Consignia may set up cheap local post service
Consignia, formerly the Post Office, is considering asking the Postal Services Commission, the independent regulator, for a licence to operate cheap local postal services in competition with its own Royal Mail subsidiary.
The project is being compared by Consignia to British Airways’ launch of its Go subsidiary, which was set up to protect the company’s position in the highly competitive market for cheap flights.
Consignia managers say they are becoming increasingly concerned by the damage to the company’s competitive position caused by a wave of unofficial strikes against new working practices agreed with the Communication Workers’ Union.
The strikes appears to have strengthened the hand of potential competitors – especially in international mail, for which no licence is needed. Larry Klimczyk, UK managing director of Deutsche Post, said the company had been approached by big commercial customers of Royal Mail.
Mr Klimczyk said the German company, one of Consignia’s main international competitors, had spare capacity at its hubs in Frankfurt and in the Netherlands, and was stepping up its marketing efforts among UK commercial customers.
Consignia said it was not surprised. “Any organisation that is unable to supply the service its customers are paying for would expect to lose some of its business to competitors.”
The company is understood to believe that its industrial relations problems could cost it up to 30 per cent of its domestic business once private sector competitors enter the market.
Consignia sees the prospect of setting up a cut-price subsidiary as a way of protecting part of its market, and of encouraging its brightest managers to stay with the company instead of setting up their own operations.
A cut-price subsidiary would be set up in a single city, probably one with bad industrial relations, such as Liverpool. It would probably be non-union, and would focus on local deliveries of bulk mail for customers such as councils, utilities, government agencies and health trusts.
Prices would be “substantially” lower than those charged by Royal Mail – perhaps as low as 10p per letter. Delivery might be slower than by conventional mail.
Consignia has delayed approaching PostComm because regulatory experts think the regulator is unlikely to award the company a second operating licence before fresh private sector competitors enter the market.
Graham Corbett, PostComm’s chairman, has talked to most of the big European post offices and express mail carriers, but none has applied for a licence since a new competition regime for postal services came into force on March 26.
PostComm said it was “duty bound” to consider any licence application put before it.
