Air cargo carrier files for bankruptcy protection

Posted: Wednesday, January 23, 2002

ANCHORAGE (AP) -- An air cargo carrier that delivers mail to dozens of Alaska communities filed for bankruptcy protection after losing a legal dispute with the U.S. Postal Service.

The Postal Service notified Anchorage-based Alaska Central Express that after Friday it will no longer be eligible to carry bypass mail between Anchorage and the state's larger communities. The carrier filed for Chapter 11 bankruptcy protection Saturday.

The company, which has hauled mail since 1988 and employs about 100 people, has been engaged in a yearlong dispute with the Postal Service over who can carry bypass mail. The dispute began after a larger competitor alleged that Central Express did not meet requirements because it had not flown an aircraft capable of carrying payloads in excess of 7,500 pounds for at least a year. The airline is certified to carry payloads of 7,500 pounds or less.

Alaska Central Express argued that it fell under a grandfather clause that exempted it from the payload requirement.

After the Postal Service last June rejected the carrier's arguments, Central Express filed a lawsuit in claims court in Washington, D.C., which ruled it did not have jurisdiction in the case.

The U.S. Court of Appeals refused to issue an injunction while Central Express continued its appeal. However, the bankruptcy filing automatically stays the Postal Service's ruling, the company said.

''We built a thriving business delivering mail and freight in a safe and efficient manner, providing the most frequent service to 50 communities throughout Alaska,'' said company President Scott Pancoast. ''We had no choice but to seek protection in Chapter 11 while we find a court to hear this case on its merits.''

Alaska's bypass mail business law was designed 30 years ago by U.S. Sen. Ted Stevens, R-Alaska, to improve passenger and mail service to Alaska's rural communities. It allows carriers to ''bypass'' post offices and carry the mail directly to communities.

Stevens has said some carriers are taking advantage of the law by flying mostly mail and few, if any, passengers to Bush Alaska. The carriers at the same time are collecting a subsidy paid by the Postal Service that allows them to pay cheaper parcel post rates.

The issue of bypass mail was brought up Tuesday during Stevens' address to the Legislature. Stevens said the Postal Service last year lost $150 million in Alaska, mostly because the bypass mail system failed to control costs. If nothing changes, Alaska might not have bypass mail service, he said.

A Stevens' bill to revise the system stalled in Congress last year. The bill would give priority for Bush routes to passenger carriers, which would share 70 percent of the mail if they provide 20 percent of passenger service to a given route.

Stevens blamed Central Express and Evergreen Aviation, an Anchorage carrier that has flown mail to Southeast Alaska for nine years, for fighting the changes, and perhaps bringing the downfall of bypass mail in Alaska.

''It looks to me like they are going to win,'' Stevens said. ''If they win, we will not have bypass mail by the end of next year.''

Stevens' bill would squeeze out the smaller carriers and steer business toward the four mainline carriers -- Alaska Airlines, Northern Air Cargo, Lynden Air Cargo and Air Cargo Express, said Jerry Rock, president of Evergreen in Alaska.

''What he is doing is eliminating us from hauling bypass mail,'' Rock said. ''It really sets up a monopoly for those four main carriers.''

Pancoast agreed that the proposed legislation works against smaller carriers.

''Restricting competition will work against the Postal Service in the long run ... costs drift up,'' he said.

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