FEDEX will become a leaner enterprise in the second half when it reduces its air services and sheds daytime flying that was tied to its expiring US Postal Service (USPS) contract, reports New York's FreightWaves.
'We're putting ourselves in a position to capitalise on a stronger market, which we're simply not seeing right now,' said chief financial officer John Dietrich.
fedex has experienced 10 consecutive quarters of negative growth in US package volumes.
'We're doing everything to rationalise our capacity with the volumes and the demand we're seeing across all our operating companies,' he said.
'The USPS situation will allow us to better adapt to a changing environment in the market because we will not be as wedded to the daytime operations on the postal service contract,' said Mr Dietrich.
The company said the postal service business was a US$400 million drag on profit for the current fiscal year.
Brandon Oglenski at Barclays Bank in March estimated FedEx could cut 50 per cent of its daytime network capacity without the postal service commitment, saving the company $1.5 billion per year.
Through fiscal year 2025, FedEx has targeted structural cost savings of $700 million in the air network. FedEx first outlined its Tricolor strategy for streamlining the air network a year ago.
It has also temporarily parked about three dozen aircraft because of the weak parcel and international shipping demand.
Tricolor intends to align the express network with various product categories and demand, but fleet segregation along those lines is just beginning, Mr Dietrich said.
'We're not going to see huge results in Tricolor certainly not this year, and we'll see some benefits in the next year. So it's going to be some lead time to get it fully up and running. There's some investment we're making,' he said.
More downsizing is planned for FedEx Freight, the less-than-truckload business, as the company focuses on more profitable customers. FedEx recently said it will close an additional seven freight facilities in the near future after closing 29 last August, while also expanding door counts in other facilities across its network.
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'We're putting ourselves in a position to capitalise on a stronger market, which we're simply not seeing right now,' said chief financial officer John Dietrich.
fedex has experienced 10 consecutive quarters of negative growth in US package volumes.
'We're doing everything to rationalise our capacity with the volumes and the demand we're seeing across all our operating companies,' he said.
'The USPS situation will allow us to better adapt to a changing environment in the market because we will not be as wedded to the daytime operations on the postal service contract,' said Mr Dietrich.
The company said the postal service business was a US$400 million drag on profit for the current fiscal year.
Brandon Oglenski at Barclays Bank in March estimated FedEx could cut 50 per cent of its daytime network capacity without the postal service commitment, saving the company $1.5 billion per year.
Through fiscal year 2025, FedEx has targeted structural cost savings of $700 million in the air network. FedEx first outlined its Tricolor strategy for streamlining the air network a year ago.
It has also temporarily parked about three dozen aircraft because of the weak parcel and international shipping demand.
Tricolor intends to align the express network with various product categories and demand, but fleet segregation along those lines is just beginning, Mr Dietrich said.
'We're not going to see huge results in Tricolor certainly not this year, and we'll see some benefits in the next year. So it's going to be some lead time to get it fully up and running. There's some investment we're making,' he said.
More downsizing is planned for FedEx Freight, the less-than-truckload business, as the company focuses on more profitable customers. FedEx recently said it will close an additional seven freight facilities in the near future after closing 29 last August, while also expanding door counts in other facilities across its network.
SeaNews Turkey