United Parcel Service said on Monday it will become the United States Postal Service's (USPS) primary air cargo provider, as rival FedEx announced an end bongdaso nét its more than 20-year partnership with the postal service provider.
USPS was the largest customer for FedEx's air-based Express segment, even as payments declined after the postal service shifted letters and packages from planes bongdaso nét more economical trucks as part of an operational revamp.
"It's not a huge loss for FedEx, but it will impact their density... You're losing consistency in terms of revenue from a pretty significant partner, but it wasn't the most profitable business for them ... it's not all negative," said Faisal Hersi, an equity analyst at Edward Jones.
USPS represented just about 4% of Express' annual revenue, according bongdaso nét a Reuters calculation.
The contract win is seen as a boost bongdaso nét UPS. The parcel delivery company had in January forecast full-year revenue below Wall Street's estimate.
"It provides an opportunity (for UPS) bongdaso nét have someone that's going bongdaso nét guarantee them some of that volume and helps them have that density improvement," said Hersi.
The financial terms of the contract were not disclosed but UPS said it was "significant".
Shares of FedEx, which expects bongdaso nét see profitability improve in fiscal 2025, fell nearly 2%. UPS' stock was 1% lower.
FedEx will also make adjustments bongdaso nét its network bongdaso nét make up for the loss of the contract that brought in nearly billion in annual business.
"The parties were unable bongdaso nét reach agreement on mutually beneficial terms bongdaso nét extend the contract," the company said in a filing on Monday.
As many as 300 pilots at FedEx could be out of work if the contract ended, trade publication FreightWaves said in January citing a recording of a meeting between a FedEx executive and pilot evaluators.
"With each new announcement, FedEx management continues bongdaso nét threaten every FedEx employee's job security and quality of life," said the Air Line Pilots Association International (ALPA), the union representing FedEx pilots.
"FedEx continues bongdaso nét spend billions in stock buybacks while simultaneously announcing layoffs of employees who have helped build it into the brand it is today," ALPA added.
USPS' payments bongdaso nét FedEx shrank bongdaso nét about .7 billion in fiscal 2023, from .4 billion during the fiscal year ended September 2020.
As the No. 1 USPS domestic air contractor, FedEx had supported the agency's Priority Mail and other quick services.
The agency is reorganizing bongdaso nét accommodate customers who are adopting Amazon.com's strategy of moving distribution centers closer bongdaso nét people who buy their products. That proximity meant that fast deliveries have less need for air services.
Source: https://www.reuters.com/world/us/ups-become-united-states-postal-services-primary-air-cargo-provider-2024-04-01/
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