Virus dents FedEx profit, but says demand for air cargo to surge

FEDEX's third-quarter results for its 2020 fiscal year show that revenue increased to US$17

22 March 2020 - 19:00

FEDEX's third-quarter results for its 2020 fiscal year show that revenue increased to US$17.5 billion, up from the $17 billion posted the previous year's quarter. However, net income fell sharply to $371 million, down from $797 million last year.

The coronavirus outbreak and its effects on global movement hurt demand for FedEx services 'due to its disruption of global manufacturing, supply chains and consumer spending' in the quarter, the company said, reports Memphis Commercial Appeal.

However, FedEx CEO Fred Smith said the logistics giant is 'ready to support increased demand' due to shrinking air cargo capacity caused by the coronavirus fallout.

FedEx saw an influx of shipment requests to China beginning in February as the country had an 'urgent need for stock replenishment,' chief marketing officer Brie Carere said. With a lack of air cargo space still persisting to and from China - capacity had dropped 40 per cent from the same period the year before - FedEx sees demand staying elevated, she added.

Still, FedEx said it expects 'weak global economic conditions will be exacerbated' the next quarter due to the COVID-19 pandemic. FedEx's financial performance is closely linked to how the world is faring economically.

It is mitigating near-term obstacles by retiring older aircraft, managing capacity, and lowering home delivery costs.

Although FedEx has seen positive signs in China, the company is noticing a recent volume decline in Europe due to more businesses closing their doors in response to the coronavirus outbreak, Ms Carere said. The company is deploying the same strategies on the continent as it did in China earlier this year, such as extending transit times and implementing peak surcharges when needed, she added.

FedEx Express' average daily package volume fell from 6.28 million the year-before quarter to 6.25 million this quarter.

FedEx Express made $8.9 billion in revenue and $137 million in operating income this past quarter. That fell from the year-before quarter's $9 billion in revenue and $389 million in operating income.

FedEx Ground, which has been faring better than Express due to the US online shopping boom, posted $5.8 billion in revenue and $355 million in operating income for the quarter. That's up from $5.3 billion and down from $586 million, respectively, the year-before quarter.

Operating costs remain a concern at the ground delivery company. FedEx Ground saw its profits sink the previous quarter partly because of preparations for year-round Sunday delivery and ending its contract with Amazon.


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