Served: April 21, 2003

Posted:  April 16, 2003	

	 5:00 p.m.

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

REQUEST FOR COMMENTS REGARDING IMPLEMENTATION 

OF RURAL SERVICE IMPROVEMENT ACT

DOCKETS 14694 AND 14695

NOTICE

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. 


First, paragraph (k)(4) requires that: 

“(4) Carriers qualified to be tendered nonpriority bypass mail shall
submit to the Secretary the number and type of aircraft in the carrier's
fleet, the level of passenger insurance covering its fleet, and the name
of the insurance company providing such coverage.”  

Consistent with this paragraph, we have prepared an attachment, as a
sample of what we would tentatively require carriers to report monthly. 
We request comments on the sample report, particularly comments on
whether there are alternative reporting requirements that would meet the
statutory requirements in less burdensome ways.

Second, the law requires that the Postal Service tender mail to bush
carriers based on the outbound passengers and freight the carriers
transport in individual city pairs, relying on T-100 On-Flight O&D
statistics.  The Department’s Bureau of Traffic Statistics (BTS)
states that the T-100 will give different results depending on how
carriers depict their flight schedules.  For example, for the same
multi-stop route, if one carrier chose to assign two flight numbers and
another only one, the results of the T-100 on-flight report would be
inconsistent and carriers could manipulate the new system to receive
more mail than appropriate.   We ask the carriers for comments about how
to address this problem.  As an interim solution, we will tentatively
require that beginning 60 days after the issuance of this notice
carriers wishing to participate in the tender of mail assign flight
numbers such that single-plane operations between hubs be assigned only
one flight number in the T-100.  That does not resolve what to do for
the data from July 1, 2002, until the tentative solution above is
implemented.  The law says that for the first tender of mail under the
new system, the Postal Service will rely on an annual pool of data, and
we anticipate the YE 6/30/03 will be that period.  It must thus be
decided whether mail tender in the initial period will be determined on
less than a full year of data, on the basis of potentially inconsistent
annual data, thereby delaying the implementation of the new tender
system, or by requiring the carriers to resubmit prior data in a
consistent format as discussed above.  We request that the parties
comment on this issue.  

Third, section (k)(5) of the law provides that:

“(5) Not later than 30 days after the last day of each calendar month,
carriers qualified or attempting to be qualified to be tendered
nonpriority bypass mail shall report to the Secretary the excise taxes
paid by city pair to the Department of the Treasury and the weight of
and revenue earned by the carriage of nonmail freight.  Final compiled
data shall be made available to carriers providing service in the
hub.”

We have discussed this issue with BTS and the Postal Service.  Some
carriers have informally stated that quantifying excise taxes by market
would prove difficult, if not impossible.  It is not clear from the
legislative history what the purpose is of carriers reporting excise
taxes by route. We thus request comments on the best method to meet the
requirements of the law.

Fourth, in paragraph (s), the law provides that:

“(d) Actions of Air Carriers To Qualify--Beginning 6 months after the
date of enactment of this Act, if the Secretary determines, based on the
Secretary's findings and recommendations of the Postal Service, that an
air carrier being tendered nonpriority bush bypass mail is not taking
actions to attempt to qualify as a bush passenger or nonmail freight
carrier under section 5402 of title 39, United States Code (as amended
by this title), the Postal Service shall immediately cease tender of all
nonpriority bypass mail to such carrier.”

Carriers making no effort to carry traffic other than mail are to be
excluded from mail tender, but the law does not state how the Department
is to determine whether the carrier is making an effort to become a
passenger or freight carrier.  This provision also raises the question
as to whether carriers must carry passengers or freight in all markets
to receive mail.  Conversely, if a carrier carries only one passenger in
one market, should it be eligible to carry mail in all markets it
serves?  An option would be to require the mail-only carriers to
demonstrate to the Department the steps that they have taken to begin
carrying passengers or freight.  We request comments on this issue.

Fifth, the law provides for preferential tender to carriers providing
service under an FAA certificate issued under 14 CFR Part 121, large
aircraft operations.  Carriers cannot operate under Part 121 unless the
FAA approves such operations under the carrier’s own operation
specifications.  The USPS has taken the position that if an airport is
certificated for Part 121 aircraft and if a Part 121 carrier is serving
the market, it would pay the (lower) Part 121 rate, even if the service
were actually provided with small Part 135 aircraft.  We tentatively
propose to require all carriers to report on a monthly basis, in
Attachment A, any airports listed on their operation specifications
certificated for Part 121 service.  In addition, to report all aircraft
in their fleet that are Part 121 certified should they wish to qualify
for such preference.  

Sixth, 

In paragraph 18, the law defines as a “121 bush passenger carrier a
bush passenger carrier providing passenger service on bush routes under
part 121.”  Elsewhere, under Section 5(h)(2)(B), the law provides that
19-seat Part 121 aircraft are to receive preferred tender compared to
part 135 aircraft.  Finally, the law provides that the Department shall
establish three bush mail rates:  for Part 121, Part 135, and amphibious
aircraft. 

“6(B) The Secretary shall establish a bush rate based on data
collected under subsection (k) from 121 bush passenger carriers. Such
rates shall be paid to all bush passenger carriers operating on city
pair routes in the State of Alaska where a 121 bush passenger carrier is
tendered nonpriority bypass mail.”

Some aircraft types operating under Part 121 are not 19-seat aircraft,
and might not receive the favored treatment explicitly contemplated
under Section 5(h)(2)(b).  We ask for comment on whether the Department
should only include the costs of 19-seat Part 121 aircraft in
determining the Part-121 rate?  If so, what is to be done with the costs
of Part 121 aircraft certificated for fewer than 19 seats?  Should they
be assigned to the Part 121 cost pool, the Part 135 cost pool,
disregarded, or should they be used to establish yet a fourth bush rate,
i.e., a Part 121 rate for aircraft with fewer than 19 seats?

Seventh

A number of new ratemaking issues will arise under the base rate
investigation we are to conduct.  There will be a narrow window between
when the final data is submitted and when the Department issues an
order.  Because this will be an investigation rather than a simple
update, we encourage the parties to submit preliminary comments about
any potential ratemaking issues before the show-cause order issues.  To
assist the parties in their comments and to expedite matters, we will
provide a quarterly profile of the bush industry when the data becomes
available. 

Eighth

Paragraph k(2) requires that 

“(k)(2) In order to ensure sufficient, reliable, and timely traffic
data to meet the requirements of this subsection, the Secretary shall
require--``(A) the monthly submission of the bush carrier's data on
T-100 diskettes, or any other suitable form of data collection, as
determined by the Secretary; and``(B) the carriers to retain all books,
records, and other source and summary documentation to support their
reports and to preserve and maintain such documentation in a manner that
readily permits the audit and examination by representatives of the
Postal Service or the Secretary.”

“(3) Documentation under paragraph (2) shall be retained for 7 years
or until the Secretary indicates that the records may be destroyed.
Copies of flight logs for aircraft sold or disposed of shall be
retained.”  

In addition, under this provision, it would appear necessary that all
flight logs would have to indicate the aircraft type, the pilot, the
entire routing, the day of the flight.  In addition, in order to
document the reported traffic, it would appear that carriers would have
to retain copies of invoices of passenger tickets and freight bills.  We
also request comment regarding other documents that carriers normally
produce and can readily retain, as well as less burdensome means for
carriers to document their schedule integrity and traffic reported.  

We encourage comments on these tentative positions as well as any other
issues that the carriers, USPS, or any other party would like to comment
on.  After examining the comments, the Department will determine what,
if any, further steps should be undertaken.  We therefore request all
parties to Docket 1995-405 to supply comments and supporting
information, as requested, within 30 days of the service date of this
notice, and replies to the comments to be filed no later than 15 days
after the initial comment filing date.  Comments should be sent to: U.S.
Department of Transportation, PL 401, Docket Operations, 400 7th Street,
SW, Washington, D.C. 20590, Dockets 2003-14694 and 14695. 

We shall serve this notice on all persons on the service list in this
docket.

By:

	READ C. VAN DE WATER

							Assistant Secretary for Aviation

							    and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide
Web

  HYPERLINK "http://dms.dot.gov"  http://dms.dot.gov 











	Attachment A















Monthly Excise Taxes, Fleet Inventory, Insurance, and Airport
Specifications

















Safety Information







Two

Three

Phone

Code-Share



Name

d/b/a

Letter Code

Letter Code

Number

Partner

	Carrier Identifier	XX	 	XX	 	XX	 	XX	 	XX	 	XX

	 	 	 	 	 	 	 	 	 	 	 	 

	FAA POI	XX	 	 	 	 	 	 	 	XX	 	 

	 	 	 	 	 	 	 	 	 	 	 	 

	Insurance Company(s) 	XX 	 	 	 	 	 	 	 	XX	 	 

	Insurance Company(s)  	XX 	 	 	 	 	 	 	 	XX	 	 































Excise Tax Information







Non-Mail











Skd. Psgr.

Skd. Freight

Mail

Other

System



	Excise Taxes	XX	 	XX	 	XX	 	XX	 	XX

































Fleet and Insurance Information 1/

	Aircraft Tail	Aircraft 

Aircraft

Type of

Payload 

Number of

Liability Insur.

	Number	Type 2/

Code 2/

Operation 3/

Capacity 4/

Insured Seats 5/

per Seat ($$)

	XX	XX	 	XX	 	XX	 	XX	 	XX	 	XX

	XX	XX	 	XX	 	XX	 	XX	 	XX	 	XX

	XX	XX	 	XX	 	XX	 	XX	 	XX	 	XX

	XX	XX	 	XX	 	XX	 	XX	 	XX	 	XX

	XX	XX	 	XX	 	XX	 	XX	 	XX	 	XX

	XX	XX	 	XX	 	XX	 	XX	 	XX	 	XX

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 















	List of  Airports That Carrier's Operations Specifications Authorized
Service to Under Part 121



	ANC



























1/ Aircraft was operable and insured at any time during the month,
although aircraft was not necessarily operated.







2/ Using BTS reporting system for aircraft type and code number.







	3/ Either Part 121, Part 135, or Amphibious.









	4/ In pounds













5/ Passenger seats only, exclude pilot and co-pilot.























	

  Differences in how flight numbers are assigned would distort how
traffic is reported.  For example, assume a carrier operating Hub to A
to B assigns one flight number from Hub to A and a different flight
number from A to B.  If 10 passengers boarded the plane at the Hub and 3
were bound for point A and 7 were bound for B, the carrier would report
10 Hub to A passengers and 7 A to B passengers.  In contrast, if the
carrier assigns a single flight number for the itinerary, the carrier
would correctly report 3 Hub to A passengers and 7 Hub to B passengers. 
This reporting inconsistency could affect the carriers’ relative
standing for mail tender.  

 The problem outlined in paragraph (2), above, with flight numbers
affects the T-100 Market O&D report, but would not affect the segment
reports which would appear to be the only traffic reports critical for
calculating the various mail rates.

 The original submissions is to be unbound and without tabs on 81/2’ x
11” white paper using dark ink (not green) to facilitate use of the
Department’s docket imaging system.  In the alternative, filers are
encouraged to use the electronic submission capability available through
the Dockets/DMS Internet site (http://dms.dot.gov) by following the
instructions on the web site.

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