New throughout, adds FedEx comment, details on FedEx and Amazon ending 2019 residential delivery agreement, details on FedEx and UPS marketshare

May 12 (Reuters) - Amazon AMZN.O has hired FedEx FDX.N to handle some of its large package deliveries, the companies said on Monday, weeks after UPS said it was halting its less-profitable deliveries for the e-commerce retailer and cutting 20,000 jobs.

FedEx shares surged on Monday even more than rallying Wall Street benchmarks, finishing up 7%. The Memphis-based delivery company said the multi-year agreement covers residential delivery of select large packages for Amazon.

The deal with FedEx, signed in February, gives Amazon "cost favorability" compared with delivery rival UPS, Business Insider had reported, citing an internal document.

The agreement will not replace UPS, Amazon said as FedEx will join its third-party partners, including UPS and the USPS, and work alongside its own last-mile delivery network.

FedEx called it a "mutually beneficial, multi-year agreement" in a statement.

The deal may signal a thaw in relations between FedEx and Amazon. The companies cut residential delivery ties in 2019 as Amazon was building its now sprawling network of delivery services.

UPS UPS.N said in January it plans to shrink shipment volumes for Amazon, its largest customer, by more than 50% by the second half of 2026 to focus on fewer, but more profitable deliveries.

Late last month, UPS said it would slash 20,000 jobs and shut 73 facilities as a part of its planned reduction in Amazon deliveries, as well as cost-cutting and efficiency projects under a major operational restructuring.

FedEx and UPS have been in a fierce battle for market share over the last five years, often poaching whole or partial customer accounts from the other.

(Reporting by Christy Santhosh and Aishwarya Jain in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Leroy Leo, Arun Koyyur and David Gregorio)

((Christy.Santhosh@thomsonreuters.com;))