Apr 1, 2024 - Business
Charted: The U.S. Postal Service has a new ride
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UPS is replacing FedEx as the U.S. Postal Service's primary air cargo provider.
Why it matters: USPS accounted for $1.7 billion in revenue last year for FedEx, though that figure has been in decline in recent years.
Between the lines: Despite being the largest customer for FedEx's Express segment, the contract had become a drag on profitability.
- FedEx today said it will now be able to eliminate structural costs "currently in place to support postal service volume."
- The new contract with UPS is set to begin Sept. 30.
What we're watching: UPS called the 5.5-year minimum base term contract "significant," and CEO Carol Tomé said the parties have developed a "mutually beneficial" solution that complements UPS' network.
- Despite a pre-market pop, UPS shares closed down 0.7%.
