Can postal operators absorb fuel surcharges under current contracts models ?

The ongoing conflict in the Middle East is once again exposing the structural fragility of global air transport economics, particularly in the niche but critical segment of international postal logistics. While geopolitical tensions have immediate and visible consequences on fuel prices and airspace availability, their downstream effects on pricing mechanisms are far more complex and unevenly distributed across stakeholders.

One of the most notable consequences observed in recent months is the widespread implementation of fuel surcharges by airlines operating cargo and mail flows. Faced with rising operational costs airlines have reacted swiftly by introducing or significantly increasing fuel-related surcharges. From an operational standpoint, this response is both predictable and economically justified.

1. Two incompatible economic models forced to coexist

At its core, the issue is not the surcharge itself, but the incompatibility between two economic logics. Indeed this short-term pricing adjustment collides directly with the long-term contractual framework under which many postal operators function.

Unlike freight forwarders or integrators, designated postal operators typically negotiate air transport rates over extended periods, often annually or through multi-year agreements. These contracts are designed to ensure stability, predictability, and compliance with universal service obligations. Pricing structures are therefore fixed, or only partially adjustable, based on predefined conditions that rarely anticipate sudden geopolitical disruptions.

Within this framework, the UPU Framework for Postal Services Agreements (FPSA) does not explicitly provide for dynamic pricing mechanisms such as fuel surcharge variability linked to sudden market shocks. While the FPSA establishes a structured baseline for contractual relationships between postal operators and airlines, it remains relatively silent on how exceptional cost fluctuations (such as those triggered by geopolitical crises) should be handled in practice.

That said, the absence of an explicit provision does not preclude the inclusion of such mechanisms at the bilateral level. In practice, airlines and postal operators may incorporate specific clauses within their signed agreements to address fuel price volatility or extraordinary circumstances. However, these clauses are not systematically implemented, and in many legacy contracts, they are either limited in scope or entirely absent.

2. Regulatory constraints make postal operators structurally unable to adjust

These imbalances are further exacerbated by a structural constraint often overlooked: most postal operators are not in a position to pass these additional costs downstream. In many countries, postal tariffs are either regulated or subject to government approval. Any price adjustment may require a formal administrative, legislative, or regulatory process, which is inherently slow and ill-suited to short-term market volatility. As a result, even when confronted with significant and immediate cost increases, postal operators frequently lack the legal and operational ability to adjust their pricing accordingly.

3. A Risky Situation for Both Parties

As this situation persists, it increasingly creates tensions around capacity access and stakeholder relationships.In this context, it is essential for airlines to recognize that pushing additional surcharges onto postal flows does not automatically translate into cost recovery on the postal side. On the contrary, it may force postal operators to maintain structurally unprofitable operations, thereby weakening their financial sustainability over time. This dynamic, if prolonged, is unlikely to be viable for either party.

At the same time, postal operators may need to reassess their own positioning. While it is contractually legitimate to resist surcharges that were not foreseen at the time of negotiation, a systematic refusal can prove counterproductive. In a constrained capacity environment, such rigidity may lead, at best, to reduced or lower-priority access to available lift, and at worst, to a refusal by airlines to carry postal volumes altogether. In both scenarios, an inflexible stance may ultimately work against the operational and service interests of postal operators.

This situation raises broader questions about risk allocation within the postal air transport ecosystem. Who should bear the cost of unforeseen global crises? Should long-term agreements systematically include adjustment mechanisms for fuel and operational volatility? And how can the industry reconcile the need for contractual stability with the reality of increasingly volatile geopolitical and economic environments?

For postal operators, the challenge is particularly acute. Their mandate is not purely commercial; it is also regulatory and service-driven. Unlike other logistics players, they cannot easily adjust pricing or reduce service levels without broader implications. As such, the current context places them in a structurally disadvantaged position.

4. Beyond the BACR: why stronger contractual frameworks are the only viable path

Existing mechanisms are showing their limits in the face of what is becoming structural volatility. It is therefore worth questioning whether the Basic Air Conveyance Rate (BACR), commonly referred to as the “UPU rate”, could offer a viable response to such volatility. In practice, the answer is no. Originally designed as a standardized mechanism between postal operators, and sometimes imposed on airlines, the BACR is frequently applied to the detriment of one party or the other precisely because it is disconnected from actual market conditions. While it provides a degree of stability over a given calendar year, this advantage is largely outweighed by its structural limitations: misalignment with prevailing market rates, the effective isolation of postal operators from the dynamic air cargo ecosystem, and increased exposure to currency fluctuations.

In this sense, the BACR does not constitute a suitable tool for managing crisis-driven volatility.

More fundamentally, the industry must acknowledge that too many postal operators still operate without robust contractual frameworks with airlines. In such cases, the priority should not be to rely on standardized fallback mechanisms, but rather to establish clear, negotiated agreements. Strengthening contractual relationships remains the first and most essential step toward building a more resilient and balanced postal air transport ecosystem.

Conclusion

In a world where disruptions are no longer exceptional but increasingly systemic, aligning long-term contractual models with short-term operational realities is no longer optional, it is a necessity. For organizations looking to better understand, anticipate, or renegotiate these dynamics, LEG-2 can support the development of frameworks between airlines and postal operators.