UPS will replace FedEx as the dominant provider of domestic air cargo for the U.S. Postal Service for the first time in more than 20 years. The express delivery giant on Monday announced that the Postal Service has awarded it a “significant” contract to move the majority of the mail agency’s air cargo in the United States.
The contract will take effect on Sept. 30 and calls for a 5.5-year minimum base term, according to the Postal Service. FedEx’s (NYSE: FDX) contract with the U.S. Postal Service expires Sept. 29.
“Together UPS and USPS have developed an innovative solution that is mutually beneficial and complements our unique, reliable and efficient integrated network,” said UPS CEO Carol Tomé in a statement.
The Postal Service is one of FedEx’s largest customers, but it was clear the relationship would change this year. The Postal Service has been shifting more air parcels to its ground network since 2021 as part of a productivity drive. The agency’s transportation strategy intends to reduce overall transportation costs by $3 billion over the next two years, including $1 billion in airfreight costs savings already achieved.