FedEx gets $8 billion extension to fly U.S. mail
FedEx Express has signed a seven-year extension of its contract to haul Express, Priority and First Class mail on its aircraft for the U.S. Postal Service.
FedEx said it expects to generate about $8 billion in revenue over the life of the contract.
The new contract for domestic air transportation supersedes the final two years of the existing $6.3 billion, seven-year deal, which went into effect in September 2001.
The express courier flies more than four million pounds of mail daily for the USPS — the equivalent of 40 widebody DC10 aircraft.
Memphis-based FedEx provides dedicated carriage to the Postal Service on its network during the daytime when most of its aircraft normally would be idle, and carries the overflow on its overnight flights at a higher rate.
In order to guarantee space when needed USPS buys capacity on FedEx planes by the cubic foot, rather than using the weight times distance formula used by commercial airlines, and pays for it whether it is used or not.
USPS officials say FedEx has helped the mail monopoly achieve its best performance levels for express mail products, reach more cities and save more than $1 billion in transportation costs.
The portion of the 2001 contract which allowed FedEx to place self-service package collection boxes at post office locations is unaffected by the contract extension and will expire in 2009, the USPS said.
In June, the USPS signed a three-year contract with Atlanta-based UPS covering domestic air transportation between 98 U.S. cities. The contract, which expands UPS’s existing service to 16 cities, includes a two-year option.