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February 12, 2016

As International Trade Recovers, FedEx Sees ‘Wild Card’ in Mideast Turmoil

Fed Ex Braces For Its Busiest Day Of The Year On Cyber Monday

FedEx employees at a Miami facility sort through packages for delivery on “Cyber Monday” on Dec. 2 of last year. (Joe Raedle/Getty Images)

Package shipper FedEx Corp. on Wednesday reported 15 percent higher earnings in its fourth quarter, but warned of the possible impact of surging oil prices due to the violence raging in Iraq and Syria.

Alan Graf, FedEx executive vice president and chief financial officer told a conference call that “it is not just simply fuel price” but “when we can catch up with the surcharge” if fuel prices soar.

He added, “We have had some years where we have had some thrilling impacts” to the company’s bottom line “both good and bad” from fuel price movements. Graf said “right now we’re not expecting” a dramatic change in fuel prices “but, of course, with things that are going on in the Middle East, it’s a big wild card.”

He said, “If fuel prices continue to go up there’s also the elasticity impact of the size of the fuel surcharge” and “how our customers react to that….”

FedEx depends especially on healthy global trade volumes. Graf said “global trade growth can have an outside effect on our results. While global trade growth is improving, it is still below historical norms. We do expect the pace of trade growth improvement to continue throughout calendar year ’14 and into calendar year ’15.”

FedEx chairman and CEO Fred Smith also discussed an effort by his company and others in the LTL (less than truckload) and ground parcel industry to have the federal standards for twin trailers used in the industry increased from 28 feet to 33 feet.

“A lot of times the general news media talks about ‘the trucking industry.’ Of course, it’s divided into two parts” – the parcel industry, of which FedEx is a part, and “the truckload sector which uses 53-foot trailers, and oftentimes those trailer are used to pull very heavy loads which make it controversial in terms of road repair and so forth,” Smith said.

In the ground parcel and the LTL business, a new 33-foot standard would allow for greater efficiency, Smith said.

“If the federal standard were increased, there would be millions and millions of fewer miles driven per day… massive amounts of fuel saved, and CO2 emissions avoided,” Smith said. “And you would actuarially eliminate over 400 accidents a year just by reducing the number of vehicles on the road.”

He added, “The entire industry is behind this and we’re very hopeful it will pass in Congress soon, because again it’s safer, it’s more efficient and it’s less fuel.”

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