In a significant shift in the logistics landscape, United Parcel Service (UPS) has been named the new primary air cargo provider for the United States Postal Service (USPS), taking over from FedEx, which had held the position for over 20 years. This announcement marks a pivotal moment for UPS, which is headquartered in Atlanta, as it expands its existing partnership with USPS.
The contract, whose financial details remain under wraps, is expected to move the majority of USPS’s air cargo through UPS following a transition period. This move comes as FedEx steps back after a long-standing relationship with USPS, which was once the largest customer for FedEx’s air-based Express segment. However, the shift from air to ground transport as a cost-saving measure by USPS had already seen a decline in payments to FedEx.
Analysts view this development as a positive turn for UPS, particularly after the company’s forecast of full-year revenue fell short of Wall Street’s expectations earlier in the year. Faisal Hersi, an equity analyst at Edward Jones, commented, “It provides an opportunity (for UPS) to have someone that’s going to guarantee them some of that volume and helps them have that density improvement.”
On the other hand, FedEx is not viewing the change as a significant loss, given the relatively small percentage of revenue USPS represented in its Express segment. Nonetheless, the end of this contract will lead to adjustments in FedEx’s network and could potentially impact up to 300 pilots’ jobs, as reported by trade publication FreightWaves.
The USPS’s move to end its contract with FedEx aligns with its broader strategy to reduce transportation costs. Postmaster General Louis DeJoy has indicated a goal to cut overall transportation expenses by $3 billion over the next two years, building on a $1 billion saving already achieved in air freight. This strategy mirrors the approach of Amazon.com, which has been moving distribution centers closer to customers, thereby reducing the need for air services for fast deliveries.
The transition from FedEx to UPS as the primary air cargo provider for USPS is a reflection of the evolving demands and strategies within the shipping and logistics industry. As USPS adapts to changing market conditions and consumer expectations, the partnership with UPS could provide the flexibility and efficiency needed to navigate the future of mail and package delivery.
As the logistics industry continues to evolve, the impact of this contract change will be closely watched by investors and industry experts alike. With the rise of e-commerce and the increasing importance of efficient delivery systems, the role of major carriers like UPS and FedEx remains critical in the global supply chain.
The new contract between UPS and USPS signifies a major shift in the air cargo sector and could herald a new era of growth and strategic realignment for UPS. As the company takes on this significant role, the focus will be on how it leverages this opportunity to enhance its services and meet the demands of a rapidly changing market.
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UPS to replace FedEx as U.S. Postal Service’s primary air cargo provider
UPS to replace FedEx as U.S. Postal Service’s primary air cargo provider
UPS to replace FedEx as primary air cargo provider for United States Postal Service
