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USPS Spending More on Air Cargo to Meet UPS Contract Minimums

The Postal Service is spending significantly more on air cargo than necessary due to minimum volume commitments in its contract with United Parcel Service, according to the Office of Inspector General. To avoid penalties for unmet thresholds, USPS has shifted First-Class and marketing mail to planes rather than pursuing cheaper ground transportation. The agency would have faced $127 million in charges for unused air capacity without supplementing package volumes with mail. Officials failed to account for declining parcel volumes and a strategic shift toward motor carriers when negotiating the UPS deal. While the current contract is more favorable than the previous FedEx agreement, contractual minimums have forced greater reliance on expensive air networks. The Inspector General's audit found that USPS did not properly forecast volume declines or network changes when setting requirements. This contradicts earlier efficiency initiatives to move mail to surface transportation.