Strong Q3 for FedEx as it predicts ongoing freighter demand

By Damian Brett

FedEx saw revenues and profits rise in its fiscal third quarter results, while it also predicts ongoing bellyhold capacity shortages in air cargo.

The express giant saw fiscal third-quarter revenues increase by 22.9% year on year to $21.5bn, operating profits improved 145.7% to $1bn and net income was up 64.7% to $892m.

The company said the increases were on the back of strong volume growth in US domestic residential package – propelled by e-commerce demand – and a 41% increase in FedEx International Priority volume, led by Asia and Europe, and price rises across all transportation segments.

These were partially offset by costs for managing Covid, higher staff costs, severe weather in the US and an extra working day last year.

Looking ahead at the air market, the company is expecting constrained capacity to continue over the next few years, although some passenger capacity is expected to return this year.

Chief marketing and communications officer Brie Carere said: “Global air cargo capacity remains down 20% year on year as of January and we expect air cargo capacity to remain constrained through to the end of calendar year 2021.

“We expect passenger capacity to recover between 55% and 75% of its pre-covid level by the end of calendar year 2021 with a full recovery not anticipated until 2023 or 2024.”

Carere said that from a demand perspective, Asia Pacific outbound has recovered to pre-Covid levels, while the company expects Europe outbound to partially recover by the end of 2021 and for a full recovery sometime in 2023.

“With these projections, demand trends will continue to favour freighters and integrators,” said Carere. “We are confident in our ability to maintain elevated yields for at least 12 months.

“With e-commerce driving significant growth internationally, we will increasingly utilise peak surcharges in our international business.”

Meanwhile, the company also revealed plans to expand its offering from Europe.

Firstly, in the fourth quarter it will provide a next-day service to the US in twice the number of origin countries currently offered.

In addition, FedEx will launch an International Priority Express service in Europe and FedEx International Connect Plus from Europe to the US, Asia within Europe.

This latter service aims to reduce the cost to serve and specifically targets e-commerce customers.

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