Tag: FedEx

FedEx chief says U.S. is not in a recession

Posted by | Jul 21, 2008 | |

FedEx Corp. Chief Executive Officer Fred Smith said the U.S. economy isn’t in a recession and that oil prices will “drift down for a while.”

FedEx said in June the coming year would be “very difficult” because of near-record fuel prices and a cooling domestic economy. U.S. shipping volume fell 3.4 percent for the three months ended May 31, as fuel surcharges for express service reached 28 percent.

Oil will likely fall in the second half, Smith said, declining to predict a price. “Whether it stays at USD 140 or goes down to USD 110 is anyone’s guess,” he said. “Barring some global event, I think oil prices will drift down for a while.”

Crude jumped more than 70 percent in the past year, closing at a record USD 145.29 a barrel on July 3. The price has dropped 10 percent since then, to USD 130.10 this morning on the New York Mercantile Exchange.

While some shippers are still trading down to cheaper shipping options such as two-day or ground delivery, the “vast majority” of those switches have occurred already, Smith said. Intercontinental express shipments are growing at a “good rate,” he said, without giving specific figures.

Smith wouldn’t comment on his interest in any acquisitions. The Financial Times reported on July 12 that FedEx is in preliminary discussions to buy TNT NV, Europe’s second-biggest express-delivery company.

There have been “lots of rumors swirling about TNT for years,” Smith said. “We don’t comment on corporate development activities.”

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U.S. express traffic slows

Posted by | Jul 18, 2008 | |

Air Cargo Management Group reports that revenues for the U.S. domestic air freight and express industry totaled USD 32.81 billion in 2007, a slim 1.0 pct increase over 2006, but nonetheless a new record for the industry. “Gains in 2007 must have come from fuel surcharges, as total market revenue-ton-mile (RTM) traffic and the daily shipment counts of the express carriers both declined,” noted Robert Dahl, ACMG Proj¬ect Director.
Traffic volume for the industry was 14.924 billion RTMs, down 1.5 pct year-over-year, and the number of shipments moving through the major express networks was 6.644 million per day, down 1.8 pct versus 2006. “The industry remains at or near 1999 levels based on both these performance metrics; in other words, this industry has gone through eight years with no net growth,” Dahl said. “Furthermore, part-year data for 2008 gives little hope of any major increase this year. In fact, there are numerous challenges facing the industry, including re¬cord-high fuel prices, a weak U.S. economy and a perceived shift of air shipments to trucks, which could lead to further traffic declines in 2008 and 2009.”

ACMG finds that the US domestic air freight and express industry continues to undergo significant structural changes in both the express and general freight sectors. The players in the express side remain unchanged, consisting of FedEx, UPS, DHL and BAX Global; however, DHL is changing its business model in the domestic U.S. market to eliminate its own contracted air network, instead buying space starting this year from UPS to move its shipments on an airport-to-airport basis within North America. When the DHL shift to UPS is complete in 2009, there will be just three express freighter networks operating within the U.S. (UPS, FedEx and BAX/Schenker), down from eight in the mid-1990s.

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FedEx plans to acquire TNT would shake up the industry

Posted by | Jul 17, 2008 | |

Independent research company Datamonitor says FedEx is reported to be interested in acquiring TNT, which seems to suggest that it does not want to rely on organic growth to strengthen its position in the global express market. Although combining two of the world’s leading players would put strong pressure on the other two integrators, UPS and DHL, overall, the competitiveness of the industry looks set to remain intact.

FedEx has already been trying to reduce its dependence on its home market and the use of air networks by building a stronger presence in the European market, as well as investing in its Asian network. The acquisition of ANC in the UK helped to secure a stronger position in one of Europe’s key markets, and TNT’s dominant position in the intra-European express market makes it an ideal target that would allow FedEx to develop its position in Europe further.

Preliminary results from Datamonitor’s upcoming European Express Market Map suggest that, despite showing decreasing growth rates, the European express market is still in a good state, with the B2C and Eastern European markets acting as its main growth drivers. TNT is particularly well positioned to capture any growth in the B2B markets as it has a strong road and air network that is operational in all the key markets. The company also boasts a strong position in emerging markets in the rest of the world, notably the Brazilian, Russian, Indian and Chinese (BRIC) markets and the Middle East.

FedEx and TNT have reciprocal geographic strengths and, as TNT has lost its monopoly in its home mail market, a combination of the two companies appears to make strategic sense. The merger would also put significant pressure on European market leader DHL, which is trying to recover its market position in the US, where it continues to lose money in a co-operation agreement with UPS (which has also been reported to have an interest in acquiring TNT).

Should the tie-up be completed, the effects would be far-reaching, says Datamonitor Logistics and Express senior analyst Erik Van Baaren. “Significant pressure would be placed upon DHL and UPS, given that they would have to compete with a global player capable of exploiting greater economies of scale and serving the needs of globally operating companies more efficiently as further internationalization of the industry takes shape.”

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Amazon, others to suck up holiday shipping costs

Posted by | Jul 17, 2008 | |

Online retailers cannot afford to raise shipping prices. The high cost of fuel is hurting the wallets of American consumers and businesses alike, but online retailer Amazon.com Inc and others will likely forgo shipping price increases on its discount programs this upcoming holiday shopping season for fear of alienating hard-pressed shoppers in the weak economy.

Long-term contracts with shippers may insulate Amazon and some others, even as companies small and large scramble to find other costs to cut. Margins could suffer more as time goes on, but the biggest companies could watch smaller rivals fade away as the move to online shopping continues to accelerate.

Avoiding shipping price hikes may appear foolhardy — after all, the cost of diesel fuel has risen 154 percent in the last year. But companies such as Amazon and Overstock.com Inc rely on low or free shipping to stoke business in good times — so any rise in bad times could be a major problem.

Free shipping is a major competitive advantage for Amazon, which has already been lowering prices to stave off rivals, said Forrester analyst Sucharita Mulpuru.

U.S. carriers like United Parcel Service Inc, FedEx Corp and the U.S. Postal Service have been raising prices due to higher fuel costs.

But Amazon and some brick-and-mortar companies with major online businesses say they’ve largely been able to insulate themselves by being more efficient elsewhere in their businesses, whether through better distribution or less waste.

Overstock will not raise its blanket USD 2.95 shipping price on a full order, and fuel increases have not affected the company’s profit margins, Chief Executive Patrick Byrne said.

Large online shippers have bargaining leverage over transport carriers when it comes to contracts, Amazon and Overstock said.

However, smaller online retailers that aren’t as nimble as Amazon will be struggling this holiday with higher fuel costs and be forced to raise shipping prices.

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FedEx Corp. Reports fourth quarter and full year earnings

Posted by | Jul 17, 2008 | |

FedEx Corp. (reported a loss of USD 0.78 per share for the fourth quarter ended May 31, compared to earnings of USD 1.96 per diluted share a year ago. The quarter’s results include the previously announced charge of USD 891 million (USD 696 million, net of tax, or USD 2.22 per diluted share) related predominately to one-time, non-cash asset impairment charges. These charges were associated with the decision to minimize the use of the Kinko’s trade name and a reduction in the value of the goodwill resulting from the Kinko’s acquisition. Last year’s fourth quarter included a USD 0.06 per diluted share net benefit from a settlement with Airbus related to the A380 aircraft order cancellation. Excluding these items, earnings were USD 1.45 per diluted share in the fourth quarter compared to USD 1.90 per diluted share a year ago.

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