Atlanta, April 1, 2024 – After 20 years of partnership, the United States Postal Service (USPS) and FedEx are parting ways. The new leader in air transportation for USPS will be UPS, with which the American postal service has signed a contract of “significant” value.
Why did USPS break up with FedEx?
The reason for the breakup was declining payments for air transportation. In recent years, USPS has been shifting more and more shipments to cheaper ground transportation, which reduced the volume and value of the contract for FedEx. Although FedEx was previously the largest customer of UPS’s air division, the two sides were unable to agree on terms for a contract extension that would be acceptable to both parties.
What are FedEx’s plans?
FedEx plans to optimize operations and streamline costs to improve profitability in 2025. It intends to compensate for the loss of the USPS contract (1.85 billion EUR per year) by adjusting its distribution network. However, these adjustments could also have negative consequences – the potential layoff of up to 300 pilots.
What are USPS’s plans?
USPS is looking to reduce costs and streamline operations. Moving distribution centers closer to customers reduces the need for air transportation and increases the share of ground transportation.
Facts and figures:
- Value of the new contract between UPS and USPS: undisclosed, labeled as “significant” (source: USPS press release)
- Annual turnover from the FedEx-USPS contract in 2023: 1.85 billion EUR
- Planned reduction in the number of pilots at FedEx: 300
- Decline in USPS payments for air transportation: 2.4 billion USD in 2020 to 1.7 billion USD in 2023
