FedEx Corp has decided not to renew its domestic United States contract with Amazon.com for delivery through its cargo carrier FedEx Express (FX, Memphis International), aiming to shift instead to serve Amazon's smaller rivals whose focus is on one- to two-day delivery.
The move also reflects Amazon gradually transiting to its own courier fleet and away from FedEx and UPS Airlines (5X, Louisville International), both of which have the e-commerce giant as a customer, Reuters has reported.
"FedEx has made the strategic decision to not renew the FedEx Express US domestic contract with Amazon.com, Inc. as we focus on serving the broader e-commerce market," the company said in a statement. "There is significant demand and opportunity for growth in e-commerce which is expected to grow from 50 million to 100 million packages a day in the US by 2026. FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space."
It added that the decision did not impact any existing contracts between Amazon and other FedEx business units, nor did it relate to international services.
FedEx has been pivoting from Amazon for some time, according to the cargo news site FreightWaves, as it is unwilling to deal with a growing quantity of discounted traffic that brings low margins. Amazon accounted for less than 1.3% of the courier’s revenues during 2018, the FedEx statement said.
The decision is likely to boost volumes at UPS, while Amazon itself "had a better rate with UPS, so it made no sense for them to use FedEx,” Dean Maciuba from consulting firm Logistics Trends and Insights, told Reuters.
In May, Amazon.com broke ground on a new USD1.5 billion cargo facility at Cincinnati International with a scheduled completion date in 2021. It will be the first dedicated facility for its branded Amazon Air freighters, the Cincinnati Enquirer reported.
According to the ch-aviation fleets module, Amazon's US dedicated cargo fleet uses forty-six freighters, including B737-800(F)s, B767-200(F)s, and B767-300Fs sourced from each of ABX Air, ATI - Air Transport International, Atlas Air, and Southern Air. Its European operations use two B737-400(F)s sourced from ASL Airlines France.
