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2003 annual report united states postal service | 31
management discussion & analysis
operations
tive year, in contrast to the years before 2001
when our strong TFP growth was achieved by
absorbing an increasing workload.
Transportation
Transportation expenses decreased by
$143 million in 2003. After the terrorist
attacks on September 11, 2001 the Federal
Aviation Administration placed restrictions on
mail pieces weighing more than 16 ounces,
which prohibited us from using commercial
air carriers. We were thus forced to move
virtually all Priority Mail to the FedEx network
and our surface network, with a small volume
of mail on expensive air taxis. Although the
FedEx network is less expensive than our old
dedicated network, it is more expensive than
commercial air carriers. We are currently
moving 51% of Priority Mail on our surface
network and 48% on FedEx.
Even with the additional increase in
volume to the FedEx network, we were able to
keep the growth in transportation costs to a
minimum. We moved more Priority Mail to
surface transportation, reducing those
network costs. We negotiated changes to the
FedEx contract that lowered our rates as
volume on that network increased. A midyear
decline in fuel prices also helped reduce
transportation costs.
We think that our transportation costs for
2004 will remain in line with our costs for 2003.
We continue to work with the Transportation
Safety Administration with the expectation that
we will again be able to use passenger air
transportation for Priority Mail. We are also
working to integrate and realign our distribution
and transportation infrastructure.
Cost Reduction Initiatives
We will continue our efforts not just to
control costs but to reduce them. For 2004, we
plan $1,368 million in cost reductions. We will
reduce operating costs by continuing our
Breakthrough Productivity Initiative. We plan a
reduction of 25 million work hours in 2004,
even with the additional work hours from an
extra delivery and retail day due to a leap year.
This reduction, which is equal to approximately
11,000 full-time equivalent employees, will be
the fifth consecutive year that we have reduced
work hours, for a five-year total work hour
reduction of 191 million. We continue to reduce
our total work hours and our costs even as we
deliver to 1.9 million new addresses each year.
Change in
Transportation Expenses
2003 2002 2001
-2.8% 1.5% 7.4%