Dive Brief:
- FedEx Freight is temporarily parking and selling equipment to rightsize its fleet and reduce future maintenance costs, FedEx President and CEO Raj Subramaniam said on the company's Q3 earnings call Thursday.
- The LTL unit is also limiting its hiring and furloughing employees in order to match staffing with volume levels, Subramaniam said. The company disclosed in February that it has enacted temporary furloughs for the period of March 5 to May 27 for certain markets, with some employees offered transfers to other locations.
- For the quarter ending Feb. 28, Freight's operating income increased 15% YoY, even though average daily shipments fell 12%. A jump of 11% in revenue per shipment and selling an undisclosed facility for $30 million helped the unit's results, CFO Mike Lenz said.
Dive Insight:
Carriers are cutting costs in the face of weakening demand. Furloughs, attrition and selling assets are some of the levers companies have pulled to reduce the impact of falling volumes to their bottom line.
This difficult environment has also spurred FedEx Freight to trim its costs. Purchased transportation costs at Freight declined 27% YoY in Q3, while salaries and employee benefits fell 7% YoY, which contributed to a decrease in total operating expenses.
"Freight has also illustrated disciplined commitment to profitable growth, revenue quality and managing cost of volumes," Subramaniam said. "The team continues to execute cost reduction actions in this regard."
FedEx Freight's ability to manage costs while keeping profits growing has long been a highlight in quarterly earnings calls, and its parent company is looking to translate actions Freight took to other operating units. Subramaniam noted that despite the cost-cutting initiatives, Freight's service levels were not compromised.
"We’re taking the relevant learnings from this proven Freight model and implementing them at both Ground and Express," Subramaniam said.
Freight will also intermingle with Ground more frequently under FedEx's Network 2.0 initiative. FedEx has identified roughly 8 million "bobtail miles" that could be cut by having the two units collaborate better on intermodal container movements.
