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AA is Handed a $95 Million Loss from USPS

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  • AA is Handed a $95 Million Loss from USPS

    Fort Worth Star-Telegram
    February 15, 2005
    USPS cuts tie to American Airlines
    By Paul Bourgeois and Trebor Banstetter

    FORT WORTH - The U.S. Postal Service says American Airlines just isn't efficient enough to deliver the mail.

    As of Saturday, postal officials say, the post office suspended its domestic mail delivery contract with American, the nation's largest airline, after the carrier failed to meet certain performance goals, including on-time delivery.


    For consumers, mail delivery won't be affected, postal officials say. But the decision could cost the airline tens of millions of dollars this year, at a time when Fort Worth-based American is already struggling with high fuel prices and intense competition that has driven down airfares.

    "Revenue is revenue, and right now American doesn't have a lot of it," said Robert Mann, an airline industry analyst and consultant with R.W. Mann & Co. of Port Washington, N.Y. "So they'll have to make it up somewhere else."

    American executives, however, dispute the postal service's assertion. They say the contract remains in force, although they acknowledge that the airline is in talks with the post office regarding future mail delivery.

    "We're having a conversation about the nature of our relationship," said Tim Wagner, an airline spokesman. "But our contractual relationship with the postal service has not changed."

    Wagner also noted that American's international mail delivery business remains unaffected.

    According to postal officials, the suspension affects all mail carried by the airline to the cities it serves in the United States.

    "This won't mean anything to mail service," said John Bonafilia, manager of the postal service's commercial air operations.

    The postal service also suspended domestic mail delivery on US Airways, citing similar problems.

    Bonafilia said American had carried about 10 percent of the nation's domestic mail, including letters and small packages.

    He said other airlines under contract with the postal service are picking up the excess and that postal service customers should not see any delays.

    "They were not meeting the goal of on-time performance," said Jim Quirk, a spokesman at the postal service's Washington headquarters. "We gave them time to meet goals, and they didn't."

    Bonafilia said the postal service installed a new mail distribution and routing system in 2003.

    The system electronically tags each piece of mail, and each is tracked as it moves through the system, which includes the airlines that carry the mail. Bonafilia said officials put American on notice in December and gave the company until Feb. 10 to comply.

    Officials with neither American nor the postal service would disclose the value of the airline's contract.

    But according to data from the U.S. Transportation Department, American collected about $73 million from domestic and international mail delivery services during the first nine months of 2004, the latest figures available.

    That would give American the second-highest revenue for mail delivery among passenger airlines, after United Airlines.


    Passenger airlines have carried U.S. mail since the industry's inception. In fact, the first airlines focused on mail delivery before taking on passengers.

    But in recent years, domestic mail has become less important, particularly as passenger loads have increased, leaving less room in airplane cargo holds for letters and packages.

    For example, American collected nearly $38 million in the third quarter of 2000 from mail delivery, both domestic and international. The same quarter last year -- the most recent period for which figures are available -- produced $22.47 million in mail revenues, a decline of more than 40 percent.

    Some airlines have exited the mail business. Northwest Airlines, for example, no longer delivers domestic mail, although it still carries mail on international routes.

    "Depending on what the cost involved is to the airlines, this may not be that big a deal to American," Mann said. "Still, they can't afford to walk away from revenues these days."

    IN THE KNOW

    Mail money

    Carrying mail for the U.S. Postal Service brought tens of millions of dollars in revenue to passenger airlines during the third quarter of 2004.


    Carrier Revenues from mail*
    United Airlines $35.4 million
    American Airlines $22.47 million
    Delta Air Lines $14.95 million
    Continental Airlines $10.48 million
    Alaska Airlines $8.6 million
    Northwest Airlines $6.29 million
    Southwest Airlines $5.58 million
    America West $1.9 million
    US Airways $1.33 million
    JetBlue Airways $188,080
    Follow me on Twitter! www.twitter.com/flyingphotog


  • #2
    Its not good for an airline such as AA to lose anymore revenue. With fuel prices this high, American needs all the money it can get to offset the increase in fuel prices. Also, American needs more money just to make a profit.
    Fly Delta Jets!

    Comment


    • #3
      Not good for AA at all It needs the money. Our mail gets up here on AS, they are the only people who can actually do it efficiently in and out of JNU.
      You've got to try to find what's right before your eyes-Finger Eleven


      Comment


      • #4
        Didn't the USPS have it's own fleet of planes at one time?

        Comment


        • #5
          Originally posted by Airbus_A320
          Didn't the USPS have it's own fleet of planes at one time?
          Yes then they contracted the rest of the flying to FedEx which is now the USPS aircraft (sorta)

          Comment


          • #6
            Didnt Ryan International operate some 727's for USPS?
            You've got to try to find what's right before your eyes-Finger Eleven


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