FedEx to end air shipping contract with Amazon

Darnell Taylor
June 10, 2019

On Friday, FedEx announced it was a "strategic decision" not to handle air service for Amazon "as we focus on serving the broader e-commerce market".

The decision does not impact any existing contracts between Amazon and other FedEx business units or relating to global services, the package delivery company said.

Amazon represented less than 1.3 per cent of FedEx's sales previous year, according to a statement Friday by the delivery giant.

"Amazon had a better rate with UPS so it made no sense for them to use FedEx", said Dean Maciuba, director of consulting services at Logistics Trends and Insights. According to Amit Mehrotra, analyst for Deutsche Bank, companies other than Amazon will account for 55 percent of parcel revenue growth over the next five years.

By breaking ties with Amazon for air shipments, FedEx seems to convey a lack of interest in delivering packages for a company building out its own air network.

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

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FedEx's stated reason for severing the air contract with Amazon was its desire to broaden its shipping relationships with other major retailers including Walmart, Target and Walgreens.

Among many other moves, Amazon last month broke ground on the northern Kentucky air hub - in a photo op that featured CEO Jeff Bezos driving a payloader - and is creating an army of delivery contractors through leasing 20,000 Mercedes Benz vans. "We are excited about the future of e-commerce and our role as a leader in it", it said.

FedEx says it is still focused on e-commerce delivery and will focus on "serving the broader e-commerce market". Amazon, however, is more than three times their size by revenue and was sitting on about $23.5 billion in cash at the end of March.

In a move not entirely expected but hardly surprising, FedEx Corp.

In recent years, Amazon has steadily grown its fleet of delivery aircraft, which Air Transport Services Group Inc (ATSG) and Atlas Air Worldwide Holdings have operated.

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