3 percen t pe r Orde r 2010-8-7 , t o 2.7 6 percen t thi s year . 8 Th e fac t

that tota l Imehau l cost s hav e slightl y decreased , althoug h nonfue l linehau l cost s slightl y increase dreflect s th e sligh t decreas e i n fuel expenses , fro m$0.5142 9 pe r AT M i n Orde r

2011-6-2 1 t o $.4964 5 i n Appendi x D- 2 t o thi s order

. Whil e th e averag e for

al l o f th e carrier s i n th e cos t

poo l show s littl e change , ther e wer e significan t

but offsettin g change s amon g th e differen t carriers. Th e non-fue l linehau l cost s for A S an dTO L decrease db y 13.9 1 an d16.4 1 percen t respectively , whil e the y increase db y 36.0 2 an d4.5 5 percen t

for LA C an dNAC , respectively

. Th e increas e i n cost s for LA C seem s t o b e drive n b y th e significan t decreas e i n airborn e hour s i t operated

. Thos e hour s decrease d% 4 1 percent , fro m11,59 0 t o 6,89 3 pe r th e carrier' s For m41 , Schedul e P5.1 , whil e correspondin g direc t expenses , whic h ar e ofte n drive n b y airborn e hours , di dno t decreas e a s significantly

. Th e resultin g increas e i n uni t cost s reflect s management' s decisio n no t t o tri mbac k

persoime l an dothe r

expense s commensuratel y with th e decreas e i n hours

. Fue l Expei^s e Thi s orde r

propose s t o revis e th e way w e determin e fuel expense . Traditionally , w e hav e take n NAC' s an dTOL' s fuel expens e fro mth e For m41 , Schedul e P5.1 , an dAS' s fro m For m41 , Schedul e P5.2 , an dLAC' s fro maspecia l interna l report o f tha t carrier

. W e ar e proposin g thi s tim e t o rel y o n Schedul e PI 2 wher e feasible

. A s detaile di n Appendi x D-2 , w e determin e fuel bu mpe r bloc k hou r for AS , LAC , an dNAC , an dthe n th e pric e o f fuel fo r thos e carrier s b y dividin g schedule dintra-Alask afuel expense s b y schedule dintra-Alask a gallon s i n Schedul e P12

. Thi s propose dchang e wa s precipitate db y NA C indicatin g that i t woul db e operatin g increasin g amount s o f servic e outside o f

Alaska , an dtha t

thos e fuel expense s coul ddiffe

r significantl y fro mit s schedule dintra-Alask aservic e becaus e som e o f

° Th e most recen t year-over-yea

r increas e o f 0.7 6 percen

t wa s les s tha n th e long-ter mtrendbu

t th e addition o

f thi s year' s result s marginall y increasedthe ten-yea

r tren dfro m2.5 3 percen

t t o 2.7 6 percent
. Thi s counter

intuitiv e result

i s du e to th e dropping o

f th e 200 1 result s becaus e the y ar e no w beyon dth e ten years o

f th e trend

.

### -4
-

th e fuel expens e woul db e pai dfor b y th e part y tha t

chartere dth e aircraft. ^ Th e relativ e weaknes s o f

Schedul e PI 2 i s that

i t doe s no t distinguis h betwee n fuel expense s b y aircraf t type
. Thi s i s amajo r

weaknes s for

TOL , whic h operate s som e aircraf t type s whic h bu m expensiv e Avga s an dother s les s expensiv e Je t A

. Fo r TOL , w e propos e t o continu e t o rel y o n th e For m41 , Schedul e P5.1

. W e believ e thi s relianc e o n Schedul e P1 2 wil l produc e mor e accurat e mai l rate s tha n th e curren t methodology

. Also , LA C wil l n o longe r hav e t o submi t

a specia l report

t o th e Departmen t

t o determin e mtra-Alask afuel expense . Finally , PenAi r doe s not repor t Schedul e P12 , s o w e propos e t o us e th e fuel expens e i t report s o n Schedul e F2

. Termina l Result s A s show n i n Appendi x C-Terminal , th e regressio n calculate da n average armua

l increas e o f 3.8 0 percen t

i n uni t cost s ove r

th e ten-year

period , with astron g T-Valu e o f 7.27 , indicatin g tha t ther e i s aconsisten t

upwar dtren di n termina l costs
. Th e mos t recen t annua l termma l cost s hav e decrease dsignificantly , fro m$384.0 9 i n 201 0 t o $368.8 5 i n 2011 , o r 4. 0 percent , a s show n i n Appendi x C , Terminal

. Thi s decreas e i n cost , combine dwith adecreas e i n th e lon g ter mtren dfro m4.1 4 percen t t o 3.8 0 percen t

result s i n th e decreas e i n termina l expense s o f

4.4 5 percent
. Amon g th e carriers , AS , LAC , an dNA C showe dyear-over-year decrease s fro mth e prio r

year o f 5.92,4.11 , an d5.2 0 percent , respectively , but thos e decrease s wer e offse t

b y TOL' s increas e o f

1 percent
. Th e additio n o f K S slightl y increase dtermina l cost s becaus e that carrier' s averag e o f

$458.4 7 pe r

to n enplane d significantl y exceede dth e intra-Alask aaverage o f $368.85

. O f

course , that

effec t wa s limite db y th e fac t

that K S enplane dles s tha n thre e percen t o f intra-Alask amail

. ACCORDINGLY , 1

. W e direc t

al l intereste dperson s t o sho w cause , n o late r tha n twent y (20 ) day s afte r th e dat e o f servic e o f

thi s order , wh y th e Departmen t shoul dnot

adop t th e foregoin g tentativ e finding s and , conclusion s an dfix , determin e an dpublis h th e propose dfinal aimual rate s specifie di n Appendi x A , t o b e effectiv e o n o r abou t Octobe r 1 , 2011 , subjec t

t o th e quarterl y fue l adjustment , a s discussed

. Vagu e o r unsupporte dAnswer s tha t d o no t includ e al l propose dadjustment s an dbacku p dat awil l not b e accepted ; 2

. If n o objectio n i s file dwithi n th e designate dtime , o r if n o timely-file dobjectio n raise s materia l issue s o f

fact , w e hereb y delegat e authority t o th e Director , Offic e o f Aviatio n Analysis , t o mak e th e abov e rate s final ; 3

. Thi s docke t

shal l remai n ope n unti l further orde r o f th e Department ; an d

^ For m41 , Schedule P5. 1 onl

y report s tota

l fue l expense . I

t doe s no t distinguis h thos e expense s tha t ar e pickedu p directl y b y charte r customers
. As such , the scheduledfue l expens e reportedon Schedule P1 2 i s superio r becaus e virtuall

y al l o f the intra-Alask

amai l move s on schedule

dservice , an

dscheduledcustomers do no t pic k u p th e cos t o f fuel

.

## -5

-

4

. W e will serv e thi s orde

r upon all partie s on the Servic e Lis t fo r thi s Docket

. By :

Susan L

. Kurlan d Assistan t Secretar y fo r Aviatio n an

dIntemationa

l Affair s (SEAL) A n electroni c versio n o

f thi s documen

t i s availabl e on the WorldWid e We b a t http://www.regulations

. go

vIntra-Alask aClas s Servic e Mai l Rate s Appendi x A

Effective : O n o r abbu t Octobe r 1 , 201 1

Colum n (1 ) (2 ) (3 ) (4 ) (5 )

Bas e Yea r Rate s 1 / Adjustmen t

Factor s 2 / Propose d

Fina l Rate s 3 / Curren t Rate , Orde r 2011-6-2 1 Chang e from

Prio r Rat e 4 /

Linehau l Charg e pe r

Billin g Ton-Mil e

Priority Non-priorit y $1.196 9 $Q.724 6 187.00 %

187.00 % $3.435 1

$2.079 6 $3.467 4

$2.099 2 -0.93 %

-0.93 %

Termina l Charg e pe r

Poun dOriginate d

Priority Non-priority $0.169 7 $0.145 8 103.68 %

103.68 % $.345 6 $.297 0 $.361 7

$.310 8 -4.45 %

-4.44 %

1/Pe r Orde r 82-11-23

. 2 / Se e Appendi x B

. 3 / Colum n (I ) increase dby Colum n (2)

. 4 / Any difference s du e t o rounding

.Intra-Alask aClas s Servic e Mai l Rate s Cos t Adjustmen t

Factor s Appendi x B

(1 ) (2 ) (3 ) (4 ) (5 ) (6 )

Bas e Yea r Ende d 9/30/8 0 1 / Yea

r Ende d 3/31/112 / Averag e Annual

Chang e Y E 3/31/0 2 t o Y E 3/31/113 / Midpoin t t o Midpoin t Chang e 4 / Estimate d

Uni t Cos t at 4/1/1 2 5 / Percen t

Chang e 198 0 Bas e Yea r t o 4/1/1 2 6 /

Uni t Cos t pe r Availabl e Ton-Mil e Fue l Nonfue l Tota l $0.39946 9 $0.4964 5 $0.6239 6 $1.1204 1 n a

2.76 % n a

4.18 % $0.49645 0

$0.65004 2 $1.14649 2 187.00 %

Uni t Cos t pe r To n Enplane d $191.5 4 $368.8 5 4.14 % 5.77 % $390.1 3 103.68 %

1 / Pe r Orde r 82-11-23 , update dinos t

recentl y i n Orde r

97-12-24

. 2 / Se e Appendi x D

. Fo r

nonfuel , w e use dY E Marc h 31 , 2011 ; fo r fuel expense , w e use dQ E Marc h 31 , 2011 , Appendi x D-2

. 3 / Se e th e regressio n result s i n Appendi x C

. 4 / Reflect s th e fac t

that fromth e mi dpoin t

o f th e reportin g perio dt o th e midpoin t o f th e prospectiv e rat e i s 1 an d1/ 2 years . 1.027 6 X 1.0138 , wher e 1.013 8 I s th e averag e annua l uni t cos t increas e projecte dfo

r a6-mont h period

. 1.038 0 X 1.019 0 wher e 1.019 0 i $ th e averag e annual uni t

cos t increas e projecte dfor

a6-mont h period

. 5 / Colum n (2 ) multiplie db y colijin m(4) , excep t

for fuel

. A s indicate din Orde r 97-9-37 , w e will rel y o n th e mos t recen t fue l costs , wit

h n o inflatio n factor

. Fue l for th e Q E 3/31/1 1 i s th e mos t recen t availabl e at

thi s time , bu t w e anticipat e i n th e final orde r addin g fuel fo

r th e Q E 6/30/11

. 6/ $ 1.14649 2 i n precedin g colurt mdivide db y $.39946 9 i n th e bas e period , an d$390.1 3 i n th e preceedin g colum n divide db y $191.5 4 in th e bas e period

.Orde r

Numbe r 2004-8-2 6 2004-8-2 6 2004-8-2 6 2005-9-1 6 2006-9-2 3 2007-8-2 6 2008-9- 3 2009-9- 1 2010-8- 7 Ne w ANOV A Regressio n Residua l Tota l
Intercep t X Variabl e 1 Appendi x C Linehau l Pag e I o f 2
Calpulatio n o f

th e Linehau l Portio n o f

th e 10-Yea

r Trend : TOL

. LAC

. NAC , PenAir

. an dAlask a

YE|3/31 / 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1

d

f 1 8

Co < 9 ifficient s -:^5.1619 2 0.027179 4
Regressio n Statistic s Multipl e R0.846357 4 RSquar e 0.716320 8 Adj

. RSquar e 0.680860 9 Standar dErro i 0.054926 5 Observation s 1 0 Actua l Y Natural Lo g $/AT M $/AT M Non-Fue l Linehau l 0.486 9 0.469 7 0.522 5 0.531 2 0.531 2 0.492 4 0.5156 2 0.5754 2 0.6192 7 0.6239 6

S S 0.060944 5 0.024135 4 0.085079 9 Std

. Erro r 12.13374 2 0.006047 2 Non-Fue l

Linehau l Predicte dY -0.71969 7 -0.75566 1 -0.64913 0 -0.63261 7 -0.63261 7 -0.70846 4 -0.66238 5 -0.55265 5 -0.47921 4 -0.47166 9

M S 0.060944 5 0.003016 9

tSta t -4.54615 9 4.494537 8 -0.74871 8

-0.72153 9 -0.69435 9 -0.6671 8 -0.64000 1 -0.61282 1 -0.58564 2 -0.55846 2 -0.53128 3 -0.50410 4

F 20.2008 7

P-valu e 0.001883 9 0.002016 6 Residual s

0.02902131 6 -0.03412210 5 0.04522947 4 0.03456305 3 0.00738363 2 -0.09564278 9 -0.07674342 9 0.00580729 9 0.05206903 4 0.03243451 2
Significanc e F 0.00201660 6

Lowe r 95 % -83.1423790 9 0.01323452 6 EXP(Y)

.

0.472972 4 0.486003 8 0.499394 2 0.513153 6 0.527292 1 0.541820 1 0.556748 4 0.57208 8 0.587850 3 0.604046 8

Uppe r 95 % -27.1814 6 0.041124 3 Predicte d

Annual Increas e 2.76 %-0.5 0



## fee 0 1 

### o u

" E 3 -0.6 5 -

-0.7 0 Appendi x C Linehau l Pag e 2 o f 2

-0.4 52 0 D 2 Nonfue l Linehaul , Uni t Cos t pe rATM , Actua l vs
. Predicte d
200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 2(^ 1

6 0 o -0.5 5 y = 0.0272x-55.16 2 R ^ = 0.716 3

-0.8 0 Year s Ende d Marc h 31,2002 , throug h Marc h 31 , 201 1Calculatio n o f th e Termina l Portio n o f

th e 10-Yea

r Trend : TOL

. LAC

. NAC

. PenAir

. an dAlaska

Orde r Numbe r 2004-8-2 6 2004-8-2 6 2004-8-2 6 2005-9-1 6 2006-9-2 3 2007-8-2 6 2008-9- 3 2009-9- 1 2010-8- 7 Ne w ANOV A Y E 3/3 1

200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1

d f Actua l Y

Natura l Lo g $/To n Enp

. Termina l $278.3 4 $299.9 2 $302.6 4 $304.9 1 $318.3 0 $368.5 3 $363.2 9 $386.2 9 $384.0 9 $368.8 5

S S $/To n Enp

. Termina l Predicte dY 5.62884 3 5.70351 6 5.71254 4 5.72001 7 5.76299 4 5.90952 2 5.89520 1 5.95658 8 5.95087 7 5.91039 0

MS 5.647110 6 5.684430 3 5.7217 5 5.759069 7 5.796389 4 5.83370 9 5.871028 7 5.908348 4 5.945668 1 5.982987 8 Residual s

-0.01826756 4 0.01908573 9 -0.00920595 8 -0.03905265 5 -0.03339535 2 0.07581295 2 0.02417225 5 0.04823955 8 0.00520886 1 -0.07259783 6

FSignificanc e F EXP(Y )

283.471 2 294.250 2 305.439 0 317.053 2 329.109 1 341.623 4 354.613 6 368.097 7 382.094 6 396.623 6 appendi x C

Termina l Pag e 1 o f

2

I

Annual Increas e 3.80 %

Regressio n Residua l Tota l
Intercep t X Variabl e 1

8 9 Coefficient s -69.0669 2 0.037319 7 0.114902 7

0.017379 6 0.132282 3 StdErro r 10.29645 4 0.005131 5 0.114902 7

0.002172 5

tSta t -6.70783 6 7.272605 5 52.8907 9

P-valu e 0.000151 5 8.614E-0 5 8.61425E-0 5

Lowe r 95 % -92.8105885 8 0.02548633 5 Uppe r

95 % -45.3232 6 0.049153 1

Regressio n Statistic s Multipl e R0.931996 4 RSquar e 0.868617 2 Adjuste dR , 0.852194 4 Standar dEr

i 0.046609 6 Observatio n 1 0Appendi x C Termina l Pag e 2 o f 2

6.0 5 - 6.0 0 - Z t 5.9 5 - 2 3 1 5.9 0 - 0 ) ^ 5.8 5 - a c U J g 5.8 0 - 

# 5
• | 5.7 0 - 3 5.6 5 1

i
< ; fin

. 

# r ^

• D.D U 200 2 Terminal , Uni t Cos t pe rTo n Enplaned , Actua l vs
. Predicte d



## • J

y = 0.0373 X - 69.06 7 # ^^"' ^ R ^ = 0.868 6 M T

W ^ #



## .- W 

# • 

# 1 ^ ^ I B 

# r ^
•

E t ! • ' 1 1 1 1 1 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 Year s Ende d Marc h 31,2002 , throug h Marc h 31 , 201 1Appendi x D- 1
Operatin g Expenses , AlaskaAirlines , Norther n Air Cargo , Lynden Ai

r Cargo , an dTatonduk

Outfitters , Ltd

. Intra-Alask aClas s Servic e Mai l Rates-Yea r Ende dMarch 31 , 201 1

Total AlaskaAirline s

rAS ) #61 7 B-737-40 0 Lynden

Air Carg o (LAC) " #55 6 Hercule s Norther

n Air Carg o (NAC ) #62 0 737-20 0 Tatonduk

Outfitter s (TO P (TO P #21 8 #46 1 DC- 6 Brasili a PenAir PenAir 45 6 45 9 Saa b 34 0 Saa

b 34 0 Domesti c Fuel 1 / Dom.N-Fue l 2 / Total Intra-A K Skd

. BIk

. Hrs

. 3 / Domesti c Tota

l 4 / Intra-A K N-Fue l Intra-A K Skd

. ATM s 3 / $/ATM , N-Fue l Intra-A K Skd

. Mail RTM s 3 / RTM % o f Total $/ATM , N-Fuel

Terminal Expens e 5 / SystemTon s Enplane d6 / Intra-A K Skd

. Svc

. 7 / Intra-A K Skd

. Svc

. Ton s 8 / $/Ton Enplane d A K Mail Ton s Enplane d9 / Mail Ton s % o

f Tota l Wtd

. $/To n Enplane d 45,05 8 133,55 4 $110,191,98 1 192,350,89 3 $0.57287 0 22,975,02 8 99.99 % $0.62396 0

Total

53,80 2 100.00 % $368.8 5 $167,613,00 0

$240,736,00 0 $408,349,00 0 25,50 4 86,31 0 $71,135,80 1 133,088,50 9 $0.53450 0 6,591,51 2 28.69 % $0.1533 5

A S

$49,373,39 9 149,14 1 $331.0 5 14,44 8 26.85 % $88.8 9 $15,609,57 4 $38,395,69 4 $54,005,26 8 1,58 5 7,52 9 $8,083,03 6 10,095,10 7 $0.80068 8 3,586,54 6 15.61 % $0.1249 9

LA C

$4,613,39 5 11,29 4 $408.4 8 7,41 4 13.78 % $56.2 9 $15,976,96 3 $16,526,02 7 $32,502,99 0 5,06 9 6,54 6 $12,797,19 4 25,559,04 4 $0.50069 1 5,248,40 4 22.84 % $0.1143 6

NAC $15,256,98 2 33,36 1 $13,827,82 6 30,23 6 $457.3 3 13,80 3 25.66 % $117.3 5 $12,357,20 0

$12,109,48 7 $24,466,68 7 5,904 7,18 2 $9,954,66 6 17,639,28 1 $0.56434 6 6,423,39 0 27.96 % $0.1577 9

TO L $10,536,05 7 34,68 2 $7,989,68 6 26,30 0 $303.7 9 16,77 5 31.18 % $94.7 2 $593,44 0

$1,945,09 9 $2,538,53 9 1,13 9 1,23 0 $1,801,19 3 983,83 7 $1.83078 4 400,04 9 1.74% $0.0318 6 $10,372,27 6

$25,101,32 8 $35,473,60 4 4,91 8 22,98 9 $5,369,88 7 4,216,95 3 $1.27340 5 356,58 7 1.55 % $0.0197 4

PenAir $13,741,21 2 29,97 2 $13,552,78 2 29,56 1 $458.4 7 1,36 2 2.53 % $11.6 0 $828,28 5 $1,977,38 0 $2,805,66 5 93 9 1,76 8 $1,050,20 4 768,16 2 $1.36716 5 368,54 0 1.60 % $0.0218 7

1/ AlaskaAirlines , Schedul e P5.02 , l#5145.1 ; PenAir , Schedul e F2 , Lin e #2

. LAC , NAC , TO L ar e fro mP5.1 , Lin e #40

. I I Source s hav e same schedule s a s dbove

. For PenAir , w e hav e exclude dPassenge r Liabilit y Insurance , Lin e #5

. 3 / Pe r T-10 0 Segmen

t Report , excep t

fo r PenAir

. W e relie do n aspecia l interna l repor t o f PenAir , becaus e th e T-10 0 repor t doe s not distinguis h between servic e wit h mainlin e an dbus h aircraf t wit h an y precision

. 4 / Pe r T-10 0 Segmen

t Report

. 5 / For m41 , #690 0 account

fo r NA G andTOL

. For

PenAir , w e rel

y on Schedul e F2 , Departure Relate dExpens e an d Capacit y Relate dExpense , Lin e #1 3 an d#14

. 6/ Pe r T-10 0 Market

Repor t fo r NAC an dTO L andPenAir

. I I Fo r A S an dLAC , th e source s are specia l interna l reports
. For

NAC , TOL , an dPenAir , it' s allocate dbase don th e dat ashown

. 8/ Fo r LAC , th e dat ai s base don aspecia l interna l report
. Fo

r th e others , th e dat ai s fro

mth e T-lO O Market

Report

. 9 / T-lOO Market

Report , wit

h thos e result s fo

r TO L an dPenAir

adjuste dby payloa

dt o estimate th e mainlin e portion , a s follows : TOL : 17,017 * 103,717,18 9 mainlin e payload- r 105,215,28 9 syte

mpayload , T-lO O Segmen t Report

. PenAir : 6,126*32,275,10 0 mainlin e payloa d-rl45,140,80 3 systempayload , T-lO O Segmen t Report

.operatin g Expenses , Alask aAirlines , Northern Ai r Cargo , Lynde n Ai r

Cargo , an dTatondu k

Outfitters , Ltd

. Intra-Alask aClas s Servic e Mai l Rates-Quarte r Ende dMarc h 31 , 201 1 Appendi x D- 2

Skd

. PI2 , Skd

. Intra-A K

Gallon s Skd

. P

. 12 , Skd

. Intra-A K Cos t Cos t pe r Gallo n

Tota l F-41 , Fue l Expense , #4 0 F-41 , 'Gallons , Z9210 , Domesti c T-lOO , Bloc k

Hours , Domesti c Gallon s pe r

Hou r S/Gallo n

Fue l Inn-a-AK Skd

. BIk

. Hrs

. Tota l Bloc k

Hour s Tota l

$5,612,03 7 10J49 7 29J85 9 Alask a

(AS ) 1 / 4,716,67 0 $13,615,43 1 $2.8 9

Alask aAirline s

(AS ) #61 7 B-737-40 0 45,603,00 0 16,302,00 0 19.99 1 81 5 $2.8 0

Alask a (AS ) #61 7 B-737-40 0

6,07 7 19,99 1 Lynde n

Ai r Carg o (LAC ) 1 / 267,18 1 $841,31 2 $3.1 5 Lynde n Ai r Carg o (LAC ) #55 6 Hercule s 3,794,01 0 1,125,35 3 1,74 6 64 5 $3.3 7 Lynde n Ai r Carg o (LAC) ~ #55 6 Hercule s

37 5 1,74 6 Northern

Ai r Carg o NACl / 1,026,98 9 $3,141,63 5 $3.0 6
Northern Ai r Carg o NA C #62 0 737-20 0 3,560,95 6 1,105,53 1 1,27 5 86 7 $3.2 2 Northern Ai r Carg o NA C #62 0 737-20 0

1,18 9 1,27 5 Tatondu k Outfitters

. Ltd

. (TOL ) 577,96 1 S2.457.87 2 $4.2 5
Tatondu k Outfitter s (TOL ) #21 8 DC- 6 2,813,03 9 585,07 5 1,53 9 38 0 $4.8 1 Tatondu k

Outfitter s (TOL ) #46 1 Brasili a 143,74 0 41,01 2 25 5 16 1 $3.5 0

Tatondu k Outfitter s Ltd

. (TOL ) (TOL ) #21 8 DC- 6 $2,813,03 9 1,35 4 1,53 9 #46 1

Brasili a $143,74 0
24 0 25 5 Peninsul a

(KS ) 45 6 2 / Saab 34 0 $2,655,25 8 1,26 2 5,05 3 Airway s (KS )

45 9 2 / Saab 34 0 $356,47 4 15 3 67 8

Intra-A K Fue l Expens e $21,503,14 1 $14,313,46 2 $761,90 6 $3,154,44 1 $2,474,88 9 $135,28 5 $663,15 8 $80,44 3

Intra-A K Skd

. ATM s 2 / Uni t Cost/ATM , Fue l Inn-a-AK Mai l RTM s 2 / RTM Percen t

o f Tota l Wtd

. Cost/ATM , Fue l 45,019.54 0 $0.47764 0 5,576,80 9 100.00 % $0.4964 5 31,328,06 9

$0.45688 9 1,521,22 5 27.28 % $0.1246 4 2,435,56 4

$0.31282 5 887,27 4 15.91 % $0.0497 7 5,933,48 1

$0.53163 4 1,402,28 2 25.14 % $0.1336 5 4,046,04 2

$0.61168 1 1,540,35 6 27.62 % $0.1689 5 203,50 9

$0.66476 2 84,45 9 1.51 % $0.0100 4 1,072,87 5

$0.61811 3 84,69 4 1.52 % $0.0094 0 119,30 1

$0.67428 6 56,51 9 1.01 % $0.0068 1

1 / Fue l cost s for

Alask aAirlines , Lynde n an dNorthern Ai r Carg o i s calculate db y fu^s t determinin g th e intra-Alask acos t fo r pe r gallo n fo r thos e carrier s fromSchedul e PI2 , secondl y determinin g th e fue l bu mpe r

bloc k hour

. Tatondu k

i s no t calculate dthis way , becaus e it s DC- 6 aircraf t bum s expensiv e Avga s whil e it s turbopro p Brasili abum s les s expensiv e Je t A , an dSchedul e P1 2 doe s no t break dow n intra-Alask a expense s int o thos e tw o categories

. PenAi r doe s no t report schedul e F12 , an ds o w e hav e reliedo n Schedul e F-2

. expense s int o thos e tw o categories

. PenAi r doe s no t report schedul e P I 2 , an ds o w e hav e relie do n Schedul e F-2

. 2 / For PenAir , th e first

an dthir drow s reflec t

th e total s fo

r diat aircraft , th e intra-Alask aschedule dbloc k hours , ATMs , an dMai l RTM s reflec t th e mainlin e portio n o f

PenAir' s fleet, i.e. , thos e operation s wh o averag e payloa dpe r departur e i s 7,50 0 lbs

. o r more .Appendi x E Exclud e Operation s Belo w th e On e Percen t Threshold

. Y E 3-31-1 0

Carrie r Alask aAirline s Inc

. Tatondu k Outfitter s Norther n Ai r

Carg o Inc

. Lynde n Ai r

Carg o Airline s Tatondu k Outfitter s Peninsul aAirway s Peninsul aAirway s Tatondu k Outfitter s Er aAviation , Inc

. Alask aAirline s Inc

. Alask aAirline s Inc

. Alask aAirline s Inc

. Gran dTota l T-10 0 Segment , Aircrafttvp e #617 , B-737-40 0 #218 , DC- 6 #620 , B-737-20 0 #556 , Hercule s #461 , Brasili a #45 9 (Mainlin e Only ) #45 6 (Mainlin e Only ) #150,C-4 6 #483 , Das h 8-10 0 #614,B-737-80 0 #612,3-737-70 0 #634 , B-737-90 0 Linehau l Result s Intra-Alask a RTM s o f Mai l 6,591,51 2 6,423,39 0 5,248,43 2 3,586,54 6 400,04 9 368,84 3 356,65 8 195,88 7 84,45 2 72,68 1 26,01 5 7.45 3 23,361,91 8 Percen t

28.21 % 27.50 % 22.47 % 15.35 % 1.71 % 1.58 % 1.53 % 0.84 % 0.36% 0.31 % 0.11 % 0.03 % 100.00 % Note : Exclud e 258,11 8 Mai l RTM s o f Alask aAirline s fo

r Aircraf t Typ e #619

. NA C operate dthi s airraf t fo r onl y par t o f on e quarte r

an dsinc e discontinue dit

.
T-lO O Market , Termina l Result s Uniguecarriem^m e Tatondu k Outfitter s 1 / Norther n Ai r

Carg o Inc

. Alask aAirline s Inc

. Lynde n Air

Carg o Airline s PenAi r 2 / Er aAviatio n Gran dTota l Intra-Alask a Mai l Ton s Enplane d

17,01 7 13,80 3 14,44 8 7,41 4 6,12 6 39 0 59,19 8 Adj

. Fo r

Mainlin e Mai l Ton s Enplane d

16,77 5 13,80 3 14,44 8 7,41 4 1,36 2 390 54,19 2 Percen t

30.95 % 25.47 % 26.66 % 13.68 % 2.51 % 0.72 % 99.99 % Cumulativ e

Percen t 30.95 % 56.42 % 83.08 % 96.76 % 99.27 % 99.99 %

1 / Tatonduk : 17,01 7 *103,717,18 9 mainlin e payloa dH

- 105,215,28 9 syste mpayloa dpe r T-lO O Segmen t

Report

. PenAir : 6,12 6 * 32,275,10 0 mainlin e payloa d•= • 145,140,80 3 syste mpayload , pe r specia l interna l report
.