The Big News

[Ricochet1a]

I'm not sure it's quite that simple. That profit margin shows only one number. It doesn't take into consideration reinvestment in the infrastructure, does it? The company could easily show a larger profit if it increased it's debt load, couldn't it?

It all depends on what accounting method being utilized. If FedEx purchases an aircraft outright, then decrease equity, increase assets - the net income would remain unchanged. Depreciation would show as a recurring expense with the method chosen to depreciate the asset. Increasing debt load doesn't increase profitability, since there is a corresponding increase in company assets. You should know this, since you're running a business...

 

[Ricochet1a]

The three highest paid group of airline pilots for US airlines are the pilots of UPS, Express and Southwest Airlines.

FedEx and UPS vie for the top position. Wide body Captains with some years under their belt clear just over $200,000 a year, plus per diem and other payments. First Officers average around $120,000/yr, with starting pay around $70,000 and progressing initially rapidly, then steadily to about $150,000/yr.

Southwest Captains top out just under $200,000/yr. Their FO pay is somewhat less than FedEx and UPS.

This compensation EXCLUDES payments into pension plans and health insurance benefits. Southwest aircrew also receive a number of comp flying passes each year to use as they desire.

The contract feeder pilots don't make squat compared to this. They are flying to either build hours to get into an airline, or to have a predictable job.

 

[bbsam]

It all depends on what accounting method being utilized. If FedEx purchases an aircraft outright, then decrease equity, increase assets - the net income would remain unchanged. Depreciation would show as a recurring expense with the method chosen to depreciate the asset. Increasing debt load doesn't increase profitability, since there is a corresponding increase in company assets. You should know this, since you're running a business...

Exactly the point I'm making. Increasing debt load doesn't increase profitability but it can make it look as if it does for accounting purposes which is what shows up on financial statements.

 

[Ricochet1a]

Exactly the point I'm making. Increasing debt load doesn't increase profitability but it can make it look as if it does for accounting purposes which is what shows up on financial statements.

On a balance sheet, both sides must be looked at - therefore anyone who knows what they are looking at, can easily see that a sudden infusion of cash isn't due to income from business operations, but rather assuming debt. Anyone just looking at an asset account and not taking a look at the other side of the ledger is an absolute fool.

In a statement of cash flows, taking on debt would definately show as a source of cash, but again, it is identified from the source.

Properly prepared financial statements are clear as to the sources and flows of assets and expenses. It is only when accounting isn't done according to GAAP that deception can occur.

A possible source of manipulating income is varying depreciation from one year to the next. If depreciation isn't done on a straight line basis, then in times of company profitability, depreciation can be accelerated, to offset those profits. Likewise, in times of company losses, depreciation can be deferred, to limit the losses showing on a particular annual statement. But even here, the assets of the company are listed with the depreciation method used. One would need to look at financial statements going back 3 to 5 years to establish a trend in how depreciation is performed and it impact on stated profitability.

If depreciation is done too quickly, the business won't look as profitable as it should. Likewise, if depreciation is done too slowly, the company would have profitability that is artificially inflated. By looking at the methods of depreciation, an astute analyst can easily determine if any games are being played in the preparation of the statements. This is why there are CPA's and clear statutes regarding deceptive accounting practices.

 

[bbsam]

So if Fedex states a 5.6% profit margin, do you take them at their word? Or if Fred's compensation dipped recently as reported?

 

[Mr. 7]

So,
If Express has to fly the 2day coast to coast stuff, there's gonna be a much higher cost than it staying in the ground system from start to end. This raises a whole lot of logistic problems. Mainly, sending something "ground" coast to coast will never be as cheap as it is now.

 

[vantexan]

So,
If Express has to fly the 2day coast to coast stuff, there's gonna be a much higher cost than it staying in the ground system from start to end. This raises a whole lot of logistic problems. Mainly, sending something "ground" coast to coast will never be as cheap as it is now.

The cost savings of reducing hours across the board for 10's of thousands of employees will more than make up for the cost of running 2 and 3 day freight to and from ramps by Ground trucks. Express typically gets freight in early and takes it on road that day. Ground can pick up freight for multiple stations, drop it off to go out next day. No need to get it in early.

 

[bbsam]

We are usually on the road long before express is.

 

[vantexan]

We are usually on the road long before express is.

Welcome to the Express side. If a 2 day pkg is flown from L.A. to Boston on Monday night, it can be dropped off at a Ground facility on Tuesday to be taken out by you early on Wedsnday. If it arrived at an Express station on Tuesday it would go out that morning. No need for it to be there early for you on Tuesday so one truck can take the 2 and 3 day freight of several stations. Afterall much of the 2 and 3 day freight will be handled through Ground system, only destinations too far away will go through Express hubs.

 

[Ricochet1a]

So,
If Express has to fly the 2day coast to coast stuff, there's gonna be a much higher cost than it staying in the ground system from start to end. This raises a whole lot of logistic problems. Mainly, sending something "ground" coast to coast will never be as cheap as it is now.

You've missed exactly how the change would be implemented. All, All, All Express non-overnight volume would be PUP'ed just as it has been. It would move through AGFS - no change. The change would occur once the non-overnight volume arrives at its destination ramp. Instead of having it sorted for trucking to Express stations, it would be trucked over to a Ground terminal (right off the aircraft, onto a truck, headed to a Ground terminal) where THEY would sort it out to the Ground routes and have the Ground contractors deliver it the next day. I've already illustrated that the additional volume would be a relatively small increae for Ground now. Two years ago, it would've swamped them - not now.

AGFS wouldn't see any change in how they conduct their operation, with the exception of the PM ramp sorts. Those would be virtually eliminated IF - IF there was a single Ground terminal to which all the volume could be trucked to.

If there were multiple Ground terminals within the service area of a particular Express ramp, then the ramp would presumably have to perform a sort to break up the volume going to each respective Ground terminal.

One of two things would happen. Either a sort would occur breaking out ASTRA coded stations into destination Ground terminals which cover the same geographic area as the Express stations. If the Ground terminal served the same geographic areas as the Express stations MMMA, NNNA and OOOA, then the sort would pull those station ASTRAs and load them into cans (or a bulk truck) headed to the Ground terminal which served the service areas covered by those three stations. Or, if the Ground terminal covered a geographic area greater than the geographic area served by a particular ramp, that ramp volume received in the PM would be trucked straight over to the Ground terminal for sorting.

Since there isn't a direct matching of geographic area coverage between Express ramps and Ground terminals, there would be a combination of the two methods used.

The stuff which is currently moved by truck between ramps could in theory deliver their volume directly to Ground terminals for final delivery, unless a situation occurs as explained above. Then a ramp sort would need to be performed.

 

[vantexan]

So you are saying P2 would still be pupped by Express and still taken to Express stations where Ground would come get it. I was thinking Ground would completely handle P2 and run national freight to ramp but better still run it to nearest Express station to go to ramp on their truck. All regional 2 and 3 day would flow through Ground system. I just think they are going to make Express strictly overnight and as Ground grows with regional overnight Express will shrink that much more.

 

[Mr. 7]

The cost savings of reducing hours across the board for 10's of thousands of employees will more than make up for the cost of running 2 and 3 day freight to and from ramps by Ground trucks.

Good point.

You've missed exactly how the change would be implemented. All, All, All Express non-overnight volume would be PUP'ed just as it has been. It would move through AGFS - no change. The change would occur once the non-overnight volume arrives at its destination ramp. Instead of having it sorted for trucking to Express stations, it would be trucked over to a Ground terminal (right off the aircraft, onto a truck, headed to a Ground terminal) where THEY would sort it out to the Ground routes and have the Ground contractors deliver it the next day.

So,
Express would carry the frt. 2/3 of the way to the destination only to let ground do the actual, final, delivery. Sounds like now you have to pay 2 completely different divisions for the same pkg. What will be the bottom line price to the shipper? Same rate as a ground pkg?

And, how come ground will carry a pkg. 2/3 of the way to it's destination only to have USPS do the final delivery? I can't understand that one either.

 

[Ricochet1a]

So you are saying P2 would still be pupped by Express and still taken to Express stations where Ground would come get it. I was thinking Ground would completely handle P2 and run national freight to ramp but better still run it to nearest Express station to go to ramp on their truck. All regional 2 and 3 day would flow through Ground system. I just think they are going to make Express strictly overnight and as Ground grows with regional overnight Express will shrink that much more.

No.... you've missed it again.

The only change occurs AFTER, AFTER the volume is moved through AFGS to the destination ramp. It is from that point, the volume is moved over to Ground for final sort and delivery.

I assumed that everyone knows how the AGFS system works, since most Couriers get a familiarization in AGFS process when they are in training.

Here's how it would work.

A 2nd day piece is PUPed in downtown LA on a Monday afternoon, destined to downtown NYC. It is taken back to the station and loaded into a MEM 2nd day can (S ASTRA coded). That can is trucked to the ramp (lets presume LAX) for departure on Tuesday AM bound for MEM.

The can arrives in MEM midday Tuesday and is sorted bound for the destination ramp (we can use either EWR or JFK, lets just assume its JFK). The piece arrives at JFK Tuesday late afternoon.

Currently, that piece is sorted early Tuesday evening at JFK, then trucked to the delivering station sometime late Tuesday night or early Wednesday AM. It goes through the Wednesday AM station sort, is loaded on a delivery truck for delivery sometime Wednesday.

The change would occur at the JFK ramp. Instead of having a PM ramp sort, the piece (loaded in the cargo container coming off the flight from MEM) would be run straight through the ramp building onto a truck bound for the Ground terminal. They would then sort the volume with their normal sort, and a Ground driver would make the delivery.

Hope this helps

 

[Ricochet1a]

So,
Express would carry the frt. 2/3 of the way to the destination only to let ground do the actual, final, delivery. Sounds like now you have to pay 2 completely different divisions for the same pkg. What will be the bottom line price to the shipper? Same rate as a ground pkg?

And, how come ground will carry a pkg. 2/3 of the way to it's destination only to have USPS do the final delivery? I can't understand that one either.

The shipper pays the exact same price as they do now. Ground is acting as a cartage agent for Express. There is no reason to give the customer a break just because a different color coded truck is making the final delivery. They are still getting all the "Express" service, just having the final delivery made by a Ground driver. This is why FedEx is going to do this, they get the same revenue, but reduce their cost.

Cartage agents have and are used whenever the cost for the shipper to maintain a network for final transportation to the consignee is prohibitively high. In this case, it isn't prohibitively high, merely more cost efficient to transfer the volume over to a lower overhead service provider. in this case, that lower overhead service provider just happens to be an other opco of FedEx Corporation - how convenient...

Look at that piece of propaganda you received from Fred early in the week. There isn't any direct talk of this change, but the issue of "Quality Driven Management" is behind this. The customer decides what is quality. So, if acceptable quality can be maintained, then it is the responsibility of management to slash operating costs where ever possible. Having a Ground driver make the final "movement" of the 2nd day volume does indeed cut costs for FedEx Corporation while maintaining minimum acceptable quality.

 

[vantexan]

That's what DGO/AGFS is currently doing but I don't see the huge cost savings if Ground is only delivering pkg. I think they'll want customers to completely deal with Ground on everything but overnight deliveries. Ground will move 2 and 3 day regional freight thru it's system and either run extended area freight directly to ramps for shipment to be sorted by Express hubs or drop off can at Express station to be sent to ramp on station truck. The more of the process they put in Ground's hands the bigger the savings. Those regional pkgs will cost FedEx considerably less being shipped on Ground trucks.

 

[Mr. 7]

R1a,
I certainly do appreciate your insight.

 

[oldrps]

In the days before FedEx Ground, RPS had 2 Day and 3 Day services. They stopped these services when FedEx made the purchase. Hard to believe, but Express took volume from Ground.

The two day packages were hauled to the nearest hub at night, it was taken to the airport in the morning where it was flown to a central sorting location, I think Indianapolis. It was sorted in the late morning, early afternoon and flown to the airports near the RPS hubs late in the afternoon where it was sorted and loaded to the destination trailers. The three day packages moved by ground and only flew the three day that was four or more days away.

This is nothing new for FedEx Ground and they could easily start it back up. I would guess now with their much improved service levels versus the old RPS days, they would truck a lot more than they did back in the day.

 

[Ricochet1a]

That's what DGO/AGFS is currently doing but I don't see the huge cost savings if Ground is only delivering pkg. I think they'll want customers to completely deal with Ground on everything but overnight deliveries. Ground will move 2 and 3 day regional freight thru it's system and either run extended area freight directly to ramps for shipment to be sorted by Express hubs or drop off can at Express station to be sent to ramp on station truck. The more of the process they put in Ground's hands the bigger the savings. Those regional pkgs will cost FedEx considerably less being shipped on Ground trucks.

So just how is Ground supposed to get a package moved in 2 days betwen LAX and JFK? Frankly, you don't know what you are talking about here. By attempting to have Express split out non-overnight volume which can be moved via Ground methods and that which cannot - would take too much time. How are stations supposed (under your misinformed supposition) to split out volume for Ground to move during the reload? The savings are enough for FedEx Corp. by taking delivery off of Express Couriers.

Customers ALREADY have the option at WSC's and Office locations to choose between Ground and Express for the movement of their shipment. They give transit time quotes at the same time they give shipping charge information. The customers ALREADY take care of making the decision as to which service is to be used to do the primary movement. Why should there be further waste of time in differentiation between which method is to be used for cross country movement.

Express already uses trucks BETWEEN ramps to move non-overnight volume, if there is sufficient volume to justify a CTV run. The larger ramps have MULTIPLE trucks running to destination ramps (bypasing hubs) that are within 20 hours driving time (allowing enough time at the destination ramp to put the volume through their PM sorts).

Some stations have enough 2nd day volume on Thursdays and Fridays that they send trucks DIRECTLY to MEMH for sort. That volume never even makes it to a departure ramp - it is bulk loaded into a trailer on Thursday or Friday afternoon, and driven directly to MEMH, where it is sorted then distributed in time to make the destination ramps' Sunday afternoon sorts.

There are things which one can make informed guesses about - however here it is clear you don't have a working knowledge of how the AGFS system moves freight and utilizes CTV's to get as much volume as possible off the jets. That budget squeezing has already been done.

 

[vantexan]

That has already been done for Express, but they want to reduce the costs and trim Express. Ground guy in L.A. picks up 2 day pkg for New York, brings to Ground facility, put in can and run to Express ramp or if too far away taken to Express station where it goes to ramp on Express truck. Freight unloaded in Memphis where sorting stations have separate can set up for Ground. Goes back out on plane to ramp where it's either pupped by Ground or taken to Express station where it's retrieved by Ground there. Might go to a central Ground facility where it's sorted to right Ground station. Meanwhile all regional Ground shipments are completely handled by Ground, greatly reducing FedEx per pkg costs. Guess we'll see how it shakes out but I'm betting they'll go for most bang for buck.

 

[Ricochet1a]

That has already been done for Express, but they want to reduce the costs and trim Express. Ground guy in L.A. picks up 2 day pkg for New York, brings to Ground facility, put in can and run to Express ramp or if too far away taken to Express station where it goes to ramp on Express truck. Freight unloaded in Memphis where sorting stations have separate can set up for Ground. Goes back out on plane to ramp where it's either pupped by Ground or taken to Express station where it's retrieved by Ground there. Might go to a central Ground facility where it's sorted to right Ground station. Meanwhile all regional Ground shipments are completely handled by Ground, greatly reducing FedEx per pkg costs. Guess we'll see how it shakes out but I'm betting they'll go for most bang for buck.

The only way you are going to understand how your logic is flawed is to do a time-motion study of the package.

Step one- Ground guy picks up package and takes back to Ground terminal - STOP.

First off, Ground can't load Express cans, they can unload them, but can't load them. There are FAA requirements for security requirements for cargo containers prior to loading on aircraft, training requirements for the handlers loading the cans, there has to be qualified DG Agents at the location to spot and process any DG (declared or hidden). Once a can comes off an aircraft, the FAA doesn't care who unloads it, they only care if the processing takes place in a secured location, then the only requirement is that the employees be security cleared for the level of access they have to the aircraft.

"... or if too far away taken to Express station where it goes to ramp on Express truck".

Here I know you don't understand AGFS, so no point in going any further. Are the CTV bound for the ramps in the afternoon supposed to wait for freight coming in from Ground terminals? You're kidding, right??? The reload operations are already timed to the point where returning routes have just enough time to all get in, get their freight unloaded, get it sorted into the correct outbound cans and the CTVs loaded and departed to the ramps.

You've introduced a myriad of extra handling exceptions in your scheme which can't possibly be done on either a time basis or efficient cost basis. This is why the movement of freight through the AGFS system will be unaffected - it is already time optimized to the limit - there is no room for additional fidgeting with packages.