USPS announces new mail contract aimed at better service

The U.S. Postal Service today awarded 18 competitively bid air
transportation contracts to 34 airlines. The value of these contracts will be dependent on the
individual air carrier’s price, capacity and service performance. The contracts will take effect
June 28 and are expected to increase efficiency and improve service.

Total dollar value of the contracts will not be available until the end of each fiscal year
when total mail volumes flown by the airlines is known. Last year, the Postal Service paid the
airlines approximately $370 million.

“These contracts are in the best interest of our customers and the American consumer,”
noted Vice President Network Operations Management Paul Vogel, “because they will ensure
continued timely delivery and maintain and enhance the superior service customers now receive.”

The 18 contracts awarded are: ABX/Airborne, Inc., Wilmington, OH; Air Flamenco, San
Juan, PR; American Airlines, Dallas, TX; America West Airlines, Phoenix, AZ; American Trans
Air, Indianapolis, IN; BAX Global Inc., Irvine, CA; Continental Airlines, Houston, TX; Delta/United
Airlines, Atlanta, GA/Chicago, Il and Denver, CO; Four Star Aviation, San Juan, PR; Frontier
Airlines, Denver, CO; JetBlue Airways, Queens, NY; M&N Aviation Inc., San Juan, PR; Midwest
Express Airlines, Milwaukee, WI; Northwest Airlines, Minneapolis, MN; Roblex Aviation, San
Juan, PR; Southwest Airlines, Dallas, TX; Spirit Air, Miramar, FL; and, US Airways, Washington,
DC.

Vogel explained that the new awards require the airlines to scan mail at the time the Postal
Service provides the mail to the carrier; the time the carrier loads the mail onto a flight; during
transfers to connecting flights; and upon delivery to the Postal Service following the flight’s arrival.

By tracking the mail, the Postal Service can assure its customers that:
– their mail is only transported by top performing carriers;
– their mail can always be accounted for; and,
– the superior service they have come to expect will continue to improve.

Noting the Postal Service mandate to operate as a public service in a businesslike
manner without taxpayer support, and without making a profit, Vogel said every business
relationship is approached from a prudent perspective.

“As a customer of the airlines, we expect to receive the best possible service at the lowest
possible rates, so our customers – America’s postal ratepayers – receive the same.”

Failure to meet strict on-time performance standards for any route, as validated by the
scanning requirement, could result in the airline losing business to competing airlines. If there is
more mail to offer than the successful carrier is capable of carrying, the additional mail is
provided to the carrier with the next best value.

Similar to the previous contract award structure, these contracts do not provide a
minimum mail volume guarantee.

The differences between the two end there.

Under the old contracting structure, which expires June 27, all participating airlines
transported mail at a flat rate established by the Postal Service. An equitable tender provision
required that mail be shared among carriers that serviced the same routes. For example, if
1,000 lbs. of mail were to be flown between two cities serviced by four participating airlines, each
carrier would have received 250 lbs. There was no incentive to provide superior service.

Federal Aviation Administration security restrictions put in place following 9/11 prohibited
placing a significant portion of mail on commercial passenger airlines. Many airlines voiced
concerns that this drop in volume, coupled with the equitable tender provision, created a financial
strain since each airline had to absorb the cost of maintaining a mail handling and processing
infrastructure that was receiving less mail. The Postal Service discussed these issues with the
airlines and the Air Transport Association. The competitive bidding aspect was developed and
incorporated into the contract solicitation after consulting with these entities.

Since 1775, the U.S. Postal Service has connected friends, families, neighbors and businesses by mail.
It is an independent federal agency that makes deliveries to about 140 million addresses every day and
is the only service provider to deliver to every address in the nation. The Postal Service receives no
taxpayer dollars for routine operations, but derives its operating revenues solely from the sale of
postage, products and services. With annual revenues of more than $67 billion, it is the world's leading
provider of mail and delivery services, offering some of the most affordable postage rates in the world.
The U.S. Postal Service delivers more than 43 percent of the world's mail volume – some 203 billion
letters, advertisements, periodicals and packages a year – and serves seven million customers each day
at its 38,000 retail locations nationwide.