FedEx postal contract ends in 2008--Will they get it again?

[FreightNazi]

I gotta ask.. if UPS was so interested in the contract why didn't they go after it in the first place? One thing to talk about it at a "workshop", whole different animal to actually execute it.

From what I understand, the USPS "invited" FedEx to bid on the contract. They were the only ones "invited" and therefore the only ones that "bid" on the current contract. If my understanding is incorrect then I invite anyone with the facts to please correct my understanding of the facts. It really seems that UPS now realizes just how much revenue the contract brings in and they definately want it for themselves. This should get real interesting come contract bidding time as we will see if UPS is really serious about going for the contract. Like I said in an earlier post, I personally heard the president of UPS Airlines say that UPS would bid on the contract when it comes up and will bid so as to make sure that they get it or whoever does get it can't make any more off it. When asked if UPS would bid under cost to get the contract, he just smiled and said that UPS has lots of ways to spread the cost out. It really seems as if UPS is going to do a "scorched earth" type bid.

 

[PurpleTail]

He answered by saying that UPS was VERY interested in bidding on the contract. So much so, he said that UPS' bid would be so "competetive" that if UPS did not get the contract, whoever would get it would not make a dime. He said that UPS now realizes how much revenue the contract brings in and they definately want it.

So what you are saying is UPS will do it for free?? What makes you think you can do it more effecient?

In regards to the major issue, the damage has already been done. Even if FDX loses some (not likely it would be all) of the mail it is still FEDEX DROP BOXES in front of every post office in the country. Envelops retrieved from the drop boxes yield the highest profit margins for the company, that is why the are EVERYWHERE. Part of the deal Fred made was for EXCLUSIVE rights, UPS can not do that if they get some US mail.

But lets get real for a second...the competetion is not domestic, everyone knows that...its been flat for years The race is for China and India which we are already deep rooted and well established. I kinda like where I'm sitting

 

[Lear70]

Actually, the USPS is so happy they keep renewing the 7 year deal and beg FedEx to fly more every year. FedEx is actually the one not accepting more freight from the USPS right now. (we are short of lift) The on time/reliability rate is always double digits higher than any time before FedEx starting carrying their packages, and at a cheaper rate.

That would be a neat trick. The average on-time / completion factor within the "holy trinity" (Express One, Ryan, and Emery) flying the USPS priority mail contract prior to FedEx was somewhere north of 98%.

"Double Digits higher" would be somewhere north of 100%...?

Don't shoot the messenger, although it's a LOT cheaper with FedEx and is the primary reason it was done. On-time / reliability suffered somewhat initially, but they keep on asking you guys to fly more, so you can't be doing TOO terribly bad of a job...

 

[Big Beer Belly]

No doubt UPS wants the contract. I would be surprised if they don't get some of the mail.

UPS flies mail every day. I've seen many a 747 full of nothing but mail ... and I'm not referring to xmas overflow.

My guess is UPS has finally seen the light when it comes to air freight and is a "johnny come lately" to this party. With their recent acquisitions of Menlo Worldwide and Overnite, and their construction of multiple air freight handling facilities, my guess is UPS intends to become a serious player in the freight biz (both ground and air). Many analysts say to watch for further freight industry consolidation.

BBB

 

[FlyBoeingJets]

the seven year contract is domestic mail. US international mail is a different contract which fedex took over last summer from DHL.

c'mon fly...............stirring the pot about something you have little knowledge of other than reading a 4 year old press release isn't the best way to "probe". To answer your question, FedEx's 98+% reliability rate provided to the post office is well ahead of their 95% goal. USPS has actually shown a profit since this contract took effect. FedEx isn't going to lose this contract.

I heard mixed things about international mail. Some said it was not really an exclusive contract. I'll have to take your word for it.

It was good for the cargo guys when big post office packages couldn't be carried by the pax guys. China growth will make up for any slack with this post office stuff, but it might take a year or two in a worst case scenario IMHO.

 

[klhoard]

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I remember a few years ago UPS suing the USPS trying to get the rights to do First Class mail. . .
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[Big Beer Belly]

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I remember a few years ago UPS suing the USPS trying to get the rights to do First Class mail. . .
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Haven't heard that one and highly doubt it. Can't imagine UPS wants any part of delivering first class mail. Perhaps the right to place an "overnight" letter in a mailbox ... but certainly not delivering the "last mile".

 

[410dude]

It seems UPS is into the mail business afterall. Check out this link.
http://www.upsmailinnovations.com/about/overview.html

 

[FN FAL]

When asked if UPS would bid under cost to get the contract, he just smiled and said that UPS has lots of ways to spread the cost out. It really seems as if UPS is going to do a "scorched earth" type bid.

Sounds like the UPS guys are in for a "scorched earth" type contract.

 

[TexaSWA]

Actually, the USPS is so happy they keep renewing the 7 year deal and beg FedEx to fly more every year. FedEx is actually the one not accepting more freight from the USPS right now. (we are short of lift) The on time/reliability rate is always double digits higher than any time before FedEx starting carrying their packages, and at a cheaper rate.

...UPS has also always stated they don't want any part of flying USPS freight.

Not sure where you are getting your info. Got this stuff from the horse's (BC) mouth.

h.

Ditto what Lear70 said. Except that ExpressOne was anything but "Holy" (outside of the EuroTran flying).

And im not sure how FedEx could be asked to "renew" a "7 year deal" that has not even been in existence for 7 years.

 

[Echopapa]

I don't think that UPS has the infrastructure to handle the postal contract.

UPS is about half the size of FedEx. FedEx is maxed out handling the USPS contract, and as previous posts have indicated, USPS is looking for more lift which we cannot support.

How on earth would UPS, at half our size, take on this type of commitment. The reality is they could not without dramatic infrastructure changes, and by that I mean twice the ramp space, twice as many aircraft, and twice the pilots.

That type of infrastructure change doesn't happen overnight (no pun intended) and is not cheap. Just imagine how long it would take to train 2000 new hires, and of course every other pilot already on property as they move immediately to Captain? Where would UPS find the over 200+ freight aircraft they would require? Where would UPS put those aircraft? We are talk about doubling the size of your IIU hub or creating an equal sized hub somewhere else from scratch.

I do think its possible to see UPS get a portion of this contract, especially if we are unable to handle the additional freight, but the idea that they could take the entire contract is ludicrous.

 

[410dude]

UPS would get the pilots they would need from all the furloughs FedEx would have if they lost the contract!

 

[410dude]

I don't think that UPS has the infrastructure to handle the postal contract.

UPS is about half the size of FedEx. FedEx is maxed out handling the USPS contract, and as previous posts have indicated, USPS is looking for more lift which we cannot support.

How on earth would UPS, at half our size, take on this type of commitment. The reality is they could not without dramatic infrastructure changes, and by that I mean twice the ramp space, twice as many aircraft, and twice the pilots.

That type of infrastructure change doesn't happen overnight (no pun intended) and is not cheap. Just imagine how long it would take to train 2000 new hires, and of course every other pilot already on property as they move immediately to Captain? Where would UPS find the over 200+ freight aircraft they would require? Where would UPS put those aircraft? We are talk about doubling the size of your IIU hub or creating an equal sized hub somewhere else from scratch.

I do think its possible to see UPS get a portion of this contract, especially if we are unable to handle the additional freight, but the idea that they could take the entire contract is ludicrous.

They would get the lift needed by turning the aircraft that fly the express night packages to fly the mail during the day..... just like FedEx does!

 

[capt_zman]

hey 410, why don't you take your know it all punk a$$ someplace else. You know nothing about how fedex or ups operates either airplanes or their business, so please do us all a favor, and go away.

 

[410dude]

hey 410, why don't you take your know it all punk a$$ someplace else. You know nothing about how fedex or ups operates either airplanes or their business, so please do us all a favor, and go away.

Then why don't you tell me what I said that is inaccurate? Did FedEx go out and purchase aircraft SCRICTLY to fly the mail? The answer is NO they did not, they continued to purchase aircraft to service their ever expanding global express operation. The added lift needed to fly the mail comes by turning the aircraft that flies the night express runs and having them fly the mail during the day. The only thing that FedEx did strictly for the mail contract was to expand their hiring of pilots and if they ever lose the contract, they would suddenly find themselves way overstaffed and very likely to furlough.

 

[Echopapa]

410....


Your missing the whole point of my post. FedEx was twice the size of UPS when they picked up the USPS contract. We have hired additional pilots but we had the infrastructure in place to handle the contract. We had the gates and the aircraft available that wern't being used during the day.

My point is that UPS doesn't have the volume of aircraft or ramp space to handle the full mail contract.

 

[410dude]

410....


Your missing the whole point of my post. FedEx was twice the size of UPS when they picked up the USPS contract. We have hired additional pilots but we had the infrastructure in place to handle the contract. We had the gates and the aircraft available that wern't being used during the day.

My point is that UPS doesn't have the volume of aircraft or ramp space to handle the full mail contract.

I think that UPS has lots of aircraft that sit at outstations during the day that can be turned to fly the mail. Their domestic system is roughly the same size as yours. The only thing they would have do on a large scale is the same thing that you guys did, hire more pilots.

 

[Echopapa]

Their domestic system is roughly the same size as yours.

Your just plane (pun intended) wrong on this one

As of the year 2004, UPS owned 265.

FedEx has roughly 327. Both airlines have large numbers on order.

FedEx has 4300 pilots, UPS has around 2500 (this is a estimate...)

So no...they are not "roughly" the same size.

 

[Mr Zog]

Then why don't you tell me what I said that is inaccurate? Did FedEx go out and purchase aircraft SCRICTLY to fly the mail? The answer is NO they did not, they continued to purchase aircraft to service their ever expanding global express operation. The added lift needed to fly the mail comes by turning the aircraft that flies the night express runs and having them fly the mail during the day. The only thing that FedEx did strictly for the mail contract was to expand their hiring of pilots and if they ever lose the contract, they would suddenly find themselves way overstaffed and very likely to furlough.

UPS's express network (ie planes and pilots) is a little smaller than FedEx's. I am not saying that with the cash UPS has on hand that they could not increase it drastically in a short time. They can. From what I understand, the USPS is pleased with the way we are handling the mail. Maybe, you have heard otherwise. I don't know. They have repeatedly come back for increases in the amount of mail we deliver. I do think that eventually UPS will get part of this pie in the future. It makes good business sense to diversify. How much I don't know? I think the people that are going to be hurt are the smaller carriers who handle the mail. The chances of FedEx losing the ENTIRE mail contract, are pretty slim. IMHO. Even if they did lose the entire contract, it would be something that is phased out over a year or two. It is not likely that they would hand over such a large contract to UPS at once. But we are way ahead of ourselves here. Plus, I don't think there would be drastic furloughs like you predict. Yes, we did hire more pilots for the postal contract. But it was not as much as you think. FedEx just made us work more efficiently (ie out-and-backs). Plus, the USPS contract is not all roses. If your plane that is handling the mail doesn't get back in time to bring the express packages (your bread and butter) to the evening sort, that is a lot of lost revenue. There is a lot of system change to be made to handle the postal contract. It isn't as easy as you make it. I personally think there are bigger threats to the FedEx bottom line than the Postal Contract (terrorist attacks, oil prices, economy slowing down, etc). Just my opinion though. But shouldn't this be on the cargo thread?

 

[410dude]

Your just plane (pun intended) wrong on this one

As of the year 2004, UPS owned 265.

FedEx has roughly 327. Both airlines have large numbers on order.

FedEx has 4300 pilots, UPS has around 2500 (this is a estimate...)

So no...they are not "roughly" the same size.

If you would have paid attention, you would have noticed that I said the DOMESTIC system was roughly the same size. FedEx does have a substantially larger international system. Sounds like you are worried that FedEx may lose the contract when it comes up for renewal. Where you one of thoses hired mainly because of it?

 

[PurpleTail]

Is everyone missing the point of the USPS agreement that I commented on back on page two?? There really isn't THAT much money in the postal contract, thats why we aren't charging to do it. The point was to get our highest profit yeild packages more accessable to our customers hence getting to put FDX Drop Boxes in front of EVERY post office. It doesn't matter if UPS gets some of the contract, it is still FDX, and ONLY FDX, drop boxes at the post office.

And yes, I was one of the lucky 500 hired needed to fly the mail. But I have over 900 behind me now so no worries

 

[410dude]

Is everyone missing the point of the USPS agreement that I commented on back on page two?? There really isn't THAT much money in the postal contract, thats why we aren't charging to do it. The point was to get our highest profit yeild packages more accessable to our customers hence getting to put FDX Drop Boxes in front of EVERY post office. It doesn't matter if UPS gets some of the contract, it is still FDX, and ONLY FDX, drop boxes at the post office.

And yes, I was one of the lucky 500 hired needed to fly the mail. But I have over 900 behind me now so no worries

First of all, congrats on being furlough proof and secondly, FedEx's agreement with the USPS on drop boxes is NOT exclusive to FedEx. Reference this USPS website....http://www.usps.com/news/2001/press/pr01_015.htm

Here is the exerpt of the press release stating that ANY qualifying company can put a drop box in front of a post office.....
"This non-exclusive business agreement will eventually be open to any company that offers overnight package service with a national reach."

 

[Mr Zog]

If you would have paid attention, you would have noticed that I said the DOMESTIC system was roughly the same size. FedEx does have a substantially larger international system. Sounds like you are worried that FedEx may lose the contract when it comes up for renewal. Where you one of thoses hired mainly because of it?

NOT WORRIED. Thanks. Is FedEx invincible? NO. It think everyone realizes that. We aren't ignorant. But I think the Postal Contract is not as big as you think. And the odds of FedEx losing the ENTIRE postal contract are slim. Fred Smith, like him or not, is a very shrewd businessman who understands politics. Why do you think we bought FedEx Field in Washington DC? But if we do lose it 3 YEARS FROM NOW, I don't think it will effect anyone on property (at least as furloughs go). It may mean we don't hire as many pilots IN 3 YEARS.

Since you all but handed the postal contract to UPS or someone else, do you know something? You seem very interested in it? Why?

 

[klhoard]

Since you all but handed the postal contract to UPS or someone else, do you know something? You seem very interested in it? Why?

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I think the official psychological term is "projection". He's not happy with his own work situation, so he's "projecting" ill wishes on others to try to bring them down to his own miserable level.
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I love flightinfo!!!
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[PCL_128]

Since you all but handed the postal contract to UPS or someone else, do you know something? You seem very interested in it? Why?

410dude is just the latest incarnation of the flamebaiting troll Rhoid. He doesn't have any inside info, he's just trying to stir the pot. He does it under a screen name for a little while until he gets banned and then moves on to a new name and starts stirring things up again. Best bet is to just ignore him.

 

[seefive]

C-R-J ignore

 

[adqrip]

My 2 cents.

If Fred is making money, then I imigine FedEx will do all that they can to keep the contract.

Besides I like the day flying.

 

[jetflyersteve]

Hmmm.. interesting thread.

I know FedEx is adding 19 MD airframes in this calendar year. The old Delta MD11s were the only ones publically announced. There are 7 others from other airlines. Then there are @ half a dozen DC-10 airframes previously bought (AA and United) and stored in the desert which are now being converted to MD-10s.

The Airbus dudes are getting an additional 6 airframes this year.

Something is driving the growth.

 

[FN FAL]

My 2 cents.

If Fred is making money, then I imigine FedEx will do all that they can to keep the contract.

Besides I like the day flying.

USPS flying has expanded opportunities and ensured jobs down at the feeders as well.

Although I think originally, USPS stuff wasn't allowed to go on feeder flights, we now have three caravans based in Ohio specfically for mail contract flying.

I don't think FedEx is going to have any problems keeping the USPS contract.

 

[FearlessFreep]

Having drop boxes in front of the post office is a great idea. I walk right past them into the office and send it Express Mail. Guess what, it's just flat cheaper to send stuff Express Mail - Thank you Fedex for the glaring disparity in prices! If it does not have to be guaranteed to get there in one single day but still needs expeditious handling I will send it Express Mail. Try getting a settlement/refund from Fedex/UPS when they drop the ball.

Just watch the way you all crow about the Postal contract. Contracts are won and lost on a daily basis. That means furloughs! Just talk to anyone that has worked for the myriad of companies that had/have postal contracts. The Fedex postal contract is just such a small part of the postal system it is nearly inconsequential.

When you purple and brown guys finally get your pilot contracts re-negotiated and settled upon, your companies are going to start to lose money on the postal contracts and they will then drop them of their own volition.

The vaunted Fedex & UPS systems combined couldn't handle not even half of the volume the postal system does.

As derided as the postal system has been at times if anyone would put any thought into the logistics involved in moving the mail they would understand just how amazing a system it is. It is absolutely mind-boggling that you hand scrawl a barely ledgible address and zip code on an envelope, drop it in a box for 37 cents, it becomes one small piece of millions of tons of other envelopes, gets sorted out, and in the matter of a few days it will with great reliability (for the most part) arrive at the most remote locations in the country. No one puts any thought into that when you drop all your bills in the mail. How many times has anyone really truly had any problem with the mail? With what frequency? With the sheer volume and overwhelming logistics involved you now can understand why Post Office employees "go postal"!

In contrast with Fedex & UPS I have problems with them at least 5 to 10% of the time - Damaged/lost freight, late deliveries, etc. When you take into consideration how often these services are utilized in comparison to how much I use the good ol' U.S. Mail, I'll take the mail any day! Fedex & UPS still have a lot to learn. Statisically Fedex & UPS service sux! I would be very afraid if UPS and Fedex got anything more than just a few crumbs of the mail system.

Oh, and one more thing - One Christmas morning I watched a U.S. Postal truck pull up to the neighbor's house with a Express Mail delivery. You couldn't pay Fedex & UPS enough to do that!