FedEx drops air-delivery contract with Amazon

Marco Green
June 13, 2019

FedEx Corporation, the American multinational courier delivery services company recently announced plans to not renew its contracts with e-commerce giant Amazon for USA cargo delivery via FedEx Express, the units that delivers packages via planes, cite sources. Amazon has increasingly situation its sights on the segment, which is most fundamental for its core industry, threatening the possibilities of the incumbents UPS and FedEx. It's also launching a program that lets contractors start businesses delivering packages in vans bearing the Amazon smile logo.

Even without Amazon, FedEx sees the potential for significant growth in handling online-shopping deliveries, which FedEx believes will double by 2026.

"FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space".

"We believe Amazon, representing less than 1.3% of FedEx's almost $70 billion of consolidated annual revenue, is one of FedEx's least profitable customers on a margin basis and that the decision implies that Amazon would not agree to financial terms that would meet FedEx's needs", Root wrote in a note to investors on Monday. "FedEx, I'm sure did not want to (once again - as amazon did this to FedEx before when they pulled the Smart Post business) be left to explain the revenue loss to Wall Street".

The company said that its other existing contracts with the tech giant won't be affected.

FedEx said it made the "strategic decision" to terminate the contract as it focuses on serving the broader e-commerce market.

UPS volumes have been boosted by Amazon's move to one-day shipping for its paid Prime service, and "this news means more growth in lower priced, lower weight, lower service level. domestic express products at UPS", Vernon said.

In its statement about the Amazon contract, FedEx made clear it is looking to service other e-commerce customers apart from Amazon.

Following the end of the partnership, FedEx has displayed a lack of interest in delivering packages for a firm and remains keen on expanding its own air network.

It is understood the decision will not impact any existing contracts between Amazon.com and other FedEx business units or those relating to worldwide services.

Memphis, Tennessee-based FedEx cited that outlook when it announced last week that it will go to year-round, seven days a week deliveries in January.

And the company added that Amazon is not FedEx's largest customer, with the total FedEx revenue attributable to Amazon accounting for less than 1.3% of total FedEx revenue for the 12-month period ended December 31, 2018.

Other reports by Click Lancashire

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