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Volume VI, No. 4 July-August 1999 Newsletter

PRC Chairman Ed Gleiman to Speak at APMU Breakfast and Briefing

Hon. Edward J. Gleiman, Chairman of the Postal Rate Commission, will be the guest speaker at APMU's Breakfast and Information Session on Tuesday, September 28, 1999 at the National Postal Forum in Chicago. Chairman Gleiman has agreed to share with us some important thoughts about Priority Mail from his unique vantage point as Chairman of the Postal Rate Commission, the body which recommends postal rates and postal classifications. Members will be receiving their invitations separately and other interested mailers can contact APMU for further information.

Update on Delivery Confirmation/Signature Service

Delivery confirmation is receiving heavy promotion from the Postal Service's current advertising campaign, which includes television, print media and direct mail. Cumulative usage of delivery confirmation (since March 14) now exceeds 20 million items. The Postal Service's current scan rate is up to 96 percent; that is, for every 10,000 pieces bearing a delivery confirmation barcode, 9,600 are scanned when the piece is delivered, while 400 pieces fail to get scanned. Although less than perfect, the Postal Service's delivery confirmation service is off to a good start.

Priority Mail users who want to send and receive delivery confirmation information electronically can obtain a technical guide on the requirements by calling 1-800-279-2651 (or contacting their account representative).

The Postal Service's new electronic signature confirmation service has been delayed due to problems with equipment and software. According to a Postal Service spokesperson, nationwide availability of the new signature service, originally slated for early next year, is not likely to begin before the summer of 2000.

Priority Mail Supplies Again Available

A temporary shortage of Priority Mail supplies led to unfounded rumors that the Postal Service was making permanent cutbacks as part of its belt-tightening efforts. Not so. Here's what happened. The appearance of Priority Mail envelopes and other packaging materials is being changed by the Postal Service. The new design requires less color ink and will be less expensive to produce. During the changeover, the Postal Service miscalculated the available quantity of supplies with the old design, and temporary shortages developed in various parts of the country. The supply pipeline has now been refilled. Look for the new design to appear around mid-September.

H.R. 22 Stalled in House Government Reform Committee

Rep. Dan Burton (R-IN), chair of the House Government Reform Committee, has been unable to muster enough votes to move H.R. 22, the Postal Reform Act, to the House floor. At present, no further hearings, markup, or other committee action is scheduled for the bill. Unless Chairman Burton can fashion some sort of breakthrough, it looks increasingly as though the bill could languish in committee for the remainder of this session of Congress.

Postal Service Wins Omnibus Rate Case Appeal

With the next omnibus rate case on track to be filed as early as mid-November, the appeal of the last omnibus rate case with respect to Priority Mail draws to a close. The United States Court of Appeals for the District of Columbia Circuit handed down its decision on the appeal of Docket No. R97-1 on July 23, 1999. Two issues of importance to Priority Mail users had been appealed by UPS. First, UPS argued that unless the markup on Priority Mail was higher than the markup on First-Class Mail, it was unlawful. Second, UPS argued that the costs of the Alaska airlift for parcel post should be attributed in their entirety to parcel post. The Court of Appeals rejected both arguments. The immediate UPS goal was to push up parcel post rates. Had UPS prevailed, however, it could have been expected to argue (as it has in the past) that Priority Mail rates should be increased so as to exceed parcel post rates by a comfortable margin. APMU's brief in the Court of Appeals opposing the UPS positions, which is available on the APMU website.

Global Priority Mail Set to Expand

In early March the Postal Service joined with DHL Worldwide Express to offer a two-day service, called Priority Mail Global Guaranteed, from 11 metropolitan areas to 19 countries in Western Europe. Priority Mail Global Guaranteed provides delivery confirmation, day-certain delivery and on-line track and trace capability, three features not available with International Express Mail. Talks are now underway to expand the service with respect to both more U.S. cities and more foreign destinations.

What's Your E-Priority" Ad Campaign Launched

The Postal Service launched a major 8-week advertising campaign for Priority Mail on August 30, called "What's your E-Priority," leading up to the 1999 holiday season. The campaign promotes Priority Mail for the shipment of merchandise purchased on the Internet, and is considered by the Postal Service to be an evolution from the previous "What's Your Priority" campaign. Network and cable television will feature testimonials from online retailers and Eddie Bauer. The campaign also includes advertisements in business and trade publications such as The Wall Street Journal, Business Week, and Forbes, and an Internet advertising strategy. The Postal Service hopes to increase its market share in E-commerce shipping from last year, when it achieved a one-third share.

The E-commerce market has exhibited exponential growth. Online sales are expected to reach $18 billion in 1999 and grow to $33 billion in the year 2000. Revenue generated by package shipments resulting from Internet retail sales is expected to grow at the same clip, and exceed $4 billion by the year 2003.

Arbitration Continues Between USPS and NALC

The Postal Service's contract with the National Association of Letter Carriers ("NALC"), which expired at the end of last November, has been in binding arbitration since last Spring. The carriers are reported to be again asking for an across-the-board step increase from level 5 to level 6, on the theory that delivery point sequencing of letters has made their job more difficult. Mailers should be aware that any such increase (i) could be retroactive to last November, and (ii) would have a substantial continuing negative impact on Postal Service finances.

New Priority Mail Web Site

The Postal Service established a new web site exclusively for Priority Mail on August 27. This web site, at the address, is intended for use by retailers as well as shoppers. Retailers can use the site to obtain information on Priority Mail rates and to order Priority Mail supplies and postage. The site also provides retailers with information about the Merchandise Return program, which can be used to authorize an online shopper to print out a postage paid label to return merchandise.

Postal Service in the Black at End of A/P 11

After A/P 11 (ended July 16), Priority Mail volume was up 3.2 percent, while the higher rates that took effect January 1 helped increase revenues by 9.2 percent. Net income of the Postal Service after A/P 11 was reported to be $821.5 million. At this time last year, net income was $1,091.8 million. During the balance of FY 1998 the Postal Service lost $541.8 million, and wound up the year with a $550 million net profit. Should recent history repeat, the Postal Service would end FY 1999 with a net profit of about $280 million. The big unknown clouding any forecast is the pending arbitration settlement with the letter carriers union. The size of this year's profit is not expected to affect filing of the next rate case, which is likely to occur in November, but conceivably could be put off until sometime in January/February.

Postal Service Employment Continues Upward Creep

The Postal Service reported the following employment data at the end of accounting period 11.

Last This Percent
Year Year Change
Career Employees 782,957 800,352 2.2%
Casual Employees 31,151 26,904 -13.6%
Transitional Employees 17,846 12,881 -27.8%
Total 831,954 840,137 1.0%

Conclusion: total employment continues to expand. Looking at the details, the most expensive category, career employees, has grown, while the less expensive categories have declined. Productivity remains essentially stagnant, reflecting the comparatively paltry amount of net investment by the Postal Service to automate and upgrade its facilities.

Postal Service Inks Contract with Kitty Hawk

The Postal Service has signed a six-year contract with air freight carrier Kitty Hawk to support Priority and Express Mail transportation mail in the West. The contract includes two three-year renewal options for nine aircraft operating out of a new hub, the location of which is still being decided. There are conflicting reports on the price tag of this contract.

1999 Calendar of Events

APMU Meetings (tentative) September 28 -- Chicago, Illinois
(Breakfast & Briefing at National Postal Forum)
October 19 -- Washington, D.C. (at MTAC)
National Postal Forum
September 26-29 Chicago, Illinois
MailCom 1999
October 17-20 -- Las Vegas, Nevada
MTAC Meetings October 19-21 -- Washington, D.C.
MTAC Meetings
October 4-5 -- Kansas City, Missouri
November 1-2 -- Washington, D.C.
December 6-7 -- Washington, D.C.

The Association of Priority Mail Users, Inc. is a nonprofit organization of Priority Mail users and suppliers to Priority Mail users which seeks to ensure that proper business and financial decisions are made by the United States Postal Service to promote and protect the cost efficiency and quality of service of Priority Mail. For information on APMU programs and membership information, please call 703-356-6913.
Association of Priority Mail Users, Inc. 8180 Greensboro Drive, Suite 1070 McLean, Virginia 22102-3823 (703) 356-6913 (phone) (703) 356-5085 (fax) (URL) (e-mail)