FedEx Slowdown Looms Over the Holiday Season

The threat of a slowdown — and possible strike — by Federal Express' pilots during the holidays is causing many catalogers to implement alternative delivery plans in a fashion similar to what took place during last year's United Parcel Service strike.

The pilots association's board of directors voted late last month to implement a no-overtime flying policy for its members commencing Nov. 9 because contract negotiations weren't proceeding at an acceptable pace. The pilots are seeking a new labor contract that includes pay increases, job protection and retirement package improvements. The association represents 3,595 pilots, or 90 percent of FedEx's pilots for the express package delivery arm of transportation company FDX. At press time, the two sides had returned to the bargaining table.

Carla Boyd, a spokeswoman for Fed Ex, said the two sides are “very hopeful that they will come up with a contract. Both parties are negotiating in good faith.” She would not speculate on the outcome of a possible strike.

“FedEx is well-known for its contingency plans. We deal with them every day for weather situations, etc.,” she said, adding that overtime flying constitutes a small percentage of FedEx's air operations.

Rumors, however, are percolating in mailing circles about a full strike since the pilots board has asked its members if they would agree to go on strike. The vote is still outstanding but expected to be announced shortly. Several calls to the pilots association were not returned.

Although the pilots account for only 2 percent of FedEx's employees, they are a critical part of its ability to deliver mail across the county overnight. Analysts said that if a strike occurs, it won't have the same ramifications as last year's UPS strike since DMers rely more heavily on UPS. In addition, even though FedEx is the leader in the express mail service category, there are more alternative carriers. Still, a strike could be devastating during the holidays.

“Anything that affects [FedEx's] capacity to operate at 100 percent will have an impact on the direct marketing community,” said Jim Jellison, executive vice president of the Parcel Shippers Association, Washington.

Many mail-order companies that don't use FedEx regularly switch all of their orders routinely to FedEx on Dec. 15, just to be sure packages get delivered before Christmas.

“For the last couple of Christmases, FedEx had to be careful about how it meted out its available airlift, and newer customers were somewhat limited,” Jellison said.

Jo-Von Tucker, chairwoman/CEO of Clambake Celebrations, Cape Cod, MA, a direct mail company that ships lobster and clambake dinners exclusively via FedEx, is particularly chagrined.

“Last year, with the UPS strike, we lost a huge amount of profits that should have fallen to our bottom line,” she said.

Tucker, however, plans to stick with FedEx — she experimented with another express shipper after the UPS strike but wasn't happy with the results. She also taking steps in case a strike occurs. For example, when customers call to place orders to be delivered during the Christmas season, the company is asking to send a gift certificate via First-Class mail instead of the clambake dinner overnight.

Virtual Vineyards, Palo Alto, CA, which relies on FedEx during the holidays to ship its bottles of wine, is planning to “switch everything over to UPS, since we use a combination of both right now,” said Cyndy Ainsworth, director of marketing.

Other catalogers are putting together contingency plans in addition to the ones they normally have for the holidays.

“I don't know if the UPS or the postal service has enough extra capacity during the holiday season to handle the influx of volume they will receive. It could be horrible,” said Doug Rockel, a transportation analyst at ING Baring Furman Selz, New York, an investment banking firm.

David Fockelsrud, a spokesman at DHL Worldwide Express, Redwood City, CA, said that if a FedEx slowdown or strike occurs, his company will “increase the scale of our normal holiday ramp-up program by acquiring supplemental aircraft, hiring temporary employees, bringing some part-time employees to full-time staff and acquiring supplemental vehicles.”

UPS, Atlanta, wouldn't comment on how its business could be affected, “but has planned our peak the way we always do, adding capacity to handle the anticipated needs of our customers,” said spokesman Norman Black.

The USPS also has worked out its contingency plans, but spokesman Roy Betts wouldn't discuss the details. He also said the USPS' labor negotiations that are taking place with its two largest postal unions won't affect its service.

“Customers should not be concerned about the negotiations going on,” he said. “They will have no impact on our holiday mailing schedules.”

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