United Parcel Service (UPS) has struck a deal to become the primary air cargo provider for the U.S. Postal Service, replacing rival Federal Express (FDX).
Federal Express, which counted the U.S. Postal Service as its largest customer for its air-based Express segment, had said that it was seeking a more profitable contract and was prepared to walk away from the 22-year relationship if terms of the deal were not improved.
The current contract between Federal Express and the U.S. Postal Service will now expire on Sept. 29 and UPS will take over.
The deal with the U.S. Postal Service paid Federal Express $1.73 billion U.S. in 2023.
However, that amount was down from $2.4 billion U.S. in 2020 after the American postal service gradually shifted letters and packages from airplanes to trucks, which are more economical.
The stock of UPS rose 2% in premarket trading on news of the deal with the U.S. Postal Service. Federal Express’ stock declined 2% on the news.
Prior to today (April 1) UPS’ stock had decreased 23% over the last 12 months and was trading at $148.63 U.S. per share.
