Changing business demand: FedEx to realign its resources

FedEx Corporation is an American global courier delivery services company headquartered in Memphis, Tennessee. In 1st quarter 2013, FedEx Corp cut its full-year forecast after a worse-than-expected quarterly profit as customers shift from air express to slower but cheaper modes of shipping.

FedEx Express, the overnight courier services, provides next day air service within the United States and time-definite international service. FedEx Express operates one of the largest civil aircraft fleets in the world and the largest fleet of wide bodied civil aircraft; it also carries more freight than any other airline.

 FedEx express is the biggest source of revenue for the company. To meet the customer domestic and international shipping needs, the company operates the world’s largest cargo airline. Looks like many online buyers and big businesses are willing to wait for a little longer for the goods to arrive. This new mindset of its customers is hurting the company’s express delivery service.

As per the articles the operating income (difference between operating revenues and operating expenses) in the express unit fell 66 percent in the third-quarter. It is not clear as what portion of the reduction in operating income is due to actual revenue and what portion is due to the increase in the operating expenses.

FedEx has said that the express unit had under-performed largely due to weakness in Asia and other international markets and has cut the forecast of the year. FedEx plans to realign its resources to reflect the change in the business demands. FedEx plans to cut costs by cutting the express capacity to and from Asia and is looking at reducing its fleet by retiring its older, less-efficient aircraft, among other options to realign its network.


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