Like The Herald Business Journal on Facebook!
The Herald of Everett, Washington
Heraldnet.com

The top local business stories in your email

Contact Us:

Josh O'Connor
Publisher
Phone: 425-339-3007
joconnor@heraldnet.com

Jody Knoblich
General Sales Manager
Phone: 425-339-3445
Fax: 425-339-3049
jknoblich@heraldnet.com

Jim Davis
Editor
Phone: 425-339-3097
jdavis@heraldnet.com

Site address:
1800 41st Street, S-300,
Everett, WA 98203

Mailing address:
P.O. Box 930
Everett, WA 98206

HBJ RSS feeds

FedEx shuts out UPS to win Postal Service work

SHARE: facebook Twitter icon Linkedin icon Google+ icon Email icon |  PRINTER-FRIENDLY  |  COMMENTS
Bloomberg News
Published:
FedEx agreed to a seven-year contract with the U.S. Postal Service valued at about $10.5 billion to carry mail between U.S. airports, fending off a challenge from United Parcel Service.
The new accord to fly Express Mail and Priority Mail for the Postal Service starts in October once the current deal ends, FedEx said Tuesday. The company, based in Memphis, Tenn., didn't give details beyond the value and length of the agreement.
The contract solidifies FedEx's business with the Postal Service and eases concern that it would lose some work to UPS as the U.S. mail carrier restructures after years of losses, according to Satish Jindel, president of SJ Consulting Group. FedEx operates the world's largest cargo airline.
"It is going to provide a good support for their stock price, which has been declining," Jindel said from Sewickley, Penn. "Putting this out to bid, almost everyone expected that UPS would get at least 20 percent or 30 percent of the business."
FedEx received about $1.62 billion from the Postal Service in fiscal 2012, up about 8 percent from a year earlier, according to estimates compiled by Washington law firm Husch Blackwell LLP, which tracks postal contracting. UPS got $126.4 million.
UPS had said in July that it planned to fight FedEx for the postal contract, triggering speculation about what financial terms might be set after the Postal Service lost $15.9 billion in the fiscal year ending Sept. 30.
The Postal Service didn't elaborate on those issues today. The agency said FedEx's contract proposal represented the "best value," and a spokeswoman, Katina Fields, declined to discuss specifics.
FedEx's winning the sole award for the domestic airlift work was a "disappointment" to UPS, said Kara Ross, a spokeswoman for the world's biggest package-delivery company.
"UPS has other contracts with the USPS and will continue to provide excellent service and the company looks forward to future opportunities to expand its business with the USPS," Ross said.
Shares have tumbled 15 percent since reaching a 2013 high on March 15, and the company cut its 2013 earnings forecast on March 20 as customers shift to cheaper deliveries.
"The Postal Service is continuing its commitment to using FedEx as its main supplier when it comes to airport-to-airport services," Lee Klaskow, senior analyst of logistics at Bloomberg Industries, said from Skillman, N.J.
FedEx has been flying for the Postal Service for 12 years, FedEx Express Chief Executive Officer David Bronczek said.

MORE HBJ HEADLINES

CALENDAR

Share your comments: Log in using your HeraldNet account or your Facebook, Twitter or Disqus profile. Comments that violate the rules are subject to removal. Please see our terms of use. Please note that you must verify your email address for your comments to appear.

You are logged in using your HeraldNet ID. Click here to update your profile. | Log out.

Our new comment system is not supported in IE 7. Please upgrade your browser here.

comments powered by Disqus

Market roundup