FedEx announced it would not renew Amazon’s U.S. domestic flying contract, continuing its multi-year process of untethering from Amazon.com Inc. This does not affect Amazon’s use of FedEx’s ground parcel delivery, nor does it impact Amazon’s U.S. last-mile and international business with FedEx. According to FedEx, Amazon accounted for just 1.3 percent of FedEx’s total revenue for the 2018 calendar year, and in a statement, FedEx said it made the move to focus more of its resources on the broader e-commerce sector. FedEx has been moving away from Amazon for years, as offering significant price discounts compressed the carrier’s margins. While its focus shifts to other opportunities and existing customers, Amazon continues to pursue linking its own logistics chain, including warehouses, planes, delivery trucks, cargo ships and now planes all over the world. Already, Amazon has launched night flights to and from its hub in Wilmington.
Though FedEx denied concerns about Amazon building its logistics capabilities to become a potential competitor in December, in FedEx’s just released annual report, the company stated that further growth of Amazon’s services could “reduce our revenue” and “negatively impact our financial condition.” Already competing with UPS, USPS and airlines that offer extended services, FedEx now has to contend with Amazon.com as it uses independent contractors for deliveries as well as invests in a network of hubs, aircraft and vehicles—lowering the cost to ship its own products. Still, according to Goldman Sachs on Business Insider, Amazon would have to invest $122 billion to reach the levels of logistics and delivery network of major carriers.