FedEx sees sluggish numbers, packs up freighters
Although FedEx’s revenue rose 3.8 percent, year-over-year, in the fourth quarter of fiscal-year 2012, which ended May 31, the U.S.-based integrator saw earnings slide 1.4 percent, year-over-year, to $550 million. Even so, FedEx Ground and FedEx Freight performed particularly well in the fourth quarter, with revenues in those segments surging 9 percent and 7 percent, year-over-year, respectively. FedEx Corp. President Frederick W. Smith said recently that the improved performances of FedEx Ground and FedEx Freight throughout the entire financial year, as well as better yields across all business segments, led to “strong earning results for fiscal 2012.”
The integrator’s express segment — its most lucrative sector — saw mixed results in the fourth quarter of fiscal-year 2012, however. Revenue increased 2.6 percent, year-over-year, to $6.8 billion, although operating profit in the sector fell 34 percent, year-over-year. FedEx Express’ average daily package volume in the U.S. also dropped in the fourth quarter, declining 5 percent, year-over-year. To address such declines, the integrator retired 18 Airbus A310-200 and six Boeing MD10-10 aircraft, as well as 43 jet engines, from its U.S. Express fleet during the quarter. The retirements led to a non-cash impairment charge of $134 million during the fourth quarter of fiscal-year 2012, according to a press release.
The 24 recently retired freighters joined the five Boeing 727-200 aircraft FedEx cut from its fleet in the fourth quarter of fiscal-year 2012, according to the press release. This year, there will be even more capacity cuts, however, with the retirement of 21 B727 aircraft, a measure previously announced. “Along with the decisions to retire these 50 aircraft, we are also developing detailed operating and cost structure plans to further improve our efficiency,” David Bronczek, FedEx Express president and CEO, said in a statement. “We expect to provide additional information on these plans in the fall.”
The integrator also saw declining daily package volumes abroad, with traffic decreasing 3 percent, year-over-year, in the fourth quarter of fiscal-year 2012. Sluggish volumes out of Asia contributed greatly to this decrease, according to a press release. Despite this drop, FedEx officials are looking to grow its express business overseas, particularly in Europe.
In April, FedEx agreed to purchase Polish courier Opek Sp.z o.o. — a deal that is expected to close this summer — and announced plans to procure French business-to-business express company Tatex one month later. The Tatex acquisition will give FedEx Express access to a domestic ground network that generates approximately €150 million in annual revenue, according to reports. FedEx hopes such acquisitions will benefit the company in the upcoming financial year. “We are focused on improving margins in all businesses, although we face certain cost increases in fiscal 2013,” Alan B. Graf, Jr., the company’s executive vice president and CFO, said in a statement.
“We expect to mitigate [the challenges ahead] by reducing costs and improving efficiencies,” he added, “and we are continuing to evaluate additional actions to substantially improve FedEx Express margins.”