FedEx FY 4Q15 Earnings Call Notes

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See moderate growth in global economy

“We see moderate growth in the global economy. Our annual U.S. GDP forecast is for 2.3% growth in calendar ’15 and for 2.9% growth in calendar ’16. We expect industrial production growth of 2.2% this year and 3.2% in calendar ’16. We expect global growth of 2.5% in calendar ’15 and 3% for calendar ’16.”

Pricing environment is rational

” I would characterize the pricing environment is very rational, in terms of Ground pricing obviously the change that we’ve made with the dimensional weight surcharge is now in full effect and we expect those trends to continue. So I just would characterize the pricing environment is rational.’

It’s very capital intensive to build a network

“first of all, let me just say that setting up a transportation network is an extremely capital intensive network, requires very sophisticated information technology and takes a very long time to build out to scale, to be able to provide the type of service that customers expect.’

The cost of pickup and delivery has not changed

“I think what a lot of people lose in this conversation is the fundamental input cost on pickup and delivery and that while technology today has certainly made user interface much more streamlined and easy as in the case of some of the applications we’re all accustomed to today, the fundamental input costs have not changed.”

Customer service with uniformed delivery person is important

“The other part about it that I think people lose sight of is the customer experience. Research has indicated time and time again that a uniformed person with proper identification showing up at your doorstep is an important issue for customers and consistency of customer experience is very critical in that regard.”

Getting rid of inefficient fuel burning aircraft

“Let me go ahead and start with the second part of your question, where we are actually modernizing our fleet. So we’re getting rid of very inefficient fuel burning aircraft of high maintenance to a newer fleet, better maintenance, better reliability, better fuel efficiency. So we’re balancing our fleet in the United States and around the world and that’s part of our profit improvement plan.”

Growth in oversized packages is a big deal in e-commerce

“we are a big outfit and we buy lots of trucks, lots of ground support equipment, lots of trailers, I mean between ground and the freight, I was just looking at these numbers, the other day we have over 70,028 foot [parts]. There was an article in the Wall Street Journal a couple of days ago about UPS handling oversized packages and I can tell you that the growth in those oversized packages is a big deal in e-commerce, so we are very, very hopeful that the Congress will increase the limit on twin trailers from 28 feet to 33 feet because it will take thousands of vehicles off the road, improve safety, save fuel, reduce emissions and allow both the LTL and the ground parcel businesses to better reflect the needs of the nation’s supply chain.”

We need to invest in new planes. Planes depreciate

“as it applies to airplanes, they’re just like trucks and ground support equipment. We need to buy the modernized fleet, 12, 15 airplanes a year and we continue to do that and you can count on us continuing to do that because they are aluminum, they oxidize, they wear out and the new models fortunately burn a lot less fuel and are much more reliable.”