Over the past few months you have not been able to go on the Web without running
into the Brown Bailout guy talking about FedEx using airplanes and UPS using
trucks without seeming to make much of a point.
While the ads are lighthearted, the issue is serious. If UPS and the Teamsters get the FAA Reauthorization amendments that they are lobbying for, Federal Express will be forced to change its entire business model and may never recover.
The issue is not that complicated. As everyone knows, Federal Express’s core business is taking a package from point A to point B guaranteed next-day delivery. This constitutes about 80 percent of its business, and it relies upon the dependability of strike-free airline hubs to deliver this service to the public at a reasonable cost.
Federal Express is an airline that uses vans to finish the job, and as such its employees have been classified, since the company’s inception in the late 1970s, as covered under the Railway Labor Act (RLA). When FedEx acquired a ground trucking company, it separated its express business from its ground business, incurring the additional expense of having two trucks delivering to the same location in order to have the certainty provided under the Railway Labor Act for its core express-delivery business. You see, under the RLA, employees have to unionize nationally, and cannot have local hub strikes, and the Teamsters have been unable to unionize Memphis-based FedEx. However, without this local hub organization prohibition, they might be able to unionize a single hub and destroy Federal Express’s reliability promise.
In the early 1990s, UPS tried to get all of its employees covered under the Railway Labor Act as well, but the federal courts and regulators ruled against it because about 80 percent of UPS’s package traffic goes by truck. Upon losing the ruling, UPS had a choice: It could separate out its airline business and have those who work in that business covered under the RLA, or it could continue with its combined businesses under the National Labor Relations Act.
UPS chose to avoid the extra expense and not split up the company. Now it is whining to Congress alongside a frustrated Jimmy Hoffa Jr. that the playing field is not level due to this decision.
While I have always been an admirer of UPS, it seems incongruous for the market leader in a very lucrative worldwide business to be complaining to Congress that the playing field is not level due to a business decision that it made almost 20 years ago and has come to regret.
Ironically, the source of the un-level playing field is the fact that UPS is unionized, and FedEx isn’t. UPS’s lobbying effort essentially is telling Congress and anyone else who would listen that the Teamsters are too heavy of a burden for it to carry alone, and it is unfair that its competitor is not saddled with Jimmy Hoffa’s boys as well. Hardly a ringing endorsement for Big Labor, but a telling admission about the significant drag that a union puts on a company’s ability to compete.
The sad part about this power play is that the FAA Reauthorization has been held hostage to UPS and the Teamsters’ power play, and some much-needed upgrades to the air traffic system are not being done due to this attack on FedEx.
Let’s hope that Congress strips this unnecessary bit of corporate warfare out of the bill when it convenes again in the lame-duck session, or else we might all be subjected to Mr. Brown Bailout dominating our screens no matter where we turn for another six months or so.
Rick Manning is the communications director for Americans for Limited Government, but his posts don’t necessarily reflect the views of that or any other organization.