FedEx pioneered the overnight shipping industry in the 1970s, and its air division, FedEx Express, remains the world’s largest cargo airline. Its only real competition comes from UPS and DHL, but DHL primarily relies on contract carriers to perform its flying, and UPS is more reliant on its trucking division than the airline. FedEx, meanwhile, started as an airline that later purchased trucks, and it remains the king of the air cargo industry.
Cargo flights primarily operate in the middle of the night, but due to the size and scale of FedEx’s operation, it does perform some daytime flying as well, particularly in the United States. But amidst general financial struggles and difficult labor relations, FedEx Express is also cutting some of its daytime flights in the United States. Why is FedEx Express doing this?
Overview Of FedEx Express
FedEx Express is the world’s largest cargo airline. It has a fleet of over 350 mainline aircraft, made up of the Airbus A300RF, Boeing 757-200SF, Boeing 767-300F, Boeing 777F, and McDonnell Douglas MD-11F. Additionally, there are over 300 turboprops flying under its FedEx Feeder brand, operated by contract carriers. Combined, this amounts to 799 aircraft, making this the world’s largest cargo airline fleet.
FedEx has hubs all across the world. In the US, it has its national hub in Indianapolis, along with regional hubs in Anchorage, Fort Worth, Greensboro, Miami, Newark, and Oakland. In Europe, it has hubs in Cologne, Liege, London-Stansted, and Paris-Charles de Gaulle. In Asia, it operates hubs in Dubai, Guangzhou, Mumbai, Osaka, Singapore, Shanghai, Taipei, and Tokyo-Narita. However, its most important hub is in Memphis, Tennessee.
Memphis International Airport is home to FedEx’s “Superhub“. This is where FedEx first commenced operations, and it is the company’s largest base of operations. This is due to its location near the mean population center of the United States, which means that FedEx can reach the largest number of people in the shortest amount of time. From Memphis, FedEx operates services across the world, and it is by far the largest airline at this airport.
How Cargo Airlines Operate
Cargo carriers typically pick up their freight in the evening or late-night hours. Consumers and companies tend to prefer their goods to arrive early in the day, and landing in the early morning hours allows cargo to be transported onto trucks for an imminent arrival. Planes arrive at the hub in the evening for sorting and then depart once sorting is done, typically sitting on the ground at the spoke throughout the whole day.
This is not true for all cargo operations, but this is almost universal for carriers like FedEx or UPS. These companies primarily deliver small packages, and they rely heavily on contracts with retailers and businesses. FedEx, UPS, and DHL do operate some daytime flights due to the size and scale of their operations, but overwhelmingly, they perform their operations at night. For FedEx, most of its daytime flights operate to or from Memphis, as this is its largest hub.
|
FedEx Mainline Fleet (Data From Planespotters.net) |
Number |
|---|---|
|
Airbus A300-600RF |
51 |
|
Boeing 757-200SF |
82 |
|
Boeing 767-300F |
147 |
|
Boeing 777F |
59 |
|
McDonnell Douglas MD-11F |
29 |
|
Total |
368 |
Because of how little freighter planes actually fly in a given day, cargo airlines don’t often purchase new aircraft. Instead, they purchase used aircraft from other cargo companies or convert aging passenger aircraft. In the case of FedEx Express, data from Planespotters.net shows that its average fleet age is 17.4 years, higher than any major US passenger airline. Its oldest aircraft type is its Boeing 757 fleet at 33.7 years on average.
Why Is FedEx Express Reducing Its Daytime Flying?
FedEx relies hugely on contracts for its business, and one of its largest was with the United States Postal Service (USPS). Not only did this provide significant business, but the nature of the contract meant that FedEx Express operated a significant number of daytime flights. However, the contract was set to expire in September 2024, and it was announced that the USPS would instead hand the contract to UPS Airlines.
On the surface, this appears to be a loss for FedEx, and it certainly led to a loss in revenue for the carrier. This is the main reason why FedEx has been reducing daytime flying and has had to make cuts across its United States network due to the expiration of the USPS contract. However, the loss of the contract may not have been all bad for FedEx Express, and it could be a case of short-term loss, long-term gain, depending on the company’s future moves.
|
Airline |
Mainline Fleet Size |
|---|---|
|
FedEx Express |
368 |
|
UPS Airlines Planespotters.net) |
295 |
Reportedly, revenue from the USPS contract has been on the decline, and FedEx has invested significant sums in its infrastructure to support these operations. As such, the company may no longer have seen enough of a benefit to continue the contract. While FedEx is feeling pain from the loss of the contract and the daytime flights that were cut may never come back, it does allow FedEx to pursue new opportunities that may be more beneficial for the company in the long run.
General Challenges At FedEx Express
FedEx Express’ decrease in daytime flying primarily stems from the loss of the USPS contract, but the legendary cargo airline has also generally been struggling. FedEx and other cargo airlines were booming during and immediately after the COVID-19 pandemic, but the full return of passenger widebody capacity means that demand for cargo airlines is significantly reduced due to competition from passenger airlines.
One of the biggest competitive threats to FedEx is coming from another shipping company, and that’s Amazon. Express shipping requires scale to work, but Amazon is able to create its own demand, and its Amazon Air division now includes nearly 100 aircraft. It’s been experiencing strong growth due to Amazon’s general popularity, and by eliminating the middleman, Amazon Air has been rapidly outgrowing established cargo carriers year after year.
|
Amazon Air Fleet (Data From Planespotters.net) |
Number |
Operator |
|---|---|---|
|
Airbus A330-300P2F |
10 |
Hawaiian Airlines |
|
Boeing 737-800BCF |
29 |
ASL Airlines Ireland Quikjet Airlines Sun Country Airlines |
|
Boeing 767-300F |
59 |
21 Air ABX Air Air Transport International Cargojet Airways |
Beyond increased competition, the air freight industry has been suffering from a decrease in demand. Economic uncertainty, particularly in the US, has led to a noticeable decline in parcel shipping, and it’s also been struggling with high costs. Weak margins and lack of demand have created a challenging operating environment for FedEx, and the company is in cost-cutting mode as it looks to navigate these challenges.
Deteriorating Labor Relations
Not only is FedEx dealing with a difficult competitive environment, but its employees are not happy. FedEx has been executing an initiative called “Network 2.0“, a companywide move to streamline operations and cut costs, but as part of it, the company is laying off employees. It’s laid off hundreds of employees across the country as it shutters dozens of facilities and reduces staffing at even more, and the cuts haven’t ended.
Even with its pilots, FedEx is having issues. FedEx pilots were once some of the highest-paid in the world with excellent working conditions, but the contract currently in place is now 10 years old. Contract talks first began in 2021, but negotiations have stalled. As such, pilots have been publicly displaying their frustration with the company and have notably been targeting CEO Raj Subramaniam not just for their issues, but with the company’s overall direction.
FedEx is struggling and attempting to make a turnaround, but workforce relations can be a tricky thing to manage. Labor is often the biggest overall cost for any company, yet keeping employees happy is crucial to success. FedEx is making brutal cuts to reduce its operating expenses, but the downside is that employee morale is low, and when morale is down, performance goes down. As such, FedEx has to be extremely cautious on how to manage labor relations going forward.
Rundown Of FedEx Express
The loss of the USPS contract has led to a reduction in daytime flying. This is not itself a bad thing, as the contract was reportedly not giving the returns that the company was looking for, and being free from this contract, which may not have been providing a return on investment, could allow FedEx to pursue other, more lucrative opportunities. However, these cuts have also led to job losses, and the company as a whole has been slimming down in a brutal fashion.
FedEx Express is facing a challenging operating environment, but it needs to strike a balance between reducing its costs and keeping employees happy. With job losses, stalled contract negotiations, and a loss of confidence declaration by the Airline Pilots Association ( ALPA), it’s clear that FedEx is struggling with this, too.
