Postal Service, FedEx continue to discuss alliance

Postal Service, FedEx continue to discuss alliance

Updated 3:46 p.m. ET, Tue Jan 9, 2001

BY WILLIAM ARMBRUSTER
JoC ONLINE

The U.S. Postal Service and FedEx are continuing to discuss a possible business alliance, but have not reached an agreement.

The announcement by the Postal Service on Tuesday came one day after a federal court rejected a plea by Emery Worldwide Airlines for a temporary restraining order prohibiting USPS and FedEx from signing an agreement. Emery said it will continue to pursue the case.

“We consider the Postal Service’s pursuit of an exclusive agreement with FedEx to be irresponsible and anti-competitive and therefore not in the best interests of consumers,” said Kent T. Scott, president and chief operating officer of Emery Worldwide Airlines.

A final decision in the court case is expected by March 2. FedEx and the Postal Service said they are confident that the final ruling will be consistent with Monday’s decision by the Federal Court of Claims in Washington. Emery filed the suit on Friday.

Emery currently operates a $200 million-a-year hub-and-spoke air transportation network in support of Express Mail and other classes of mail under a 10-year contract with the USPS. Even though Emery Worldwide Airlines has received no notice of termination, the sole source contract contemplated with FedEx would likely result in termination of Emery’s contract about 2 1/2 years before it is set to expire in January 2004.

The Postal Service and FedEx are reportedly very close to an agreement under which FedEx would provide air transport for priority and express mail. Such a deal, if reached, would represent a dramatic increase in volume for FedEx.

Ed Wolfe, an analyst with Bear Stearns, estimates that priority mail accounts for 5 million packages a day, of which about one-third moves by air. FedEx’s entire domestic express business, including deferred shipments, is about 3 million packages a day.