FedEx to lose US$400 million
17 / 01 / 2012
RESTRUCTURING behind the doors of the US Postal Service (PS) will likely cost FedEx Express almost half a billion dollars a year in lost business.
Revenue from carrying PS express, priority and first-class mail in FedEx freighters may fall from the current US$1.4 billion to less than $1 billion annually once the current agreement expires and a new one is negotiated, consultants say. PS’ entire transportation total expenditure amounts to approximately $6 billion.
PS is struggling with a 2012 loss projected at $14.1 billion. First-class volumes plummeted 29 per cent from 2000 through 2011. Chief financial officer Joe Corbett said in November: “We’re not looking to grow what’s in the air”.
Analyst believe that FedEx, PS’ largest supplier, will retain the priority-mail contract, but at a lower rate. Rival UPS by contrast has a contract worth only $95 million, David Hendel, a partner at law firm Husch Blackwell, says.
Further abroad, meanwhile, FedEx has expanded its Hong Kong (China) airport facility by 37 per cent to 4,695m2 to enable greater cargo handling capability.