BrownCafe
The market is worried about the threat to the package delivery firms coming from online retailers expanding their cargo networks.
First it was Amazon.com) drones that were set to destroy the businesses of FedEx Corporation and United Parcel Service, Inc. Now it’s the online retailer’s expansion of its air-cargo network. It all sounds dramatic, but in reality Amazon’s moves don’t present a significant threat to the two mega-logistics players. Here are five reasons why.
Five key themes
FedEx’s third-quarter earnings were discussed in more detail in an earlier article, so let’s focus here on the takeaways that are relevant to UPS:
One of Atlanta-based United Parcel Service Inc.’s big retail customers – Amazon.com Inc. – will lease its own fleet of 767 cargo jets to move merchandise.
There has been a lot of talk that Amazon might set up its own delivery service that would compete with UPS and FedEx.
Amazon says the new lease deal will compliment the company’s existing delivery network and ensure air cargo capacity to support one and two-day delivery for customers. Company officials also say the move is meant to reduce shipping costs.
UPS is lobbying hard across the world to stop FedEx from buying TNT Express, but its efforts aren’t likely to succeed.
Three years ago, United Parcel Service called off its planned merger with Dutch rival TNT Express after the European Commission threatened to block the deal due to antitrust concerns.
Last April, FedEx stepped into the gap, striking its own deal to buy TNT Express for nearly $5 billion. This merger will make FedEx a much more formidable competitor globally — and especially in Europe.
Not surprisingly, UPS fears this outcome. As a result, it has done everything within its power to prevent FedEx from consummating this critical merger.
Objection could potentially stall the nearly $5 billion acquisition
The delivery giant filed the appeal after Brazil’s antitrust agency, also known as CADE, cleared the proposed transaction on Feb. 2.
“The review process in Brazil contains an option to submit an application to the senior level of CADE to consider a more in-depth review of an initial finding,“ a UPS spokesman said Thursday. ”This option has been exercised as part of ensuring a fair and thorough investigation.”