Sorting FedEx’s US Mail

Still seething from losing lucrative U.S. Postal Service business in 2001, passenger airlines want FedEx Express to pony up information about its postal contract.  The airlines want the Department of Transportation to demand FedEx segregate mail volume from freight data. The Bureau of Transportation Statistics requires airlines to submit volume and revenue data about what they carry, including mail. Airlines and airports use the data for planning purposes and as fodder when they bid to carry USPS cargo. But Memphis-based FedEx, which carries more than half of the U.S. domestic mail, lumps the mail it carries in with its "freight" category on its quarterly reports to the BTS. Given the large volume of freight FedEx carries, BTS and passenger airlines say the aggregate number is meaningless when it comes to parsing out Postal Service information. The passenger airlines say that hurts them and shippers too. "Without information from FedEx, passenger carriers cannot determine the true size of the market, where mail volumes are growing and declining and what price per pound to bid on potential new business," Southwest Airlines Vice President and General Counsel Deborah Ackerman wrote to the BTS. "This lack of information inhibits airline investment in mail transportation and stifles competition in the marketplace," she said. The less competition that exists, the higher the rates for moving mail are likely to be, she wrote. Only FedEx and the USPS know the details of their confidential contract, which took effect in 2001. The Air Line Pilots Association, which represents FedEx Express pilots, unsuccessfully tried to get a copy of the contract last year through the Freedom of Information Act. FedEx began flying mail under that seven-year contract in August 2001 and got a boost the next month after the September 11 terrorist attacks. When air service resumed after the attacks, passenger airlines were prohibited from carrying packages from unknown shippers, a change that banned them from carrying USPS items weighing more than one pound unless adequate screening measures – measures that do not now exist – are in place. The loss of that business coincided with a sharp downturn in earnings for nearly all U.S. passenger airlines, which lost upwards of USD4 billion collectively during the fourth quarter of 2004 alone. Although the revenue they earned from carrying postal packages was a small part of their overall income, it was a dependable – and profitable – portion.   FedEx requested a waiver from the BTS reporting requirements in a confidential letter sent in April 2004 saying its USPS contract is of a different enough nature that it should fall outside the reporting requirements. Even before the waiver request, FedEx declined to break out its mail information in its submissions to the BTS. A FedEx spokesperson did not return a phone call seeking comment. "The alliance between FedEx Express and the USPS is a unique sole-source contract structured to fulfill very specific service and quality needs of the USPS," FedEx Managing Director of Regulatory Affairs Sarah Prosser wrote to the BTS Jan. 3. "It is completely different in operational requirements, service parameters and pricing from the collectively bid mail transportation agreements that USPS has historically entered into with U.S. carriers, including FedEx Express." FedEx argues that it does report its mail data under competitively bid contracts but that this contract falls outside the usual BTS reporting requirements. The parcel delivery giant says passenger airlines have only a prurient interest in seeing the data. "The only apparent need for the data is for competitors to obtain confidential, competitively sensitive information," Prosser wrote. She told the BTS that in addition to being irrelevant to passenger carriers, providing the mail data to the agency would be operationally difficult. "Obtaining the data would destroy the ability for the USPS to meet its service and operational needs," Prosser wrote. Passenger airlines scoffed at that claim, noting FedEx is known for its technological savvy in tracking its packages and measuring metrics in all walks of its business. "The 'burdensome' process alleged by FedEx of unloading, analyzing, sorting and reloading is the very essence of its business," American Airlines Manager of Postal Affairs Mark Gilbert told the BTS. "As an industry leader in the logistics field, FedEx should not be heard to complain that reporting mail data e is so unduly or uniquely burdensome that a waiver is required." A USPS spokesperson did not respond to a request for comment.