https://www.newsmax.com/finance/streettalk/ups-usps-air-cargo/2024/04/01/id/1159312/



United Parcel Service will become the United States Postal Service's (USPS) primary air cargo provider, the company said on Monday, as rival FedEx walked away after pressing for a better new contract with the U.S. agency.

UPS' shares rose 1.4% before the bell while FedEx's stock fell 1.6%. Financial terms of the contract, which is set to take effect after a "transition period," were not disclosed.

UPS said the postal service's award was "significant."

USPS is the largest customer for FedEx's air-based Express segment. The company has said it was prepared to walk away from the 22-year relationship if the terms of the existing contract, set to expire on Sept. 29, did not improve.

FedEx, which has been on a drive to rein in expenses to combat sagging freight demand and a bloated cost structure, said on Monday it would not extend its contract with USPS.

"The parties were unable to reach agreement on mutually beneficial terms to extend the contract," FedEx said in a securities filing.

As the No. 1 USPS domestic air contractor, FedEx had supported the agency's Priority Mail and other quick services.

A lapse of the domestic contract with USPS would erase nearly $2 billion in annual business that funds hundreds of pilot jobs at FedEx. However, the loss will push FedEx to reduce its air capacity, which will benefit it in the medium term, some analysts have said.

The parcel delivery firm is yet to reach a new contract agreement with its pilots.

USPS' payments to FedEx shrank to about $1.73 billion in fiscal 2023, from $2.4 billion during the fiscal year ended September 2020 after the postal service shifted letters and packages from planes to more economical trucks.

Grumpy cat "Good"

I’m just going to check FedExs stock price….

It's a commodity business.  Whoever does it the cheapest wins.  UPS planes are the same as Fed Ex planes.

This will be interesting

Really interesting.
How can you not make money off of a government contract?
It will be very interesting to see how this works out over time.
I'm glad I'm not a FedEx pilot.

It's not a hard thing to screw up. Even commodity contracts like this one. My wife got laid off from an FAA contract because somehow the contractor managed to burn all the hours 6 months short of the end of the period of performance even though the burn rate was supposedly set in stone.

That said, a company the caliber of UPS is unlikely to not make money!

It will be interesting if UPS doesn't make any money on that contract either.
Uncle Sam will have to cough up more money, or find someone else to do it, if they can.

Buster Brown flyin' the mail around.........

Hiring is starting again at UPS after 14 months of no new hires.  Chief Pilots saying 170 this year and the union thinking 300+ pilots to support this contract.  

What separates FedEx and UPS is the fact FedEx is an airline that has some trucks while UPS is a trucking company with a small airline.  Chances are FedEx was putting low yield postal volume on airplanes with little else to make money.  My bet is UPS will leverage their integrated trucking capacity to move a lot of the postal volume and fly postal volume along with the normal volume.

As a week on, week off vampire I'm hoping for additional day flying to support this new contract.

There's waaaay more to it than that.

The USPS contract required FedEx to conduct flights to move the mail, regardless of if there was other company business on board. There were massive system inefficiencies tied to it; at some stations virtually empty airplanes were being flown in and out, because system form had the aircraft flying FedEx Express packages flying into a station in the morning, then flying USPS packages out of that station later that morning with the USPS on board.

FedEx is currently in an efficiency streak, with merging the three main divisions (Express, Ground, Freight) to eliminate the substantial redundancies, and in the process the mucky-mucks decided the USPS yield wasn't worth the infrastructure cost inefficiencies.  So, they apparently made a bid for the USPS contract that was pretty high, reflecting what was "required" to cover those inefficiencies.

No surprise, UPS underbid the contract (or, more correctly, they bid it with a realistic number). Turns out, however, that since UPS's business and network is organized differently they believe they can do it without the fat that FedEx had.

It isn't that Purple couldn't "make money" on the contract -- it is that the McKinsey and Co folks believed that the yield from the flights required by the USPS contract would be better served moving someone else's freight.  It is basically the same decision FedEx made about Amazon's business back in 2019.

The impact on work for Purple Pilots remains to be seen. The messaging from corporate HQ is that they were expecting (hoping?) to lose the contract so they could go after the ACMI freight market instead. There are still two distinct triggers in the pilot contract that must be executed prior to furloughing pilots, and neither of those steps have been yet taken.

Again, it isn't that FedEx isn't making money on the Postal contract -- it is that it didn't make *enough* money from the contract given the company's current efficiency standard.

It comes down to the structural differences between UPS ("the trucking company with airplanes") and FedEx ("the cargo airline that has trucks"). UPS may be able to do just fine with it.

Wait till September...

I heard a rumor thatFedEx is starting a new slogan out of their townhall:

"What can browneye do for you"

Where is everyone seeing this clip from the town hall?  Am I just functionally retarded that everyone else has seen (heard?) it but I can't find it?

It was in the background of the speakers.