FedEx’s CEO Fred Smith says that more people are shipping goods via ocean shipping companies rather than by air transport. This modal shift was reflected in FedEx’s most recent earnings reports. “FedEx delivered strong earnings results for fiscal 2012 due to the outstanding performance by FedEx Ground, our new value proposition at FedEx Freight and improved yields across all transportation segments,” said FedEx Chairman, President and CEO Fred Smith.
According to a report about the shift on the Journal of Commerce web site, “Shippers’ shift toward slower transport services pulled down FedEx Express’s fourth quarter operating margins from 6.5 percent to 4.1 percent on a year-over-year basis. Overnight volume dropped 5 percent in the same period, contributing to a 1.4 percent slip in total profit.”
“I think, in the larger perspective, over several years now, it’s very clear that the door-to-door Express segment is growing, the movement of goods on the water is growing and traditional airport-to-airport commodity airfreight is not growing,” Smith told investors on June 20, according to a SeekingAlpha transcript.
FedEx’s freight forwarding organization and customs brokers have been experiencing growth during the shift from air to ocean shipping. It has moved more freight to the company’s Trade Networks, the freight forwarder and customs broker for FedEx. Chief Operating Officer and FedEx Express President David Bronczek said reports that shippers also have been choosing to move freight “from international priority into international deferred” to cut costs, according to an article on the Journal of Commerce web site.
“The deployment of FedEx Trade Networks over the last few years we believe is a forwarding growth story that is often overlooked, but has achieved scale quickly and is continuing to grow and take share. In fact, management indicated that FTN is winning new customers on a weekly basis,” BB&T analyst Kevin Sterling wrote in a June 20 research report.
The JOC also reported that Sterling said that “FedEx earnings confirm the trend among FedEx and other integrators building their forwarding services to scoop business away from traditional forwarders.”
“FedEx’s 100 long-range wide-body freighters also allow the company to handle surges of high-tech shipments, giving it an advantage over smaller carriers and forwarders that don’t have the capacity.” Even forwarder Panalpina “believes controlling some capacity is a key differentiator to offering customized solutions and the ability to quickly react to change,” Sterling wrote.