The US Postal Service, riding the wave of strong demand for its Priority Mail deferred air product, gained US air market share in 2005 for the first time in three years, The Colography Group, Inc., said today in releasing its full-year 2005 analysis of the domestic US air cargo market.

According to The Colography Group, the USPS’s share of the air shipment market increased to 37.7% in 2005, as compared to 37.1% in 2004. The Postal Service, the only carrier to gain shipment share year-over-year, grew its shipment base by 4.9% in 2005, by far the fastest growth of any domestic air competitor.

The Postal Service’s gains were attributable to a resurgence in Priority Mail, its two-to-three day delivery product which had fallen on three years of hard times following a 15% rate increase in 2002 that sent customers fleeing to competitors. Since then, however, the USPS has kept rates steady while its private-sector rivals have imposed annual price increases. In addition, USPS can pass on lower operating costs to its customers because it cannot by law impose surcharges to offset rising fuel costs. The result of both factors has been a widening price differential between low-cost Priority Mail and its competition, leading to increased demand from value-conscious shippers.

Not surprisingly, deferred air shipments showed healthy growth in 2005, rising 4.2% over 2004 levels. By contrast, overnight air traffic grew by less than half that at 1.9%. Priority Mail accounted for almost three-quarters of total growth in the deferred air shipment category.

Another highlight of 2005 was the overall performance of the domestic air market. In the last three quarters of the year, domestic air growth exceeded that of US GDP, the first time in four years that has occurred. For the full year, air shipments grew by 3.2% to 2.5 billion shipments, with gains across all market categories: letters and envelopes, packages and freight. Revenue totaled $33.6 billion, a 5% increase over 2004 levels, a phenomenon driven largely by the impact of fuel and other surcharges on the carriers’ top lines.

‘It was a solid year for the domestic industry, paced by an impressive performance by the Postal Service,’ said Ted Scherck, President, The Colography Group. ‘The gains in Priority Mail illustrate two key points: First, shippers continue to substitute slower ’ yet still time definite ’ deferred transit times for faster, more expensive overnight deliveries. Second is the USPS’s ability to leverage its superior infrastructure to capitalize on the growth of business-to-consumer retail activity driven increasingly by the Internet.’

Scherck noted a larger, more favorable trend in the increased spirit of collaboration between the Postal Service and its private sector rivals. Today, UPS, FedEx and DHL use USPS’s unrivalled ‘last-mile’ delivery network to route customer shipments to residential and light-density commercial destinations. Meanwhile, USPS has agreements to move First Class, Express and Priority Mail shipments aboard FedEx and UPS aircraft in what has been successful collaborations that improve service reliability while driving down costs.

‘The big picture here is that USPS and its rivals are cooperating more fully than ever before, and in doing so are focusing on their core competencies,’ said Scherck. ‘This bodes well for all concerned, especially shippers.’

Among the key findings in The Colography Group’s 2005 Domestic Air Cargo Trends report:

Domestic air revenue rose by five percent year-over-year. However, since shipment growth totaled 3.2%, it appears much of the revenue gains came from the impact of fuel surcharges. In fact, it is likely that fuel surcharges are actually retarding the growth of the underlying rate structure.

In 2005 more than 56% of all overnight air shipments and 66% of second-day air shipments moved less than 350 miles to their destinations. This continues the trend towards the regionalization of US commerce, and represents service boundaries where ground parcel and LTL truckers