USPS joins forces with rival UPS

Amy Scott Jun 28, 2006

TESS VIGELAND: Today UPS announced it’s won a contract to fly priority and firstclass mail on its airplanes. The Post Office is no stranger to the “if you can’t beat ’em, join ’em” philosophy. Fed Ex has been hauling US mail going on five years now and making more than a billion dollars a year doing it. But the new deal with “Brown” could spell trouble for more than Fed Ex.

Marketplace’s Amy Scott reports.

AMY SCOTT: The deal delivers another blow to passenger airlines. Until about five years ago, most mail traveled beneath passengers’ feet on commercial flights. Problems with delays and security hassles prompted the post office to seek alternatives. Today, FedEx transports roughly half the mail delivered by air. Starting next month UPS will fly mail between nearly one hundred US cities. Industry analyst David Campbell says companies devoted to shipping stuff rather than people are far more reliable.

DAVID CAMPBELL: The postal service mail deliveries need to be reliable in order to get the business.

The partnership announced today expands a smaller contract UPS already had with the post office. But at around $100 million a year, the new contract is less than a tenth the size of the Fed Ex deal. No Brown drop boxes will appear in post office lobbies.

In fact you, the customer, probably won’t notice a thing. Transportation consultant Satish Jindel says it’s not the size of the deal that counts, but rather that fierce competitors have become collaborators.

SATISH JINDEL: This is actually a change in the way the post office is working with all private carriers, looking to see where their work-sharing opportunities are better handled by working with companies that one may view as their competitors.

The chance to deliver the mail efficiently and on time also positions UPS to compete for a much bigger slice of the pie when Fed Ex’s contract expires in a few years.

In New York, I’m Amy Scott for Marketplace.

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