FedEx Express Decides Not to Renew Amazon Contract

FedEx to end Amazon contract for Fed Ex Express plane service

"FedEx has made the strategic decision to not renew the FedEx Express US domestic contract with Amazon.com, Inc.as we focus on serving the broader e-commerce market", the company's statement reads.

The decision does not impact existing contracts between Amazon and other FedEx business units, nor worldwide services, FedEx said.

Amazon is not FedEx's largest customer and only 1.3 per cent of the total revenue generated by the global courier company in 2018 was attributed to Amazon.com.

FedEx Express is the company's quick shipping option.

Packages delivered using FedEx Express arrive either overnight or in two days, which aligns with Amazon's one-day and two-day Amazon Prime shipping offers. "FedEx will achieve higher margins and better returns on its investments in its Express network by re-deploying capacity to customers other than Amazon".

FedEx pointed to "significant demand and opportunity for growth in e-commerce" and emphasized that 1.3% of FedEx's total revenue comes from Amazon.

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FedEx's stated reason for severing the air contract with Amazon was its desire to broaden its shipping relationships with other major retailers including Walmart, Target and Walgreens. FedEx, which operates on a June 1 to the following May 31 fiscal year, has fiscal year revenues of just under $70 billion. "We are excited about the future of e-commerce and our role as a leader in it".

Amazon provided us with the following statement: "We respect FedEx's decision and thank them for their role serving Amazon customers over the years".

"This is just a fact of Amazon using less of FedEx over the a year ago or so given that they're building out their own air fleet, combined with the fact their volume probably didn't warrant the kind of discounts they were getting", Klaskow said.

Among many other moves, Amazon last month broke ground on the northern Kentucky air hub - in a photo op that featured CEO Jeff Bezos driving a payloader - and is creating an army of delivery contractors through leasing 20,000 Mercedes Benz vans.

In a move not entirely expected but hardly surprising, FedEx Corp.

"We believe Amazon, representing less than 1.3% of FedEx's almost $70 billion of consolidated annual revenue, is one of FedEx' least profitable customers on a margin basis and that the decision implies that Amazon would not agree to financial terms that would meet FedEx' needs", Root added.

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