UPS to become US Postal Service’s primary air cargo provider

UPS will become the primary air cargo provider for the United States Postal Service (USPS) after signing an expansive new contract, UPS announced Monday.

The carrier will move the majority of USPS air cargo in the United States following a transition period.

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

The details of the contract were not disclosed.

News of the contract comes after USPS negotiations with FedEx ended March 29, after both parties “were unable to reach agreement on mutually beneficial terms to extend the contract,” according to the FedEx SEC filing.

FedEx will provide domestic transportation services by air, and including Puerto Rico, for USPS through Sept. 29, when its contract expires.

In a statement, USPS said the new contract comes after “our requirements were reevaluated in light of the dramatic changes in the mailing and shipping marketplace” that have taken place in the last few years.

“A core strategy of the Postal Service’s Delivering for America plan is to optimize and improve the efficiency of both national and local transportation,” the USPS statement read.

USPS said it aims to reduce transportation costs by $3 billion in the next two years, including the $1 billion in airfreight costs.

“Finalizing this agreement is a key step toward achieving our operational and financial sustainability goals,” the statement read.

In the SEC filing, FedEx said the USPS’s plan for “strategic changes to its operations to reduce its reliance on the [FedEx] air network” would have adverse effects on the company’s operations and financial condition.

Updated at 4:11 pm.