Postal Service taps UPS for cargo

U.S. agency fails to reach deal with FedEx in contract talks

FILE - A delivery vehicle passes by a UPS depot, Thursday, June 29, 2023, in New York. UPS has received an air cargo contract from the United States Postal Service, significantly expanding on an existing partnership between the two. UPS said Monday, April 1, 2024, that it will become USPS's primary air cargo provider and move the majority of its air cargo in the U.S. following a transition period.(AP Photo/John Minchillo, File)
FILE - A delivery vehicle passes by a UPS depot, Thursday, June 29, 2023, in New York. UPS has received an air cargo contract from the United States Postal Service, significantly expanding on an existing partnership between the two. UPS said Monday, April 1, 2024, that it will become USPS's primary air cargo provider and move the majority of its air cargo in the U.S. following a transition period.(AP Photo/John Minchillo, File)

UPS will become the primary air cargo provider for the U.S. Postal Service.

The Atlanta shipping company said Monday that it had received an air cargo contract from the Postal Service that significantly expands an existing partnership between the two.

UPS will move the majority of air cargo in the U.S. for the Postal Service after a transition period, according to UPS.

Financial terms of the deal were not disclosed.

The Postal Service's current air cargo contract with FedEx Corp. is set to expire in late September. The agency said in a statement that its contract with UPS will be for a minimum of 5½ years.

FedEx said in a regulatory filing that it wasn't able to reach an agreement on mutually beneficial terms to extend its contract with the Postal Service. The company said negotiations ended Friday after extensive talks.

FedEx Express will continue to provide air transportation services domestically and to Puerto Rico until the contract expires Sept. 29. UPS' contract with the U.S. Postal Service takes effect the next day.

During FedEx's third-quarter conference call on March 21, Chief Customer Officer Brie Carere said the company had provided its services to the Postal Service for more than two decades and that the two sides were still in negotiations.

The Postal Service announced a four-year extension of its air cargo network contract with FedEx in 2020. The mail and delivery service said the contract provided for domestic air transportation for U.S. Mail, Priority Mail and Priority Mail Express.

In recent years, the Postal Service has focused increasingly on lowering costs through transitioning from air freight to ground transportation. In February, USPS Postmaster General Louis DeJoy said the service is looking to reduce its overall transportation costs by $3 billion over the next two years, which includes $1 billion cost savings already achieved in air freight.

While the Postal Service is looking to move more to ground shipments as a cost-saving tactic, air cargo shipments have been rising globally.

Last month the International Air Transport Association said that total demand for air cargo, which is measured in cargo ton-kilometers, climbed 18.4% in January compared with the prior-year period. That's the highest annual growth in the figure since the summer of 2021.

Shares of United Parcel Service Inc. dipped slightly in Monday trading to close down about 1%, while FedEx's stock declined nearly 3.3%.

Upcoming Events