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FedEx ends US air delivery service contract with Amazon

By midian182 · 7 replies
Jun 10, 2019
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  1. FedEx said it made the “strategic decision” to terminate the contract as it focuses on serving the broader e-commerce market. The move, which only affects air transportation, won’t impact any existing contracts between the two firms.

    With Amazon continuing to build out its fleet of delivery planes and vehicles, speculation that it could eventually dump FedEx, UPS, and USPS has been around for years. The firm's air transport service launched in mid-2016, leasing aircraft from Air Transport Services Group Inc and Atlas Air Worldwide Holdings.

    The retail giant expanded its fleet of cargo planes last December, announcing that it’s leasing 10 additional Boeing 767–300 cargo planes for its Amazon Air operations, which will increase its total fleet to 50 aircraft. The company is also investing $1.5 billion to build an air cargo hub in northern Kentucky, all of which will see it become less reliant on other delivery partners.

    FedEx told investors that Amazon is far from its biggest customer, accounting for just 1.3 percent of its total revenue. The company predicts that e-commerce is expected to grow from 50 million to 100 million packages a day in the US by 2026.

    Amazon gave a short statement regarding the move: "We respect FedEx’s decision and thank them for their role serving Amazon customers over the years," said a company spokesperson.

    Earlier this year, FedEx announced an autonomous delivery robot that will be used for short-distance deliveries, called SameDay bot. Amazon, meanwhile, is still working on its drone delivery service and recently revealed a helicopter-airplane hybrid, which it hopes will deliver packages under 5lbs to customers within a 15-mile range in under 30 minutes.

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    Last edited: Jun 10, 2019
  2. QuantumPhysics

    QuantumPhysics TS Evangelist Posts: 1,146   +836

    Amazon is so big and powerful now, I'm sure they can get contracts with some other airline...or maybe even start one themselves?
     
  3. p51d007

    p51d007 TS Evangelist Posts: 1,927   +1,195

    If Amazon thinks they can do it better than FedEx, USPS, UPS...more power to them.
    BUT, if it starts impacting the customer, it might tick off the consumers if packages are
    not delivered on time, wrong packages, damaged etc.
    But, Amazon is so big, who's going to leave them for Ebay and the like?
     
  4. captaincranky

    captaincranky TechSpot Addict Posts: 14,779   +3,906

    If you had read the article in its entirety, that's exactly what the are doing.

    Take this highlight for example:

    "The retail giant (Amazon) expanded its fleet of cargo planes last December, announcing that it’s leasing 10 additional Boeing 767–300 cargo planes for its Amazon Air operations, which will increase its total fleet to 50 aircraft. The company is also investing $1.5 billion to build an air cargo hub in northern Kentucky, all of which will see it become less reliant on other delivery partners".


    I emboldened the text for your convenience.
     
    yRaz and TheBigT42 like this.
  5. pininfarina575

    pininfarina575 TS Rookie

    Antitrust? anyone?
     
  6. Dimitrios

    Dimitrios TS Guru Posts: 430   +310

    If they start their own delivery version like FEDEX or UPS there will be PRO's and CON's just like how INTEL is with in house fabs.

    There are times where it may be better to leave certain jobs to others for less headache's and up front cost/investment.
     
  7. wiyosaya

    wiyosaya TS Evangelist Posts: 3,820   +2,173

    Businesses trying to eek out an extra $0.01 per item sold is nothing new. I'm not saying it is a good thing, but it is happening everywhere.

    My bet is that this is the cost of an unsustainable model - crApazon Prime. It costs them to run Prime.

    If you ask me, its an unsustainable model and here is why I think it is unsustainable. Recently, I have ordered several things from crApazon on several different orders. I am not a Prime member and have no intention of becoming one. In all but one of my recent orders, I ordered over $25.00 worth of stuff to get free shipping. In all but that one instance, my items came faster, usually by crApazon's delivery service, than the speed that the order form said it would come if I chose free shipping. In fact, every order but that one order came faster than the order form said it would if I had paid for shipping. So where is the incentive to pay for shipping?

    I agree - crApazon may be asking for a world of hurt if they continue to go this route.
     
    Dimitrios likes this.
  8. Uncle Al

    Uncle Al TS Evangelist Posts: 5,249   +3,666

    Ahhhhh ..... we have a smart one! Guess they see the writing on the wall and want to diversify BEFORE Amazon bites the big one ...... smart, very very smart!
     
    wiyosaya and Dimitrios like this.

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