Consultant’s Insight: FedEx, UPS expect muted holiday peak season

Retailers reported record sales as the holiday peak season officially kicked off during Thanksgiving weekend, according to data collection companies including Adobe Analytics and Mastercard. [caption id="attachment_57146692" align="alignright" width="254"] Cathy Roberson, Cargo Facts Consulting senior consultant and Cargo Facts columnist[/caption] However, express and last-mile delivery carriers will likely experience less-than-record revenue and parcel volumes as retailers look for ways to lower last-mile delivery costs by diversifying the number of last-mile carriers or doing deliveries themselves. UPS predictions UPS will benefit mostly from its relationships with Amazon and the U.S. Postal Service to keep its airplanes full — or at least almost full — during the season. Amazon continues to represent a significant percentage of UPS’ total revenue, at 11.8%, equating to $10.7 billion at the end of 2023. UPS services provided on behalf of Amazon include last-mile deliveries, retail returns transportation and next-day air. Amazon did not provide a holiday forecast in terms of volumes or revenue but estimated that its Q4 sales will rise between 7% and 11% year over year, according to its third-quarter earnings call last month. To meet Amazon Prime’s promises of next-day deliveries during the holiday season, Amazon will likely lean on UPS’ next-day air service to ensure on-time last-mile deliveries. Volume and revenue bumps from the USPS will also help UPS during the holiday peak season. UPS officially took over the USPS’ domestic air contract on Oct. 1. FedEx held the contract for more than twenty years. “We expect revenue growth will continue in the fourth quarter as the air cargo volume under our agreement is now fully onboarded,” UPS Chief Executive Carol Tome said in the company’s Q3 10-Q filing with the Securities and Exchange Commission. FedEx outlook As a result of losing the USPS contract , FedEx reduced its number of domestic flights. “We’re working on a daily basis to pull out more of that variable expense tied with the [USPS] contract, and we'll continue to do so,” FedEx Chief Financial Officer John Dietrich said at the Nov. 12 Baird Global Industrial Conference in Chicago. “We'll continue to look for opportunities for the capacity that's been released to us, particularly in the daytime network that largely serves the postal service business to adapt that network to our liking and not necessarily the customer's liking,” Dietrich added. Meanwhile, FedEx is expanding its international reach. Recently FedEx Express increased its frequency from one to five flights between Qingdao, China, and expanded its flights between Miami and the following countries: Honduras; Guatemala; Argentina; Chile; and Ecuador. Canada Post strike Another opportunity for UPS and FedEx express services is the Canada Post strike, which began in mid-November. UPS and FedEx have experienced an increase in last-mile volumes in Canada because of the strike, according to media reports. There may also be increases in Canada-bound parcel volumes from UPS and FedEx due to shippers looking for alternatives to Canada Post. Holiday peak season Overall, UPS and FedEx are experiencing more competition on the ground and in the air. Both UPS and FedEx have noted in earnings calls this year that expectations for the holiday peak season were positive but more muted due to retail customers’ forecasts. In fact, according to parcel consulting firm ShipMatrix, carriers are prepared to handle 120 million parcels per day during the peak holiday season, while demand is estimated to be just 106 million parcels per day. Register now for Cargo Facts' essential regional events for industry stakeholders: Cargo Facts LATAM 2025 on Feb. 10-11 at the Pullman Sao Paulo Guarulhos Airport in Brazil; Cargo Facts Asia 2025 on March 24-26 at the W Shanghai in China; and Cargo Facts EMEA 2025 on May 6-8 at the Shangri-La Bosphorus in Turkey.

Consultant’s Insight: FedEx, UPS expect muted holiday peak season

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