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After Cutting Costs On Aircraft, FedEx Announces Employee Buyout Offer

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After Cutting Costs On Aircraft, FedEx Announces Employee Buyout Offer

FedEx Corporation (NYSE:FDX), the world’s second largest package delivery company, made good on its hints earlier this year that substantial cost cuts were on the cards in the face of a global slowdown, which could pressure earnings. The company announced plans to offer voluntary buyouts to staff, in order to implement a restructuring of its U.S. operations. In June the company had cut back on capex plans on new aircraft, while it rid itself of older, fuel-guzzling planes. Fedex Freight, a division of the company, increased shipping rates by 6.9 percent with effect from July.

Though the number of employees affected, and their eligibility, is yet to be determined, the buyouts are likely to be concentrated on its FedEx Corporation (NYSE:FDX) and shared-services units, which employ over 158,000 workers. However, as per a clarification from the company, the buyouts will emphasize on support staff, rather than operational personnel, and the vast majority would be from the U.S. The Express unit, which was the hardest hit, as the slowing economy led customers to opt for slower, but cheaper means of delivery. A reduced demand for Asian-manufactured goods from Europe and Asia also contributed to its lack-luster performance.

For its fourth quarter, FedEx Corporation (NYSE:FDX) reported a decline of 1.4 percent in profit at $550 million ($1.73 a share), while revenues rose 3.8 percent to $11 billion. Earnings were impacted adversely by a fall in volumes in the Express shipping division and a charge of $134 million on retired aircraft.

Chief Executive Fred Smith said, “It’s very clear that the door-to-door express segment is growing, and the movement of goods on the water is growing,” while the traditional airport-to-airport business was not growing. The company’s forecast of earnings for the current quarter missed analysts’ expectations.

Rival United Parcel Service, Inc. (NYSE:UPS)’ second quarter results missed market expectations and the company cut its guidance for the fiscal 2012 based on a bleak global economic outlook.



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