Ever since FedEx flew its first Falcon jet laden with small packages, UPS has spent tens of $millions on lobbyists whining and complaining to the politicians and bureaucrats on Washington Beltway that FedEx has an unfair advantage over them because neither their pilots nor their labor force is unionized while UPS’s is. FedEx from day one up until now has always had its employees on its side because Fred Smith has been a very generous boss making sure their take home pay is higher than any of its competitors but their retirement and healthcare plans set the bar for American industry. On the other hand the Teamsters Union has fought tooth and claw for decades with UPS to attain satisfactory levels. A FedEx executive today reminds me of where IBM executives were a generation ago. They are highly skilled, motivated and commercial. Take a look inside the UPS “mahogany rows” in the various buildings spread around Atlanta, and the lot of them resemble a bunch of worthless and sanctimonious religious missionaries all donned in their Church issue hair cuts, gray suits, white shirts, bland ties and polished black shoes. None of them could make a decision to save themselves, whereas Fred Smith has always encouraged his key men to be innovative and entrepreneurial as though they are not only running the business but they also own it.

Currently the House of Representatives appear to favor the UPS position that FedEx workers should be treated under the same act that governs UPS workers. Fred Smith, it appears has the ears of the majority of the Senate. Both UPS and FedEx have been conducting campaigns of disinformation and both in the last year have spent nearly $10 million each with Washington law firm lobbyists. If UPS can convince the Senate, then war will break loose between FedEx and UPS and I know who I would have my money in the marketplace. It is a no-brainer!

That prognosis is basically how one of the bell weather companies FedEx, sees it too. Fred Smith, the eternal optimist, conceded the weak economy will continue to hurt FedEx’s results for some time to come. He did try to suggest there were glimmers of hope though. Inventories, he claimed were getting low. That is not how I view where FedEx is heading. When things do start to pick up, just as has been happening over the past five years 2nd day delivery and road will continue to bite into the highly profitable overnight business. Just like the email/scanner has replaced the fax, only if the package/envelope is a “must deliver by 10.00AM the following day”, second day and time definite trucking service will become the FedEx’s mainstay of domestic business. I believe USPS with their one price up 70lbs “New Priority Mail Box” is a winner and will further erode FedEx’s and UPS’ market share of the domestic express business.

FedEx has already become the best trucking company in America and with Yellow on the brink of bankruptcy they can step in and over the next two years swallow up the lion’s share of both the LTL and FTL business. Fred can start parking up all those gas guzzling DC 10′s and cancel his Boeing orders and put investment into thousands more Freightliner trucks and tens of thousands of 53 foot trailers. If I were him, I would strike a deal with DHL to get out of the international business altogether. As for UPS, they probably need another five years of management meetings to decide what engineering needs to take place to meet the changed business environment. That is why FedEx will pass them by.

With regards to the international operations, Fred Smith will rue the day someone sold him the bill of goods on China. International heavyweight express is history. Excess capacity has seen to that. Every airline in the world, especially the combination carriers are now offering overnight at their standard deferred rates tariffs. Who in the heck is going to listen to a FedEx/UPS/DHL salesman telling the customer he must continue to pay a premium to move his high priority goods? Of course the question is if he has any in the newly evolving economy! Fred, your best bet is to become closer with USPS, cut a deal with them for home delivery and continue to be their line haul operator. Your future is domestic and with many large American corporations bringing their factories back to America, Fred your company has a huge future.

Apart from these low cost airlines that compete with the Greyhound buses, there is not one carrier operating in the black. Never in aviation history have so many modern generation aircraft been parked up, most with little chance of flying another passenger or kilogram of freight ever again. Air N.Z. sent its first 747-400 to the Arizona desert to be broken up for parts! Less than five years ago a 400 series Boeing was considered as high tech as the day the world witnessed its maiden flight in the late eighties. British Airways is down to asking its staff to turn up for work with no pay! Others are moving to four day working weeks. Freight volume to many major destinations is down 40% and rates have never been lower. Some carriers are even dealing on the fuel surcharge in an effort to persuade a forwarder to tender the shipment to them. The airline industry is downsizing because all indications are present passenger travel and airfreight levels may remain with us for years to come, not months.

Sure, I am a little biased when it comes to choosing between the two. If it weren’t for Mike Scanlan, our FedEx rep when we opened our doors sixteen years ago and the help he and his team gave us, there might not have been a company that next month will be celebrating its sixteenth birthday. Yes, some smart Alecs did arrive on the scene at Memphis H.Q. in the late nineties to make us feel miserable enough to switch over to UPS for a few years, but if any CII staff members are asked today where their preference is, all would yell in unison, “FEDEX!” In L.A. FedEx’s Beverly Bolin and Mike Scanlan sixteen years later are still looking after CII’s best interests.

As far as UPS is concerned, I couldn’t care less if they are in the forwarder business or not. Maybe if I were some Bible bashing evangelical Christian, UPS and I would still be great buddies, but my business relationships require far more substance than “speaking in tongues”. Every time I see an ugly, ancient looking UPS van go rumbling by painted up in its 100 plus year old toilet brown livery I compare it to the bright white, orange and mauve FedEx attired trucks and say to myself, those guys in Atlanta still have their heads firmly stuck up their “you know whats”. I can’t believe it, it is obvious the boys from “Oops” in many ways are proud of still being stuck in the nineteenth century! By contrast FedEx stands for and is a perfect example of the American dream come true, while UPS should have stayed in Seattle delivering furniture by horse and cart!

Fred Smith, who founded FedEx, knew from the get-go that he had to keep that Mafia dominated Brotherhood of Teamsters’ Union out of the equation. This wasn’t because they controlled UPS, but it was an evil organization hell bent on graft and corruption and Fred Smith saw no future for his company with that involvement. In fact UPS was a trucking company (therefore its workers were teamster controlled) of longstanding and only got into the overnight airfreight business because if it hadn’t, FedEx would have “cleaned their clock”. FedEx drivers were organized under the Railway Labor Act, which blocks workers at railroads and airlines from organizing themselves at a local level. UPS now wants to see FedEx stripped from its right to bargain under this act.

Congress is in a dilemma as both UPS and FedEx are huge political party donors and as well as major spenders on lobbying. Over the past few years, labor unions have lost significant influence inside the Democratic Party and UPS with nearly 260,000 Teamsters in its ranks is not exactly the company the Republicans want to openly support for obvious reasons. Fred Smith is claiming that if legislation is passed which makes FedEx exempt from the Railway Labor Act, he will be forced to downsize his company and all future Boeing aircraft orders may have to be canceled.

I am taking sides here. The United States needs FedEx, even if it is just for the USPS to deliver our mail in a timely fashion. Furthermore, we probably no longer need even two overnight delivery companies. DHL, the third overnight integrator suddenly died in January, life went on as usual and quite frankly apart from 9000 workers in Wilmington, Ohio, no-one mourned its passing. If UPS suddenly decided to get back into the business it was created for in the first place, transporting and delivering parcels by road, it might just be a good thing. The last thing I do know and that is we don’t need FedEx unionized because of the poor sportsmanship of UPS.

Now the world is turning green, do we need 1000 half laden aircraft filling U.S. air space every night emitting all those pollutants? I’m all for economies of scale. Maybe UPS should go the way of USPS and contract their airfreight to FedEx. They might make more money and have a happier customer base. Once an old salt of the industry a few years ago said to me, “UPS is a trucking company trying be an airline and FedEx is an airline trying to be a trucking company.” I think there is a certain truth to that. For the sake of the environment, can I ask Scott Davis, CEO of UPS, to consider pulling out of airfreight altogether. It might also help your balance sheet no end.