FedEx, USPS extend air transport contract to 2024

Earlier this week, FedEx and the United States Postal Service (USPS) said they have entered into an agreement to extend their air transportation contract, which was originally executed on April 23, 2013, through September 29, 2024.

FedEx officials said that this modified contract is expected to account for around $1.5 billion per year for FedEx Express, with FedEx Express providing airport-to-airport transportation of USPS Priority Mail Express and Priority Mail within the U.S.

“We are pleased to be able to extend this agreement and to continue the outstanding service that FedEx Express has provided to the USPS for more than 16 years,” said David J. Bronczek, president and chief operating officer of FedEx, in a statement. “This contract provides USPS with the operational reliability and flexibility they have come to expect from FedEx.”

Baird & Co. analyst Ben Hartford wrote in a research note that the terms of this contract are consistent with the existing agreement that was struck in 2013, with the extension initiated by the USPS.

And he added that this extension marks a continuation of handing USPS packages that initially began in 2001, was resigned in 2006, a two-year early re-signing that has yielded a relatively stable roughly $1.5 billion in annual revenue for FedEx “and historically each extension of the agreement has incurred no incremental costs to FedEx.”

Jerry Hempstead, president of Hempstead Consulting, said that this deal benefits USPS in that USPS “pays a lot less and is fat more reliable than when it had its own airline, because there are FedEx packages on those planes with the USPS and it is not a dedicated USPS operation.”