USPS Moves Half of Long-Distance Mail by Air to Satisfy UPS Contract
- Jul 20
- 2 min read
A new Inspector General audit finds the U.S. Postal Service is flying more mail than intended because minimum volume commitments in its air cargo contract with UPS prevent it from shifting more volume to cheaper surface transportation. To meet contractual minimums and avoid penalties, USPS has supplemented declining package volumes with First-Class and marketing mail — without this, it would have paid an extra $127 million for unused air capacity.
The IG says USPS failed to align the UPS contract with projected declines in parcel volume and its own strategy favoring motor carriers over air. The percentage of First-Class mail (3-5 day window) moving by air rose from 2% in October 2024 to 50% by March 2025, and marketing mail — historically trucked — began moving by air in March 2025 as well.
Background: as part of its Delivering for America plan, USPS extended First-Class delivery standards in 2021 and again in 2025 to shift more volume to trucks, and replaced FedEx with UPS in 2024 under a contract valued at roughly $1.5 billion/year (now over $10 billion total per the IG). Despite these efforts, USPS overshot its transportation cost plan by about $200 million in FY2025 due to network realignment, including mail returning to air.
The IG recommends USPS consider early termination of the UPS air contract and pursue a new deal with a shorter base term and option years for more flexibility. USPS leadership disagrees, arguing the current contract offers sufficient flexibility and that shifting First-Class mail to surface would raise costs and hurt service — noting the air contract and service standard changes have cut transportation costs by over $1.7 billion between FY2023 and FY2025.
Key Takeaway
Tension between USPS's UPS air contract minimums and its surface-first cost strategy is driving unplanned air volume and costs — worth watching for potential contract renegotiation or termination, which could reshape USPS linehaul capacity and rates.
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