Dive Brief:
- FedEx gained new volume and customers last quarter due to the UPS labor negotiations and Yellow's bankruptcy, executives said on an earnings call Wednesday.
- FedEx's Ground and Express units added about 400,000 in average daily package volume by the end of August amid fears of a strike at UPS, said EVP and Chief Customer Officer Brie Carere. The rival ratified a new contract agreement with the International Brotherhood of Teamsters in August.
- Volume at FedEx Freight declined 13% YoY in the quarter, but the LTL unit saw significant improvement in August due to Yellow's closure, Carere said. It resulted in Freight gaining about 5,000 more average daily shipments.
Dive Insight:
UPS' contract negotiations and Yellow's demise created unique opportunities for FedEx to gain additional volume and revenue that’s been hard to come by in a soft demand environment.
The company was selective in the new volume it took on, however. President and CEO Raj Subramaniam said FedEx prioritized keeping service levels high and acquiring more profitable volumes from these events.
"We were highly discerning in terms of the business we accepted in keeping with our goal to drive high-quality revenue," Subramaniam said. "Importantly, we expect to maintain the majority of the volume we added in the quarter."
FedEx Ground particularly benefited from the uncertainty at UPS, as volume increased 1% YoY and revenue per package jumped 3% YoY.
"The team did an excellent job focusing on commercial Ground business acquisition," Carere said.
New customers that have been onboarded are committed to a long-term partnership with FedEx, according to Carere. The chief customer officer said she's focused on making sure FedEx maintains strong service, so these shippers don't return to UPS.
UPS estimated that a combination of FedEx, the U.S. Postal Service and regional carriers gained 1 million parcels daily due to the Teamsters negotiations during the carrier’s Q2, which ended June 30. UPS is touting its delivery speeds and its lower-cost SurePost product, along with expanding its weekend services, in an attempt to regain volume lost during labor negotiations.
As for volume FedEx gained from Yellow, half of the 5,000 in average daily shipments came directly from the bankrupt carrier's customers. The other half came from other competitors that struggled to maintain service quality after taking on volume from Yellow, according to Carere.
"Yellow had a lot of low-quality revenue, and so there was some revenue there and some customers that really didn't want to pay for the value of the FedEx Freight fee and the quality that we provide," Carere said. "What happened, however, was some competitors took on more Yellow volume and their service was not what it needed to be."
