UPS has recently announced a significant expansion of its partnership with the United States Postal Service (USPS), becoming the primary air cargo provider for the postal service after FedEx failed to negotiate terms to extend its contract. While specific financial terms of the contract were not disclosed in the company’s statement, UPS spokesperson Glenn Zaccara stated that there is currently no additional information available beyond the press release. The transition to UPS as the primary air cargo provider for USPS will occur over a period of time.
Negotiations between FedEx and USPS to extend their contract concluded on March 29, with the two parties failing to reach an agreement on mutually beneficial terms for an extension. As a result, FedEx’s contract is set to expire on September 29. The company will continue to provide air cargo services throughout the United States and Puerto Rico until the contract expiration date. Following the announcement of the partnership expansion, UPS shares rose approximately 1.86% during pre-market trading, while FedEx shares fell roughly 1.81%.
UPS is a leading global package delivery company with reported revenue of $91 billion in 2023. In comparison, FedEx, UPS’s main competitor, reported revenue of $90.2 billion in the same year. FedEx and USPS have had a longstanding business relationship since 2001, with their contract last renewed in 2020. The contract involved FedEx providing transportation services for U.S. Mail, Priority Mail, and Priority Mail Express. FedEx had reportedly been prepared to end its relationship with USPS if it could not negotiate improved financial terms.
The announcement of UPS becoming the primary air cargo provider for USPS comes after FedEx’s full-year revenue and quarterly profit forecasts fell below expectations in December. This development raises questions about the future direction of FedEx Express and its relationship with USPS. Some reports suggest that FedEx Express pilots are seeking to end mediation, with the union indicating that a strike could be a possibility. The USPS has been looking to capture more package delivery business from UPS and FedEx, indicating a potential shift in the competitive dynamics of the industry.
Overall, the partnership expansion between UPS and USPS reflects a significant development in the logistics and package delivery sector. The transition to UPS as the primary air cargo provider for USPS marks a shift in the competitive landscape, with UPS taking on a more prominent role in servicing the postal service’s air transportation needs. Moving forward, it will be interesting to see how this partnership evolves and the impact it has on both UPS and FedEx, as well as the broader package delivery industry.
