As global air cargo demand continues to rise – by 18.4% between January 2023 and January 2024 according to IATA – UPS has been awarded a “significant” air cargo contract by the United States Postal Service (USPS).
According to UPS, the contract greatly expands the existing relationship between the two organizations and is effective immediately.
Following a transition period, UPS will become the USPS’s primary air cargo provider and move the majority of USPS air cargo in the USA.
“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.
Financial targets
The contract from USPS will help UPS achieve its financial targets for the next three years, which were announced during an investor and analyst conference on March 26. The targets included consolidated revenue ranging from US$108bn to US$114bn, with capital spending for 2024-2026 of approximately 5.5% of total revenue.
You can read more on that story here.
FedEx response
The USPS contract was previously serviced by FedEx. In a statement on its website, FedEx said:
“In a Form 8-K filed with the Securities and Exchange Commission on April 1, 2024, FedEx Corporation announced the agreement between FedEx Express and the United States Postal Service for domestic transportation services will expire by its terms on September 29, 2024. This decision was made on March 29, 2024, following extensive discussions.
“FedEx and the United States Postal Service have had a long and productive relationship for more than 20 years. Over time, our respective strategies have shifted as we transform our networks and operations for the future.
“We have long said we would extend the contract with the USPS if we could agree to commercial terms in the best interests of FedEx shareholders. Although we were unable to reach mutually agreeable terms, we remain committed to delivering outstanding service through the completion of our contract in September.
“Upon the conclusion of the contract, we will implement adjustments to our network that will drive efficiencies and create more flexibility. The elimination of structural costs currently in place to support postal service volume will be addressed and, in conjunction with our DRIVE efforts, FedEx profitability will improve in FY25 and beyond.”