Mondor: Everything you ever wanted to know about Alaska’s bypass mail

Bypass Mail on the way to Fort Yukon. (By Joseph/Flickr Creative Commons.)

Looking deep into the current maelstrom of political uncertainty, one problem that stands out for Alaskans is the recent attack on the bypass mail system by Postmaster Louis DeJoy. Testifying before the Senate Homeland Security Committee on August 21, DeJoy pointed to the state’s bypass mail system as a budget cutting target, referring to it as “an unfunded mandate” that “costs us like $500 million a year.” Although Alaska’s congressional delegation immediately issued a strongly worded statement which prompted DeJoy to walk back his comments, his threat can not be ignored. 

According to the Department of Transportation, over one hundred million pounds  of mail was flown in Alaska in 2019, making it a hugely significant part of the state’s aviation industry. DeJoy came to his position from the private sector and presents no discernible understanding of how or why Alaska has a unique mail system or how deeply entwined it has become with commercial aviation here. That he has set aside his plans for now is no cause for relief but rather an opportunity to gain a better understanding of why the bypass system exists and how it contributes to the state’s transportation economy.

MORE: Postmaster general considers bringing budget axe down on Alaska’s Bypass Mail

Alaska aviation’s relationship with the USPS goes back nearly a century. In 1925 Ben Eielson flew the first commercial flight in the territory, carrying mail from Fairbanks to McGrath. Mail planes rapidly became ubiquitous and companies large and small, including Alaska Airlines, can trace their histories back to flying the US mail. Without the financial security those early postal contracts provided, the state’s transportation system would look nothing like it does today.

The establishment of aviation mail rates shifted from the USPS to the Department of Commerce after a 1934 corruption scandal. (A senate investigation found that airmail contracts were being awarded not through competitive bidding but due to collusion between the Postmaster General and certain operators.) Commerce, and later the Department of Transportation (DOT), were key to approving airlines and cargo companies to carry the mail and determining how much they would be paid. For decades, Alaska’s system was similar to that in the Lower 48, until it began to develop a definite problem with too much parcel post mail.

MORE: The 1934 Airmail Scandal

In a 2011 report prepared by the USPS Inspector General, the bypass system was dated to 1972, “as a mutually beneficial solution between the U.S. Postal Service and air carriers to remove bottlenecks and improve service.” In more basic terms, by the 1970s the USPS in Anchorage was having a problem as it could no longer physically accept and store the high number of parcel post packages destined for the Bush. Even worse was the situation in rural Alaska, especially in hub communities like Bethel. It was in solving this logistical problem that the story of bypass begins. 

But, contrary to the 2011 report, there is no single year to point to, no specific date to say “this is where bypass originated.” (Believe me, I have looked everywhere for any sort of definitive statement on when bypass started, including through a lot of old newspapers.) The closest we get to bypass mail’s origins is what became unofficially known as “The Bethel Experiment”.

MORE: USPS’s ‘Alaska Bypass: Beyond Its Original Purpose,” 2011

The Bethel Experiment

As described in a 2014 congressional hearing, in the late 1970s the “Bethel Experiment” developed as a narrowly focused version of what the bypass system is today. Under the direction of Anchorage postal authorities, shipments in excess of 1,000 pounds of parcel post mail, from a single customer to single recipient, were flown on large “mainline” carriers (flying hub to hub), like Alaska Airlines to Bethel, without the need for physical distribution or acceptance at the post office on either end. Essentially, shipments went from the shipper directly to the air carrier with postal officials supervising the weight and acceptance at the carrier’s facility. (Hence the name: this class of mail was “bypassing” postal facilities.) 

MORE: 2014 Congressional hearing

After arriving in Bethel, bypass mail destined for another village was transferred to the Bush carrier as assigned by the USPS. When Bush carriers got it to the destination airport, their agents unloaded the bypass and delivered it directly to the recipient. The carriers were responsible for storage and security until shipment, and for maintaining the USPS delivery schedule. The post office didn’t have to expand its physical facilities statewide to deal with all this mail nor hire additional personnel nor purchase a lot of forklifts. The experiment was deemed a resounding success and expanded. By 1988, bypass rates were set and certain delivery restrictions were established by DOT. Bypass was here to stay, although not everyone was sure how it was always supposed to work. 

One problem was exposed most famously in June 1988, when an Anchorage shipping agent, Bush Consolidators, arranged to mail approximately 530,000 pounds of concrete blocks and cement from Anchorage to Wainwright. The USPS lost $200,000 in the difference between what it charged for postage and what it was required to pay the air carriers involved. (It was trucked to Fairbanks, transferred to Northern Air Cargo and flown to Barrow and then transferred to Bush mail carriers for Wainwright.) A small scandal erupted and there was concern that the entire system might be shut down. A few months later then-Postmaster General Anthony Frank told Senator Ted Stevens that construction materials could still be shipped via bypass but only within reason. “We’re not going to prohibit people from sending out residential building supplies, he said, “but we’re not going to allow them to mail out a whole house.” In the wake of all the furor, Bush Consolidators largely stopped shipping via bypass. 

Things get complicated

The ‘90s was a period of relative stability in the Bush mail system. The USPS used the “equitable tender” method to split the mail and bypass between all carriers flying similar routes and schedules. However, it was increasingly clear that local postal officials exerted enormous sway over carrier operations by “rewarding” companies willing to take flights in marginal conditions. This was accomplished by transferring the mail and bypass from more cautious competitors to those who would depart. The National Transportation Safety Board found pressure from the USPS so egregious that it was listed as a factor affecting Alaska commercial flight safety in reports published in 1980 and 1995. For its part, the USPS has typically not responded in-depth to questions regarding safety, placing the onus on individual pilots and companies for operational decision-making. Accident statistics in the ‘80s and ‘90s were a problem for Alaska however, and partly led to the next great change in the state’s mail system.

This is where everything about the USPS and Alaska gets very complicated.

In 2002 Senator Ted Stevens shepherded the Rural Services Improvement Act (RSIA) into law. Ostensibly, it addressed two things: modifying the bypass system (especially Bush mail out of the hubs) and saving the USPS money while also incentivizing passenger airline service of larger aircraft to rural Alaska. RSIA did several radical things in pursuit of its goals. It created barriers for new entry of air carriers into the mainline and Bush mail business, by requiring that before they receive bypass, companies had to fly routes for twelve months with the aircraft of the size they planned to always fly in the route, (so no flying a Cessna 207 if you intended to later fly a Beech 1900). Carriers also had to possess a certain minimum seat capacity before they entered a route. (In other words, they had to provide a minimum percentage of passenger seats annually on the routes.) Cumulatively, these rules presented high hurdles for anyone contemplating getting into the air carrier business and flying mail. For Bush mail specifically, RSIA emphasized operation of the larger Part 121 carriers. Generally, companies operating under Part 121 of the Federal Aviation Regulations fly larger, heavier aircraft, with ten passenger seats or more, on scheduled flights. The rules governing all facets of their operation are exceedingly strict. Like companies operating under Part 135 of the regs, using smaller aircraft, Part 121 is for-hire. Large aircraft can fly under Part 135 for charter operations but can not carry the mail on those flights. (This is the most basic way to explain the difference between Part 121 and Part 135; it can and does get much more complicated.)

All Bush mail bypass carriers were put on a five-year clock to convert to Part 121, a very expensive and time-consuming process, or they would be dropped from the system in 2007. In the meantime, the passenger Bush carriers had to fly 20% of a route’s annual passenger traffic to receive any of the bypass. In turn, they would split a greater portion of the mail (75%) than cargo companies (25%) on an identical route. It was immediately clear that these rules would put smaller companies operating under Part 135, especially cargo companies, out of business. In later comments at a field hearing of the Senate Committee on Commerce, Science and Transportation in Anchorage, Stevens specifically named Bellair, Servant Air and Village Aviation as three Part 135 companies who almost exclusively flew the mail and nothing else prior to RSIA. They were all cut out of the mail service by the time he mentioned them in 2005.

MORE: Report from the 2005 field hearing

As the industry reeled from the ramifications of RSIA, Frontier Flying Service, one of the only Part 121 passenger carriers flying Bush mail, began to expand its route structure. Frontier’s growth was fueled by the issuance of waivers from DOT, permitting them to ignore the 20% passenger requirement that their Part 135 competition remained bound to. In rapid succession smaller companies went out of business or were sold, (Cape Smythe Air, Larry’s Flying Service, Olson Air), or reduced service and/or dropped the mail entirely (Tanana Air Service, Baker Aviation, etc.) Almost overnight, Frontier became a dominant force in the state.

In 2006 Stevens revisited RSIA and created special provisions for the three Part 121 Bush mail operators in the state (Frontier, ERA Aviation and PenAir). A new amendment waived for a year the 20% passenger requirement entirely for any Part 121 on any Bush mail route. In the second year, the Part 121s would need only 5% of the passenger traffic and then ultimately only 10%. (The 20% requirement remained for Part 135 operators.)

The amendment also gave the Part 121s 10% more of the mail, by taking it away from their Part 135 competition. Finally, it dropped the mandate that Part 135s would have to convert to Part 121 by 2007 to receive bypass. Art Warbelow, longtime owner of a Fairbanks Part 135, had by then spent millions for his company’s still incomplete conversion. He was stunned by the changes. 

“We’ve come full circle,” he told the Daily News-Miner in a March 11, 2006, article. “We’re going to provide the vast majority of the mail to a carrier providing no other service.” His frustration in the interview was palpable. “This is not about creating a system that makes rational sense,” said Warbelow. “It’s about benefiting certain operators.”

As history went on to show, Art Warbelow was not wrong.

Frontier, which had acquired Cape Smythe’s assets in 2005, merged with Hageland Aviation in 2008 and the following year, as Frontier Alaska, bought ERA. The new ERA Alaska also bought Arctic Circle Air Service, rebranded as Ravn Air and ultimately acquired Yute Air and PenAir. By 2018 with a cash infusion from two east coast private equity firms, Ravn was indisputably the largest Bush carrier in the state, while also operating multiple mainline routes as well. In many towns and villages, its planes were the only option for mail and scheduled passenger service. 

Then, Ravn went out of business.

Uniquely Alaskan

The April 2020 collapse of Ravn, which included the separate companies Hageland Aviation, Corvus Airlines (formerly ERA) and PenAir, provided Alaskans with a real-world look at just what a massive upset to the state’s air mail system would look like. As USPS officials scrambled to deal with the fallout, it was Part 135 carriers who mobilized to get the mail back in the air. Ravn carriers exclusively held several routes, which, according to RSIA, raised issues for other carriers to enter into markets. Working with the post office, Bering Air, Alaska Central Express, Wright Air Service, Grant Aviation and Ryan Air were some of the companies that stepped up to bring order to the chaos. The irony that it was Part 135 carriers that saved the mail in the wake of Part 121 destruction is not lost on many. I would imagine that somewhere Art Warbelow, who sold his company in 2012, was shaking his head at how things turned out. (Frontier Flying Service’s operating certificates were dormant by 2020. Warbelow’s, along with sister company Wright Air Service, is now the largest operator in Fairbanks.)

How any of these events factor into the USPS’s recent thinking on bypass is uncertain. Postmaster DeJoy’s negative viewpoint is not unique; postal officials from Outside often exhibit a stark lack of understanding about bypass, and indeed Alaska itself. In the 2011 Inspector General’s report for example, the USPS stressed that King Salmon, whose population was cited at 347, received 90 flights per month from Anchorage contrasted with Juneau, which had 31,275 residents and received only 80 flights. The report’s writers concluded this showed unreasonably high and “extensive availability of passenger air service” to a bypass hub which was being supported by USPS subsidies.

What they failed to research is that King Salmon serves as a travel hub for surrounding destinations which receive high seasonal industry traffic, also it is an entrance to Katmai National Park and the Bristol Bay Borough’s seat of government. They also didn’t take the time to check Federal Aviation Administration enplanement data, which showed 41,514 revenue passengers boarded in King Salmon in 2010. 

The entire report exhibits similar flaws and misunderstandings and yet it has been the keystone to the USPS’s efforts to transform bypass for almost ten years.

The bypass system, along with the entire Alaskan mail system, is not perfect. It was designed on the fly, adjusted over time, heavily tampered with to aid in the growth of one company and, with subsequent reductions in the aviation industry, has little capacity to cope with the failure of any significant air carrier. The USPS has addressed its issues with a lack of sincerity, choosing to rely on a poor understanding of not just Alaska’s physical infrastructure but its society and economy. It has suggested more than once that the Permanent Fund, which the 2011 USPS IG’s report projected to be valued at $80 billion in 2022, should be tapped to “reimburse the Postal Service for its Bypass losses.” It has also suggested simply dropping bypass altogether. This, of course, is based on the assumption that everyone who utilizes bypass would then ship goods via freight and not parcel post which, as the post office itself would do well to recall, is what necessitated the system’s development in the first place.

Bypass mail is a uniquely Alaskan solution to a uniquely Alaskan problem. 

Every year rural Alaskans purchase tons of food from Alaskan merchants in Alaskan cities to be shipped on Alaskan air carriers and they do all of this without requiring the post office to handle a single box. A huge segment of our transportation economy is built on bypass and while the current Postmaster General might see savings in destroying it, Alaskans know better. The US mail was key to the territory’s survival and to the state’s success. Ben Eielson, Joe Crosson, Bob Reeve, Bob Ellis, Russ Merrill, Shell Simmons, the Wien Brothers and all their contemporaries proved that the days of mushing vaccine to the village are over. Now pilots are moving 10,000 pounds of food for the local store, but the job of delivering what rural Alaska needs is still the same. If we learned nothing else from the end of Ravn Air it should be that the fallout from halting bypass would be a lot more complicated than anyone at the US Postal Service can imagine.

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1 Comment on "Mondor: Everything you ever wanted to know about Alaska’s bypass mail"

  1. James dearwent | October 28, 2020 at 6:05 pm | Reply

    I know of several places where this is being abused out of King Salmon Ak. and I mean big time.

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