USPS is making UPS its primary air cargo provider, with plans to move the majority of its US air cargo to UPS, it announced on Monday. FedEx announced that its agreement between FedEx Express and USPS will expire on September 29, 2024, a decision that was made on March 29, 2024, “following extensive discussions.”
The volume of USPS air cargo is likely less than it used to be – 2 years ago, USPS announced it would begin transporting First Class Package Service (FCPS) packages by ground instead of by air, slowing service. At the time, it said packages traveling the greatest distances would be most affected: it predicted 32% of volume would see the service standard increase by one or two days. Note that since then, the USPS has folded FCPS into what is now the new USPS Ground Advantage offering.
UPS CEO Carol Tome said in an announcement: “Together UPS and USPS have developed an innovative solution that is mutually beneficial and complements our unique, reliable and efficient integrated network.”
FedEx submitted the following filing to the SEC on Monday (see the full announcement for forward-looking statements):
“FedEx and the United States Postal Service have had a long and productive relationship for more than 20 years. Over time, our respective strategies have shifted as we transform our networks and operations for the future.
“We have long said we would extend the contract with the USPS if we could agree to commercial terms in the best interests of FedEx shareholders. Although we were unable to reach mutually agreeable terms, we remain committed to delivering outstanding service through the completion of our contract in September.
“Upon the conclusion of the contract, we will implement adjustments to our network that will drive efficiencies and create more flexibility. The elimination of structural costs currently in place to support postal service volume will be addressed and, in conjunction with our DRIVE efforts, FedEx profitability will improve in FY25 and beyond.”
Ina Steiner
