FedEx Corp. will use third-party aircraft capacity to handle less-urgent shipments that don’t need to move on the company’s own planes, the company’s president and CEO said.
In addition, FedEx Express, the company’s air and international unit, will implement a new U.S. network design for pickup and delivery services. That will save $300 million annually once it is fully implemented, said Raj Subramaniam.
The moves are part of a global initiative to integrate Express’ ground delivery operations, Subramaniam told a Citi Global Industrial and Mobility Conference in Miami late last week.
There will be an increasing demand for less-urgent, deferred shipments, Subramaniam said. In the future, only goods with urgent delivery schedules will move on FedEx (NYSE: FDX) aircraft, he said. This aligns with a long-term strategy to permanently ground a portion of the company’s aircraft and supporting routes, he said.
The steps are part of a broad program known as Drive, which the company said will yield about $4 billion in savings by its 2025 fiscal year, which begins June 1, 2024. This is on top of $1 billion in permanent cost savings for its current 2023 fiscal year. Most of those savings have been targeted at Express.
The company plans to launch an update on Drive on April 5 in New York City. At the meeting, investors and analysts can expect to get a granular feed as to what the company is doing to reach those goals. “We have more than 100 separate initiatives all within a line of sight,” Subramaniam said.
The company has also identified $2 billion in annual savings starting in fiscal 2025 from Network 2.0, which effectively brings to an end the siloed operating model of the past 50 years and replaces it with a unified and integrated network.
FedEx has chosen Alaska and Hawaii as key testing grounds to merge FedEx Express and Ground operations. It is expected that similar initiatives will be rolled out across the contiguous 48-state network.
The company has eliminated 12,000 positions since last June, the most recent move being a more than 10% reduction in headcount of global officers and directors. Subramaniam would not comment on whether the company is now right-sized to meet current demand
Captain Obvious
Jeff Bezos is trying to bring all “subcontracted” airlines he is using under one umbrella for efficiency and cost savings in the long run. FredEx is trying to do the opposite… Amazon can buy FredEx 5X over for cash but this imbecle, Subramaniam, seems to want the efficiency of India and it’s companies… (which is not).
Fedex seems to own their pilots’ union, ALPA. And the pilots, most from the military, seem to believe that when management says jump, they are supposed to say “how high” and jump. These former and current military pilots have put their lives on the line for their country but afraid to stand up for their families for better salary and work rules. I have never seen a bunch of pilots so afraid to use their clout to get a better CBA (collective bargaining agreement) than this group.
So much for the SCOPE clause in the current and future contract. Goes to show that judges, attorneys, and union leadership can be bought off to get what you want. (My personal opinion)
Tyler Hawkins
How does combining ground and express opcos not violate Fedex’s RLA status with the government?? Ups better challenge this in federal court as unfair competition
John
Looks like I’m going to get laid off.
Harry
Ok. What does this mean for FedEx express employees if your giving there work to ground ??
Rita
Sounds like the way FedEx started it’s operations. Very few routes going out but covering a massive area to get pkgs. delivered. That’s exactly how DHL does it!
Ben
If they make all of fedex frontline employees go “contractor” the company will turn worse than it already has which is already horrible. Corporate greed will bite them in the end hopefully.
Paul
FedEx Express also, did not need to pay out tens of millions of dollars for corporate bonuses. And were the billions of dollars spent on the Indy and Memphis hubs really necessary?