FedEx (NYSE: FDX - News) is in preliminary talks to acquire TNT, its smaller Dutch rival, in a deal that would bolster the package-delivery company's parcel network throughout Europe.

A deepening economic downturn and mounting fuel costs have hurt demand for package deliveries, reviving merger discussions that have continued in starts and stops for years.

While FedEx and arch-rival United Parcel Service have coveted TNT's European parcel business, they have been reluctant to take on the Dutch company's slower-growing postal division.

On Friday, FedEx's market capitalisation was $22.8bn (€14.3bn), while TNT's market capitalisation was $11.3bn.

Deutsche Post's £3.7bn to acquire Exel, the UK-based logistics group, in 2005 has so far been the biggest deal in the sector. Other transactions have included the $1.1bn merger of Deutsche Bahn, the German rail operator, and Bax Global, the logistics arm of US-based Brink's and the €490m acquisition of Paris-based ACR Logistics by Kuhne & Nagel of Switzerland.

DHL, TNT and FedEx together account for about 60 per cent of the European express logistics market in value terms.

TNT, which primarily operates in Europe and North America, divides its business into two segments: express and mail.

FedEx runs the world's largest express-delivery company. The group mainly operates in the US, but in recent years has begun to expand its international operations.

However, the US company in June posted its first quarterly loss in 11 years and projected earnings that fall short of analysts' estimates because of fuel costs and declining demand.

FedEx reported a fourth quarter loss of $241m on a writedown for its Kinko's unit and predicted a "very difficult" environment in the coming year.

Economists have cut their US growth forecasts for later this year and next as job losses, food and fuel prices and tougher lending rules hurt consumers.

"As a matter of policy, FedEx does not comment on rumours or speculation about corporate development activities," a company spokesman said.

FedEx has sought to build out its Continental network as well as aiming to establish a presence in individual European countries. The company bought ANC in 2006 to strengthen its domestic express-delivery business in the UK.