MESSAGE FROM THE CHAIRMAN
To Our Shareowners:
This past year, 280,000 FedEx team members applied their
dedication, creativity, and passion to the task of changing
what's possible for our customers, offering them more
innovative solutions, faster delivery, and greater access
to the world. In short, our team members are providing
a consistently outstanding customer experience that we
believe sets an industry standard. Thanks to their efforts,
I am pleased to report that FedEx Corporation achieved
another benchmark in financial performance.
We have just entered our 35th year of continuous operation,
and often, someone mentions to me they've seen the first
FedEx aircraft - the very special "Wendy" N8FE - at
the Smithsonian Air and Space Museum. I tell them how
honored I am to be a part of that history. But I also say I'm
proud to be part of a team that focuses on the future and
new ways we can help our customers achieve their goals
in the vast global marketplace. In fact, I often tell people
that FedEx is just getting started. Though customers may
begin talking to us about one or more of our services,
they sometimes end up telling us what they really want
to accomplish is better service, greater sales, and higher
profits. Then, given our broad portfolio of solutions, we
can really help them achieve their goals.
And as we talk to businesses large and small, we realize
that what FedEx provides is greater than transportation,
logistics, and business services. We ultimately provide
access. As we've learned from our landmark research with
SRI International, greater access leads to better societies.
Individuals, businesses, and nations alike benefit from the
ability to draw from a global marketplace of goods, services,
and information. The possibilities speak to our customers,
and they speak to us at FedEx as well. Looking forward, we
will strive to meet the evolving needs of our customers and
create new markets for our services.
With that forward focus in mind, I'd like to mention in
particular three areas of accomplishment among many
in fiscal 2007.
The first is the growth of our networks. We believe we
have the best collection of networks in the industry and
are always looking to expand them strategically for
more profitable growth and greater possibilities for our
customers. In FY07, we completed acquisitions in areas
where we see a bright future.
In China, FedEx Express completed its acquisition of our
partner DTW's share of our joint venture international
priority express business. We also acquired DTW's domestic
China express network. Within three months, we instituted
next-business-day domestic express service in China,
improving access to markets for businesses throughout the
world's largest nation.
In India, we acquired our service provider, PAFEX, giving us
a wholly owned subsidiary serving nearly 4,400 destinations
in a country that has joined China as one of the world's
fastest growing markets.
We strengthened our network in both the eastern and
western portions of the European Union. In the UK, we
acquired ANC, allowing FedEx Express to directly serve the
entire UK domestic market, providing customers a broader
range of shipping options and services. In Hungary, we
acquired our global service provider there, Flying-Cargo,
increasing our capacity in fast-growing eastern Europe.
In North America, we enhanced our less-than-truckload
freight portfolio by completing the acquisition of Watkins
Motor Lines. Watkins now operates as FedEx National
LTL, broadening our FedEx Freight service offerings.
Watkins' Canadian operations are now FedEx Freight
Canada, a great addition to our portfolio there. A number
of new terminals were opened throughout the Freight
system this past year.
The second area of accomplishment to note this past fiscal
year was continued crisp execution.
When we acquired FedEx Kinko's, we envisioned it as a
complementary and powerful retail and digital network,
having great synergies with other FedEx services. We made
significant progress toward that vision in FY07. We are
weaving FedEx philosophy, culture, and metrics deep into
the fabric of FedEx Kinko's, resulting in reduced employee
turnover and continued performance improvement. We
rolled out a new, more compact model for FedEx Kinko's
centers and opened more than 200 of them in FY07. This
new model will help us open more locations faster and
increase convenience and service for our customers.
Through FedEx Print Online, we are applying our digital
network expertise to helping customers print complex
documents, regardless of time and distance. In the same
vein, customers can now initiate end-to-end direct mail
campaigns right from their computers, with the order
fulfilled at a FedEx Kinko's. The FedEx Kinko's network
is now producing significant revenues - at an
$800,000,000 run rate as we ended FY07 - for our
Express and Ground companies. This highly profitable
traffic is growing substantially.
FedEx Ground made a seamless transition from its longtime
leader Dan Sullivan to its new president and CEO, Dave
Rebholz, who brings great skills and many years of FedEx
experience to his new role. This past year FedEx Ground
added new hubs, additional direct routings, and numerous
IT system improvements to further reduce transit times
in our Ground network. A number of new state-of-the-art
FedEx Ground facilities were opened during FY07.
The FedEx Ground small business owners have remained
committed to providing outstanding service to Ground
customers, despite litigation challenges. As we have in the
past, we will continue to aggressively defend our model,
At FedEx Express, we further strengthened our industry-leading
global network. Our strongest emphasis in FY07
came where growth is fastest: Asia. Our new Asia Pacific
Hub is slated to open in FY09 in Guangzhou, the epicenter
of Chinese manufacturing, optimally positioning us to meet
the future needs of this thriving market. Our domestic hub
in Hangzhou opened at the end of FY07 and will play a
major role in our new China system. We also created a new
administrative center for China in Nanjing and one for the
Asia Pacific region in Manila. We added more capacity to
meet projected shipping growth in South Korea as well.
A third area of significant accomplishment is our continuing
commitment to improving our customers' experience at
every FedEx touchpoint.
We know that expanding the physical networks of our
companies is not enough. We must also fulfill our Purple
Promise: "I will make every FedEx experience outstanding."
In FY07, we revamped our Service Quality Index across
operating companies to better reflect customer needs.
This is making our networks easier to use and helping us
offer new solutions that enable customers to build their
businesses by tapping into the power of access.
FedEx team members in our operating companies literally
see the world from the air, the ground, and from store
windows facing main streets and malls in cities and towns
of every size. From every angle, we see opportunities to
improve the quality of life for people in the communities we
serve. We continue to act on many of those opportunities,
both in our daily business activities and through our
corporate citizenship activities.
In FY07, we expanded our long-standing commitment to
bring help quickly when disaster strikes. We announced a
donation to the Salvation Army to deploy mobile canteens,
each providing up to 2,500 meals a day, along with a grant
to train Salvation Army emergency response personnel
in countries around the world. On a day-to-day basis, our
company continues to increase support to communities
by giving people access to needed food, education,
medical care, safety programs, and more. This past year,
in conjunction with Heart to Heart, we agreed to pre-stage
disaster-relief supplies in a response center in Kansas City
and in FedEx facilities in Subic Bay, Dubai, and Miami.
We also maintain a significant support relationship with
the Red Cross to help in times of crisis.
We recognize the importance of environmental stewardship
and the necessity of improving fuel efficiency. That is why
we are adding more hybrid vans to our FedEx Express
fleet and are participating in the development of improved
commercial hybrid powertrains, to accelerate the spread
and lower the acquisition costs of this promising technology
industry-wide. We will further reduce our energy intensity
and noise footprint by acquiring Boeing 757 aircraft, which
offer major reductions in fuel consumption per ton earned
over the planes they replace. Also with conservation in
mind, we have chosen the fuel-efficient Boeing 777-200LR
twin jet wide-body freighter to meet future international
Our focus in FY07 resolutely remained on providing more
possibilities each day to our customers, while positioning
FedEx to extend access to more markets and offer more
services in coming years. This is how the people of FedEx
keep businesses small and large on the leading edge of
commerce - equipping them for continued success in a
changing business world.
Though the years ahead will certainly contain challenges,
there will also be unprecedented opportunities. Whether in
China, Chile, California or the Czech Republic, people today
move to a global beat of new possibilities, thanks in large
part to the explosive growth of access to goods and ideas.
It's a future we at FedEx anticipate with great excitement.
Frederick W. Smith
Chairman, President and Chief Executive Officer