FedEx Corp. said today it won a $10.5 billion contract to provide domestic air transportation services for the U.S. Postal Service.
The Memphis-based shipping giant had previously warned that the contract could be transitioned to another provider, like rival UPS, and that the terms and conditions of the new arrangement could be “less favorable” than the current contract, which expires in September 2013. The new contract begins in October 2013.
FedEx will keep the Postal Service contract to provide airport-to-airport transportation of Postal Service Express Mail and Priority Mail for another seven years.
“Following a rigorous evaluation of technical aspects, pricing, and other factors in the proposals, the Postal Service determined that the FedEx proposal represented the best value,” the agency said in a prepared statement.
The new deal allows for service improvements, capacity flexibility and other operational benefits, the Postal Service said.
FedEx Corp. said it expects a decision “shortly” from The U.S. Postal Service on whether it will continue providing domestic air transportation services for its First-Class, Priority and Express Mail services.
The Memphis-based shipping giant disclosed that it anticipates a contract announcement soon in its most recent quarterly regulatory filing.
The U.S. Postal Service has solicited proposals for the delivery of these services after FedEx Express’ current contract ends in Sept. 2013. FedEx warned that the services could be transitioned to another provider, and that even if the Memphis-based company does retain the contract, the terms and conditions of the new arrangement may be “less favorable.”
FedEx also said that any changes in the Postal Service’s operations, network, services offerings or pricing could have an adverse result on FedEx’s financial results. Because the independent government agency is both a customer and a vendor for FedEx, the Postal Service’s financial struggles could also have an adverse impact on FedEx.
The Postal Service has said it could run out of money if Congress does not allow it to change its business model and increase profitability. Yesterday, The Postal Service said it would not end Saturday delivery of first-class mail, citing Congressional opposition.