FY13 Proposed Uniform Rates and Rules and FY13-FY17 Draft MOU.pdf

For Official Use Only

11 JUL 12

MEMORANDUM FOR ALL CARRIERS

FROM: USTRANSCOM/TCAQ-P

508 Scott Drive

Scott AFB IL 62225-5357

SUBJECT: Notice of Proposed Fiscal Year 2013 (FY13) Uniform Rates and Rules for

International Service – Solicitation Number HTC711-12-R-C004

(SUSPENSE: 1 Aug 12)

1. The proposed FY13 rates are the first rates set under the draft FY13-FY17 Memorandum of

Understanding (MOU) as attached.

2. The proposed FY13 rates are based on fuel pegged at $2.70 per gallon for passenger and

$2.50 for cargo, combi and L-100. The proposed rates for the various classes of service are as follows. All passenger rates are expressed per seat mile. All cargo rates are per ton mile; while, combi is per plane mile.

Effective Rate Linehaul Rate Stop Charge

Large Class Passenger $0.11924

Medium Class Passenger $0.13152

Small Class Passenger $0.14499 $2,000

Large Class Cargo – MFE $0.37297

Large Class Cargo – Classic $0.38787

Medium Class Cargo $0.54347 $2,000

Combi Service $23.81169

L100 Service $1.31329

3. Carriers providing cost data for the rate review should provide comments and supporting documentation on the attached FY13 Proposed Rates. All carriers are requested to provide comments and supporting documentation on the attached draft MOU. All comments must be sent to USTRANSCOM/TCAQ-P, 508 Scott Drive, Scott AFB IL 62225-5357 by close of business 1 Aug 12. It is imperative carriers identify all issues of concern prior to this deadline.

If specific information is required on individual cost elements, analysts will provide detailed step-by-step treatment upon carrier request.

4. If not already provided, carriers may also request USTRANSCOM provide copies of the

DCAA audit reports of their proposals and/or TCAQ-P work papers (i.e., analyst cutsheets).

Requests shall be made in writing to Lucretia Sanchez at Lucretia.Sanchez@ustranscom.mil and your designated analyst, Susan Wickell, Todd White, or Scott Rader upon receipt.

UNITED STATES TRANSPORTATION COMMAND

508 SCOTT DRIVE

SCOTT AIR FORCE BASE, ILLINOIS 62225-5357

mailto:Lucretia.Sanchez@ustranscom.mil

For Official Use Only

5. In accordance with our Memorandum of Understanding, please direct any questions or concerns to me at Lucretia.Sanchez@ustranscom.mil or 618-220-7119.

//SIGNED//

LUCRETIA A. SANCHEZ

Chief, Pricing Branch

Two Attachments

1. 11 Jul 12 FY13 Proposed Uniform Rates and Rules for International Service

2. Draft FY13 – FY17 Memorandum of Understanding (MOU) mailto:Lucretia.Sanchez@ustranscom.mil

Prepared By: United States Transportation Command, Command Acquisition, 508 Scott Drive, Scott AFB IL 62225-5357

UNITED STATES

TRANSPORTATION COMMAND

PROPOSED

UNIFORM RATES AND RULES

FOR

INTERNATIONAL SERVICE

FISCAL YEAR 2013

INTRODUCTION

The proposed FY13 USTRANSCOM Uniform Rates and Rules (hereafter referred to as

“Rates”) have been developed using rate-making procedures in compliance with the Federal

Acquisition Regulation (FAR), DRAFT Memorandum of Understanding (MOU) for FY13 through FY17, attached, and methodologies previously established by the Civil Aeronautics

Board (CAB). The objective of the MOU is to establish guidelines to facilitate the ratemaking process for DOD airlift with carriers willing to participate in the Civil Reserve Air

Fleet (CRAF).

The contracting officer for the CRAF contract determined the services provided under CRAF are not commercial, in accordance with the definition at FAR 2.101; and will utilize FAR Part

15, Contracting by Negotiation, procedures. USTRANSCOM was given legislative authority in the FY12 National Defense Authorization Act to be the rate setter for the CRAF

International contract, providing an exception to the requirement for certified cost and pricing data at FAR 15.403-1(b)(2). USTRANSCOM will no longer require certifications for cost and pricing data upon conclusion of negotiations. In accordance with 48 CFR Part 9903.201-

1(5), this language provides an exemption to Cost Accounting Standards.

Late information.

Certain information, while received too late for inclusion in this proposed rate, will be evaluated and negotiated with individual carriers for consideration in the final rate.

Transparency.

Carriers have been invited to meet with TCAQ-P analysts during the week of 23-26 Jul, before comments are due. This meeting provides an opportunity for face to face discussions on carrier-specific cost/statistical data as well as general items of interest. In addition, individual carrier cut sheets were provided on 18 May, 11 Jun, and again on 3 Jul to facilitate on-going discussions. USTRANSCOM will make available, upon request, the latest analyst cut sheets supporting carrier costs in the rate. These cut sheets provide detailed information related to adjustments made by the analyst based on contractor’s costs and/or statistical data.

Comment Period

Considering the extensive amount of time and energy expended by both industry and the government toward this FY13 proposed rate, USTRANSCOM is requesting a 21-day suspense for comments. Comments are due by close of business on 01 Aug 12. Carriers requiring additional time may submit a written request to TCAQ-P, no later than 25 Jul 12.

The final rates must be published and the MOU signed before the FY13 contract is awarded.

Participation.

USTRANSCOM rates are based on carriers’ historical costs, projected into the contract year, plus a profit element. Carrier’s rates are weight averaged (based on USTRANSCOM revenues for a two-year period) into a single worldwide rate per seat-mile and ton-mile for each of the USTRANSCOM rate categories. The FY13 rates were developed on experienced base year cost and statistical data from seventeen carriers who provided twenty-one proposals for the base year ending 30 Jun 11. In accordance with the attached DRAFT MOU, carriers receiving 5 percent or greater of USTRANSCOM charter business, as calculated by

USTRANSCOM’s internal database, i are required to submit their actual cost data.

USTRANSCOM’s objective is to include a pool of accurate cost data that fairly represents the cost of providing DoD charter service. Carrier’s cost data was audited and USTRANSCOM analyzed carrier’s forecast operating cost projections in the development of the FY13 rates.

Adjustments made to carriers forecast costs were based on past ratemaking practices, findings reported by the Defense Contract Audit Agency (DCAA), the FAR, and the DRAFT MOU.

Explanatory notes are provided in Appendix K to identify individual carrier adjustments. The more significant items of interest for all carriers are further explored in the following paragraphs.

Capital Compensation.

The methodology established in the attached DRAFT MOU for ROI encompasses a number of key elements such as the industry capital structure, depreciation policies, industry’s leased equipment (both capital and operating), working capital considerations, and profit risk.

USTRANSCOM understands CRAF participants should receive a fair and reasonable ROI for their capital investment and business risk for their efforts to provide transportation services for DOD customers. The capital compensation component has been studied extensively in the past by industry and government groups and again reviewed as part of the FY13-FY17 MOU discussions.

The Capital Asset Pricing Model (CAPM) was used to calculate the cost of equity in the full

ROI calculation. The CAPM methodology is directed by the DRAFT MOU and uses several elements to develop a percentage for carriers receiving full ROI. The FY13 proposed rate full

ROI calculation included 10 major carriers whose revenues represented approximately 90 percent of all major carriers’ revenues. The carriers who met these criteria were: Alaska

Airlines, American Airlines, Continental Airlines, Delta Air Lines, Federal Express, Jet Blue, Southwest Airlines, United Air Lines, United Parcel Service and US Airways Group. This analysis resulted in a full ROI rate of 9.92 percent. No carriers received full ROI for FY13.

Appendix N, along with the attached DRAFT MOU, provides the details for the development of the 9.92 percent full ROI for the FY13 Rates.

USTRANSCOM applies a minimum return allowance (profit) for those carriers who have no flight equipment assets, capital assets that are fully depreciated, or an investment base that no longer yields a full return on investment that is greater than the minimum return (or profit) calculation. In accordance with the attached DRAFT MOU, USTRANSCOM proposes to calculate minimum return (or profit) using the weighted guidelines approach described in detail in the Defense Federal Acquisition Regulation Supplement (DFARS). The weighted guidelines approach allows USTRANSCOM to reward carriers focused on reducing costs and investing in modern, more efficient aircraft. This is specifically categorized in the weighted guidelines under the facilities capital employed and cost efficiency ratings. If the year-over-year cost efficiency factor applied to an individual carrier does not adequately predict the individual cost efficiencies applied, carriers are encouraged to provide a narrative explaining the cause of the discrepancy, with supporting documentation of the proposed cost efficiency factor. The narrative is limited to 10 pages in length and is to be provided to the appropriate assigned cost analyst. The minimum return allowance is applied to individual carriers in an open, transparent and consistent manner. The resulting minimum returns range from 6.52 percent for older, aged aircraft to 24 percent for the most modern, fuel efficient aircraft.

Cost Escalation.

Whenever possible, the carriers and USTRANSCOM use factual information such as future lease agreements, contract wage agreements, equipment purchase agreements, and insurance premiums to project base period costs into the forecast year. In the event actual data is not available, USTRANSCOM applies a general cost escalation factor. USTRANSCOM’s first preference is to review actual documentation. In accordance with the attached DRAFT MOU, the proposed general cost escalation model is as detailed on Appendix M. The model uses two indices, Global Insight Incorporated (GII) Travel Cost Index weighted at 20 percent and

GII Scheduled Freight Air Transportation Index, adjusted to remove fuel, direct labor, and capital equipment, weighted at 80 percent. The GII Scheduled Freight Air Transportation

Index is adjusted to remove the above input costs since USTRANSCOM does not apply general cost escalation to these three input costs. Fuel is escalated by the forecasted pegged price of fuel in the contract year. Direct labor is escalated by the actual salary increases to be received in the contract year in accordance with contract wage agreements. Finally, USTRANSCOM uses depreciation and rental cost in accordance with depreciation schedules and lease agreements forecasted in the cost package in lieu of escalating historical capital cost.

The FY13 proposed general cost escalation factor is 4.74 percent. USTRANSCOM will review and update the input indices as needed for the final rate.

Working Capital.

Working capital represents the timeframe from which services were provided under CRAF until the date those services are paid, notwithstanding the carrier’s working capital on hand.

Working capital became part of the investment base under the MOU negotiations for FY88-

FY93. The number of days used in the calculation was changed to 23 days from 21 days during the FY03-FY07 MOU negotiation process. This change was carried into the attached

DRAFT FY13-FY17 MOU.

The Director, Defense Procurement and Acquisition Policy, approved an early payment class deviation for CRAF contracts, which supports the 23 days cash operating expense in the working capital calculation, dated 3 August 2010, effective until 31 March 2013.

USTRANSCOM is currently working a request for a class deviation effective beyond

31 March 2013.

Fuel.

USTRANSCOM rates peg the price of fuel for charter services based on data from carrier provided fuel reports and industry. Fuel reports are reviewed for commercial fuel price trends for DoD missions and ratio of DoD to commercial fuel uplifted in support of DoD missions.

Carriers’ fuel reports for the period Jul 10 – Mar 12 conclude cargo carriers receive 64 percent of their fuel at military installations and are charged the rate set by the Defense

Logistics Agency (DLA) Energy, which fluctuates dependent on gains and losses within the

Defense Working Capital Fund. Conversely, passenger carriers receive 75 percent of their fuel commercially, which fluctuates up and down with the fuel market.

For the period Jul 10 – Mar 12, commercial fuel prices for USTRANSCOM service averaged

$3.04 and $3.06 for passenger and cargo, respectively. The monthly Spot Market analysis from Oil Price Information Service (OPIS) Worldwide Jet Fuel Report for Jul 12, along with the average of the Platts Market International Air Transport Association (IATA) Fuel Price

Analysis for Jul 12 indicates average commercial fuel prices at $2.71. Further analysis of fuel prices in USTRANSCOM service showed CRAF carriers experience approximately 5 percent higher commercial prices due to mission locations which are outside the SPOT markets recognized by OPIS and IATA. DLA projected JP-5 and JP-8 fuel effective 1 Jul 12 at $2.33 and $2.31, respectively. The weightings between commercial fuel and military fuel along with projected DESC fuel price and current commercial market prices resulted in a proposed

USTRANSCOM pegged fuel price of $2.70 and $2.50 per U.S. gallon, for passenger and cargo (Combi will use cargo price), respectively. The pegged price includes into-plane fees and taxes. The projected DESC fuel prices and commercial fuel prices will be reviewed again for inclusion in the FY13 final rate.

USTRANSCOM will continue to adjust each carrier’s monthly revenues upward or downward if the price of fuel varies by $.01 or more per gallon over/under the pegged prices in the established rate. The solicitation addresses the fuel adjustment procedure.

Ferry.

USTRANSCOM changed the ferry rate in FY02 from 75 percent to 90 percent. The ferry rate is a reduced rate based on savings of flying an empty aircraft. An empty aircraft does not incur costs such as food, full cabin crew salary, and passenger liability insurance. The aircraft in empty service is more fuel-efficient and flies a more direct route. An empty aircraft in non-revenue service also incurs lower cost in “aircraft and traffic servicing.” Non-revenue enroute stops do not incur cost related to traffic handling personnel, gate requirements, security, and in some cases lower landing fees. USTRANSCOM reviewed the current cost levels in all cost categories. The ferry rate for FY13 will remain at 90 percent of the effective rate for cargo and passenger.

ii Also see Appendix A for ferry rates.

One-Way Rates.

Historically, USTRANSCOM carriers claim commercial backhaul opportunities for

USTRANSCOM missions are nonexistent. Passenger and cargo missions are obviously different. Cargo generally moves in one direction and is consumed; while passengers generally require round trip service. Therefore, the ability to find a one-way commercial passenger charter to parallel USTRANSCOM’s one-way requirements generally does not exist. USTRANSCOM cargo charter carriers are afforded significant USTRANSCOM expansion missions operating into Southwest Asia that appear to parallel their commercial operations, where they are able to coordinate aircraft flow and achieve commercial backhaul.

The FY13 Proposed one-way rates are as follows:

One Way Rates (Percent of round-trip seat/ton mile rate)

Cargo

Large Class

Cargo

Medium Class

Passenger

Combi

One-Way

Missions

166%

166%

N/A

185%

Contingency Rate

(per Appendix A, Para G)

195%

195%

N/A

193%

The above one-way cargo rates are based on the round-trip rate, adjusted to reflect certain savings and economies. The adjustments for the one-way rates are: (1) cost savings associated with flying an empty aircraft in backhaul service, (2) a reduction for backhaul miles flown in commercial service, (3) a reduction for fewer miles flown in backhaul service due to aircraft scheduling efficiencies. USTRANSCOM addressed a 10 percent savings of flying an empty aircraft in the earlier paragraph concerning the “ferry” rate. This savings holds true for flying an empty aircraft in the reverse segment of a one-way mission.

Historical data for cargo carriers suggests efficiency in aircraft scheduling resulting in fewer miles flown in empty backhaul service. Appendix O reflects the cargo carrier data associated with empty backhaul service for USTRANSCOM missions, excluding quarterly-buy expansion data incorporated at Appendix P.

Large Class Cargo: For FYs 10 and 11, USTRANSCOM hypothesized there should be noted efficiencies associated with planning time. The greater the lead-time, the more time a carrier has to align their commercial services, resulting in more efficient operations. This would be the opposite for ad-hoc missions, where little planning time is available. During the

FY11 and FY12 analyses, it was noted this was not the case, as carriers appeared to simply assign commercial missions closely tied to their USTRANSCOM mission at the time of operation. This analysis indicated a single one-way rate would again be appropriate.

Therefore, as part of the FY12 rate, USTRANSCOM proposed a single one-way rate.

As a result of the same type of analysis for FY13, USTRANSCOM proposes a single one-way rate, based on the discussion that follows.

Again this year, USTRANSCOM reviewed one-way expansion missions reported on carrier

S2 reports. Carriers report empty miles associated with the 2 legs before USTRANSCOM one-way missions originating outside CONUS or, conversely 2 legs after one-way missions originating inside the CONUS. The empty legs represent the movement of the aircraft prior to re-entering commercial service, positioning to maintenance, or positioning to a carrier’s home base of operation. Appendix O reflects samples of the calculation for all cargo missions and then ad-hoc missions only; while Appendix P reflects samples of the calculation for the quarterly awards for the period Jul 10 through Mar 12. This year’s results reflect the carriers’ ability to work the flow of DoD one-way missions with their commercial one-way business to create an efficient operation regardless of the lead time provided by USTRANSCOM. The overall ratio of empty miles to one-way live revenue miles for the large cargo class was 54 percent, while the Quarterly/Semi-Annual calculation resulted in a ratio of 53 percent empty miles to one-way live revenue miles. The statistical ratio of base year paid empty flown miles to paid one-way miles reflects, on average, 45 percent efficiency in the scheduling of aircraft in empty reverse segments. This savings in conjunction with the 10 percent savings for flying an empty aircraft reflects an average of 55 percent savings for one-way cargo missions.

Realizing not all carriers achieve a 45 percent savings in empty backhaul, and in consideration of the most recent S2 data (through Mar 2012) USTRANSCOM is proposing a one-way rate of 166 percent for FY13, allowing for the 10 percent savings associated with flying empty in conjunction with a 24 percent savings due to efficiencies in scheduling aircraft in empty reverse segments. This is 1 percent lower than the FY12 one-way rate.

Medium Class Cargo: In FY10, USTRANSCOM separated the medium class and large class cargo categories due to the negligible amount of USTRANSCOM one way missions offered the medium class category. This year’s medium cargo class ratio of empty miles to one-way live revenue miles was 53 percent, reflecting some efficiency in their one-way operations. The statistical ratio of base year paid empty flown miles to paid one-way miles for the medium class reflects, on average, 45 percent efficiency in the scheduling of aircraft in empty reverse segments. This savings in conjunction with the 10 percent savings for flying an empty aircraft reflects an average of 55 percent savings for one-way cargo missions. It is noted one carrier operating over 20 percent of USTRANSCOM business in this category did not achieve this efficiency in their operations. Because the proposed rate must consider all carriers within this category, USTRANSCOM is proposing a one-way cargo rate for the medium class of 166 percent for FY13, allowing for the 10 percent savings associated with flying empty in conjunction with a 24 percent savings due to efficiencies in scheduling aircraft in empty reverse segments. This is 1 percent lower than the FY12 one-way rate.

Passenger: The one-way passenger rate has historically been based on the round-trip rate, adjusted to reflect savings and economies, as discussed above. Over the past few years, passenger carriers in USTRANSCOM service were receiving ferry based upon a formula derived by TCAQ-C. This ferry formula made it complex for carriers attempting to report live miles, ferry miles and empty backhaul miles on passenger one-way missions. This became increasingly complicated for TCAQ buyers and administrators.

In FY12 USTRANSCOM introduced a live mile rate for all passenger missions. For FY13

USTRANSCOM proposes no change to this methodology. This proposal incorporates the effective or line-haul rate for all live miles, regardless if the miles are one-way or round trip.

For one-way missions, carriers will also receive a “paid ferry return”, based on the ferry rate, for positioning or depositioning miles.

Standard Allowable Cabin Loads (ACL).

In FY92, USTRANSCOM implemented the concept of maximum standard ACLs for aircraft performing USTRANSCOM business. USTRANSCOM was concerned about parity among carriers and maintaining a competitive environment within the USTRANSCOM Rates. The maximum standard ACLs are based on range capability, aircraft usable floor space, gross takeoff weight capacity, lavatories, aircraft operating expense, and passenger comfort and convenience.

As part of the FY13 rate process, TCAQ performed a thorough review of the standard pay

ACLs used in the ratemaking process to recognize fuel efficiency, range and capacity. The objective of this review was to determine reasonableness of our current standard pay ACL in relation to aircraft productivity, weight sensitivity, cube sensitivity, range capability, passenger comfort and convenience as well as actual payloads achieved by DoD. This analysis is an on-going process.

During this ratemaking cycle, USTRANSCOM was requested to re-evaluate the charter configured B777 passenger aircraft, as well as the A330-300, A330-200 and B767-200 passenger aircraft. As with the cargo B747-400 aircraft, the proposed ACLs are subject to change as additional data becomes available.

In FY11, the charter-configured B777 passenger aircraft was added at a proposed ACL of

380. This ACL was based on a consideration of the enhanced performance capability of the

B777, as well as actual seats available on the charter-configured aircraft. The dimensional differences between the B777 and the MD11 and DC10 were taken into consideration in establishing this ACL. Further review of the capability of this aircraft along with available seats and fuel efficiency continues to support a 380 ACL at this time. As further information becomes available during FY13, this ACL will again be evaluated.

USTRANSCOM was also requested to review the standard ACL for the A330-300 and A330-

200 passenger aircraft. Research indicates the A330-200 passenger aircraft is correctly classified as a large class aircraft with a standard ACL of 310. The analysis of the A330-300, indicates this aircraft has comparable payload and range of the B777 aircraft in scheduled service configuration and has more available seats than the A330-200. The A330-300 ACL is therefore established at 330. As further information becomes available during FY13, this

ACL will again be evaluated.

Additionally, USTRANSCOM was requested to review the ACL for the B767-200 passenger aircraft. Our analysis indicates this aircraft is correctly classified as a medium class aircraft with a standard ACL of 200.

Appendix A provides the maximum ACLs by rate aircraft category.

Eurocontrol.

USTRANSCOM provides a Eurocontrol surcharge to compensate carriers for the costs of missions through Eurocontrolled airspace. USTRANSCOM analyzed actual Eurocontrol invoices for specific routes shown in Appendix L. For the FY13 proposed rate, USTRANSCOM evaluated sixty-nine representative routes for passenger missions and thirty-four for cargo. The current Eurocontrol charges (converted to U.S. dollars) were calculated as a percent of the trip revenues using the FY13 proposed effective rate, for all but the small class passenger and medium class cargo categories. For the small class passenger and medium class cargo categories, Eurocontrol charges (converted to U.S. dollars) were calculated as a percent of the trip revenues using the FY13 proposed line haul rate (without stop charge). USTRANSCOM is proposing the FY13 Eurocontrol surcharge of 2.3 percent for passenger, 3.3 percent for cargo missions, .44 percent for combi. L-100 euro control will be provided on a cost reimbursable basis. This is a change from the FY12 Eurocontrol of 2.4 percent, 3.0 percent and .42 percent for passenger, cargo and combi, respectively. The L-100 eurocontrol on a cost reimbursable basis remains unchanged.

Incremental Passenger Movement.

In FY02, USTRANSCOM developed an incremental passenger service rate for periodical requirements requiring the use of extra seats above the standard ACL. The rate applies when the number of additional passengers above the standard ACL is identified in advance for an exercise, SAAM, or contingency. USTRANSCOM proposes $221 for the FY13 Incremental

Passenger Rate, an increase from $206 in FY12. It is based on the weighted passenger service cost applied to the average miles per trip iii

. See Appendix A for details.

Aeromedical.

In FY10 USTRANSCOM proposed to utilize the medium class passenger negotiated uniform rate for the aeromedical per mile rate (Rate x 240ACL). No comments were received and so, for FY13, the Aeromedical Evacuation Proposed rate will be based on the medium class rate proposed herein. USTRANSCOM will establish the reconfiguration daily and under utilization hourly rates and publish those in the proposed Aeromedical Airlift Uniform Rates and Rules document.

Appendices.

Appendix A provides procedures and rules for the application of USTRANSCOM Rates.

Appendix B provides the weighting and participation of carriers comprising the large, medium, and small class of passenger aircraft, the large (modern), large (classic), and medium class of cargo aircraft, combi and L-100 aircraft rates, respectively. Appendices C through J illustrate individual treatment of each carrier’s cost by aircraft type, with explanatory notes provided in Appendix K. Appendices L, M and N provide the Eurocontrol Surcharge, Cost

Escalation Factor and Rate of Return on Investment Computations, respectively. Appendices

O and P provide Backhaul Operational Data for USTRANSCOM Services excluding one-way cargo large class long-term expansion, and Backhaul Operational Data for USTRANSCOM

One-Way Cargo Large Class Long-Term Expansion, respectively. Finally, Appendix Q demonstrates the FICA calculation.

i The Commercial Operation Integrated System (COINS) database supports contracting of commercial airlift.

The database for contract dollars is maintained by USTRANSCOM/TCAQ-C.

ii The analysis of the Passenger ferry rate was performed using the Proposed FY13 Large Class passenger rate of

$0.11924 (effective rate) per seat mile. The proposed passenger ferry rate and paid ferry return rate will be 90% of the effective rate. The analysis of the Cargo ferry rate was performed using the Proposed FY13 Large Class

MFE cargo rate of $0.37297

SUBJECT: FY13 Proposed Ferry Rate Passenger

Wgt'd Percentage Cost Ferry Cost Category Cost Allowed Allowed Rate %

Crew 1.1703 100% 1.1703 Fuel 3.8419 88% 3.3617 Maintenance 1.8309 100% 1.8309 Insurance 0.1069 99% 0.1058 Rent 0.4881 100% 0.4881 Depreciation 0.1646 100% 0.1646 Preop 0.0154 100% 0.0154 Capital Gains/Losses 0.0383 200% 0.0766 Grd Property 0.0051 100% 0.0051 Aircraft & Traffic Service 0.7988 85% 0.6789 Passenger Service 1.7407 65% 1.1315 G&A 0.3812 100% 0.3812 Profit 1.3402 100% 1.3402 Total 11.922

10.750 0.9017

SUBJECT: FY13 Cargo Ferry Rate

Wgt'd Percentage Cost Ferry

Cost Category Cost Allowed Allowed Rate %

Crew 3.4972 100% 3.4972 Fuel 14.0476 75% 10.5357 Maintenance 5.3226 100% 5.3226 Insurance 0.2113 100% 0.2113 Rent 3.1861 100% 3.1861 Depreciation 1.0923 100% 1.0923 Preop 0.0000 100% 0.0000 Cap Gains/Losses 0.0000 0% 0.0000 Grd Property 0.0585 100% 0.0585 Aircraft & Traffic Service 2.5693 85% 2.1839 G&A 1.3380 100% 1.3380 Profit 5.9741 100% 5.9741 Total 37.2970

33.3997 0.8955 iii

One-Way Round-Trip Total

Avg Live Pay Miles

2,107,098 12,853,826 14,960,924.00 FY13 Proposed Passenger Seat Mile Rate 0.22059 0.11924

168,587,739 555,906,740

Total Dollars

724,494,479 Total Trips

1,178

Total Passengers

427,261 Avg Passenger per Trip

Avg Price Per Trip

615,020.78 Avg Seat Miles Per Trip 4,606,389.76 Avg Miles Per Trip

12,700

Additional passenger service cost per trip 221

INDEX OF APPENDICES

No.

Appendix Title Pages

A USTRANSCOM Uniform Negotiated Rates and Rules 6

B Computation of Uniform Rates: 8

Large Class Passenger Service

Medium Class Passenger Service

Small Class Passenger Service

Large Class Cargo (MFE) Service

Large Class Cargo (Classic) Service

Medium Class Cargo Service

Combi Class Service

L100 Class Service

C Costs Per Seat Mile by Carrier and Aircraft Type

In Large Class Charter Passenger Service 2

D Costs Per Seat Mile by Carrier and Aircraft Type in Medium Class Charter Passenger Service 4

E Costs Per Seat Mile by Carrier and Aircraft Type in Small Class Charter Passenger Service 3

F Costs Per Ton Mile by Carrier and Aircraft Type in Large Class Cargo Service (MFE) 3

G Costs Per Ton Mile by Carrier and Aircraft Type in Large Class Cargo Service (Classic) 3

H Costs Per Ton Mile by Carrier and Aircraft Type in Medium Class Cargo Service 4

I Cost Per Plane Mile by Carrier Charter

Combi Service 1

J Cost Per Ton Mile by Carrier Charter

L100 Service 1

K Explanatory Notes 9

L Eurocontrol Surcharge 6

M Cost Escalation Factor 2

N Rate of Return on Investment 3

O Backhaul Operational Data for USTRANSCOM Service

Excluding One-Way Cargo Large Class Quarterly Expansion 1

P Backhaul Operational Data for USTRANSCOM Service

One-Way Cargo Large Class Quarterly Expansion 1

Q FICA Escalation 1

APPENDIX A

SCHEDULE OF UNIFORM NEGOTIATED RATES AND RULES

FISCAL YEAR 2013

A. RATES. Air transportation services shall be paid for at the following rates. In addition, carriers' monthly

USTRANSCOM revenues based on the uniform rate will be adjusted for the variance in fuel price as provided in paragraph C of this Appendix A.

(1) CHARTER PASSENGER SERVICE PER SEAT MILE

Large

Live Effective Rate

$0.11924

Ferry Rate (Base - Effective Rate) 90% $0.10732

Incremental Passenger

$221

Fuel Pegged Rate

$2.70

Medium

Live Effective Rate

$0.13152

Ferry Rate (Base - Effective Rate) 90% $0.11837

$2.70

Small

Live Line Haul Rate

$0.14499

Ferry Rate (Base - Effective Rate) 90% $0.13902

Stop Charge (Per Directed Landing)

$2,000

Fuel Pegged Rate $2.70

(2) CHARTER CARGO SERVICE PER TON MILE

Large - Modern Fuel Efficient (MFE)

Round Trip Effective Rate

$0.37297

One-Way 166% $0.61913

Contingency Rate (Per Para G) 195% $0.72729

Ferry Rate (Base - Effective Rate) 90% $0.33567

$2.50

Large - Classic

$0.38787

One-Way 166% $0.64386

Contingency Rate (Per Para G) 195% $0.75635

Ferry Rate (Base - Effective Rate) 90% $0.34908

$2.50

Medium

Round Trip Line Haul Rate

$0.54347

One-Way 166% $0.90216

Contingency Rate (Per Para G) 195% $1.05977

Ferry Rate (Base - Effective Rate) 90% $0.51337

Stop Charge (Per Directed Landing)

$2,000

Fuel Pegged Rate $2.50

(3) CHARTER COMBI SERVICE PER PLANE MILE

$23.81169

One-Way 185% $44.05163

Contingency Rate (Per Para G) 193% $45.95656

Ferry Rate (Base - Effective Rate) 90% $21.43052

(4) CHARTER L-100 SERVICE PER TON MILE

$1.31329

Ferry Rate (Base - Effective Rate) 90% $1.18196

(5) EUROCONTROL. Eurocontrol applies where a carrier is required to transit countries with an ICAO prefix of "E" or "L" (i.e., EDAF, LIRA), with the exception of EGYP in the Falkland Islands. The Eurocontrol surcharge calculation does not include stop charges. On round trip passenger, cargo or combi missions, Eurocontrol will be paid on live miles only. On one way passenger missions, Eurocontrol will be paid on the live miles plus an additional 85 percent of those miles (i.e., 6,000 mile one way passenger mission would be paid 2.3 percent on 6,000 miles + 5,100 miles). Carriers will be paid the applicable rate plus a surcharge of 3.3 percent for cargo missions and

0.44 percent for combi. Eurocontrol fees for the L100 class aircraft will be cost reimbursable.

(6) FERRY. Ferry will be paid based on standard ACL or lesser amount.

(a) Close the jaw ferry: In the event the air carrier operates a round-trip flight where the distance between originating and terminating stations exceeds 250 statute miles, the carrier will be paid either ferry rate for the statute miles between the originating station and termination, or ferry rate for the statute miles between the terminating station and, by mutual consent, one of the carrier's principle operating bases. The carrier will not be paid ferry compensation to ―close the jaw‖ if USTRANSCOM has contracted that carrier to operate a follow-on flight, which originates from the terminating station, within 24 hours.

(b) Positioning and depositioning ferry: Positioning and depositioning ferry shall be included with the offer and negotiated at time of award.

(c) ―Front/backhaul ferry‖ on one-way passenger missions will be applied to empty backhaul miles in addition to, and in the same manner as, positioning/depositioning ferry identified in subparagraph (b) above.

(7) INCREMENTAL PASSENGER MOVEMENT. The incremental passenger rate applies when the number of additional passengers above the standard ACL is identified for an exercise, SAAM or contingency. The incremental passenger movement rate is $221 for each additional passenger over the standard ACL. In cases when the per seat cost is lower than USTRANSCOM’s incremental passenger rate, USTRANSCOM will pay the lesser amount.

(8) TRIP CANCELLATION. A cancellation charge will be paid on missions canceled with notification given within the time frames noted below (see contract Section H, TRIP CANCELLATION). Times are all prior to scheduled departure. Reference to days means a continuous 24-hour period. All ―days‖ refers to ―calendar days.‖

The cancellation charge will be applied to the trip price for the route segment only (ferry, stop charges, Eurocontrol surcharge or any other additional charges will not be included). Cancellation of one way passenger missions will be calculated on a trip price made up of the live miles plus 85 percent of those miles at the live mile rate (i.e., 6,000 mile one way passenger mission would be paid the applicable cancellation percentage on 6,000 miles + 5,100 miles times the live mile rate). The charges are as follows:

Time Frame Service Type 1 Oct 12 – 30 Sep 13

Seven days or less

Passenger and Combi:

Cargo:

30.45%

24.87%

8 to 14 days

Cargo:

19.30%

18.71%

15 to 30 days

Cargo:

15.58%

14.99%

31 to 45 days Passenger and Combi 7.88%

31 to 75 days Cargo 6.85%

Beyond 45 days Passenger and Combi 0%

Beyond 75 days Cargo 0%

Missions awarded less than 14 days prior to operating date and subsequently cancelled

Passenger and Combi:

Cargo:

19.30%

18.71%

(9) DEMURRAGE. Demurrage will be paid on completed cargo missions when departure is delayed over 3 hours beyond scheduled block time and the delay is Government controlled (see contract Section H, REIMBURSABLE SUBMISSION). Payment of delays of fractions of an hour will be calculated using normal rounding procedures, i.e., 29 minutes or less will be dropped, 30 minutes or more will be rounded to the next whole hour. Demurrage charges are as follows:

Aircraft Type ACL Demurrage

B747-100/200 90 $1796

B747-400/400ER 100 $1832

MD11F 86 $1576

MD11C 86 $1576

B777F 88 $1612

DC10-30/40 75 $1496

A300-600ER 51 $1858

A300-400F 50 $1822

B767-200F 48 $1749

DC8 45 $1640

L100 23 $1896

B727-100 18 $905

B727-200 22 $1742

B. AIRCRAFT STANDARDS. The rate set forth in paragraph A shall be applied to the following standard aircraft loads. When an aircraft is offered for the fixed buy missions with fewer seats than the standard ACL, and the aircraft is not 34 inch seat pitch configuration, we will only pay for the actual number of seats.

PASSENGER AIRCRAFT CARGO AIRCRAFT

Aircraft Type Maximum Standard

Payload Aircraft Type Maximum Standard

Payload

Small Aircraft: Small Aircraft:

A319 135 B737-200 14

MD80 140 B727-200 22

B737-400/700 140 L100 23

B737-800 150

A320 150

A321 170

Medium Aircraft: Medium Aircraft:

B757-200/200ER 190 DC8 45

B757-300 200 B767-200F 48

B767-200/200ER 200 A300-B4(F) 50

A310 200 A300-600ER 51

A300 210

B767-300/300ER 240

B767-400ER 260

Large Aircraft: Large Aircraft – Modern Fuel Efficient (MFE)

A330-200 310 MD11 86

A330-300 330 B747-400 100

B777-200ER 330 B777F 88

DC10-30 330 B767-300F 61

A340 345

MD11/MD11ER 360 Large Aircraft – Classic

B777 Charter Config. 380 DC10-30/40 75

B747 400 B747-100/200/300 90

C. FUEL ADJUSTMENTS.

(1) The carrier shall be compensated for variance in fuel prices incurred on USTRANSCOM contracted full planeload missions bought at the USTRANSCOM rate. Compensation will not be made to the prime or subservicing carrier for substitute service or subcontracted miles. Adjustments will be made upward or downward if the price of fuel varies by more than one cent per gallon from the pegged price (as stated in the USTRANSCOM Uniform

Negotiated Rates and Rules) used in establishing the USTRANSCOM rates.

(2) The solicitation/contract addresses the current fuel adjustment procedures (see PWS, Appendix 3, FUEL

ADJUSTMENT PROCEDURES).

D. ROUND-TRIP SERVICES. The round-trip rate will be applied to trips where cargo is transported on two or more successive revenue flights in opposite directions.

E. SEATTLE CHANNELS. Seattle closed as of 1 Oct 05 as a full up commercial gateway and now operates as a channel extension. Channel extension services at Seattle, as directed by the performance work statement, are TBD prior to performance.

F. COMPUTATION OF PASSENGER SEAT-MILES AND CARGO TON-MILES FOR PAY PURPOSES.

Long Range Service: Computation of miles and stop charges shall be computed as follows:

(1) If a live route segment is less than 4,000 miles, mileage shall be computed nonstop from origin to destination of that segment.

(2) When a route segment is 4,000 miles or more the mileage shall be computed via an intermediate point(s) which yields the shortest mileage. The government will pay for a directed operational stop when a route segment exceeds 4,000 miles. Carrier enroute stops related to paid ferry when positioning an aircraft for AMC service do not receive a stop charge since paid ferry is paid on the effective rate versus the linehaul rate.

Examples: KBWI*CYQX–EDDF–LTAG–EDDF*CYQX–KBWI-KCHS = 7 Paid Stops 1/

KCHS#MMCZ-MPTO=1 Paid Stop 2/

KWRI+KCOF-TAPA-FHAW-TAPA-KCOF+KWRI= 4 Paid Stops 3/

1/ *

This symbol used in the above example indicates operational stops.

2/ # This symbol used in the above example indicates special miles for circumnavigating countries which will not grant over flight clearances—stop charges do not apply.

3/

+ This symbol used in the above example indicates ferry leg for which stop charges do not apply.

(3) If a route segment is in the Pacific, the mileage shall be computed as indicated below:

PACIFIC ROUTINGS

PHILIPPINE

BETWEEN THAILAND A/ ISLANDS GUAM KOREA HAWAII TAIWAN OKINAWA JAPAN ALASKA

CONUS 4 or 6 4 or 6 5 4 or 8 B/ 1 4 or 8 B/ 4 or 8 B/ 2 or 5 B/ 1

ALASKA 3 3 - 3 - 3 3 1 or 3

JAPAN 1 1 1 1 1 B/ 1 1

OKINAWA 1 1 1 1 3 B/ 1

TAIWAN 1 1 1 1 3 B/

HAWAII 7 7 1 3 B/

KOREA 9 1 1

GUAM 1 1

PHILIPPINE 1

ISLAND

ROUTINGS

1. Direct 4. Via Anchorage and Yokota AB, Japan 7. Via Guam

2. Via Anchorage 5. Via Honolulu 8. Via Honolulu and Yokota AB, Japan

3. Via Yokota AB, Japan 6. Via Honolulu - Guam 9. Via Taipei

A/ Certain trips to Thailand require submission of flight plan for circumnavigation.

B/ Honolulu – Yokota AB, Japan either direct or via Midway or Guam as specified in the USTRANSCOM contract.

G. DEFINITIONS.

―Charter Service‖ means USTRANSCOM contracted airlift for the transportation of passengers in full planeload lots on aircraft chartered from the commercial air industry and paid at the USTRANSCOM negotiated rate.

These international charter flights are scheduled by AMC to and from designated commercial airports and/or AMC gateways and/or military aerial ports.

―Charter rate‖ means a commercial price that is in fact available to the general public for equivalent services.

Missions bought at a commercial charter price are all inclusive of taxes and any other ancillary cost and are not subject to adjustments for fuel prices.

―Contingency rate‖ The USTRANSCOM proposed contingency one-way rates are to be used at the

USTRANSCOM commander’s discretion during conditions such as outbreak of war, armed conflict, insurrection, civil or military strife, or similar conditions (overseas). The one-way rates are adjusted to reflect limited backhaul capabilities.

―Stop charge‖ The stop charge is paid by the government in the case of government directed landings

(operational and traffic stops) identified by the contract or delivery order to support USTRANSCOM contracted missions. Operational stops allowed in accordance with Appendix A, Paragraph F (b) are considered directed stops.

Landings made by the contractor of his own discretion for maintenance, aborted flights, fuel stops, crew changes, or emergency landings are not considered "directed landings," and therefore receive no stop charge.

―Pay miles‖ means the statute miles used to compute the price of the mission in accordance with COINS.

COINS calculates distances based on longitude and latitude for geographical locations listed in the DoD Flight

Information Publication (FLIP) and identified by location indicators assigned by the International Civil Aviation

Organization (ICAO) and published in the Location Indicator, Doc 7910/67.

―Linehaul Rate‖ The Linehaul rate = Effective Rate - (Stop charge/(Average Stage Length * ACL))

APPENDIX B

COMPUTATION

USTRANSCOM UNIFORM RATE

ROUND-TRIP PASSENGER SERVICE

LARGE CLASS AIRCRAFT

USTRANSCOM FY11 FY12 Total

Adjusted Passenger Passenger Passenger

Aircraft Rate Per Revenues Revenues Revenues Weighted

Carrier Type Pax Mile [000] [000] [000] Wgt % Rate

OMNI AIR INTERNATIONAL INC B777 0.13030$ 21,957$ 77,391$ $99,348 13.28% $0.01731

WORLD AIRWAYS INC MD11 0.11754$ 444,489$ 203,986$ $648,476 86.72% $0.10193

$747,823 1.0000

RATE -- WEIGHTED BY REVENUES $0.11924

Exclusive of Fuel $0.08080

USTRANSCOM UNIFORM RATE

ROUND-TRIP PASSENGER SERVICE

MEDIUM CLASS AIRCRAFT

USTRANSCOM FY11 FY12 Total

Adjusted Passenger Passenger Passenger

Aircraft Rate Per Revenues Revenues Revenues Weighted

Carrier Type Pax Mile [000] [000] [000] Wgt % Rate

DELTA AIR LINES INC B767-300 0.13102$ 50,727$ 42,299$ $93,026 8.56% $0.01121

NORTH AMERICAN AIRLINES B767-300 0.12975$ 208,249$ 186,804$ $395,052 36.34% $0.04715

OMNI AIR INTERNATIONAL INC B767-300 0.12929$ 172,622$ 136,268$ $308,890 28.41% $0.03673

RYAN INTERNATIONAL AIRLINES, INC. B767-300 0.13647$ 186,703$ 103,507$ $290,209 26.69% $0.03643

$1,087,178 1.0000

RATE -- WEIGHTED BY REVENUES $0.13152

Exclusive of Fuel $0.09220

USTRANSCOM UNIFORM RATE

ROUND-TRIP PASSENGER SERVICE

SMALL CLASS AIRCRAFT

USTRANSCOM FY11 FY12 Total

Adjusted Passenger Passenger Passenger

Aircraft Rate Per Revenues Revenues Revenues Weighted

Carrier Type Pax Mile [000] [000] [000] Wgt % Rate

DELTA AIR LINES INC B737-800 0.16123$ 2,364$ 4,172$ $6,536 15.53% $0.02504

MIAMI AIR INTERNATIONAL INC B737-800 0.15503$ 17,008$ 8,047$ $25,056 59.53% $0.09229

UNITED AIRLINES (Continental) B737-800 0.14892$ 7,243$ 3,253$ $10,496 24.94% $0.03714

$42,088 1.0000

RATE -- WEIGHTED BY REVENUES $0.15447

Exclusive of Fuel $0.11565

Average Average Rate Per Linehaul Rate

Effective Rate Stage Seats Per Directed Per Paid

Per Seat Mile Length Mission Landing Seat Mile

$0.15447 1,421 149 $2,000 $0.14499

Note: The weighted average stage length and weighted average seats per mission are based on USTRANSCOM base year data.

USTRANSCOM UNIFORM RATE

ROUND-TRIP CARGO SERVICE

LARGE CLASS AIRCRAFT (MFE)

USTRANSCOM FY11 FY12 Total

Adjusted Cargo Cargo Cargo

Aircraft Rate Per Revenues Revenues Revenues Weighted

Carrier Type Ton Mile [000] [000] [000] Wgt % Rate

ATLAS AIR, INC. B747-400 0.36301$ 94,420$ 222,307$ $316,727 55.45% $0.20127

FEDERAL EXPRESS CORPORATION MD11 0.42595$ 65,049$ 63,141$ $128,190 22.44% $0.09559

WORLD AIRWAYS INC MD11 0.34416$ 74,721$ 51,604$ $126,325 22.11% $0.07611

$234,190 $337,051

$571,241 1.0000

RATE -- WEIGHTED BY REVENUES $0.37297

Exclusive of Fuel $0.23249

USTRANSCOM UNIFORM RATE

ROUND-TRIP CARGO SERVICE

LARGE CLASS AIRCRAFT (CLASSIC)

USTRANSCOM FY11 FY12 Total

Adjusted Cargo Cargo Cargo

Aircraft Rate Per Revenues Revenues Revenues Weighted

Carrier Type Ton Mile [000] [000] [000] Wgt % Rate

EVERGREEN INTERNATIONAL AIRLINES, INC. B747 0.39890$ 380,253$ 191,294$ $571,547 63.45% $0.25310

KALITTA AIR, LLC B747 0.43816$ 104,452$ 16,627$ $121,079 13.44% $0.05889

SOUTHERN AIR INC. B747 0.32833$ 99,019$ 109,156$ $208,175 23.11% $0.07588

$583,724 $317,077

$900,801 1.0000

RATE -- WEIGHTED BY REVENUES $0.38787

Exclusive of Fuel $0.17552

USTRANSCOM UNIFORM RATE

ROUND-TRIP CARGO SERVICE

MEDIUM CLASS AIRCRAFT

USTRANSCOM FY11 FY12 Total

Adjusted Cargo Cargo Cargo

Aircraft Rate Per Revenues Revenues Revenues Weighted

Carrier Type Ton Mile [000] [000] [000] Wgt % Rate

ABX AIR INC B767-200F 0.42854$ $2,507 $1,784 $4,291 18.77% $0.08044

AIR TRANSPORT INTERNATIONAL LLC DC8 0.43045$ $1,720 $3,119 $4,838 21.16% $0.09109

ASTAR AIR CARGO, INC. DC8 0.74761$ $5,115 $3,559 $8,674 37.94% $0.28364

NATIONAL AIR CARGO GROUP, INC. DC8 0.52080$ $4,168 $891 $5,059 22.13% $0.11524

$13,509 $9,353

$22,862 1.0000

RATE -- WEIGHTED BY REVENUES $0.57041

Exclusive of Fuel $0.35043

Average Average Rate Per Linehaul Rate

Effective Rate Stage Tons Per Directed Per Paid

Per Seat Mile Length Mission Landing Seat Mile

$0.57041 1628 45.6 $2,000 $0.54347

Note: The weighted average stage length and weighted average tons are based on USTRANSCOM base year data.

USTRANSCOM UNIFORM RATE

ROUND-TRIP COMBI SERVICE

COMBI AIRCRAFT

USTRANSCOM FY11 FY12 Total

Adjusted Combi Combi Combi

Aircraft Rate Revenues Revenues Revenues Weighted

Carrier Type Per Mile [000] [000] [000] Wgt % Rate

Air Transport Int'l DC8-62/72 $23.81169 $380,253 $191,294 $571,547 100.00% $23.81169

$571,547 1.0000

RATE -- WEIGHTED BY REVENUES $23.81169

Exclusive of Fuel $14.24730

USTRANSCOM UNIFORM RATE

ROUND-TRIP SERVICE

LYNDEN L100 AIRCRAFT

USTRANSCOM FY11 FY12 Total

Adjusted L100 L100 L100

Aircraft Rate Revenues Revenues Revenues Weighted

Carrier Type Per Ton Mile [000] [000] [000] Wgt % Rate

Lynden Air Cargo LLC L100 1.31329$ $24,332 $19,138 $43,470 100.00% $1.31329

$43,470 1.0000

RATE -- WEIGHTED BY REVENUES $1.31329

Exclusive of Fuel $1.05326

APPENDIX C

OMNI AIR INTERNATIONAL (OAE) Aircraft Type B777-200CH

LARGE CLASS AIRCRAFT Passenger Service

FY13 RATE REVIEW

FORECAST YEAR FY13

YE JUN 11

CARRIER BY AS

SYSTEM CARRIER ADJUSTED

TOTAL REVENUE & BACKHAUL/PAID MILES (000) 1,135 142 A 495

AVERAGE DAILY AIRCRAFT UTILIZATION 6.4 9.1 B 9.1

COST PER REVENUE/PAID AIRCRAFT MILE

Direct Variable:

Crew $5.3498 $11.2267 C $6.2922

Fuel, Oil, & Aircraft Supplies 18.0863 15.7106 D 12.8879

Flight Equipment Maintenance 7.9339 13.0278 E 7.8831

Total Direct Variable 31.3700 39.9651 27.0631

Direct Fixed:

Hull, Public Liability, & Property Damage Insurance 0.0176 0.1996 F 0.2074

Aircraft Rentals & Miscellaneous 0.1630 0.8128 G 0.0468

Flight Equipment Depreciation & Obsolescence 0.4458 3.9341 H 3.8497

Amortization of Preoperating Expense 0.0000 0.0000 I 0.4409

Capital Gains & Losses 0.0000 0.0000 J 0.0000

Total Direct Fixed 0.6264 4.9465 4.5447

Indirect:

Maintenance & Depreciation-General Ground Property 0.0019 K 0.0000

Aircraft & Traffic Servicing 3.1952 L 3.1785

Passenger Service 4.1282 M 4.1071

General & Administrative 1.4826 N 1.0642

Total Indirect 8.8079 8.3498

TOTAL OPERATING COST 53.7195 39.9577

Return on Investment 5.9091 O 9.5569

TOTAL COST $59.6286 $49.5146

Average Investment for FY13 Working Capital 3.1453 P 2.2470

Owned/Capital Leased Flight Equipment (net) 31.7587 Q 31.7578

Long Term Operating Leased Flight Equipment (net) 0.0000 R 0.0000

Ground Property & Equipment (net) 0.0479 S 0.0479

Deferred Preoperating Expense/Other 0.0000 T 0.0000

Annual Operating Lease Expense 0.0000 U 0.0000

Allowable Cabin Load 380 V 380

RATE PER SEAT MILE $0.15692 $0.13030

APPENDIX C

WORLD AIRWAYS (WOA) Aircraft Type MD-11

LARGE CLASS AIRCRAFT Passenger Service

FY13 RATE REVIEW

FORECAST YEAR FY13

YE JUN 11

CARRIER BY AS

SYSTEM CARRIER ADJUSTED

TOTAL REVENUE & BACKHAUL/PAID MILES (000) 9,599 9,330 A 9,240

AVERAGE DAILY AIRCRAFT UTILIZATION 7.7 7.7 B 7.7

COST PER REVENUE/PAID AIRCRAFT MILE

Direct Variable:

Crew $3.5839 $3.9210 C $3.9451

Fuel, Oil, & Aircraft Supplies 13.7364 18.0544 D 14.0794

Flight Equipment Maintenance 6.0456 6.3894 E 6.4570

Total Direct Variable 23.3659 28.3648 24.4816

Direct Fixed:

Hull, Public Liability, & Property Damage Insurance 0.1372 0.2577 F 0.4135

Aircraft Rentals & Miscellaneous 3.8776 3.0764 G 2.0194

Flight Equipment Depreciation & Obsolescence 0.3332 0.1670 H 0.2833

Amortization of Preoperating Expense 0.0000 0.0000 I 0.0000

Capital Gains & Losses 0.0000 0.0000 J 0.0000

Total Direct Fixed 4.3479 3.5011 2.7162

Indirect:

Maintenance & Depreciation-General Ground Property 0.0848 K 0.0213

Aircraft & Traffic Servicing 2.5773 L 2.8547

Passenger Service 6.6115 M 6.6305

General & Administrative 1.5835 N 1.4344

Total Indirect 10.8571 10.9409

TOTAL OPERATING COST 42.7230 38.1386

Return on Investment 4.6995 O 4.1769

TOTAL COST $47.4225 $42.3155

Average Investment for FY13 Working Capital 2.7326 P 2.3835

Owned/Capital Leased Flight Equipment (net) 0.7214 Q 1.4677

Long Term Operating Leased Flight Equipment (net)…