Smith explained to investors that FedEx – which lowered its projections on 2013 profits last month – would be better served in the long run by making the necessary cuts now. He anticipates the effects of the move to really be felt in 2015 and 2016, by the end of which he estimates profits will have improved by $1.7 billion.
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“We intend to improve annual profitability substantially in our FedEx Express segment,” Smith said at the investors’ dinner in Memphis, Tennessee.
The Express business, which executes FedEx’s overnight deliveries via aircraft, saw its operating earnings fall 28 percent last quarter. Smith attributes this fall-off to customers’ increasing preference for cheaper shipping options.
Meanwhile, FedEx’s biggest competitor United Parcel Service (NYSE:UPS) – the largest delivery service company in the world – is anticipating a blow next week from the European Union’s anti-trust commission.
A source close to the issue reports that EU regulators are reviewing UPS’s proposed buyout of TNT Express (AMS:TNTE) and are likely to deem it anti-competitive. The EU commission is expected to list its concerns about the $6.6 billion deal in a meeting with UPS before filing an official statement of objections.
Analysts believe if UPS wants the deal to be approved – the largest in company history – it must be prepared to offer a number of concessions to ease the EU’s anxieties about the merger, although its unclear what sort of concessions the company is in a position to make.