Postal Service and FedEx Form Business Alliance.

The U.S. Postal Service and FedEx have formed a business alliance under which the Postal Service will buy space on FedEx airplanes to transport Express Mail, Priority Mail and First-Class Mail and FedEx will locate overnight service collection boxes at post offices nationwide.

"With FedEx we have found a way to give the American consumer greater choice, flexibility and convenience," said Postmaster General William J. Henderson. "These agreements will leverage two great networks--the extensive reliability of FedEx planes and the coast-to-coast retail presence of the Postal Service."

The USPS will pay FedEx approximately $6.3 billion over seven years for shared access to the FedEx national air transportation network. This agreement, set to begin in August 2001, will provide one integrated national air transportation network for the Postal Service. With more than 650 aircraft, FedEx is one of the largest airlines in the world.

The retail agreement gives FedEx the opportunity to place FedEx self-service collection boxes on postal property. The USPS said this is a nonexclusive agreement that it will make available to any company that offers overnight package service nationally.

Over the life of the agreement, FedEx has the option to place thousands of boxes at post offices nationwide. And depending on the number of boxes eventually installed, FedEx will pay the Postal Service between $126 million and $232 million. FedEx expects to place thousands of drop boxes throughout the country within the next year.

FedEx will provide about 3.5 million pounds of airlift capacity every day for postal materials--the equivalent of 30 wide-body DC-10 aircraft. (FedEx reports that it handles about 4.8 million packages each business day. The post office handles about 4 million pieces of Priority Mail and 188,000 pieces of Express Mail.)

In opposition to the deal, Emery Worldwide, which operates some air transport for the Post Office, unsuccessfully sought a court order to block the deal. Also, the United Parcel Service has questioned whether the deal will raise antitrust problems.