Cargo Airlines Escalate Opposition to New Pact Between U.S. Postal Service and Federal Express; Emery, Evergreen, and Ryan Say Exclusive Deal Will Add to Costs and Give FedEx Monopoly Powers

WASHINGTON, Apr 3, 2001 (BUSINESS WIRE) — On the eve of a House Government
Reform Committee hearing on Postal Service performance, executives of three
airfreight carriers announced that their companies will step up opposition
to an
unprecedented agreement between the U.S. Postal Service and Federal Express.
In a joint statement, the three executives said:
“Mail users, taxpayers and our companies will pay a high price for the
fatally
flawed contract between the Postal Service and FedEx. 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.
“In scrapping the present system – which distributed responsibility among
several carriers – USPS will incur higher costs. Service standards will
decline.
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.
“USPS management sold this scheme to the Postal Board of Governors by using
grossly inaccurate figures. The data employed exaggerated the per-pound
price of
shipping mail under the present system by 50 percent. USPS also projected
artificial inflation of costs if the present system continued. It
understated
the expenses of the FedEx arrangement and ignored a proposal by a potential
competitor that actually would have reduced costs. For all these reasons,
the
FedEx deal should be shelved and other alternatives examined.”
The joint statement was made by Jerry Trimarco, CEO of Emery Worldwide
Airlines;
Delford Smith, Chief Executive Officer of Evergreen International Aviation;
and
Ron Ryan, CEO of Ryan International Airlines.
Written testimony on the FedEx issue is being submitted to the House of
Representatives’ Government Reform Committee, which is holding its hearing
on
Wednesday, April 4 at 10 a.m. While Congress has no direct role in approving
USPS contracts, legislators are likely to be called on to appropriate funds
necessary to offset USPS’s growing deficit.
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.
The airfreight carriers mentioned above, along with several other companies,
today are petitioning the Justice Department to open a formal inquiry into
the
antitrust aspects of the transaction. The Antitrust Division, according to
news
media accounts, is already considering this possibility.
By granting FedEx control over air transportation, USPS is further narrowing
what is already a concentrated industry. Over time, reduced competition will
force price increases, service reductions, or both. (Copies of the petition
and
other materials can be obtained by going to:
http://wswinteractive.com/usps/ ).
In a matter of national security, the agreement threatens the existence of a
number of the regional airlines that participate in the Civil Reserve Air
Fleet
(CRAF). The CRAF program is a highly successful partnership between the
airfreight industry and the government created in 1952.
Under CRAF, air carriers voluntarily contribute aircraft in the event the
military is unable to fulfill airlift requirements during an emergency. For
example, CRAF participants flew thousands of supply missions during
Operation
Desert Storm/Desert Shield. Significantly, the two participants which flew
more
missions than any other carrier were Evergreen and Emery.
They were two of a handful of carriers – which initially did not include
FedEx –
to fly into the hostile Gulf region.
On another front, the U.S. Court of Appeals in Washington in July will hear
oral
arguments in a suit brought by Emery Worldwide Airlines to block the
transaction. The suit argues that awarding the $6 billion-plus contract in
t