Beyond Amazon: How UPS is redefining its logistics future

United Parcel Service (UPS) is an American multinational express integrator and supply chain management company known for punctuality and precision. UPS offers air shipping on an overnight or two-day basis as well as more budget–friendly options such as UPS Mail Innovations and UPS SurePost. Founded in 1907, it is the largest courier company in the world by revenue, with annual revenues of $91.1 billion in 2024, ahead of rival FedEx at $88 billion). Although volatile in recent months, UPS has a market cap of over $100 billion. 

Figure 1: UPS revenue and operating profit (2015 – 2025) 

Source: Cargo Facts analysis of UPS financial statements 

UPS’ main hub, UPS Worldport, is located at Louisville Muhammad Ali International Airport (SDF) in Louisville, Ky. UPS Worldport boasts a 5.2 million-square-foot sorting facility, capable of sorting 416,000 packages and documents per hour. The 300-acre apronram includes 125 aircraft parking positions where more than 360 flights are handled each day, heading to more than 200 countries and territories around the world.  

Largely due to UPS, SDF is the sixth–busiest airport in the world when measured by cargo traffic (2.7 million metric tonnes) and the third–busiest in the United States behind FedEx‘s Memphis Superhub (MEM) and Ted Stevens Anchorage International Airport (ANC). However, it is worth noting that SDF has slid from 4th in 2019 to 5th in 2023, and6th in 2024 due to an 11.1% decrease in metric tons from 2023. 

A powerhouse in air cargo, the UPS fleet includes 534 aircraft, mainly Boeing 747s, 767s and MD-11s. UPS continues to dominate express deliveries, particularly in North America and Europe. In 2025, UPS has enhanced its next-day international shipping services and adopted greener aircraft technologies, reducing emissions and improving efficiency. The company’s extensive integration with e-commerce platforms has solidified its role as a key logistics partner for online retailers. 

Amazon 

When Amazon first started, it relied on traditional logistics providers like the U.S. Postal Service (USPS), FedEx and UPS to handle deliveries. These partnerships worked well initially, but as the company grew, so did its need for a more streamlined and controlled delivery process. December 2013 marked the tipping point:. Its third-party delivery partners, namely UPS and FedEx, failed to deliver packages on time for Christmas Day. Amazon elected to issue $20 gift cards and apologies to customers, likely at great expense.    

UPS and FedEx conceded that they had been overwhelmed by last-minute orders and bad weather that caused unexpected delivery delays. Also, the overall volume of online orders for the 2013 holiday season had exceeded projections.  

After this debacle, Amazon took the major step of creating its own logistics arm, Amazon Logistics, in a bid to gain more control over its supply chain and improve the customer experience with its own team of drivers and vehicles. The program began in 2014 in Seattle and expanded across the U.S. and other parts of the world. Customer obsession, one of Amazon’s leadership principles, was put on display in the early days, with drivers being pushed to complete multiple delivery attempts in a day and essentially doing everything in their power to get the customer their package.  

Amazon Logistics now includes an air network in the U.S., Canada, Europe and India. Cargo Facts believes that Brazil is the next country to be added, based on online job postings for key operational roles. Amazon Logistics delivered an estimated 13.2 million packages per day in 2022, a number that has surely grown since. 

USPS 

UPS volumes will get a boost since USPS announced it will no longer deliver UPS SurePost packages after the government agency’s contract with the parcel service expired Dec. 31, 2024. SurePost is a hybrid shipping service offered by UPS launched in 2003 and geared toward non-urgent residential shipments weighing less than 10 pounds. These packages will now be handled door to door utilizing UPS’ network.  

USPS has stated publicly that it is in the process of a mass review of contracts, citing prior contracts that failed to fully reflect operational costs. Millions of SurePost packages going back on UPS trucks and, in some cases, planes will likely result in UPS growing its headcount. 

Although USPS elected to end its SurePost deal with UPS, the companies will continue to work together in other facets. After the Sept. 29, 2024, expiration of USPS’ domestic air transportation services contract with FedEx, the contract was awarded to UPS.  

The UPS-Amazon relationship  

UPS and Amazon have long maintained a complex relationship, evolving from mutual dependence to increasing competition. Historically, Amazon relied heavily on UPS for parcel delivery, contributing significantly to the carrier’s shipment volume. However, as Amazon expanded its in-house logistics capabilities — most notably through Amazon Air — the company has steadily reduced its reliance on third-party carriers.  

As of December 2024, Amazon Air operates a fleet of 104 aircraft through nine contracted operators, including ATI, Atlas Air and ASL Airlines Ireland, with its primary hub at Cincinnati/Northern Kentucky International Airport (CVG). Investments such as the $1.5 billion Amazon Air Hub at CVG and secondary hubs in Wilmington (ILN), Fort Worth (AFW) and San Bernardino (SBD) underscore its commitment to self-sufficiency in logistics.  

Additionally, Amazon Air’s move to offer third-party cargo services positions the company as a direct competitor to UPS, leveraging excess capacity for additional revenue while challenging established industry players. For UPS, the declining profitability of handling Amazon’s high-volume, low-margin shipments has prompted a strategic shift away from e-commerce giants like Amazon in favor of more lucrative sectors, including healthcare logistics and small- and medium-sized businesses. While UPS remains a critical logistics partner for Amazon, the relationship is increasingly defined by strategic realignment as both companies seek to optimize their operational models and profitability. 

Strategic USPS partnership  

UPS’ recent multiyear contract win to become the primary air cargo carrier for USPS marks a significant shift in the logistics landscape, ending a 20-year partnership between USPS and FedEx. This strategic move presents UPS with a major opportunity to enhance its market presence and leverage its integrated network for increased efficiency.  

Anticipating a surge in parcel volume, UPS has announced plans to hire more than 300 pilots to support its expanding operations. The partnership aligns with USPS’ broader strategy of transitioning more volume to ground transportation while maintaining a reliable air network.  

Despite the competitive victory for UPS, FedEx sees an opportunity to streamline operations at FedEx Express, which has struggled with declining parcel revenues. The financial benefits and operational synergies from this deal are expected to strengthen UPS’ position in the market. However, USPS’ recent announcement that it will stop carrying products for UPS adds a layer of complexity to the evolving relationship between the two logistics giants. 

Operational changes  

UPS’ recent expansions and network adjustments are aimed at accommodating the increasing demand for air freight services, particularly in sectors like high fashion, food and beverage, aerospace and pharmaceuticals. The integration of new flight routes, additional capacity and strategic network enhancements reflect the growing need to streamline and support international shipping, including USPS shipments. 

The new flight routes connecting key global hubs — such as the Paris Charles de Gaulle (CDG) to Hong Kong International (HKG) and Sharjah International Airport’s (SHJ) connection to mainland China and South Korea — enable faster deliveries to major markets like Nigeria, Saudi Arabia and South Africa. These developments not only expedite shipments but also highlight the importance of specialized services catering to industries such as the expanding dental and pharmaceutical sectors in Hong Kong. 

To bolster its global network, UPS added more than 200 intercontinental flights in the fourth quarter, significantly boosting capacity between Asia Pacific, Europe and the U.S. This increase in capacity is critical during peak holiday periods and helps businesses maintain a competitive edge through faster deliveries and enhanced supply chain resilience. Additionally, UPS’ recent introduction of next-day services for regions like South Korea, Vietnam and Australia further underscores its commitment to meeting increasing customer demand for speed and reliability in global shipments. 

Fleet and infrastructure modifications play a crucial role in UPS’ growth strategy. With 534 aircraft in its fleet, including Boeing 767-300Fs and 747-8Fs, UPS is expanding its cargo capacity. The company’s Jan. 30 8-K filing showed that it now has twenty-five 767-300Fs on order instead of seventeen. Boeing attributes a December order of eight 767-300Fs to an “unidentified customer” which we believe to be UPS. In October and November 2024, UPS also put two ex-Qatar Airways 747-8Fs (37564 and 63199) into service. 

The company is also innovating in air freight technology. UPS has received approval from the Federal Aviation Administration to operate drones for package delivery beyond visual line of sight. This technological shift allows UPS to provide more efficient deliveries, especially in remote or underserved areas, without relying on expensive visual observers. The use of ground-based radar to monitor air traffic adds a layer of safety and scalability to drone operations, marking a significant leap in the integration of uncrewed vehicles into the air freight network. 

UPS is making adjustments to its workforce and facilities to accommodate the expanding air network. As part of its “Network of the Future” initiative, the company is temporarily closing and upgrading several facilities across the U.S. This overhaul, while impacting thousands of employees in the short term, is aimed at reducing reliance on manual labor through automation, enhancing productivity and efficiency in package sortation processes and helping UPS meet the growing demand for air freight services. 

Competitive landscape, industry impact 

UPS’ decision to pivot away from Amazon and USPS marks a significant shift in the competitive landscape, directly impacting FedEx and other air cargo players. With both UPS and FedEx adjusting their operating strategies due to weak demand for high-margin premium services, this move allows UPS to improve profitability by focusing on higher-margin deliveries from new partners like Temu and Shein. By absorbing packages it previously handed off to USPS, UPS is strengthening control over its network and boosting operational margins, projected to rise from 7.5% in 2024 to 12% by late 2026. Meanwhile, Amazon’s response remains a key industry variable — whether it will further scale its in-house logistics or seek new partners could reshape contract dynamics across major logistics players. These shifts highlight broader industry trends of carriers reevaluating e-commerce profitability and restructuring their networks to secure more lucrative business, intensifying competition among freight and air cargo operators. 

These are interesting times for the industry, with contract changes, tariffs on China, the elimination of the de minimus exception and potential tariffs on Mexico, Canada and the European Union on the horizon. 

Financial implications, outlook 

UPS is navigating a significant shift in its revenue mix, as it rapidly reduces its dependence on Amazon while securing new business from USPS. The company’s decision to cut Amazon volumes by more than 50% by the second half of 2026 — five times faster than its previous reduction pace — marks an aggressive push to move away from lower-margin, high-volume e-commerce deliveries.   

This transition comes at a short-term cost, with UPS issuing a downbeat 2025 revenue forecast that led to an 18% drop in its stock price. Amazon accounted for 11.8% of UPS’ revenue in 2024, and the accelerated shift will result in 1.25 million fewer daily deliveries, forcing UPS to find new revenue sources. However, the projected gains from its growing USPS partnership could offset some of this decline.  

In the long term, this strategy positions UPS for greater financial sustainability by reducing its reliance on Amazon and focusing on higher-margin deliveries. The shift also supports cost-cutting initiatives, with UPS expecting to save $1 billion by optimizing its network, including reductions in infrastructure and labor costs. By prioritizing more profitable shipments and diversifying its customer base, UPS is laying the foundation for a leaner business model that is less vulnerable to the competitive pressures of large e-commerce players like Amazon. 

Figure 2: UPS revenue by segment 

Source: Cargo Facts analysis of UPS financial statements 

UPS is strategically integrating health care logistics and international expansion into its broader business model to counteract stagnation in its traditional package delivery sector. By acquiring Frigo-Trans and BPL, UPS has strengthened its position in temperature-controlled and time-sensitive health care logistics across Europe, reinforcing its ability to meet growing global demand. UPS Healthcare, the company’s specialized health care logistics service, offers higher margins than standard parcel delivery and has become a key growth driver, with a goal of doubling its $10 billion revenue by 2026.  

In addition to acquisitions, UPS is investing in infrastructure, such as the newly constructed Labport facility near its Louisville air cargo hub, which provides custom laboratory and warehousing space for medical companies. This allows UPS to facilitate faster diagnostics and streamline health care supply chains while expanding its footprint in high-value international markets. By differentiating its health care division with specialized logistics solutions and premium service offerings, UPS aims to become the leading global provider of complex health care logistics while mitigating financial pressures in its core business. 

 Conclusion 

For years, Amazon has been both a major customer of and a growing competitor to UPS. The e-commerce giant has built its own logistics network, reducing its dependence on third-party carriers. In response, UPS has diversified its customer base, prioritizing high-margin deliveries and business-to-business shipments rather than focusing on lower-margin e-commerce packages. This shift is a strategic move to maintain profitability amid Amazon’s increasing self-sufficiency in logistics. 

Another major development is UPS’ changing relationship with USPS. UPS has historically relied on the postal service for last-mile deliveries in rural and hard-to-reach areas. However, with USPS expanding its own package delivery services and partnering with Amazon, UPS is reconsidering its reliance on these arrangements. The renegotiation of contracts and pricing structures reflects a broader industry trend in which logistics companies are seeking more control over their operations to reduce dependency on external partners. 

To adapt to these challenges, UPS has implemented efficiency measures, including network optimization, automation and investment in new delivery models. The company is focusing on integrating technology and AI-driven logistics to improve delivery speed and cost-effectiveness. Additionally, UPS is exploring alternative revenue streams, such as healthcare logistics and specialized freight services, to offset losses from declining e-commerce shipments.  

Despite these strategic shifts, UPS faces ongoing competition from Amazon, FedEx, and emerging regional carriers. Maintaining a balance between profitability and market share will be critical in the coming years. UPS’ ability to leverage its extensive logistics network while embracing new technologies and business models will determine its long-term success. 

UPS is at a pivotal moment in its evolution, redefining its business model to remain resilient in a changing logistics landscape. The company’s move away from Amazon dependency, its recalibration of USPS agreements and its focus on high-margin services signal a strategic pivot designed to ensure long-term profitability. As the industry continues to evolve, UPS’ ability to innovate and adapt will be crucial in maintaining its position as a global logistics leader.