March 15, 2005 Update

Dear BSA Member:
As of yesterday, the following is the situation on air mail of lives:

I. THE PROBLEMS

Delta Airlines: As earlier reported, Delta unilaterally decided (for economic considerations), that it would no longer take “live” air mail shipments of if such shipment would mean a transfer in the shipment. In other words, you could ship from A to B but not to C if the shipment required a transfer from B.
American Airlines and U.S. Air: Due to sub-performance in their contracts with the USPS, the USPS temporarily suspended the contracts with American and U.S. Air.
United Airlines: It has been learned that United will not take “lives” from Dallas to Denver.
II. THE “Solutions”
In order to “take up the slack” from the above situation, USPS has contracted with Air Tran and Airbourne. Airbourne, in turn, has contracted with Northwest Airlines to carry “lives.”
Northwest currently takes “lives” under a direct contract with USPS from Detroit (DTW) and Minneapolis-St. Paul (MSP) and, by April 18th, Northwest will be taking “lives” from all it other hubs: Memphis (MEM), Los Angeles (LAX), and New York (JFK). A surcharge will be imposed of $.20 per pound from all hubs except Detroit and Minneapolis-St. Paul where it will continue the current surcharge rates. Northwest is to submit its routing to the USPS by the end of the week.
It turns out that Air Tran does not (will not?) take “lives.” John Bonafilia informs me that Air Tran admits it “misled” the USPS on this issue.
The USPS was unaware of the United refusal to take “lives” from Dallas to Denver but will investigate.
American will be back to carry air mail starting next week for a four (4) week test. Initially, the USPS would not allow them to take “lives” during a test period. I (respectfully) requested that it reconsider this decision due to the critical economic impact the absence of air mail service has had on the industry. The USPS changed its position and American will be required to take “lives” during this test period.
U.S. Air is now “not ready” for the test period but will be by April 2nd.
III. LEGAL ISSUES
The unilateral decision by Delta not to take transfers is clearly in conflict with the statute we successfully obtained. This was pointed out to the USPS that responded with the statement that their attorneys were “looking into it.” As a practical matter, Delta started to dismantle its transfer facilities beginning in March. It has to be concluded it did so with either the tacit approval of the USPS or the perceived or certain knowledge that the USPS would do nothing about it. I fear the same may be true of the United situation.
Of course, there is still the FedEx issue that it was covered by the statute but, even so, the USPS contractually allowed it not to carry “lives.’
IV. CONGRESSIONAL ASSISTANCE
I met with the staff of Senator Charles Grassley yesterday.
Firstly, apparently, the Senator’s office had out considerable pressure on Northwest to do what it has done by some “trade off” on other agriculture issues.
Secondly, it is agreed that the problems (with the exception of sub-performance by American and U.S. Air) are clearly systemic from USPS’s failure to enforce the provisions of the statute. (i.e., FedEx, Delta and United).
Thirdly, in view of these conclusions, I was requested to draft a letter for Senator Grass signature to the USPS (Vogel) indicating his displeasure with the current state of affairs that are mainly the fault of the USPS in its failure to enforce it authority under the statute (or, in turn, using its discretion to not enforce it per FedEx).
Fourthly, after a letter of explanation from the USPS that will undoubtedly be unacceptable the USPS will be “invited ” to come to the Senator’s office for a “chat.” At that time, the FedEx issue will “be on the table” and if the USPS will not remove the clause from the FedEx contract and require FedEx to carry “lives,” it will be informed that legislation will introduce to insure that it be done.
[FedEx had expressed the notion that if it were required to carry "lives" as air mail, it would not carry any air mail. Initially, the Senator Grassley's office was concerned with that threat viz-a-viz the carrying of medical products. This was of specific concern to the Senator as he is Chairman of the Senate Finance Committee that has jurisdiction over Medicare. The Senator now believes that the threat was, and is, a bluff so he does not have any hesitation in going forward].
Fifthly, in view of the surcharge issue, the Senator’s office will look into some form of establishing parity in the market place for those shippers that have to pay the surcharge. The initial thought was to craft some form of a tax credit scheme. This will be pursued.
V. CONCLUSIONS
I really believe that the USPS is attempting to be responsive to the current problems. Having acknowledged that notion, most, if not all, the problems have, in point of historical fact, been caused by the USPS:
1. by eliminating the USPS owned and operated Eagle Service and replacing it with contract service that will not carry “lives” in the face of the statute and facts that required an air carrier to do so;
2. by compounding the this failure by specifically contracting with the carrier that it does not have to do so;
3. by having bid contracts for the carrying of air mail rather than negotiated contract; and
4. by “permitting” Delta and United to unilaterally decide to alter its policy on how it will carry air mail.
From the very beginning of the problems, it was clear that the USPS believes it is held hostage by the air carriers and has consistently deferred to them. The air carriers have, in turn, evidenced to the industry that they “are in control.” The air lines and the USPS (let alone the animal rights crowd) never thought the statute would pass the Congress. Although the passage of the statute (temporarily) “made believers” of the USPS and the air line industry, it is clear that it is time to legislatively make it abundantly clear to the USPS and the air lines that the air mail service the industry is entitled to under the Constitution and statutory law shall be available. Fortunately, we have an “800 pound Congressional gorilla” to help in obtaining this objective.
Sincerely,
Murray McMurray
Chairman