Postal Service, DHL Team Up on Overseas Deliveries

By Bill McAllister
Washington Post Staff Writer
Wednesday, March 3, 1999; Page E03

Tired of losing business to competing private delivery services, the U.S. Postal Service announced a new marketing strategy yesterday: It is teaming up with one of them.

In a marketing move aimed at both foreign and domestic competitors, the federal agency announced that it has created a strategic alliance with DHL Worldwide Express Inc. to offer two-day delivery of documents from 11 U.S. cities to 19 countries in Europe. The Postal Service and DHL compete domestically for delivery of overnight parcels.

Their new product, to be called Priority Mail Global Guaranteed, will be sold at post offices in Washington and 10 other metropolitan areas and delivered in Europe by DHL couriers. It will be the first overseas product offered by the Postal Service that will bypass the foreign postal administrations that Postmaster General William J. Henderson has said are becoming increasingly competitive with his agency.

Prices for the new service will be below those charged by rivals Federal Express, United Parcel Service Inc. and DHL, all of which have sliced into the Postal Service's share of European-bound overnight parcels, postal officials said. The number of overnight express mail packages sent to Europe fell to 800,000 last year from 1.2 million four years ago, officials said.

Left with only about 6 percent of the international overnight shipping market, postal officials decided about six months ago that they had to act. The resulting new service, which is to begin April 12, will provide the federal agency with a relatively inexpensive way to compete for a larger slice of the lucrative North Atlantic market.

John F. Kelly, postal vice president for package services, said the agency's customers were deserting its international express mail service because of poor service by European post offices and the inability of the Postal Service to trace its parcels. DHL will offer that tracking service, he said.

Postal officials said they will charge $23 for a half-pound shipment to Europe, compared with FedEx's $25.50 and UPS's $27.50 for a same-size parcel. Under the plan, the Postal Service will fly all the parcels to New York, where they will be placed in a DHL plane for delivery to Europe.

Rivals FedEx and UPS denounced the move, saying the agency was using profits from its monopoly products to compete against private competitors. "Once again, the Postal Service is able to use its vast resources to compete with private industry," said UPS spokesman Tad Segal.

Bill Margaritis, a FedEx vice president, questioned whether the new service, which will be restricted to documents, will be successful. FedEx, which has about 40 percent of the European parcel market, doubts that many of its customers will desert the firm for the prospect of a lower price and an unproven service, he said.

Unlike domestic mail products, the new service is not subject to review by the Postal Rate Commission. Both UPS and FedEx called this unfair. "The post office needs to stick to its core mission and improve delivery of first-class mail," Margaritis said.

Separately, the Postal Service announced it will begin offering delivery confirmation of domestic parcels on March 14, a service similar to the track-and-trace services offered by the commercial delivery firms.

© Copyright 1999 The Washington Post Company