UPS CEO emphasizes network flexibility in securing US Postal Service contract

UPS is preparing to transfer most of the Postal Service's domestic air cargo volume to its network.

UPS's CFO, Brian Newman, expects that their current daytime flying operations in the United States will handle most of the traffic. According to Tomé, this means the company will be able to accommodate the volume increase by hiring more pilots instead of buying more planes.

Despite not winning the new Postal Service contract, FedEx has faced difficulties in recent quarters due to the Postal Service's decision to shift the volume of air cargo to its less expensive ground network.

The new deal incorporates "volume protection" with set minimums, according to UPS EVP and Chief Commercial and Strategy Officer Matt Guffey, to guarantee that sufficient Postal Service parcels continue to flow into its network. Guffey continued, saying that in order to guarantee a seamless transition ahead of the busiest holiday shipping season, the company meets with the agency once a week.

As it attempts to recover from a run of poor quarterly results that persisted in Q1, UPS executives expressed confidence that the contract will help boost its bottom line.

A 3.2% decrease in average daily volume was the primary cause of the 5% annual fall in U.S. revenue. Customers prefer cost savings over delivery speeds, as seen by the more noticeable decline in volume observed in next-day air and postponed services compared to ground services, according to Newman.

Towards the conclusion of the quarter, however, the business noticed encouraging signs regarding demand; according to Newman, the last few weeks were "basically break-even from a volume perspective." Due to the efforts of its sales team to increase the number of packages in the network, UPS anticipates somewhat positive volume developments in Q2.