UPS replaces FedEx as the primary air freight provider for the United States Postal Service

UPS will become the main air freight provider for the United States Postal Service (USPS), the company said on Monday, as rival FedEx reduces its stake after pushing for a new, better-than-current contract with the North American agency.

UPS shares rose 1.4% in premarket trading, while FedEx shares fell 1.6%. Financial terms of the contract, which is expected to come into force after a “transition period”, were not disclosed.

USPS is FedEx’s largest air express customer, and the company said it was willing to abandon the 22-year relationship if terms of the existing contract, expiring Sept. 29, did not improve.

FedEx, which has struggled to control expenses to combat declining transportation demand and an inflated cost structure, said Monday it will not extend its contract with USPS.

“The parties failed to agree on mutually beneficial terms to extend the contract,” FedEx said in a statement.

The end of the USPS national contract will eliminate nearly $2 billion in annual business that funds hundreds of pilot jobs at FedEx. However, the loss will lead FedEx to reduce its air capacity, which some analysts say will benefit it in the medium term. .

The delivery company has not yet reached a new contractual agreement with its riders.

USPS payments to FedEx fell to about $1.73 billion in fiscal 2023, from $2.4 billion in the fiscal year ended September 2020, after the Postal Service switched to sending letters and parcels by truck.

Source: Terra

Rose

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