Free «Federal Express Aviation» Essay Sample

Federal Express Aviation

The transportation business today is nothing but an advantage to the modern world, with its emerging and globalizing trends and evolving economy. The better delivery service operates the better the business performs. Still, with the dozens of seasoned companies worldwide conducting millions of deliveries a day, there are only a few ones that form the basis of the whole business. This research paper intends to highlight one of such companies, which is FedEx Corporation and to be more precise, one of its division.

Before starting to analyze the operation of the air unit the research aims at, it is important to provide the general background of what FedEx Corporation is. Federal Express Corporation (usually referred to as “FedEx”) is the global transportation company founded in Little Rock, Arkansas in 1971 and currently headquartered in Memphis, Tennessee. Originally founded in the United States of America, FedEx moved to the absolutely new level and expanded its activities all over the world making it one of the most successful transportation companies in the world.

Today, FedEx consists of several key “segments” uniting a considerable number of units carrying on different functions and performing diverse activities but acting under the conjoint name of FedEx Corporation (“FedEx Annual Report 2014” 16).

Those “segments” or “blocks” include the following:    

  • FedEx Express
  • FedEx Ground
  • FedEx Freight
  • FedEx Services

FedEx Express segment consolidates FedEx Express (express transportation of goods), FedEx Supply Chain (logistics) and FedEx Trade Networks (air and sea forwarding and customs operation). FedEx Ground consists of FedEx Ground (small-sized packages delivery) and FedEx Smart Post (small packages consolidator). The next segment in the list is FedEx Freight uniting FedEx Freight (less-than-truckload transportation) and FedEx Custom Critical (goods transportation as soon as possible). Finally, the last division is FedEx Services, which comprises three main elements. The first one is FedEx Services (IT, marketing, sales information, communication etc.); the next one is FedEx Tech Connect (technical support and customer service), and lastly, the third element is FedEx Office (documents execution) (“FedEx Annual Report 2014” 16).

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FedEx Express is the company’s original air transportation division. The company that was formerly known as Federal Express transformed into the internationally known FedEx Corporation in 1971(“About FedEx”).

The history of the company began in the above mentioned 1971 when Frederick Smith, an ordinary student at Yale University introduced the idea that changed the transportation business once and forever. He has advanced the theory that in the nearest future, the world would become dependent on technology and hi-tech devices. The problem was that decentralization of production through the world would bring immense difficulties to the manufacturers because of logistics problems and goods delivery speed. The solution to these problems could be found in the increased the of the air transport. The air transport had been perceived as the fundamental contributor to the transportation revolution. The basic concept of the Smith’s theory was as follows. The only one operator should be responsible for the shipping of goods from one point to another by using its proper system of airlines, depots, vans and infrastructure, without any forwarders (“About FedEx”). All the operations would be controlled from the central control station to ensure the correct and timely initiation of all dispatches. At that time, the air infrastructure of the United States was rather inefficient and incapable of initiating such kind of deliveries. In addition, there was another difficulty in the form of the element that Frederick Smith had been trying to avoid by all means.

 
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The air transportation, as well as other transportation types, was highly dependent on interlining and had to rely on multiple agents performing the activities to fill in the gap where needed. The idea was highly innovative for that time so that it did not find much support from the faculty personnel and did not get the best mark. Nevertheless, despite all obstacles, Fred Smith did not abandon his idea and continued to develop it. The results of his efforts are clearly visible nowadays. Currently, FedEx Express is the largest air transportation company by the total volume of freight carried in the world and the fourth largest company in terms of fleet in use (“About FedEx”).

The rapid growth of the company began in 1977 and had been continuing over the next decades until the very beginning of the world economic crisis of 2008. The 1977 was the year of legislative restriction removal, which afforded ground for the international air transportation. Furthermore, the aforementioned law removal enabled the large aircrafts acquisition. The next year, Federal Express went public and became listed on NYSE, and year after, it became the first company to implement the computer software to increase the management productivity (“Time Flies”). Two years later, in 1980, the company expanded its service network by adding 90 new cities all over the USA. One year after, the company opened its global airline hub in Memphis International Airport, the US These hubs today are frequently referred to as “super hubs” (“About FedEx”).

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In 1983, company reached the milestone and hits 1 billion dollars revenue (“Time Flies”). FedEx was the first company to hit this immense number, without getting into any mergers or acquisitions. Three years later, the company implemented “Super Tracker” system in the industry making it possible to track every parcel by using special code scanner (“Time Flies”). In late 1980-s, Federal Express opened a bunch of hubs throughout the USA: Newark Liberty International Airport hub in 1986, Oakland International Airport hub in 1988, and Ted Stevens Anchorage International Airport hub in 1989. In the same year, the company bought out “Flying Tigers” company and expanded its presence on the international shipping arena (“About FedEx”).

The development of the corporation in the 1990-s played the important role in the company’s aviation and general history, as well. In this decade, the air power of the company increased drastically as it opened additional super hubs in Subic Bay International Airport in 1994, Fort Worth Alliance Airport hub in 1997, and Charles de Gaulle Airport hub in 1999 (“Time Flies”). In 2000, the company officially changed its name from “Federal Express” to “FedEx Express”. From then on, it is easily recognizable among the other divisions of the FedEx Corporation (“About FedEx”).

However, the company’s success could not last forever, and continuous growth of FedEx Corporation and its air power and capacity was not the exception. The world economic crisis of the late 2000-s hit the industry very quickly and rather hard. FedEx Corporation, with FedEx Express relying mostly on jet fuel, faced difficulties at most. During that period, the aviation transportation companies experienced the strong need to find an alternative ways of transportation, such as road or sea shipping. In that specific period of time, FedEx Corporation announced production capacity reduction at FedEx Express. The point was that at that time, the aircraft depot had some old and inefficient (in comparison to the newest ones) aircrafts, such as Airbus A310 and McDonnell Douglas DC-10. However, that was not enough, and the company had to decrease the work hours at some hubs. Still, the most of the challenges were to come. In 2009, for the first time in the history of company, it had to stop the activity of the Subic Bay International Airport hub in Philippines (Du). From that moment, all the operation that had been conducting at that hub moved to Guangzhou Baiyun International Airport hub in China. In early 2009, the corporation opened the new hub in China, and later on, in the same year, it opened another hub at Piedmont Triad International Airport (“Time Flies”). Despite the planned opening time set for 2008, the actual opening happened one year after mostly because of the financial pressure. In addition, the company had to decrease the personnel in almost 10 times, from around 1500 employees to nearly 160 (“Time Flies”). Obviously, as the consequence, the productivity and operations scale decreased, as well. In 2010, FedEx opened Cologne Bonn Airport hub that was to become the main European hub at that time. The company introduces a new type of automatic sorting system there thus making it possible to sort 18000 packages an hour (“Time Flies”). Additionally, the company could achieve energy economy by using solar technology installation on the roof of the building giving more than 800000 kilowatt hours yearly. At the time of February, 2015, FedEx possesses 10 hubs all over the world and serves more than 220 countries worldwide (“About FedEx”).

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Before starting to examine the fleet size and its specifics, it is important to mention FedEx Feeder, the operation of which will be emphasized later. FedEx Feeder is the brand name for the propelled aircrafts that are perceived as the mediators between pick-up place and large jet aircrafts. The point of the program is that FedEx Feeder, which is operated by FedEx Express on the lease basis, leases the aircraft included into the FedEx fleet to the contractor, which possesses its own personnel to operate the plane for FedEx. Most of the contractors are located in the US and Canada, but there are also “outside” carriers.

FedEx aviation logistics may be described as the “global chain system” connecting main sorting facility in Memphis, Tennessee with its regional and national subdivisions consisting mostly from Indianapolis International Airport hub, Newark Liberty International Airport hub, Oakland International Airport hub, Fort Worth International Airport hub, and Piedmont Triad International Airport, with sorting facilities in Anchorage, Chicago and Los Angeles (Toure). The rest of the sorting facilities are located worldwide in Europe (represented by airports in France, Germany, and United Kingdom), China, Japan and Canada (Toure). It is important to add that to be able to quickly react to the volatile freight transportation demand, FedEx keeps certain number of its planes in the air on standby waiting for the orders.  

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The fleet of FedEx consists of 666 various models in service as of the date of February, 2015 (“About FedEx”). The companies producing aircrafts for FedEx are Airbus, Boeing, McDonnell Douglass, ATR and Cessna (“Airline Information”).

Airbus is represented by the following models:

  • 71 unit of Airbus A300F4-600R
  • 12 units of Airbus A310-200F
  • 11 units of Airbus A310-300F

The next one in the list is Boeing. It is represented by three types:

  • 112 units of Boeing 757-200SF
  • 14 active units of Boeing 767-300F and 39 ordered ones
  • 25 active units of Boeing 777F and 18 ordered ones

The third company providing FedEx with airplanes is McDonnell Douglas:

  • 45 units of McDonnell Douglas MD-10-10
  • 16 units of McDonnell Douglas MD-10-30
  • 60 units of McDonnell Douglas MD-11F

ATR provides FedEx with the following airplanes:

  • 26 units of ATR 42-300/320
  • 21 unit of ATR 72-200

Another company that produces aircrafts for FedEx is Cessna, and there is only one model in service of FedEx, which is Cessna Caravan 208B. So far, there are 243 active units. It is important to outline that both ATR and Cessna models (290 planes) operate as FedEx Feeder. From the list mentioned above, it is clearly seen that currently, FedEx has the most powerful cargo aircraft depot in the world. It is the largest operator of Airbus A300/A310, Cessna 208B and both McDonnell Douglass DC-10/MD-10 and MD11. To update and renew its fleet, FedEx invests huge amounts of money yearly. For example, in 2007, FedEx spent $2.6 billion and bought 90 units of Boeing 757-200 to replace old fleet of Boeing 727s. However, it is important to note that the planes bought have already been in use. The replacement was not sudden but gradual, with the number of 727s decreasing every year and their final disappearance in 2013 (Toure).

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In 2011, the company revealed its plan to buy 27 units of Boeing 767-300F to renew the aircraft fleet and replace old ones McDonnell Douglass MD-10, with age of some units reaching 40 years and more (“FedEx Announces Order”). Those planes should be delivered proportionally between 2014 and 2018. In addition, the introduction of the new jets to the aircraft depot will make it possible to achieve 20% reduction in both fuel emission and operating costs up to 2020 (Toure). 

According to FedEx, the implementation of the sustainable long-term strategy will save result into huge profit and allow company to achieve 30% fuel burn emission decrease in comparison with the obsolete McDonnell Douglas MD-10 models by just getting the planned volume of Boeing 767 into work. These actions are estimated to bring around $2 billion to the profitability of the company. FedEx decided to go further and add some more of Boeing 777Fs into its fleet. Boeing 777F operating in 100 tons capacity class demonstrates amazing range, carrying capacity and fuel efficiency, as well as low exploration and maintenance costs, and it had some advantage over FedEx current best wide range airplane model McDonnell Douglass MD-11F (Toure). Additionally, Boeing 777F model, with all of its privileges, was in earnest thought to become a serious alternative to the Airbus A380F model that was planned for depot entry in 2009. Another important concern is that Boeing 777F is considered to be an effective alternative to Boeing 747-200 and Boeing 747-400 that are prevailing in the air transportation industry today.

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In the following years, FedEx is planning to put the main accent on keeping the balance of the logistics chain and aircraft depot complementarity between Boeing 767F and Boeing 777F, which will remain crucial in terms of unit costs decrease and overall efficiency growth.

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