UPS will become the primary air freight provider for the United States Postal Service.

The Atlanta-based shipping company said Monday it has received an air freight contract from the US Postal Service, significantly expanding an existing partnership between the two.

According to UPS, after a transition period, UPS will carry the majority of air freight in the US for the Postal Service.

Financial terms of the deal were not disclosed.

USPS’s current air freight contract with FedEx Corp. expires at the end of September. The agency said in a statement that the contract with UPS will be for a minimum of five and a half years.

FedEx said in a filing with the regulator that it failed to agree on mutually beneficial terms to renew its contract with USPS. The company said negotiations were completed on Friday after extensive discussions.

FedEx Express will continue to provide air transportation services domestically and to Puerto Rico until the contract expires on September 29. UPS’s contract with USPS starts the next day.

During FedEx’s third quarter conference call on March 21, Chief Customer Officer Brie Carere said the company has been providing its services to USPS for more than two decades and that the two sides were still in negotiations.

FILE - A United Parcel Service truck is parked on the street in New York, Thursday, May 11, 2023. Shares of UPS are falling before the market opens on Tuesday, January 30, 2024, after the package delivery company issued a weaker-than-expected full-year revenue forecast year.  (AP Photo/Richard Drew, File)

USPS announced a four-year extension of its air freight network contract with FedEx in 2020. The postal and delivery service said the contract provided for domestic air transportation for US Mail, Priority Mail and Priority Mail Express.

In recent years, USPS has increasingly focused on reducing costs, and the solution to this is switching from air freight to ground transportation. In February, USPS Postmaster General Louis DeJoy said the USPS aims to reduce its overall transportation costs by $3 billion over the next two years, including $1 billion in cost savings already realized in air freight.

As USPS looks to increase ground shipping as a cost-saving tactic, air freight shipments have increased worldwide. Last month, the International Air Transport Association said total air freight demand, measured in tonne-kilometres, rose 18.4% in January compared to the same period last year. That is the highest annual growth since the summer of 2021.

The shares of United Parcel Service Inc. fell slightly in Monday afternoon trading, with shares of FedEx down nearly 3%.

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