FedEx dismisses headline grabbing "fantastical" reports that Amazon's air network could compete with integrators

17 / 03 / 2016

FedEx has dismissed headline grabbing reports that Amazon’s new US air cargo network will become a competitor for its own operations.

Speaking shortly after announcing its fiscal third-quarter results, FedEx Services president and chief executive Mike Glenn said Amazon was a valuable customer and it would be difficult for an e-commerce company to compete with its own services or those of UPS and United States Postal Service.

“Amazon is a valuable customer that we worked with for many years and we expect to work with them for many years to come," he said.

“We’ve been in dialogue with them about their transportation needs as they have experienced significant growth.

“We’ve been aware of Amazon’s need for supplementary capacity related to inventory management, which is driving some of the investments they are making in transportation.

“Large retailers have long had transportation capabilities, primarily to enable movement and positioning of inventory across their store and fulfilment locations.

“While recent stories and reports of a new entity competing with the three major carriers in the US grabs headlines, the reality is that it will be a daunting task requiring tens of billions of dollars in capital and years to build sufficient scale and density to replicate existing networks such as FedEx.”

Glenn said that the three major carriers in the US accounted for 95% of all e-commerce shipments today.

He added that no single FedEx customer represented more than 3% of the total revenue.

FedEx chairman, Fred Smith, meanwhile, described reports as fantastical.

He said: “The concerns about industry disruption fuelled by fantastical, and let me emphasise I chose this word carefully, reports and articles which are devoid of any in-depth knowledge of logistics systems and the markets which FedEx serves.

“As we have previously noted, network design, technology, facilities, capabilities and route density are the key elements in the FedEx, UPS and postal services systems that make it highly likely these entities will remain the primary carriers for e-commerce shipments in the US for the foreseeable future.”

During the quarter, the company saw revenues increase by 8.6% year on year to $12.7bn thanks to growth in e-commerce business, while adjusted net income was up 18% to $692m thanks largely to improved profitability in its air express division.

Its air express division benefitted from improving yields, demand increases and lower outgoings.

The company added that it continued to expect its acquisition of TNT to go-ahead in the first half of this year, but provided no update on an appeal launched by UPS against the acquisition in Brazil.