More on UPS mail contract
By DAVE HIRSCHMAN
The Atlanta Journal-Constitution
Published on: 06/28/06
Long-time rivals UPS and the U.S. Postal Service are set to become the transportation industry's odd couple with a deal that would put U.S. mail on brown-tailed jets.
The formerly bitter adversaries are about to announce a $100 million deal to move some mail on UPS jets, company officials said Wednesday.
The deal is striking because UPS has long accused the Postal Service of abusing its first-class mail monopoly to unfairly subsidize its small package business, which competes with service by UPS and other private shippers. The Postal Service has taken issue with UPS's political clout and the company's frequent opposition to postal rate increases.
The UPS/Postal Service contract will sign a three-year contract with an option for two more years that become effective July 1 and sends first-class, priority and express mail on UPS jets flying between 98 U.S. cities.
UPS expects to fly its airplanes more as a result of the deal, but it won't add new aircraft to its fleet.
The Postal Service has complained recently that U.S. passenger airlines haven't provided the on-time deliveries it requires, and the UPS contract shifts much of the mail formerly carried on airlines to UPS.
The revenue boost is relatively minor for UPS, which had revenue of about $42.6 billion last year. But the deal also positions UPS to contend for a much larger, $1.3 billion deal between the Postal Service and FedEx. The Memphis-based delivery firm signed a precedent setting deal in 2001 that allows it to carry a broad range of Postal Service products.
At the time the deal was signed, Postal Service officials said FedEx was the only cargo airlines that could meet its requirements.
UPS expects to be a serious competitor when the FedEx contract expires next year.