Posted on: Tuesday, February 15, 2005

Postal Service pulls mail off two contracted carriers

By Kim Chipman and Mary Schlangenstein
Bloomberg News Service

DALLAS — The U.S. Postal Service said it has suspended shipments on American Airlines and US Airways Group Inc. because they didn't get the mail to destinations on time.

The air routes used to help ship first-class mail across the country were halted Feb. 12 after a five-month analysis showed consistent lateness, John Bonafilia, who oversees commercial air operations at the Postal Service, said yesterday. He declined to comment on the dollar value of the contracts.

The mail shipments provide added revenue for airlines — which have had four straight years of losses, most recently because of higher fuel costs and lower average fares. Major U.S. carriers have had combined losses of $33 billion since 2001. Lateness has been an issue since contracts with the two airlines took effect in June 2003, the Postal Service said.

"We put them on official notice in December that we expected improvement immediately," Bonafilia said. "And actually, since then, the performance has declined even more."

The airlines' on-time record wasn't tracked before 2003, the agency said. The Postal Service, which delivers 206 billion pieces of mail a year, said the two airlines will be used again if they can show how they intend to do a better job.

"Our contractual relationship with the U.S. Postal Service has not changed," said Tim Wagner, a spokesman for AMR Corp.'s American. "We are in negotiations with the Postal Service about our level of service."

A spokesman for Arlington, Va.-based US Airways didn't immediately respond to requests for comment.

Senior executives of Fort Worth, Texas-based AMR met with Postal Service officials today to present a "detailed recovery plan," said Bonafilia, who didn't attend the meeting. US Airways is scheduled to meet with the agency tomorrow.

American, the world's largest carrier, had a net loss of $761 million last year, and US Airways had a net loss of $611 million. US Airways filed for Chapter 11 bankruptcy protection Sept. 12, its second such filing in two years.

Wagner declined to break out revenue from the mail contract. Cargo provided $625 million of $18.65 billion in total revenue at AMR in 2004.

The Postal Service said other carriers have picked up the volume typically handled by American and US Airways and that there's no backlog of mail.