Dive Brief:
- The U.S. Postal Service reduced its spending on FedEx’s services by nearly 11% from fiscal year 2021 to 2022, according to data compiled by David Hendel, a partner at law firm Culhane Meadows.
- FedEx was still the agency's top supplier in FY2022, which ended Sept. 30. However, the Postal Service's spending with the delivery giant is likely to drop again in FY2023 as it shifts volume from air cargo to ground transportation, according to an April press release from Hendel and Culhane Meadows.
- Hendel has compiled a list of the top 150 Postal Service suppliers each year since 1999 based on data obtained from Freedom of Information Act requests. His practice focuses on Postal Service matters.
U.S. Postal Service reduces FedEx spending
Dive Insight:
The Postal Service is increasing its reliance on trucks to move mail and packages between facilities under Postmaster General Louis DeJoy's transformation plan to improve the agency's financial health.
That spells trouble for FedEx, which counted the Postal Service as the largest customer of its Express unit as of Feb. 28, according to a securities filing. FedEx Express provides the agency with domestic airport-to-airport transportation services under a contract that expires in September 2024.
FedEx warned in the filing that it expects lower volumes from the Postal Service in Q4 2023 and next year. The company has recently been grappling with plummeting package volumes, particularly at Express, and it's cutting flight hours and parking aircraft in order to reduce costs.
Other carriers beyond FedEx are vulnerable to the Postal Service's overhaul. Hendel and Culhane Meadows' release noted that American Airlines, United Airlines and Delta Air Lines received nearly $45 million less from the Postal Service in FY2022 than the year prior. Some air cargo carriers fared better, with Kalitta Air, Amerijet International and Alaska Airlines seeing an increase in agency spending YoY.
Despite the Postal Service's shift from air to ground transport, its overall spending on outside transportation increased by $1 billion YoY.
"The Postal Service attributes the rise to increased fuel expenses and inflationary pressures due to supply imbalances," the release said.
The Postal Service declined to comment on the list.
