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June 8 (UPI) – FedEx has decided not to renew its express delivery contract with Amazon, the online retail giant stepping up its air service.
On Friday, FedEx announced it was a "strategic decision" not to manage air services for Amazon as we focus on the broader e-commerce market.
The decision does not affect existing contracts with other FedEx business units, including ground services and last mile delivery or international services.
FedEx added that Amazon accounted for only about 1.3% of its total business figure in 2018.
"There is significant demand and growth opportunities for e-commerce, which is expected to grow from 50 million to 100 million packets per day in the US by 2026," said the delivery service. "FedEx already has the network and capacity to serve thousands of retailers in the e-commerce sector, and we are excited about the future of e-commerce and our leadership role."
CNBC said, "We respect FedEx's decision and thank them for their role in serving Amazon's customers over the years."
Amazon is expanding its transportation system for the delivery of its products, including overnight and two-day service. He outsourced cargo planes and trucks.
Amazon Prime Air, based in Hebron, Kentucky, near Cincinnati, Ohio, uses its own branded aircraft operated by Air Transport International, ABX Air, Atlas Air and Southern Air.
Last May, Amazon inaugurated an airfield in northern Kentucky, whose opening is scheduled for 2021 "to ensure customers a fast and free delivery."
Amazon has been testing a new online service since last year that matches truckers and shippers.
A new program called Delivery Service Partners allows entrepreneurs to run their own local delivery van business with Prime logos for last mile service.
And its freight services allow shippers to get instant quotes on packages they want to ship between warehouses.
Last year, Amazon spent $ 27 billion on shipping.
"We estimate that Amazon will pay about $ 6 a box to move that themselves on its own airline network," Morgan Stanley's Shanker told CNBC. "Compared to what we estimate Amazon paying UPS and FedEx: about $ 8 or $ 9 a box today … and given the magnitude of Amazon, this could represent a few billion dollars at least in savings. "
However, it would be "a daunting task requiring tens of billions of dollars" to build and replicate FedEx's existing delivery network, said in 2016 the former FedEx Executive Vice President, T. Michael Glenn.
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