FedEx Express remains in black despite difficult year

FedEx Express, the shipping giant's airline segment, finished its fiscal year ended May 31 with a $794 million operating profit, down 58% from the $1.9 billion reported in 2007-08, while the company suffered a 91% plunge in consolidated profit to $98 million.

"The operating environment for our first two quarters in fiscal 2010 is expected to be extremely difficult," corporate Executive VP and CFO Alan Graf Jr. said. "Manufacturing activity is expected to be substantially negative year-over-year through the summer. . .Also, the recent run-up in fuel prices will have a significant negative impact on our first quarter's results." He said there was not sufficient visibility to provide a full-year forecast but that the company is "poised for growth in our fiscal second half as our many cost-saving initiatives gain traction and the economy begins to improve."

Express's full-year revenue fell 8% to $22.36 billion and expenses declined just 4% to $21.57 billion. Average daily freight dropped 15% and composite package yield was down 4% to $21.30.

In the fourth quarter, the airline suffered an operating loss of $136 million, reversed from a $426 million profit in the three months ended May 31, 2008, on a 25% decline in revenue to $4.8 billion. The removal of 10 A310-200Fs and four MD-10 freighters (ATWOnline, April 15), termination of certain aircraft-related leases and contracts and layoffs resulted in $260 million in charges that resulted in the deficit.

It said reduced flight and labor hours, fuel consumption and a "continued focus on aggressive expense reductions" helped offset falling revenue and rising fuel prices.