No more FedEx air shipments for Amazon after this month

FedEx Reduces Amazon Ties as Retailer Flexes Delivery MusclesMore

The company is investing $1.5 billion to build an air cargo hub in northern Kentucky, setting it up to rely less on others for air shipping.

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.

Amazon's contract with FedEx Express will not be renewed, the air delivery service announced Friday. "FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space".

Amazon accounted for less than 1.3% of FedEx's revenue previous year, the company said in its statement.

"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.


Amazon in an email statement t CNBC said: "We respect FedEx's decision and thank them for their role serving Amazon customers over the years".

FedEx Corp on Friday made a decision to not renew its contract with Amazon.com Inc for US cargo delivery through FedEx Express, the unit that delivers packages on planes, a move that reflects the broader trend of the e-commerce company moving services in-house. It also said it was moving to lessen its dependence on USPS by integrating FedEx SmartPost volume into standard operations and adding large-package capabilities.

"Although (FedEx Express) represents a relatively small amount of the total Amazon spend, FedEx and UPS are the only carriers that can effectively move some of the next-day and two-day shipments", Anderson said.

However, the decision did not really come as a surprise to Amazon, the report said. The move may be in response to Amazon's similar on-demand "Flex" last-mile delivery program. The 3PL has continuously defended itself against analyst warnings of Amazon Air as a threat to established businesses like UPS and FedEx.

FedEx shares rose $1.17, or 0.7 per cent, to close at $158.02, while Amazon gained $49.67, or 2.8 per cent, to $1,804.03.

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