Emery suffers court reverse in battle over USPS air contract

Emery Worldwide Airlines (EWA) appears to be losing its legal battle to overturn a decision by the US Postal Service (USPS) to switch over to using FedEx as its main provider of domestic air transport for postal express shipments later this year without putting the business out to competitive tender.

According to FedEx Corporation, the US Court of Federal Claims has now ruled in favour of the USPS and FedEx, allowing the new transportation agreement between them to go ahead and be implemented as planned in late August. The court has said it will issue a public decision after March 28.

EWA had challenged the USPS/FedEx agreement in that court, claiming the contract concerned should have been competitively bid for (the-chain, January 11). EWA also alleges that although the USPS engaged in “substantial” discussions with FedEx about the services involved, it refused to enter into meaningful talks with EWA.

A subsidiary of US-based transportation group CNF Inc, EWA currently operates a $200 million per year hub-and-spoke air network in support of express mail and other classes of mail under a 10-year contract with the USPS. EWA claims that the planned new USPS sole source contract with FedEx will result in termination of its agreement about two and one half years before it is due to expire in January 2004.

Senior FedEx executives are predictably “very pleased” with the final judgement of the US Court of Federal Claims in respect of EWA’s complaint. Referring to the FedEx/USPS transportation deal which triggered the carrier’s legal action, Kenneth Masterson, FedEx Corporation executive vice president, general counsel and secretary, adds. “This agreement represents an excellent opportunity to improve service for customers of the US Postal Service, while giving FedEx an opportunity to improve its revenues and operating efficiencies by transporting express mail and priority mail in our existing air system.” See also Corporate Announcements (March 21).

Meanwhile, FedEx Corporation has just reported reduced income for its third quarter period to February 28. Operating income was down 7 per cent on the same quarter a year ago to $191 million while net income dropped by 4 per cent to $109 million. Revenue was up 7 per cent at $4.8 billion. “Our third quarter was challenging, as economic conditions worsened throughout the quarter,” commented Alan Graf, FedEx executive vice president and chief financial officer. For full details of the latest FedEx results, see Corporate Announcements (March 21).