Profits improved
High-end logistics software has become so critical to moving intercontinental airfreight that it can be easy to forget the human element involved in the process. This is not the case for Dave Bronczek. When asked about the accomplishment he was most proud of in 2015, he immediately mentioned the labor agreement signed between FedEx Express and the Air Line Pilots Association in October. “Labor peace is very important to us,” he said.
The six-year contract – the longest such labor agreement FedEx has ever signed – has been in the works since 2011, with formal bargaining starting in 2013. FedEx’s pilots, Bronczek said, have gained improvements for retirement and healthcare benefits, plus enhanced new-hire compensation and a signing bonus.
“I’m very gratified because when you look around the world, a lot of unions are rejecting the airlines’ contracts,” he said. This year alone has seen labor strife at UPS, Delta, Southwest, Cargolux, Lufthansa and Air France-KLM, just to name a few.
The pilots’ contract can also be seen as an offshoot of FedEx’s three-year “profit improvement plan” that began in fiscal 2013 and has been in place for the last 10 consecutive quarters. The goal of the plan – which involves a streamlining of processes, a fleet realignment and a reduction in costs, including a voluntary buyout and early retirement plan for some redundant staff – is expected to boost net revenues for the company by $1.6 billion by the end of fiscal 2016. By May 31 this year, at the end of fiscal 2015, Bronczek said FedEx had already reached 75 percent of the goal it had announced under the profit improvement plan.
A major part of the improvement plan was executed in July this year when FedEx moved forward on the next step of its long-running fleet modernization plan, with an order for 50 additional new-build 767 freighters from Boeing, bringing its 767 order to a total of 100 freighters. The 767s, of which FedEx has now taken delivery of 24, are being used to replace the integrator’s aging fleet of A300s, A310s, MD-10-10s and MD-10-30s, Smith said.
In fact, the fleet optimization program began before the official profit improvement plan, when FedEx purchased 757s to replace the carrier’s old 727s, as well as 777s to replace DC-10s. But today, the new aircraft – which will only replace older planes not add more net capacity – are a major part of FedEx’s strategy to reduce both fuel consumption and carbon emissions.
“These planes are 30 percent more fuel efficient,” Bronczek said. “They’re obviously much, much more reliable.” In his role as a former IATA Chairman a few years ago, he made a commitment to the 2020 carbon neutral program. “The fleet modernization programs around the world certainly contributed to that, and that’s certainly been the case at FedEx Express.”