FedEx Unveils $7B Deal With USPS

FedEx Corp. (FDX) on Wednesday announced that its FedEx Express subsidiary and the U.S. Postal Service have approved two service contracts – one for domestic air transportation of postal express shipments, the other for placement of FedEx drop boxes at U.S. post offices.

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The agreement is not exclusive – USPS can continue to use other air carriers. The announcement comes shortly after Emery Worldwide Airlines lost a court battle to stop the deal on grounds that it would derail a long-term contract that the trucking company subsidiary had with the postal service.

The boards of USPS and FedEx have approved the agreements.

The Memphis, Tenn.-based company said the public-private alliance would provide greater choice, reliability and convenience for American consumers. Most shipments will be carried on FedEx planes, which are now idle during the day.

he two seven-year service agreements are expected to generate approximately $7 billion for FedEx over the term. FedEx expects to invest between $350 and $400 million over the seven-year period to provide services under the agreements they include the following:

• FedEx Express, the world's largest express transportation company, will provide air capacity for transportation of certain postal services. The air transportation agreement is expected to take effect in late August and will generate approximately $6.3 billion in revenue.
• FedEx Express will have the option to place a self-service drop box in every U.S. postal location. This non-exclusive retail agreement will be launched with an operational test in February, and FedEx expects to place more than 10,000 drop boxes throughout the country within the next 18 months. FedEx expects this to produce approximately $900 million in increased drop box revenues.

Even after both service agreements take effect, FedEx Express and the U.S. Postal Service will continue to operate competitively, maintaining the separate services.

The postal service will not pick up or deliver any FedEx packages, and FedEx employees will not accept or deliver U.S. mail. In addition, FedEx and USPS have no plans to co-brand, and neither plans to alter current features of service, the company said.

FedEx Express will provide approximately 3.5 million pounds of airlift capacity every day - the equivalent of about 30 wide-body DC10 aircraft. FedEx aircraft will carry predominantly unitized shipments, pre-sorted by the postal service into sacks, trays, tubs or containers.

FedEx will pay annual fees to the USPS for drop-box placements. After initial implementation, USPS may seek similar agreements with other shipping companies.