Parcel Power Plays and Pricing Shocks (7/29/25)

Ellie Thornton

Hello and welcome back to Milestones Behind the Freight Curtain! I’m Ellie Thornton, and as always, I’m joined by the one and only Steve DeNunzio. Professor are you ready to get into the parcel power plays of 2025?

Steve DeNunzio

Absolutely, Ellie. This week’s been wild for parcel news. I mean, the Postal Service’s big switch from FedEx to UPS as their main air carrier? That’s a seismic move in the logistics world.

Ellie Thornton

It really is! And the numbers are just staggering. The USPS dropped its air transportation spending by 43%—that’s nearly half—after moving to UPS. And this isn’t just a little side deal, right? We’re talking a $10 billion contract, with UPS now handling about 85% of the Postal Service’s air volume. First-Class and Priority Mail are all going through UPS now, while FedEx is left with the tricky stuff—hazmat, perishables, live animals. I mean, I wouldn’t want to be the one sorting out the tarantulas and lithium batteries. Would you?

Steve DeNunzio

No thanks! I’ll pass on the tarantulas. But you’re right, Ellie, this is a huge operational shift. And it’s not just about saving money. The new contract gives USPS more flexibility—less volume commitment, more planned capacity, and even stricter on-time requirements. UPS is touting their network flexibility, being able to use regional gateways, not just their main hub. That’s a big deal for service reliability.

Ellie Thornton

But, as with any big change, there’ve been some teething issues. I was reading the Inspector General’s report, and apparently, a handful of hazardous materials packages—eighty-four out of nearly 29,000—ended up in the wrong network, going through UPS when they should’ve stayed with FedEx. It’s a tiny percentage, but still, it’s a risk. It actually reminded me of this London retail brand I worked with a few years back. They switched logistics partners to save costs, but for the first few months, we had perfume bottles—hazmat technically—showing up in the wrong depots. It was chaos! And it sounds like USPS is dealing with a similar learning curve, even with new software and extra training for staff.

Steve DeNunzio

Yeah, and I think that’s just the reality of these big transitions. Even with all the tech and protocols, you’re gonna have some hiccups. But, you know, the Postal Service is also moving more volume to ground to cut costs, so they’re relying less on air overall. It’s a balancing act—cost, speed, and risk. And, honestly, it’s impressive how quickly they’ve managed to shift so much volume without major service disruptions. I mean, as we talked about in our India Post episode, these big postal systems can be surprisingly nimble when they need to be.

Ellie Thornton

Totally! And I think it’s a good reminder that even the giants have to keep adapting. Alright, let’s talk about what all this means for pricing, because Steve, it’s not just the Postal Service making moves—FedEx and UPS are shaking things up for everyone else, too.

Steve DeNunzio

Yeah, so, if you’re a business shipping parcels in the U.S. right now, you’re probably feeling the pain. FedEx and UPS have basically ended a lot of their commercial discounts. They’re laser-focused on high-yield, profitable shipments, and they’re not shy about tacking on surcharges—especially fuel surcharges. I mean, fuel surcharges are up 30% even though fuel prices are flat. That’s, uh, that’s not just covering costs, that’s, well, weaponizing the surcharge, right?

Ellie Thornton

It’s wild! And ground delivery costs are at a record high—32% above what they were in 2018. So, what are businesses doing? They’re shifting to cheaper, slower options like USPS Ground Advantage or other economy services. But it’s not always a perfect swap, is it? You lose some speed, maybe some tracking, but you save a few quid—or, well, a few bucks, in this case.

Steve DeNunzio

Yeah, and, you know, this isn’t just a theoretical thing. Back when I was working for a big retailer, these surcharges could swing our quarterly budgets by millions. You’d plan for a certain rate, and then—bam—UPS or FedEx would roll out a new fee, or fuel would spike, and suddenly you’re making tough calls. Do you eat the cost? Do you pass it on to customers? Or do you downgrade your service level and risk disappointing people? It’s a constant juggling act.

Ellie Thornton

And it’s not just the big guys feeling it. Smaller shippers are kind of trapped, aren’t they? If they move some volume to USPS or a regional carrier to save a few dollars per package, they lose out on the volume discounts from FedEx or UPS. So, it’s like, you’re stuck between a rock and a hard place—pay more, or risk losing your discount altogether. And meanwhile, the carriers are focusing more on B2B, less on B2C, because they can’t—or won’t—compete with Amazon and the startups on price or speed for home deliveries.

Steve DeNunzio

Exactly. And, you know, the pricing is more stable than it was during the pandemic, but it’s still not predictable. Surcharges keep popping up, and UPS especially has been aggressive with new fees. It’s forcing everyone to rethink their shipping strategies. We’re seeing a lot of companies get creative—mixing and matching carriers, renegotiating contracts, or just biting the bullet and raising their own prices. It’s a tough environment, and I don’t see it getting easier anytime soon.

Ellie Thornton

No, and I think it’s only going to get more competitive as new players come in and the big carriers double down on profitability. But, speaking of competition, let’s talk about the people behind the parcels—because UPS and FedEx are hiring like mad this summer, and that’s a whole other story.

Ellie Thornton

So, here’s something that really caught my eye: UPS and FedEx are expanding their seasonal hiring by 10% this year. That’s nearly 176,000 new jobs just for the summer and back-to-school rush! We’re talking package handlers, drivers, warehouse support, customer service—the whole lot. And it’s not just about numbers, is it? They’re changing how they hire, too.

Steve DeNunzio

Yeah, they’re streamlining everything—mobile applications, virtual job fairs, SMS interview scheduling. And they’re offering big sign-on bonuses, flexible schedules, and even temp-to-perm pathways. It’s all about getting people in the door fast and keeping them around, especially in hotspots like Louisville and Memphis. Those hubs are just massive, and they need all hands on deck during peak season.

Ellie Thornton

I actually chatted with a young package handler in Memphis last summer—he’d started as a temp, and by the end of the season, he’d landed a permanent role. He said it was life-changing, honestly. But it’s not all rosy. There’s still a real challenge with retention. Up to 40% of seasonal hires leave right after peak, so both companies are trying to double conversion rates with better training, career pathways, and wellness support. It’s a tough job, but for a lot of people, it’s a foot in the door to a stable career.

Steve DeNunzio

And, you know, it’s not just about filling roles. These jobs inject over a billion dollars in wages into local economies, and the skills people pick up—forklift certs, customer service, even just learning how to work in a fast-paced environment—those are valuable beyond the shipping industry. Plus, with automation ramping up, there’s still a big need for human oversight, especially when things get busy or unpredictable. It’s a good reminder that, even as tech advances, people are still at the heart of logistics.

Ellie Thornton

Absolutely. And with e-commerce still growing, I don’t see the demand for these roles dropping off anytime soon. Alright, Steve, I think that’s a wrap for today’s episode. We’ve covered contract shakeups, pricing shocks, and the people powering the parcel boom. Any final thoughts?

Steve DeNunzio

Just that, you know, the only constant in logistics is change. Whether it’s contracts, costs, or careers, everyone’s gotta stay nimble. And I’m sure we’ll have plenty more to talk about as the summer rolls on.

Ellie Thornton

Couldn’t agree more. Thanks for joining us on Milestones Behind the Freight Curtain. Steve, always a pleasure. And thanks to all our listeners—don’t forget to subscribe, and we’ll see you next week for more behind-the-scenes in logistics. Bye Steve!

Steve DeNunzio

Adios Ellie! Take care, everyone!