FedEx Corp. will restructure its operations to take advantage of low demand for its priority shipping services, the company announced. FedEx is the world’s largest air freight company has suffered from a decline in demand for its high-speed delivery services and a market that is increasingly opting for cheaper, slower options.
Despite the decline in demand for its air freight services, the company reported a higher-than-expected profit for the last quarter. FedEx’s primary revenue source is its international air freight operation, which has suffered from oversupply and low demand for high-speed freight services in key Asian markets such as China.
Most of FedEx’s freight activities in East Asia are related to consumer goods that are manufactured in China and Korea for the North American market. Major firms based in the East Asian manufacturing zone, including Apple and Samsung, have seen their products sell as slower-than-normal rates in recent months.
The company has also suffered from increased supply of high-speed freight services, which are becoming increasingly commonplace in China. Competition from national freight companies such as China Airlines Cargo have reduced the company’s former control of much of the international high-speed freight market.
At the same time as its air freight operations are suffering from lower demand from consumers and businesses, FedEx’s North American trucking operations are rapidly expanding. The company’s domestic ground freight service saw its demand grow by ten percent during the last quarter, over five times the industry growth average.
As consumers increasingly opt for slower sea freight services, FedEx will need to rethink its air freight operations in order to increase profitability. The company’s current plan is to reduce its US-Asia freight flights and ground planes to reduce the amount of under-filled planes and lower its operating costs.
