FedEx ditches Amazon contract

FedEx has made the strategic decision to not renew the FedEx Express US domestic contract with Amazon in order to focus on serving the broader e-commerce market.

The move comes after the e-commerce retail giant launched its own airfreight network three years ago through deals with Atlas Air and ATSG and has been ramping up its delivery network.

It is understood the decision will not impact any existing contracts between Amazon.com and other FedEx business units or those relating to international services.

Amazon is not FedEx’s largest customer and the express company has stated in the past that it does not see Amazon’s own logistics network as a threat to its business.

The percentage of total FedEx revenue attributable to Amazon represented less than 1.3% of total revenue for the 2018 calendar year.

“There is significant demand and opportunity for growth in e-commerce which is expected to grow from 50m to 100m packages a day in the US by 2026,” FedEx said.

“FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space. We are excited about the future of e-commerce and our role as a leader in it.”

In response to the news, an Amazon spokesperson said: “We respect FedEx’s decision and thank them for their role serving Amazon customers over the years.“

Amazon is upping the ante in the race to the consumer’s door with the announcement that it is slashing delivery times for its Prime customers from a standard two-day window to next day in the US.

On the fleet front, the online retail firm recently moved into the B737 sector with plans to add five of the aircraft to its existing fleet of 40 B767F aircraft.

It has also announced it will add a further 10 B767Fs through ATSG, while there are options for even more, and has broken ground on a new $1.5bn Air Hub located at the Cincinnati/Northern Kentucky International Airport.

Analysts have said the move by FedEx may have been the result of the company reducing its use of the express firm, meaning it no longer justified the discounts it was receiving.

It may also have been to pre-empt Amazon taking its business away from FedEx.

Earlier this year, XPO Logistics cut its revenue forecast for the year by $600m after it lost two thirds of its business for a major customer, believed to be Amazon.