Consultant Insight: Record earnings on repeat at FedEx

Another quarter, another record for FedEx, which announced a quarter of impressive results for the period ending May 31. The company reported total revenue for the quarter was up 30% year over year to $22.5 billion. Express revenue increased 32% to $11.2 billion, Ground revenue increased 27% to $8.1 billion and Freight revenue increased 38% to $2.2 billion. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] According to FedEx, global trade volume has surpassed pre-pandemic levels and is on course for its fastest year of growth in over a decade. However, global air capacity is down 10% YoY as of April, mainly due to the reduction in passenger capacity. The company expects air cargo capacity to remain constrained through at least the first half of 2022, with full recovery not anticipated until 2024. As such, "we believe favorable pricing internationally should continue through the fiscal year 2022,” Brie Carere, FedEx’s chief marketing and communications officer, told investors during the company’s Q4 and fiscal year earnings call on Thursday. “We will continue to manage demand internationally even yield management and continuation of peak surcharges especially on trans-Pacific and trans-Atlantic lanes." International volumes remained strong for the quarter, with total international export volumes up 31.1% YoY. E-commerce seemed to drive these volumes not only for the quarter but for the fiscal year from June 1 to May 31. E-commerce parcel volumes grew by more than 1 billion year-over-year out of Asia and Europe. Carere noted that FedEx's overall export demand from Asia has recovered to pre-COVID levels and that the company will add six intercontinental daily flights from Asia to provide more consistent, predictable capacity in fiscal year 2022. International domestic volumes were up 12.6% and intra-European business-to-business volumes have recovered to pre-COVID levels, with business-to-consumer volumes further accelerating. FedEx expects the European economy as a whole to be back to pre-pandemic levels in late 2021. Domestic growth While the Express division's successful quarter was highlighted during the call, the true financial success of the company was its Ground division. In terms of operating income, Ground led the way for the quarter. Increasing by 64% YoY, Ground's operating income represented the largest portion of the company's total operating income at $1.1 billion. In addition, Express's operating income increased 118% to $73.7 million while Freight’s operating income increased 173% to $360 million. FedEx Ground's operation efficiencies, including its seven-day delivery service, led the Ground division. In fact, FedEx's seven-day operations are currently considered a competitive advantage for FedEx over its main competitor, UPS. FedEx's Saturday coverage reaches 98% of the U.S. population, while Sunday coverage reaches 95%. Meanwhile, UPS expects to cover 90% of the U.S. population for Saturday deliveries by October and to rely on its SurePost hybrid service with the USPS for Sunday deliveries. FedEx noted that packages delivered on Sundays during the quarter increased 56% from the same quarter last year. FedEx also plans to expand its capacity by completing 16 new automated facilities and implementation of nearly 100 expansion projects at existing operations before the holiday season. As part of the company's last-mile optimization plan, the three divisions are collaborating. Announced last year, FedEx Express began to contract with FedEx Ground to transport and deliver select day-definite, residential Express shipments. Since then, Express has delivered some Ground packages, and FedEx Freight has also delivered Ground packages. In fact, FedEx Freight provided approximately 70 million linehaul miles and delivered 1.75 million packages for Ground during fiscal year 2021. The collaboration is smart and improves operational efficiencies such as identifying Express and Ground packages destined to the same location to be delivered by Ground, a lower-cost solution than Express. As the company focuses on small- and medium-sized customers and e-commerce, collaboration between the three divisions will be needed to ensure on-time delivery, help manage capacity and grow profits. Regarding capacity, FedEx Freight confirmed during the call that it had dropped a number of customers to maintain its service levels. According to Lance D. Moll, president and chief executive officer of FedEx Freight, the move was intended to "protect our employees and reduce backlogs." FedEx Freight has since restored some of the services to customers who were dropped.

Consultant Insight: Record earnings on repeat at FedEx

Ameriflight requests FAA exemption for drone ops

SmartLynx expands with sub-20-year-old A321Fs

SmartLynx expands with sub-20-year-old A321Fs

Cargo Facts Free Newsletters

Cargo Facts Connect Podcast

Follow Us

Welcome Back!

Retrieve your password