Air Transport World

'Trim' growth; Federal Express continues to spread out but is cutting costs to offset the expenses of expansion. (company profile)

Certain brand names have become so familiar that they not only are generic but actually have become verbs-such as to xerox" something, meaning to photocopy it. So it is with Federal Express. if you want something delivered overnight in the U.S., you "FedEx" it-even if you send it by UPS, Airborne, DHL or, of course, Federal Express.

Founded in 1973 by Frederick W. Smith, Federal Express, or FedEx, now is synonymous with small-package overnight delivery, controlling about 47% of the market. Its two nearest competitors, Airborne and UPS, control 17% and 12% respectively, according to financial analyst Helane Becker of Shearson Lehman Brothers.

A survey by Landor Associates ranked FedEx as the 139th most powerful name brand in the U.S., ahead of the likes of American Express (149), Texaco (158) and even Cidillac (162), all much older companies. The survey was a ranking of consumer familiarity and image, equaling the power of the brand. The closest passenger airline in the survey was American, ranked at 292.

FedEx has been growing and showing increased profitability since 1976, reaching revenues of $1 billion in 1983. Last year, it reported revenues of $7 billion, a 36% increase over 1989, and Becker projects its revenues for fiscal 1992 at $8.5 billion .

Unfortunately, over the past couple of years, the phenomenal success of the company has been offset by losses associated primarily with expansion into foreign markets. And the current worldwide economic climate hasn't helped.

For the fiscal year that ended May 31, FedEx reported net income of $5.9 minion, a drop from $115.8 million in fiscal 1990 and $184.5 million in fiscal 1989. Both operating and net income have continued to drop during the current fiscal, with third-quarter '91 showing an operating loss of $89.5 million and net loss of $105.6 million. This was the first quarterly loss since going public in 1978.

James Barksdale, chief operating officer, pointed out that the FY91 losses have come from "one-time write-offs." A $121 million write-off came from restructuring the company's U.K. operations, while $32 million more was lost through what FedEx says was "the failure of a vendor, Hamilton Taft & Co., to remit withholding taxes on behalf of Federal Express." A further $4.9 million was lost through the reversal of aircraft-noise-reduction-kit service.

However, as they say, what's past is prologue and Smith is using the experience to trim his company into lean fighting shape. …

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