UPS in, FedEx out as the primary air cargo provider for U.S. Mail

United Parcel Service Inc (NYSE: UPS) is in the green this morning after the United States Postal Service said the multinational will become its primary air cargo provider.

FedEx is parting ways with USPS

U.S. Mail has so far been working with FedEx Corp (NYSE: FDX) on air cargo.

But the New York listed firm opted to walk away today after the “parties were unable to reach agreement on mutually beneficial terms to extend the contract”.  

USPS is yet to reveal the financial details of its agreement with United Parcel Service but the latter has already called the award “significant”.

The news arrives a few weeks before $UPS is scheduled to report its financial results for the first quarter. Consensus is for it to earn $1.43 a share versus $2.20 per share a year ago.

What UPS-USPS deal means for $FDX

Note that FedEx will take a $2.0 billion hit to its annual business now that it’s terminated the decades-long relationship with the United States Postal Service.

But the decision will enable the $71 billion giant based out of Memphis, Tennessee to trim its air capacity that may be a tailwind in the medium term, as per some analysts.

On the flip side, Carol Tome – the chief executive of UPS that’s down 25% versus its 52-week high said in a press release on Monday: