FedEx Express

Since commencing operations in 1973, FedEx has grown to become one of the world’s largest integrated air express carrier in revenue terms, and a pioneer in the implementation of expedited services on a global basis. FedEx’s Express division, which accounts for most of its international revenues, offers time-critical, door-to-door delivery in over 220 countries and territories, featuring customs clearance and money-back guarantees. FedEx’s principal business segments, after its 2023 restructuring, include: FedEx Express, FedEx Ground, and FedEx Services, which are now integrated into a single company under Federal Express Corporation, operating a unified air-ground network. FedEx Freight continues as a separate entity, providing less-than-truckload freight transportation services within Federal Express Corporation. Figure 1 provides a current overview of FedEx hubs and focus cities across its air express network. Recently the focus has been on modernizing existing hubs throughout the US as well as building new technologically advanced facilities in India, Italy, and Dubai.

Figure 1 – FedEx Hubs and Focus Cities – 2023

FedEx reported revenues of $90.2 billion in FY2023, a 3.5% decrease from FY2022 while the consolidated operating income also rose by 10% to $6.87 billion year-over-year. FedEx Express faced a decline due to lower global volumes but managed to offset some of this with decreased expenses and higher U.S. domestic yields. In the fourth quarter of FY23, FedEx demonstrated strong momentum across the business, attributed to effective expense management and execution of DRIVE initiatives.

Figure 2 shows how in FY2011, approximately 59% of FedEx corporate-wide revenue came from the Express unit, but as the new initiatives continued to make an impact, the Express share found itself dropping to about 48% in FY2023, the lowest it has been in more than a decade. This was also, in part, due to low cargo demand, high fuel prices, and overcapacity in the market, and as a result, Ground now accounts for a significant increase to 39%, up from 31% in 2019.

Figure 3 shows the profit margin (EBIT) development by division where the Express unit has seen margins between 4% and 10% in the last twelve years. The growth has not been consistent among its business segments with FedEx Freight now accounting for 20%, up from 13% in 2021 and Ground falling 1% within the same time. Of note is the fact that the Ground unit profit margin has begun to stagnate at around 9% over the past 3 years while the freight margin has seen significant growth. This shift aligns with the e-commerce boom brought on by the COVID-19 pandemic and is expected to continue.

Figure 2 – FedEx Revenue by Business Segment FY2011 – FY2023

Figure 3 – FedEx Profit Margin (EBIT) by Business Segment FY2006 – FY2023

Figure 4 shows the volume share by product and how this has changed over time. FedEx introduced its International Economy product in 2011 and its International Domestic services in 2007, which consists of the transportation of packages within a country excluding the US. Over the years FedEx has increased its international domestic business through acquisitions, which have helped drive increases in international domestic revenues and volumes, and in the last fiscal year, the International Domestic product represented a 32% share of the total annual shipments in the Express division. However, it is important to note that International Domestic shipments are often low-yield and are transported via ground.

Figure 4 – FedEx Express Volume Distribution by Product FY2011 – FY2023

Much of the recent International sector increase has come from acquisition-induced growth in the International Domestic category. The TNT acquisition disrupted FedEx Express product volume share and the International Domestic volumes grew considerably at the expense of the US domestic overnight and deferred services. At the same time, international package (Economy & Priority) volume growth has slowed across most regions due to the weakening economic conditions and investment priorities across other products.

Figure 5 summarizes the revenue per package development by Product Line. The total express composite package yield for all products remains consistent at $24, matching the international composite package yield since 2021.

Figure 5 – FedEx Express Yield by Product FY2006 – FY2023

Currently, the overall composite yield for the Express division stands approximately $2 higher than the Domestic division, primarily due to increases in international segment yields throughout 2022 and 2023. This adjustment aligns with historical trends observed before 2017 and is fortified by the International Export segment, which recorded the highest yield at $55 in FY2023. FedEx will also implement a General Rate Increase (GRI) of 5.9% for its Express segment in U.S. domestic, export, and import services, effective from January 1, 2024.

Even though its profit margins are lower than the other two integrators, FedEx Express continues to be an established profitable business and is now implementing a series of initiatives to reduce costs and improve efficiency. In FY2023, the company focused on enhancing operational efficiency and reducing expenses through strategic efforts like network optimization and fleet modernization. FedEx Express is also investing in AI and automation technologies to further cut costs and adapt to the current market environment. Additionally, the company is committed to achieving carbon-neutral operations by 2040, reflecting its long-term sustainability goals as environmental regulations continue to emerge​.