FedEx 3Q earnings tumble 75%

[MrFedEx]

There have been watch lists because they have been shown to me by a friend who is in management. If you speak-up about unions or distribute flyers etc. you are on the list and a manager is assigned to keep track of your activities. This was 7 years ago, so it may have been discontinued because it leaked or somebody let them know it was illegal. I would bet it's still continuing.

We'll have to agree to disagree on how couriers feel about the IBT. Where I work, the majority have had it with the low pay, long top-out times, and general lousy treatment. The PPP was the final straw for many of us, and I notice you didn't respond to my questioni on how killing the traditional plan was an example of Fred keeping his commitment to us.

Yes, the lousy economy will hinder unionization, but Fred's payoff will be further reduced morale and problems if he doesn't address the many issues hourlies have. And that's whether we go union or not. Even when the economy was strong, Smith kept up the takeaways, justifying them by "needing to expand into International markets", "buying new and more efficient aircraft" and on and on. At some point, upper management needs to remember that there are other employees who matter at FedEx besides pilots and executives. Somewhere along the line, that's been forgotten. And they can spout PSP, and "FedEx Cares" and whatever other feel good manure sounds good, but nobody is buying it anymore. When we view Frontline, many couriers just laugh, and the ops managers say nothing, because they've got nothing they can counter with that says FedEx does give a sheet.

Upper management has completely lost any shred of believability with the average worker, and they still don't realize it. It's kind of pathetic to watch MT3 and his ilk keep spouting the same old crap like we actually believe any of it.

It sounds like you're one of the few good ones and I respect you for that. But Fedex has a long ways to go before they get it straightened out and flying right. A lot of people don't give a damn anymore, and the customer sees it. Fred will get what he pays for, and that won't be good for either the employees or the customers. In the meantime, those shippers will go over to UPS, and I can't blame them for doing so.

[FedEx2000]

Didn't intentionally avoid the pension statement, just forgot to touch on it. Sure, the changes weren't all for the better, but many were also due to legal changes/SOX. I guess i am just glad i still have one and that it wasn't just taken away all together a la United/Enron/insert company here. My advice is to plan your retirement like you don't have a pension, just a 401k/IRA/whatever investments you want and the pension is all gravy. Easier said than done, I know. Hopefully it will be more than the 10 cents a week I might get from social security.

I agree that most of upper mgt is out of touch with the day-to-day operations, but I think it's more due to their macro-view of the company. They are trying to do the best thing for the company as a whole as well as the shareholders (which is the goal of a publicly held company), but that doesn't always translate well to the hourlies. They are well aware that without the hard work/effort of the hourlies, FedEx would not have become the company that it is. (Some would say use to be, not I)
Most of them have come up through the ranks as well, though it is a bit more about who you know than what you know. That's just how the world works. Can't say I blame them that much, I would prefer to have people around me that I know and trust who have come up through the ranks with me and have a vested interest in the company. Not a perfect situation, but I think better than headhunting people from other company's that don't give a darn about the place they work and are just following the money.

It is interesting to the SFA results each year and upper mgt wonders why they score so much lower than local mgt (usually). They assume local mgt has passed the buck and sold them out. May be true in a few places, but usually it's just b/c most of the hourlies are intelligent enough to know where things come from.

I, personally, would like to see FedEx give the hourlies a "FedEx Stimulus" if you will. (If there are no raises this year) $1,000 to each FTer and $500 to the PTers, or something similar. It would be cheaper than raises, but would at least be a good faith effort. Probably not going to happen though for obvious reasons.

It's tragic that some people don't care anymore, especially if it is affecting the customer. I don't care what the issue is, the customers pay the bills and giving them crappy service will guarantee no raises/fewer jobs etc. Taking it out on them is the worst possible solution and counteracts everything that you/I/FedEx stands for. Whatever is bothering you that day, leave it at home/in the station and forget about it while you are in front of the customers. They have problems too, they don't need to hear or care about ours.

As we lose a customer to UPS, they lose one to us. It's a neverending process and the only thing I can do about it is make sure it doesn't happen at my location. Control what you can control my friend! We may not see eye to eye on many things, but you obviously still care and that is a very good thing.

[MrFedEx]

It's nice to have a discussion with someone who actually has a clue about what's going on at FedEx. Please clone yourself and spread a few more examples around through the ranks of management.

Fred pulled a fast one with the PPP, and I won't forget it, nor will most of the hourlies. He didn't have to pull the plug on the old plan, which wasn't very generous either, but he did. Always the opportunist, Fred played-up the financial problems of the passenger airlines, which were having lots of problems, and used that to justify eliminating our pension, even though FedEx was still extremely profitable. ERISA figured into it, but Smith basically made our pension into a non-pension. The portable plan only benefits very senior employees who had already maxed-out under the old plan. New people are hosed, and will have to depend on their 401k's, which aren't making any money now either, especially since the FedEx match is gone. Most of them are actually headed backwards. If and when the economy recovers, expect a mass exodus as couriers who are only there because the job market is so weak, leave for greener pastures.

I'm glad you agree that upper management is severely out of touch, but I disagree that they realize that frontline employees are important too. Actions speak louder than words, and their decisions over the last 10 years send a strong message to us box monkeys that they not only do not care, but that they will throw us under the bus every chance they get if it saves or makes money. There is always a tipping point, and Fred and the upper crust have far exceeded it. His latest games concerning the RLA, the EFCA, and the Boeing scam are openly discussed among the lowly, and Fred is generally thought of in unprintable terms these days.

I like the "stimulus plan", but it needs to be accompanied by some reform of our pension plan if it is going to be an effective anti-union mechanism. Like many others, I'm no big fan of Hoffa and the IBT, but if it means having a job that actually pays me a decent wage and retirement plan, count me in. Hoffa and Smith are both as crooked as a mountain road in the Alps, and they both disgust me, but Hoffa doesn't smell quite as bad as Fred does.

[moreluck]

Why in the world is Fredex suing UPS ???

Every burger joint says they have the best burger....whats the difference here??

[moreluck]

Here's the story.....


FedEx Sues UPS Over ‘Most Reliable’ Claim

Monday, May 04, 2009, Vol. 124, No. 86
ANDY MEEK | The Daily News


Memphis-based FedEx Corp. has gone to court in an attempt to get rival United Parcel Service Inc. to take down TV and print advertising touting UPS as “the most reliable” shipment carrier.
FedEx filed a complaint in U.S. District Court for the Western District of Tennessee Friday asking for a temporary restraining order against UPS. The legal flap concerns UPS’ promotion of a November 2008 Morgan Stanley Parcel Return Survey the Atlanta-based carrier refers to in TV and print ads.
FedEx and UPS spokesmen did not immediately return calls. In its complaint, FedEx uses the wording of a voiceover in the UPS TV ad as one example of why the Memphis shipping giant was rankled enough to go to court.
“If you’re looking for a shipping company who really understands today’s economy, you’d want one that’s helped customers through 20 recessions, had over 400,000 employees worldwide, over a hundred years’ experience and was just ranked the most reliable,” the TV ad tells viewers. “Well, that would be UPS.”
Not quite, FedEx lawyers told its rival in a March 31 letter to UPS lawyer James Harris.
In the 2009 version of the Morgan Stanley survey, FedEx was listed at the top of the “service reliability” category, according to the FedEx complaint. The Memphis company also takes issue with the wording that UPS was “just ranked” the top carrier.
“UPS’ claim that it was ‘just’ ranked most reliable is simply not true,” FedEx senior counsel Bradley Peacock wrote to Harris a few weeks ago. “The ‘survey’ was published in early November 2008, and was obviously based on information compiled prior to that date.
“Moreover, the survey was conducted prior to DHL’s departure from the U.S. domestic market, a factor which would likely have a significant impact on the results if the survey were conducted again today.”
Late last year, UPS and FedEx competitor DHL announced it would end its U.S. domestic operations effective Jan. 30.

[moreluck]

FedEx to take Q4 $900mln charge as recession bites

Wed Jun 3, 2009 5:16pm EDT
* $900 mln goodwill charge, mostly for FedEx Kinko's
* Charge due to weak economic conditions
CHICAGO, June 3 (Reuters) - FedEx Corp (FDX.N: Quote, Profile, Research, Stock Buzz) said on Wednesday that it would record a fourth-quarter impairment charge of $900 million related to two acquisitions that have been hit by weak economic conditions.
The majority of the charge is related to Kinko's, which FedEx bought in 2004 and has been seen as a disappointment by the package delivery giant.
FedEx's announcement came in a regulatory filing with the U.S. Securities and Exchange Commission.
The Memphis-based company said it would record a non-cash goodwill charge of $810 million for the quarter ending May 31 for the home office supply chain, which it bought in 2004 and re-branded first FedEx Kinko's and more recently FedEx Office.
Kinko's has not performed well under FedEx, which analysts have attributed to the fact that it lies outside the package delivery company's area of expertise in the world of shipping.
The remaining $90 million of the goodwill charge is related to the acquisition of less-than-truckload company Watkins Motor Lines -- now known as FedEx National LTL -- in 2006.
Less-than-truckload companies consolidate smaller loads into a single truck. FedEx's acquisition of Watkins was welcomed by analysts at the time. But the business has suffered along with the rest of the U.S. trucking sector, which has struggled with weak volumes since late 2006 and has been battered by the recession.
FedEx said that altogether it should record charges of $1.2 billion for the fourth quarter. The company said that apart from the $900 million goodwill charge, most of those charges have already been announced.
FedEx's main rival United Parcel Service Inc (UPS.N: Quote, Profile, Research, Stock Buzz) owns less-than-truckload company UPS Freight and shipping and office supply chain UPS Stores.
Both UPS and FedEx are seen as bellwethers of U.S. economic activity and have seen their shipping business hit by the recession.

[big_arrow_up]

Originally Posted by moreluck

Here's the story.....


FedEx Sues UPS Over ‘Most Reliable’ Claim

Monday, May 04, 2009, Vol. 124, No. 86
ANDY MEEK | The Daily News


Memphis-based FedEx Corp. has gone to court in an attempt to get rival United Parcel Service Inc. to take down TV and print advertising touting UPS as “the most reliable” shipment carrier.
FedEx filed a complaint in U.S. District Court for the Western District of Tennessee Friday asking for a temporary restraining order against UPS. The legal flap concerns UPS’ promotion of a November 2008 Morgan Stanley Parcel Return Survey the Atlanta-based carrier refers to in TV and print ads.
FedEx and UPS spokesmen did not immediately return calls. In its complaint, FedEx uses the wording of a voiceover in the UPS TV ad as one example of why the Memphis shipping giant was rankled enough to go to court.
“If you’re looking for a shipping company who really understands today’s economy, you’d want one that’s helped customers through 20 recessions, had over 400,000 employees worldwide, over a hundred years’ experience and was just ranked the most reliable,” the TV ad tells viewers. “Well, that would be UPS.”
Not quite, FedEx lawyers told its rival in a March 31 letter to UPS lawyer James Harris.
In the 2009 version of the Morgan Stanley survey, FedEx was listed at the top of the “service reliability” category, according to the FedEx complaint. The Memphis company also takes issue with the wording that UPS was “just ranked” the top carrier.
“UPS’ claim that it was ‘just’ ranked most reliable is simply not true,” FedEx senior counsel Bradley Peacock wrote to Harris a few weeks ago. “The ‘survey’ was published in early November 2008, and was obviously based on information compiled prior to that date.
“Moreover, the survey was conducted prior to DHL’s departure from the U.S. domestic market, a factor which would likely have a significant impact on the results if the survey were conducted again today.”
Late last year, UPS and FedEx competitor DHL announced it would end its U.S. domestic operations effective Jan. 30.

Why don't UPS just bring up another poll or survey that ranks us at the top of the industry? There is usually more than one. FedEx sounds like a sore loser on this one.

[MrFedEx]

Originally Posted by big_arrow_up

Why don't UPS just bring up another poll or survey that ranks us at the top of the industry? There is usually more than one. FedEx sounds like a sore loser on this one.

You are absolutely correct. One would think that FedEx has more to worry about than this kind of crap.

[big_arrow_up]

Originally Posted by MrFedEx

You are absolutely correct. One would think that FedEx has more to worry about than this kind of crap.

It's ridiculous to even compare UPS and FedEx anyway. It's kind of like comparing the Navy and the Coast guard. Doesn't add up.

[moreluck]

Teamsters: FedEx Threatens to 'Destroy' Members of Congress


PR Newswire




Follows Fred Smith Threat to Pull Contracts with Boeing



WASHINGTON, June 5 /PRNewswire-USNewswire/ -- FedEx CEO Fred Smith's arrogant campaign of threats and intimidation continued this week when his top spokesman threatened to take down members of Congress who oppose FedEx's position on a key piece of legislation.
When asked about FedEx's multi-million dollar ad campaign against the legislation that is reported to launch on Tuesday, June 9, top FedEx flack Maury Lane told U.S. News and World Report in a story posted in The White House Bulletin, "I'm going to try to destroy them."

This follows Smith's repeated threats to cancel a $10 billion contract to purchase Boeing 777 planes if FedEx Express workers were moved under the National Labor Relations Act (NLRA).
FedEx clearly threatened in a March 24, 2009 SEC filing, and Smith reiterated in testimony before Congress in May, that its contract to purchase additional aircraft from Boeing is contingent upon its labor relations for all of its employees being governed by the Railway Labor Act (RLA). Under this provision, if Congress dares to grant even a portion of its workers the rights enjoyed by most American private sector employees under the NRLA, FedEx has the right to cancel those purchase orders.

"Fred Smith and FedEx breed a culture of arrogance," said Teamsters General President Jim Hoffa. "First, they cut wages, increase medical insurance premiums and eliminate pension benefits for its employees. Then they try to blackmail Congress with threats to pull the Boeing contract. Now they threaten to destroy the political careers of those who oppose them."

Currently, all workers at FedEx Express are covered by the RLA regardless of whether they have any direct relationship with the operation or maintenance of the air fleet. This includes package delivery drivers, workers at sorting facilities and truck mechanics.

The House of Representatives overwhelmingly passed legislation on May 21 that is a part of the Federal Aviation Administration reauthorization and would place those workers under the NLRA, the statute that protects virtually all other private sector workers. Under the NLRA, workers may organize by individual terminals while the RLA requires a more difficult path to unionization that requires a national vote by every worker at FedEx Express. The reauthorization bill is currently awaiting action in the Senate.
"It's astonishing that Fred Smith and his flacks will go to any length to boost FedEx's profits at the expense of American workers and the economy," said Ken Hall, Director of the Teamsters Package Division. "By threatening to destroy members of Congress, FedEx's efforts to manipulate the American system of government have crossed the line."

SOURCE International Brotherhood of Teamsters

[TechGrrl]

Originally Posted by MrFedEx

Take a look at my post in the FedEx Forums about the real reasons Fred is grounding the planes. Aircraft are usually engineered according to the engine technology available at the time they were designed.As a result, very few aircraft are good candidates for engine swaps. The DC-8 is one of the few exceptions, and was very successfully re-engined with CFM56's. UPS still flies them, as do other cargo carriers.

Actually, UPS has grounded all DC-8's. The engines may be more efficient than the originals, but a 4-engine plane burns more gas than a 2-engine plane. 727's are gone, also, for the same reason. AND, they need 3 people in the cockpit instead of 2. 50% more personnel cost, and pilots ain't cheap.

UPS' real cost advantage over FredEx is the air network. Their airfeed costs are much lower than FredEx because of a more efficient network. Industrial Engineers can be a real pain in the butt sometimes, but this is one area they really earn their keep.

[unionman]

Originally Posted by TechGrrl

Actually, UPS has grounded all DC-8's. The engines may be more efficient than the originals, but a 4-engine plane burns more gas than a 2-engine plane. 727's are gone, also, for the same reason. AND, they need 3 people in the cockpit instead of 2. 50% more personnel cost, and pilots ain't cheap.

UPS' real cost advantage over FredEx is the air network. Their airfeed costs are much lower than FredEx because of a more efficient network. Industrial Engineers can be a real pain in the butt sometimes, but this is one area they really earn their keep.

Yeah but those DC8s were payed for. How much money is UPS going to lose when they get caught with there pants down when the economy picks up. You bean counters can't see past the end of your pencil, you don't know anything about running an airline and you only see numbers. Why did we buy the MD11? Because FEDX had them? Why did we spend millions putting glass cockpits and new engines on 727s and why didn't we take the option for 30 more Airbus 300s for 30 million a piece? Mistake after mistake and the pilots make to much.

[1989]

Originally Posted by unionman

why didn't we take the option for 30 more Airbus 300s for 30 million a piece? Mistake after mistake and the pilots make to much.

Because Obama is gonna make all planes run on solar power by 2012?

[MrFedEx]

Originally Posted by TechGrrl

Actually, UPS has grounded all DC-8's. The engines may be more efficient than the originals, but a 4-engine plane burns more gas than a 2-engine plane. 727's are gone, also, for the same reason. AND, they need 3 people in the cockpit instead of 2. 50% more personnel cost, and pilots ain't cheap.

UPS' real cost advantage over FredEx is the air network. Their airfeed costs are much lower than FredEx because of a more efficient network. Industrial Engineers can be a real pain in the butt sometimes, but this is one area they really earn their keep.

Yes, I'd read that the DC-8's have been retired as have our DC-10's (the MD10 derivative is still flying). I'm not sure if UPS airfeed costs are any less than ours because you are flying the same routes we are in most cases. One big advantage UPS has is more newer 757's and 767's flying on runs where we use MD10's. FedEx is starting to buy 757's to totally eliminate the 727....as far as I know we are still using some of them.

[TechGrrl]

Originally Posted by MrFedEx

Yes, I'd read that the DC-8's have been retired as have our DC-10's (the MD10 derivative is still flying). I'm not sure if UPS airfeed costs are any less than ours because you are flying the same routes we are in most cases. One big advantage UPS has is more newer 757's and 767's flying on runs where we use MD10's. FedEx is starting to buy 757's to totally eliminate the 727....as far as I know we are still using some of them.

No, the airfeed costs actually are lower. Although superficially it appears that we fly the same routes, small differences add up. I was once involved in a project that demonstrated one less airplane equaled over $100 million in annual costs. UPS flys fewer airplanes to cover more volume. I know FedEx IE's are working hard to make up ground, but airplanes are really really really expensive. One airplane = at least 6 pilots + mechanics + fuel + spare parts + yada yada yada.

[TechGrrl]

Originally Posted by unionman

Yeah but those DC8s were payed for. How much money is UPS going to lose when they get caught with there pants down when the economy picks up. You bean counters can't see past the end of your pencil, you don't know anything about running an airline and you only see numbers. Why did we buy the MD11? Because FEDX had them? Why did we spend millions putting glass cockpits and new engines on 727s and why didn't we take the option for 30 more Airbus 300s for 30 million a piece? Mistake after mistake and the pilots make to much.

Sorry, pal, I'm not a beancounter, and I do know what I am talking about. Does the concept of amortization have any meaning to you? Even though a DC-8 or a 727 is "paid for" in the sense there is no outstanding debt left on the purchase, there is still a very high cost of ownership to operate beasts like that. 4 engines burn more fuel than 2, and 3 people in the cockpit is 50% more than 2 people in the cockpit. And each airplane requires at least 3 full crews, usually 4 or more, to cover vacations, and the fact that a pilot is only able to fly 100 hours per month.

As far as "only seeing numbers", when the numbers have as many zeros trailing as airline costs do, it's a good idea to see the numbers first. One extra airplane = approximately $100 million in excess costs. One extra package car on the road, or even one extra feeder driver on the road, is, comparatively, chump change.

And the pilots may make too much money from our lowly point of view, but they have legally negotiated the deal with the company, and that's the way it works in a free market. Go to flight school, accumulate about 1,000 hours in a cockpit, and apply for a job as a pilot. That's also the way it works in a free market. We get to choose what we want to be when we grow up.

[Ricochet1a]

Originally Posted by TechGrrl

No, the airfeed costs actually are lower. Although superficially it appears that we fly the same routes, small differences add up. I was once involved in a project that demonstrated one less airplane equaled over $100 million in annual costs. UPS flys fewer airplanes to cover more volume. I know FedEx IE's are working hard to make up ground, but airplanes are really really really expensive. One airplane = at least 6 pilots + mechanics + fuel + spare parts + yada yada yada.

When it comes to jets, FedEx operates 352 aircraft, and UPS operates 208 aircraft. The specific numbers are as follows (excluding props operated by contractors):
UPS ..................FedEx
747-400: 8....... MD11: 57
747-400BCF: 2 .MD10: 64
MD11: 38......... A300: 63
767: 32 ............A310: 66
A300: 53.......... 757: 22
757: 75............ 727: 80

With the exception of the FedEx 727’s, the fleets are comparable in capability and efficiency in fuel use per cargo ton/mile. The last time I checked (been awhile) the typical cargo aircraft flew just under 80 hours a week, or about 4,000 hours a year. Operating cost per flight hour does vary, but falls between $7,000/hr to $10,000/hr (fuel, maintenance, depreciation, crew). That places the annual operating cost of a cargo aircraft in the ballpark of $30-40 million a year, not $100,000,000. The 747’s may approach $100 million a year in operating costs, but I think the real figure for them is between the $40 million and the $100 million you state (closer to $40 than $100 M).

The 727s are inefficient, but I have to assume that they are a fully depreciated asset, reducing the cost to operate to: fuel, maintenance and aircrew costs. The variance between FedEx and UPS on this is most likely really small, since this is the MAJOR cost incurred by both companies for “air” cargo. I have no familiarity with the UPS air routing system, but I’d have to assume that UPS has to have a greater number of aircraft service two ramps before going to the hub. FedEx does have aircraft make two ramp “stops” before hitting the regional hubs, but this is limited to the greatest extent possible. When you state that UPS uses fewer planes to cover more volume, those fewer numbers have to make more landings on route back to the hub. Every landing costs money. The majority of FedEx aircraft serve a single ramp, they fly to the hubs without making stops en route for additional cargo (majority, not all).

UPS has 2,908 pilots for 208 aircraft, or just under 7 crews for each aircraft. FedEx has 4,678 pilots for 352 aircraft, or 6.6 crews per aircraft. This data is current as of today.

If UPS had a significant advantage in the line haul system for air cargo, FedEx would be out of business in short order. I’m going to go out on a limb and state that the costs per ton/mile for UPS and FedEx are within a few percentage points of each other. FedEx makes it profit on the margin on International air (just under 50% of total revenues). The margin on docs (UPS flats) is also very good for FedEx. Combined with the contract with the USPS, FedEx is able to keep its aircraft operating without any voided positions in the aircraft in most flights.

If one were to compare UPS Air rates to Express rates for similar services, the variation is extremely small. Where FedEx gets its advantage is through its lower labor costs.

[unionman]

Originally Posted by Ricochet1a

When it comes to jets, FedEx operates 352 aircraft, and UPS operates 208 aircraft. The specific numbers are as follows (excluding props operated by contractors):
UPS ..................FedEx
747-400: 8....... MD11: 57
747-400BCF: 2 .MD10: 64
MD11: 38......... A300: 63
767: 32 ............A310: 66
A300: 53.......... 757: 22
757: 75............ 727: 80

With the exception of the FedEx 727’s, the fleets are comparable in capability and efficiency in fuel use per cargo ton/mile. The last time I checked (been awhile) the typical cargo aircraft flew just under 80 hours a week, or about 4,000 hours a year. Operating cost per flight hour does vary, but falls between $7,000/hr to $10,000/hr (fuel, maintenance, depreciation, crew). That places the annual operating cost of a cargo aircraft in the ballpark of $30-40 million a year, not $100,000,000. The 747’s may approach $100 million a year in operating costs, but I think the real figure for them is between the $40 million and the $100 million you state (closer to $40 than $100 M).

The 727s are inefficient, but I have to assume that they are a fully depreciated asset, reducing the cost to operate to: fuel, maintenance and aircrew costs. The variance between FedEx and UPS on this is most likely really small, since this is the MAJOR cost incurred by both companies for “air” cargo. I have no familiarity with the UPS air routing system, but I’d have to assume that UPS has to have a greater number of aircraft service two ramps before going to the hub. FedEx does have aircraft make two ramp “stops” before hitting the regional hubs, but this is limited to the greatest extent possible. When you state that UPS uses fewer planes to cover more volume, those fewer numbers have to make more landings on route back to the hub. Every landing costs money. The majority of FedEx aircraft serve a single ramp, they fly to the hubs without making stops en route for additional cargo (majority, not all).

UPS has 2,908 pilots for 208 aircraft, or just under 7 crews for each aircraft. FedEx has 4,678 pilots for 352 aircraft, or 6.6 crews per aircraft. This data is current as of today.

If UPS had a significant advantage in the line haul system for air cargo, FedEx would be out of business in short order. I’m going to go out on a limb and state that the costs per ton/mile for UPS and FedEx are within a few percentage points of each other. FedEx makes it profit on the margin on International air (just under 50% of total revenues). The margin on docs (UPS flats) is also very good for FedEx. Combined with the contract with the USPS, FedEx is able to keep its aircraft operating without any voided positions in the aircraft in most flights.

If one were to compare UPS Air rates to Express rates for similar services, the variation is extremely small. Where FedEx gets its advantage is through its lower labor costs.

How come FEDX has 2620 Aircraft mechanics and UPS has 920 and getting smaller? FEDX is bringing more maintenance inhouse while UPS outsources everything that isn't bolted down. UPS has a 4 o 1 mechanic to aircraft ratio while FEDX has a 7 to 1.

[TechGrrl]

Your figures are impressive! I'm not going to refute them in detail, just repeat what the results of our project were. Our airfeed costs are lower than FedEx, and that helps offset the higher labor costs we have everywhere else. If our airfeed costs were NOT lower, WE would have gone out of business long ago.

Look at DHL--lower costs than UPS or FedEx, but they still couldn't compete, even with the deep pockets of Deutche Post behind them.

Management skill still counts for something. We used to joke around, while standing in a steaming pile of cock-up, "Hey, we could be working for a POORLY managed company!"

[mungrin]

Mark my words,Fedex is going out of business.Ive been saying it all along.

[Ricochet1a]

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.

[Just Numbers]

Originally Posted by mungrin

Mark my words,Fedex is going out of business.Ive been saying it all along.

How can they be going out of business when you use Kinko's for your Copy needs!!!!!!!

[Ricochet1a]

Originally Posted by Just Numbers

How can they be going out of business when you use Kinko's for your Copy needs!!!!!!!

Kinko's no longer exists... It is FedEx Office. That little change and the write off of the "goodwill" of the Kinko's name cost FedEx about $800 million. Another $800 million has been lost due to the operating losses of "Office" since its purchase almost 5 years ago. This is a case of the "Borg" attempting to "assimilate", and getting a serious case of indigestion.

FedEx would've been better off copying UPS's model of establishing franchises of "FedEx Store", and letting the owners pick up the headache of running the individual stores (much like Ground operates with ICs)...

This is another example of "proof" that Ground's model was established with the primary intent of keeping out the Teamsters. The model of the UPS store existed for a few years before FedEx bought Kinko's. FedEx would've been better off offering franchise operation of "FedEx Store's", and letting the owners take the headaches (much like Ground). Since there wasn't a fear of these stores being organized by unions, FedEx went ahead and purchased Kinko's lock, stock and barrel, and ran them as a separate FedEx operating company (thinking they had the expertise to make it profitable). If Kinko's had some sort of union, that poison pill would've been too much for FedEx to swallow and they would've forgone the purchase.