UPS to Take Lead Role in Transporting Air Cargo for USPS

(NYSE:UPS) has clinched a substantial contract to become the top air cargo provider for the United States Postal Service (USPS), indicating a growth in their existing partnership. The Atlanta-based shipping corporation declared the arrangement on Monday, uncovering strategies to address the majority of air cargo for USPS following a transition phase.

While particular financial particulars of the contract were not revealed, this growth signals a considerable shift in USPS’s air cargo operations. The present air cargo contract between USPS and FedEx Corp. is set to expire in late September. FedEx stated in a regulatory filing that discussions to expand the contract on mutually beneficial terms finished without an agreement.

FedEx Express (NYSE:FDX) will maintain providing air transportation services domestically and to Puerto Rico until the contract expires on Sept. 29. Notwithstanding ongoing discussions between FedEx and USPS, UPS arose as the chosen partner to meet USPS’s air cargo necessities.

USPS’s spotlight on cost cutback has initiated strategic changes in its transport methods. In February, USPS Postmaster General Louis DeJoy announced strategies to diminish overall transport costs by $3 billion over the next two years, with $1 billion already saved in airfreight costs.

While USPS aspires to transition more shipments to ground transport for cost savings, universal air cargo demand has been on the surge. The International Air Transport Association reported an 18.4% boost in total demand for air cargo in January contrasted to the prior year, mirroring the highest annual development since the summer of 2021.

Following the announcement, shares of United Parcel Service Inc. encountered a nearly 2% boost before the opening bell on Monday, while FedEx’s stock viewed a 2.1% decline. The collaboration between UPS and USPS signifies a strategic move to improve air cargo operations and fulfill developing transport necessities.