Unlike United Parcel Service, Federal Express has not spent millions of dollars in rates and classification proceedings before the Postal Rate Commission trying to gain an upper hand on the U.S. Postal Service. Instead it’s gotten what it wanted without having to lift a litigious finger. Just witness the really sweet contract FedEx has been enjoying as the USPS’ primary provider of Express Mail and Priority Mail transportation.
When first announced, this contract was viewed as a solution to the postal service’s air transport problems. After Sept. 11, it seemed a stroke of genius.
Under the contract, the USPS promised to provide FedEx certain quantities of mail. At the beginning, this amounted to 430,000 cubic feet of mail a day. Now it’s up to 810,000.
Normally this might not seem like much, but there’s nothing normal about the mail business these days. For the first time in its history, the USPS is seeing declines in first class mail volume, and business for Express and Priority Mail has fallen off a cliff.
Even so, the postal service is supposed to be expanding its use of FedEx. Without Priority and Express Mail claims for air transport space, the contract requires taking more mail off commercial passenger aircraft and shifting it to FedEx jets. The 35 to 38 cents per pound the USPS had been paying commercial airlines to transport mail has swelled to the 80 cents per pound (and some say $1.20) it’s now paying FedEx. Is there any doubt these costs ultimately will be borne by first class mailers?
As one Wall Street firm put it, for FedEx, the USPS contract is
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