In brief: Delivery giant FedEx has announced that it won’t be renewing its US domestic contract with Amazon to deliver the company’s packages through FedEx Express.
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.