FedEx stopped flying Amazon Prime packages in June because the partnership wasn’t profitable enough — and UPS has the same problem

Last month, FedEx ended its years-long air freight contract with Amazon. Insiders pointed to Amazon’s low-margin business for why the Memphis-based package giant cut its business with the retailer

FedEx raised eyebrows last month when its air freight division dumped America’s largest online retailer— Amazon. The Memphis-based package giant told investors last month that it expects to recoup losses stemming from that decision by fiscal year 2021.

UPS has a similar issue with Amazon in that moving the e-commerce giant’s packages yields lower profit — but UPS depends far more on Amazon for revenue than FedEx does.

The end of the partnership has raised questions about just how much money can come out of working with Amazon. It’s a customer with a lot of volume but not a lot of money to be made on each parcel, analysts say.
Amazon made up some 1.3% of FedEx’s 2018 revenue. Donald Broughton, the founder and managing partner of Broughton Capital, told Business Insider the operating profit from that revenue was under 0.25% — “something between tiny and zero.”