Royal Mail moves ahead with new integrated road and air network

Royal Mail today revealed its plans to have a more efficient and flexible UK-wide distribution network, integrating air and road, in place by the end of the financial year.

Original plans to include rail in the new network have now been dropped after Royal Mail failed to reach agreement with its rail freight supplier because the cost was too high.

As part of a complete review of its road, rail and air network, Royal Mail announced last year that it intended to stop using rail for the distribution of First Class mail due to poor reliability, but would continue using rail for less time critical items. This would have increased the amount of mail distributed by rail from 14 per cent of the daily postbag of 82 million items to around 18 per cent.

However, following the failure of protracted negotiations with rail freight supplier EWS over the transfer of existing services to the new network, Royal Mail has concluded that it has no alternative but to move forward with a restructure based on a road and air network only.

Paul Bateson, Royal Mail’s Managing Director, Logistics, said: “There is a marked difference between the price we believe we should be paying for rail services and that which was on the table. Quite simply, other forms of transport can give us the same benefits, in terms of flexibility and quality, but at a lower cost.

“We are disappointed that, after two years of discussions with EWS, we have been unable to make any headway. But we cannot negotiate any longer. We need to move ahead and create a new distribution network which is more robust and has greater flexibility to improve quality of service as well as one which is more cost effective than we have now.”

He added: “To continue talks would simply have caused unacceptable delays to our plans to restructure our distribution network, costing us money and impacting on the service we provide to our customers.”

Royal Mail will now begin a process of cancelling its train services, in line with the terms of its contract with EWS, and expects its new distribution structure to be in place by the end of the financial year.

Mr Bateson said: “We are totally confident that the newly designed road and air solution, based on a hub and spoke network, will give us the improved quality of service expected under the original plan.

“Work on a new £40 million National Distribution Hub in the Midlands, which underpins the new road network, is underway and the phased opening will begin later this year. Detailed planning of the air element of the integrated network will be completed by the end of July.”

He stressed: “We expect this solution to provide us with the annual cost savings of £90 million originally envisaged and the reduced impact of our distribution network on the environment through more efficient use of road vehicles.”

Mr Bateson said a return to rail for some elements of the distribution network had not been ruled out for the future. Options will be scoped when the new network is in place and rail companies will be invited to tender for services if Royal Mail feels they can add benefit in terms of quality of service and price.

Ends

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NOTES TO EDITORS:

· The restructure of the distribution network is a key element of Royal Mail’s renewal plan to reduce annual costs by £1.4 billion to invest in improving services.
· 49 train services currently serve Royal Mail’s distribution network each day.
· 33 of these are freight services, used for the distribution of large volumes of mail across the country. 16 of these are Travelling Post Offices, on which mail is sorted during the trains’ journey.
· Notice has already been given to EWS to cease five of those at the end of July. The phased cessation of the remaining services will take place between September 2003 and the end of March 2004.
· Royal Mail is considering tenders from a range of air operators for services distributing mail across the UK. This process will be completed, with successful operators chosen, by the end of July. Implementation of the new integrated air network will begin in October.