FedEx charges peak surcharges! It suspends flights and lays off employees, trying every possible way to increase revenue and cut costs!

The plummeting package volume has given FedEx more incentive to extract as much revenue as possible from each delivery, an effort advanced by dynamic pricing, which FedEx initially rolled out in August 2022.

FedEx said we are releasing a feature that will allow for more granular peak surcharges to be able to really manage customers in an automated way when they are not meeting the requirements that they have given us.

FedEx's results for the most recent quarter, which ended on February 28, show the company's ability to improve delivery margins despite lower demand. Average daily package volumes for FedEx Express (-14% for U.S. domestic packages) and Ground (-11%) declined year over year. Revenue per package for U.S. domestic Express and Ground increased 11%.

Despite the company's enduring pricing power, FedEx executives said revenue, or earnings, per package growth will slow in the coming quarters.

“Volume growth will come under pressure as year-over-year fuel surcharge comparisons normalize and customer demand shifts, particularly in Asia,” Chief Financial Officer Mike Lenz said on a conference call Thursday.

FedEx has enacted various cost-cutting measures to adapt to cooling demand, according to a report from the Express. This includes parking Express aircraft and reducing ground Sunday delivery coverage. FedEx, a major U.S. cargo airline, will cut flights and park more aircraft in the coming weeks as freight demand continues to be sluggish. The airline's executives confirmed the move last week.

The decision means aircraft utilization will be reduced by nearly 10% as larger aircraft will be grounded and smaller aircraft will be used on specific routes. It is reportedly part of a larger cost-cutting plan by the parcel company, including office closures and layoffs.

At the same time, the company is working to improve its long-term operational efficiency and save billions of dollars through its DRIVE and Network 2.0 initiatives. Anthony DeRuijter, an analyst at Third Bridge, said in emailed comments that despite the potential benefits of the overhaul, successful execution will be a difficult task. FedEx has ordered 27 new Boeing 767 and six 777 freighters, which are expected to be delivered by Boeing in 2024 and 2025.

Editor ✎Estella/

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