UPS Will Become the Postal Service’s Primary Air Cargo Provider

After FedEx announced it would end its more than 20-year partnership with USPS to provide domestic cargo transport, rival carrier UPS said it would become the U.S. Postal Service’s primary air cargo provider.

FedEx Was the Postal Service’s Primary Air Cargo Provider for 20 Years

USPS was FedEx’s largest customer for the company’s air-based Express segment for more than 20 years. In essence, USPS relied on FedEx’s cargo aircraft to transport the majority of its domestic Priority Mail and Priority Mail Express shipments. However, FedEx said it was prepared to walk away from the relationship if the terms of the existing contract didn’t improve. The current contract expires on September 29th.

The contract between FedEx and the Postal Service reportedly brought in almost $2 billion in annual business (paid to FedEx by USPS). By comparison, an investor relations announcement from June 2023 showed that FedEx earned $90.2 billion in revenue during the company’s fiscal year 2023.

While the FedEx/USPS partnership reportedly generated $2 billion in yearly revenue for the company, a February report from the logistics trade industry publication Freightwaves cited research from Barclays Bank stating that the cost of the contract exceeded $3 billion each year.

USPS Doesn’t Have its Own Fleet of Cargo Airplanes to Transport Mail & Packages

Unlike private carriers FedEx and UPS, USPS doesn’t own or operate any aircraft. Instead, it relies on “leasing” space on other carriers’ cargo planes for transporting the parcels in its network. These planes then haul Priority Mail and Priority Mail Express parcels to different regions of the United States. On top of transporting parcels, they also transport bins of First-Class Mail products like letters and postcards.

Postal Service Continues its Transition to More Ground-Based Transport

The announcement comes as USPS continues its transition away from air transport to more ground-based methods. As ground-based transportation costs less than air transportation, this move is a key part of the Postal Service’s 10-year Delivering for America Plan to lower costs and achieve financial stability.

The Postal Service launched the ground-based service USPS Ground Advantage in July 2023, which combined the two previously offered services First Class Package and Parcel Select Ground into a single product. All USPS Ground Advantage shipments travel via ground transportation only.