UPS will become the primary provider of air cargo transportation for the United States Postal Service.
The Atlanta shipping company reported Monday that it had received an air cargo contract from the United States Postal Service (USPS) that significantly expands an existing partnership between the two.
UPS will carry most of the air cargo in the United States for the postal service after a transition period, according to the company.
Financial terms of the deal were not disclosed.
The Postal Service’s current contract with FedEx Corp. ends at the end of September.
FedEx said in a regulatory filing that it had been unable to reach an agreement on mutually beneficial terms to extend its contract with USPS, adding that negotiations ended Friday after extensive talks.
FedEx Express will continue to provide air transportation services nationally and to Puerto Rico until the contract expires on September 29.
During FedEx’s third-quarter conference call on March 21, Chief Customer Officer Brie Carere said the company had served USPS for more than two decades and the two sides were still negotiating.
USPS announced a four-year extension of its air cargo network contract with FedEx in 2020. The mail and delivery service detailed that the contract provided for domestic air transportation for US Mail, Priority Mail and Priority Mail Express.
In recent years, USPS has increasingly focused on cost reduction, and one avenue is the transition from air to ground transportation. In February, USPS Postmaster General Louis DeJoy stated that USPS aims to reduce its global transportation costs by $3 billion over the next two years, including $1 billion in cost savings already achieved in air transport.
As USPS tries to shift more to ground shipping as a cost-saving tactic, air cargo shipping has been on the rise around the world. Last month, the International Air Transport Association stated that total air cargo demand, measured in tonne-kilometres, rose 18.4% in January compared to the same period a year earlier. This is the highest annual growth in the figure since the summer of 2021.
United Parcel Service Inc. shares rose nearly 2% before the U.S. Stock Exchange opened on Monday, while FedEx shares fell 2.1%
Source: Gestion
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