Competition between FedEx and UPS has been heating up in recent months. This is a good thing in a free market economy, promoting customer service, fair pricing, and better services, right?  Well maybe, but that's not what's at issue here. This recent competition has little to do with actual services provided by the parcel delivery giants. This battle is about unionization, and is being fought in the halls of the house and senate by hired professionals. Sometimes referred to as congressman and senators, the label mercenary might fit just as well if you accept the loose definition as "someone who fights for monetary gain without regard to political principles."

The core issue is whether FedEx Express should be placed under the National Labor Relations Act (NLRA)or continues to be governed by the Railway Labor Act (RLA). Since its operations began in 1973 most FedEx Express workers have been governed under the RLA.

FedEx Express is the world's largest airline in terms of freight tons flown and the world's second largest airline in terms of fleet size. So why would a company who's business is primarily carried out in the air be governed by a "Railway" Labor Act, and why does it matter?

The answer lies in what the Railway Labor Act was originally intended to accomplish. The Act, originally passed by the U.S. Congress in 1926, was intended to govern railroad labor negotiations and limit economically crippling strikes. As transportation systems evolved, congress amended the act to cover airlines and express carriers, which are the dominant national transportation systems of today.

The original Railway Labor Act was a response to several local strikes which effectively bottle-necked the entire national railway system.  In a balancing act between workers rights to unionize and the need for the uninterrupted flow of goods, Congress adopted the position that the workers could unionize on a national level, but not at a local level. This compromise would prevent companies from being held hostage by a local union which could stop the flow of goods on the entire system.

FedEx started as an air delivery company. Although it has over 40,000 ground delivery vehicles, FedEx contends, and the Courts have agreed, that these are an integral part of the air cargo business and therefore should remain under the Railway Labor Act.

On the other side, UPS started out as a ground delivery company and has been under the National Labor Relations Act, which allows for local unionization.  UPS claims that FedEx Express is essentially engaged in the same business, and should be covered under the same set of rules. FedEx Express claims that their business is different.  They are primarily an air carrier with ground support while UPS is primarily a ground carrier with air support.

FedEx has three main business segments, FedEx Express, FedEx Ground, and FedEx Freight. FedEx Express operates a separate and distinct network for air shipments. They are a U.S. airline and are properly governed by the Railway Labor Act.

FedEx Ground and FedEx Freight are both ground delivery providers and are under the National Labor Relations Act, just like UPS. It seems that if UPS were truly interested in playing under the same set of rules they would recognize the distinction.

But this battle isn't really about a level playing field. This battle is about using political power, an all out public relations campaign, and a FAA Reauthorization Bill to change FedEx Express' status so that their costs of doing business will increase. FedEx Express fears, and UPS apparently believes, that if FedEx Express is placed under the NLRB that local unionization could interrupt their business.

FedEx Express has threatened to cancel the delivery of 15 Boeing 777Fs if the House version of the FAA Reauthorization Bill is signed into law. Of course businesses will do what is in their best interest.  Investing in aircraft may be more risky with the possibility of localized strikes, but this may be a risk FedEx Express would be willing to take.  

In the FAA Reauthorization Bill the House version seeks to single out FedEx Express by including the Express Carrier Employee Protection Act.  The Senate version does not have this provision. Apparently the House wants to use an "Aviation" bill to redefine the second largest airline, in terms of fleet size, as something other than an "Airline".

Congress tries spinning their bills with names like the Patriot Act, the Express Carrier Employee Protection Act, and the Affordable Health Care Act. Sadly, the list of euphemistic names for legislation could probably fill a book. Congress has also become famous for including totally unrelated items in the same bill.

Both FedEx and UPS have a lot at stake. You can bet that they have hired some of the best attorney's, lobbyist, and marketing companies they can find to protect and promote their interest.  At Dunlap, Grubb, and Weaver we focus on Corporate and Finance Law. We stay abreast of current legislation so that we may provide your business with the best advice possible. We are in the business of protecting and promoting your business.

For both sides of the UPS/FedEx debate visit
http://www.pressroom.ups.com/Recently+Added/Why+the+Railway+Labor+Act+Must+Be+Amended and http://fdx.client.shareholder.com/releasedetail.cfm?releaseid=388559  or Google "FedEx Ups" .