FedEx Express has entered into a new express air transportation contract with the U.S. Postal Service.
The current contract ends in September 2013, and the new contract will begin in October 2013.
Under the seven-year agreement, worth about $10.5 billion, the FedEx subsidiary will provide airport-to-airport transportation of USPS express mail and priority mail within the U.S.
“This contract provides enhanced value and additional flexibility allowing the USPS to respond to possible changes,” said David J. Bronczek, president and CEO of FedEx Express, in a written statement.
Since the USPS is looking to improve profitability in the face of uncertain and potentially declining volumes, the annual minimum it will pay FedEx under the contract is lower than the prior contract, according to Stifel Transportation & Logistics Research.