(Reuters) - United Parcel Service ( UPS ) will become the United States Postal Service's (USPS) primary air cargo provider, the company said on Monday, replacing rival FedEx.

FedEx, which counted USPS as its largest customer for its air-based Express segment, has said it was seeking a more profitable contract with and was prepared to walk away from the 22- year relationship if terms didn't improve.

FedEx's contract with the USPS is set to expire on Sept. 29. The company was not immediately available for comment.

USPS' payments to FedEx shrank to about $1.73 billion in fiscal 2023, from $2.4 billion during the fiscal year ended September 2020 after the postal service shifted letters and packages from planes to more economical trucks

Shares of UPS rose 1.4% in pre-market trade.

(Reporting by Ananta Agarwal and Deborah Sophia in Bengaluru; Editing by Savio D'Souza, Varun H K and Sriraj Kalluvila)