Consultant Insight: FedEx Express’ great potential

FedEx Express is taking full advantage of the constrained air market and anticipates a continued favorable pricing environment for the foreseeable future. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] FedEx’s reported total revenue for the latest quarter ending Nov. 30 was up 14.1% year over year to $23.5 billion, while operating income was up 11.3% on an adjusted basis to $1.68 billion. However, staffing needs were a focal point during FedEx’s recent earnings call. “The difficult labor market once again had the largest effect on our bottom line, representing an estimated $470 million in additional year-over-year costs,” FedEx CFO Mike Lenz told analysts on the call. Much of the estimated costs were attributed to staffing issues within the Ground division. While the company works to beef up its Ground division, the Express division finished the quarter with total revenue increasing 11.9% to $11.6 billion and operating income up 5.4% to $949 million. Meanwhile, export demand in Europe and Asia-Pacific fully recovered to pre-pandemic levels while international capacity remains tight, Brie Carere, executive vice president, chief marketing and communications officer at FedEx, said during the call. Total export volume increased 7.6%, with more than 1 million average daily volumes. “With new variants of COVID causing uncertainty in the global recovery, we believe that air cargo capacity will remain constrained through the calendar year 2022, and a full recovery is not anticipated until at least 2024,” said Carere. In addition, its integrated air network made up of the combination of TNT and FedEx Express will begin after April 2022. Charles de Gaulle Airport (CDG) will serve as the main hub for all European and intercontinental flights. Meanwhile, Liege (LGG) will connect specific large European markets. FedEx will target B2B and cross-border e-commerce to grow its Express market share. Target lanes, particularly to and from Europe, have been identified as an opportunity, according to FedEx executives. Another important part of FedEx’s companywide strategy is integrating its Express, Ground and Freight divisions. In 2020, FedEx Express contracted with FedEx Ground to deliver some of its parcels. However, as the COVID-19 pandemic deepened, FedEx Express and FedEx Freight assisted FedEx Ground with the increased volumes. FedEx Freight trucks, for example, traveled 4 million miles while operating on behalf of FedEx Ground this year. FedEx Express’ focus on cross-border e-commerce will contribute about half of the growth in the parcel market over the next decade, Carere said. FedEx International Connect Plus, which launched across Europe, Asia Pacific and the United States earlier this year, will play a leading role. To help its customers, FedEx has also introduced FedEx Ship Manager in more than 100 countries, and will launch it in the U.S. in 2022. The service is focused on the small business segment, enabling these shippers to create a label and to book and manage parcels and freight. FedEx is very optimistic about its integrated air network and expects to gain market share from such players as UPS and DHL. But, perhaps more importantly, FedEx’s integration plans are worth pointing out. “We’ll utilize our air and ground networks in a smarter, more calculated manner” through expanded collaboration across its divisions, President and Chief Operating Officer Raj Subramaniam said during the earnings call. This collaboration, if done successfully, will result in cost savings, improved on-time deliveries and increased profits.

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