USPS moves 50% of long-distance mail by air to meet UPS contract commitments, facing scrutiny over strategy and costs, says Inspector General.
The US Postal Service is moving half of its long-distance mail by air to meet minimum volume commitments under a contract with United Parcel Service, reported New York's FreightWaves.
The Office of Inspector General stated that postal officials failed to align the UPS deal with falling parcel volumes and a strategy favoring cheaper trucking. To avoid penalties for unused air capacity, the agency shifted First-Class and marketing mail to planes.
The watchdog estimated that USPS would have paid an extra US$127 million without supplementing package volumes with mail. It urged consideration of early termination and a new contract with more flexible terms.
The UPS agreement, signed in 2024 after replacing FedEx, has a base term of 5.5 years and an annual value of $1.5 billion. The Inspector General now lists the total value at more than $10 billion.
Under the contract, the share of First-Class mail traveling by air rose from 2 percent in October 2024 to 50 percent by March 2025. Marketing Mail also began flying, despite historically moving by truck.
Postal leadership disputed the audit's findings, stating that air transport helped maintain favorable pricing tiers and improved service. Chief logistics officer Peter Routsolias mentioned that the contract and service standard changes enabled the agency to cut transportation costs by more than $1.7 billion between fiscal years 2023 and 2025.
