39 U.S.C. § 5402 — Contracts for transportation of mail by air

(a) Definitions. In this section: (1) “acceptance point” means where nonpriority bypass mail begins; (2) “foreign air carrier,” “air carrier,” “interstate air transportation,” and “foreign air transportation” have the meanings in section 40102(a) of title 49; this section does not define them. (3) “base fare” means the fare paid to the carrier issuing a passenger ticket or carrying nonmail freight, even if more than one carrier provides service. (4) “bush carrier” means a carrier using aircraft meeting subsection (g)(1)(A)(iv)’s payload limit on a city-pair route. (5) “bush passenger carrier” means a passenger carrier meeting that limit and providing passenger service on a city-pair route. (6) “bush route” means an air route on which only a bush carrier receives nonpriority bypass mail between an acceptance point or hub, as the Postal Service determines, and the destination city. (7) “certificated air carrier” means an air carrier with a certificate of public convenience and necessity under section 41102(a) of title 49. (8) “city pair” means service between an origin and destination city. (9) “code-share relationship” means using one certificated or foreign air carrier’s designation code to identify a flight operated by another carrier. (10) “composite rate” means (A) mainline and bush linehaul rates together plus one bush-terminal handling payment for a direct flight from an acceptance point to a bush destination beyond a hub, and (B) the mainline rate to the hub plus the lowest Alaska bush rate for the distance from hub to destination. (11) “equitable tender” means the Postal Service’s fair and reasonable distribution of mail among carriers offering equivalent service and cost between two communities under Postal Service regulations. (12) “existing mainline carrier” means a mainline carrier that on January 1, 2001, was certified under part 121, qualified for mainline nonpriority bypass mail, and actually carried scheduled mainline nonpriority bypass mail in Alaska under its designation code. (13) “mainline carrier” means a carrier using part 121 aircraft within subsection (g)(1)(A)(iv)(II)’s payload capacity on a city pair. (14) “mainline route” means a city pair receiving mail tendered to a mainline carrier. (15) “new,” for a carrier, means one that meets the applicable subsection (g)(1)(A)(iv)(I) or (II) aircraft requirement, began Alaska nonpriority bypass mail service after January 1, 2001, and is not made up of previously qualified existing mainline carriers through merger or sale. (16) “part 121” means part 121 of title 14, Code of Federal Regulations. (17) “part 135” means part 135 of that title. (18) “scheduled service” means: (A) publicly available common-carriage flights on a published schedule; (B) schedules announced in advance in systems the Postal Service specifies and in the Official Airline Guide or air-cargo equivalent; (C) flights that leave whether full or not; and (D) customers separately contracting for carriage regularly. (19) “Secretary” means the Secretary of Transportation. (20) “121 bush passenger carrier” means a bush passenger carrier providing bush-route passenger service under part 121. (21) “121 mainline passenger carrier” means a mainline carrier providing scheduled passenger service under part 121. (22) “121 passenger aircraft” means a passenger aircraft on a city pair operated under part 121. (23) “121 passenger carrier” means a carrier providing scheduled part 121 service. (24) “135 bush passenger carrier” means a bush passenger carrier providing scheduled bush-route service under part 135. (25) “135 passenger carrier” means a carrier providing scheduled part 135 service.

(b) International Mail. (1) Unless this subsection says otherwise, the Postal Service may contract for foreign air transportation only with certificated air carriers. It may award a contract for routes the Secretary of Transportation authorized that carrier to serve directly or through a code share with foreign carriers. If the Postal Service asks certificated carriers for proposals for service between points or city pairs in a region and fewer than two offer service meeting its requirements at a fair and reasonable price, it may ask foreign carriers. If two certificated carriers cannot provide the required service at a fair and reasonable price, directly or through code share, the Postal Service may contract with a foreign carrier only if it also asks every certificated carrier serving those points for a proposal on the same terms. The Postal Service must use a fair-price method developed with, and approved by, certificated carriers representing at least 51 percent of available ton-miles in the relevant markets. Ceiling prices are presumed fair if they do not exceed a weighted average based on International Air Transport Association market data, or, if that data is unavailable, another neutral regularly updated weighted average designated with that carriers’ approval. If approval cannot be obtained for the substitute data, the latest available market data continues to apply. (2) Contracts must use an open process giving potential offerors timely detailed notice, proposed requirements and evaluation criteria, and prompt feedback on request to unsuccessful offerors. (3) The Postal Service may skip these requirements for a certificated or foreign carrier when emergency or unanticipated conditions make compliance impractical, or when demand exceeds existing lift space and there is not enough time to obtain more space without harming customer commitments, provided it first offers the excess to any certificated carrier already contracted for the route on its existing terms.

(c) Good-faith effort. The Postal Service and potential offerors must make a good-faith effort to resolve disputes over subsection (b) contracts.

(d) Air taxis. If certificated-carrier service between foreign-air-transportation points is inadequate, the Postal Service may contract without advertising for bids, on suitable terms, with an air-taxi operator or combination of operators. The parties may renew at the existing rate. With the operator’s consent, compensation may be adjusted for cost changes caused by changed conditions during the contract. The Postal Service must cancel the contract when the Secretary authorizes additional certificated service between covered points and that service starts adequate schedules.

(e) Interstate air transportation. (1) The Postal Service may set rates and contract with any air carrier through negotiation or competitive bidding. (2)(A) It may require a carrier to accept as mail day-old poultry, honeybees, and other live animals Postal Service rules allow as mail. It may not use this authority against a carrier that commonly and regularly refuses all live animals as cargo. (B) It may charge mailers a reasonable postage surcharge for these shipments to compensate carriers for necessary extra handling costs.

(f) Alaska. The Secretary’s and Postal Service’s powers under (b), (c), and (d) also cover mail by aircraft between two points in Alaska when the carrier is authorized to carry mail between them. The Postal Service’s subsection (e) power does not apply to that transportation.

(g) Alaska carrier selection. (1)(A) For a point served by more than one carrier, the Postal Service must use equitable tender within a qualified group and, at minimum, require a carrier to: (i) hold a section 41102(a) certificate; (ii) operate at least the weekly scheduled-flight number in (B)(i) to the point; (iii) follow that schedule; and (iv) for at least 12 consecutive months provide the weekly number of scheduled noncontract flights in (B)(ii) between two Alaska points, using aircraft up to 7,500 pounds payload capacity before bush-rate selection and over 7,500 pounds before mainline-rate selection. (B) The numbers are three flights for smaller aircraft and two for larger aircraft under (ii); and three flights for both sizes under (iv) before the Rural Air Service Improvement Act of 2004, then two for larger aircraft after its effective date. (C) After consulting affected carriers, the Postal Service may require more large-aircraft flights or specify service days. (2) The Postal Service may provide direct mainline mail to a bush point if it costs no more and is at least as good as interline service. It must subtract direct-flight bush mail pounds from that carrier’s monthly allocation to the nearest hub. It must offer a qualifying bush passenger carrier on an acceptance-point-to-hub route not served by a mainline carrier the chance to receive mainline rates when a mainline carrier begins service if the bush carrier met paragraph (1), carried at least 20 percent of passengers during the preceding 6 months, and continues carrying at least 20 percent. It must offer qualifying passenger and nonmail-freight carriers mainline-rate tender from a hub to a destination when a mainline carrier also serves the city pair, if the passenger carrier met paragraph (1), had at least 20 percent of passenger service in the prior 6 months, and keeps that level, or the freight carrier met paragraph (1) and had at least 25 percent of nonmail freight in that period. It may not give a bush carrier mainline-rate mail from acceptance point to hub except under the preceding bush-carrier opportunity. It may give bush-rate mail on that route if the carrier qualifies, direct mainline service is unavailable, and the tender will not reduce route efficiency measured by payments and timely delivery. It may give a passenger carrier composite-rate mail beyond a hub if the carrier satisfies subsection (h)(2), qualifies under (h) out of the bypassed hub, delivery efficiency will not decrease, and Postal Service payments will be lower. It must give composite-rate mail proportionally among qualified passenger and freight pools for direct acceptance-point-to-bush-destination service if the passenger carrier had 20 percent or the freight carrier 25 percent of the prior 12 months’ service and either composite tender existed on January 1, 2000, or the bypassed hub lacked a mainline carrier then. Allocation must be equitable between direct-route carriers and hub-to-destination carriers, based on mail volume on both routes. (3) The Postal Service must determine bush points and hubs after consulting Alaska, affected communities, and carriers. It must make changes after the same consultation and 12 months’ public notice. For a new hub created by a change, tender during the first 12 months must use the affected hub or hubs’ passenger and freight shares. (4) It must select only existing mainline carriers for acceptance-point-to-hub mail, unless an exception applies. It may select another carrier if it finds, under advance criteria, that service is deficient, gives existing mainline carriers written notice including inadequate capacity, and after 30 days finds the deficiency remains. The selected carrier may temporarily subcontract to another existing mainline carrier when extra or replacement aircraft are needed, but remains responsible from origin to destination. (5) It must offer equitable tender to a new 121 mainline passenger carrier entering a route if it meets the large-aircraft requirement and had at least 75 percent of the insured seats provided by the route’s largest-seat mainline carrier during the prior 6 months. The new carrier may receive mail only on qualifying city pairs, may not count that passenger service toward minimum requirements, and must continue providing at least 20 percent of passenger service. It may immediately receive hub tender if it meets the listed requirements and all qualified 121 mainline carriers leave or none serves the route. A code-share carrier receiving mail on the enactment date may count the entire arrangement after the code share ends but must continue at least 20 percent as a 121 mainline carrier. (6) Essential-air-service passenger carriers must receive all nonpriority and bypass mail to Alaska destinations served under their Department of Transportation orders unless the Postal Service finds their service inadequate. That service cannot count toward this section’s minimum qualifications. (7) The section does not stop Postal Service regulations from preferring aircraft for products other than nonpriority bypass mail.

(h) Bush passenger pool. (1) Except as paragraph (7) provides, the Postal Service must offer 70 percent of route nonpriority bypass mail equitably to scheduled part 121 or 135 bush passenger carriers that meet (g)(1), carried at least 20 percent of the route’s passenger service during the preceding 12 months, and meet paragraph (2). (2) To remain eligible, the carrier or aircraft must keep at least 20 percent passenger service; use at least 19-seat part 121 aircraft, at least 5-seat part 135 aircraft, or at least 3-seat part 135 aircraft where only water landings are available; insure all available passenger seats; and fly the published schedule. (3) A qualifying new or existing 121 bush carrier is exempt from the 20-percent tests for one year, plus a second year if it reached 5 percent in year one, plus a third year if it reached 10 percent in year two. The first three such carriers divide no more than an extra 10 percent of mail equally: up to 5 percent from each qualified non-121 passenger carrier’s share and up to 5 percent from each nonpassenger carrier carrying at least 25 percent of total nonmail freight. Later entrants get no extra share. If a recipient stops service, the longest-serving otherwise eligible nonrecipient gets that share. If only one passenger carrier or aircraft qualifies, it must receive 20 percent of the paragraph (1) pool if it provides at least 10 percent of passenger service. (4) Qualification here does not count for another route. (5) Passenger-service percentages use subsection (k) data. An intervillage carrier may count passengers carried at any point between origin and final destination, but only regularly scheduled flights away from the hub count; charter flights do not. (6) The Secretary must establish bush rates from subsection (k) data: a 121 rate paid to bush carriers where a 121 carrier receives mail; a 135 rate paid where no 121 bush carrier receives mail; and a water-landing rate paid where only water landings are available. (7) The 70-percent rate becomes 75 percent three years and three months after enactment of the Rural Service Improvement Act of 2002.

(i) Freight pool. (1) Except as paragraph (7) provides, the Postal Service must offer 20 percent of route nonpriority bypass mail equitably to carriers that carried at least 25 percent of total nonmail freight, measured by revenue or weight as the Postal Service determines, during the prior 12 months. (2) The carrier must continue at least 25 percent to remain eligible. (3) A new freight carrier must meet (g)(1) and operate 12 months before qualifying. (4) If none qualifies, the mail goes to the highest-percentage freight carrier; if none is present, it is divided equitably among carriers qualified under (h). (5) Qualification does not count on another route. (6) The percentage is the carrier’s revenue or weight divided by all carriers’ revenue or weight for nonmail freight from the origin to destination, using subsection (k) data. (7) The 20-percent rate becomes 25 percent three years and three months after the 2002 Act’s enactment.

(j) Other carriers. (1) Except under paragraph (3), 10 percent of route mail must be tendered equitably to carriers meeting (g)(1) but not qualifying under (h) or (i). (2) If none qualifies, that 10 percent is divided evenly between the (h) and (i) pools, making 75 percent available among (h) carriers and 25 percent among (i) carriers. (3) The rate becomes zero three years and three months after the 2002 Act’s enactment, except it remains 10 percent for six years and three months for a carrier on routes served only by bush carriers from its designated main hub if it meets (g)(1), is not qualified under (h) or (i), operates from that hub, and invested at least $500,000 in a physical hangar there before January 1, 2002. The carrier may designate only one main hub, must transmit that designation within six months, and may not change it. It loses eligibility once qualified under (h) or (i). Buying another carrier’s hangar after enactment does not count.

(k) Data and rates. (1) At least every two years, with annual updates, the Secretary must review whether a bush-mail rate investigation is needed and use show-cause procedures to determine service cost quickly and accurately. The Secretary must exclude passenger insurance rates or premiums and other passenger-service costs. (2) To obtain sufficient and timely data, the Secretary must require monthly bush-carrier data on T-100 diskettes or another suitable form and require carriers to keep supporting books, records, and source and summary documents in a form that Postal Service or Secretary representatives can audit. (3) Records must be kept seven years or until the Secretary permits destruction; flight logs for sold or disposed aircraft must be kept. (4) Qualified carriers must report fleet aircraft number and types, fleet passenger-insurance level, and insurer name.

(l) A carrier may not receive mail under both (h) and (i) on one route unless no other carrier receives mail under either pool.

(m) (1) A carrier qualifying under both pools receives mail under (h). (2) It receives mail under (i) if it qualified under both, then loses (h) qualification but remains qualified under (i).

(n) (1) After a merger or acquisition between two Alaska carriers, the resulting operation may count all merged or acquired carriers’ passenger and nonmail-freight service on the route toward the resulting carrier’s minimum requirements for 12 months. (2) After that period, it must show it meets this section’s passenger or freight minimums to continue receiving mail.

(o) In addition to other FAA or Secretary penalties, a carrier that significantly misstates required passenger or freight data to qualify gets a one-month route suspension for the first offense, a six-month route suspension for the second, a one-year suspension of all Alaska bypass mail for the third offense in the State, and a permanent statewide suspension for the fourth.

(p) (1) In applying (g)(2), (h), or (i), the Postal Service or Secretary may deny equitable tender to an otherwise qualified carrier that does not act in good faith or consistently with this section’s purpose. (2) They may waive any (h) or (i) provision when the carrier provides substantial passenger or freight service on the route. (3) To maintain competition on an Alaska mainline route without a 121 mainline carrier, they may waive the listed (g) and (h) requirements for a 121 bush carrier providing substantial passenger service, but only in extreme cases and only as far as absolutely needed for the community. The waiver ends when a qualified mainline carrier begins service and seeks mail. The waived service does not count for another route. (4) In granting a waiver or denying tender, they must consider, in order: destination passenger needs; destination nonmail-freight needs; bypass-mail service already available; destination mail needs; Postal Service savings; passenger service already available; and nonmail-freight service already available.

(q) The Secretary must regularly review carriers receiving or seeking equitable tender. If the Secretary suspends or revokes a carrier’s operating certificate, the Secretary must notify the Postal Service. The Postal Service must stop tendering mail until the Secretary certifies safe operation. The carrier must then show it meets the section’s other minimum carriage requirements.

(r) The Postal Service may tender bypass mail on an emergency basis to any carrier meeting (g)(1) on an Alaska city pair. The emergency tender ends when a carrier qualifies under this section.

(s) Except for written contracts authorized under (b), (c), and (d), Postal Service tender of any mail category to a carrier between Alaska points does not create a Postal Service-carrier contract, and past or present receipt creates no right to future or continued tender. This rule applies to cases begun before, on, or after enactment of this subsection.