### Order 2013

- 12

- 3 Served: December 6, 2013
UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued by the Department of Transportation

on the 6 th 

### of December, 2013

INTRA

- ALASKA MAINLINE SERVICE MAIL RATES
Under 49 U.S. C. 419 0 1 et seq. Docket OST
- 2003
- 14695 (Docket OST
- 95
- 429)

ORDER TO SHOW CAUSE ESTABLISHING NEW MAINLINE SERVICE MAIL RATES Summary By this Order, the Department proposes to establish new intra

- Alaska mainline 1 

### mail rates for the next annual period, beginning on or about January 1 , 201 4 . The rates that are currently in effect were established by Order 201 2

- 9

- 26 , adjusted by Order 201 3

- 6

- 15 for the fuel costs for the quarter ended March 31, 201 3 . The cost pool consists of the mainline operations of five carriers: Alaska Airlines (AS), Era Aviation, Inc. ( 7H, Era ), 2 

### Lynden Air Cargo ( L2, Lynden ), Northern Air Cargo (NAC , NC ), and Tatonduk Outfitters, Ltd., d/b/a Everts Air Cargo (Tatonduk , 5V ). Alaska and NAC pr ovide all of their service with mainline aircraft; Era and Tatonduk provide most of their service with mainline equipment

. 3 

### As shown in the Appendices, we have separated the bush traffic and expenses from the mainline for each carrier that provides both m ainline and bush services. As shown in Appendix E, PenAir no longer meets the one percent threshold, so we have excluded that carrier from the calculations

. Background Because mail rates are made effective on a final, prospective basis, but are based on historical unit costs, we project what costs will be in the forthcoming year based on ten

1 Mainline aircraft are defined as aircraft with more than 7,500 pounds payload , and m ainline mail is mail transported on mainline aircraft. The Postal Service pays a lower rate for mainline than bush mail to reflect the greater efficiency of large aircraft when transporting higher loads. 2 HoTH, Inc., a/k/a Era Alaska, is a regional airline hol ding company whose wholly

- owned subsidiaries include Era Aviation, Inc., Hageland Aviation Services, Inc., and Frontier Flying Service, Inc. Those three subsidiaries operate as independent carriers throughout the state of Alaska. Era Aviation, Inc. opera tes as a code share partner with Alaska Airlines, Inc. for some of it s destinations within Alaska. 3 The Dash 8

- 100 aircraft operated by Era are mainline aircraft, as they have more than 7,500 pounds of payload. In prior years, we excluded Era from the calculation of the mainline mail rate because it transported less than one percent of Intra

- Alaska mainline mail.

### - 2

- years of data

– if ten years of data are available. Until Order 2004

- 8

- 26 was issued, we estimated the long

- term cost trend based on a ten

- year moving average that included only NAC and AS, 4 

### the only two carriers for which we had ten years of data. Order 2004

- 8

- 26 temporarily abandoned the use of a ten

- year trend for a five

- year trend

– the entire period for which we had data for the four carriers 5 

### then constituting the mainline cost pool

-- but added a successive year with each new annual update until, as contemplated by Order 2004

- 8

- 26, we had a full ten years. We propose to maintain the use of a ten

- year trend by adding the most recent year , March 31, 201 3 , and dropping the earliest year, March 31, 20 0 3

. As is our usual practice, the proposed rates, contained in Appendix A, reflect the application of cost adjustment factors, developed in Appendix B, to the basic mail rate structure established by the Civil Ae ronautics Board in Order 82

- 11

- 23. We have used the carriers’ reported operating expenses and traffic for the year ended March 31, 201 3 . When the final Order is issued, we will update unit costs of fuel for the most recent quarter available at that time

. We have increased the carriers’ non

- fuel unit costs and their terminal unit costs to the mid

- point of the new rate period based on the long

- term (ten

- year) annual change in unit costs for all of the carriers. 6 

### Results of the Updated Data The proposed line

- haul and terminal rates differ from the rates currently in effect by the amounts shown in the table:

Order 201 3

- 6

- 15 Proposed 7 Increase (%) 8 Line

- haul , $/RTM 9 Priority $3.5841 $3. 7009 3.26 Non

- priority $2.1698 $2. 2405 3.26 Terminal, $/Pound Enplaned Priority $0.3456 $0.3 854 11.52 Non

- priority $0.2970 $0.3 311 11.48 

### Line

- haul unit costs , including fuel, experienced a slight year

- over
- year increase whereas the terminal rate underwent a larger year

- over
- year increase. The combination of changes in the line

- haul and terminal unit costs results in proposed rates that are 6.27 percent higher than those in effect for the current period for a 43 4
- mile 10 

### average length of haul.

4 The long

- term trend was based on the expenses of Alaska and NAC, even though a total of four carriers

– (Alaska, NAC, Lynden, and Tatonduk) transported sufficient volumes of mainline mail that their traffic and expense data were included in calculating annual unit costs , because other than for Alaska and NAC, ten years of data was not available. 5 Alaska, NAC, Everts, and Lynden. 6 The final rate will rely on unit fuel costs for the quarter ending June 30, 201 3

. 7 Includes fuel expense for the quarter ended March 31, 201 3

. 8 Any difference between Priority and Non

- priority is due to rounding. 9 The proposed line

- haul rates are the sum of the non

- fuel line

- haul expense, with a 10

- year average inflation factor applied, and the most recent fuel expense unadjusted for inflation. 10 2 1,643,354 mail RTMs divided by 49,853 mail tons enplaned per Appendi x D.

### - 3

-

General Matters Appendix E shows all the mail transported by carriers operating mainline equipment within Alaska for the year ended March 31, 2013 . Consistent with our longstanding policy, we have tentatively excluded from the line

- haul calculation for that period the data of all aircraft types transporting less than one percent of Intra

- Alaska mainline revenue ton miles of mail , and from the termi nal calculation the data of those carriers enplaning less than one per cent of Intra

- Alaska mainline mail tons enplaned. In this case, that means excluding the unit costs of PenAir’s Saab 340 and Tatonduk’s Brasilia, and including Northern Air Cargo’s 737

- 300. To determine the long

- term trend s , we propose to continue our practice of separately regressing annual unit costs against the corresponding years , in this instance, the ten

- year period from March 31, 200 4 , through March 31, 201 3 . The results of bot h the line

- haul and terminal regressions are shown in Appen di ces C

- 1 and C

- 2

. We will not retroactively recreate the results of the prior nine years that are part of the ten

- year trend by excluding the unit costs of PenAir’s Saab 340 and Tatonduk’s Brasilia or by including Northern Air Cargo’s 737

- 300

. 11 

### First, such an adjustment would have a de minimis effect, because each of the three made up only slightly more than one percent of the mail

. Second, we typically do not adjust the final results for prior years making up the ten

- year trend

. 12


### Non
- fuel Line Haul Results Appendix C

- 1 , Non

- fuel Line Haul, shows an average annual increase of 1.65 percent in unit costs over the ten

- year period with a T

- Value of 5.1 0 , indicating a high degree of confidence in the upward trend in the proposed non
- fuel line haul costs. The average annual increase in the long

- term trend has de creased from 3.06 percent per Order 201 2

- 9

- 26 , to 1.65 percent this year. Fuel Expense Last year, we modi fied the method for calculating the unit cost of fuel by rely ing on fuel expenses for Alaska, NAC, and Lynden reported on Form 41 Schedule P12 that all major carriers routinely submit to the Department’s Office of Airline Information . The current calculations again rely on Schedule P12, which shows the costs and gallons for Scheduled Intra

- Alaska operations. As usual, w e did not apply this to Tatonduk because the Schedule P12 does not differentiate fuel expense by aircraft type or b etween Avgas and JetA. Tatonduk operated various aircraft burning significant amounts of each fuel type, with each fuel type differing in price; thus, it would be inappropriate to apply an average price per gallon for that carrier. For Tatonduk, we will continue our practice of relying on unit fuel costs per aircraft type as reported on Schedule P5 .1

. Because Lynden, unlike the other carriers, has only one aircraft type operating in Alaska, we determined its fuel burn by dividing its intra

- Alaska gallons burned in scheduled service by intra

- Alaska scheduled block hours.

11 In other words, we could have adjusted prior year results by pulling PenAir’s data out of those annual results in order to maintain a more consistent pool of carriers since in this, the tenth year of the trend, PenAir did not pass the one percent ma rker

. 12 If there were strong reasons to believe that adjusting an annual result before making it part of the ten

- year trend were necessary , we would do so . For example, Order 2011

- 10

- 3 made such an adjustment for the bush carriers

.

### - 4

-

Terminal Results As shown in Appendix C

- 2, the terminal regression calculated an average annual increase of 3.33 percent in unit costs over the ten

- year period, with a T

- Value of 6.1 1 , indicating a high degree of confidence in the upward trend in unit terminal costs. Year

- over
- year unit terminal costs have increased by 7.09 percent, from $3 86.70 per ton in 201 2 t o $ 414.10 in 201 3 , as shown in Appendix D of this Order. While the most recent 7.09 percent year

over
- year increase is higher than the long term average annual increase of 3.33 percent, the results for this year is right on the 10

- year trend line, as shown in Appendix C

- 2 . This reflect s the fact that the prior year result was significantly below trend.
Other Matters We recognize that the issuance of this Order is approximately t hree months later than usual. Lynden has grown such that it is now required by the Department’s regulations to separately report international and domestic operations. Lynden first reported Schedule P5.2 for the quarter ended September 30, 2012, reverted to reporting Schedule P5.1 for the quarter ended December 31, 2012 , and since then has reported Schedule P5.2. 13 

### As shown in Appendix G, Lynden’s d ata shows that its domestic nonfuel unit cost per flight hour, the costs that should be used for calculating mail rates, exceeded those for its international operations by a factor of ten. 14 

### Also, the revenue flight hours it reports on the T

- 100 Segment re port exceed the total (revenue plus non

- revenue) flight hours it reports on its Form 41 15 

### . To correct th ose apparent problem s , we combined Lynden’s domestic and international data

. For Era, we continued our adjustment of that carrier ’ s terminal expense, as we did for the bush class rate, by determining the average unit costs of Frontier Flying Service, Inc., Era Aviatio n, Inc., and Hageland Air Services, Inc. , all commonly owned carriers, and applying that figure to the mainline payloa d generated by Era’s Dash 8 aircraft, its only mainline operation. ACCORDINGLY, 1. We direct all interested persons to show cause, no later than ten ( 1 0) days after the service date of this Order, why the Department should not adopt the foregoing tentative findings and conclusions and fix, determine and publish the proposed final annual rates specified in Appendix A, to be effective on or about January 1, 201 4 , subject to the quarterly fuel adjustme nt, as discussed. Vague or unsupported Answers that do not include all proposed adjustments and backup data will not be accepted;

13 Department regulations require that carriers with less than $100 million annual operating revenues file the P5.1, while those with $100 million or more must file the P5.2. 14 For example, for QE 3

- 31

- 13 Lynden’s data indicates that its domestic operations cost $14,524.03 per flight (airborne) hour and the corresponding amount for its international operations $1,427.64. 15 For example, for the QE 9

- 30

- 12, Lynden reported on its Form 41, total domestic flight hours, revenue plus nonrevenue, of 417, but revenue flight hours reported on its T

- 100 report of 675.

### - 5

- 2. If no objection is filed within the designated time, or if no timely

- filed objection raises material issues of fact, we h ereby delegate authority to the Director, Office of Aviation Analysis, to make the above rates final; 3. This docket shall remain open until further Order of the Department; and 4. We will serve this Order upon all parties on the Service List for this Do cket. By:

Susan L. Kurland Assistant Secretary for Aviation and International Affairs (SEAL)
An electronic version of this document is available on the World Wide Web at http://www.regulations.govAppendix A

Intra-Alaska Class Service Mail Rates

Effective: 1/ On or about January 1, 2014

Column (1) (2) (3) (4) (5)

Base Year Adjustment Proposed Current Rate, Change from

Rates 2/ Factors 3/ Final Rates 4/ Order 2013-6-15 Prior Rate 5/

Linehaul Charge per Billing Ton-Mile

Priority $1.1969 209.21% $3.7009 $3.5841 3.26% Non-priority $0.7246 209.21% $2.2405 $2.1698 3.26%

Terminal Charge per Pound Originated

Priority $0.1697 127.11% $.3854 $.3456 11.52% Non-priority $0.1458 127.11% $.3311 $.2970 11.48%

1/ Both the current and proposed linehaul rates below include fuel expense for the quarter ended March 31, 2012, the most current data available at this time. As discussed in the body of the Order, we anticipate including fuel expense for the quarter ended June 30, 2012, in the final Order. 2/ Per Order 82-11-23. 3/ See Appendix B. 4/ Column (1) increased by Column (2). 5/ Any differences due to rounding.Appendix B

Intra-Alaska Class Service Mail Rates Cost Adjustment Factors

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

Average Annual Percent Base Year Change Midpoint to Estimated Change 1980

Ended Year Ended YE 3/31/ 04 Midpoint Unit Cost at Base Year to 9/30/80 1/ 3/31/ 13 2/ to YE 3/31/ 13 3/ Change 4/ 4/1/ 14 5/ 4/1/ 14 6/

Unit Cost per Available Ton-Mile Fuel $0.52411 na na $0.576050 Nonfuel $0.64313 1.65% 2.49% $0.659144 Total $0.399469 $1.16724 $1.235194 209.21%

Unit Cost per Ton Enplaned $191.54 $414.10 3.33% 5.05% $435.01 127.11%

1/ Per Order 82-11-23, updated most recently in Order 97-12-24. 2/ For nonfuel, we used YE March 31, 2013, App. D ; for fuel expense, we used Order 2013-6-15 , App. C. 3/ See the regression results in Appendix C. 4/ Reflects the fact that from the mid point of the reporting period to the midpoint of the prospective rate is 1 and 1/2 years. 1.0165 x 1.00825 , where 1.00825 is the average annual unit cost increase projected for a 6-month period. 1.0333 x 1.01665 where 1.01665 is the average annual unit cost increase projected for a 6-month period. 5/ Column (2) multiplied by column (4), except for fuel. As indicated in Order 97-9-37, we will rely on the most recent fuel costs, with no inflation factor. Fuel for the QE 3/31/13 is the most recent available at this time, but we anticipate in the final order adding fuel for the QE 9 /30/13. 6/ $1.230306 in preceding column divided by $.399469 in the base period, and $435.01 in the preceeding column divided by $191.54 in the base period.Appendix C-1 Linehaul Page 1 of 2

Calculation of the Linehaul Portion of the 10-Year Trend

Actual Y Natural Log $/ATM $/ATM Predicted Order Non-Fuel Non-Fuel Annual Number YE 3/31/ Linehaul Linehaul Predicted Y Residuals EXP (Y) Increase 2004-8-26 2004 0.5225 -0.649130 0.495112364 0.027387636 1.640682582 1.65% 2005-9-16 2005 0.5312 -0.632617 0.511469394 0.019730606 1.667739962 2006-9-23 2006 0.5312 -0.632617 0.527826424 0.003373576 1.695243561 2007-8-26 2007 0.4924 -0.708464 0.544183455 -0.051783455 1.723200736 2008-9-3 2008 0.51562 -0.662385219 0.560540485 -0.044920485 1.751618968 2009-9-1 2009 0.57542 -0.55265507 0.576897515 -0.001477515 1.78050586 2010-8-7 2010 0.61927 -0.479213914 0.593254545 0.026015455 1.809869142 2011-9-6 2011 0.62396 -0.471669015 0.609611576 0.014348424 1.839716669 2012-9-26 2012 0.63249 -0.458090869 0.625968606 0.006521394 1.870056428 New 2013 0.64313 -0.441408398 0.642325636 0.000804364 1.900896537

ANOVA df SS MS F Significance F Regression 1 0.022073076 0.022073076 26.05193509 0.000925144 Residual 8 0.006778176 0.000847272 Total 9 0.028851253

Coefficients Std. Error T Stat P-value Lower 95% Upper 95% Intercept -32.28437636 6.436603317 -5.015747402 0.001032335 -47.12721023 -17.4415425 X Variable 1 0.01635703 0.003204678 5.104109628 0.000925144 0.008967028 0.023747032

Regression Statistics Multiple R 0.874679797 R Square 0.765064747 Adj. R Square 0.73569784 Std. Error 0.029107938 Observations 10Appendix C-1 Linehaul Page 2 of 2

y = 0.0164x

- 32.284 R2 = 0.7651

0.45

0.5 0.55

0.6 0.65

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Unit Cost per ATM, Natural Log

Years Ended March 31, 2004, through March 31, 2013 

### Unit Cost per ATM, Nonfuel Linehaul, Actual vs. PredictedAppendix C-2 Terminal Page 1 of 2

Calculation of the Terminal Portion of the 10-Year Trend

Actual Y Natural Log Order $/Ton Enp. $/Ton Enp. Annual Number YE 3/31 Terminal Terminal Predicted Y Residuals EXP (Y) Increase 2004-8-26 2004 $302.64 5.712544 5.73270009 -0.020156091 308.8019 3.33% 2005-9-16 2005 $304.91 5.720017 5.76547538 -0.045458382 319.0907 2006-9-23 2006 $318.30 5.762994 5.79825067 -0.035256673 329.7223 2007-8-26 2007 $368.53 5.909522 5.83102596 0.078496036 340.7081 2008-9-3 2008 $363.29 5.895201 5.86380125 0.031399745 352.0599 2009-9-1 2009 $386.29 5.956588 5.89657655 0.060011455 363.7899 2010-8-7 2010 $384.09 5.950877 5.92935184 0.021525164 375.9108 2011-9-6 2011 $368.85 5.910390 5.96212713 -0.051737127 388.4355 2012-9-26 2012 $386.70 5.957649 5.99490242 -0.037253418 401.3775 New 2013 $414.10 6.026107 6.02767771 -0.001570709 414.7507

ANOVA df SS MS F Significance F Regression 1 0.08862312 0.08862312 37.324706 0.000286491 Residual 8 0.01899506 0.00237438 Total 9 0.10761818

Coefficients Std. Error T Stat. P-value Lower 95% Upper 95% Intercept -59.9489829 10.7750833 -5.5636677 0.00053238 -84.79636962 -35.10159616 X Variable 1 0.032775291 0.00536474 6.10939489 0.00028649 0.020404187 0.045146394

Regression Statistics Multiple R 0.907466705 R Square 0.823495821 Adjusted R Sq 0.801432799 Standard Error 0.048727635 Observations 10Appendix C-2 Terminal Page 2 of 2

y = 0.0328x

- 59.949 R2 = 0.8235

5.70 5.75 5.80 5.85 5.90 5.95 6.00 6.05

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Unit Cost per Ton Enplaned, Natural Log

Year Ended March 31, 2004, through March 31, 2013 Terminal, Unit Cost per Ton Enplaned, Actual vs. PredcitedAppendix D

Operating Expenses and Unit Costs, Intra-Alaska Mainline Operations, Year Ended March 31, 2013

Linehaul Calculations

Alaska Era Lynden Northern Air Cargo Tatonduk AS 7H L2 NC NC 5V 5V #617 #483 #556 #619 #620 #218 #640 Total 737-400 Dash 8 Hercules 737-300 737-200 DC-6 DC-9-30 Fuel $222,521,000 $9,219,908 $13,222,078 $4,886,613 $17,928,170 $7,579,084 $7,637,552 N-Fuel $261,438,000 $21,981,565 $46,505,049 $4,608,270 $14,827,080 $10,218,506 $6,881,967 Ʃ Domestic 1/ $483,959,000 $31,201,473 $59,727,127 $9,494,883 $32,755,250 $17,797,590 $14,519,519
Intra-AK Skd. BH 2/ 25,784 12,867 1,535 321 4,562 2,641 2,155 Ʃ Domestic 3/ 87,007 14,963 9,081 1,612 5,832 3,865 2,188 Intra-AK Fuel $65,942,757 $7,928,394 $2,234,984 $973,079 $14,024,059 $5,178,877 $7,522,360 Intra-AK N-Fuel $77,475,575 $18,902,412 $7,860,946 $917,652 $11,598,275 $6,982,425 $6,778,171 Total $143,418,332 $26,830,806 $10,095,930 $1,890,731 $25,622,334 $12,161,302 $14,300,531
Intra-AK S-ATMs 2/ 135,130,166 9,856,935 9,736,931 1,757,234 23,372,939 7,481,565 12,750,622 $/ATM, Fuel $0.487994 $0.804347 $0.229537 $0.553756 $0.600013 $0.692218 $0.589960 $/ATM, N-Fuel $0.573340 $1.917676 $0.807333 $0.522214 $0.496227 $0.933284 $0.531595 Total $1.061334 $2.722023 $1.036870 $1.075970 $1.096240 $1.625502 $1.121555
IntraAK Mail RTMs 2/ 21,643,354 4,759,688 320,290 3,553,240 425,574 5,911,182 2,500,814 4,172,566 RTM % of Total 100.00% 21.991% 1.480% 16.417% 1.966% 27.312% 11.555% 19.279% $/ATM, Fuel $0.52539 $0.10731 $0.01190 $0.03768 $0.01089 $0.16388 $0.07999 $0.11374 $/ATM, N-Fuel $0.64313 $0.12608 $0.02838 $0.13254 $0.01027 $0.13553 $0.10784 $0.10249 Wtd. $/ATM, Total $1.16852 $0.233390 $0.040280 $0.170220 $0.021160 $0.299410 $0.187830 $0.216230

Terminal Calculations Alaska Era Lynden Northern Air Cargo Tatonduk AS 7H L2 NC 5V Terminal Expense 4/ $8,218,125 $18,442,976 $11,377,010 Tons Enplaned 5/ 44,946 33,288 32,802 Intra-AK Skd. Svc. Exp. $48,415,834 6/ $4,214,268 6/ Intra-AK Skd. Svc. Tons 150,256 6/ 9,722 6/ $/Ton Enplaned $322.22 $182.84 $433.48 $554.04 $346.84
Intra-AK Mail Tons 7/ 49,853 10,207 1,029 7,580 15,043 15,994 Mail Tons % of Total 100.00% 20.474% 2.064% 15.205% 30.175% 32.082% Wtd. $/Ton Enplaned $414.10 $65.97 $3.77 $65.91 $167.18 $111.27Appendix E Exclude Operations Below the One Percent Threshhold, YE 3-31-13 T-100 Segment, Linehaul Results, Intra-Alaska Mail Revenue Ton Miles (RTMs) Mainline Aircraft Only Carrier Aircraft Intra-AK, Intra-AK, Mail RTMs Code Carrier Type Mail RTMs Percentage Mainline-Only Carriers NC NAC 620 5,914,235 26.75% NC 6,339,809 AS Alaska 617 4,759,688 21.52% AS 4,775,483 5V Tatonduk 640 4,172,566 18.87% L2 3,539,634 L2 Lynden 556 3,539,664 16.01% 5V Tatonduk 218 2,500,877 11.31% Tatonduk, Main+Bush NC NAC 619 425,574 1.92% 79 7,666 7H Era 483 321,273 1.45% 150 82,087 5V Tatonduk 461 203,384 0.92% 218 2,500,877 KS PenAir 1/ 456 185,210 0.84% 416 13,110 5V Tatonduk 150 82,087 0.37% 461 203,384 AS Alaska 612 11,473 0.05% 479 6,743 AS Alaska 614 4,120 0.02% 640 4,172,566 5Z UPS 819 8 0.00% 6,986,433 AS Alaska 634 202 0.00% 22,120,361 100.03% ERA, Main+Bush 483 321,273 PenAir, Intra-AK Mail RTMs 405 70,292 Order Quarter Mainline Total 391,565 2013-6-15 QE 3-31-13 35,428 322,728 2013-4-8 QE 12-31-12 46,118 360,044 PenAir, Main+Bush 2012-12-5 QE 9-30-12 47,923 429,657 79 13,949 2012-9-26 QE 6-30-12 55,741 503,943 170 1,762 185,210 1,616,372 416 48,324 456, Mainline 185,210 T-100 Market, Terminal Results, Enplaned Mail, Exclude Those Carriers 456, Bush 335,616 Enplaning less than 1% of Mainline Mail 459 1,031,511 Intra-AK, 3/ Intra-AK Mail RTMs Adjusted % of 1,616,372 Carrier Mail Tons Main A/C 4/ All A/C 5/ Mail Tons Total 5V 16,745 6,958,914 6,986,370 16,679 32.646% AS 10,241 4,775,483 4,775,483 10,241 20.045% NC 15,051 6,339,809 6,339,809 15,051 29.460% L2 7,636 3,539,634 3,539,634 7,636 14.946% 7H 1,257 321,273 391,565 1,031 2.018% KS 3,948 185,210 1,616,372 452 0.885% Total 54,878 22,120,323 23,649,233 51,090 100.00% 1/ See quarterly fuel updates below. 2/ A special report of PenAir breaks out the mainline and bush portion of its service. 3/ T-100 Market Report. 4/ T-100 Segment Report, all mainline aircraft, including those mainline aircraft enplaning less than 1 percent of Mail RTMs. 5/ T-100 Segment Report, all aircraft, mainline and bush.

### Appendix F
Year Ended March 31, 2013 Calculation of Terminal Expenses for Era Aviation

Carrier Schedule F-2 Expense Payload in Tons Unit Cost Era Aviation Capacity/Administrative Related $9,344,827 Era Aviation Departure/Station Related $6,508,292 $15,853,119 77,629 $204.22

Frontier Capacity/Administrative Related $12,549 Frontier Departure/Station Related $4,810 $17,359 1,248 $13.91 Hageland Capacity/Administrative Related $7,099,379 Hageland Departure/Station Related $12,164,799 $19,264,178 145,979 $131.97

Total, All Three Carriers $35,134,656 224,856 $156.25 Payload, Tons, ERA's Dash 8, 52,596 The Only Mainline Aircraft Expenses, Allocated by Dash 8, The Only Mainline Aircraft $8,218,125 1/

1/ 52,596 tons of mainline paylod multiplied by average unit costs, mainline and bush, of $156.25.Appendix G

Lynden Linehaul Costs

QE 6-30-12 QE 9-30-12 QE 12-31-12 QE 3-31-13 YE 3-31-13

Domestic 1. Fuel $1,972,362 $2,245,808 $2,223,075 $2,721,872 2. Total Directs $12,827,861 $11,175,759 $12,247,169 $11,596,052 3. Non-Fuel Directs $10,855,499 $8,929,951 $10,024,094 $8,874,180 4. Total Airborne Hours 710 417 696 611 5. Non-fuel Unit Cost, Form 41 $15,289.44 $21,414.75 $14,402.43 $14,524.03 6.Revenue Flt. Hours, T-100 752 675 794 612 7. #4 ÷ #6 less one. -5.59% -38.22% -12.34% -0.16%

International 1. Fuel 1,345,650 $ 947,018 $ 1,564,268 $ 202,025 $ 2. Total Directs 3,713,363 $ 2,409,579 $ 4,157,659 $ 1,599,685 $ 3. Non-Fuel Directs $2,367,713 $1,462,561 $2,593,391 $1,397,660 4. Total Airborne Hours 1,541 1,330 1,459 979 5. Non-fuel Unit Cost, Form 41 $1,536.48 $1,099.67 $1,777.51 $1,427.64 6.Revenue Flt. Hours, T-100 1,501 1,162 857 1,872 7. #4 ÷ #6 less one. 2.66% 14.46% 70.25% -47.70%

Combined 1. Fuel $3,318,012 $3,192,826 $3,787,343 $2,923,897 $13,222,078 2. Total Directs $16,541,224 $13,585,338 $16,404,828 $13,195,737 $59,727,127 3. Non-Fuel Directs $13,223,212 $10,392,512 $12,617,485 $10,271,840 $46,505,049 4. Total Airborne Hours 2,251 1,747 2,155 1,590 7,743 5. Non-fuel Unit Cost, Form 41 $5,874.37 $5,948.78 $5,854.98 $6,460.28 $5,654.11 6.Revenue Flt. Hours, T-100 2,253 1,837 1,651 2,484 8,225 7. #4 ÷ #6 less one. -0.09% -4.90% 30.53% -35.99% -5.86%
Note: Total Directs is either Account #7098.9 on Schedule P5.2 or #90 on Schedule P5.1 Note: Fuel Expense is either Account #5145.1 on Schedule P5.2 or #40 on Schedule P5.1