FedEx, the world's largest cargo airline company and top U.S. package firm, said net profit surged 35 percent in its fiscal third quarter ended Feb. 28, while operating income rose 29 percent.

FedEx reported net income of $428 million on $8 billion in revenue, up from $317 million on $7.34 billion a year earlier. Only its retail FedEx Kinko's unit saw income fall; all other units saw solid growth in income and margins.

The results outpaced the company's own expectations as well as those of analysts, and FedEx also raised its earnings guidance for the full fiscal year.

Alan Graf, chief financial officer, said the company's "outstanding" performance in the December-February period included a stronger holiday peak season than expected for its Ground unit, productivity gains and lower fuel costs than the company looked for, plus the company's decision to hold some marketing costs until its March-May quarter.

The dominant air Express operations saw revenue grow 9 percent to $5.34 billion, but FedEx said Express operating income jumped 31 percent to $446 million as margins "improved significantly."

One FedEx official said that "by design" some Express business moved to its Ground package network, but said most of Ground's growth "came from the market itself." Ground revenue grew 14 percent to $1.36 billion, and operating income rose 26 percent to $187 million.

The less-than-truckload FedEx Freight segment saw income jump 35 percent, to $73 million, on a 14 percent revenue gain to $848 million.

For Kinko's, operating income of $7 million fell 36 percent, while revenue of $501 million was up slightly. FedEx recently installed a new CEO and chief operating officer for that unit, but the company said it expects recent Kinko's revenue and cost trends to continue in the period ahead, along with costs of adding more retail stores.

John D. Boyd