American Proves Itself, Signs 5-Year Contract to Ship U.S. Mail

In early 2005, the U.S. Postal Service rated American Airlines Inc.'s ability to deliver the mail on time so low that it stopped shipping mail on the carrier.

But a determined effort to improve service restored American to the postal service's good graces - so much so that it signed a new contract with the Fort Worth-based airline on Wednesday that could mean $500 million in cargo revenue over the next five years for American.

At a joint signing ceremony with airline president and chief executive Gerard Arpey, Postmaster General Jack Potter said American will carry more mail than any other U.S. passenger carrier, second behind only FedEx Corp. among all U.S. carriers.

"It's no secret that back in February of 2005, we pulled all our mail off of American Airlines," Mr. Potter said.

"And the reason we did was poor service. They were literally at the bottom of commercial passenger airlines when it came to delivery of the mail in a timely fashion."

Mr. Potter said Mr. Arpey called him after the suspension and said: "We're embarrassed. We're embarrassed that we were not delivering the mail at the levels you expected. American Airlines is just too good to have that kind of performance." Mr. Arpey also expressed concern about the jobs of about 450 American employees assigned to the mail contract.

"I walked away from that conversation with confidence that they were going to step up to the plate," Mr. Potter said.

David Brooks, president of American's cargo division, said American most recently was getting $80 million to $100 million annually from its mail revenue.

In 2005, revenue from all cargo, including mail, was $622 million.

Mr. Arpey said the carrier had had to decide whether to get out of carrying mail or figure out a way to do so profitability with better service. He credited managers and Transport Workers Union members for working together to figure out ways to meet both goals.

Tony Pajunas, USPS vice president of network operations, said American will pick up business from "carriers that either were not invited to participate in the contracts going forward or decided that they had better opportunities for their cargo capacity."

Among the airlines that won't have mail contracts are United Airlines Inc., Southwest Airlines Co. and Northwest Airlines Inc., he said. "So some of those carriers that have been doing business with us aren't going to be doing business with us in the future," Mr. Pajunas said.

Mr. Potter said American got the new contract "because of a very high level of service and a competitive price. It's that simple. We're in the business of delivering mail for America, so we need reliable suppliers, people who'll move our product in a timely fashion. American has shown in the last year that they can do it."

Mr. Potter said that among commercial passenger airlines two years ago, "there were almost none that were delivering the product at the levels that we expected," including lowest-ranking American.

"American Airlines contacted us and let us know that they wanted to be in the business, they wanted to work closely with us to achieve the levels of service we had expected and we really needed for our customer base," Mr. Potter said.

"I'm very proud to say they've done a fantastic job."

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