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Intra-Alaska Mainline Class Service Mail Rates

The Department has not updated the Reeve rate in almost 20 years because Reeve never petitioned the Department to make an inflation adjustment. Also, special factors present when the rate was created no longer apply. For example, when the territorial rate was established, Reeve was the only carrier operating in the Aleutians, it did not operate outside the Aleutians, and the aircraft types used by Reeve that were severely weight limited due to the long stage lengths and few alternate airports have since been replaced.

Now, of course, Reeve is not operating scheduled service, while Alaska Airlines and Northern Air Cargo both operate in the Aleutians, but with different aircraft types than Reeve operated. The intra-Alaska mainline rate in some respects now exceeds the Reeve rate, even though the Reeve territorial rate was initially carved out from the rest of Alaska to account for Reeve's higher costs, at the time, of operating in the Aleutians. By letter to the carriers and the Postal Service dated December 19, 2000, the Department affirmed that the Reeve territorial rate would continue to apply in the Aleutians until further Department action, notwithstanding that Reeve had ceased scheduled operations. The letter also requested comments about phasing out the Reeve rate. Options specifically addressed were to end the Reeve rate altogether at a pre-agreed to date; make the higher intra-Alaska mainline priority rate apply to priority mail service in the Aleutians and have the higher Reeve rate apply as the non-priority rate until the nonpriority rate exceeded the Reeve rate; and selectively phase out the Reeve rate in specific markets.

All parties agree that the Reeve territorial rate should end. While Alaska Airlines indicates that it would accept April 1 as the transition date, the Postal Service is silent on the date. However, there is no justification for extending the non-compensatory Reeve rate beyond the time needed for an orderly transition. Service to most markets in the Aleutians is now provided with bush-only aircraft, and so the much higher intra-Alaska bush rate applies. However, at Dutch Harbor Peninsula Airways has equalized to the Reeve rate for its service with bush aircraft. Peninsula is entitled to the higher rate, and by offering a higher rate Peninsula may be able to expand service and reduce some apparent capacity shortfalls in the market. We will therefore terminate the Reeve rate effective five days after the service date of this order, and incorporate the Aleutians in the intra-Alaska mainline and bush mail rate system that is applied to the rest of Alaska.

We note the Postal Service's comment that its primary concern is to ensure that the Aleutians receive reliable and dependable mail service and that the mail rates must be high enough to attract and compensate carriers to serve the more remote, smaller Aleutian communities. In that context, the Postal Service has asked that we meet with it and the parties to discuss market specific contracting and perhaps other options for service in the Aleutians. Given these outstanding issues in the Aleutians and the Postal Service's request, we will arrange to meet with the Postal Service, the carriers, and the State of Alaska to examine mail issues in the Aleutians.

By:  Susan McDermott

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