FedEx continues to focus on airfreight capacity as Q2 results under pressure

By Damian Brett

FedEx will continue to examine further air cargo capacity retirements following a decline in its fiscal second quarter operating performance on the back of a weaker global economy and the loss of Amazon business.

The express giant saw its revenues for the quarter ended November 30 drop by 2.8% year on year to $17.3bn while operating income fell 52.6% to $554m and net income was down 48% to $560m.

Following the announcement the company cut its earnings guidance for the year.

It blamed the performance on: “Weak global economic conditions, increased FedEx Ground costs from expanded service offerings, the loss of business from a large customer [Amazon], a continuing mix shift to lower-yielding services and a more competitive pricing environment.

“In addition, the later timing of the Thanksgiving holiday resulted in the shifting of Cyber Week into December, which negatively impacted the quarter’s results.”

FedEx announced earlier this year that it would stop working with Amazon in the air and on the ground.

FedEx Express recorded asset impairment charges of $66m related to the permanent retirement of 10 Airbus A310-300 aircraft and 12 related engines.

It will retire another 29 aircraft over the next 30 months.

During the remainder of fiscal 2020, FedEx Express will make further network capacity changes by reducing flight hours by around 8%, it said.

FedEx exits ground shipping contract with Amazon

FedEx ditches Amazon contract

Fred Smith of FedEx slams ‘protectionist’ US trade policy

“The company continues to evaluate if additional aircraft retirements are warranted,” the company said.

Fred Smith, FedEx Corp. chairman and chief executive said: “Fiscal 2020 is a year of continued significant challenges and changes for FedEx, particularly in the quarter just ended due to the compressed shipping season.

“We have significantly enhanced our e-commerce capabilities with strategic initiatives including year-round seven-day FedEx Ground delivery, enhanced large package capabilities and the insourcing of FedEx SmartPost packages.

“These changes have been well-received by the marketplace as reflected in our record volumes this peak season.

“While we have experienced some higher-than-expected expenses this quarter, we forecast FedEx Ground operating margins to rebound to the teens in our fiscal fourth quarter as the bow wave of costs for these changes is absorbed.”

Rajesh Subramaniam, FedEx Corp. president and chief operating officer, added: “We are also taking immediate actions to address the short-term challenges facing our business, including eliminating multiple international flights to reflect reduced global airfreight demand.

“These actions combined with benefits from the TNT integration should allow FedEx Express to enter fiscal 2021 with profit improvement underway.”

Share this story

Related Topics

Latest americas news

Former Alliance Ground International employee sentenced for stealing

By Rebecca Jeffrey

A former Alliance Ground International (AGI) employee has been sentenced to 12 months in federal prison for stealing from a…

Read More

Share this story

Canada invests to keep freight moving

By Chris Lewis

The Canadian Government has pledged investment to make the country’s air transport system more reliable in the face of extreme…

Read More

Share this story

Chennault Airport air cargo facility to open next month

By Rebecca Jeffrey

Chennault International Airport in the US plans to open its new air cargo facility next month. The Lake Charles, Louisiana-based…

Read More

Share this story