I know this has been mentioned before, but Ground is still moving on Express aircraft, and Express is still moving on Ground trucks. I realize that Express can claim to "pay" Ground for services rendered, but let's say that rate is unrealistically low and not even close to what Express would have to pay out-of-network so to speak. To be legal, wouldn't Express have to pay a competitive rate? Also, my local friends at Ground are saying that there is tarped material at their facility that they believe may be ballmats. The facility is being enlarged, so maybe it's "transition" ballmat as mentioned by bbsam, or maybe not.
What one opco pays another for "contracted services" is entirely up to the opcos. In the case of FedEx, it is up to FedEx Corporation. In theory, one FedEx opco could pay $1 for a service performed by another opco - and there is nothing technically wrong. Now I very seriously doubt something as obvious as this is done, but there isn't a requirement for opcos of a holding corporation to pay a "market rate" for contracted services.
Now, if the opcos had separate stock issued for them - then yes, the company management of each opco would have a fiduciary responsibility to their stockholders to maximize THEIR company profit - therefore the best deal for contracted services would need to be sought. Since FedEx has a single stock, with multiple operating companies under that single stock - cash can be moved around, and there is nothing "illegal" about it. Cash is moved from one pocket to another, and the overall FedEx Corporation balance sheet shows no net change. This is one of the reasons it amazes me that people don't believe that the business model of Express (DGO in particular), can be radically changed in the future. Have one opco "contract" out to another, move cash around, move service around - and it is all perfectly legal. As long as doing so doesn't violate any procedural regulations (specifically FAA in the case of Express), all is good.
Many in Express may find it difficult to believe, but they are the highest compensated individuals within the FedEx operating companies for the work they do. Compare what someone in Office makes to a CSA in Express. Compare what a handler in Ground makes in total compensation to that of a handler in Express. Compare what a Courier in Express makes to what a driver in Ground makes - or what a local delivery driver for Office makes. People in Express KNOW that they make LESS than what UPS employees make, but WITHIN the constellation of FedEx Corporation, they are the highest compensated employees for the tasks they perform and level of responsibility they possess.
FedEx Corporation obviously knows this, and therefore the reason to move as many functions as possible OUT from under Express and have them "contracted" for by other FedEx opcos -which inevitably have lower compensation levels, and therefore would offer an even greater competitive advantage for FedEx. Even though this stays within the letter of the law, the intent is clearly circumvented.
FedEx recently moved the managers of the Office stores under FedEx Services (they are employees of Services). Does FedEx Office "pay" FedEx Services the EXACT value of the compensation for the store managers they "contract" for? Who knows.
What is undisputable, is that when Federal Express became FedEx Express and FedEx Corporation popped into existance, cash was moved from Express to the new Corporation, then Corporation used that cash to acquire existing companies (RPS, Kinkos, etc) and brought them under the FedEx Corporation umbrella. Those companies continued to receive cash infusions, till they were self sufficient. Express was used as the cash cow to start all of these companies. The shareholders of FedEx were "done right", since the value of the holding corporation increased over time (we'll forget about all those screw-ups, like the writedown for Kinkos, when that name was retired).
The issue for the employees of Express, is that the "retained earnings" (cash) of Express was used to start other companies. Nothing illegal about that obviously, but that cash that in theory, should've been available as wage increases and bonuses for Express employees - since they played a large part in creating that cash. When Express had reached market saturation with its business model in the late 90's, the cash that was available as a result of that success was used by Fred to enter into new ventures - not disbursed to the shareholders of Express or used to pay compensation above "market level" to the Express employees which were responsible for creating that success.
FedEx has a growth strategy - the primary contributors of capital to enable that growth were the Express employees (1990's through about 2004). Now, the opcos are technically self sufficient and are able to generate cash for FedEx Corporation, which will inevitably find some other businesses to acquire.
As with all holding corporations that have centralized management and a single stock listed, they will expand beyond their technical competence eventually. The functional specialization of what was once Federal Express, can only be applied to so many business models (they almost blew it with Kinko's, which is outside the area of expertise of the employees of what was an air cargo business). FedEx has completely transformed what was once Kinko's, to the point where one cannot make a connection between Kinkos that existed in the 1980s and early 90's, to what exists now as FedEx Office.