FY14_Proposed_Uniform_Rates_and_Rules.pdf

18 Apr 13

MEMORANDUM FOR ALL CARRIERS

FROM: USTRANSCOM/TCAQ-P

508 Scott Drive

Scott AFB IL 62225-5357

SUBJECT: Notice of Proposed Fiscal Year 2014 (FY14) Uniform Rates and Rules for

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

(SUSPENSE: 20 MAY 13)

1. The proposed FY14 rates are based on fuel pegged at $3.67 per gallon for cargo and combi and $3.62 for passenger. 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 $0.12886

Medium Class Passenger $0.14516

Small Class Passenger $0.15394 $2,000

Large Class Cargo – MFE $0.45962

Large Class Cargo – Classic $0.55917

Medium Class Cargo $0.63043

Combi Service $27.98452

L100 Service $1.36700

2. Carriers providing cost data for the rate review should provide comments and supporting documentation to USTRANSCOM/TCAQ-P, 508 Scott Drive, Scott AFB IL 62225-5357 by close of business 20 May 13. It is imperative carriers identify all issues of concern prior to this deadline. Under no circumstances will an extension be granted. If specific information is required on individual cost elements, analysts will provide detailed step-by-step treatment upon carrier request.

UNITED STATES TRANSPORTATION COMMAND

508 SCOTT DR

SCOTT AIR FORCE BASE, IL 62225-5357

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

//SIGNED//

LUCRETIA A. LAPE

Chief, Pricing Branch

Attachment:

18 Apr 13 Proposed FY14 Uniform Rates and Rules for International Service mailto:Lucretia.Lape@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 2014

INTRODUCTION

The proposed FY14 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), Memorandum of Understanding (MOU) for FY13 through

FY17, 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).

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 are encouraged to discuss issues with their analyst at any point and will be invited to meet with TCAQ-P after comments have been received but before the final rate is issued.

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 11 Apr 13 to facilitate on-going discussions. These cut sheets provide detailed information related to adjustments made by the analyst based on contractor’s costs and/or statistical data.

Comment Period

USTRANSCOM is providing a 30-day suspense for comments. Comments are, therefore, due by 4pm CDT on 20 May 13.

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. In accordance with the MOU, carriers receiving

5 percent or greater of USTRANSCOM charter business, as calculated by USTRANSCOM’s internal database, i are required to submit their cost data. USTRANSCOM’s objective is to include a pool of accurate cost data that fairly represents the cost of providing DoD charter service. The FY14 rates were developed on experienced base year cost and statistical data from fifteen carriers who provided twenty-five proposals for the base year ending 30 Jun 12.

Carrier’s cost data was audited and USTRANSCOM analyzed carrier’s forecast operating cost projections in the development of the FY14 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 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.

Stop Charges.

Stop charges were initially introduced as an attempt to better align carrier’s revenues with the cost of operations where certain DOD missions had significantly more revenue stops and the stage length among carriers reflected significantly different averages. At that time, there were two rate classes in each type of service – narrowbody and widebody. Carriers contended that missions such as the Mediterranean channel produced a short stage length, low speed and significantly higher operating costs than the typical long range DoD mission. Carriers operating the inefficient routes with short stage lengths and low utilization experienced higher operating costs per mile, but were receiving the same compensation under the uniform rate.

Stop charges were introduced in an effort to curve the revenues to accommodate for those inefficient routes with short stage lengths.

Since USTRANSCOM changed the classes of rates from two (narrowbody and widebody) to six (Passenger large, medium and small and Cargo large modern, large classic and medium)

USTRANSCOM maintains our position that stop charges are no longer necessary. A thorough review of the base year data indicates USTRANSCOM mission requirements resulted in the weight averaged stage lengths for most classes to remain greater than 2,000 miles. The linehaul rate is a mathematical equation derived from the effective rate, using weight averaged stage lengths, average tons/seats per mission and the stop charge rate ii . Provided that the average stage length for all carriers within a rate category remains similar to the weight averaged stage length and there are no extreme differences between the stage lengths of carriers within the same class, paying the effective rate versus the linehaul/stop charge should be revenue neutral. This year’s analysis supports the addition of stop charges for the small passenger class only iii

. The requirements for this category aircraft are significantly different in volume and areas of operation. Many of these missions are short range and mid range in nature and can cause a significant variation in average stage length between carrier aircraft. The stop charge used to develop the linehaul rate for the passenger small class category will be $2000 for FY14.

Capital Compensation.

The methodology established in the 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 MOU and uses several elements to develop a percentage for carriers receiving full ROI. The FY14 proposed rate full ROI calculation included 9 major carriers whose revenues represented approximately 90 percent of all major carriers’ revenues. The carriers who met these criteria were: Alaska Airlines, American 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 9.78 percent. No carriers received full ROI for FY14. Appendix N, along with the

MOU, provides the details for the development of the 9.78 percent full ROI for the FY14

Rates.

Minimum Return (Profit).

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 MOU, USTRANSCOM calculated the 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. The minimum return allowance is applied to individual carriers in an open, transparent and consistent manner. The resulting minimum returns range from 6.97 percent for older, aged aircraft to 25.29 percent for the most modern, fuel efficient aircraft.

Cost Efficiency.

The FY13 through 17 MOU encouraged carriers to provide narratives supporting cost efficiencies that may not have been adequately predicted in year-over-year differences. Few narratives were received with the initial cost package submissions, so USTRANSCOM issued a formal request to all carriers. A total of six narratives were received, supporting ten aircraft types. After analysis of these narratives, along with a year-over-year comparative analysis, thirteen proposals received a cost efficiency factor within their profit calculations for the proposed rate. Carrier’s individual factors, as well as responses to narratives, were initially provided to carriers on 11 Apr 13.

Facilities Capital.

As indicated in the introduction to the FY13 Final Rate published on 7 Sep 12, USTRANSCOM sought assistance from the Office of the Secretary of Defense/Defense

Procurement and Acquisition Policy with regard to the expended capital calculation within the weighted guidelines. Based on these discussions, USTRANSCOM will include the total net book value (NBV) for airframes, engines and modifications within the facilities capital calculation so that these costs are correctly distributed over the forecasted mileage base.

However, the NBV of general ground property within the weighted guidelines calculation will be allocated to USTRANSCOM services only, because these costs are distributed over the historical miles flown in USTRANSCOM service. In this way, the base and pool are consistent and follow the treatment of these assets within the cost package itself.

Fuel Cap for Profit.

In accordance with the FY13 through 17 MOU, profit on fuel will be applied up to a maximum amount per gallon, or cap. The cap will be calculated as a five-year rolling average of fuel paid by CRAF carriers as reported on fuel reconciliation summary reports for the previous 5 years and tracked in the TCAQ-P fuel database. The fuel cap for the proposed rate was calculated at $2.68, this is up from $2.50 used in the FY13 rate.

iv

Last year’s abnormally low DESC fuel price which began on 1 Jul 12 was not a factor in this year’s calculation. In accordance with the MOU, it will be evaluated and adjusted in future years.

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 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 FY14 proposed general cost escalation factor is 3.73 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 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 13 March 2013. This deviation is effective until 30

September 2017, unless otherwise rescinded.

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 11 – Dec 12 conclude cargo carriers receive 62 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 70 percent of their fuel commercially, which fluctuates up and down with the fuel market.

For the period Jul 11 – Dec 12, commercial fuel prices for USTRANSCOM service averaged

$3.33 and $3.37 for passenger and cargo, respectively. The monthly Spot Market analysis from Oil Price Information Service (OPIS) Worldwide Jet Fuel Report for Feb 13, along with the average of the Platts Market International Air Transport Association (IATA) Fuel Price

Analysis for Feb 13 indicates average commercial fuel prices at $3.25. Further analysis of fuel prices in USTRANSCOM service showed CRAF carriers experience approximately 10 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 Oct 12 at $3.75 and $3.73, 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 $3.62 and $3.67 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 FY14 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 FY14 will remain at 90 percent of the effective rate for passenger and will be reduced to 87 percent of the effective rate for cargo.

v 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 FY14 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

150%

187%

N/A

187%

Contingency Rate

(per Appendix A, Para G)

195%

N/A

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 13 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.

Large Class Cargo: For FY14, USTRANSCOM proposes a single one-way rate based on the discussion that follows.

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 Jul

11 through Nov 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.

The overall ratio of empty miles to one-way live revenue miles for the large cargo class was

48 percent. The statistical ratio of paid empty flown miles to paid one-way miles reflects, on average, 52 percent efficiency in the scheduling of aircraft in empty reverse segments. This savings in conjunction with the 13 percent savings for flying an empty aircraft reflects an average of 65 percent savings for one-way cargo missions. Realizing not all carriers achieve a 52 percent savings in empty backhaul scheduling, and in consideration of the most recent S2 data (through Nov 2012) USTRANSCOM is proposing a one-way rate of 150 percent for

FY14, allowing for the 13 percent savings associated with flying empty in conjunction with a

37 percent savings due to efficiencies in scheduling aircraft in empty reverse segments. This is 16 percent lower than the FY13 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 101 percent. The statistical ratio of base year paid empty flown miles to paid one-way miles for the medium class reflects little efficiency in the scheduling of aircraft in empty reverse segments. However, USTRANSCOM addressed a 13 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. However, as a result of the negligible amount of USTRANSCOM one way missions offered in this class, USTRANSCOM is proposing a one-way cargo rate for the medium class of 187 percent for FY14. This is 21 percent higher than the FY13 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 FY14

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 FY14 rate process, TCAQ performed a 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 has been forwarded to USTRANSCOM’s JDPAC for review. The outcome of their analysis will be addressed at a later date.

During this ratemaking cycle, USTRANSCOM was requested to re-evaluate the charter configured B777 passenger aircraft, a charter configured B747-400 passenger aircraft, as well as a 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 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 FY14, this ACL may again be evaluated.

USTRANSCOM was also requested to review the standard ACL for a charter configured

B747-400 passenger aircraft. The analysis indicates this aircraft has a higher payload than other B747 aircraft in scheduled service configuration and has more available seats. The ACL was therefore established at 435. As further information becomes available during FY14, this

ACL may again be evaluated.

USTRANSCOM also reviewed 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 FY14 proposed rate, USTRANSCOM evaluated seventy-seven representative routes for passenger missions and forty for cargo. The current Eurocontrol charges (converted to U.S. dollars) were calculated as a percent of the trip revenues using the FY14 proposed effective rate, for all but the small class passenger category. For the small class passenger, Eurocontrol charges (converted to

U.S. dollars) were calculated as a percent of the trip revenues using the FY14 proposed line haul rate (without stop charge). USTRANSCOM is proposing the FY14 Eurocontrol surcharge of 2.2 percent for passenger, 2.5 percent for cargo missions, .33 percent for combi.

L-100 euro control will be provided on a cost reimbursable basis. This is a change from the

FY13 Eurocontrol of 2.0 percent, 2.6 percent and .36 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 $192 for the FY14 Incremental

Passenger Rate, a decrease from $206 in FY13. It is based on the weighted passenger service cost applied to the average miles per trip vi

. 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 FY14, 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. Appendix O provides Backhaul Operational Data for USTRANSCOM Services for both large and medium class cargo categories. Finally, Appendix P 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 Linehaul rate = Effective Rate - (Stop charge/(Average Stage Length * ACL)) iii

Average

Stage

Length

Large Class Pax Weighted Avg 2591

GTI B747-400 2791

DAL A330 2566

DAL B747-400 2039

OAE B777 2602

WOA MD11 2602

Medium Class Pax Weighted Avg 2554

GTI B767 3011

DAL B767 1993

NAO B767 2443

OAE B767 2593

Small Class Pax Weighted Avg 1421

DAL B737 670

BSK B737 1292

SCX B737 1743

UAL B737 781

Large Class Cargo Weighted Avg 2979

(MFE) GTI B747-400 3104

FDX MD11 3129

CKS B747-400 2919

SOO B747-400 2622

WOA B747-400 3119

WOA MD11 2737

Large Class Cargo Weighted Avg 2739

(CLASSIC) EIA B747 2703

CKS B747 3103

Medium Class Cargo Weighted Avg 1496

ABX B767-200 1491

ATI DC8 1505

Combi ATI DC8-62/61 2081 iv

FY09 Rate FY10 Rate FY11 Rate FY12 Rate FY13 Rate 5 yr Avg

Cargo 2.64 2.58 2.67 2.59 3.20 2.74

Pax 2.76 2.39 2.38 2.51 3.05 2.62

Overall 5 Yr

2.68 v The analysis of the Passenger ferry rate was performed using the Proposed FY14 Large Class passenger rate of

$0.12886 (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 FY14 Large Class

MFE cargo rate of $0.45962

SUBJECT: FY14 Proposed Ferry Rate Passenger

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

Crew 1.2114 100% 1.2114 Fuel 4.9231 88% 4.3077 Maintenance 1.5016 100% 1.5016 Insurance 0.1003 100% 0.1003 Rent 0.2967 100% 0.2967 Depreciation 0.4962 100% 0.4962 Preop 0.0000 100% 0.0000 Capital Gains/Losses 0.0000 0% 0.0000 Grd Property 0.0410 100% 0.0410 Aircraft & Traffic Service 0.8059 85% 0.6850 Passenger Service 1.5908 65% 1.0340 G&A 0.3681 100% 0.3681 Profit 1.5508 100% 1.5508 Total 12.886

11.593 0.8997

SUBJECT: FY14 Cargo Ferry Rate

Wgt'd Percentage Cost Ferry

Cost Category Cost Allowed Allowed Rate %

Crew 4.2873 100% 4.2873 Fuel 22.4813 75% 16.8610 Maintenance 5.1245 100% 5.1245 Insurance 0.2265 100% 0.2265 Rent 3.3019 100% 3.3019 Depreciation 1.3107 100% 1.3107 Preop 0.0000 100% 0.0000 Cap Gains/Losses 0.0003 0% 0.0000 Grd Property 0.2615 100% 0.2615 Aircraft & Traffic Service 2.2049 85% 1.8742 G&A 1.4355 100% 1.4355 Profit 5.3274 100% 5.3274 Total 45.9618

40.0104 0.8705 vi

One-Way Round-Trip Total

Avg Live Pay Miles

1,937,048 7,317,660 9,254,708

FY14 Proposed Passenger Seat Mile Rate 0.20618 0.12886

152,400,664 359,831,120

Total Dollars

513,231,783 Total Trips

Total Passengers

292,687 Avg Passenger per Trip

Avg Price Per Trip

667,838.05 Avg Seat Miles Per Trip 4,604,428.39 Avg Miles Per Trip

12,066

Additional passenger service cost per trip 192

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 5

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 4

F Costs Per Ton Mile by Carrier and Aircraft Type in Large Class Cargo Service (MFE) 6

G Costs Per Ton Mile by Carrier and Aircraft Type in Large Class Cargo Service (Classic) 2

H Costs Per Ton Mile by Carrier and Aircraft Type in Medium Class Cargo Service 2

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 8

L Eurocontrol Surcharge 6

M Cost Escalation Factor 2

N Rate of Return on Investment 3

O Backhaul Operational Data for USTRANSCOM Service 1

P FICA Escalation 1

APPENDIX A

SCHEDULE OF UNIFORM NEGOTIATED RATES AND RULES

FISCAL YEAR 2014

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

$0.12886

Ferry Rate (Base - Effective Rate) 90% $0.11597

Incremental Passenger

$192

Fuel Pegged Rate

$3.62

Medium

Live Effective Rate

$0.14516

Ferry Rate (Base - Effective Rate) 90% $0.13064

$3.62

Small

Live Line Haul Rate

$0.15394

Ferry Rate (Base - Effective Rate) 90% $0.14699

Stop Charge (Per Directed Landing)

$2,000

Fuel Pegged Rate $3.62

(2) CHARTER CARGO SERVICE PER TON MILE

Large - Modern Fuel Efficient (MFE)

Round Trip Effective Rate

$0.45962

One-Way 150% $0.68943

Contingency Rate (Per Para G) 195% $0.89625

Ferry Rate (Base - Effective Rate) 87% $0.39987

$3.67

Large - Classic

$0.55917

One-Way 150% $0.83875

Contingency Rate (Per Para G) 195% $1.09037

Ferry Rate (Base - Effective Rate) 87% $0.48647

$3.67

Medium

Round Trip Effective Rate:

$0.63043

One-Way 187% $1.17891

Contingency Rate (Per Para G) 195% $1.22934

Ferry Rate (Base - Effective Rate) 87% $0.54848

Fuel Pegged Rate $3.67

(3) CHARTER COMBI SERVICE PER PLANE MILE

$27.98452

One-Way 187% $52.33105

Contingency Rate (Per Para G) 195% $54.56981

Ferry Rate (Base - Effective Rate) 90% $25.18607

(4) CHARTER L-100 SERVICE PER TON MILE

$1.36700

Ferry Rate (Base - Effective Rate) 87% $1.18929

(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, one-way passenger when either the live or empty segment transits a eurocontrol country, cargo or combi missions, Eurocontrol will be paid on live miles only.

On one way passenger missions when Eurocontrol is applicable to both the live and empty segment, 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 2.2 percent on 6,000 miles + 5,100 miles). Carriers will be paid the applicable rate plus a surcharge of

2.5 percent for cargo missions and 0.33 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 $192 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

Seven days or less

Passenger and Combi:

Cargo:

26.84%

25.24%

8 to 14 days

Cargo:

18.59%

20.69%

15 to 30 days

Cargo:

15.30%

17.46%

31 to 45 days Passenger and Combi 7.39%

31 to 75 days Cargo 6.77%

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:

18.59%

20.69%

(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 $1977

B747-400/400ER 100 $2190

MD11F 86 $1883

MD11C 86 $1883

B777F 88 $1927

DC10-30/40 75 $1647

A300-600ER 51 $1805

A300-400F 50 $1770

B767-200F 48 $1699

DC8 45 $1593

L100 23 $1909

B727-100 18 $905

B727-200 22 $1106

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

B747 Charter Config. 435

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 FY12 FY13 Total

Adjusted Passenger Passenger Passenger

Aircraft Rate Per Revenues Revenues Revenues Weighted

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

ATLAS AIR, INC. B747-400 0.11117$ 99,064$ 60,558$ $159,622 19.51% $0.02169

DELTA AIR LINES INC A330 0.13077$ 37,830$ 16,328$ $54,158 6.62% $0.00866

DELTA AIR LINES INC B747-400 0.11101$ 35,899$ 30,052$ $65,951 8.06% $0.00895

OMNI AIR INTERNATIONAL INC B777 0.14140$ 108,237$ 87,082$ $195,319 23.88% $0.03376

WORLD AIRWAYS INC MD11 0.13308$ 247,291$ 95,691$ $342,982 41.93% $0.05580

$818,033 1.0000

RATE -- WEIGHTED BY REVENUES $0.12886

Exclusive of Fuel $0.07963

USTRANSCOM UNIFORM RATE

ROUND-TRIP PASSENGER SERVICE

MEDIUM CLASS AIRCRAFT

USTRANSCOM FY12 FY13 Total

Adjusted Passenger Passenger Passenger

Aircraft Rate Per Revenues Revenues Revenues Weighted

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

ATLAS AIR, INC. B767-300 0.15739$ 74,167$ 63,331$ $137,498 17.68% $0.02782

DELTA AIR LINES INC B767-300 0.13064$ 50,485$ 18,176$ $68,662 8.83% $0.01153

NORTH AMERICAN AIRLINES B767-300 0.14977$ 235,072$ 78,207$ $313,280 40.27% $0.06032

OMNI AIR INTERNATIONAL INC B767-300 0.13693$ 171,388$ 87,040$ $258,428 33.22% $0.04549

$777,868 1.0000

RATE -- WEIGHTED BY REVENUES $0.14516

Exclusive of Fuel $0.09440

USTRANSCOM UNIFORM RATE

ROUND-TRIP PASSENGER SERVICE

SMALL CLASS AIRCRAFT

USTRANSCOM FY12 FY13 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 0.17009$ 4,224$ 3,132$ $7,356 12.60% $0.02143

MIAMI AIR INTERNATIONAL INC B737-800 0.16516$ 11,760$ 13,932$ $25,691 44.01% $0.07269

MN AIRLINES, LLC DBA SUN COUNTRY AIRLINES B737-800 0.15746$ 3,594$ 14,302$ $17,897 30.66% $0.04828

UNITED AIRLINES INC B737-800 0.16439$ 2,219$ 5,212$ $7,431 12.73% $0.02093

$58,375 1.0000

RATE -- WEIGHTED BY REVENUES $0.16333

Exclusive of Fuel $0.11412

Average Average Rate Per Linehaul Rate

Effective Rate Stage Seats Per Directed Per Paid

Per Seat Mile Length Mission Landing Seat Mile

$0.16333 1,421 150 $2,000 $0.15394

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 FY12 FY13 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 0.45176$ 249,673$ 149,103$ $398,776 37.90% $0.17119

FEDERAL EXPRESS CORPORATION MD11 0.55495$ 73,135$ 36,639$ $109,774 10.43% $0.05789

KALITTA AIR, LLC B747-400 0.47564$ 99,708$ 71,451$ $171,158 16.26% $0.07736

SOUTHERN AIR INC. B747-400 0.45404$ 64,663$ 84,111$ $148,774 14.14% $0.06419

WORLD AIRWAYS INC B747-400 0.42546$ 72,903$ 60,859$ $133,762 12.71% $0.05408

WORLD AIRWAYS INC MD11 0.40773$ 60,494$ 29,575$ $90,069 8.56% $0.03490

$620,576 $431,737

$1,052,314 1.0000

RATE -- WEIGHTED BY REVENUES $0.45962

Exclusive of Fuel $0.23481

USTRANSCOM UNIFORM RATE

ROUND-TRIP CARGO SERVICE

LARGE CLASS AIRCRAFT (CLASSIC)

USTRANSCOM FY12 FY13 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 0.55545$ 197,618$ -$ $197,618 90.89% $0.50487

KALITTA AIR, LLC B747 0.59621$ 19,801$ -$ $19,801 9.11% $0.05430

$217,419

$217,419 1.0000

RATE -- WEIGHTED BY REVENUES $0.55917

Exclusive of Fuel $0.23973

USTRANSCOM UNIFORM RATE

ROUND-TRIP CARGO SERVICE

MEDIUM CLASS AIRCRAFT

USTRANSCOM FY12 FY13 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 0.66828$ $3,341 $4,160 $7,501 65.75% $0.43941

AIR TRANSPORT INTERNATIONAL LLC DC8 0.55777$ $3,491 $416 $3,907 34.25% $0.19102

$6,832 $4,576

$11,408 1.0000

RATE -- WEIGHTED BY REVENUES $0.63043

Exclusive of Fuel $0.35365

USTRANSCOM UNIFORM RATE

ROUND-TRIP COMBI SERVICE

COMBI AIRCRAFT

USTRANSCOM FY12 FY13 Total

Adjusted Combi Combi Combi

Aircraft Rate Revenues Revenues Revenues Weighted

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

AIR TRANSPORT INTERNATIONAL LLC DC8 $27.98452 $90,579 $92,726 $183,305 100.00% $27.98452

$183,305 1.0000

RATE -- WEIGHTED BY REVENUES $27.98452

Exclusive of Fuel $13.95560

USTRANSCOM UNIFORM RATE

ROUND-TRIP SERVICE

LYNDEN L100 AIRCRAFT

USTRANSCOM FY12 FY13 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 DC8 1.36700$ $17,360 $14,581 $31,941 100.00% $1.36700

$31,941 1.0000

RATE -- WEIGHTED BY REVENUES $1.36700

Exclusive of Fuel $0.99592

APPENDIX C

ATLAS AIRLINES (GTI) Aircraft Type B747-400

LARGE CLASS AIRCRAFT Passenger Service

FY14 RATE REVIEW

FORECAST YEAR FY14

YE JUN 12

CARRIER BY AS

SYSTEM CARRIER ADJUSTED

TOTAL REVENUE & BACKHAUL/PAID MILES (000) 2,489 1,490 A 1,466

AVERAGE DAILY AIRCRAFT UTILIZATION 7.7 6.3 B 7.9

COST PER REVENUE/PAID AIRCRAFT MILE

Direct Variable:

Crew $2.6018 $3.4599 C $3.5039

Fuel, Oil, & Aircraft Supplies 2.3015 17.6339 D 24.4410

Flight Equipment Maintenance 5.2626 3.4227 E 2.9568

Total Direct Variable 10.1658 24.5165 30.9016

Direct Fixed:

Hull, Public Liability, & Property Damage Insurance 0.9693 1.0993 F 0.9213

Aircraft Rentals & Miscellaneous 2.2089 0.0955 G 0.0714

Flight Equipment Depreciation & Obsolescence 2.2089 1.3200 H 1.0240

Amortization of Preoperating Expense 0.0000 0.0000 0.0000

Capital Gains & Losses 0.0000 0.0000 0.0000

Total Direct Fixed 5.3871 2.5148 2.0167

Indirect:

Maintenance & Depreciation-General Ground Property 0.0512 K 0.0370

Aircraft & Traffic Servicing 4.1349 L 4.0448

Passenger Service 10.3471 M 4.3561

General & Administrative 2.3470 N 1.4581

Total Indirect 16.8802 9.8960

TOTAL OPERATING COST 43.9115 42.8143

Return on Investment 5.2694 O 5.5441

TOTAL COST $49.1809 $48.3584

Average Investment for FY14 Working Capital 0.2762 P 2.6305

Owned/Capital Leased Flight Equipment (net) 19.1001 Q 15.3466

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

Ground Property & Equipment (net) 19.1532 S 0.5018

Deferred Preoperating Expense/Other 0.0000 T 0.0000

Annual Operating Lease Expense 0.0000 0.0000

Allowable Cabin Load 400 V 435

RATE PER SEAT MILE $0.12295 $0.11117

DELTA AIR LINES (DAL) Aircraft Type A330

LARGE CLASS AIRCRAFT Passenger Service

FY14 RATE REVIEW

FORECAST YEAR FY14

YE JUN 12

CARRIER BY AS

SYSTEM CARRIER ADJUSTED

TOT…