FedEx focuses on boosting yields

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FedEx is focusing on improving yields in the coming year after reporting $2bn operating income for the year to 31 May – up from $747m the year before despite a two per cent drop in sales to $34.7bn.

Chief financial officer Alan Graf said: “We expect continued improvement in both revenue and earnings in fiscal 2011. Resumed growth in industrial production and global trade is increasing demand for our transport services, and yield management remains a top priority across all of our operating companies.”

For the fourth quarter the group produced operating income of $696m, against an operating loss of $849m last year.

The express division led the move back into profit with operating income of $413m for the quarter, up from an operating loss of $136m last year.

“FedEx International Priority (IP) average daily package volume increased 23 per cent, led by exports from Asia. IP revenue per package grew 6 per cent due to higher weight per package, higher fuel surcharges and a favourable exchange rate impact. U.S. domestic revenue per package grew 8 per cent due to higher fuel surcharges and improved weight per package, while average daily package volume increased 1 per cent.

Operating profit and margin improvements were driven by volume and revenue growth, particularly in higher-margin IP package and freight services. Results also include the partial reinstatement of certain employee compensation programs and higher aircraft maintenance expenses, primarily due to increased utilization. Last year’s fourth quarter operating income and margin were negatively impacted by one-time costs of $260 million associated with aircraft-related charges and severance programs.

Operating income at the FedEx Ground business rose 57 per cent to $319m in the fourth quarter with the average daily package volume growing 7 per cent driven by increases in the business-to-business market and the FedEx Home Delivery service.

And the FedEx Freight business reduced its losses – the operating loss of $36m, compared with an operating loss of $106m a year ago.

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