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FedEx 3Q earnings tumble 75%
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<blockquote data-quote="Ricochet1a" data-source="post: 548683" data-attributes="member: 22880"><p>The reports for the fiscal year which just ended are due out Friday, but I’ll use the fiscal year before the last for a starting number to get another perspective on operating cost for aircraft. FedEx reported just under $38 Billion in operating revenue for FY08, with Express listing $24.4 Billion (64.3% of total FedEx revenue). Express is actually shrinking in terms of total percentage FedEx revenue due to the growth of the Ground and Freight companies (where the majority of the investment has gone in the past few years). Personnel expense for Express has been listed around 50% of revenues, and direct aircraft related expenses are around one-third of revenue. Including the direct personnel expenses to the operation of the aircraft would mean about 40% of revenues are directly related to aircraft operating expense, or $9.75 Billion. </p><p> </p><p>With 352 aircraft operating, one can divide $9.75 billion by 352 to get an average annual operating cost per aircraft of $27.7 million per year. I originally came up with a figure between $30 and $40 million per year (using information on per hour operating costs that are industry averages, and an assumption of 4000 flight hours per aircraft per year), so it looks like the $30 million per year is the best average operating cost that can be derived without access to actual hard data. This means that the $100 million figure is way off base. </p><p> </p><p> </p><p>What may have been done is to get a cost to deliver air cargo from shipper to recipient. When all the labor costs of ground transport, sorting, loading, movement to destination “station” from the airport and final delivery is made, a total cost for air cargo per aircraft involved per year can be stated as being in the ball park of $100 million per year. If one takes my assumption of 40% of revenues directly related to aircraft operations ($30 million in this case), and then attempts to get a total cost of air cargo service from shipper to recipient, take $30 million and divide that by 40% to get $75 million. As a sort of cross check to the mathematical assumption, multiply $75 million by the 352 FedEx aircraft and one gets $26.4 Billion (actual revenue is listed as $24.4 Billion). With all the rounding that has been done, the numbers check out. FedEx can state that every one of its aircraft performing air cargo service has a total cost associated of about $75 million per year, from pickup to delivery of air cargo. Given UPS’s higher labor costs, this figure would be higher than FedEx’s by about 35% of labor expense. I get about $12 million per aircraft per year when labor is correctly adjusted, or a number around $87 million per year per aircraft.</p></blockquote><p></p>
[QUOTE="Ricochet1a, post: 548683, member: 22880"] The reports for the fiscal year which just ended are due out Friday, but I’ll use the fiscal year before the last for a starting number to get another perspective on operating cost for aircraft. FedEx reported just under $38 Billion in operating revenue for FY08, with Express listing $24.4 Billion (64.3% of total FedEx revenue). Express is actually shrinking in terms of total percentage FedEx revenue due to the growth of the Ground and Freight companies (where the majority of the investment has gone in the past few years). Personnel expense for Express has been listed around 50% of revenues, and direct aircraft related expenses are around one-third of revenue. Including the direct personnel expenses to the operation of the aircraft would mean about 40% of revenues are directly related to aircraft operating expense, or $9.75 Billion. With 352 aircraft operating, one can divide $9.75 billion by 352 to get an average annual operating cost per aircraft of $27.7 million per year. I originally came up with a figure between $30 and $40 million per year (using information on per hour operating costs that are industry averages, and an assumption of 4000 flight hours per aircraft per year), so it looks like the $30 million per year is the best average operating cost that can be derived without access to actual hard data. This means that the $100 million figure is way off base. What may have been done is to get a cost to deliver air cargo from shipper to recipient. When all the labor costs of ground transport, sorting, loading, movement to destination “station” from the airport and final delivery is made, a total cost for air cargo per aircraft involved per year can be stated as being in the ball park of $100 million per year. If one takes my assumption of 40% of revenues directly related to aircraft operations ($30 million in this case), and then attempts to get a total cost of air cargo service from shipper to recipient, take $30 million and divide that by 40% to get $75 million. As a sort of cross check to the mathematical assumption, multiply $75 million by the 352 FedEx aircraft and one gets $26.4 Billion (actual revenue is listed as $24.4 Billion). With all the rounding that has been done, the numbers check out. FedEx can state that every one of its aircraft performing air cargo service has a total cost associated of about $75 million per year, from pickup to delivery of air cargo. Given UPS’s higher labor costs, this figure would be higher than FedEx’s by about 35% of labor expense. I get about $12 million per aircraft per year when labor is correctly adjusted, or a number around $87 million per year per aircraft. [/QUOTE]
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