Logistics and courier company UPS will become the primary air cargo provider for the United States Postal Service (USPS) after the national post office failed to reach an agreement with its current provider FedEx

UPS’s new contract, a significant expansion of its relationship with USPS, will begin after a transition period, coming into full effect on 30 September, the day after FedEx’s contract expires. 

UPS CEO Carol B. Tomé said: “Together UPS and USPS have developed an innovative solution that is mutually beneficial and complements our unique, reliable and efficient integrated network.” 

According to FedEx, the two organisations “were unable to reach agreement on mutually beneficial terms” and concluded contract extension negotiations on 29 March. 

USPS said it had re-evaluated its “decade-old” air cargo contract in light of dramatic shifts in the mailing and shipping markets to focus on optimising the efficiency of its transportation. 

A statement said: “Our objective in this area is to reduce our overall transportation cost by $3bn over the next two years, including $1bn in airfreight cost savings already achieved. 

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“Finalising this agreement is a key step toward achieving our operational and financial sustainability goals.” 

The postal service’s decision comes as it continues to struggle with a decrease in mail deliveries after an upsurge during the pandemic, recording a $6.5bn net loss in FY2023 and projecting a struggle to break even for the current financial year. 

Additionally, in the air cargo market, the International Air Transport Association (IATA) stated that US carriers saw the weakest demand growth at the end of 2023, despite the global market recording some of its strongest year-on-year growth.