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FedEx’s Express unit ends relationship with Amazon (with video)

This is a breaking news update. A new version of this story has been published here.

In a move not entirely expected but hardly surprising, FedEx Corp. (NYSE:FDX) said Friday that it will not renew its contract for its FedEx Express air and international unit to handle Amazon.com, Inc. (NASDAQ:AMZN) U.S. air delivery business.

The announcement does not affect Amazon’s relationship with FedEx Ground, FedEx’s ground parcel unit. FedEx Ground is believed to handle most of Amazon’s U.S. traffic. It does not affect any domestic last-mile or international services between the two companies.

FedEx has been pivoting from Amazon for some time, increasingly unwilling to accept a deluge of discounted traffic that results in low margins. Today, Amazon represents about 1.3 percent of FedEx’s total revenue based on calendar year 2018 figures. FedEx, which operates on a June 1 to the following May 31 fiscal year, is expected to have fiscal year 2019 revenues of just under $70 billion.

In a statement, FedEx said it made the move to focus on broader e-commerce growth. According to Amit Mehrotra, analyst for Deutsche Bank, companies other than Amazon will account for 55 percent of parcel revenue growth over the next five years.

In a statement, Amazon said that “we respect FedEx’s decision and thank them for their role serving Amazon customers over the years.”

Analysts said the move has the potential to accelerate Amazon’s own delivery capabilities. Mehrotra said Amazon may take a harder look at using, if not acquiring, “asset-light” companies to achieve delivery density and make good on delivery commitments while its parcel traffic continues to spike at a remarkable pace.

To learn more about Amazon’s impact on Transportation and logistics, download our report by filling out the form below:

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.

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