FedEx’s air cargo network may look much different come October, as its Express unit prepares for life without the U.S. Postal Service as a top customer.

Rival UPS will take over as the Postal Service’s primary air cargo transportation provider under a contract being implemented Sept. 30, the day after the agency’s deal with FedEx for airport-to-airport shipping expires. FedEx said in a statement it will make adjustments to its network once the contract ends, such as cutting structural costs currently in place to support the Postal Service’s volume.

One likely target in the company’s adjustments is daytime flights, which the Postal Service frequently uses. FedEx could cut 50% of its daytime flight capacity and save $1.5 billion without the contract in place, Barclays analysts said in a February research note.

Reaching that figure will depend on to what extent FedEx is willing to shrink its capacity. Experts told Supply Chain Dive that the company won’t be afraid to install changes fast when the deal ends, given its aggressive approach to cost-savings in recent quarters.

“I think FedEx knew they were going to walk away from the business with the USPS, and I think what they want to do in terms of reorganizing air operations and shrinking the footprint of it is already in the books,” said Dean Maciuba, managing partner, United States, for Crossroads Parcel Consulting. “They’ll be able to implement these changes really, really quickly.”

FedEx’s large air network keeps evolving

FedEx is a giant in the air cargo space. It outranks UPS in terms of fleet size, daily departures and capacity, and it also generates more global air freight revenue than UPS, the Barclays analysts wrote. The Postal Service contract is a key piece of that success, as FedEx counted the agency as its largest Express customer as of May 31, 2023.However, FedEx’s airline is also much more expensive to maintain and operate compared to its rival. Daytime domestic U.S. flight operations, driven primarily by the Postal Service business, cost FedEx roughly $3 billion annually, according to the Barclays analysts. Meanwhile, FedEx’s revenue has been pressured by reduced Postal Service activity in recent quarters, as the agency leans more on ground transportation to move volume.