As a result of the slow growing global economy and the modal shift away from air, FedEx announced it was parking more airplanes. During the previous quarter, FedEx had announced similar measures as well. Still, during the previous quarter, FedEx agreed to purchase 27 new 767 over the remainder of the decade with 3 arriving in FY2014 and 6 per years in FY2015 through FY2018. These will eventually replace the company’s MD-10s. Also, FedEx announced plans to delay the delivery of 11 777s but agreed to exercise 2 additional 777 options. This financial commitment may have prevented the company from bidding on TNT Express, however, I am of the opinion the company no longer was interested in TNT Express.
In 1992, FedEx withdrew from the intra-European express market. Since then, it entered into a series of alliances. For example, in 2001, FedEx and La Poste entered into an agreement where La Poste’s GeoPost would handle FedEx’s domestic volume in France and Belgium whereas FedEx would handle La Poste’s international volumes. However, by 2006, it appears FedEx’s European strategy may have changed as it acquired ANC, resulting in FedEx’s entry into the UK’s domestic market. In 2007, FedEx acquired Hungary’s Flying Cargo as well. After seriously considering TNT, perhaps by this time, the company had instead decided to make small targeted acquisitions in order for FedEx to move into selected European countries. Or, perhaps FedEx may have decided to take a page out of DHL’s playbook - DHL Express had pulled out of the US, Canada and China domestic markets to focus on export cargo instead. Alliances/partnerships were created to handle domestic cargo in these regions.FedEx CEO, Fred Smith refused to comment on UPS’ acquisition of TNT. Instead he made it clear his company planned to continue to grow organically in Europe. Perhaps because TNT is unionized and the only FedEx employees that are unionized are its pilots may have also been a deterrent.
Still, in a sluggish global economy and increasingly high oil prices, the shift to less expensive modes of transport – trucking and ocean – will continue and will have a negative impact on FedEx’s largest division – FedEx Express as well as to other companies such as UPS.Of interest though, within the FedEx Express division is FedEx Trade Networks which has been opening offices all over the world. This group may prove successful as it increasingly utilizes its freight forwarding offerings.
Time will tell who will be the most successful in its strategy. UPS has said that it would take up to four years to integrate TNT Express (it should be noted its history of integration has not been the most successful). This will allow other competitors to attempt to take TNT or even UPS customers as UPS focuses its efforts on this monumental task. Perhaps the overall airfreight market will recover the second half of this year as many are hoping – this will be beneficial for FedEx as well as to others in the market.