Chapter 4 Our Operations

Transportation

In 2007, the Postal Service spent $6.5 billion for mail transportation, including terminal dues, transit charges, and other international expenses discussed below. The $457 million increase compared to last year is driven by the expansion of peak season operations, increases in contract rates for the offshore networks, and fuel expenditures.

CONTRACT TRANSPORTATION

Air Transportation

Air transportation costs totaled $3 billion, an increase of 7.9 percent from 2006. This increase is a direct result of rising fuel costs and the shift of volume to cargo carrier airlift where necessary to meet service commitments. New air transportation contracts awarded in 2006 contributed to better service performance. Where service is maintained or enhanced, mail has been shifted from air to ground transportation, a strategy that has been successful in reducing cost.

The Postal Service continues to pursue the deregulation of air transportation rates for international and military mail, including the authority to contract competitively in the open market. In its proposal this year for the Federal Aviation Administration reauthorization bill, the Administration supported such a transfer of authority and explained that its “rate-setting responsibilities in this area are no longer in sync with the realities of air and mail transportation.” In particular, the Administration proposal would repeal the requirement that the Postal Service file international mail contracts in advance, as well as the Department of Transportation’s authority to set the rates for international air transportation of mail. Deregulation would significantly reduce postal costs for international transportation.

Highway Transportation

Approximately $3.1 billion was spent on highway transportation costs an increase of 5.8 percent compared with 2006. The increase is attributable to contractual wages, expansion of the surface network, and the shift of some mail volumes from air to service-responsive ground transportation.

Other Transportation

Expenses for rail transportation were $126.6 million, a 0.5 percent increase from 2006. The cost of transporting mail to domestic offshore and inland destinations by water was $29.2 million, a 0.6 percent increase from 2006.

The cost of international surface transportation by ocean increased to $6.2 million. Ocean transportation suppliers are selected on the basis of a best value comparative analysis of proposals.

Terminal Dues, Transit Charges, and Other International Expenses

Under the Acts of the Universal Postal Union (UPU), each postal administration that receives mail from another administration has the right to collect payment from the originating administration for costs incurred to deliver that mail. These charges are called terminal dues for letter mail and inward land rates for parcels. Express Mail International items also incur processing and delivery charges from foreign postal administrations (FPAs) or private delivery companies. Additionally, the UPU provides for transit charges for mail exchanged between administrations through a third country. Transit charges are paid by the originating country to the intermediary country for its forwarding of mail to the destination.

For the most part, settlements of terminal dues, inward land rates, and transit charges are contingent upon both the Postal Service and FPA accepting statistics on the mail exchanged. Final settlement and payment can occur a year or more after service is performed. The Postal Service accrues an estimate of these expenses based on available weight and piece data by country. This year $541 million in terminal dues, Express Mail, transit charges, and other international expenses unrelated to the transportation of mail were incurred.

POSTAL-OWNED TRANSPORTATION

The Postal Service-owned fleet is predominantly used for its delivery network. In addition to providing delivery and processing support, the fleet includes vehicles used for law enforcement, plant and vehicle maintenance support, mobile Post Offices, and other functions.

Source: Area and National Summary of Vehicles Report.

Source: Make/Model Component Cost Report and Fuel And Oil Usage by Make Model Report.

MAIL TRANSPORT EQUIPMENT

Mail Transport Equipment (MTE) consists of sacks, trays, lids, pallets, and wheeled containers. The Mail Transport Equipment Service Center is an integrated network of 23 facilities that collect, sort, repair, store, and distribute MTE to internal and external customers. The Mail Transport Equipment Support System, a redesigned software application, integrates and manages the network. The number and variety of MTE and sack types continue to be reduced to lower maintenance costs, improve availability, and enhance inventory control. The Postal Service is engaged in various recycling programs for MTE.

SUPPORT SYSTEMS

The Transportation Optimization Planning and Scheduling (TOPS) system allows managers to perform long-range and week-to-week optimization for domestic, military, and international mail on contracted or postal transportation. The latest enhancement supports total air and surface transportation planning, such as the generation of non-stop direct international flights to streamline service and reduce total transportation time. TOPS has been designed to determine mail volume based on historical data and trends, and to allocate anticipated volumes to authorized suppliers based on cost and performance.

The Surface Air Support System (SASS) integrates scan data from air transportation suppliers with existing systems to improve accountability and payment verification. SASS receives assignment data from postal facilities, from the Surface Air Management System, and from transportation suppliers. These data are used to measure supplier performance and reconcile payment for air carriers.