Three shipping firms driving substantial gains in Postal Service’s package business

By Bill McAllister, Washington Correspondent

A footnote to its latest financial report could place a cloud over one of the United States Postal Service’s biggest pending projects and the booming growth of its package business.

In bold type on page 29 of the first-quarter report comes the caution that while the USPS has scored big gains in package deliveries “this increase is largely due to significant volume growth from three major customers.”

And it adds that all three “are building the capacity which would enable them to divert volume away from the Postal Service.”

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What that could threaten is the Postal Service’s long-held plans to replace its entire fleet of delivery vehicles with a new generation of trucks made especially for its use.

With the anticipated purchase of 180,000 vehicles, the purchase could be the largest fleet sale in the United States, with a price tag “in excess of $6 billion” according to one estimate.

But if those three big shippers vanish as rapidly as first-class letters have, so would the Postal Service’s demand for a large, new fleet.

The USPS has already taken one cautionary step backward.

It recently asked truck manufacturers if an off-the-shelf, right-hand drive vehicle might meet its future delivery needs.

Meanwhile, six firms are producing prototype vehicles for USPS to test.

DC Velocity, a website that deals with transportation issues, reported Feb. 9 that the three companies that have driven up the Postal Service’s package business are: Amazon.com, the Seattle-based retailer; Memphis-based FedEx Corp.; and Atlanta-based UPS Inc.

Velocity said all three shippers have used “parcel select,” a USPS service that allows shipments to be delivered to post offices near a package’s destination for “last mile” delivery by a postal vehicle.

Amazon, which has made much of its hope to use drones for some of its deliveries, has signaled it would like to control more of its deliveries.

Both FedEx and UPS have noted the boom in e-commerce shipments and are “confident they can build the package density necessary to more cost-effectively ship themselves rather than turn them over to USPS.”

The truck purchase is a good reason why postal executives have been anxious for Congress to address the Postal Service’s financial woes.

Financing such a large truck purchase might require special legislation. A House hearing Feb. 7 showed that lawmakers (especially those with auto plants in their district) were anxious about the Postal Service’s truck plans.

The Postal Service’s quarterly report, filed with the Postal Regulatory Commission, said that if the three shippers move away from the USPS, “the growth in our competitive service revenues may not continue.”

The report did not mention what might happen to the truck purchase plan if package volume declines.

PMG Brennan urges Postal Regulatory Commission to end postage price cap

There is a crack in the mailers coalition backing the bipartisan bill that Postmaster General Megan J. Brennan has endorsed.

The Alliance of Nonprofit Mailers said Brennan’s testimony before the House Oversight Committee “should send chills down the backs of every mailer.”

The postmaster general said she wants the Postal Regulatory Commission to urge an end to the price cap that keeps postage increases to no more than the rate of inflation.

“The Postal Service is going for the brass ring — unfettered monopoly pricing power,” the Alliance said in its newsletter.

In an article titled “PMG Trust us,” the organization attacked Brennan’s arguments for placing greater pricing powers in the hands of the USPS.

“Generally, monopolists charge the highest price they can get away with while not worrying about lower than maximum possible volume,” the article said.

“Ms. Brennan, however, said that the Postal Service would be different by emphasizing growth and scaling its operation to demand.”

The price cap has been in place since 2007. Before that time, Brennan said the Postal Service was always careful about the size of its price increases.

Congressman questions USPS authority to issue semipostal stamps

Rep. Michael C. Burgess, R-Texas, wants to strip the U.S. Postal Service of its powers to create semipostal stamps.

The eight-term conservative lawmaker told Linn’s through a spokeswoman that he does not believe the USPS should have the “unilateral ability to raise funds through specialty stamps and give those funds to its own preferred designations.”

“That is a prerogative that the Constitution grants solely to the Congress in the ability to appropriate funds,” said spokeswoman Lesley Fulop.

Burgess offered a similar bill in the previous session, and it failed to get out of committee.

Although the USPS has said it can issue semipostal stamps on its own authority, all four of the semipostal stamps it has issued have come after congressional authorization.

These are semipostals for breast cancer research (Scott B1 and B5), victims of the Sept. 11, 2001, terrorist attacks (B2), domestic violence victims (B3), and endangered species (B4).

Postal Service spokesman Mark Saunders told Linn’s Feb. 14 the USPS had no immediate comment.