UPS To Become USPS’s Main Air Cargo Provider, Replacing FedEx

Atlanta-based global freight transportation and logistics services provider UPS said earlier today it has been awarded what it labeled a “significant air cargo contract” by the United States Postal Service (USPS).

UPS officials said that this contract takes effect immediately while also expanding the existing relationship between UPS and USPS. And the company added that after a transition period, UPS will be the primary air cargo provider for USPS, moving the majority of USPS’s United States air cargo.

“Together UPS and USPS have developed an innovative solution that is mutually beneficial and complements our unique, reliable and efficient integrated network,” said UPS Chief Executive Officer Carol B. Tomé in a statement.

Additional details regarding the contract were not made official by UPS, and USPS officials did not reply for comment at press time.

UPS takes over the USPS contract from its biggest rival, Memphis-based FedEx.

In an 8-K statement filed with the United States Securities and Exchange Commission today, FedEx said that the contract between its FedEx Express subsidiary and the USPS—in which it provides domestic transportation services for the USPS, “will expire by its terms” on September 29, 2024.

This development does not come as a total surprise, considering that on FedEx’s fiscal second quarter earnings call late last year that FedEx President and CEO Raj Subramanian called 2023 a “particularly difficult year” for the company’s Express unit, which saw revenue fall 6% annually to $10.2 billion, with operating income off 60% to $137 million. One reason for the loss, he explained, was related to USPS’s strategy to shift more of its volume handled by FedEx from air to ground, which Subramaniam viewed as a headwind.  And he also noted that FedEx’s ability to drive near-term margin improvement was partially constrained by the year-over-year decline in USPS volume, combined with minimum service obligations associated with UPS’s contract with USPS.

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