FedEx quarterly profits up with high airfreight rates expected for at least next year

FedEx reported net income of $892 million for its Fiscal Year 2021 third quarter ended Feb. 28, nearly triple its reported net income for the same quarter a year earlier, as growth in e-commerce and high airfreight rates led to substantial increases in both the Express and Ground segments. [caption id="attachment_93550" align="alignright" width="450"] Photo/FedEx[/caption] Airfreight rates have remained elevated with capacity out of the market, and the integrator expects high rates to continue at least during the next 12 months. Current market dynamics “will continue to favor freighters and integrators,” said Executive Vice President and Chief Marketing and Communications Officer Brie Carere during today’s call. According to Carere, FedEx expects to see high yields through at least the next 12 months thanks to ongoing growth in the e-commerce sector, especially in its international service, and will “increasingly” implement peak surcharges in its International Express business. Average daily package volumes moving in FedEx’s U.S. Domestic Express network during the quarter, rising 20% YoY to nearly 3.6 million. Including International Express, total average daily package volumes were up 12% YoY for the quarter to more than 7.0 million. As the U.S. economy reopens, FedEx is forecasting a potential slowdown in e-commerce, but expects online retail to continue growing as a share of overall retail. On the international side, the integrator expects airfreight capacity to be constrained through the remainder of 2021. Full passenger capacity recovery and the return of bellyhold space is unlikely until 2023 or 2024, which should support international rates for the longer-term. “We know, however, that these prices are not sustainable in the longer term, and we will flex our networks appropriately as commercial capacity returns into the market,” Raj Subramaniam, FedEx president and COO, said during today’s earnings call. Looking ahead, FedEx is expanding its services in Europe alongside the completion of its integration of TNT into its business , which is expected in spring of 2022. Plans for the upcoming months include an expansion of next-day Express service from Europe to the U.S., adding nine origin countries to its current service to double the current number, as well as the launch of a new FedEx International Priority Express service in Europe and an International Connect Plus (FICP) service between Europe, the U.S. and Asia. The International Priority expansion will offer customers in Europe a choice of overnight service within Europe for delivery by noon or end-of-day, while the FICP service covers shipments moving from Europe to the U.S. and to Asia and within Europe across multiple routes. FICP is targeted specifically at FedEx’s e-commerce customers, Carere noted, and is part of FedEx’s strategy to capture market share from other integrators in intercontinental e-commerce.

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