Alaska Central Express Inc. has filed for bankruptcy protection after losing a valuable bypass mail contract with the U.S. Postal Service.
The Anchorage-based air cargo carrier filed for Chapter 11 bankruptcy protection Jan. 19, six days before its eligibility stopped for flying bypass mail from Anchorage to some 50 rural towns around the state.
Alaska Central Express has been locked in a lengthy legal dispute with the Postal Service over the company's eligibility to carry bypass mail, said Bill Patch, vice president of San Diego-based Western States Investment Corp., majority owner of the airline.
Anne Butler, wife of former MarkAir owner Neil Bergt, owns 49 percent of the airline. Bergt's son, Neil, is Alaska Central Express' general manager.
The dispute over bypass mail began a year ago after at least one of the four major mainline air carriers alleged the airline did not meet Postal Service requirements that required a company to carry payloads of at least 7,500 pounds for a year or more, Patch said.
Alaska Central Express has been in business since 1988 and has in the past flown aircraft that meet the requirement, Patch said.
The company is certified to fly airplanes that meet the requirement, Patch said, adding that a federal law in 1995 also exempted Alaska Central Express from the requirement.
The Postal Service, however, has rejected the company's arguments. Alaska Central Express filed a lawsuit with the Court of Federal Claims in Washington, D.C., which ruled that it did not have jurisdiction. The carrier then asked the U.S. Court of Appeals for an injunction to allow it to continue receiving mainline bypass mail during the appeal process. That request was denied and the company was notified by the Postal Service it would receive no more bypass mail after Jan. 23.
Steve Deaton, network planning specialist for the Postal Service in Anchorage, said the agency would not comment on any matter concerning Alaska Central Express because of pending litigation.
Patch said his company turned to the bankruptcy court hoping to get a favorable ruling, or the majority of the company's 100 employees may be out of work.
"We've tried the other courts and we're at the point where we don't know where to go with this,'' Patch said.
Patch said the company can stay afloat for about a month without the bypass mail contract and expects a bankruptcy court ruling soon.
"We feel we have better than even odds the court will agree with us," Patch said.
Whatever happens in bankruptcy court, the issue of bypass mail looms large for Alaska's air carriers.
Sen. Ted Stevens, R-Alaska, and Rep. Don Young, R-Alaska, are sponsoring bills to limit the number of air carriers who deliver bypass mail.
Stevens says the Postal Service loses up to $150 million a year in Alaska and the program faces extinction.
Stevens in 1970 secured the state's current bypass mail law, a unique system where shipments of at least 1,000 pounds are stamped air mail but never touched by postal workers and delivered to Alaskans at cheaper parcel post rates.
Some 35 air carriers -- large and small -- vie for federal money that comes from the tons of mail dispatched from Anchorage and Fairbanks daily to hub communities throughout the state, and then on to smaller villages.
Federal legislation is being drafted to limit the number of air carriers that can handle Alaska mail, which includes everything from food and construction materials to medical supplies.
The new legislation is being pushed by large, so-called mainline carriers including Air Cargo Express, Alaska Airlines, Lynden Air Cargo and Northern Air Cargo.
Smaller carriers say if new rules become law, many of the carriers will go out of business, and passenger and cargo service to the Bush will be reduced dramatically and will be more expensive.
