BEFORE THEDEPARTMENT OF TRANSORTATION

WASHINGTON, DCOFFICE OF THE SECRETARY

________________________________________________)

In the Matter of the ))

INTRA-ALASKA BUSH SERVICE MAIL RATES ) Docket DOT-OST-2003-14694________________________________________________)

PETITITION FOR RECONSIDERATION

OF ORDER 2020-3-6

Communications with Respect to this Document Should be Addressed to:

Hank MyersMTC

PO Box 7142Bellevue, WA 98008

425-830-4265hank@mtcworld.com

April 13, 2020

BEFORE THEDEPARTMENT OF TRANSORTATION

WASHINGTON, DCOFFICE OF THE SECRETARY

________________________________________________)

In the Matter of the ))

INTRA-ALASKA BUSH SERVICE MAIL RATES ) Docket DOT-OST-2003-14694________________________________________________)

PETITITION FOR RECONSIDERATIONOF ORDER 2020-3-6

The undersigned carriers, collectively the “Consolidated Carriers”, request reconsideration of

Order 2020-3-6, Finalizing the Intra-Alaska Bush Service Mail Rates proposed in Order 2020-2-

18.

Introduction

As will be proven below, Order 2020-2-18 contains significant errors that result much lower

rates than what would be in effect had the data been analyzed and computed correctly. Some

of this underpayment has been going on for years, but no carrier caught the errors previously.

Other errors are new in this year. As a result, the Postal Service has paid millions of dollars less

than a compensatory rate for transportation of mail in Alaska. There is no way for the carriers

to recover this underpayment, but the continuation of the underpayment can stop now.

The errors in Order 2020-2-18 fall into three general categories. First, there were two major

misapplications of the approved procedure for determining mail rates in Alaska. There are the

most significant errors. Second, the rates for the Part 135 Wheelplanes and the Seaplanes are

not computed in accordance with 39 USC §5402, commonly know as the Rural Service

Improvement Act. This has resulted in a consistent underpayment for mail transported by

seaplanes. Third, there are miscalculation errors. These errors are relatively major, but have

been resolved in the attached Appendices.

Order 2020-2-18 was posted on February 26, 2020. On March 6, a timely requested was filed

by Kalinin Aviation, LLC to extend the response period until at least March 30. On March 17,

the Department posted approval of an extension until March 13, four days earlier. On March

24, the Department posted Order 2020-3-6 making the rates in Order 2020-2-18 final. The

deadline for submission of Petitions for Review is 20 calendar days, April 14, 2020.

Procedural Errors

There are two major procedural errors that alone make the rates improper. The first error is a

failure to accurately escalate the rates from the test period (YE 9-30-2018) to the midpoint of

the rate period, YE 9-30-2021. The escalation had previously been applied correctly, see, e.g.

Order 2018-8-17, Appendix B, or Order 2015-9-17, Appendix A. In both cases, the escalated

rate was taken from the YE 9/30 of the immediately preceding year and escalated for two years

at the compound rate taken from the regression analysis to estimate the cost levels at the

midpoint of the proposed rate. Order 2020-2-18, however, used YE 9-30-2018 as the test year,

or a year out of date. The proper method of escalation would be three years of compound

increases, not the two years used in the Order. Even if we accept the regression results as

reflective of the actual increase, the rate was not applied correctly. On Appendix G, the ten

year regression analysis resulted in a projected expense increase of 3.97% per year. On

Appendix F, this rate was applied for only two years, or a rate of 8.09%. The correct three year

escalation would be 12.39%. As will be shown below, simply correcting the escalation error will

not resolve other structural problems with the calculation of the mail rates. T-100 and F-2 date

for all the carriers used in order 2020-2-18 has been available since February, 2020. That year,

as in previous Orders, should be the basis of the mail rates.

The second major procedural error is the exclusion of the 9.4% rate of return on the terminal

charge element. Apparently this omission has been going on for years, but was not noticed by

the carriers previously. This has resulted in a savings of millions of dollars for the Postal Service,

to the detriment of the bush carriers. Appendix T calculates the terminal charge based on the

expenses for YE 9-30-2019, and adds the 9.4% for return and taxes.

Legal Errors

The mail rates computed for the Seaplanes in particular do not comply with the requirement of

39 USC §5402(h)(6)(D). This section requires “The Secretary shall establish a bush rate based

on data under subsection (k) from bush passenger carriers operating aircraft on city pair routes

where only water landings are available. (emphasis added). What the Department did was to

include all aircraft operations with aircraft capable of water landings in the Seaplane rate,

regardless of the actual city pair route being served. These are aircraft demarked with the “4”

configuration in the T-100 and F-2 reports. This category includes amphibious aircraft using

land airports. Here is the text of an inquiry to the Bureau of Transportation Statistics about the

meaning of the “4” configuration.

From: Rodes, Jennifer (OST) <Jennifer.Rodes@dot.gov> Sent: Monday, March 23, 2020 2:57 AMTo: hank@mtcworld.comSubject: RE: Configuration QuestionHank,4Jennifer

From: Hank Myers <hank@mtcworld.com> Sent: Saturday, March 21, 2020 7:47 PMTo: Rodes, Jennifer (OST) <Jennifer.Rodes@dot.gov>Subject: Configuration QuestionImportance: HighThere are pure wheel planes (Config 1, 2, 3)There are pure seaplanes (Config 4)Then there are amphibious aircraft, Grumman Goose; C-185/206, deHavilland Beaver and Single Otter, Cessna Caravan on wheel floats (amphibs)

If an amphibious aircraft flies nonstop airport to airport, wheel Takeoff and wheel landing, what configuration do they enter?

Asking for a friend…

Best wishes-

Hank Myers425-830-4265

Clearly, the “4” configuration includes aircraft operating to points other than where only water

landings are available. This is all Island Air Express (I4) does. All of its scheduled flights are

between land airports, primarily Ketchikan International Airport (KTN) and Klawock airport

(KLW). Island Air Express’ data first appears in Order 2015-9-17, but it had less than a 1% share

of the mail. Its data were included in all subsequent Seaplane rates, to the detriment of true

Seaplane operators. Additionally, the Postal Service has determined that Craig (CGA) is served

from the Klawock Airport, and is thus common rated with Klawock. All Craig mail, whether

originating at KTN, or the Waterfront Base (WFB) is paid at a wheel rate and must be excluded

from the Seaplane rate calculations. A similar situation occurs at Juneau where Alaska

Seaplanes uses amphibious aircraft from time to time to serve land airport city pairs. All “4”

configured aircraft flying among Juneau (JNU), Excursion Inlet (EXI), Gustavus (GST), Haines

(HNS), Hoonah (HNH), Kake (KAE), Ketchikan (KTN), Klawock (KLW) and Petersburg (PSG) must

be excluded. A handful of flights serving Larson Bay and Old Harbor from Kodiak were operated

by Island Air. These flights should be included in the Part 135 Wheelplane calculations. This

change only affects the Seaplane rate as none of the land operations of “4” configured aircraft

are in the 1% Linehaul pool. All departures, wheelplane or seaplane are included in the

terminal charge.

The second legal error is that a Mail Rate consists of a Terminal Charge and a Linehaul Charge.

The Department has failed to calculate a Terminal Charge for each category of aircraft. It is a

simple task to segregate the pure wheelplane operators from the operators who operate

seaplanes exclusively or as part of their total operation. Seaplane operators have a higher cost

for ground handling, due to having to load and unload mail between the aircraft and the dock.

It is not possible to make a more accurate estimate because indirect expenses are not allocated

by aircraft type. With the elimination of Part 121 bush flights, the division among carriers is

simple.

Miscalculations

There are three examples of elements that can be called miscalculations. Previously, the

underlying data for the mail rates have been made available in spreadsheet form. In that form

was it was easy to understand the data and calculations involved. In this rate, spreadsheet data

were not made available, so any analysis had to work with the printed copies at face value. In

figuring the Part 135 wheelplane rate, three lines vital to the calculation of the rate are

inaccurately described. In Appendix H, Part 135 Wheelplane Linehaul, Eligible Expense (Row

14), a dollar figure, is described as being the product of Row 23, Total RTM’s, times Row 46,

which does not exist, multiplied by Row 30, RTM’s per Mile. None of the inputs that exist are a

dollar amount. Row 15, Eligible Cost per RTM, is the result of dividing Row 24, Available Ton

Miles, by Row 50, which does not exist. The Cost Wtd by Mail RTM’s (Row 17) is described as

the product of multiplying Row 25, by Row 26, which does not exist. By referring to historic

Orders as well as Appendix M, page 1, the correct methodology could be derived.

The next miscalculation, for lack of a better word, is the use of obsolete data. The use of two

year old data was noted above as being the cause of the miscalculation of the escalation rate.

More importantly, air carriers, particularly bush carriers, have experienced a significant increase

in the costs for pilots, mechanics and liability insurance. The pilot and mechanic increases are

the most significant items in terms of dollars, but the percentage increase in liability insurance

has been significant as well. For example, these increases have been brought to the attention

of the Essential Air Service staff in renewing contracts in Alaska. The labor costs have increased

because of the expansion of mainline operations in Alaska and outside. The increase in the

retirement age for Part 121 pilots, and the increased operations by Part 121 carriers have

attracted many bush pilots to bigger air carriers. This drain has hurt the seaplane industry in

particular, as all seaplane pilots are also land plane pilots, but only a small portion of land plane

pilots are seaplane pilots. As noted above, all the necessary data were available in February. In

all previous Orders, data from the most recent year was used to reflect to most current cost

trends.

Cost escalation estimates should be for the most current period, and for as few years as

possible. Just as importantly, the data should reflect the requirements of the model being used

to make the regression. Appendix M, for example, lists ten periods for the calculation of the

Terminal Charge escalation. The first three periods are for years ending June 30. There is no

observation between June 30, 2010 and September 30, 2012. All inputs thereafter are for years

ending on September 30. Appendix A is an article describing the effect of missing data on a

regression, e.g. nothing between 6/30/2010 and 9/30/2012, but also includes inconsistent data

periods. A second issue is the best correlation period for regressions. Most economic models

use shorter periods reflecting the natural six-eight year business cycle. Long enough for

stability but short enough highlight turning points earlier than longer terms. This analysis uses

the eight most recent years, all of which end on September 30. It must be noted that there is

an apparent error on Appendix R, the escalation of the Terminal Charge. The base cost per

weighted departure for YE 9/30/2018 is listed as $19.55, and references Appendix T, column 10.

The total cost per weighted departure is $18.80, or 4% less. Escalating the cost per Appendix R

yields $21.33, not the $22.18 listed. This translates to an average terminal charge of $1369.04

rather than the $1420.80 shown on page 1 of the Order.

Finally, the projected data use Microsoft Excel’s “Forecast” tool which creates a least squares

regression line. This is much simpler and more accurate than the SPSS based tool used in the

order. The descriptive statistics for the Forecast tool are shown and are better than those for

the method used in the Order. The Forecast tool is described in Appendix B.

Conclusion

The attached Appendices contain all data and calculation required to compute class mail rates

in accordance with the Department’s model, and should be adopted forthwith.

WHEREFORE, the undersigned carriers request the Department reconsider Order 2020-3-6, and

adopt the corrections to the rate established in Order 2020-2-18 as outlined in the Appendices

hereto.

Respectfully submitted

40-Air, Ltd. By Leif WilsonAir Excursions by Kent CrafordAlaska Air Transport by Dan OwenAlaska Seaplanes by Kent CrafordBering Air, Inc. by Jim RoweTanana Air Service by Eric Shade

Taquan Air Service by Brien SalazarTatonduk Outfitters by Rob EvertsWarbeow’s Air Ventures by Matt AtkinsonWright Air Service by Matt AtkinsonYute Alaska by Wade Renfro

April 13, 2020

CERTIFICATE OF SERVICE

I hereby certify that I have this day served a copy of the foregoing Petition for Reconsideration by email to all parties served by the Department with Order 2020-3-6, as well as the office of Senator Lisa Murkowski, Senator Dan Sullivan, and Congressman Don Young.

Respectfully submitted

Hank Myers425-830-4265

April 13, 2020

Appendix APage 1 of 2

Errors Involved in Using InconsistentDate Periods in Regression Analysis

Missing data

From Wikipedia, the free encyclopedia

In statistics, missing data, or missing values, occur when no data value is stored for the variable in an observation. Missing data are a common occurrence and can have a significant effect on the conclusions that can be drawn from the data.

Missing data can occur because of nonresponse: no information is provided for one or more items or for a whole unit ("subject"). Some items are more likely to generate a nonresponse than others: for example items about private subjects such as income. Attrition is a type of missingness that can occur in longitudinal studies—for instance studying development where a measurement is repeated after a certain period of time. Missingness occurs when participants drop out before the test ends and one or more measurements are missing.

Data often are missing in research in economics, sociology, and political science because governments or private entities choose not to, or fail to, report critical statistics,[1] or because the information is not available. Sometimes missing values are caused by the researcher—for example, when data collection is done improperly or mistakes are made in data entry.[2]

These forms of missingness take different types, with different impacts on the validity of conclusions from research: Missing completely at random, missing at random, and missing not at random. Missing data can be handled similarly as censored data.

Types

Understanding the reasons why data are missing is important for handling the remaining data correctly. If values are missing completely at random, the data sample is likely still representative of the population. But if the values are missing systematically, analysis may be biased. For example, in a study of the relation between IQ and income, if participants with an above-average IQ tend to skip the question ‘What is your salary?’, analyses that do not take into account this missing at random (MAR pattern (see below)) may falsely fail to find a positive association between IQ and salary. Because of these problems, methodologists routinely advise researchers to design studies to minimize the occurrence of missing values.[2] Graphical models can be used to describe the missing data mechanism in detail.[3][4]

Appendix APage 2 of 2

The graph shows the probability distributions of the estimations of the expected intensity of depression in the population. The number of cases is 60. Let the true population be a standardised normal distribution and the non-response probability be a logistic function of the intensity of depression. The conclusion is: The more data is missing (MNAR), the more biased are the estimations. We underestimate the intensity of depression in the population.

Missing completely at random

Values in a data set are missing completely at random (MCAR) if the events that lead to any particular data-item being missing are independent both of observable variables and of unobservable parameters of interest, and occur entirely at random.[5] When data are MCAR, the analysis performed on the data is unbiased; however, data are rarely MCAR.

In the case of MCAR, the missingness of data is unrelated to any study variable: thus, the participants with completely observed data are in effect a random sample of all the participants assigned a particular intervention. With MCAR, the random assignment of treatments is assumed to be preserved, but that is usually an unrealistically strong assumption in practice.[6]

Missing at random

Missing at random (MAR) occurs when the missingness is not random, but where missingness can be fully accounted for by variables where there is complete information.[7] Since MAR is an assumption that is impossible to verify statistically, we must rely on its substantive reasonableness.[8] An example is that males are less likely to fill in a depression survey but this has nothing to do with their level of depression, after accounting for maleness. Depending on the analysis method, these data can still induce parameter bias in analyses due to the contingent emptiness of cells (male, very high depression may have zero entries). However, if the parameter is estimated with Full Information Maximum Likelihood, MAR will provide asymptotically unbiased estimates.[citation needed]

Missing not at random

Missing not at random (MNAR) (also known as nonignorable nonresponse) is data that is neither MAR nor MCAR (i.e. the value of the variable that's missing is related to the reason it's missing).[5] To extend the previous example, this would occur if men failed to fill in a depression survey because of their level of depression.

Appendix BPage 1 of 1

Description of Microsoft Excel Forecast Tool

FORECAST and FORECAST.LINEAR functions

This article describes the formula syntax and usage of the FORECAST.LINEAR and FORECAST functions in Microsoft Excel.

Note: In Excel 2016, the FORECAST function was replaced with FORECAST.LINEAR as part of the new Forecasting functions. The syntax and usage of the two functions are the same, but the older FORECAST function will eventually be deprecated. It's still available for backward compatibility, but consider using the new FORECAST.LINEAR function instead.

Description

Calculate, or predict, a future value by using existing values. The future value is a y-value for a given x-value. The existing values are known x-values and y-values, and the future value is predicted by using linear regression. You can use these functions to predict future sales, inventory requirements, or consumer trends.

INTRA-ALASKA BUSH SERVICE MAIL RATES CASE - DOCKET DOT-OST-2003 -14694 Appendix CUPDATE FOR 12 MONTHS ENDED SEPTEMBER 30, 2019 Part 135 Wheelplane Linehaul Page 1 of 8Line # System Parameters for Each Carrier TOTAL Hageland Hageland Ryan Air

1 Capacity Related Expenses (CR) $ 24,440,986 $ 24,440,986 $ 3,949,553 2 Direct Expenses, includes Fuel $ 43,150,512 $ 43,150,512 $ 13,238,300 3 Indirect Expense $ 43,150,512 $ 43,150,512 $ 7,543,825 4 Capacity Related Markup 1.3951 1.3951 1.23465 Return and Tax Markup 1.094 1.094 1.0946 T-100 Segment Mail R.T.M.'s 2112521.9 2112521.9 458068.27 T-100 Market Mail R.T.M.'s 2130756.2 2130756.2 442365.58 Circuity Markup 1.0000 1.0000 1.0355

By Aircraft Type Beech 1900 Caravan Casa 212Aircraft Code 405 416 412

9 Direct Expense including Fuel $ 21,280,323 $ 27,510,335 $ 8,302,689 10 Less Passenger Liability Insurance $ 108,010 $ 689,458 $ - 11 Linehaul Expense Allocable to Mail $ 21,172,313 $ 26,820,877 $ 8,302,689 12 Cost per Block Hour $ 2,043.49 $ 963.69 $ 1,713.53 13 Marked Up Costs $ 32,314,050 $ 40,935,120 $ 11,612,466 14 Eligible Expense $ 29,537,848 $ 37,586,666 $ 11,568,288 15 Eligible Expense per R.T.M. $ 17.20 $ 9.46 $ 21.09 16 Percentage of Eligible Mail R.T.M.'s 100.0% 38.0400% 14.9900% 10.6400%17 Cost Weighted by Mail R.T.M.'s $ 18.9446 $ 6.5447 $ 1.4175 $ 2.2437

Scheduled + Nonscheduled Traffic18 Block Hours T-100 Segment 10360.9 27831.4 4845.419 Passenger R.T.M.'s 519929.3 1155265.7 0

Appendix CPage 2 of 8

Carrier Hageland Hageland Ryan AirBy Aircraft Type Beech 1900 Caravan Casa 212Aircraft Code 405 416 412

20 Freight R.T.M.'s @ 0.75 95241.4 64148.9 213527.721 Mail RTM's 1203108.9 474892.8 336105.322 Total RTM's 1818279.6 1694307.4 549633.0

Eligible Traffic32 Block Hours, T-100 Segment 9470.7 25554.8 4827.033 Passenger Revenue Ton Miles @ 200# 423825.0 899.6 0.034 Freight Revenue Ton Miles Wtd @ 75% 91294.6 17980.9 212506.035 Mail Revenue Ton Miles 1201721.0 77652.4 336085.336 Total Eligible Revenue Ton Miles 1716840.6 3974678.7 548591.3

46 Total Fuel Expense $ 4,938,057 $ 7,064,698 $ 2,029,848 47 Total Revenue Block Hours (R-18) 10360.9 27831.4 4845.448 Total Eligible Block Hours (R-32) 9470.7 25554.8 4827.049 Total Eligible RTM's (R-36) 1716840.6 3974678.7 548591.350 Total Eligible Fuel Expense $ 4,513,813 $ 6,486,812 $ 2,022,126 51 Cost per Eligible RTM (R-50/R-45 $ 2.6291 $ 1.6320 $ 3.6860 52 Mail RTM's Percentage (R-16) 38.0400% 14.9900% 10.6400%53 Cost per RTM Weighted by Mail RTM's $ 3.1338 $ 1.0001 $ 0.2446 $ 0.3922 54 Total Non-Fuel Cost/RTM (R-17-R-53 ) $ 15.81

INTRA-ALASKA BUSH SERVICE MAIL RATES CASE - DOCKET DOT-OST-2003 -14694 Appendix C

UPDATE FOR 12 MONTHS ENDED SEPTEMBER 30, 2019Part 135 Wheelplane

Linehaul Page 3 of 8System Parameters for Each Carrier Bering Air Grant Wright HagelandCapacity Related Expenses (CR) $ 2,637,633 $ 3,310,768 $ 740,557 $ 24,440,986 Direct Expenses, includes Fuel $ 24,291,806 $ 23,998,391 $ 11,891,988 $ 40,279,950 Indirect Expense $ 10,177,041 $ 9,027,134 $ 3,962,351 $ 43,150,512 Capacity Related Markup 1.0829 1.1114 1.0490 1.4143Return and Tax Markup 1.094 1.094 1.094 1.094T-100 Segment Mail R.T.M.'s 363895.5 322057.7 203413.2 2112521.9T-100 Market Mail R.T.M.'s 352752.3 309654.8 191660.6 2130756.2Circuity Markup 1.0316 1.0401 1.0613 0.9914

By Aircraft Type Grand Caravan Caravan Caravan Piper NavajoAircraft Code 415 416 416 194Direct Expense including Fuel $ 13,832,532 $ 13,137,452 $ 10,176,161 $ 6,558,985 Less Passenger Liability Insurance $ 116,665 $ 37,878 $ 86,212 $ 76,907 Linehaul Expense Allocable to Mail $ 13,715,867 $ 13,099,574 $ 10,089,949 $ 6,482,078 Cost per Block Hour $ 1,122.04 $ 921.09 $ 653.08 $ 847.03 Marked Up Costs $ 16,761,811 $ 16,565,630 $ 12,289,315 $ 9,943,726 Eligible Expense $ 14,260,941 $ 15,118,606 $ 11,334,986 $ 9,482,191

Eligible Expense per R.T.M. $ 17.34 $ 16.87 $ 7.58 $ 27.26

Percentage of Eligible Mail R.T.M.'s 7.4900% 7.1900% 6.2900% 2.8400%Cost Weighted by Mail R.T.M.'s $ 1.2991 $ 1.2130 $ 0.4769 $ 0.7741

Scheduled + Nonscheduled TrafficBlock Hours T-100 Segment 12224.1 14221.8 15449.7 7652.8Passenger R.T.M.'s 642307.2 1158886.9 1158886.9 259895

Appendix CPage 4 of 8

Carrier Bering Air Grant Wright HagelandBy Aircraft Type Grand Caravan Caravan Caravan Piper NavajoAircraft Code 415 416 416 194Freight R.T.M.'s @ 0.75 58374.4 213274.7 213274.7 9789.7Mail RTM's 236629.8 199383.3 199383.3 89891.4Total RTM's 937311.4 1571544.8 1571544.8 359576.1Eligible TrafficBlock Hours, T-100 Segment 10400.2 12979.5 14250.0 7297.6Passenger Revenue Ton Miles @ 200# 545003.8 646675.9 1100301.0 248786.0Freight Revenue Ton Miles Wtd @ 75% 40589.6 22398.1 196042.2 9293.7Mail Revenue Ton Miles 236629.8 227052.3 198744.1 89790.2Total Eligible Revenue Ton Miles 822223.2 896126.3 1495087.3 347869.9

Total Fuel Expense $ 3,005,627 $ 7,064,698 $ 2,320,210 $ 1,777,943 Total Revenue Block Hours (R-18) 12224.1 14221.8 15449.7 7652.8Total Eligible Block Hours (R-32) 10400.2 12979.5 14250.0 7297.6Total Eligible RTM's (R-36) 822223.2 896126.3 1495087.3 347869.9Total Eligible Fuel Expense $ 2,557,186 $ 6,447,590 $ 2,140,034 $ 1,695,420 Cost per Eligible RTM ( $ 3.1101 $ 7.1950 $ 1.4314 $ 4.8737 Mail RTM's Percentage (R-16 7.4900% 7.1900% 6.2900% 2.8400%

Cost per RTM Weighted by Mail RTM's $ 0.23 $

0.52 $

0.09 $ 0.14 Total Non-Fuel Cost/RTM (R-17-R )

INTRA-ALASKA BUSH SERVICE MAIL RATES CASE - DOCKET DOT-OST-2003 -14694 Appendix CUPDATE FOR 12 MONTHS ENDED SEPTEMBER 30, 2019 Part 135 Wheelplane Linehaul Page 5 of 8System Parameters for Each Carrier Hageland Ryan Air Bering Air AK SeaplanesCapacity Related Expenses (CR) $ 24,440,986 $ 3,949,553 $ 2,637,633 $ 2,193,507 Direct Expenses, includes Fuel $ 40,279,950 $ 13,238,300 $ 24,291,806 $ 6,476,599 Indirect Expense $ 43,150,512 $ 7,543,825 $ 10,177,041 $ 5,768,130 Capacity Related Markup 1.4143 1.2346 1.0829 1.2182Return and Tax Markup 1.094 1.094 1.094 1.094T-100 Segment Mail R.T.M.'s 2112521.9 458068.2 363895.5 54749.9T-100 Market Mail R.T.M.'s 2130756.17 442365.5 352752.3 48247.9Circuity Markup 1.0000 1.0355 1.0316 1.1348

By Aircraft Type Cessna 207 Caravan Beech 1900Grand

CaravanAircraft Code 035 416 405 415Direct Expense including Fuel $ 6,665,792 $ 8,302,689 $ 2,822,093 $ 3,034,560 Less Passenger Liability Insurance $ 99,309 $ - $ 29,195 $ 51,199 Linehaul Expense Allocable to Mail $ 6,566,483 $ 8,302,689 $ 2,792,898 $ 2,983,361 Cost per Block Hour $ 379.19 $ 4,522.41 $ 1,889.86 $ 513.18 Marked Up Costs $ 10,160,153 $ 11,612,466 $ 3,413,129 $ 4,511,882 Eligible Expense $ 8,908,958 $ 10,981,947 $ 2,537,271 $ 4,420,302 Eligible Expense per R.T.M. $ 28.06 $ 113.76 $ 13.19 $ 10.97 Percentage of Eligible Mail R.T.M.'s 2.6200% 2.4600% 2.1600% 1.4100%Cost Weighted by Mail R.T.M.'s $ 0.7352 $ 2.7986 $ 0.2848 $ 0.1547

Scheduled + Nonscheduled TrafficBlock Hours T-100 Segment 17317.1 1835.9 1477.8 5813.5Passenger R.T.M.'s 257388.5 8811.7 205077.7 323433.9

Appendix CPage 6 of 8

Carrier Hageland Ryan Air Bering Air AK SeaplanesBy Aircraft Type Cessna 207 Caravan Beech 1900 Grand CaravanAircraft Code 035 416 405 415Freight R.T.M.'s @ 0.75 8155.5 18225.9 11837.2 38697.0

82834.5 77786.0 68298.6 44608.3Mail R.T.M.'s 348378.5 104823.5 285213.5 406739.2Eligible TrafficBlock Hours, T-100 Segment 15184.5 1736.2 1098.6 5695.5Passenger Revenue Ton Miles @ 200# 226880.9 899.6 112756.4 319523.1Freight Revenue Ton Miles Wtd @ 75% 7898.1 17980.9 11377.3 38697.0Mail Revenue Ton Miles 82689.3 77652.4 68298.6 44608.3Total Eligible Revenue Ton Miles 317468.2 96532.9 192432.3 402828.4

Total Fuel Expense $ 1,837,961 $ 722,367 $ 741,457 $ 802,549 Total Revenue Block Hours (R-18) 17317.1 1835.9 1477.8 5813.5Total Eligible Block Hours (R-32) 15184.5 1736.2 1098.6 5695.5Total Eligible RTM's (R-36) 317468.2 96532.9 192432.3 402828.4Total Eligible Fuel Expense $ 1,611,621 $ 683,145 $ 551,188 $ 786,259 Cost per Eligible RTM ( $ 5.0765 $ 7.0768 $ 2.8643 $ 1.9518 Mail RTM's Percentage (R-16 2.6200% 2.4600% 2.1600% 1.4100%Cost per RTM Weighted by Mail RTM's $ 0.13 $ 0.17 $ 0.06 $ 0.03 Total Non-Fuel Cost/RTM (R-17-R )

INTRA-ALASKA BUSH SERVICE MAIL RATES CASE - DOCKET DOT-OST-2003 -14694 Appendix CUPDATE FOR 12 MONTHS ENDED SEPTEMBER 30, 2019 Part 135 Wheelplane Linehaul Page 7 of 8System Parameters for Each Carrier Ryan Air Grant Bering AirCapacity Related Expenses (CR) $ 3,949,553 $ 3,310,768 $ 2,637,633 Direct Expenses, includes Fuel $ 13,238,300 $ 23,998,391 $ 24,291,806 Indirect Expense $ 7,543,825 $ 9,027,134 $ 10,177,041 Capacity Related Markup 1.2346 1.1114 1.0829Return and Tax Markup 1.094 1.094 1.094T-100 Segment Mail R.T.M.'s 458068.2 322057.7 363895.5T-100 Market Mail R.T.M.'s 442365.5 309654.8 352752.3Circuity Markup 1.0355 1.0401 1.0316

By Aircraft Type Cessna 207 Gipps Aero CASA 212Aircraft Code 035 026 412Direct Expense including Fuel $ 1,155,420 $ 3,635,177 $ 828,860 Less Passenger Liability Insurance $ 7,464 $ 18,029 $ 7,332 Linehaul Expense Allocable to Mail $ 1,147,956 $ 3,617,148 $ 821,528 Cost per Block Hour $ 372.57 $ 531.27 $ 1,785.15 Marked Up Costs $ 1,605,576 $ 4,574,220 $ 1,003,968 Eligible Expense $ 1,571,375 $ 4,325,190 $ 837,331

Eligible Expense per R.T.M. $ 27.92 $ 32.82 $ 16.39

Percentage of Eligible Mail R.T.M.'s 1.3100% 1.3100% 1.2600%Cost Weighted by Mail R.T.M.'s $ 0.3657 $ 0.4300 $ 0.2065

Scheduled + Nonscheduled TrafficBlock Hours T-100 Segment 3081.2 6808.5 460.2Passenger R.T.M.'s 5222.5 93217.6 0

Appendix CPage 8 of 8

Carrier Ryan Air Grant Bering AirBy Aircraft Type Cessna 207 Gipps Aero CASA 212Aircraft Code 035 026 412Freight R.T.M.'s @ 0.75 10772.5 2370.3 21070.3

41495.4 41381.3 39768.4Mail R.T.M.'s 57490.4 136969.2 60838.7Eligible TrafficBlock Hours, T-100 Segment 3015.5 6437.8 383.8Passenger Revenue Ton Miles @ 200# 4099.3 88204.2 0.0Freight Revenue Ton Miles Wtd @ 75% 10691.3 2181.6 11320.3Mail Revenue Ton Miles 41495.4 41381.3 39768.4Total Eligible Revenue Ton Miles 56286.0 131767.1 51088.7

Total Fuel Expense $ 104,010 $ 614,305 $ 195,406 Total Revenue Block Hours (R-18) 3081.2 6808.5 460.2Total Eligible Block Hours (R-32) 3015.5 6437.8 383.8Total Eligible RTM's (R-36) 56286.0 131767.1 51088.7Total Eligible Fuel Expense $ 101,794 $ 580,861 $ 162,973 Cost per Eligible RTM ( $ 1.8085 $ 4.4082 $ 3.1900 Mail RTM's Percentage (R-16 1.3100% 1.3100% 1.2600%Cost per RTM Weighted by Mail RTM's $ 0.02 $ 0.06 $ 0.04 Total Non-Fuel Cost/RTM (R-17-R )

ESCALATION OF PART 135 WHEELPLANE LINEHAUL EXPENSE TO MIDPOINT OF RATE TERM Appendix D

Year Ended$/RTM Non-Fuel Linehaul

With Fuel Linehaul Page 1 of 1

9/30/2012 $ 10.1679 9/30/2013 $ 10.5489 9/30/2014 $ 10.5845 9/30/2015 $ 9.6948 9/30/2016 $ 10.6011 9/30/2017 $ 13.7461 9/30/2018 $ 14.3665 $ 17.6900 9/30/2019 $ 15.8100 $ 18.9446 9/30/2020 $ 15.6365 $ 18.7367 9/30/2021 $ 16.4572 $ 19.7201

SUMMARY OUTPUT

Regression StatisticsMultiple R 0.93090478R Square 0.86658371Adjusted R Square 0.84752424Standard Error 1.048890005Observations 9

ANOVA

df SS MS FSignificanc

e F

Regression 1 50.0218321450.0218

345.4673

6 0.000267Residual 7 7.701191704 1.10017Total 8 57.72302384

Coefficients Standard Error t Stat P-value Lower 95%Upper 95% Lower 95.0% Upper 95.0%

Intercept -94.45884874 15.94765326 -5.923060.00058

6 -132.169 -56.7486 -132.169 -56.748641

41182 0.002499736 0.0003707196.74294

90.00026

7 0.0016230.00337

6 0.001623 0.0033763

INTRA-ALASKA BUSH SERVICE MAIL RATES CASE - DOCKET DOT-OST-2003 -14694 Appendix EUPDATE FOR 12 MONTHS ENDED SEPTEMBER 30, 2019 Seaplane Linehaul Page 1 of 4Line # System Parameters for Each Carrier TOTAL Taquan Taquan Pacific1 Capacity Related Expenses (CR) $ 814,727 $ 814,727 $ 230,981 2 Direct Expenses, includes Fuel $ 5,364,016 $ 5,364,016 $ 1,360,198 3 Indirect Expense $ 2,529,422 $ 2,529,422 $ 774,113 4 Capacity Related Markup 1.103215734 1.103215734 1.1082227475 Return and Tax Markup 1.094 1.094 1.0946 T-100 Segment Mail R.T.M.'s 18122.22 18122.22 2617.877 T-100 Market Mail R.T.M.'s 16993.94 16993.94 1947.818 Circuity Markup 1.066 1.066 1.344

By Aircraft Type Beaver Single Otter BeaverAircraft Code 040 042 040

9 Direct Expense including Fuel $ 4,077,276 $ 1,286,740 $ 1,360,198 10 Less Passenger Liability Insurance $ 74,019 $ 65,917 $ 42,796 11 Linehaul Expense Allocable to Mail $ 4,003,257 $ 1,220,823 $ 1,317,402 12 Cost per Block Hour $ 909.72 $ 1,583.67 $ 584.89 13 Marked Up Costs (R11*R4*R5*R8) $ 5,152,389 $ 1,571,259 $ 2,146,660 14 Eligible Expense (R13*R32/R18) $ 4,978,946 $ 1,461,295 $ 1,893,847 15 Eligible Expense per Total RTM's $ 42.76 $ 40.17 $ 53.89 16 Percentage of Eligible Mail R.T.M.'s 100.00% 49.37% 18.56% 9.81%17 Cost Weighted by Mail R.T.M.'s $ 42.5352 $ 21.1105 $ 7.4556 $ 5.2887

Scheduled + Nonscheduled Traffic18 Block Hours All Classes 4400.5 770.9 2252.419 Passenger R.T.M.'s 96541.3 29247.6 35243.5

20 Freight R.T.M.'s @ 0.75 5760.5 2881.8 850.921 Mail R.T.M.'s 13171.3 4950.9 2624.4

Appendix EPage 2 of 4

Carrier Taquan Taquan PacificBy Aircraft Type Beaver Single Otter BeaverAircraft Code 040 042 040

22 TOTAL WTD. REVENUE TON MAIL 115473.1 37080.4 38718.8Eligible Traffic

32 Block Hours, T-100 Segment 4252.4 716.9 1987.133 Passenger Revenue Ton Miles @ 200 94722.5 27090.5 31213.334 Freight Revenue Ton Miles Wtd @ 75% 8246.0 4202.6 1260.835 Mail Revenue Ton Miles 13480.3 5082.6 2666.736 Total Eligible Revenue Ton Miles 116448.8 36375.6 35140.8

46 Total Fuel Expense 513314 122716 27177347 Total Revenue Block Hours (R-18) 4400.5 770.9 2252.448 Total Eligible Block Hours (R-32) 4252.4 716.9 1987.149 Total Eligible RTM's (R-36) 116448.8 36375.6 35140.850 Total Eligible Fuel Expense $ 496,034 $ 114,128 $ 239,766 51 Cost per Eligible RTM (R-50/R-45 $ 4.2597 $ 3.1375 $ 6.8230 52 Mail RTM's Percentage (R-16) 49.3738% 18.5590% 9.8133%53 Cost per RTM Weighted by Mail RTM's $ 4.6050 $ 2.1032 $ 0.5823 $ 0.6696 54 Total Non-Fuel Cost/RTM (R-17-R-53 ) $ 37.9302

Appendix ESeaplane Linehaul Page 3 of 4

System Parameters for Each Carrier Alaska Seapl. Alaska Seapl. Alaska Seapl. Island (ADQ) Capacity Related Expenses (CR) $ 2,193,507 $ 2,193,507 $ 2,193,507 $ 318,317 Direct Expenses, includes Fuel $ 6,476,599 $ 6,476,599 $ 6,476,599 $ 3,234,443 Indirect Expense $ 5,768,130 $ 5,768,130 $ 5,768,130 $ 1,162,059 Capacity Related Markup 1.179138877 1.179138877 1.179138877 1.072402333Return and Tax Markup 1.094 1.094 1.094 1.094T-100 Segment Mail R.T.M.'s 5315.59 5315.59 5315.59 746.71T-100 Market Mail R.T.M.'s 5016.53 5016.53 5016.53 541.11Circuity Markup 1.060 1.060 1.060 1.380By Aircraft Type Caravan Beaver Cessna 185 BeaverAircraft Code 416 040 035 040Direct Expense including Fuel $ 472,906 $ 883,993 $ 440,377 $ 798,328 Less Passenger Liability Insurance $ 9,910 $ 10,765 $ 6,715 $ 29,487 Linehaul Expense Allocable to Mail $ 462,996 $ 873,228 $ 433,662 $ 768,841 Cost per Block Hour $ 599.19 $ 488.61 $ 708.15 $ 1,063.33 Marked Up Costs $ 632,859 $ 1,193,597 $ 592,763 $ 1,244,726 Eligible Expense $ 621,147 $ 1,001,985 $ 469,832 $ 675,256 Eligible Expense per R.T.M. $ 18.49 $ 32.90 $ 59.40 $ 113.95 Percentage of Eligible Mail R.T.M.'s 8.81% 8.33% 2.79% 2.33%Cost Weighted by Mail R.T.M.'s $ 1.6286 $ 2.7395 $ 1.6596 $ 2.6527 Scheduled + Nonscheduled TrafficBlock Hours 772.7 1787.2 612.4 723.1Passenger R.T.M.'s 28122.7 30183.4 7782.1 10679.3Freight R.T.M.'s @ 0.75 3573.7 3112.0 896.0 1179.3Mail R.T.M.'s 2349.2 2221.1 745.3 621.6

Appendix EPage 3 of 4

Carrier Alaska Seapl. Alaska Seapl. Alaska Seapl. Island (ADQ)By Aircraft Type Caravan Beaver Cessna 185 BeaverAircraft Code 416 040 035 040TOTAL WTD. REVENUE TON MAIL 34045.5 35516.5 9423.4 12480.3Eligible TrafficBlock Hours, T-100 Segment 758.4 1500.3 485.4 392.3Passenger Revenue Ton Miles @ 200 27663.5 25108.7 6217.9 4441.6Freight Revenue Ton Miles Wtd @ 75% 3573.7 3123.1 931.3 863.2Mail Revenue Ton Miles 2349.2 2221.1 760.2 621.0Total Eligible Revenue Ton Miles 33586.3 30452.9 7909.4 5925.8

111912 187390 73970 152388772.7 1787.2 612.4 723.1758.4 1500.3 485.4 392.3

33586.3 30452.9 7909.4 5925.8 $ 109,841 $ 157,308 $ 58,630 $ 82,670 $ 3.2704 $ 5.1656 $ 7.4127 $ 13.9507

8.8061% 8.3260% 2.7939% 2.3279% $ 0.2880 $ 0.4301 $ 0.2071 $ 0.3248

ESCALATION OF SEAPLANE LINEHAUL EXPENSE TO MIDPOINT OF RATE TERM Appendix FYear Ended $/RTM Non-Fuel LH With Fuel LH Page 1 of 1

9/30/2012 $ 24.7248 9/30/2013 $ 23.1757 9/30/2014 $ 23.0594 9/30/2015 $ 25.5845 9/30/2016 $ 25.7963 9/30/2017 $ 27.0723 9/30/2018 $ 28.8005 $ 34.5408 9/30/2019 $ 37.9302 $ 42.5352 9/30/2020 $ 34.1354 $ 38.2796 9/30/2021 $ 35.7156 $ 40.0517

SUMMARY OUTPUT

Regression StatisticsMultiple R 0.914070981R Square 0.835525758Adjusted R Square 0.812029437Standard Error 2.404724859Observations 9

ANOVA df SS MS F Significance F

Regression 1 205.6320352 205.6320352 35.55985555 0.000562568Residual 7 40.47891152 5.782701646Total 8 246.1109467

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0%

Intercept -188.9455817 36.56219244-

5.167785875 0.001298253 -275.4014286-

102.4897347 275.401428641182 0.00506827 0.000849923 5.963208494 0.000562568 0.00305852 0.007078019 0.00305852

Year Ended$/Wtd Departure Conversion of $/Wtd Dep to $/Ton Enplaned Appendix H

9/30/2012 $ 12.53 Period $/Wtd Dep.Adj for ROI/Taxes $/Ton Enplaned Page 1 of 1

9/30/2013 $ 12.93 YE 9/30/2018 $ 18.80 $ 20.57 $ 1,269.66 9/30/2014 $ 14.65 YE 9/30/2021 $ 22.55 $ 1,392.06 9/30/2015 $ 16.54 Relative to Mean 9/30/2016 $ 17.53 Wheelplanes $ 0.98 $ 1,367.54 9/30/2017 $ 18.11 Seaplanes $ 1.12 $ 1,562.15 9/30/2018 $ 18.80 9/30/2019 $ 20.12 9/30/2020 $ 21.43 9/30/2021 $ 22.55

SUMMARY OUTPUT

Regression StatisticsMultiple R 0.990391199R Square 0.980874727Adjusted R Square 0.978142546Standard Error 0.458162557Observations 9

ANOVA df MS F Significance F

Regression 1 75.36039016 359.0078552 2.83671E-07Residual 7 0.209912928Total 8

Coefficients t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept -113.8843148 -16.34848384 7.80714E-07 -130.3563996 -97.41222998 -130.3563996-

97.4122299841182 0.003068216 18.94750261 2.83671E-07 0.002685306 0.003451125 0.002685306 0.003451125