Cargo Airlines Escalate Opposition to New Pact Between U.S. Postal Service and Federal Express; Emery, Evergreen, and Ryan Say Exclusive Deal Will Add to Costs and Give FedEx Monopoly Powers.

Business Editors

WASHINGTON--(BUSINESS WIRE)--April 3, 2001

On the eve of a House Government Reform Committee hearing on Postal Service performance, executives of three airfreight carriers announced that their companies will step up opposition to an unprecedented agreement between the U.S. Postal Service and Federal Express.

In a joint statement, the three executives said:

"Mail users, taxpayers and our companies will pay a high price for the fatally flawed contract between the Postal Service and FedEx. The unprecedented contract is worth more than $6 billion over seven years. USPS prohibited competition in making FedEx the sole source carrier for the three types of mail most important to the general public: Priority Mail, Express Mail and First Class letters.

"In scrapping the present system - which distributed responsibility among several carriers - USPS will incur higher costs. Service standards will decline. The public interest will be at serious risk because if a single company's hub is crippled - by a strike, a natural disaster, or other unanticipated event - paralysis will occur.

"USPS management sold this scheme to the Postal Board of Governors by using grossly inaccurate figures. The data employed exaggerated the per-pound price of shipping mail under the present system by 50 percent. USPS also projected artificial inflation of costs if the present system continued. It understated the expenses of the FedEx arrangement and ignored a proposal by a potential competitor that actually would have reduced costs. For all these reasons, the FedEx deal should be shelved and other alternatives examined."

The joint statement was made by Jerry Trimarco, CEO of Emery Worldwide Airlines; Delford Smith, Chief Executive Officer of Evergreen International Aviation; and Ron Ryan, CEO of Ryan International Airlines.

Written testimony on the FedEx issue is being submitted to the House of Representatives' Government Reform Committee, which is holding its hearing on Wednesday, April 4 at 10 a.m. While Congress has no direct role in approving USPS contracts, legislators are likely to be called on to appropriate funds necessary to offset USPS's growing deficit.

Critics of the FedEx deal argue that instead of saving money, it will add between $433 million and $1.17 billion to USPS' costs over the contract's life.

The airfreight carriers mentioned above, along with several other companies, today are petitioning the Justice Department to open a formal inquiry into the antitrust aspects of the transaction. The Antitrust Division, according to news media accounts, is already considering this possibility.

By granting FedEx control over air transportation, USPS is further narrowing what is already a concentrated industry. Over time, reduced competition will force price increases, service reductions, or both. (Copies of the petition and other materials can be obtained by going to: http://wswinteractive.com/usps/ ).

In a matter of national security, the agreement threatens the existence of a number of the regional airlines that participate in the Civil Reserve Air Fleet (CRAF). The CRAF program is a highly successful partnership between the airfreight industry and the government created in 1952.

Under CRAF, air carriers voluntarily contribute aircraft in the event the military is unable to fulfill airlift requirements during an emergency. For example, CRAF participants flew thousands of supply missions during Operation Desert Storm/Desert Shield. Significantly, the two participants which flew more missions than any other carrier were Evergreen and Emery.

They were two of a handful of carriers - which initially did not include FedEx - to fly into the hostile Gulf region.

On another front, the U.S. Court of Appeals in Washington in July will hear oral arguments in a suit brought by Emery Worldwide Airlines to block the transaction. The suit argues that awarding the $6 billion-plus contract in the absence of competition, and even in the absence of due public disclosure, violated both statute and USPS regulations.

For additional information: Ramsey Poston 202/585-2136 Laurence Barrett 202/585-2024 Or go to: http://wswinteractive.com/usps/