FedEx Freight spinoff may impact shipper contracts, open door for new LTL options.

FedEx's upcoming spinoff of its trucking unit, FedEx Freight, could impact shipper contracts, particularly those with bundled agreements that include parcel shipping services. Shippers may be able to negotiate lower last-mile delivery rates by separating LTL and parcel deals. Experts recommend maintaining favorable pricing as FedEx's discounting push dissipates and surcharges rise. FedEx is already pushing for reworked agreements to move shippers from bundled contracts to separate parcel and LTL arrangements.

FedEx is preparing to spin off its trucking unit, FedEx Freight, by June 2026, which could significantly impact shipper contracts, particularly those with bundled agreements that include parcel shipping services. The move is set to shake up some of the carrier's contract agreements, opening the door for shippers to consider new less-than-truckload (LTL) options.

According to Brie Carere, Executive Vice President and Chief Customer Officer at FedEx, the bulk of FedEx Freight's volume is tied to standalone agreements, but most of its smaller customers have bundled contracts that include FedEx's parcel shipping services. These bundled contracts feature discounts for parcel delivery services, with the more LTL volume customers ship, the lower their last-mile delivery rates can be [1].

As the spinoff advances, FedEx is already pushing for reworked agreements that move shippers from bundled contracts to separate parcel and LTL arrangements. This shift aims to reflect the revenue for one shipping mode per contract, allowing for comparable discounts with similar agreement structures [1].

For FedEx, adjusting these agreements should be a straightforward endeavor. The carrier can tweak the earned discount spending tiers, reflecting the revenue for one shipping mode per contract, and come up with comparable discounts featuring similar agreement structures [1].

Shippers need to understand how their parcel and LTL volume contributes to their current spending-based discounts to prepare for the shift away from bundled contracts. They can then reach out to FedEx about adjusting their base parcel shipping discounts to account for whatever incremental benefits they may lose from LTL spend no longer being factored in the contract [1].

In the early going, FedEx is targeting contracts with a significant amount of LTL volume. Parcel-heavy customers with a low number of freight shipments are top candidates to explore alternative LTL options and see cost savings as a result, experts said, as FedEx Freight has a reputation for more premium pricing [1].

FedEx's goal is to provide a smooth transition for shippers, ensuring both their parcel and freight shipping needs are satisfied “today and in the future.” However, as ties between LTL spending and parcel discounting fade, customers may consider other trucking firms [1].

References:

[1] https://finance.yahoo.com/news/fedex-freight-spinoff-could-impact-090000951.html