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FedEx Announces $1.7bil Restructuring  
User currently offlineLAXintl From United States of America, joined May 2000, 24729 posts, RR: 46
Posted (1 year 9 months 5 days 21 hours ago) and read 14433 times:

Details about the much anticipated restructuring are being revealed at the annual investors and lenders meeting.

Fedex has revealed it intends to reduce cost and boost profits by $1.7Bil within 3-years.

In the face of slowed global demand that has seen customers shift to cheaper options, FedEx plans shake up of its Express division and Services division.

Biggest changes:
o $700mil savings - Dispose of 5,000 trucks and reconfigure the companies delivery networks
o $400mil savings - Consolidating back office operations, and reduce number of facilities
o $300mil savings - Ground or replace older less efficient aircraft - net flying reduced by 3%

Company anticipates it will need shed its workforce by "several thousand", primarily with a buyout program.

Keen focus will be on the bottom line to improve yields, build profitable market share, and leverage its network and various product offerings in face of anemic global demand forecast to deliver the best value proposition for customers.

Some other changes announced are that CEO of FedEx Ground will retire.


Story:
http://www.sfgate.com/business/bloom...-Profit-Growth-Plan-in-3935780.php

Investor details:
https://edge.media-server.com/m/s/w8f957yq/p/ypfzvrd3/lan/en

=


From the desert to the sea, to all of Southern California
39 replies: All unread, showing first 25:
 
User currently offlinegsoflyer From United States of America, joined May 2001, 1093 posts, RR: 1
Reply 1, posted (1 year 9 months 5 days 21 hours ago) and read 14355 times:

Wow, so how will this affect a hub like GSO where the hub opening has been severely delayed.

User currently offlineAeroWesty From United States of America, joined Oct 2004, 20322 posts, RR: 63
Reply 2, posted (1 year 9 months 5 days 21 hours ago) and read 14267 times:

From the linked article:

"The size of the target reflects FedEx’s view that the move of some customers to ground, freight and even ocean shipping is permanent and not a temporary change linked to a slowing economy."

I'm more optimistic than this. Businesses have very short memories, and as soon as there's a competitive advantage to ship by air instead of ground, freight or ocean, they'll ship by air. Ground isn't even that cheap. A 14-lb. box someone sent me from Wisconsin last week cost them $65 to ship FedEx Ground to Oregon. We were both thinking it couldn't possibly cost more than 25 bucks when we first talked about the shipment.



International Homo of Mystery
User currently offlineLAXintl From United States of America, joined May 2000, 24729 posts, RR: 46
Reply 3, posted (1 year 9 months 5 days 21 hours ago) and read 14159 times:

You have to remember that air has gotten ever more expensive over the years primary due to fuel, while ships have remained pretty steady thanks to growing efficiency in size and speed.

In the international arena a whole new generation of vessels are entering the market.

Supersize container ships (known as “Post-Panamax” and “Super-Post-Panamax”) are hitting the market that are not only larger, but faster also. Not only do have per tonne operating cost as much a 45% lower, they are able to shave a day or two off the week-long Trans-Pacific crossing.
Add in the benefits of the Panama Canal widening finished by 2015, these super ships will be able to deliver directly to East Coast US quicker then ever before.

So unless if an item is super time critical to move by air, ships are definitely becoming ever more competitive for international freight.

Domestically air is competing to a greater degree with trains and trucks again. Air cost have rise faster then ground cost.
Even UPS now moves growing volume of its own domestic stuff on rail as the cost is very compelling versus air.

So I think there truly could be a paradigm shift by growing number of clients willing to forgo air in favor of other forms of delivery.



From the desert to the sea, to all of Southern California
User currently offlineAeroWesty From United States of America, joined Oct 2004, 20322 posts, RR: 63
Reply 4, posted (1 year 9 months 5 days 21 hours ago) and read 14059 times:

Quoting LAXintl (Reply 3):
So I think there truly could be a paradigm shift by growing number of clients willing to forgo air in favor of other forms of delivery.

I thought about that while writing my post, then remembered FedEx's commercial where their nonstop out of China vs. UPS' one-stop, created higher value to their shipping base.

We've all heard of paradigm shifts in the past in regards to transportation. The first fuel crisis in the 1970s brought out predictions that we'd never see large passenger vehicles again, until SUVs hit the market in the '90s with better fuel economy than their predecessors, and were a sudden hit.

Will advances in aircraft and engine technologies allow the same, to make air shipments competitive to ground and ocean when it means the difference of making a sale or not? I guess time will tell.



International Homo of Mystery
User currently onlineStitch From United States of America, joined Jul 2005, 30424 posts, RR: 84
Reply 5, posted (1 year 9 months 5 days 21 hours ago) and read 14031 times:
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Quoting LAXintl (Thread starter):
$300mil savings - Ground or replace older less efficient aircraft - net flying reduced by 3%

The 727-200F fleet is scheduled to be gone by 2015, so I am guessing accelerated retirements of the MD-10-30 as the 767-300F arrives?


User currently offlineLAXintl From United States of America, joined May 2000, 24729 posts, RR: 46
Reply 6, posted (1 year 9 months 5 days 20 hours ago) and read 13922 times:

Well back in June they already announced 50 aircraft retirements.
Fedex To Retire 50-aircraft; Establish Japan Hub (by LAXintl Jun 4 2012 in Civil Aviation)

I'm sure more details will come out in the coming weeks what today's announcement means fleet wise.

I know one of the investor slides from today said air focus was on "premium service traffic", so there seems to be a concerted move to shift lower value traffic away from its air network towards ground.



From the desert to the sea, to all of Southern California
User currently offlineGiancavia From Vatican City, joined Feb 2010, 1308 posts, RR: 0
Reply 7, posted (1 year 9 months 5 days 20 hours ago) and read 13726 times:

Will Monarch still be doing the maintenance on FEDex planes. I enjoy watching them in Luton, Since they test them and lift up early its quite the site to see.

User currently offlineimiakhtar From , joined Dec 1969, posts, RR:
Reply 8, posted (1 year 9 months 5 days 19 hours ago) and read 13598 times:

Quoting LAXintl (Reply 6):
I'm sure more details will come out in the coming weeks what today's announcement means fleet wise.
http://api.ning.com/files/bn*4uy1zFq...iqK2Ek4w/FedExsixyearfleetplan.jpg



User currently offlineblueflyer From United States of America, joined Jan 2006, 3902 posts, RR: 2
Reply 9, posted (1 year 9 months 5 days 19 hours ago) and read 13417 times:
Support Airliners.net - become a First Class Member!

Quoting LAXintl (Thread starter):
Dispose of 5,000 trucks and reconfigure the companies delivery networks

Is that code for they're going to, finally, integrate express and ground operations?



I've got $h*t to do
User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12128 posts, RR: 52
Reply 10, posted (1 year 9 months 5 days 19 hours ago) and read 13409 times:

Quoting imiakhtar (Reply 8):
imiakhtar

I think they meant the B-767-300F, not the listed -200F. It is interesting to see the A-306F and MD-11F fleet begins retirement in 2018. Total capacity also decreases by more than 12%.


User currently offlineual747-600 From United States of America, joined Sep 1999, 577 posts, RR: 0
Reply 11, posted (1 year 9 months 5 days 19 hours ago) and read 13374 times:

In looking at the chart, why wouldn't they keep the newer MD-11F's and get rid of the older, and I would think, less efficient MD-10's? Parts for the ones they keep?

UAL747-600


User currently offlineHPRamper From United States of America, joined May 2005, 4036 posts, RR: 8
Reply 12, posted (1 year 9 months 5 days 17 hours ago) and read 13091 times:

Quoting gsoflyer (Reply 1):
Wow, so how will this affect a hub like GSO where the hub opening has been severely delayed.

Well, physically the "hub" at GSO will still be there, waiting for the volume to come back. It may never, we don't know.

Quoting Stitch (Reply 5):
The 727-200F fleet is scheduled to be gone by 2015, so I am guessing accelerated retirements of the MD-10-30 as the 767-300F arrives?

The 727s will be gone before 2015. Mark my words. And the company does not seem to be retiring the -30s any faster than the -10s, although the A310 is leaving the fleet as fast as the 767s come online.

Quoting LAXintl (Reply 6):
Well back in June they already announced 50 aircraft retirements.

Mostly aircraft that were already parked - it was just making things official.

Quoting blueflyer (Reply 9):
Is that code for they're going to, finally, integrate express and ground operations?

No. There is no way to do that without 1. mass layoffs and 2. mass chaos. Fedex is quickly retiring older, diesel-guzzling larger vans - the boxy ones we are all used to seeing - and acquiring more fuel-efficient Sprinter vans to replace them. Routes are also being optimized - there is a lot of inefficiency in the system because routes are still being run the way they were ten years ago.

Quoting ual747-600 (Reply 11):
In looking at the chart, why wouldn't they keep the newer MD-11F's and get rid of the older, and I would think, less efficient MD-10's? Parts for the ones they keep?

The chart shows a hurried retirement of the MD10s. MD11s will probably end up being retired because internationally they are being replaced by the 777s, and domestically the capacity simply isn't needed. FX has no problem with an upgauge in volume if there is also a fuel savings (see the 757 replacing the 727) but in this case there is not.


User currently offlineaa61hvy From United States of America, joined Nov 1999, 13977 posts, RR: 57
Reply 13, posted (1 year 9 months 5 days 16 hours ago) and read 12905 times:

Quoting blueflyer (Reply 9):
Is that code for they're going to, finally, integrate express and ground operations?

That won't happen any time soon, thank God.

Ground drivers are contractors/small business owners. Express are salaried/hourly.

If you merge the two together a la UPS you will lose so much accountability and service while increasing damages per 1,000 boxes. FedEx will not merge GND and EXP as long as the current executive team is in place.



Go big or go home
User currently offlinenyc2theworld From United States of America, joined Mar 2007, 662 posts, RR: 0
Reply 14, posted (1 year 9 months 5 days 16 hours ago) and read 12895 times:

Quoting aa61hvy (Reply 13):
That won't happen any time soon, thank God.

Ground drivers are contractors/small business owners. Express are salaried/hourly.

If you merge the two together a la UPS you will lose so much accountability and service while increasing damages per 1,000 boxes. FedEx will not merge GND and EXP as long as the current executive team is in place.

Also as soon as they merge GND and EXP no one will be covered by the Railroad Labor Act like EXP is. This is why UPS was pushing to get FedEx reclassified because EXP is technically an airline that has ground ops, vs a delivery service with planes.



Always wonderers if this "last and final boarding call" is in fact THE last and final boarding call.
User currently offlineaa61hvy From United States of America, joined Nov 1999, 13977 posts, RR: 57
Reply 15, posted (1 year 9 months 5 days 16 hours ago) and read 12824 times:

Quoting nyc2theworld (Reply 14):
Also as soon as they merge GND and EXP no one will be covered by the Railroad Labor Act like EXP is

Helluva point that I forgot.

On top of it, Ground drivers want to keep what they have. I worked super closely with around 7 ground drivers in my past life, and they loved being contractors. They only dealt with the route owner, rarely with FX management.
Plus some of them make good $ (more than EXP drivers) because most GND drivers are paid per on time box (pick up and deliveries). So it's a huge incentive for them to work hard and get things delivered.



Go big or go home
User currently offlineCompensateMe From United States of America, joined Jan 2009, 1031 posts, RR: 0
Reply 16, posted (1 year 9 months 5 days 16 hours ago) and read 12674 times:

Quoting LAXintl (Reply 3):
Domestically air is competing to a greater degree with trains and trucks again. Air cost have rise faster then ground cost.
Even UPS now moves growing volume of its own domestic stuff on rail as the cost is very compelling versus air.

So I think there truly could be a paradigm shift by growing number of clients willing to forgo air in favor of other forms of delivery.

UPS has long integrated its air operations into its ground operations. For example, an overnight package from S.F. to L.A. is hauled by truck, as is a third-day package from Chicago to L.A. UPS keeps packages on the ground as long as possible to still meet its guarantee. Meanwhile, a third-day (“saver”) FedEx package from Chicago to Indy is flown overnight; if volume’s light, you’ll get it the next day, otherwise it’ll stay in the warehouse.

FedEx Air operation uses highly-compensated FedEx Air drivers whereas the Ground (former RPS) operation uses a contractor model. Concerns that an integrated company may not be covered by the RLA have delayed FedEx from integration. When it became clear that true Ground employees (part-timers that load trucks) were increasingly in favor of unionization, FedEx gave them medical benefits to compete with UPS. It's a very big concern. The Ground operation has big margins for the company, unlike the air.

UPS shifted somewhat away from the rail model in the late 1990s/early 2000s as it and FedEx Ground competed on speed (sleeper teams move faster than trains). With increased fuel costs, UPS is adding a bunch of 53' trailers that can be double-stacked on rails. It's placed pressure on FedEx, which has -- finally -- responded with some rails of its own (although I've never actually seen them in action).

Quoting aa61hvy (Reply 15):
On top of it, Ground drivers want to keep what they have. I worked super closely with around 7 ground drivers in my past life, and they loved being contractors. They only dealt with the route owner, rarely with FX management.
Plus some of them make good $ (more than EXP drivers) because most GND drivers are paid per on time box (pick up and deliveries). So it's a huge incentive for them to work hard and get things delivered.


Uh, no.

Contractors (or "Independent Service Providers" as FedEx calls them) own multiple routes and are responsible for hiring drivers to run them. Most FedEx Ground drivers earn about $600 per week, regardless of how many hours they work, with limited benefits (no medical, no retirement... usually just some vacation & holiday pay, with holiday bonuses to make-up for long seasonal work weeks) -- there's tremendous turnover. In comparison, the average UPS driver earns twice that, plus receives medical & retirement benefits. As for the ISP... many do very well, but plenty have gone bankrupt (remember, the ISP pays for the truck, maintenance, gas, uniforms, is responsible for covering the routes should employees no-show, etc.) Most have been happier since FedEx modified the model several years ago, though.

[Edited 2012-10-10 18:48:03]


Hypocrisy: "US airlines should only buy Boeing... BTW, check out my new Hyundai!"
User currently offlineHPRamper From United States of America, joined May 2005, 4036 posts, RR: 8
Reply 17, posted (1 year 9 months 5 days 5 hours ago) and read 8942 times:

Quoting CompensateMe (Reply 16):
Meanwhile, a third-day (“saver”) FedEx package from Chicago to Indy is flown overnight; if volume’s light, you’ll get it the next day, otherwise it’ll stay in the warehouse.

A route like this is now trucked. Even overnight packages on such a short stage length are trucked to save money these days. Just one example, overnight packages to the East Coast that are shipped from MSP on Friday night are put on a truck to EWR so as to arrive before the Sunday night sort. It was long ago realized that driving on the ground is much more cost-effective.


User currently offlineneveragain From , joined Dec 1969, posts, RR:
Reply 18, posted (1 year 9 months 5 days 5 hours ago) and read 8737 times:

Quoting gsoflyer (Reply 1):
Wow, so how will this affect a hub like GSO where the hub opening has been severely delayed.

I'd say doesn't look promising with that fleet plan.


User currently offlineHPRamper From United States of America, joined May 2005, 4036 posts, RR: 8
Reply 19, posted (1 year 9 months 5 days 4 hours ago) and read 8060 times:

Quoting neveragain (Reply 18):
I'd say doesn't look promising with that fleet plan.

I tend to agree - unless the domestic economy explodes at some point. Turns out the construction of GSO was badly timed. Still nothing close to the disaster that would have been FX taking delivery of the A380 before that order was cancelled.


User currently offlineLAXintl From United States of America, joined May 2000, 24729 posts, RR: 46
Reply 20, posted (1 year 9 months 5 days 2 hours ago) and read 7446 times:

President of the Express division was on CNBC last night.

He made a few points -

o There has been a real shift in demand globally. Not just drop in trade volumes, but interest by customers seeking cheaper options. Boats and ground transport are seeing this growth.
o This is mostly OK for FedEx. Its more affordable ground division is ready, and happens to be a more profitable segment anyhow for the company.
o Ground based delivery is reliable and timed by the day. Headed towards being timed to the minute as air is.
o Long term sees FedEx growing freight forwarding especially overseas to partner with business clients and provide them a complete transportation solution beyond just air. Could see FedEx booking sea freight for its customers. Already have a division (FedEx Trade Networks) that works with third-party shippers on behalf of clients.
o Don't expect much growth in 2013. Maybe 2014 sees improvement. But if things were to pick up fast can always hold onto aircraft and trucks longer.
o Restructuring is also good opportunity to improve technology and review overall operations. Can do more with less.
o Expects virtually all employee reductions to be by attrition or voluntary buyouts.

=



From the desert to the sea, to all of Southern California
User currently offlinegsoflyer From United States of America, joined May 2001, 1093 posts, RR: 1
Reply 21, posted (1 year 9 months 5 days 2 hours ago) and read 7192 times:

To be honest, I don't understand why FedEx maintains a feeder presence at RDU, CLT, AVL, ROA and why they don't focus them all in GSO and ramp the operation up to a feeder for the region type of thing at minimum.

User currently offlineJohnJ From United States of America, joined Jun 2000, 1655 posts, RR: 2
Reply 22, posted (1 year 9 months 4 days 18 hours ago) and read 5265 times:

There was an interview with Fred in today's Commercial Appeal:

http://www.commercialappeal.com/news...fred-smith-backs-efforts-to-boost/


User currently offlineHPRamper From United States of America, joined May 2005, 4036 posts, RR: 8
Reply 23, posted (1 year 9 months 4 days 17 hours ago) and read 5159 times:

Quoting LAXintl (Reply 20):
Long term sees FedEx growing freight forwarding especially overseas to partner with business clients and provide them a complete transportation solution beyond just air. Could see FedEx booking sea freight for its customers. Already have a division (FedEx Trade Networks) that works with third-party shippers on behalf of clients.

Trade Networks already books sea freight with third parties. Not sure why he mentioned this as a "possibility."

Quoting gsoflyer (Reply 21):
To be honest, I don't understand why FedEx maintains a feeder presence at RDU, CLT, AVL, ROA and why they don't focus them all in GSO and ramp the operation up to a feeder for the region type of thing at minimum.

That was sort of the idea originally, but now MEM is operating at much less than capacity so there is no reason to spin off freight to a secondary hub. In any case the area you refer to, basically the Piedmont, while populous is just not big enough to warrant or support flights to even major markets across the country or internationally nor is there enough freight traveling within the region to justify even a small hub.

GSO originally was supposed to be the hub for the entirety of area from about Washington DC, south to Florida and west to around the western border of Alabama. Fedex wants its regional hubs to be the main transit for overnight packages within their respective regions while MEM and to a lesser extent IND handle the transit of inter-regional freight as well as 2- and 3-day cargo. For instance if someone ships overnight from Seattle to Los Angeles, this package never touches MEM but transits OAK instead. You suggest what would amount almost to a North Carolina hub and there is just not enough express traffic to do that when even states like Texas and California do not sustain hubs on their own merits.


User currently offlineLAXintl From United States of America, joined May 2000, 24729 posts, RR: 46
Reply 24, posted (1 year 9 months 4 days 16 hours ago) and read 5070 times:

I believe the way I took his comment was that FedEx under its own umbrella could utilize sea freight as an option for its clients directly, and not simply act as a logistics broker.


From the desert to the sea, to all of Southern California
25 HPRamper : That would entail either buying ships or wet-leasing would it not? In any case...that would seem to go against the whole tenet of Fedex. Shipping som
26 gsoflyer : Well, I mean right now. GSO has flights to MEM, IND, EWR, ORF, BQN and Mountain Air Cargo to EWN and ILM. So, with RDU having daily flights to MEO (o
27 LAXintl : Simply make a block-space agreement with one or more of the big container shipping companies such as Evergreen, NYK, APL, COSCO, etc.. FedEx could of
28 aa61hvy : That is purely based on who (route owner) they report to. The drivers I used to work with had benefits. Source for that? Do you know what service? As
29 HPRamper : Those usually are not full sort ops. They are often shared flights with maybe a transload. For instance BIL will show as having connecting flights to
30 Darksnowynight : How are those working out for deliveries? We have a bunch ourselves for ramp work & local parts x-fer. Personally, I think they're great. Your gu
31 Post contains images F9animal : I have heard some negative talk about this restructure. But, we should be thankful that the company is being proactive! Some companies wait till the l
32 HPRamper : They can basically fit just as much freight as the old ones - Express does not normally bulk out its trucks like Ground and UPS do - and while a gust
33 gsoflyer : That's what I'm saying, consolidating feeder ops into centralized locations seems like it would cut costs. For instance, why fly into RDU with a load
34 JohnJ : With regard to the rail question, a Google search on "fedex piggyback trailer" yields a fair number of YouTube videos depicting trains carrying FedEx
35 KC135TopBoom : Shipping by rail is one of the cheapest way to move freight there is. I believe it is the second method of shipping only to shipping by barge. Correc
36 Trucker : That's surprising. When you order something online the shipping doesn't cost anywhere near that much. How does that work exactly? Does the ISP buy th
37 HPRamper : Private shippers generally pay full price. Businesses that are passing on the cost to the consumer almost always have a contract with Fedex in which
38 HPRamper : I also heard earlier today from a person with access to information that FX is now down to around 28 active 727s, and sometime around the beginning of
39 CompensateMe : No doubt FedEx Air utilizes the ground as much as possible, but only a small percentage of its volume is carried in this manner as it lacks the infos
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