FedEx to add freighters and boost spending to meet demand

FedEx will boost spending over the coming year and add more freighter orders to meet growing e-commerce demand.

Announcing its results full-year results for fiscal year ended May 31, the express giant said it expected to spend around $7.2bn in FY 2022 compared with around $5.9bn last year.

Meanwhile, FedEx will exercise options to purchase 20 additional B767Fs, 10 for delivery in fiscal year 2024 and 10 for delivery in fiscal year 2025.

The investments will also include 16 new automated facilities and the implementation of nearly 100 expansion projects at its ground division.

“To handle future ground volumes, we are significantly increasing capacity to deliver both, great service and improved financial results,” chairman and chief executive Fred Smith said.

“This summer, we are intently focused on improving network and delivery operations prior to the volume surge in the fall.”

Looking to the air cargo market, FedEx said that trade volumes have surpassed pre-pandemic levels and are on course for the fastest year of growth in over a decade.

It said that global air cargo capacity remained down 10% year-on-year in April as a result of lower bellyhold capacity.

FedEx expects air cargo capacity to remain constrained at least in the first half year and capacity recovery to be slow and possibly episodic. A full recovery is not anticipated until 2024.

The company also believes that “favourable” pricing internationally should continue through fiscal year 2022.

It will manage international demand through yield management and peak surcharges, especially on transpacific and transatlantic lanes. Currently it is seeing a “very good capture rate” on surcharges.

Last fiscal year, the company saw revenues increase to $84bn from $69.2bn the prior year and operating income was a $5.9bn against $2.4bn.

In its fourth quarter, revenues stood at $22.6bn against $17.4bn in the prior year and operating income was $1.8bn compared with $475m 12 months earlier.

“Fourth quarter operating results increased primarily due to volume growth and disciplined revenue and portfolio management,” the company said. 

“These factors were partially offset by costs to support strong demand, increased variable compensation expense, and higher labour rates.”

FedEx Express fourth quarter operating income more than doubled year over year, driven by exceptional growth in international export and US domestic package services.

FedEx Ground reported record earnings for the quarter and revenue growth of 27%. The revenue increase was primarily driven by strong growth in business-to-business shipments and a 14% rise in revenue per package.

FedEx Freight reported record earnings and operating margin of 16.1% for the quarter, as average daily shipments grew 30% and revenue per shipment increased 6%.