Category Archives: FedEx Corporation

FedEx accelerates the retirement of 86 aircraft, the last Boeing 727 to be retired on July 1

FedEx Corporation (FedEx Express) (Memphis) announced today it had permanently retired or will accelerate the retirement of 86 aircraft and 308 related engines as it continues to modernize its aircraft fleet and improve the global network of FedEx Express.

The permanent retirement of aircraft and related engines announced today includes:

Two Airbus A310-200 aircraft and four related engines;
Three Airbus A310-300 aircraft and two related engines; and
Five McDonnell Douglas MD-10-10 aircraft and 15 related engines.

The impact of retiring these aircraft, engines and parts resulted in an impairment charge of $100 million recorded in May 2013.

In addition, FedEx will accelerate by several years the retirement of:

47 McDonnell MD-10-10 aircraft and 172 related engines;
13 McDonnell MD-10-30 aircraft and 55 related engines; and
16 Airbus A310-200 aircraft and 60 related engines.

As of July 1, 2013, FedEx Express will complete the final retirement of the Boeing 727-200 fleet.

“We are modernizing our aircraft fleet by retiring older, less-efficient, and less-reliable aircraft and replacing them with modern aircraft to build a fleet with higher reliability and better cost efficiency,” said David J. Bronczek, president and chief executive officer of FedEx Express. “With the planned acquisition of new aircraft and projected slower economic growth than previously forecast, FedEx Express is lowering maintenance costs by aggressively parking and retiring aircraft.”

The impact of accelerating the retirement of aircraft will result in additional year-over-year depreciation expense of $74 million in FY14.

FedEx Express Aircraft Fleet Facts

As of February 28, 2013, FedEx Express’s fleet totaled 660 aircraft, including 368 jet aircraft.
During the four quarters ended on February 28, 2013, FedEx Express spent $3.8 billion on 1.2 billion gallons of jet fuel.
The Boeing 757-200 is significantly more fuel efficient per pound of payload and has 20% additional payload capacity than the Boeing 727 it replaces.
The Boeing 767 will provide similar capacity as the MD-10s, with improved reliability, an approximate 30% increase in fuel efficiency and a minimum of a 20% reduction in unit operating costs.
The Boeing 767 shares spare parts, tooling and flight simulators with the B757.

Dividend Declaration

The Board of Directors today declared a quarterly cash dividend of $0.15 per share on FedEx Corporation common stock, an increase of $0.01 per share over the previous dividend payment. The dividend is payable on July 1, 2013 to stockholders of record at the close of business on June 17, 2013. FedEx remains committed to paying higher dividends to shareowners in years to come.

Copyright Photo: Bruce Drum/AirlinersGallery.com. The pictured Boeing 727-233 (F) N221FE (msn 20932) was originally delivered as a passenger aircraft to Air Canada as C-GAAA on September 25, 1974.

FedEx:

FedEx renews its contract with the United States Postal Service

FedEx Corporation (Memphis) has announced that its FedEx Express (Memphis) subsidiary has entered into a new express air transportation contract with the United States Postal Service. The current contract ends in September 2013, and the new contract will begin in October 2013.

Under this seven-year agreement, valued at approximately $10.5 billion, FedEx Express will provide airport-to-airport transportation of USPS Express Mail and Priority Mail within the United States.

Copyright Photo: Nick Dean/AirlinersGallery.com. Boeing 777-FS2 N884FD (msn 37137) gracefully climbs away from the Boeing factory at Paine Field near Everett, Washington.

FedEx Express:

FedEx Corporation reports third quarter operating income of $589 million, down 28% from $813 million last year

FedEx Corporation (FedEx Express) (Memphis) today reported earnings of $1.23 per diluted share for the third quarter ended February 28, excluding business realignment costs totaling $47 million primarily related to the company’s voluntary buyout program for eligible U.S. officers and managing directors. Including this year’s realignment costs, third quarter earnings were $1.13 per diluted share.

Last year’s third quarter earnings were $1.55 per diluted share, excluding a $0.10 per share reversal of a reserve associated with a legal matter at FedEx Express. Including last year’s reserve reversal, earnings were $1.65 per diluted share.

“The third quarter was very challenging due to continued weakness in international air freight markets, pressure on yields due to industry overcapacity and customers selecting less expensive and slower-transit services,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “In response, beginning April 1, FedEx Express will decrease capacity to and from Asia and will aggressively manage traffic flows to place low yielding traffic in lower-cost networks. We are currently assessing how these actions may allow FedEx Express to retire more of its older, less-efficient aircraft. We remain focused on our strategic cost reduction programs, which are ramping up and on track.”

Third Quarter Results

FedEx Corp. reported the following consolidated results for the third quarter:

• Revenue of $11.0 billion, up 4% from $10.6 billion the previous year

• Operating income of $589 million, down 28% from $813 million last year

• Operating margin of 5.4%, down from 7.7% the previous year

• Net income of $361 million, down 31% from $521 million a year ago

As discussed above, the quarter’s results reflect the decline in profitability at FedEx Express due to the accelerating demand shift toward lower-yielding international services and lower international export yields. The quarter’s results were also negatively impacted by the business realignment costs noted earlier and by fewer operating days in each transportation segment.

Outlook

FedEx projects earnings to be an adjusted $1.90 to $2.10 per diluted share in the fourth quarter and an adjusted $6.00 to $6.20 per diluted share for fiscal 2013 before charges related to the company’s business realignment. Costs of the benefits provided under the voluntary buyout program will be recognized in the period that eligible employees accept their offers, predominantly in the fourth fiscal quarter. Including the third quarter costs, the company now expects the fiscal 2013 pretax cost of the voluntary buyout program to range from approximately $450 million to $550 million in cash expenditures, or $0.89 to $1.09 per diluted share, with some additional costs expected in fiscal 2014. Actual costs will depend on employee acceptance rates. Including the business realignment costs, earnings are expected to be $0.94 to $1.34 per diluted share in the fourth quarter and $4.91 to $5.31 per diluted share for fiscal 2013. This guidance assumes the current market outlook for fuel prices. The capital spending forecast for fiscal 2013 is now $3.6 billion, compared to $3.9 billion in the company’s previous forecast.

In last year’s fourth quarter, the company reported earnings of $1.99 per diluted share, excluding a $0.26 per diluted share non-cash aircraft impairment charge at FedEx Express. Including this charge, earnings were $1.73 per diluted share.

“Our lower-than-expected results for the quarter and reduced full-year earnings outlook were driven by third quarter international revenues declining approximately $100 million versus our guidance primarily due to accelerating customer preference for lower-yielding international services, lower rate per pound and weight per shipment,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer. “We expect these international revenue trends to continue. We have other actions under way beyond those already included in our profit improvement program. Some of these additional actions may involve temporarily or permanently grounding aircraft, which could result in asset impairment or other charges in future periods.”

“In early February, a number of officers and managing directors, primarily at FedEx Services and FedEx Express, accepted voluntary buyouts, and on February 15, thousands more team members were notified of their eligibility for the buyout program. This program is one of the first steps in a process that will help FedEx Express achieve necessary cost structure reductions and improved efficiency. In addition to continued profit improvements in the base businesses at FedEx Ground and FedEx Freight, our profit improvement programs are targeting annual profitability improvement at FedEx Express of $1.6 billion by the end of fiscal 2016, from the fiscal year 2013 base business. Collectively, these initiatives are expected to increase margins, improve cash flows and increase our competitiveness,” said Graf.

Stock Repurchase Program Authorization Increase

The FedEx Corp. board of directors has authorized the repurchase of up to 10 million shares of FedEx Corp. common stock. These shares augment the remaining 188 thousand shares authorized for purchase under existing share repurchase programs. It is expected that the additional share authorization will primarily be utilized to offset equity compensation dilution over the next several years. Purchases may be made in the open market and in negotiated or block transactions. FedEx had 317 million shares outstanding as of February 28, 2013.

FedEx Express Segment

For the third quarter, the FedEx Express segment reported:

• Revenue of $6.70 billion, up 2% from last year’s $6.54 billion

• Operating income of $118 million, down 66% from $349 million a year ago

• Operating margin of 1.8%, down from 5.3% the previous year

Revenue increased due to this year’s business acquisitions and growth at FedEx Trade Networks, while core express revenue was constrained by continued demand shift toward lower-yielding international services. U.S. domestic revenue per package grew 1% as higher rate per pound and weight per package were offset by lower fuel surcharges, while average daily package volume increased 1%. Higher growth in international deferred services continued, with FedEx International Economy^® volume growing 12%, while FedEx International Priority^® volume increased 2% during the quarter. International export revenue per package fell 3% due to the demand shift to lower-yielding international services, lower rates and lower fuel surcharges.

Operating income and margin were significantly lower due to the demand shift to lower-yielding international services, the prior year reversal of a $66 million reserve associated with a legal matter, the negative impact of one fewer operating day, higher pension cost and increased depreciation expense. Costs associated with the business realignment program also negatively impacted operating results by $34 million.

FedEx Express:

FedEx’s 2Q net income slips to $438 million, down 12% from last year’s $497 million, orders four Boeing 767-300 freighters

FedEx Corporation (FedEx Express) (Memphis) today reported earnings of $1.39 per diluted share for the second quarter ended November 30, compared to $1.57 per share last year. Superstorm Sandy impacted the quarter’s results by $0.11 per diluted share due to reduced shipment volumes and incremental operating costs.

Second Quarter Results:

FedEx Corp. reported the following consolidated results for the second quarter:

• Revenue of $11.1 billion, up 5% from $10.6 billion the previous year

• Operating income of $718 million, down 8% from $780 million last year

• Operating margin of 6.5%, down from 7.4% the previous year

• Net income of $438 million, down 12% from last year’s $497 million

The results of the quarter also reflect, primarily at FedEx Express, the net year-over-year negative impact from the timing lag that exists between when fuel prices change and indexed fuel surcharges automatically adjust.

FedEx Express Segment:

For the second quarter, the FedEx Express segment reported:

• Revenue of $6.86 billion, up 4% from last year’s $6.58 billion

• Operating income of $230 million, down 33% from $342 million a year ago

• Operating margin of 3.4%, down from 5.2% the previous year

Revenue increased primarily due to this year’s business acquisitions and growth at FedEx Trade Networks, as core express revenue growth was constrained by global economic conditions and the impact of Superstorm Sandy.

U.S. domestic revenue per package grew 1% as higher rate per pound was partially offset by lower fuel surcharges. U.S. domestic average daily package volume declined 2%. FedEx international export average daily package volume grew 6% driven by increases in FedEx International Economy^®(IE) from Europe and Asia and by increases in FedEx International Priority^® (IP) from Asia. Higher growth in international deferred services continued, with IE volume growing 14%, while IP volume increased 3% during the quarter. International export revenue per package fell 4% due to the demand shift toward lower-yielding international services and lower fuel surcharges.

Operating income and margin were lower due to the demand shift toward lower-yielding international services, the negative year-over-year impact of net fuel changes, increased depreciation expense, the effects of Superstorm Sandy and higher pension costs. These were partially offset by the favorable impact of cost containment actions.

FedEx Express has entered into an agreement to purchase four additional 767-300 freighters as part of the company’s continued fleet modernization efforts. This brings the total 767-300 orders to 50, with deliveries beginning in fiscal 2014. In concert with this commitment, two 777 freighter deliveries were deferred from fiscal 2015 to fiscal 2016 in order to better match capacity timing to global demand.

FedEx Express:

FedEx Corporation reports 1Q net income of $459 million, down 1%

FedEx Corporation (FedEx Express) (Memphis) reported earnings of $1.45 per diluted share for the fiscal first quarter ended August 31, compared to $1.46 per share last year.

FedEx Corporation reported the following consolidated results for the first quarter:

• Revenue of $10.79 billion, up 3% from $10.52 billion the previous year

• Operating income of $742 million, up 1% from $737 million last year

• Operating margin of 6.9%, down from 7.0% the previous year

• Net income of $459 million, down 1% from last year’s $464 million

During the quarter, improved FedEx Freight results and the continued strong performance at FedEx Ground were more than offset by lower demand for priority services at FedEx Express.

FedEx Express:

FedEx will have to compete with UPS for the U.S. Postal Service contract

FedEx Express (Memphis) has been informed by the U.S. Postal Service it will have to bid for a new postal contract that is expiring in September 2013 according to this report by Reuters. This will open the door for UPS-United Parcel Service (Atlanta) to bid on the contract. According to Reuters, “FedEx is the postal service’s top contractor, earning an estimated $1.5 billion in revenue in fiscal 2011, according to Husch Blackwell LLP’s postal service contracting practice group.”

Read the full report: CLICK HERE

FedEx Express:

FedEx Corporation completes the acquisition of French express transportation company, TATEX

FedEx Corporation (FedEx Express) (Memphis) announced today that it has completed the acquisition of TATEX, a leading French business-to-business express transportation company. This transaction represents the latest step in the company’s strategy to sustainably grow in Europe.

The addition of the TATEX business to the FedEx network will deliver an excellent extension to the service portfolio of both companies and will provide customers with more comprehensive international and domestic service options. The acquisition will give FedEx access to a nationwide domestic ground network which carries 19 million shipments and produces approximately EUR 150 million in revenues annually. In return, TATEX customers will gain direct access to the global FedEx network.

FedEx has been steadily broadening its European network and today’s announcement follows the recent acquisition of Opek, a Polish courier company with 1,200 employees and a network of 44 stations. In fiscal year 2012, FedEx opened 38 new stations across Europe, launched five Boeing 757-200 freighter flights on intra-European routes, and another Boeing 777F freighter (pictured) for long-haul routes—bringing the total number of Boeing 777Fs operating FedEx routes in and out of Europe to four.

FedEx entered the French market in 1985. Since then the company has been continuously expanding its range of international shipping services in the market and today employs over 3,000 team members in the country. In 2009, the company expanded its EMEA hub at Paris’ Roissy Charles de Gaulle airport, making it the biggest FedEx Express hub outside the U.S.

Copyright Photo: Nick Dean. The pictured brand new Boeing 777-FS2 N864FD (msn 37735) at Everett (Payne Field) joined the FedEx fleet on May 15, 2012.

FedEx Express:

FedEx to retire 18 Airbus A310-200 and six McDonnell Douglas MD-10 freighters

FedEx Express (FedEx Corporation) (Memphis) has announced its decision to permanently retire from service 18 Airbus A310-200 aircraft and 26 related engines, as well as six McDonnell Douglas (Boeing) MD-10-10 aircraft and 17 related engines. The majority of these aircraft are currently parked and not in revenue service. As a consequence, a non-cash impairment charge of $134 million ($84 million, net of tax, or $0.26 per diluted share) was recorded in the fourth quarter. The decision to permanently retire these aircraft will better align the U.S. domestic air network capacity of FedEx Express to match current and anticipated shipment volumes.

These permanent retirements are in addition to five Boeing 727-200 aircraft retired in the fourth quarter of fiscal 2012 and the planned fiscal 2013 retirement of 21 Boeing 727 aircraft, which will be fully depreciated.

FedEx Express continues to modernize its aircraft fleet by adding newer aircraft that are more reliable, fuel efficient and technologically advanced, and retiring older, less-efficient aircraft. In response to the company’s new fleet plans, FedEx Express is shortening the depreciable lives of the following aircraft and related engines: 31 additional Boeing MD-10-10s, 18 additional Airbus A310s, four Boeing 727s and one Boeing MD-10-30. This will accelerate the retirement of these aircraft to align with the delivery schedule for replacement Boeing 767-300 and Boeing 757-200 aircraft. The accelerated depreciation on these aircraft is expected to total $196 million over the next three fiscal years with a partial offset from the avoidance of depreciation related to the retirements (see table):

Total Impact on Fleet Depreciation – Decrease/(Increase)
(in millions)

	FY13			FY14			FY15			FY16		FY17-FY25		Total
Depreciation Avoided Due to Retirements	$	24		$	22		$	18		$	16	$	54	$	134
Accelerated Depreciation Impact		(69	)		(70	)		(57	)		10		186		—
Net Impact on Depreciation		($45	)		($48	)		($39	)	$	26	$	240	$	134

FedEx Express Aircraft Fleet Facts:

As of February 29, 2012, FedEx Express’s fleet totaled 688 aircraft, including 397 jet aircraft.
In fiscal 2011, FedEx Express spent $3.2 billion on 1.2 billion gallons of jet fuel.
The Boeing 757 is significantly more fuel efficient per pound of payload and has 20% additional payload capacity than the Boeing 727 it replaces.
The Boeing 767 will provide similar capacity as the MD-10s, with improved reliability, an approximate 30% increase in fuel efficiency and a minimum of a 20% reduction in unit operating costs.
The Boeing 767 shares spare parts, tooling and flight simulators with the Boeing 757.

Top Copyright Photo: Bruce Drum.

Bottom Copyright Photo: TMK Photography.

FedEx Express:

FedEx Corporation reports net income of $521 million in the fiscal third quarter

FedEx Corporation (Memphis) reported earnings of $1.65 per diluted share for the third quarter ended February 29, which includes a $0.10 per share reversal of a reserve associated with a legal matter at FedEx Express. Last year’s third quarter earnings were $0.73 per diluted share, which included $0.08 per diluted share in costs related to the combination of the company’s FedEx Freight and FedEx National LTL operations. Excluding these one-time items, earnings were $1.55 per diluted share in the third quarter, compared to $0.81 per diluted share a year ago.

FedEx Corporation reported the following consolidated results for the third quarter:

• Revenue of $10.56 billion, up 9% from $9.66 billion the previous year

• Operating income of $813 million, up 107% from $393 million last year

• Operating margin of 7.7%, up from 4.1% the previous year

• Net income of $521 million, up 126% from $231 million a year ago

Operating income improved due to the continued strong performance of FedEx Ground driven by higher yields and volumes, as well as significantly improved results at FedEx Freight. Operating income also reflects the positive year-over-year impact, predominately at FedEx Express, of a benefit from the timing lag that exists between when fuel prices change and when indexed fuel surcharges automatically adjust. The company also benefitted from a lower tax rate and mild winter weather.

FedEx projects earnings to be $1.75 to $2.00 per diluted share in the fourth quarter and an adjusted $6.35 to $6.60 per diluted share for fiscal 2012. This guidance assumes the current market outlook for fuel prices and moderate growth in the global economy. Including the FedEx Express legal reserve reversal, earnings are expected to be $6.43 to $6.68 per diluted share for fiscal 2012. The company reported earnings of $1.75 per diluted share in last year’s fourth quarter. The capital spending forecast for fiscal 2012 remains $4.2 billion.

For the third quarter, the FedEx Express segment reported:

• Revenue of $6.54 billion, up 8% from last year’s $6.05 billion

• Operating income of $349 million, up 96% from $178 million a year ago

• Operating margin of 5.3%, up from 2.9% the previous year

U.S. domestic revenue per package grew 9% due to higher rate per pound and fuel surcharges, while average daily package volume decreased 4%. International priority (IP) revenue per package grew 5% due to higher fuel surcharges and package weights, while average daily package volume decreased 1%. IP freight average daily pounds increased 4% with revenue per pound up 2% due to higher fuel surcharges. In total, IP average daily package and freight pounds increased 2% and revenue increased 6% year-over-year.

Operating income and margin improved in the quarter, reflecting the year-over-year benefit of the fuel surcharge timing lag and the reversal of a $66 million reserve associated with a legal matter. One additional operating day benefitted this year’s results, while prior year results were negatively impacted by severe winter weather.

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