UPS to Assume Primary Air Cargo Role for USPS

UPS Stock

United Parcel Service, Inc. (NYSE:UPS) has secured a significant contract to become the primary air cargo provider for the United States Postal Service (USPS), marking an expansion of their existing partnership. The Atlanta-based shipping company announced the agreement on Monday, revealing plans to handle the majority of air cargo for USPS following a transition period.

While specific financial details of the contract were not disclosed, this development signals a substantial shift in USPS’s air cargo operations. The current air cargo contract between USPS and FedEx Corp. is set to expire in late September. FedEx stated in a regulatory filing that negotiations to extend the contract on mutually beneficial terms concluded without an agreement.

FedEx Express (NYSE:FDX) will continue to provide air transportation services domestically and to Puerto Rico until the contract expires on Sept. 29. Despite ongoing negotiations between FedEx and USPS, UPS emerged as the chosen partner to fulfill USPS’s air cargo needs.

USPS’s focus on cost reduction has led to strategic adjustments in its transportation methods. In February, USPS Postmaster General Louis DeJoy announced plans to reduce overall transportation costs by $3 billion over the next two years, with $1 billion already saved in airfreight expenses.

While USPS aims to transition more shipments to ground transportation for cost savings, global air cargo demand has been on the rise. The International Air Transport Association reported an 18.4% increase in total demand for air cargo in January compared to the previous year, reflecting the highest annual growth since the summer of 2021.

Following the announcement, shares of United Parcel Service Inc. experienced a nearly 2% increase before the opening bell on Monday, while FedEx’s stock saw a 2.1% decline. The partnership between UPS and USPS signifies a strategic move to optimize air cargo operations and meet evolving transportation needs.

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