A Seismic Industry Shift, as USPS Chooses UPS for Air Cargo

The US parcel shipping sector kicked off the month of April with some big news: UPS announced that the United States Postal Service (USPS) will now be using UPS as its primary air cargo provider.  

The surprising announcement ends a more than 20-year relationship between USPS and FedEx, as they could not reach agreement on a new contract for air cargo services. USPS was the single largest air-based Express customer for FedEx, accounting for $1.7 billion in revenue in 2023 — primarily stemming from USPS Priority Mail and other quick services. 

While this loss of a consistent 20-year revenue stream is bad news for FedEx, it’s great news for UPS after a disappointing 2023. 

The Key Takeaway May Surprise You

Obviously, this news is advantageous for shippers who are negotiating with FedEx for air transportation. The carrier has lost both income and package density. FedEx is going to be much more open to rate negotiation for air and international packages.   

However, here’s an unexpected insight: It’s also good news for shippers who partner with UPS for air transportation. Fresh off this deal, UPS sales reps will also be making concessions to leverage its new and expanded air volumes — especially following last year’s less-than-stellar financial results. Again, shippers should seize this opportunity to reevaluate and renegotiate their UPS contracts. 

The key takeaway? This seismic shift, following 20 years of stability in the air cargo shipping market, is actually great news for any company that’s a large-volume air shipper. Change creates uncertainty for everyone involved. Surprisingly, both FedEx and UPS stock prices fell following the announcement. This level of market and investor uncertainty is going to make both UPS and FedEx eager to retain and win air cargo customers.

Need Help Capitalizing on This News? Trust Redwood.

While this week’s news is significant, it’s only the latest development in the US parcel shipping sector. We’ll continue to watch and interpret the efforts of USPS, UPS, FedEx and other leaders to navigate emerging industry trends and shifting demand. 

If you need help taking advantage of the current environment of uncertainty — or if you want to position your business for the next big shift — look no further than Redwood.  

We have decades of experience in parcel shipping, and our Parcel Advisory team you help you navigate market uncertainties and how you can best capitalize on recent events.. As market shifts occur, our experts can coach you in rate renegotiation, new contract management and even rethinking your carrier mix. There’s a reason our customers trust Redwood to manage over $5.5 billion in freight — which gives us market insights that you can benefit from.  

Redwood can also help you leverage process automation and other best practices in your internal parcel shipping operations to further reduce costs. Our proprietary all-in-one execution toolkit, Redwood Parcel, has saved our customers millions of dollars in labor, packaging and other expenses. 

No matter how you choose to partner with Redwood, consider this: We save our typical customer 15-25% in parcel shipping costs in the first year alone, no matter what service or solution we bring to the table. That could represent a seismic shift in your own financial results.  

Why not begin by taking advantage of our free supply chain health assessment that uncovers your parcel shipping challenges and opportunities? Whatever big news the future brings, with Redwood you’ll be prepared in advance.