UPS replaces FedEx as primary air cargo provider for US Postal Service

USPS said the new deal holds a minimum term of five-and-a-half years and is scheduled to begin on Sept. 30, when its contract with FedEx expires.

In a major deal for the largest shipping company in the United States, UPS has reached an agreement to become the majority air cargo provider for the U.S. Postal Service. 

The Atlanta-based courier announced Monday that it was awarded the contract after USPS was unable to hammer out a deal to extend its current contract with FedEx, which is set to expire in September. While the financial terms of the agreement were not publicly disclosed, UPS said it was "significant" and "effective immediately."

"Together UPS and USPS have developed an innovative solution that is mutually beneficial and complements our unique, reliable and efficient integrated network," UPS CEO Carol Tomé said in a statement.

The new deal holds a minimum term of five-and-a-half years and is scheduled to begin on Sept. 30. USPS said it aims to reduce overall transportation costs by about $3 billion over the next two years. 

"Finalizing this agreement is a key step toward achieving our operational and financial sustainability goals," USPS said in a statement.