Alaskan carriers want post office to obey rules

Nineteen Alaskan air carriers have filed a complaint with the U.S. Department of Transportation (DOT) contending that the U.S. Postal Service (USPS) has been shortchanging them as they deliver mail to rural Alaskan communities.

In the complaint, the carriers contend that the Postal Service violated DOT rules and imposed its own mileage chart for reimbursements last November. If left alone, the change could have cost the carriers an estimated $335,000 a year.

Unlike mail service in the lower 48 states, DOT regulates the rates and terms of service for Alaska and Hawaii.

There are 36 carriers that provide mail service in Alaska, including 30 that provide some level of passenger service. The size of these carriers range from four-plane operations to companies with more than 20 airplanes in their fleets.

Flying almost exclusively turboprops, only three passenger carriers are classified as Part 121 operators. The bulk fly aircraft capable of carrying no more than nine passengers.

"Under the law, the Postal Service is suppose to set out all the service particulars for the trans- portation of the mail [in Alaska] and this is the basis for rate setting. The Postal Service has never done that," said Hank Myers, a Seattle-based economist who has been active in postal rate cases since 1982. Myers filed the most recent complaint in June.

Myers is asking DOT to force the Postal Service to comply with the law.

However, even Myers in his complaint acknowledges that the Postal Service on June 2 ceased using its own mileage database and reverted to the one prescribed by DOT.

"We have acknowledged that we have changed the mileage and we have changed it back," said William J. Jones, an attorney for the Postal Service. "We are in the process of making retroactive payments to bring [us] in conformance with the BTS (Bureau of Transportation Statistics) mileage. We announced we were going to do this before they filed the complaint."

Jones said that the post office applied the same rates it negotiated with commercial mail carriers in the lower 48 states. "We substituted those across the board and in the process replaced the Alaskan numbers," he said. The difference between the two mileage databases became apparent, he said, when several Alaskan carriers complained that "we were consistently shorting them on every route."

Of the 149 bush markets, Myers said in his complaint, more than 74 percent of the distance calculations were shorter in the Postal Service database than in the BTS database. Less than 3 percent were longer.

The Postal Service, DOT and the carriers are operating under a 2002 federal law designed to reduce the number of mail carriers in Alaska by funneling most of the mail to those companies also providing scheduled passenger service to the state's rural communities. The cargo-only carriers get second preference over those companies flying only mail runs. The 2002 law took effect last November.

Myers in his complaint outlines other grievances that the carriers have against the Postal Service, including a daily online reporting requirement, even if a flight does not carry mail. "A number of new procedures are quite costly for the air carriers," Myers told CRAN. "These were done in consultation with the carriers, but they imposed the rules after ignoring our comments. As a customer, [the Postal Service] has the authority to request changes, but DOT is supposed to consider these costs and set rates accordingly. It is a fairly small teapot, but a substantial tempest."

"While the Postal Service required carriers to file extensive traffic and operations reports daily, these reports have never been used to set payments," according to the complaint. "The Postal Service is once again falling weeks behind in their mail payment schedule because of internal data entry problems . . . The untested procedural changes imposed by the Postal Service have created such a convoluted and error-prone system that the industry has been underpaid hundreds of thousands of dollars, and had correct payments delayed by as much as four months."

In June, the DOT established a new reimbursement rate for Part 135 cargo aircraft serving bush communities. The new rate, $11.50 per revenue ton mile, is slightly more than the current rate of $11.16 per revenue ton mile. After a 45- day public comment period, the rate should become effective in August. Earlier this year, DOT set separate rates for mail carriers using seaplanes and those Part 121 carriers serving bush communities.

"We are unhappy with some of it [the new rate structure]," Jones said, and "the carriers are unhappy with some of it for different reasons."

"The new law has created antagonism," Myers said. "Because of the huge volume of non-traditional items and the need to transport by air, the Postal Service is losing a bundle. This [loss] leads to animosity toward the carriers. They blame the carriers. It is not our fault that they don't have highways in Alaska.

"We filed a motion to compel them to abide by all the rules. We would like to sit down and come to an agreement," Myers said. "My primary goal is to get the post office to come into the room and put on paper what its service requirements are. Our only point – if you are going to require a service, you need to pay for it."

Jones acknowledged the poisoned relationship. "There has always been an antagonistic attitude between the [Postal] service and [the] providers. We have different interests. Our interest is to get the mail delivered in Alaska at a reasonable price.

"If we had a contract system in Alaska, I am sure the carriers we would be doing business with would be much more accommodating to us. We would be dealing with people we could get along with. We don't have that. We have a regulated system where we are obligated to give the mail to practically anyone who applies."

The level of mistrust is evident in the most recent filings. Myers filed his complaint as the "consolidated carriers" without naming the individual companies in the group. Myers told CRAN that he has not disclosed the companies because "these carriers report that when they complain to the Postal Service, they are punished. A number of carriers are not interested in going public." (Myers declined requests by CRAN to speak with some of the carriers because he was fearful of their identifies being revealed.)

Jones filed his own request with the DOT asking that Myers be compelled to name the participating carriers. He filed a matrix listing Alaska carriers that have participated in recent cases that Myers had initiated.

Myers hopes to invoke DOT rules that will permit the confidential filing of the names of the carriers. Jones said he doubts the rules would permit continued cloaking.