Advertisment

UPS Wins Contract to Become Primary Air Cargo Provider for USPS

UPS has secured a significant air cargo contract from USPS, marking a major expansion of their partnership. Learn about the end of FedEx's contract negotiations, USPS's cost reduction focus, and the market response.

author-image
Emmanuel Abara Benson
Updated On
New Update
Impact of UPS USPS air cargo contract on logistics industry

Impact of UPS USPS air cargo contract on logistics industry

United Parcel Service (UPS) announced on Monday that it has secured a significant air cargo contract from the United States Postal Service (USPS), marking a major expansion of their existing partnership.

Advertisment

Under the new agreement, UPS will handle the majority of air cargo transportation for USPS in the United States following a transition period.

End of FedEx-USPS Contract Negotiations:

The announcement comes after FedEx Corporation revealed in a regulatory filing that it was unable to reach an agreement with USPS to extend its existing air cargo contract, which is set to expire in late September. Despite extensive negotiations, the two parties were unable to finalize mutually beneficial terms, leading to the end of the agreement.

Advertisment

USPS Focuses on Cost Reduction and Ground Transportation:

In recent years, USPS has prioritized cost reduction measures, including a shift from air freight to ground transportation. USPS Postmaster General Louis DeJoy announced plans to reduce overall transportation costs by $3 billion over the next two years, with a significant portion already achieved through savings in airfreight.

Market Response and Industry Trends:

Following the news, shares of UPS surged nearly 2% before the opening bell, while FedEx's stock experienced a decline of 2.1%. The contract reshuffling comes amidst a global rise in air cargo demand, with January seeing an 18.4% increase compared to the previous year, signaling ongoing growth in the industry.

Advertisment
Advertisment