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Effort to block FedEx deal
April 3, 2001: 4:42 p.m. ET

Competitors to argue to courts, Congress against postal service pact
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - FedEx Corp.'s agreement with the U.S. Postal Service came under attack by other air cargo carriers Tuesday, as its competitors mounted a final challenge to the $6.3 billion contract that was awarded without bidding.

"In scrapping the present system -- which distributed responsibility among several carriers -- the U.S. Postal Service will incur higher costs," said a coalition of carriers led by Emery Worldwide, a unit of CNF Inc. "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."

graphicFedEx and USPS spokespeople answered that they remain confident the Jan. 10 agreement to have the company carry U.S. mail on its planes will save the postal service $1 billion over the life on the contract and improve service.

"The postal service has maintained from the beginning we've conducted a through legal and business analysis in awarding the business and that it will benefit the public," said Monica Hand, a postal service spokesperson.

Emery argued against the contract in the U.S. Court of Federal Claims, but lost an effort to block the contract's August start last month. The U.S. Court of Appeals has agreed to hear the case, however, and the House Government Reform Committee is set to hold a hearing on Postal Service performance Wednesday. An Emery attorney said he's confident of the company's chances to still block the agreement in the court of appeals.

"The judge in the case found all the facts we need," said David Hendell, an attorney for Emery.

Jess Bunn, a spokesman for FedEx, said the Memphis-based company is confident the court of appeals will uphold the lower court ruling and that any congressional inquiry will also support the deal.

graphic"Anybody in Congress who looks at the agreement will come to the conclusion it's best for the American public," he said.

FedEx's major competitor, United Parcel Service Inc., did not enter the lawsuit because it did not have standing, said Tad Segal, a UPS spokesman.

Unlike Emery and two other privately held carriers that joined Emery in its efforts Tuesday -- Evergreen International Aviation and Ryan International Airlines -- UPS did not carry any of the mail involved in this contract. Segal would not say if UPS would have tried for the contract had it been offered for bid.

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"There's a lot of 'ifs' in there," said Segal. "No one can say for sure what would have happened, but we would have liked the chance to consider it."

He said while UPS still questions the legality of the non-bid contract, it is not counting on either the courts or Congress blocking the agreement at this time.

"I think we fully expect the contract to be implemented, given the circumstances," he said. "We'll see what happens with their contract, but we don't see this impacting us from a competitive impact at all."

Shares of FedEx (FDX: Research, Estimates) lost $1.92 to $39 Tuesday, while shares of CNF (CNF: Research, Estimates) lost $1.26 to $27.68. graphic