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Old Docket:  OST-1995-405 | OST-1995-429

Intra-Alaska Class Service Mail Rates 

Notice, the Department decided for administrative convenience to inaugurate new dockets as of March 17, 2003, for Mainline Mail Rates (OST-2003-14694) and Bush Mail Rates (OST-2003-14695), respectively. Parties referring to filings in the previous dockets should state the date filed in the previous docket(s) and request incorporation. All pleadings after the above date should be filed in the new dockets.

By: Read C. Van de Water

By: John Bonafilia

During the recent Alaska Air Carriers Association convention in Anchorage you presented a working draft of the data that the USPS would like to collect from carriers to verify performance of scheduled service. You also stated that you do not intend to use the data from the carrier flight reports to the Postal Service to calculate carrier market shares, but would use the T100 data released by the USDOT to calculate market shares. I am concerned that the data elements described in your handout may not be easily obtained from carriers and they may not all be necessary for the Postal Service to accomplish its stated interests.

All responsible carriers welcome the interest of the Postal Service to verify and enforce schedule adherence. If the desired flight reports are to be successfully implemented however, it is in the best interest of the Postal Service and air carriers that the design of such reports is consistent with the records that carriers currently maintain and generate for their USDOT T100 reports. l also believe that every effort should be made to simplify the reports and require only those elements that are essential to the needs of the Postal Service to verify flight performance and transportation of the mail. The enclosed outline includes the fundamental elements and rationale of a design that would have these qualities.

By: Ken Acton

On August 2, 2002, the Rural Service Improvement Act of 2002 became law.  The Act concerns intra-Alaska mail.  Among other things, it requires the Secretary of Transportation to implement certain provisions of the Act.  The law requires that the Secretary use show-cause procedures to conduct a bush mail rate investigation to determine new rates and review the need for such every two years.  The Department has begun that process.  Order 2002-1-4 required the carriers to submit additional data to enable the Department to conduct such an investigation.

The new law also raises several issues that would have important effects on intra-Alaska mail.  As a result, the law requires the Department to act in several new areas, and we are requesting comments before we act. 

By: Read C. Van de Water

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

April 25, 2003

Comments of Cape Smythe Air

This law is totally absurd. IF service is being provided by a "Bush 121" carrier aircraft and the aircraft is certified as a 121 type aircraft the "Bush 121 rate" should prevail. However, if the carrier that is a 121/135 certificated carrier and the service that is provided is provided in a part 135 aircraft then the "121 Bush rate" should not prevail. The 121/135 certified carrier should not be allowed to carry any mail into that airport in a 135 type aircraft or the rate should be paid at the 135 bush rate.

By: Grant Thompson

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

April 23, 2003

Response of Era Aviation

By: Mike LeNorman

OST-03-14694: Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695: Intra-Alaska Class Service Mail Rates - Bush Mail Rates

Posted May 16, 2003 | Served May 21, 2003

Notice of Extension for Comments

On April 15, 2003, served April 21, 2003, the Department requested comments regarding the Rural Air Service Improvement Act of 2002. Comments are due on May 21, 2003. On May 14, 2003, Hank Myers, representing several Alaska bush carriers directly affected by this law, requested an extension to respond. He indicated that several carriers, had not received the Request for Comments until he had notified them of it, and requested an extension to close of business on June 2. We will grant his request, and give all interested parties until June 2 to submit comments.

In order to ensure that all parties are timely served with future documents in this proceeding, we have attached the current service list to this proceeding and ask all parties to correct, or add their full addresses, including e-mail, phone, and fax numbers within 14 days of the service date of this notice. The information should be sent to: Dockets Operations and Media Management, M-30, PL 401, U.S. Department of Transportation, 400 7th Street, SW, Washington, D.C. 20590, Dockets 2003-14694 and 14695.

Appendices - Service List

By: Randall Bennett

May 14, 2003

Comments of Tanana Air Service

Tanana Air Service appreciates the opportunity to comment on the Rural Service Improvernt Act. There have been numerous definitions of how and what the Act said when all parties are reading the same document. This action will change commercial aviation in Alaska for the next twenty years; therefore, how the Act is interrupted is critical. Although the form that you attached to the notice is simple to complete, this data is on file with the Department of Transportation, Federal Aviation Administration. Carriers are required to provide the FAA with a certificate of insurance at each renewal or whenever a change in the aircraft fleet occurs.

By: Fred Ciarlo

OST-03-14694: Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695: Intra-Alaska Class Service Mail Rates - Bush Mail Rates

May 15, 2003

Comments of Hageland Aviation

The Department's proposed report appears to be adequate for complying with the provisions of subsection (k)(4). It is not apparent however that a monthly frequency for its submission is necessary. This information is rather stable and normally changes only when a carrier renews its insurance or makes a change to its aircraft fleet; these events do not normally occur each month. We propose that the annual verification of insurance coverage that carriers already submit to the Department be modified to include any additional information that the law requires. Alternatively, carriers could submit the needed information on a quarterly basis with their F2 report. In either case, carriers can submit insurance verification more frequently if any of the information is updated.

By: L. Michael Hageland, 907-245-0119

May 16, 2003

Comments of Larry's Flying Service

The fact that the comments were invited by DOT leads us to believe that DOT is at least looking seriously at the ramifications of the proposed changes on the transportation system. DOT may very well see that changes proposed could and will devastate the system. We do need to make some changes to the point where both the Postal service and the passengers will be served in spite of 121, percentages and O&D's. The system is not yet broken but it is severely on the verge of becoming broken .... the proposed changes have been railroaded by the few looking to increase their own positions to the detriment and possibly the demise of the system itself. We cannot allow this to happen!

Appendix 1 & 2: Alaska Runway Information / Bevel Hovercraft Experiment

By: Lawrence Chenaille, 907-474-9169

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

May 20, 2003

Correspondence of Tanana Air Service

In response to the Notice served: May 21, 2003, Tanana Air Service has the following corrections to the service list for these Docket proceedings:

Fred H. Ciarlo Tanana Air Service P.O. Box 60713 Fairbanks, AK 99706

e-mail address is correct as listed, Tanana@polarnet.com

Harold Esmailka Tanana Air Service P.O. Box 29 Ruby, AK 99768

Harold does not have an e-mail address.

I request that all documents for these proceedings be sent to both of the above named parties.

By: Fred Ciarlo

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

May 15, 2003

Comments of Arctic Circle Air Service

By: Don Singsass

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

Correspondence of Alaska Central Express

Before commenting on some of the implementation issues raised by the DOT in its Notice, Alaska Central wants to state for the record that the Act is an unfortunate piece of special interest legislation crafted to benefit only a select number of mainline and bush carriers, while literally legislating other carriers out of business, or at least a major portion of their business. The Act is striking in its Rube Goldberg type construction making it a very cumbersome Act to understand or, as undoubtedly the DOT and USPS will discover, to fully and faithfully implement. Disputes over the provisions of the Act will engender controversy and litigation as carriers object to what may be perceived as arbitrary decisions on the part of the DOT and USPS as they struggle to execute the complicated and inartfully drafted provisions of the Act.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300, rsilverberg@sgbdc.com

May 27, 2003

Correspondence of Arctic Transportation Services

ATS believes that the reports the Department seeks would be better used as an analysis rather than a reliability reporting issue. The flight log information reports would be a substantial burden on all carriers and would not provide a meaningful analysis to determine the scheduled reliability of a bush carrier. There are numerous non quantifiable reasons such as runway, weather and safety concerns which would make an analysis problematic. The issues that the United States Post Office has with scheduled reliability pertains primarily to the priority mail movement and should not be mixed with the non priority mail requirements. In any event, "bush passenger or bush freight carrier market forces will either expand or eliminate a majority of the carriers transporting mail solely with the State of Alaska and makes the overall management of priority mail less burdensome.

By: Wilfred P. Ryan

May 30, 2003

Correspondence of Aviation Consulting & Training

To establish the kind of stable and reliable scheduled air service that is engendered in the RSIA, it is important that all bush market share calculations be done using a rolling 12-month pool of carrier traffic statistics. Calculation of bush route market shares using a data pool of less than 12-months will invite and reward short-term, opportunistic and predatory scheduled service practices from carriers trying to capture qualified status to the passenger or freight pool without making a long-term commitment to scheduled service.

By: Ken Action

June 2, 2003

Correspondence of Consolidated Carriers | Word

The Department has begun its timely and thoughtful consideration of the provisions of the Rural Service Improvement Act of 2002. The Act specifically reserves to the Secretary the ability to set appropriate mail rates, and to collect and validate the accuracy of the T- 100 reports which will be used to determine eligibility for bypass tender. At the same time, the Act specifically excludes non-bypass carriers and markets from the selection process. The Act also adds language requiring and insuring "equitable tender" for all classes of mail in all markets. The Postal Service does not have the authority on its own to disqualify any carriers from mail tender except as described in the Act's provisions governing bypass mail. Furthermore, the Postal Service does not have the authority to impose new rules, requirements of regulations that are not required to meet the specifications of the Act.

Index of Appendices | Word

By: Hank Myers

June 1, 2003

Correspondence of Frontier Flying Service

Since there are really no restrictions as to what amount or how many seats must be insured, it seems that the requested information is somewhat meaningless. The Department of Transportation has a minimum level for liability insurance. The department could kill two birds with one stone by just mandating that they be sent a certificate of insurance for the carrier. I have attached a certificate for Frontier that in one page shows the fleet by N-Number, Type aircraft, Number of seats insured and amount of liability coverage. This form is automatically generated when an aircraft is added or subtracted and of course at insurance renewal.

By: Bob Hajdukovich

June 2, 2003

Correspondence of United States Postal Service | Word

Although it was not mentioned in this notice, the Postal Service understands that the Department is considering establishing a new report or procedure for attributing fuel costs. This would seem to have an impact on the base rate investigation and the new rate update procedures being discussed as a result of the change in the law. The Postal Service is open to discussions with concerned parties on the best way to approach the attribution of fuel costs. This would also present an opportunity for the Postal Service to introduce and get feedback on the potential for a new fuel purchasing strategy which makes fuel costs a pass-through separate and apart from the rate-making process.

By: William J. Jones

May 29, 2003

Correspondence of Village Aviation | Word

All costs data relating to the Part 121 aircraft operated on a bush route should be included in the determination of the Part 121 bush rate. In the past the Department has excluded data from the rate pool from any carrier who has operations which are not consistent with the type of service provided to which the mail rate applies.

By: Don R. King

May 30, 2003

Correspondence of Warbelow's Air Ventures

The data being requested is stable over time, but may be needed by the USPS for pay and tender purposes in real time. Therefore we would suggest that each operatcr make an initial report, and then incremental reports prior to putting an aircraft in service or taking it out.

By: Arthur Warbelow

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

May 28, 2003

Correspondence of Inland Aviation Services

I believe a little more attention to the distinction between non-priority bypass and Alaska bypass mail and to which of the two the "Rural Service Improvement Act" refers to is necessary. In a recent conversation with Steve Deaton we learned that the USPS is considering allotting in house iionpriority mail in accordance with the Rural Service Improvement Act as well as bypass. This would increase the impact which this Act has on air carriers to the point which it would make it impossible for some of the carriers which are providing regular reliable service but not yet able to compete for more than 20% of a large passenger market because of size to continue operation.

By: Steven Hill

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

June 2, 2003

Correspondence of Cape Smythe Air

By: Grant Thompson, 907-852-5004, grant@capesmythe.com

June 11, 2003

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

Correspondence of Hageland Aivation Services

We are concerned that some comments recently submitted to the Docket appear to have been written by those who have forgotten the fundamental public policy issues of mail transportation in rural Alaska and the premises of the RSIA. We are also concerned that some parties would construe the RSIA to be more complex than necessary or engendered in the RSIA.

The historic and underlying public policy issues of rural Alaska transportation are still valid. Namely, it is correct for Congress and the Department to be concerned about providing reliable, scheduled air transportation for the public in places where no other transportation is practical.

The RSIA is consistent with the public interest insofar that it ensures that bypass mail transportation is no longer diverted to carriers that do not seriously compete for transportation of passengers and non-mail freight. It is commonly known by most parties, and openly admitted by some, that there are carriers who have expanded their route structure for the primary purpose of increasing mail revenues. It is not necessary to ignore this fact or to pretend otherwise.

We believe the RSIA is the best thing to happen for rural Alaska passengers, freight transportation consumers, and the Postal Service since the creation of bypass mail. We look forward to its implementation.

By: Michael Hageland, 907-245-0119

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Service Mail Rates

June 17, 2003

Reply Comments of Peninsula Airways

PenAir is a leading provider of precisely the type of high-quality rural air service which the Act seeks to promote. PenAir has provided extensive passenger, freight and mail service to rural Alaska for nearly 50 years. Indeed, PenAir has pioneered Part 121 service to many bush communities. However, in order to most efficiently and most effectively serve the needs of rural Alaska, PenAir operates scheduled service under both Part 121 and 135 (as well as Part 135 amphibious). As such, PenAir has a unique appreciation of the implementation issues that the Department is considering under the Act.

Counsel: Shaw Pittman, Robert Cohn, 202-663-8060

June 17, 2003

Reply Comments of the United States Postal Service | Word

The Postal Service would like to dispel one other myth that seems to pervade some carrier thinking. The Postal Service, as recognized by the DOT and stated clearly in its operating manual, has authority over tender decisions subject to existing regulations. As stated by the DOT in Order 2000-11-9, "the Department has long recognized that the Postal Service has both the primary authority and responsibility to determine the tender of mail under its statute and regulations." In addition, the Postal Service also has the right to remove carriers from tender. It has, in various circumstances, removed a carrier from tender for unreliable performance, without DOT intervention, and will continue to exercise its authority in that regard.

Counsel: William Jones, William.J.Jones@usps.com

June 17, 2003

Rebuttal Comments of Warbelow's Air Ventures | Word

Given the time constraints to implement before November 3, 2003, and the lack of reported excise tax as required by the RISA at this point in time, we suggest that implementation be undertaken in two steps. Initial market shares could be established using currently available data, with an order issued now to require submission of the city pair revenue or excise tax data for future reporting periods.

Carriers might be given the choice to either compile and submit this data themselves with the T-100 reports, or alternatively, coordinate with the USPS to collect this data on their Internet based data collection system now being developed. For operators with limited systems or ability to develop new systems, this would provide a simple alterative method to report the data, without incremental reporting overhead.

By: Arthur Warbelow

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Service Mail Rates

June 16, 2003

Answer of The Consolidated Carriers in response to the Comments of Other Parties Regarding Implementation of the Rural Service Improvement Act of 2002 | Word

While many of the goals are vague and contradictory, the mechanisms put in place to achieve those goals are often quite specific. These mechanisms not only tell us what needs to be done to meet the provisions of the Act, but provide some insight into the goals of the Act. These mechanisms are framework on which all subsequent actions should be built. Anything that cannot be supported by that framework must be erased from the blueprint.

One of the biggest questions raised by the Department in its Request for Comments is the discrimination between Part 121 operations and Part 135 operations as far as the payment of rates and application of preferences are involved. The Act variously uses the terms Part 121 carrier and Part 121 operations, and similarly mixes the term Part 135 carrier and Part 135 operations. Appendix A is the copy of an email from Larry Dalrymple, Manager of the Fairbanks Flight Standards District Office of the FAA. Mr. Dalrymple explains that there is no such thing as a Part 121 carrier or a Part 135 carrier in terms of certification.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com

June 16, 2003

Response of Larry's Flying Service to Comments Regarding Implementation of Rural Service Imporvement Act

We have read the comments of many ofthe carriers which were due and published as of June 2.2003. It was interesting to note that the responses of the carriers were as wide or wider than the areas they serve and types of businesses they do. It appears that DOT is in the distinct position of having the proverbial "tiger bythe tail". We would like to take the opportunity to comment on some ofthe issues raised and the responses of the carriers regarding these issues.

As we pointed out in our original submission DOT already has the information regarding what type aircraft are insured and number of seats insured for each aircraft. As we pointed out as did Frontier and many others we are required to furnish such information to DOT at insurance renewal and whenever any substantial change takes place.

By: LFS, Lawrence Chenaille, 907-474-9169

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Service Mail Rates

July 1, 2003

Reply of Consolidated Carriers in Response to the Rebuttal Comments of Other Parties and Motion for Leave to File an Otherwise Unauthorized Document | Word

The Consolidated Carriers move for leave to file an otherwise unauthorized document to respond to the filings of the U.S. Postal Service, Warbelow's Air Ventures and Peninsula Airways filed June 16, 2003. In its rebuttal filing, Warbelow's raises new issues unaddressed in its original comments. Similarly, the Postal Service reverses a position taken in its original comments in its answer. Peninsula Airways waited until the answer filing to present its initial comments. In that filing it presents its arguments for the first time.

By: Hank Myers, 425-641-8243, hank@mtcworld.com

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Service Mail Rates

June 23, 2003

Solicitation of Comments by United States Postal Service for Fairbanks-Nome/Kotzebue

By: USPS, John Bonafilia

June 23, 2003

Notice of United States Postal Service of Proposed Change in Bypass Mail Hub Points

Correspondence from John Bonafilia, United States Postal Service, to serve as an official and public notice of a proposed change in the bypass mail hub points as authorized by 39 USC Section 5402 (2002) (g)(3)(B). The Postal Service welcomes comments to this proposal.

By: USPS, John Bonafilia

OST-03-14694 - Intra-Alaska Class Service Mail Rates - Mainline Mail Rates
OST-03-14695 - Intra-Alaska Class Service Mail Rates - Bush Mail Rates

Served July 16, 2003

Notice | Word

Notice, the Bureau of Traffic Statistics (BTS) Website showing T-100 Segment and T-100 Market results by month for every reporting Intra-Alaska carrier starting with July 2002 is now on the web. The website is www.bts.gov. The data on this website will be the basis for the Postal Service's tender of mail and the Department's determination of mail rates in the upcoming implementation of the Rural Service Improvement Act.

By: Kevin Adams

Order 03-8-8
OST-03-14695 - Intra-Alaska Mainline Service Mail Rates

Issued and Served August 6, 2003

Order to Show Cause Establishing Mainline Service Mail Rates

Order 2003-8-8, the Department proposes to establish new intra-Alaska mainline mail rates for the year ending September 30, 2004. The rates that are currently in effect were established by Order 2002-9-6 and finalized by Order 2002-10-12. The cost pool comprises the bulk of mainline carriers in Alaska, and consists of Alaska Airlines, (AS), Lynden Air Cargo (LAC), Northern Air Cargo (NAC), and Tatonduk Outfitters, Ltd., d/b/a Everts Air Cargo (EAC).

By: Michael Reynolds

August 26, 2003

Comments of the United States Postal Service

The Postal Service will take this opportunity to raise its concerns about the methodology used to compute the long-term moving average for changes in unit costs. In addition, the Postal Service will again raise its concerns about the effects of carriers' aircraft choices on mail rates and unexplained increases in terminal handling expenses. Finally, the Postal Service requests that the Department consider the inclusion of all mainline carriers in the mail rate update.

Counsel: William Jones, william.j.jones@usps.com

Order 03-10-10
OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

Issued and Served October 8, 2003

Preliminary Finds and Show Cause Order

By this order, the Department makes preliminary findings in the base-rate investigation of bush mail rates required by the Rural Service Improvement Act, which became law on August 2, 2002. It follows our Request for Comments issued April 16, 2003. This order does not establish any rates, but rather addresses a number of surrounding methodological issues on the calculation of the rates and the Postal Service's tendering of the mail. A show-cause order tentatively setting rates must wait for additional data to be submitted and compiled by our Bureau of Transportation Statistics. We must act now, however, on some of the data-reporting issues, and therefore we are directing parties to comment within 15 days of the service date of this order on those issues, as discussed below and in the ordering paragraphs.

By: Michael Reynolds

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 6, 2003

Correspondence from Frontier Flying Service

Frontier Flying Service respectfully requests a waiver from the passenger ridership requirements of (h)(1) of the Rural Service Improvement Act of 2002, and requests inclusion in the 70 percent pool of the non-priority bypass mail for the following city pairs: Nome and Savoonga Nome and Gambel Kotzebue and Noatak Kotzebue and Point Hope Frontier Flying Service requests this waiver for the 12 month period immediately following the date RISA takes effect. This will enable Frontier to provide an unprecedented amount and level of service to the residents of Savoonga, Gambel, Point Hope, and Noatak, while developing the rider-ship requirements of RISA (h)(1) for the subsequent years.

Reliable all-weather Beechcraft 1900 aircraft operated in accordance with part 121 will be utilized exclusively on this flight, and Frontier is requesting equitable tender dispatch of priority, non-priority and by-pass mail.

By: Craig Kenmouth

October 9, 2003

Petition of Northern Air Cargo For Reconsideration of the Intra-Alaska Class Mainline Mail Rates Set by Order 2003-8-8 | Word

The Petitioner hereby submits this Petition to the U.S. Department of Transportation for an adjustment to the Alaska mainline mail rate as established by the Order. It has come to the attention of the Petitioner that revised data has been submitted by Everts Air Cargo to the Bureau of Transportation Statistics that will have a material impact on the rate. It has also come to the attention of the Petitioner that a computational error was made by the Department also having a material impact on the rate. For these reasons, Petitioner urges the Department to recalculate the mainline mail rate and issue a new Order setting a new corrected final rate to be effective immediately.

Attachments | Word

By: Northern Air Cargo, William Fowler

October 13, 2003

Objection of Cape Smythe Air Service | Word

By: Grant Thompson

October 14, 2003

Objections to the Application of Frontier Flying Service for a Waiver from the Terms and Conditions of the Rural Service Improvement Act of 2002 | Word

The undersigned carriers object to the request of Frontier Flying Service for a waiver from the provisions of the Rural Service Improvement Act of 2002. The requested waiver would allow Frontier to be included in the pools of non-priority mail set aside for qualifying passenger carriers as described on the Act, despite not meeting the requirements of the Act. Specific provisions for waivers are made in the Act, subject to a showing that a hierarchy of considerations has been met.

By: Cape Smythe Air Service, Larry’s Flying Service, Tanana Air Service, Wright Air, Service
Hank Myers, 425-641-8243

October 14, 2003

Response from Warbelow's Air Ventures | Word

Each argument Frontier cites in support of their waiver request was considered and rejected by Congress in writing this legislation. Congress rejected the argument that safety advantages of 121 operations mandated an immediate preference for 121 operators, instead providing for a 5 year time frame for these preferences to take effect. Congress rejected the argument that 121 operators not be required to meet the market share prerequisites for tender of bypass mail, instead setting exactly the same standards for both 135 and 121 carriers. Finally, Congress rejected the concept that the rate difference to the Postal Service between 135 and 121 service should drive tender decisions, rather than the history of passenger and cargo service provided by the carrier in the market. As the only 121 carrier in Interior Alaska, Frontier lobbied aggressively for every one of these preferences, but Congress made a carefully reasoned and explicit choice to reject each one. To now waive these requirements would be to disregard the intent of Congress.

By: Arthur Warbelow

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 17, 2003

Joint Carrier Response To Frontier Flying Request

By: Arctic Circle Air Service, Steve Anderson, Vice President / Wright Air Service
Bob Burseil / Larry's Flying Service ,Larry Chenaille, President / Tannan Air Service
Fred Ciarlo, General Manager / Hageland Aviation Services , L. Michael Hageland, Secretary/Treasurer / Village Air Cargo , Don King, President / Arctic Transportations Services
Wilfred Ryan, President / Warbelow's Air Ventures, Inc., Art Warbelow, President

October 16, 2003

Response of Hageland Aviation

Frontier's proposed passenger service of three-days-per-week with 19-seat aircraft cannot be construed to be "substantial" passenger service in the five markets where they are seeking a waiver. Frontier has yet to provide even one proposed flight to the markets of Savoonga, Gambell, Noatak and Point Hope, and all five of the proposed waiver markets are currently served at much higher levels than Frontier's proposal. These markets are served by a minimum of 3 different passenger carriers, operating a minimum of two flights per day, 6 days per week, with 9-seat aircraft. The existing carriers also provide at least one scheduled flight to each of the destinations on the 7th day of the week, and most of these carriers provide their service using multi-engine and/or turbine aircraft, which are IFR-certified.

By: Hageland, Michael Hageland

October 16, 2003

Response of Tanana Air Service

Frontier Flying Service's request is full of inaccuracies and misleading information. Frontier Flying Service was an active participant in the architecture of the RISA and has had the forewarning and opportunity to enter any market and to establish an acceptable market share for those markets that they desire to service.

By: Tanana, Fred Ciarlo

October 14, 2003

Objection of Arctic Circle Air Service

Arctic Circle Air Service, Inc. objects to the request of Frontier Flying Service for a waiver to select provisions of the Rural Service Improvement Act of 2002. To allow such a waiver to be granted virtually on the eve of the RSIA implementation makes a mockery of the entire RSIA and the reasons for its existence. Frontier Flying Service has been involved in, and is knowledgeable of the requirements of the RSIA, and like all the other carriers that will be affected by the act has had the same amount of time to strategize and prepare for it.

Obviously the free market system has been at work and unfortunately for Frontier Flying Service it did not favor them. To now grant a waiver in markets that for what ever reason they were unable to gain market share would be a complete disservice to the other carriers that have met the needs of the people as well as the requirements of the RSIA.

By: Don Singsaas

October 14, 2003

Comments of Larry's Flying Service

Our emotions progressed from interest, to humor and then to genuine disgust when we read the letter(s) from Frontier Flying requesting waiver(s) from the passenger rider-ship requirements of the Rural Service Improvement Act of 2002. Frontier is requesting relief on three fronts, two in Western Alaska and the third here at home in Fairbanks.

It is most interesting to note and probably well known that the RSIA itself was at least partially engineered by Frontier Flying and that Frontier is to date the only one to date who has requested an exemption to the law that it itself helped design. Frontier admits that this law will eliminate Frontier from Bethel and it needs the added revenue afforded by the mail in these other areas to continue to operate profitably. It also states that it left Fort Yukon in November of 2001 and finally returned there in November 2002 in an attempt to regain the market share that as a business decision it had terminated. It apparently is asking the Postal Service's help to repair a bad business decision by cutting into the pool that the carriers who have been serving Fort Yukon and who have qualified will enjoy.

It is also interesting to note that without the alleged "benefits" of this law Frontier could have initiated any of this service in a heartbeat simply by publishing a schedule 28 days in advance and then flying the routes- without needing any waiver!.

By: Jean A. Chenaille

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 20, 2003

Comments of Frontier Flying Service

Frontier could respond to each individual objection recorded in the docket, however we trust the Department of Transportation and the Postal Service to see and address this request using the intent of the Rural Service Improvement Act of 2002 as their guide: "In summary, this bill intends to reduce the Postal Service's losses on the bypass mail program while improving safety and stabilizing passenger service." (Senator Ted Stevens speaking on RSIA, Congressional Record page S7279, July 24. 2002)

Subsection (p) of RSIA authorizes DOT or the Postal Service to grant waivers for carriers that provide "substantial service". The intent is to elevate the level of safety and service, and to save the Postal Service costs. When the intent is subverted in an initial application, the waiver subsection is the mechanism whereby intent may be preserved. That is why it exists.

Frontier is requesting waivers for Fort Yukon, Gambell, Savoonga, Point Hope, and Noatak. Waivers are necessary as Frontier is in noncompliance, depending on the origin/destination, with one or two requirement of (h)(1). however, Frontier's entry or continuance serves exactly the intent of RSIA, while it's exclusion is exactly contrary to the elemental essence of RSIA. Thank you for your consideration.

By: Frontier, Craig Kenmouth, 907-450-7250

October 19, 2003

Response of Warbelow's Air Ventures | Word

Warbelow's Air Ventures, Inc. suggests that both the Department and the USPS simply count deplaning passengers (or passenger revenue generated by deplaning passengers as we argue below) in a village to establish the market shares. This will include the inter village passengers (and if revenue is used, they will be automatically weighted by their importance in the market), and will accommodate the situation where a significant amount or even the majority of the mail flows along a different routing then the passengers. Nuiqsut and Barter Island comes to mind for example, where the passengers flow from Pt. Barrow or Fairbanks, but the mail flows from Prudhoe Bay. Market share, and therefore mail tender, in such markets should be determined by the value the carrier creates for the village residents, and not just along the route that the mail flows.

We strongly disagree with the position that it is acceptable that a carrier can “construct a flight numbering system to maximize its carriage of mail.” The RSIA will fail if this is allowed to occur. The fact that “service would be displayed as requiring multiple connections for passengers…which would put that carrier at a marketing disadvantage compared to the direct service and could actually decrease the number of passengers…” is not true. Passengers in the rural Alaska village markets do not depend on computerized reservation systems for information, and would have no idea or interest in the flight numbers they are flying on. Even if it were true, market share is the heart and soul of RSIA, and the reporting of the data should not be left up the discretion of the operator to report in a way which maximizes mail tender for that operator. In addition, this interpretation appears to be contrary to the position the USPS is taking. The USPS has cautioned carriers to not report the same passenger twice along a route from the hub to the destination through intermediate stops. The USPS has indicated this would be considered double counting, and would result in penalties under the RSIA, as it should. Finally, to allow this type of self serving reporting is absolutely contrary to the spirit of the law and the letter of the law as well. If allowed, we expect there will wide spread abuse of this policy, followed be legal challenges mounted by the affected operators.

By: Art Warbelow, 907-374-6202, art@warbelow.com

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 22, 2003

Re: Rebuttal of MTC | Word

Please let me briefly rebut the letter dated October 20, 2003 from Craig Kenmonth, General Manager of Frontier Flying Service. The letter adds no new evidence in support of Frontier’s waiver application, and simply raises the same arguments using different words.

The burden of supporting a request for waiver is heavy. A waiver can only be granted if “substantial” benefit is derived from the applicant, and that benefit cannot be gained in any other way than a waiver. The applicant must show a change in circumstances, or a basic flaw or deficiency in the Act itself, and must prove that it could not have achieved the benefit sought through its own actions in compliance with the Act. Frontier has failed on all counts to justify granting of a waiver.

By: Hank Myers

October 21, 2003

Comments of Tanana Air Service

After reviewing the Show Cause Order 2003-10-10, the following comments are submitted:

Issue 3: Submission of data as required on Appendix A is going to be a very difficult process. The data required are not clear, i.e., Non-Scheduled passenger and freight data Inbound. BTS has not had their system on the Internet since before this order was published and there is no guidance for the completion of this appendix. Also, the exclusion of carriers that do not expect to qualify for bypass mail will skew the data as incomplete for a given market.

Issue 5: All other qualifications for a carrier to receive bypass mail has been and is still three flights a week. For the Department to arbitrarily reduce the requirement for a 19-seat passenger Part 121 aircraft to be flown into a market once a week to qualify as a Part 121 Bush rate is unreasonable and establishes a precedence that is unwarranted.

As stated in Issue 3, the completion of Appendix A in any meaningful manner, with the instructions provided, is impossible at this time to complete by November 1, 2003. BTS does not have their website on-line concerning Alaska Data, the requirement for inbound N-Skd Pass and Freight is unclear, and the communities are assumed to be only the hubs.

By: Tanana, Fred Ciarlo, 907-474-0301

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 17, 2003

Correspondence of Senator Donald Olson | Word

By: Senator Donald Olson

October 20, 2003

Comments of Alaska House of Representatives | Word

I strongly oppose granting any waiver at this rime, and particularly to a carrier that has no history of serving the markets out of Nome. The Act was designed to provide support for passenger and freight by supporting carriers that have established a strong market position. The Act has not been implemented yet, so it is premature to be granting any waivers until there is some deficiency in the service. Both Bering Air and Cape Smythe Air Service, the two qualifyinjpasscnger carriers, have a long history of serving St. Lawrence Island and will be increasing their flights when the Act is implemented. Merit Transportation Service, the qualifying cargo carrier, also has a long history of serving the communities on St. Lawrence bland.

By: Richard Foster

October 20, 2003

Comments of Alaska House of Representatives | Word

One of the main purposes of the RSIA is to stabilize the air transportation system. The Act was also designed to provide support for passenger and freight services by supporting carriers that already have a strong market position. In the marks where Frontier wishes to be a mail tender there are already three qualifying carriers. The carriers are Bering Air Service, Cape Smythe Air Service, and Arctic Transportation Services. Each carrier is locally based and has a variety of aircraft to meet the community needs. The carriers have some thirty years of experience in the area. This experience is extremely valuable in an area like ours where the weather and climate conditions are precarious. They have all operated safe, reliable, and frequent service throughout the area in question. On the other band, Frontier has no operating experience in this area. It would be difficult if not impossible for Frontier to be able to compensate for the thirty years of experience that the other carriers already have.

By: Reggie Joule

October 23, 2003

Comments of Peninsula Airways

PenAir strongly disagrees with the preliminary finding of the Show Cause Order to abandon a uniform scheduling requirement for carriers seeking mail tender, and instead to allow carriers to gerrymander flight schedules to create artificially inflated mail tender claims. The Show Cause Order admits that without appropriate regulation, "a carrier could attempt to construct a flight numbering system to maximize its carriage of mail." The Department has a statutory obligation to assist in the implementation and enforcement of the Act. To allow such opportunistic manipulation of the mail tender system by flight numbering practices that have no other valid purpose would defeat the purpose of the Act and this proceeding.

The Order places unjustified reliance on the alleged consumer preference for through flight numbers to discipline such gamesmanship. This simply does not hold true in the Alaska bush, where there are very limited schedule options to begin with, and where consumer reliance on such CRS display nuances is slim or non-existent

Counsel: Shaw Pittman, Robert Cohn, 202-663-8060

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 23, 2003

Comments of Consolidated Carriers | Word

In Order 2003-10-10, the Department made several tentative conclusions in the matter of the Bush Service Mail Rates Case. The Order addressed many of the points raised in the Department’s request for comments and the three rounds of responses from the various parties. In general, the Consolidated Carriers agree with the findings of the Order, but there are some areas of disagreement and a number of clarifications necessary to implement the Order.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com

October 23, 2003

Reply Comments of the United States Postal Service

The Department has decided against requiring carriers to change their flight numbering systems because it believes the T-100 data provides accurate records of traffic movement. The Postal Service supports this decision and will clarify that we will use the T-100 market data to determine carrier shares and mail tender based on the originating hubs to destination pairs that match the mail tender markets. Therefore, the Postal Service believes the most accurate flight numbering sequence for the carriers is to use a single flight number away from the hub. That way, a carrier will get credit for the passengers that embark from the hub and any in-route passengers as the law allows.

We concur with the Department’s decision to allow carriers a 15-day “grace period” commencing when the Bureau of Transportation Statistics (“BTS”) posts the T-100 data on its website, with the BTS plan to communicate both with the affected carrier(s) and the Postal Service concerning suspected problems, and with BTS’ ultimate responsibility to determine whether suspect data is or is not published in the final T-100 data. However, the Postal Service is concerned that the communications necessary in that regard not unduly delay the publication of the final monthly report. Accordingly, the Postal Service requests that BTS establish a firm calendar date (e.g., the 25th of the month) on which the final data will be transferred to the Postal Service on an ongoing basis each month. Having an established schedule will provide consistency and will allow the Postal Service to plan ahead within our systems to make tender decisions in a timely manner.

Counsel: USPS, William Jones, William.J.Jones@usps.com

October 9, 2003

Comments of Warbelow's Air Ventures

By: Arthur Warbelow

October 23, 2003

Answer of Consolidated Carriers | Word

Carriage of U.S. Mail is not a requirement. Carriers are free to determine which markets they wish to serve, and what aircraft support its purposes best. The intermediate points traffic question has been answered. Carriers are free, through their routings, to determine how they will carry their traffic. The stated purpose of the R.S.I.A. is to use mail tender to support passenger and freight service, not to use passenger and freight revenue to subsidize mail carriage. The Postal Service refers to blanket equalizations. Equalizations are within the sole control of individual carriers. Using the Postal Service example of a single qualifying Part 121 flight a week, competing carriers may see no need to equalize if it is clearly impossible for the one Part 121 flight to accommodate all of the non-priority mail traffic. As a carrier cannot “equalize” to its own Part 121 service, competing carriers are free to choose whether they need to offer service at below cost. The basic tenet of rate making is to assure that each category of traffic pays only for its properly assigned costs, but does pay for all of them. While some airlines have argued that mail should subsidize passenger carriage (pay rates that are higher than costs), the Carriers ask only that mail rates cover the full costs of mail handling and transportation of mail, plus a reasonable rate of return.

Counsel: Hank Myers, 425-641-8243, hank@mtcworld.com

October 25, 2003

Rebuttal of Warbelow's Air Ventures | Word

Frontier cites several quotes from Senator Stevens July 24, 2002 speech in the Congressional Record in support of their waiver request. While these comments show the intent of the law, they do not trump the language of the law. Furthermore, a careful reading of the comments in context shows that Senator Stevens intended to support a conversion of existing 135 carriers in their markets to 121 over time, rather than creating a windfall for the existing 121 carrier by allowing expansion into new markets without meeting the requirements on the face of the RSIA.

We agree that “conversion to part 121 is an important goal of this bill…all passenger carriers in that market should be encouraged to provide increased safety and efficiency”. The bill is not intended to attract existing 121 carriers to new markets, but rather to encourage [135] passenger carriers in that market to convert to 121. Granting this waiver would discourage that process of conversion, by denying the passenger carriers in that market the stream of revenue to make the conversion. Every dollar of mail tender Frontier asks for under this waiver must reduce legitimate tender earned under the requirements of RSIA to some other carriers, chilling these carriers ability to fund the 135 to 121 conversion mandated by RSIA

By: Arthur Warbelow

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

October 28, 2003

Correspondence of Cape Smythe Air

Cape Smythe Air objects on the fact that Frontier Plying Service should have used the time from July of 2002 till June of 2003 to secure the markets from Nome to Savooriga and Gamble, and from Kotzebue to Pt. Hope and Noatak. Instead Frontier Flying Service continued to fly basically just mail in the Bethel market as well as in other markets.

By: Grant Thompson, 907-852-8333

October 20, 2003

Correspondence of Representative Reggie Joule, District 40

I am writing to you regarding Frontier Flying Services request for a waiver from the passenger riderships requirements of (h) (1) of the Rural Service Improvement Act of 2002. I oppose granting the waiver as I believe the request violates the spirit of the RSIA in that safe, secure and reliable air transportation already exists in these markets and services with the already qualified carriers will be increasing starting November 3, 2003, Additionally, since the act has yet to be implemented it is premature to grant a waiver when there are not yet any known deficiencies in the existing market.

By: Reggie Joule

Order 03-11-2
OST-03-14695 (OST-95-429)

Issued and Served November 4, 2003

Order Revising Final Mainline Mail Rates

By this order, the Department is establishing new intra-Alaska mainline mail rates effective four days after the service date of this order because of revised data submitted by Everts Air Cargo. We are also directing EAC, Lynden Air Cargo, and Era Aviation to begin compiling past-period data so that in the next update we can examine whether it is appropriate to add their data in determining the long-term trends in unit costs. We have also referred EAC to our Office of Enforcement for investigation.

We are hereby directing EAC, ERA, and LAC to submit the required data so that in the next rate update based on data for YE 3/31/04, we may examine modifying our rate calculation accordingly. Order 2000-11-9 first added LAC's data to the mainline cost pool. Order 2000-8-14 tentatively included EAC in the mainline cost pool, but Order 2000-11-9 subsequently excluded them because it found their data unreliable. Order 2001-7-1 finally added EAC to the mainline cost pool. EAC and LAC have stated they could compile the necessary information back through YE 3/31/00.

By: Michael Reynolds

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

November 12, 2003

Reply Comments of Peninsula Airways to U.S. Postal Service

PenAir is concerned about certain ambiguities in the Postal Services comments, with respect to the number of weekly operations required to establish the (lower) Part 121 rate in bush markets. Those concerns have been exacerbated by recent comments made to carriers by representatives of the U.S. Postal Service in Alaska.

Counsel: Shaw Pittman, Robert Cohn, 202-663-8060

OST-95-429 -
OST-95-405

January 30, 2004

Terminate Rate Equalization Notice of Frontier Flying Service

Frontier Flying Service, Inc., an air carrier currently authorized to transport mail, hereby gives notice of its intent to terminate the rate equalization between Fairbanks and Deadhorse effective February 12, 2004.

By: Frontier, Robert Hajdukovich

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 6, 2004

Re: Alaska Central Express Rate Equalization Notice

Pursuant to order 90-10-34, enclosed please find the Rate Equalization Notice of Alaska Central Express, Inc. announcing its election to equalize down to the "base charge" as defined in order 90-10-34 with respect to service between Anchorage and Dutch Harbor.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 14, 2004

Re: Equalization Notice of Belair | Word

Belair, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point.

By Order 2004-2-12, the Department of Transportation established a new linehaul rate for markets where Part 121 bush service is provided by aircraft certificated by the manufacturer for 19 seats or more on one flight a week or more.  The language of the Order sets the rate “for markets where a carrier scheduling and operating at least one round trip a week with Part 121 aircraft in passenger service qualifies for the carriage of mail”.  This language establishes a single lawful rate for each market, and appears to obviate the need for any sort of equalization notice.   None-the-less, with an abundance of caution, Bellair, Inc. hereby gives notice of its equalization to the lowest lawful rate in any market where it operates service.

Requests equitable tender and full tender of bypass mail pursuant to the provisions of the Rural Service Improvement Act and the practices and procedures of the Department of Transportation and the United States Postal Service.

By: Michael Spisak

February 17, 2004

Equalization Notice of Tanana Air

By Order 2004‑2‑12, the Department of Transportation established a new linehaul rate for market where Part 121 bush service is provided by aircraft certificated by the manufacturer for 19 seats or more on one flight a week or more. The language of he Order sets the rate "for markets where a carrier scheduling and operating at least one round trip a week with Part 121 aircraft in passenger service qualifies for the carriage of Mail". This language establishes a single lawful rate for each market, and appears to obviate the need for any sort of equalization notice. None‑the‑less, with an abundance of caution, Tanana Air Service hereby gives notice of its equalization to the lowest rate in any market where it operates service.

Tanana Air Service equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point.

By: Fred Ciarlo

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 13, 2004

Equalization Notice of Arctic Circle Air Service

Arctic Circle Air Service, Inc. (5F) equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. 3. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Don Singaas

February 18, 2004

Equalization Notice of Baker Aviation, Inc. | Word

Baker Aviation, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. 3. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Greg Harding

February 18, 2004

Equalization Notice of Cape Smythe Air Service, Inc. | Word

Cape Smythe equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Grant Thompson

February 17, 2004

Equalization Notice of Grant Aviation, Inc. | Word

Grant Aviation, Inc. (GS), an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize between Bethel, Alaska and Chefornak, Eek, Goodnews Bay, Hooper Bay, Kongiganak, Kipnuk, Kwigillingok, Kwinhagak, Mekoryuk, Nightmute, Toksook Bay, Platinum, Scammon Bay, Tununak, Chevak, Tuntatuliak, and Newtok with the lower levels paid to other carriers or combinations of other carriers in these markets effective February 17, 2004.

Subject to the conditions below, Grant Aviation gives this notice of its election to equalize applicable rates for small aircraft in the Bethel to Chefornak, Eek, Goodnews Bay, Hooper Bay, Kongiganak, Kipnuk, Kwigillingok, Kwinhagak, Mekoryuk, Nightmute, Toksook Bay, Platinum, Scammon Bay, Tununak, Chevak, Tuntatuliak, and Newtok markets, to match, on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to ERA Aviation for each category of mail ERA Aviation transports in these markets to any lower rate or combination of rates paid in the future to any other carrier in these markets.

By: R. Bruce McGlasson

February 18, 2004

Equalization Notice of Larry's Flying Service, Inc. | Word

Larry's Flying Service, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Jean Chexaille

February 17, 2004

Equalization Notice of Wright Air Service, Inc. | Word

Wright Air Service, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point. Equalization under this notice is effective immediately, and is effective for an indefinite period. This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Bob Bursiel

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 18, 2004

Equalization Notice of Artic Transportation Services, Inc. | Word

Arctic Transportation Services, Inc. (7S), an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Bethel, Alaska and Chefornak, Eek, Goodnews Bay, Hooper Bay, Kongiganak, Kipnuk, Kwigillingok, Mekoryuk, Nightmute, Toksook Bay, Platinum, Quinhagak, Scammon Bay, Tununak, Chevak, Tuntatuliak, Newtok, between Nome Alaska and Gambell, Savoonga, between Kotzebue Alaska and Point Hope, Noatak with the lower levels paid to other carriers or combinations of other carriers in these markets effective February 18, 2004.

By: Wilfred Ryan

February 18, 2004

Equalization Notice of Hageland Aviation Services, Inc.

Hageland Aviation Services, Inc., is a certificated air carrier having the authority to transport
mail within the State of Alaska and hereby states its intent to equalize to the Part 121 bush
mail rate in those markets that are served by Hageland in its scheduled service and are also
served by Part 121 bush aircraft.

By: L. Michael Hageland

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 19, 2004

Equalization Notice of Bering Air | Word

Bering Air, Inc., an Alaskan Air Carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest lawful rate in the following markets effective February 13, 2004: 1.Nome and Savoonga 2.Nome and Gambell 3. Kotzebue and Noatak 4. Kotzebue Point Hope.

By: Allen Haddadi

February 19, 2004

Equalization Notice of Inland Aviation Services | Word

Inland Aviation Services, Inc. equalizes its rates to the lowest rate, or combination of rates, applicable in the markets it serves directly or by connection at an intermediate point.

By: Stepehn Hill

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 20, 2004

Re: Letter from Cape Smythe Air to Senator Ted Stevens

I would like to first thank you for your response to my letter addressing my n concerns with the air transportation system in Alaska, and the new legislation on the carriage of the by‑pass mail. I have many times tried to explain the system to the best of my knowledge of it, and have never been able to explain it as well, and with so few as words as you did in your letter. The way that you explain the legislation is exactly the way that I have understood it to be. My concern is still the same, it is the way that the Postal Service is tendering the mail. A Part 121 bush carrier was granted a waiver that I feel was totally inappropriate to all of the rest of the carriers that had been participating in securing the markets that they wanted to operate in, whether it be in the 70, 20 or 10, percent pools, ‑the‑pad 121 bush carrier had not even been operating in the Nome/Gambel, Savooga, and Kotzebue/Pt. Hope, Noatak markets to try to gather mârketshare of the Passengers or freight, instead they partitioned for a waiver. (And the Postal Service granted it)

By: Grant Thompson

February 19, 2004

Equalization Notice of Village Aviation, Inc. d/b/a Camai Air | Word

Village equalizes its mail rates to the lowest prevailing bush rate in the markets it serves by its scheduled service. Village does not elect to equalize to the mainline rate in any of its markets. Village does not elect to equalize to the Part 121 bush rate in any markets that are not served by a Part 121 bush aircraft at least once per week. Village's intent to equalize as described in this notice is effective immediately and indefinitely and shall remain in effect until Village serves further notice to modify or rescind its intent.

By: Don King

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 24, 2004

Equalization Notice of Servant Air, Inc. | Word

Servant Air, Inc., an Alaskan carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect over all routes on its system, either directly or indirectly.

By: Beth Yalch

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 24, 2004

Equalization Notice of Arctic Circle Air Service, Inc. | Word

Arctic Circle Air Service, Inc. (5F), an air carrier currently authorized to transport United States mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Bethel, Alaska and Atmautluak, Chefornak, Chevak, Eek, Goodnews Bay, Hooper Bay, Kongiganak, Kipnuk, Kwigillingok, Marshall, Mekoryuk, Newtok, Nightmute, Toksook Bay, Platinum, Quinhagak, Scammon Bay, Tununak, Tuntatuliak, between Fairbanks, Alaska and Allakaket, Anaktuvuk Pass, Arctic Village, Bettles, Chalkyitsik, Eagle, Fort Yukon, Galena, Hughes, Huslia, Kaltag, Nulato, Tanana, and Venetie, with the lower levels paid to other carriers or combinations of other carriers in these markets effective February 24, 2004.

By: Don Singaas

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 26, 2004

Re: Equalization Notice of Alaska Central Express

Alaska Central Express, Inc. (KO), an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Anchorage, on the one hand, and Sand Point, Cold Bay, St. George, St. Paul, on the other, and between Bethel, Alaska, on the one hand, and Attnauthloak, Chefornak, Eek, Hooper Bay, Kongiganak, Kipnuk. Kwigillingok, Marshall, Nightmutc, Toksook Bay, Quinhagak, Scammon Bay, Tununalt, Chevak, Tuntatullaig and Newtok, on the other, and between Kotzebue, Alaska. on the one hand, and Point Hope and Noatak, on the other, with the lower levels paid to other carriers or combinations of other carriers in these markets effective February 24,  2004.

Subject to the conditions below, Alaska Central Express, Inc. gives this notice of its election to equalize its rates for small aircraft in the following markets: Anchorage, on the one hand and Sand Point, Cold Bay, St. George, St Paul on the other, between Bethel, on the one hand, and Atmauthluak, Chefomak, Eek, Hooper Bay, Kongiganak, Kipnuk, Kwigjliingok, Marshall, Nightmute, Toksook Bay, Quinhagak, Scanunon Bay, Tununak, Chevak, Tuntatulialg and Newtok, on the other:, and Kotzebue, on the one hand, and Point Hope and Noataig on the other, in each case to match, on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to Peninsula Airways, ERA Aviation and Frontier Flying Service, respectively, for each category of mail Peninsula Airways, ERA Aviation and Frontier Flying Service transports in these markets to any lower rate or combination of rates paid in the future to any other carrier in these markets.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

February 18, 2004

Re: Ex Parte Letter to the Honorable Daniel Akaka

By: Karan Bhatia

February 27, 2004

Objection of Hageland Aviation to Order 2004-2-12 Establishing Part 121 Bush Passengers Mail Rates

According to Order 2004-2-12, the Department used T-100 and F-2 reported data from all of the identified Part 121 bush passenger aircraft operated by Penair, ERA, and Frontier. The Department made no distinction over what kind of routes these aircraft were operated. In doing so, the Department has not sufficiently identified the operations of "121 bush passenger carriers" as defined in the law, namely, to distinguish the operations of 121 bush passenger aircraft that occur on "bush routes", i.e. routes over which only a bush carrier is tendered mail.

By: Michael Hageland

February 27, 2004

Objection of Consolidated Carriers to Order 2004-2-12 and Motion to Rescind | Word

On legal and procedural grounds, the Order is deficient and must be rescinded. The rate and its rationale are contrary to Title 49 of the U.S. Code, circumvent certain requirements of Rule 701 et seq of the Department's Rule of Practice, and contradict the specific requirements of the U.S. Postal Service in its P0-508 procedures. Under its terms, carriers may freely engage in deceptive and unfair business practices as dand other laws and regulations, those contradictions cannot be used to impose rates which cannot be applied within the common meaning of all laws and regulations.efined by the Act. While there are specific legal contradictions between the R.S.I.A. and Title 49

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 3, 2004

Flight Alaska d/b/a Yute Air Notice of Equalization | Word

Flight Alaska equalizes its mail rates to the lowest prevailing bush rate in the markets it serves by its scheduled service. Flight Alaska does not elect to equalize to the mainline rate in any of its markets. Flight Alaska does not elect to equalize to the Part 121 bush rate in any markets that are not served by a Part 121 bush aircraft at least once per week.

By: Ron Dudley

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 10, 2004

Objections of Tanana Air Service to Order 2004-2-14

The Postal Service is still tendering mail to carriers that do not publish schedules in the OAG for public dissimulation, but only for Postal Service use, even with the changes in the RS1A requiring schedules be available to the general public under a published schedule. Postal Service Official said" if a Part 121 bush aircraft carries any revenue into a markct as reported on the Postal Service Daily Service report, then the Postal Service will pay all carriers in that market the Part 121 bush rate". DOT has an old definition of calling any additional section into a market a scheduled flight. The Postal Service official insist that a Part 121 aircraft flying an extra section meets the requirement of "scheduling and operating" as defined by Order 2004‑2‑14.

If the Postal Service can, without notice, change the rate a market is paid utilizing Postal Service Daily Service report and not the Official Airline Guide that is available to the general public. Carriers, that do have published schedules, are transporting mail have no means of knowing what they will be paid. There will be no way for a carrier to question any payment received, when the rate is changed without notice by the Postal Service.

Tanana Air Servicc respectfully request the Department to immediately clarify what constitutes when a market is classified as Part 121 market.

By: Fred Ciarlo

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 12, 2004

Objections of Arctic Transportation Services to Order 2004-2-12 | Word

Arctic Transportation Services, Inc., objects to the findings of Order 2004‑2‑12 establishing the rate payable to Intra‑Alaska bush mail carriers providing service with Part 121 bush passenger aircraft on two counts. Our first objection is based on the fact that the Law does not contain language directing the USPS to pay the new 121 bush passenger rate to bush nonmail freight carriers qualified on a city pair route, when a 121 bush passenger carrier enters the market. Our second objection is based on the fact that the Department derived the new 121 bush passenger rate utilizing data inconsistent with the definitions of the law. The result is a rate that does not adequately compensate 121, 135 bush passenger or nonmail freight carriers trying to fulfill requirements of the Rural Service Improvement Act.

By: Arctic Transportation, Michael Brown

March 15, 2004

Addendum to the Objections of The Consolidated Carriers to Order 2004-2-12 and Motion to Rescind | Word

The Consolidated Carriers emphatically renew their motion to rescind Order 2004‑2‑12. The rate determined in that Order is contrary to historic ratemaking standards, as well as the requirements of the Rural Service Improvement Act. The rate ordered is woefully inadequate for the class of carriers covered, and in one case is less than half the cost of service of the only carrier serving a hub. The irony of this rate is that it will discourage service in markets where the rate is inadequate. At Bethel, Era Aviation will lose 50% of its costs on every pound of mail it carries. There is no way for Era to become more efficient with its Twin Otters, and it is the sole Part 121 bush carrier at Bethel. The only incentive the new rate gives to Era is to abandon the hub. This certainly is not consistent with the goals of the R.S.I.A. or the Postal Service.

By: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com

March 15, 2004

Notice of Objections of Era Aviation to Order 2004-2-12 and Motion to Suspend Order Pending Outcome of Public Comment Period

Era respectively requests that the rate set forth in this Order be suspended pending further analysis of the comments and objections filed in response to the Order. Given the extreme under recovery of costs that Era will be forced to bear should the proposed rate of $45271 remain in place, and the fact that the Department does not intend to make any retroactive adjustments as a result of future changes in the rate, Era will be extremely prejudiced by the Department's inaction by not suspending the rate, and will be forced to take other action to remedy the situation and stem the irremediable harm.

Counsel: Era, Marcia Davis, 907-266-8325, mdavis@eraaviation.com

March 12, 2004

Motion for Leave to File and Rate Calculation of Hageland Aviation for Order 04-2-12

As stated in our filing of February 27, our objection to Order 2004‑2‑12 is based primarily on the fact that the Department did not use appropriate data when calculating the rate. Namely, the Department did not use data of 121 bush passenger carriers flying over bush routes as defined in the law. As a result, the rate found in the Department's order is not compensatory. We do not dispute the Department's ratemaking methodology, but we do contest its data selection.

By: Michael Hageland

March 13, 2004

Objections of Larry's Flying Services to Order 2004-2-12 and Request to Withdraw Order | Word

Larry's Flying Service, Inc. objects to order 2004‑2‑12 which establishes a new line‑haul rate for Alaska carriers who provide 121 service for carriage of bush mail. We request that the Order be withdrawn until such time as a reasonable rate can be established and the data which produces it confirmed to be accurate. We object to this order on several fronts and also add a few observations regarding the implementation of RSIA as it currently exists.

By: Larry's Flying Service, Jean Chenaille

March 15, 2004

Peninsula Airways Objections to and Comments on 121 Bush Rate Show Cause Order

PenAir objects to using a single weekly Part 121 operation to set the rate. PenAir reiterates its concern that allowing a single 121 operation per week to "set the rate" is too low, is inconsistent with the longstanding statutory requirement of three weekly flights for mainline mail service, will be difficult to administer, and may actually deter the deployment of 121 aircraft on developing routes.

The adoption of a single frequency requirement for rate setting purposes could have the unintended consequence of deterring carriers from deploying 121 aircraft on bush routes, which would be contrary to the purpose of the Act. Thus, if a point showed potential for transition to 121 service, a dual-certificated carrier might provide 121 service on one or two peak days, but operate the balance of its schedule with 135 aircraft. The adoption of the proposed one-weekly frequency standard for rate setting would penalize this otherwise desirable and efficient scheduling behavior, because the 135 operations would be compensated at the lower rate. Creating disincentives to the deployment of 121 aircraft in such bush markets may, in the long run, increase rates paid by the Postal Service, and is certainly not consistent with the purpose of the Act, which is to encourage, not deter, carriers from providing bush service with 121 aircraft.

Counsel: Shaw Pittman, Alexander Van der Bellen, 202-663-8060

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 15, 2004

United States Postal Service Comments on Order 04-2-13

The Order, if revised as proposed below, will reflect the mail transportation costs of Part 121 bush operations fairly and reasonably. The Postal Service believes that the Department's decision to make the new rate effective immediately, rather than subjecting it to show cause procedures, reflects a recognition that we are well past November 2, 2003, the date which the Rural Service Improvement Act established for all of the new rates to be in place. However, we also take the Department's willingness to entertain comments as an indication of its openness to consider valid revisions to the rate and we would urge the Department both to adopt the revisions explained below in this response, and to reconsider its stated decision not to make the rate retroactive.

We will first address the objections that were submitted by the Consolidated Carriers and Hageland. We are troubled both by the suggestion that Peninsula Airways' data should be excluded from the class, and that certain types of service provided by 121 bush aircraft are not relevant to the rate. There is no basis whatsoever for these positions. Because of the serious impact these issues would have on the final rate, and their direct contravention of the class rate concept, they warrant first consideration.

Counsel: USPS, William Jones, william.j.jones@usps.gov

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

March 9, 2004

Re: Equalization Notice of Tatonduk Outfitters Limited

Subject to the conditions below, Tatonduk Outfitters Limited d/b/a Everts Air Alaska gives notice of its election to equalize its rates for small aircraft in the Fairbanks to Anaktuvuk Pass, Beaver, Bettles, Eagle, Fort Yukon, Galena, Hughes, Huslia, Kaltag, Koyukuk, Lake Minchumina, Nulato, Ruby, Tanana and Venetie markets; and in the Galena to Huslia, Kaltag, Koyukuk, Nulato, and Ruby markets to match, on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to Frontier Flying Service for each category of mail Frontier Flying Service transports in these markets and to any lower rate or combination of rates paid in the future to any other carrier in these markets.

By: Harry Cook

April 29, 2004

Petition of Northern Air Cargo | Word

It is unmistakably clear that the determination of all airport-to-airport miles pursuant to an order of the Department is to be the same mileage record as maintained by the Department. Using a substitute mileage calculator is contrary to regulation.

Up until a very recent period, the Postal Service was using the same mileage records as maintained by the Department. What transpired to cause them to change to the calculator that produces the shorter miles for payment purposes is not known. Found in CFR 14, Part 241, Section 19-5, (22), the air carriers are required to use the mileage records maintained by the Department for purposes of their data reporting. It is from this same data that the Department sets the rates the Postal Service must use for payments to the air carriers. To conceive of rates being set based on one set of miles and payment being made on a different set is incongruous.

Based on the above, we ask that the Department order the Postal Service to immediately revert to use of the proper mileage records and further that the Department order the Postal Service to pay the carriers for all under paid mail since adoption of the new calculator.

By: William Fowler

OST-03-14694 - Bush Service Mail Rates

April 30, 2004

Comments on Order 2004-3-34 (USPS)

The Postal Service appreciates the opportunity to present its comments and concerns regarding Order 2004-3-34, which establishes the linehaul portion of the mail rate applicable in markets where operations with wheeled aircraft are not possible. The Postal Service’s position on the amphibious1 rate is identical to its position regarding the Part 121 bush rate contained in Order 2004-2-12, i.e., we fully concur with the Department’s inclusion of all relevant data, although we again recommend adjustments regarding the capacity-related markup, the circuity markup, and the return and tax allowance markup.

Counsel: USPS, William Jones, william.j.jones@usps.gov

OST-03-14694 - Bush Mail Rates
OST-03-14695 - Mainline Mail Rates

May 12, 2004

Modification of Equalization Notice of Warbelow's Air Ventures | Word

Terminates its equalization notice for priority mail tendered to its direct flights between the points named above, effective 10 days from receipt of this notice.

Continues it’s existing and long standing equalization notice non-priority mail tendered to its direct flights between the points named above for an indefinite period.  This notice will remain in effect until terminated by written notice filed at least ten days in advance.

By: Arthur Warblelow

May 21, 2004

Petition of Northern Air Cargo | Word

It is the DOT’s responsibility to set mail rates for intra-Alaska mail service provided by air carriers.  Rates are to be set such that carriers are fairly compensated for their services and so that the Post Office pays only those rates that are fair and reasonable.  It is within the established purview of the Department to make mid-stream adjustments to the rates if circumstances so warrant. The Petitioner asserts that circumstances now so warrant and requests that quarterly fuel adjustments be reinstated by the Department beginning with the quarter ended 3/31/04.

Attachment: Fuel Costs for Quarter Ended 3/31/04 (Refer to Word Document for Proper Formatting)

By: William Fowler, 907-243-3331, wfowler@nac.aero

Order 04-08-26
OST-03-14695 - Mainline Mail Rates
OST-95-429 - Intra-Alaska Class Service Mail Rates

Issued and Served August 23, 2004

Order to Show Cause Establishing Mainline Service Mail Rates | Word

By this order, the Department proposes to establish new intra-Alaska mainline mail rates for the year ending September 30, 2005. The rates that are currently in effect were established by Order 2003-11-2. The cost pool comprises the bulk of mainline carriers in Alaska, and consists of Alaska Airlines, Lynden Air Cargo, Northern Air Cargo, and Tatonduk Outfitters, Ltd., d/b/a Everts Air Cargo. In this order, for the first time, we are basing the long-term cost trend on data from all four carriers, rather than just AS and NAC, because we now have historical data for the two other carriers.

By: Karan Bhatia

August 25, 2004

Objection of Northern Air Cargo

We agree with the rationale used in establishing the above policies, however, we object to the change in the long-term trend calculation in as far as it is based on weighted costs as opposed to average costs.

We contend that this change results in a trend influenced in part by factors having nothing to do with costs. The quantity of tons or RTMs of mail transported by a particular carrier using a particular mix of aircraft type  are influenced by such factors as competition, service, schedules and the number of destinations served. These market factors change from year to year, and are not appropriately included as part of cost trending. The weighting process in the cost trend calculation can have a destabilizing influence on the rates. It is possible that costs could go in one direction but, because of the weighting influences, the long-term trend shows the opposite. 

By: Northern Air Cargo, William Fowler, 907-243-3331, WFowler@nac.aero

Order 04-09-14
OST-03-14695 - Mainline Mail Rates

Issued and Served September 14, 2004

Order Establishing Ad Hoc Fuel Adjustment and Quarterly Fuel Cost Adjustments

By this order the Department grants the petition of Northern Air Cargo to make an ad hoc adjustment for fuel to the mail rate tentatively set by Order 2004-8-26. This order also establishes a routine, quarterly-update procedure for the fuel portion of the mail rate’s linehaul element, until further notice.

The proposed fuel adjustment will simply allow the carriers to recoup the fuel costs on a more timely basis. We will therefore make an ad hoc adjustment to the annual rate based on more recent fuel costs, effective October 1, 2004, the beginning of the new annual rate period.

By: Karan Bhatia

Comments on Order 2004-8-26 Mainline Service Rates (USPS)

The Postal Service takes the opportunity to present comments on Order 2004-8-26 which establishes new intra-Alaska mainline mail rates, and requests that they be accepted slightly out of time. The Postal Service has no objection to the slight change in the methodology used to calculate the long-term trend and will present evidence that the idea of this change was introduced years ago and was to be expected. The Postal Service is concerned however about the continued use of a base rate and markup factors that are over twenty years old. Given the work that has been done on the bush rates, the Postal Service believes the Department should consider developing new base rates on the mainline side as well.

Counsel: USPS, William Jones, william.j.jones@usps.gov

OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

September 23, 2004

Modification of Equalization Notice of Warbelow's Air Ventures | Word

Warbelow's Air Ventures, Inc., an Alaskan carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize between Fairbanks on the one hand and Shungnak, Kobuk and Ambler on the other hand, with lower levels paid to another carrier or combination of carriers in the market effective this date.

By: Arthur Warbelow

September 23, 2004

Comments of Northern Air Cargo | Word

In comments to Order 2004-8-26 the Postal Service suggests that the Department of Transportation consider creating a new base rate for the mainline carriers as it did for the bush carriers.

We acknowledge the Postal Service’s right to request such a proceeding. Although far from clear that a proceeding is necessary, we suggest that should the Department be inclined to consider the request, that it first allows the parties the opportunity to make comment on the merits of the task and whether or not those efforts will produce results beneficial to all involved.

By: Northern Air Cargo

October 6, 2004

Notice

At a September 15, 2004, joint meeting, representative Alaskan air carriers, the United States Postal Service, and the Department of Transportation's Bureau of Transportation Statistics and Office of Secretary, agreed to develop a pilot program for collecting weekly T-100 data, in an effort to reduce air carrier reporting burden.

Currently, air carriers transporting non-priority bypass mail pursuant to the Rural service Improvement act (RSIA) are required to submit monthly T-100 traffic reports to BTS and daily activity reports to USPS, which uses the daily report to monitor air carrier compliance with RSIA's requirements that air carriers provide service at least three days a week and exhibit adherence to those scheduled flights. Some carriers hired additional staff to complete the daily activity reports. If BTS adds two new data elements to the T-100 report and requires weekly submissions (due within 7 days after weeks end), both DOT's and USPS' data needs can be met. The two new data elements are: 1) Actual Day of Flight: the numeric day of the month in which the flight was flown: and 2) Aircraft Certification: A code to identify the type of mail operation, i.e., Bush Part 121, Bush Part 135, Bush Amphibious or Mainline.

The pilot program will start on November 1, 2004. The carriers that participate in the pilot program will be relieved of the requirement to submit daily activity reports to USPS. If all parties are satisfied with the new data reporting, the pilot program will end with respect to data for December 31, 2004, and thereafter all Alaskan air carriers will be required to submit the weekly T-100) reports in lieu of the USPS daily activity reports.

By: Donald Bright

OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

October 22, 2004

Re: Equalization Notice of Frontier Flying Service

Frontier Flying Service, Inc. (2F), an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rate legally in effect between Anchorage and Dillingham with the lower levels paid to other carriers or combinations of other carriers in these markets effective immediate.

1. Order 90-10-34 provides that an air carrier may elect to establish a reduced charge equal to the charge prescribed for mail transportation actually being performed between the same origin and destination points by any other certificated air carrier or combination of carriers, regardless of routing.
2. Subject to conditions below, Frontier Flying Service, Inc. gives notice of its election to equalize its otherwise applicable rates for small aircraft between Anchorage and Dillingham on a total rate per pound basis, the lower rate or combination of rates now in effect or hereafter determined and paid to Alaska Airlines, Lyndon, Northern Air Cargo, Tatonduk Outfitters Limited, d/b/a Everts for each category of mail and further elects to equalize to any lower rate or combination of rates paid in the future to any other carrier in these markets,
3. Equalization under this notice is effective for an indefinite period and will remain in effect until terminated by written notice filed at least ten days in advance. However, the equalization ceases to be effective when and so long as a lower rated service, including a combination of services, is not offered in the market, or is not utilized by the Postal Service for mail transportation.

WHEREFORE, Frontier Flying Service, Inc. gives this notice of equalization of its mail rates and requests equitable tender of mail in these markets pursuant to the practices and procedures of the Department of Transportation and the United States Postal Service.

By: Craig Kenmonth

Order 04-11-12
OST-03-14695 - Mainline Mail Rates

Issued and Served November 16, 2004

Order Establishing Final Mainline Service Mail Rates | Word

By this order, the Department denies the objection of Northern Air Cargo and adopts the methodology for determining the long-term inflation trend proposed in Order 2004-8-26. The rates tentatively set in that order, made final and adjusted for fuel costs by Order 2004-9-14, will remain final through September 30, 2005, or until subsequent Department order, subject to quarterly adjustments for changes in fuel costs.

By: Karan Bhatia

OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

November 29, 2004

Equalization Notice of Arctic Circle Air Service

By: Paul Hendrickson

Order 04-12-22
OST-03-14695 - Mainline Mail Rates

Issued and Served December 30, 2004

Mainline Quarterly Fuel Cost Adjustments

By this order the Department is making its regular quarterly adjustments to the Intra-Alaska mainline mail rates to reflect the most recent quarterly fuel costs, effective the first Saturday after the order issues, and reflecting fuel expenses for the quarter ended September 30, 2004.

By: Karan Bhatia

OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

January 19, 2005

Re: Answer of Cape Smythe Air Service to Emergency Rate Increase Request by Frontier Flying Service | Word

Cape Smythe agrees with the implicit justification of Frontier’s request, and that is that Part 121 linehaul rates are simply too low to support service with Part 121 aircraft. Cape Smythe has had interest at one time in transitioning to Part 121 operations, and has operated twin turbine aircraft with a maximum seating capacity of greater than ten passengers capable of Part 121 operations. Cape Smythe went so far as to enter into preliminary agreements with aircraft manufacturers to purchase larger Part 121 aircraft. The basic problem with all of our attempts is that the current Part 121 mail rates are simply too low to support the use of Part 121 aircraft. Cape Smythe can't agree with some of the conditions Frontier wishes to apply to the 40% increase, but subject to the conditions outlined below, Cape Smythe supports the request of Frontier.

By: Grant Thompson, 907-852-8333, grant.thompson@capesmythe.com

January 19, 2005

Equalization Notice of Alaska Central Express

Alaska Central Express, Inc., an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Anchorage, Alaska, on the one hand, and Sitka and Ketchikan, on the other, and between Ketchikan, Alaska. on the one hand, and Wrangell and Petersburg, on the other, and between Juneau and Sitka, Alaska with the lower levels paid or to be paid to other carriers or combinations of other carriers in these markets effective January 29, 2005.

Counsel: Silverberg Goldman, Robert Silverberg

January 19, 2005

Re: Request to Remove Frontier Flying Service from Tender of Bypass Mail | Word

Frontier was also supposed file monthly progress reports relating to your requirement of attaining a qualifying market share. These reports would have allowed you to determine Frontier’s qualifications within a few days after the end of October, 2004. After D.O.T. data for the nine months showed Frontier’s failure to qualify in these three markets, you changed the process saying the Frontier’s reports were not sufficiently accurate to determine the final shares. You determined that Frontier’s qualification would be based entirely on the T-100 reports for the 12 months ended October, 2004. This action has served to extend Frontier’s presence in the markets for over three months now.

The Bureau of Transportation Statistics has released the data for the 12 months ended October 31, 2004. The data show that Frontier’s share in the Nome-Gambell passenger market is only 10.3% after 12 months, a 48% shortfall. In the Nome-Savoonga market their passenger share is only 13%, a 35% shortfall of your requirement. In the Kotzebue-Noatak market, Frontier garnered only 7.81% of the passenger market, a 60% shortfall.

As you know, all three of the incumbent carriers serving these points have aircraft which fall under the requirements of F.A.R. 121 if operated to their full seating capacity. All three carriers are pursuing the requirements of converting to Part 121 as necessary. The revenue given to Frontier came directly from the pockets of the incumbent carriers, and has reduced and delayed their ability to meet Part 121 standards.

While it has been clear for six months that Frontier would not meet your 20% requirement, the B.T.S. data release has now eliminated any doubt. Frontier has not only failed to meet your requirements, but it has diverted revenue from the carriers that had qualified for tender and disrupted the markets involved. I respectfully request that you immediately remove Frontier from tender of bypass mail in the three markets mentioned. I also request that in the future you give some consideration to the effects of waivers on incumbent carriers and the markets, as well as the probability that the carrier receiving the waiver will be able to achieve a qualifying share.

By: MTC, Hank Myers

January 21, 2005

Re: Response of The United States Postal Service to Frontier Flying Service

Frontier has proposed a rate premium of 40% to the linehaul-only portion of the rate, to be in effect for a one-year term unless the Postal Service sooner withdraws its support for the premium. Given the financial data concerning its operations which Frontier has presented to the Postal Service, and subject to further audit and review, the Postal Service accepts Frontier’s representations of the urgency of its current financial situation, and that Frontier cannot sustain its 121 bush service (passenger, freight, and mail) at the current 121 bush rate and the reasonableness of the rate premium which it has proposed.

If Frontier downgrades its operations to Part 135, there will be no Part 121 service left to the numerous bush points it serves. This will raise the cost of operations for the Postal Service since the prevailing mail rate in Frontier’s markets will rise to Part 135 levels. Further, the absence of a Part 121 carrier in these markets will remove the existing impetus for other carriers to convert from Part 135 service to Part 121 service. Given these circumstances, the Postal Service concludes that the requested emergency increase is more palatable to it than the alternative of Frontier’s withdrawal of Part 121 service from its markets, and on that basis is prepared to accede to the carrier’s request.

The Postal Service expects Frontier to provide it and the Department continuing monthly updates to allow them to assess its ongoing financial capability, and reserves the right, should it conclude on the basis of that data that the emergency no longer exists, to withdraw its support for the emergency increase. The Postal Service also reserves the right to withdraw its support for the increase should it determine for any other reason that that support is no longer in its interest.

Counsel: USPS, William Jones, william.j.jones@usps.gov

Order 05-01-18

Issued and Served January 21, 2005

Order | Word

The Rural Service Improvement Act of 2002, signed into law August 5, 2002, made significant changes to the intra-Alaska mail system for the carriers transporting the mail, the United States Postal Service and the Department of Transportation. By a series of orders the Department set final intra-Alaska bush mail rates until further notice for all the classes of mail carriage (a single terminal rate and four separate linehaul rates for Amphibious, Part 135, and Part 121 regular and short-runway operations) and directed parties to show cause why those findings should not be made final through the next annual update. In response to requests by several carriers, we granted extensions to the comment period, the latest through October 20, 2004. All parties have now commented, we have reviewed those comments, and are setting new final rates through December 31, 2004, or until further Department action, whichever comes later.

By: Karan Bhatia

OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

January 24, 2005

Answer Bering Air Service and Wright Air Service to Emergency Rate Increase Request by Frontier Flying Service and Motion to Dismiss | Word

The basic problem that Frontier has is operating its Beech 1900 aircraft in such an uneconomic way that it can never make a profit. It is overall lack of revenue that is the problem, not deficient mail rates. The problem goes back to its original introduction of the Beech 1900 into the Fairbanks‑Fort Yukon market. Despite its best efforts, Frontier was not able to make a profit in the market. This failure led to Frontier CEO Bob Hajudukvich sending a letter to the community threatening to pull the Beech 1900 service unless more passengers chose the service. (Appendix A) The market did not respond, and Frontier eliminated its Beech 1900 service to Fort Yukon. It must be remembered that at that time Frontier's Beech 1900 service received the same mail rate as was paid to its competitors using much smaller, Part 135 aircraft. It was not until the Rural Service Improvement Act reduced the number of competing carriers in the market that Frontier sought to accomplish by waiver what it could not achieve in the marketplace.

The suddenness of Frontier's request, the size of the premium requested, and its assertion that the data supporting the relief by kept confidential raises serious questions about Frontier's financial fitness. The relief sought would add hundreds of thousands of dollars to the revenue of Frontier. If this infusion of cash, on such short notice is really justified, there is valid concern for the ability of Frontier to continue its service without risk to the traveling public. The Carriers request that before any relief is granted to Frontier, the Air Carrier Fitness Division perform a review of Frontier's financial fitness and issue an opinion that it is financially fit.

Counsel: MTC, Hank Myers, 425-641-8243, hank@mtcworld.com

January 24, 2005

Equalization Notice of Alaska Central Express

Hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Anchorage, Alaska, on the one hand, and Wrangell and Petersburg, on the other, with the lower levels paid or to be paid to other carriers or combinations of other carriers in these markets effective January 29, 2005.

Counsel: Silverberg Goldman, Robert Silverberg

OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

January 26, 2005

Equalization Notice of Alaska Central Express

Alaska Central Express, Inc., an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rates legally in effect between Anchorage and Yakutat, Alaska with the lower levels paid or to be paid to other carriers or combinations of other carriers in these markets effective January 29, 2005.

Counsel: Silverberg Goldman, Robert Silverberg

January 26, 2005

Equalization Notice of Frontier Flying Service

Frontier Flying Service, Inc., an Alaskan incorporated air carrier currently authorized to transport United States Mail, hereby gives notice of its intent to equalize its mail rates to the lowest authorized rate legally in effect between Galena and Nulato with the lower levels paid to other carriers or combinations of other carriers in these markets effective January 24, 2005.

By: Craig Kenmonth

OST-03-14694 - Intra-Alaska Bush Service Mail Rates

January 27, 2005

Clarification of Issues Raised - Frontier Flying Service

Frontier Flying Service, Inc. would like to clarify two issues that have been raised by Alaska Central Express and the Carriers – Bering Air and Wright Air Service. In its petition dated January 18, Frontier recommended that mileages be limited to service longer than 50 and shorter than 530 miles. That limitation reflects the boundaries of Frontier’s operations, and so we expressed no opinion on what the Department should do for operations outside those bounds. To clarify, we do not oppose the Department adjusting regular Part 121 rates outside those parameters, i.e., we believe the markup should apply to all carriers being paid the regular Part 121 rate. There was also the Short Runway Part 121 rates. We raised that issue only to make clear that we were not concerned with that, since that rate does not directly affect us.

By: Frontier Flying Service, Robert Hajdukovich, 907-474-1739 x 233, bob@frontierflying.com

January 27, 2005

Peninsula Airways Answer of Frontier Flying Service

While the Department may be justified in concluding that the current Part 121 bush linehaul rate is not fully compensatory, and should be increased, there no basis for Frontier's self‑serving proposal to increase compensation only on the routes and stage lengths it serves. All Part 121 bush carriers depend on mail revenue to support their passenger service operations. It would be unfair to PenAir and the Part 121 bush communities PenAir serves to provide a special 40 percent subsidy payment to Frontier ‑‑ which would only exacerbate the rate disparity already caused by the Department's mileage taper. Why should the communities of Cold Bay, Dutch Harbor, Sand Point and St. George passengers have to pay more for airline service, while the communities served by Frontier receive both a higher rate under the mileage taper and a 40 percent additional subsidy payment to offset the cost of their service?

Counsel: Shaw Pittman, Robert Cohn, 202-663-8060

OST-03-14694 - Intra-Alaska Class Service Mail Rates
OST-03-14695 - Mainline Mail Rates

February 7, 2005

Withdrawal of Equalization Notices of Alaska Central Express

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300, rsilverberg@sgbdc.com

OST-03-14694 - Intra-Alaska Class Service Mail Rates