FedEx to shave daily flights to align costs with lower demand

FedEx Corp. will cut daily flights across the Atlantic, the Pacific and between Asia and Europe as it begins the process of aligning its cost structure with what the company has said is declining worldwide demand.

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FedEx (NYSE: FDX) will cut 11% of its trans-Pacific flights, 9% of its trans-Atlantic flights and 17% of its flights between Asia and Europe, the company told analysts Thursday night soon after officially releasing its fiscal 2023 first-quarter results. The company stunned everyone last Thursday by pre-announcing very weak quarterly results highlighted by a more than $600 million year-on-year decline in operating income at FedEx Express, the unit that the company’s air and international operations fall under. FedEx acknowledged that it couldn’t cut the unit’s costs fast enough to offset the dramatic volume decline out of Asia-Pacific and Europe.

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The financial impact of the flight reductions will begin to be felt in October and November, FedEx said. The company vowed that service levels will not be affected. It doesn’t plan to furlough any pilots.

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During the tense and somber analyst call, FedEx said the lion’s share of the problem was macroeconomic. Its customers missed their own forecasts, indicating that demand from their customers had rapidly declined toward the end of the quarter. FedEx’s fiscal year starts on June 1st.

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“This is a market trend, not a FedEx trend,” said Brie Carere, executive vice president and chief marketing and communications officer. Carere said that everyone is being impacted by the slowdown in demand.

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