Dive Brief:

• FedEx Freight trucks have traveled more than 7 million miles on behalf of FedEx Ground since June, as its parent company pushes for expanded collaboration across divisions, FedEx President and COO Raj Subramaniam said on a March 17 earnings call.
• "FedEx Freight has also provided FedEx Ground with intermodal containers, which have already been dispatched more than 36,000 times," Subramaniam said. "We'll continue to comprehensively look at all our assets and our network to put the right package in the right network and the right cost to serve." He added that the company is in the early stages of optimizing traffic between the two networks.
• FedEx is leveraging FedEx Freight to court small business shippers. The company is using customers' earned discounts to bundle parcel services in its LTL portfolio, "which of course, our primary competitor can longer do," said Chief Marketing and Communications Officer Brie Carere. Rival UPS sold its Freight segment to TFI last year.

Dive Insight:

FedEx Freight has been a bright spot among FedEx's different companies as investors continue to pressure leadership to improve operating margins at FedEx Ground.

In Q3, FedEx Freight more than doubled its operating income YoY, despite fuel expenses increasing by 48%. Subramaniam said FedEx is "delighted with" Freight's progress, adding that its ability to help other operating companies is a big advantage.

"I think this is a winning formula and that we expect that to continue," Subramaniam said of the cross-company collaboration.

Freight's continued work with home-delivery focused Ground is just one example of FedEx's shifting strategy after keeping its segments separate for years. FedEx announced in 2020 it would transfer some Express parcels to its Ground network for last-mile delivery to reduce duplicitous routes. Subramaniam said on an earnings call last year that Freight delivered 1.75 million packages for Ground in fiscal year 2021.

FedEx continues to make the most of Freight's assets following UPS' decision to shed its UPS Freight segment last year for $800 million, as part of the company's "better, not bigger" philosophy under CEO Carol Tomé. On a 2021 earnings call, Tomé called UPS Freight "a capital-intensive, low-returning part of our business."

But UPS remains close with its former company. A commercial agreement still allows UPS customers to keep using UPS Ground with Freight Pricing, according to an investor presentation, and UPS Freight will continue to use UPS' domestic network to fulfill shipments for a five-year period.