Battle Heats up Over FedEx Postal Contract

In a strongly worded joint statement released yesterday, Jerry Trimarco, CEO of Emery Worldwide Airlines; Delford Smith, CEO of Evergreen International Aviation; and Ron Ryan, CEO of Ryan International Airlines, blasted the deal. The executives will testify today before the House of Representatives’ Government Reform Committee about the deal.

“Mail users, taxpayers and our companies will pay a high price for the fatally flawed contract between the Postal Service and FedEx,” the statement says. “The unprecedented contract is worth more than $6 billion over seven years. USPS prohibited competition in making FedEx the sole source carrier for the three types of mail most important to the general public: Priority Mail, Express Mail and First Class letters.”

Critics of the FedEx deal argue that instead of saving money, it will add between $433 million and $1.17 billion to USPS’ costs over the contract’s life.

“In scrapping the present system – which distributed responsibility among several carriers – USPS will incur higher costs. Service standards will decline,” they added. “The public interest will be at serious risk because if a single company's hub is crippled – by a strike, a natural disaster, or other unanticipated event – paralysis will occur.”

The executives further contend that USPS management sold this scheme to the Postal Board of Governors by using grossly inaccurate figures, saying the data employed exaggerated the per-pound price of shipping mail under the present system by 50%. They are also accusing USPS of projecting an artificial inflation of costs if the present system continued, understating the expenses of the FedEx arrangement and ignoring a proposal by a potential competitor that they claim actually would have reduced costs.

While Congress has no direct role in approving USPS contracts, legislators appropriate funds when necessary. The USPS is also coming under closer scrutiny as it now projects to lose $3 billion this year, as opposed to the $150 million surplus it predicted late last year. Those rising deficits have prompted USPS to consider canceling Saturday mail deliveries, which could save the agency $1 billion a year.