The Postal Service increased its share of long-distance First-Class mail traveling by air from 2% in early FY2025 to about 50% by mid-FY2026. It used paper mail to meet the minimum volume terms of its $10 billion-plus air cargo contract with UPS, a USPS Office of Inspector General audit found. The OIG report withheld the carrier’s name but UPS won the primary air cargo contract in 2024, replacing FedEx.
USPS did this to avoid stranding paid-for air capacity. The OIG estimated that flying only packages would have left 31.7 million cubic feet of contracted space unused and pushed transportation costs up by over $127 million. So USPS flew mail it had recently decided to move by cheaper surface routes instead.
How it happened: The contract runs through March 2030. It charges by cubic foot using a rate tied to average daily volume. During negotiations, USPS projected a 2% rise in average daily volume and applied no decline factor for Priority Mail even though volumes were already falling 54%.
Package volume then met the contractual minimum in just one of 13 operating periods, leaving USPS to fill the floor by redirecting First-Class mail onto planes.
The disputed cost: The OIG found FY25 transportation expenses ran about $200 million over plan, tied partly to shifting mail back to air. USPS management disputes that conclusion, instead crediting the overage to its surface network and rising rates. It also says the air contract and service standard changes cut transportation costs by more than $1.7 billion between FY23 and FY25.
The MVC exposure: Minimum volume commitment clauses are common in linehaul, ocean, and parcel contracts. They can leave shippers paying higher costs if volume falls short. This audit documents one outcome: USPS ended up flying First-Class mail by air just months after extending delivery standards so more mail could move by surface.
The OIG asked USPS to run a cost-benefit analysis on ending or rebidding the contract early. Management disagreed, and the recommendation remains unresolved.
