It's a different level of service. USPS doesn't personally deliver your letter to a foreign location. They only sort the letters, load them into bags and send them away. At the destination country some other postal worker will do the other half of the delivery. Note that $1 USD may be a lot of money in most 3rd world countries, so USPS will still collect most of the money for the in-country trip and perhaps the airfare.
Talking about the airfare. One ticket, round-trip, from SFO to Spain is about $1,000 (there are offers for $764 too.) A standard non-cargo airliner will carry 300 people, 200 lbs each (forget the cargo.) Total load = 60,000 lbs or 960,000 ounces. Each 44 cent letter is below 1 oz. so the airplane will carry about a million letters to Europe and back. If the flight is filled with passengers the revenue would be $300K over the entire round trip. If the flight is filled with mail, each envelope has to pay 15 cents one way to make the same profit to the airline. In reality envelopes fly much cheaper because there is no service in cargo holds, no TV, no heating, no free drinks, etc. etc. Probably an envelope can catch a flight to Europe for mere 5 cents.
Let's subtract 44 cents from 96 cents to cover the delivery from your home to the airport. We get 52 cents. We just above calculated that we need about 5 to 15 cents to fly the mail to the destination country, that leaves us with 37 to 47 cents for the local delivery. This is very much on par with the US leg of the trip.
So back to FedEx. What do they charge those $28.85 for? They charge them for speedy and reliable delivery. FedEx is what you send business documents with. FedEx will cone personally to you and pick the package up. On the other end of the trip, FedEx will send a truck to the destination location, also personally. Packages will fly not on whatever airplane, but on a FedEx airplane, and they will be under company's control all the time until they are delivered. They won't be dropped off wherever (unless you specifically permit that.) USPS doesn't know what happens to your mail abroad, and doesn't care - it's not part of the service. USPS doesn't even track domestic 1st class, you have to pay more to get the service of a barcode and a scanner.
So why the FedEx price is so high? Because they are doing personal delivery now, several times per day (about 3.) If they are allowed to operate in the USPS market space they can cover it at no extra cost whatsoever; the routes already cover most of the territory that USPS covers.
There is one small side note, though. FedEx doesn't have machines to sort small mail, and I'm unsure if they can currently ship such small items. Usually FedEx ships packages - that's all that the law allows them, so no surprise that they never invested into anything else. This can change.
Fine, and that’s something everyone understands, no long explanation necessary. But a customer wants to have a letter delivered, that’s all, and doesn’t care if FedEx owns airplanes. How many times I have had FedEx and UPS packages and large envelope letters delivered to my doorstep and left there when no one was home, and even when there was someone home, and the sender, perhaps a junk mail sender, as started happening recently, paid a good price for this kind of “service”.
And what about undeliverables that require a signature? With USPS I can pick them up the next day at my local post office. With those other guys, I have to drive 12 miles out of town that same evening where the pick up times are between 8:30 @ 9PM (I kid you not), or else wait again the next day when they show up at whatever hour.
No whites working at the post offices where I live.
I had a money order stolen from the DC mail system.
Seven years ago at least one third of the junk mail in Seattle was pre-sorted off site by private companies, which were mostly owned and staffed by Asian immigrants.
The junk mail arrived at the main USPS facility near the airport, packed in official USPS trays, and perfectly sorted for each delivery route.