FedEx Express will not renew contract with Amazon

FedEx ends US air delivery service contract with Amazon

FedEx ends US air delivery service contract with Amazon

Amazon has extra and extra residence its sights on the segment, which is severe for its core alternate, threatening the possibilities of contemporary incumbents UPS and FedEx.

FedEx Corp on Friday chose to not renew its contract with Amazon.com Inc for U.S. cargo delivery through FedEx Express, the unit that delivers packages on planes, a move that reflects the broader trend of the e-commerce company moving services in-house. It's also launching a program that lets contractors start businesses delivering packages in vans bearing the Amazon smile logo. USA package volume from online shopping is expected to double by 2026, FedEx said.

Amazon has been splurging to build up its delivery network to reduce its dependence on the likes of FedEx and UPS.

FedEx may have just rejected millions in potential revenue from Amazon, but it has nothing to worry about.

"Next-day service delivery requires incremental Express/Air network capacity - thus the development of Amazon Air and its $1.5 billion primary air hub at CVG in northern Kentucky", wrote Hartford. As properly as, Amazon is pushing the frontier of supply companies and products by its extremely anticipated rollout of drone-delivered packages.

The volume of Amazon packages being affected by the policy change - which Moody's estimates is less than 200,000 packages a day out of a total of 2.9 million packages for FedEx Express US domestic - can be replaced with packages sent by e-commerce shippers who will pay more per package, resulting in increased revenue for the same volume sent through FedEx's logistics network, Root argues.

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Robert W. Baird & Co. analyst Ben Hartford wrote in a research note that the decision by FedEx is "immaterial" to the company's revenue and earnings base and "symbolic" in terms of its strategic focus on other e-commerce opportunities and customers, on the heels of Amazon's recently announced commitment to "One-Day" Prime services.

And whereas the ramifications are huge, FedEx might maybe maybe now not be beaten by its contract with Amazon ending. And it added that this decision does not impact any existing contracts between Amazon.com and other FedEx business units or relating to global services.

The percentage of total FedEx revenue attributable to Amazon represented less than 1.3% percent of total revenue for the 2018 calendar year.

Amazon accounted for less than 1.3 percent of FedEx's revenue a year ago, the company said in its statement.

In an email to Supply Chain Dive, a spokesperson for Amazon, said: "We respect FedEx's decision and thank them for their role serving Amazon customers over the years".

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