Consultant’s Insight: FedEx announces layoffs in Europe

FedEx announced plans today to reduce its European workforce by 1,700 to 2,000 positions. The reductions are expected to occur in the company’s back office and commercial teams. [caption id="attachment_69752" align="alignright" width="234"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] “FedEx is transforming to best match changing market dynamics and meet the needs of our customers,” Richard W. Smith , FedEx Express president and chief executive of airline and international, said in a statement. “Alongside the work we’ve done to optimize our networks, we’re taking necessary actions to streamline many of our functions to reduce structural costs while continuing to deliver outstanding service to our customers. We do not take these decisions lightly, but they are essential to putting FedEx on the right path for the future.” DRIVE to cut costs Chief Executive Raj Subramaniam told analysts on FedEx’s March 21 earnings call: “In Europe, we continue to improve our service levels and focus on commercial execution. However, the B2B environment remains challenged. And, in this context, we are making progress on DRIVE on track to generate $600 million of savings in fiscal year 2025 and seeking further profit optimization opportunities.” FedEx announced its cost-cutting plan, DRIVE , in April 2023 as the global market slowed. Since then, the air cargo industry has seen pockets of growth, brought on by: Increased cross-border e-commerce ; and Modal shifts favoring air due to drought impacting the Panama Canal last year and ongoing violence in the Red Sea . This benefited FedEx Express, resulting in a 3.4% increase in average daily volumes of international package exports from June 1, 2023, to Feb. 28, 2024. However, there has been a shift from the more expensive and profitable premium express service, Priority, which noted a 6.6% decline in the same period, to the lower-priced deferred service, Economy, which saw a 29.5% increase in that period. In addition, FedEx Express’ average daily volume for all domestic packages declined 1.8% in that period. To optimize its Europe network, FedEx this year opened: A logistics facility near Leipzig/Halle Airport (LEJ); A refurbished facility in the cargo center of Madrid-Barajas Airport (MAD); and An expanded facility in Karlsruhe, Germany. Competition As FedEx Express optimizes its European network, it faces stiff competition from its primary competitors: DHL and UPS . Like FedEx Express, DHL and UPS also reported disappointing quarterly results and layoffs. DHL Express reported total time-definite international volumes down 1.2% year over year and a 7.8% YoY decline in its time-definite domestic volumes for its first quarter of 2024. Meanwhile, UPS blamed its Europe region for its total average daily export volumes declining 3.6% YoY. Outlook All three express providers are investing in IT to improve operational efficiencies and hasten deliveries. However, FedEx faces an additional challenge in bringing Express and Ground under one roof while also proving to analysts that its 2016 acquisition of TNT Express was a good idea. “We’ve moved on from integration to value creation and are gaining market share in Europe,” Subramaniam said at Bernstein’s Strategic Decisions Conference in May. Register here for Air Cargo Next ’s upcoming webinar, “Air Cargo and Pharma: Using Technology to Save Lives,” on Tuesday, June 18, at 11 a.m. ET.

Consultant’s Insight: FedEx announces layoffs in Europe

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