FEDEX, U.S. POSTAL SERVICE SIGN TWO SERVICE CONTRACTS
The U.S. Postal Service and FedEx have signed two seven-year service contracts that are expected to generate $7 billion for the integrated carrier over the next seven years.
Under the agreement, which will take effect in late August, USPS will pay FedEx about $6.3 billion to buy space on FedEx planes to transport Express Mail, Priority Mail and First-Class Mail
“With more than 650 aircraft, FedEx is one of the largest airlines in the world,” USPS said. “This agreement will provide one integrated national air transportation system for the Postal Service.”
FedEx will provide about 3.5 million pounds of airlift capacity daily, or the equivalent of about 30 widebody DC 10 aircraft.
The second contract gives FedEx the option to place a self-service drop box at every U.S. postal location. Described as a “non-exclusive retail agreement,” this option begins with an operational test in February. FedEx will place more than 10,000 drop boxes throughout the U.S. in the next 18 months. The company expects approximately $900 million in increased drop box revenue over the seven-year contract.
FedEx said it will pay annual fees to the USPS for the drop-box placements. After initial implementation, the Postal Service may seek similar agreements with other shipping companies, FedEx said.
FedEx said it expects to invest $350 million to $400 million over the next seven years to provide services under the two agreements.
Under the non-exclusive agreement, the Postal Service will be permitted to continue to use carriers other than FedEx.
