Chapter 4 Our Operations

Contract Transportation

Air Transportation

Domestic air transportation costs declined 2.4 percent this year, with reduced mail volumes generally offsetting cost increases related to higher fuel prices. Total air transportation expenses, including international transportation, totaled $3 billion, a 1.9 percent increase/decrease.

FAA proposed repealing the Department of Transportation’s authority to set the rates and the requirement that Postal Service file international mail contracts in advance. The Postal Service has long advocated these changes to provide more direct control over its transportation costs.

The Air Carriage of International Mail Act was signed into law October 13, allowing the Postal Service to negotiate directly with airlines for international transportation. This change will result in improved service by promoting competition among carriers. It will also help save as much as $50 million.

Highway and other Transportation

The Postal Service spent approximately $3.5 billion on highway transportation, an increase of 11.1 percent. The increase, a result of rising fuel cost, was partially offset by an overall reduction in miles driven. About 7.7 million fewer miles of highway transportation were contracted this year.

Rail transportation costs were $117.7 million, a 7 percent decrease. The cost of transporting mail by water, to domestic offshore and inland destinations, was $29.4 million, which was virtually unchanged. The cost of transporting mail by surface (ocean) decreased from $6.1 million to $0.5 million with the elimination of the Global Economy product in the May 2007 price change. This shifted most international mail from ocean to air transportation.

Transportation systems support

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.

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 post to compensate for costs incurred to deliver that mail.