FedEx to end Amazon contract for Express plane service

FedEx Corporation, the American multinational courier delivery services company recently announced plans to not renew its contracts with e-commerce giant Amazon for US cargo delivery via FedEx Express, the units that delivers packages via planes, cite sources. 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.

In total, all of FedEx' business with Amazon is worth about $850 million across its different package delivery networks, Root estimates.

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

"We believe Amazon, representing less than 1.3% of FedEx's almost $70 billion of consolidated annual revenue, is one of FedEx's least profitable customers on a margin basis and that the decision implies that Amazon would not agree to financial terms that would meet FedEx's needs", Root wrote in a note to investors on Monday. As properly as, Amazon is pushing the frontier of supply companies and products by its extremely anticipated rollout of drone-delivered packages.

FedEx may have just rejected millions in potential revenue from Amazon, but it has nothing to worry about. Amazon's other contracts with FedEx were not affected by the new development. "Near term, we see UPS benefiting on the margin from Prime's "One-Day" service commitment given its larger exposure to Amazon (estimated 7-8% of total UPS revenue), while FDX's announcement on Friday to not renew its domestic US Express contract with Amazon, in our view, creates marginal capacity for incremental domestic US Express volume and publicly underscores its strategic decision to serve and support other customers as they react/respond to Amazon's effort to further shape customer expectations in the e-commerce arena".

And whereas the ramifications are sizable, FedEx obtained't be overwhelmed by ending its contract with Amazon.

The carrier but continue to deliver packages for Amazon internationally. The move, which only affects air transportation, won't impact any existing contracts between the two firms.

Memphis, Tennessee-based FedEx cited that outlook when it announced last week that it will go to year-round, seven days a week deliveries in January.

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".

"Despite Amazon's large share in driving e-commerce's growth, most of its FedEx US package volume flows through the FedEx Express Network", Root wrote.