Earnings
 

Hard to read the earnings call transcripts and look at the financial headlines post earnings. It seems too convenient for corporate officers to blame the drop in Express revenue squarely on the industry demand as a whole. A major part of the soft Express revenue and growth in ground is our own sales team emphasizing ground and other deferred products over Express. I personally had a Fedex Office cashier try to convince me to send ground over express because it "was a better deal", and did my stuff "really" need to be there overnight. I'm sure that is the mindset throught the service and sales team with the new focus on Drive. Our previous flagship First Overnight product has become a low margin pariah as the entire team focuses on reducing purple lift in favor of Orange and White shipping paths. I can"t believe not a single analyst challenged them on how much of the Express to Ground shift is self induced.

"When it absolutely, positively doesn't have to be there overnight"

Just look at the investor, could not make sense of it either... old JD got caught by an investor. Highlighted in bold and underlined.


from earnings call transcript...
Amit Mehrotra -- Deutsche Bank -- Analyst

Thanks, operator. Hi, everybody. I guess I just want to come back to, I think, Chris Wetherbee's question and talk about -- I mean, typically, John, we see Express profits go down, I don't know, about 50% sequentially from 2Q to 3Q. Obviously, 2Q is not what we wanted it to be, but any sense of, you know, seasonality -- normal seasonality, or are we -- is it that type of magnitude relative to where we are in the second quarter? And then, just related to that, I'm having a little bit of a hard time -- or maybe a lot of hard time understanding, sequentially, revenue was up in Express.

Packages were up, composite yield was up, DRIVE savings were up, but then profits were down. So, maybe you can dumb it down for me, but I really don't understand why profits would be down sequentially when all those pieces of mix and revenue are up sequentially. Thank you.

John Dietrich -- Executive Vice President and Chief Financial Officer

So, I'll start with the discussion on Q3 and not going to be giving Q3 guidance. But as I said, I think it's reasonable to expect that, you know, typical seasonality will apply. I will say, you know, for -- for Q3 in particular, due to FedEx Ground's very strong performance in last year's third quarter, with Ground, you know, operating margin inflecting positive by 240 basis points versus the prior year, we'll have a more difficult comparison. But I think it's fair to say, you know, seasonality will -- will play a role.

Now, with regard to the Express, you know, margins and the profits, we're going to continue to be laser-focused on that. As I said, our cost structure did not anticipate the higher demand. You cannot underestimate the impacts of all the things that Raj and Brie talked about. You know, if you -- if you look to the year-over-year decline in the U.S.

Postal Service volume, combined with, you know, some of the minimum service requirements that are required, that really has a drag on your cost. And what I will say, too, is we're really well positioned when volumes return in light of all the initiatives we're taking right now.

Earnings miss and apparently "restructuring ground"

https://finance.yahoo.com/video/fede...154303913.html

time mark 1:25: Analyst talks about shippers choosing "other alternatives" besides Air to ship products, and FedEx using less aircraft to accomplish shipping

Stock is currently down from 280 yesterday to 249 (10%) ouch.

I should have sold yesterday at 280.

Ugh.

Why are you buying single stocks, and FDX?

I bought it years ago, when it seemed like a good idea at the time.

UPS made this “philosophy” changes years ago. If a deferred product can be trucked in the same amount of time, it is much cheaper for the company. And the USPS is reducing its air footprint big time, in the name of saving money, DeJoy has been very clear about this. You will probably notice first class mail is taking longer. The much smaller air postal volume will be spread across many entities, also his desire to diversify.

This shift in delivery was bound to happen at some point. Painful for the Express side but it has always been the low hanging fruit that has yet to be picked. This combined with the “excess” pilots is not a fun situation.

It’s an interesting philosophical difference that UPS took direct action to remove excess pilots by offering incentives.

Meanwhile, management at FedEx would rather force us in to 4.a.2.b/c to lower the cost structure rather than offer financial incentives.

FedEx literally wants pilots to financially pay for managerial mistakes of poor planning.

Hear, hear! THEY over hired, and THEY should suffer the consequences, but the same players are still sending us atta boys.

Exactly! Management does NOT care about us. We are a cost center. That is all. So next time you push through a family event or sickness to “complete the mission”, realize you’re a tool. That’s all.

And to rub it in the pilot’s face with today’s huge stock buyback proves they truly don’t care at all, even worse shoving it in your faces! Unbelievable.

The way it has always been, and yet it blows my mind how many pilots claim fealty to the throne.

The throne looks down on us with a boot in our faces because we have collectively failed to challenge their rule.

And we’ve had far too many insiders colluding with the opposition for whatever favors they hope to gain.

IDK, maybe our new union leaders will be different, but even so, it’s going to take considerable effort to stand up for what we deserve when far too many in the ranks prefer negotiating on their knees.

Too many people on our seniority list getting good deals in cushy office/management/flight test jobs that only care about hourly rate and retirement. They also seem to be the vocal intimidators who are trying to get everyone else to accept a contract that gives away their work rules/career progression/career aspirations/etc. I'm sure they're expecting to be rewarded for their fealty with a promotion or even cushier assignment. It's career suicide for one of them to admit that TA1.0 was not a good deal for the majority of FedEx pilots.

options
 

Didn"t see anything in earnings report that they had to execute 767 options by end of Dec and that they might be in jeopardy as the Pat audio seemed to indicate.

1 - As of November 30, 2023, we are committed to purchase 17 B767F aircraft and have options to purchase an additional 50 B767F aircraft.

Of course the earnings report is not going to show the entire contract that FedEx has with Boeing with regards to the 767. It's a quarterly report not on everything FedEx. I don't know what's in the contact but I am sure there are option gates where FedEx needs to decide on whether they will exercise the options.

Did he say which December? my guess is that they would have to commit by Dec 24 if there's any grain of truth to what he's saying.

All new, or used?

Fedex has bought over 140 new 767 off the production line, options are for new.Don't think you can get options on used. All the Fedex 767 where newly delivered.

Too bad the company screwed up and didn't buy 757's off the line when Boeing was try to keep the line open.

Instead they waited barely a few years longer and got converted high time 757s for the same price that they could have gotten brand new 757Fs off the line, and I bet someone got a bonus for that. Then consider all the extra fuel and labor expense they spent on running the 727s longer than they should have. They're doing the same thing now, they could have secured new narrowbody and widebody freighters for pennies on the dollar during the height of covid. Instead they diverted that money to shareholders. In 5 years they're going to be begging to take deliveries of clapped out converted 777-300ERFs instead of 777-XFs or A350Fs.

I was told the story a long time ago; in the very early 1980's Fred tried to work a deal for new 57's from Boeing and asked if the bellys could be modified slightly to hold 2 additional LD3 containers. As the story goes, Boeing told him to pack sand. UPS asked the same question a year or so later and with the economy in the tank and airlines cancelling and deffering their orders from Boeing, Boeing agreed to the change. This was the birth of the Package Freighter.

Too bad Boeing threw away all their tools and fixtures for the 757.

This narrative is a little silly. Would it not still be cheaper to retool than to go clean-sheet? Imagine a 757 that employs new materials, new electronics, and new engine technology.

Here's the problem - Boeing already has an aircraft in the 180 seat market. Boeing won't steal its own market share from these stupid MAX contraptions. No net gain for Boeing. Lack of jigs isn't the issue.

We are where we are because Boeing enslaved themselves to WN at a critical time. That's it.

I respectfully disagree. Boeing is the one who said they threw away all there fixtures. Note, they did not do a clean sheet design, either.

Being where we are because they are enslaved to WN does not make sense to me. They were not enslaved enough to develop the Dreamliner.

Different market, plane size and range. Apples to oranges