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A R C H I V E S

N E W S

"AT WHOSE EXPENSE FEDEX"

     Walk into any FedEx shipping center and you might be surprised at what the integrator with $21 billion dollars in annual throughput offers.
     No longer a one-trick niche company today, you can choose various speeds and levels of service and prices at FedEx.
     Most intriguing is FedEx Ground or what Big Purple has made of its $2.7 billion 1998 purchase of RPS Ground.
     Elsewhere despite growth in Asia and a windfall of business post 9/11, as the company picked up U.S. flag carriers’ parcel post business from the U.S. Postal Service in the post 9/11 security hysteria, FedEx has not had much positive financial news from its domestic air business during seven straight losing quarters.
     So why not take some of the billions already earned and go after UPS and its 10 million package a day U.S. domestic ground business?
     That is exactly what is happening right now.
     FedEx is investing about $2 billion to develop hubs in various U.S. locations on top of the $2.7 billion, plus another $600 plus million it pitched in after the Caliper Systems acquisition
     What is UPS doing about all of this?
     Right now UPS has about 80% of the U.S. domestic ground market versus FedEx’s 10% share.

Maybe they slug it out above and below, but this cute brown bear that dropped in out of nowhere and landed under our tree, is one of the reasons that the tree is still up. Christmas doesn’t last long enough anyway. Good job, UPS, and thanks.

     So don’t cry for me UPS.
     In the harsh light of reality, FedEx represents to UPS about the equivalent of a spot in Brown’s rear view mirror.
     UPS was thought at one time ready to swallow FedEx. Maybe some day the Atlanta-based giant will be sorry it didn’t.
     But UPS position on the ground today and into the foreseeable future is commanding.
     The irony here is, that while UPS is spending huge amounts of money to get into the air cargo business that once was the sole domain of FedEx, FedEx is spending similarly to go after the ground business, once known as an excuse for UPS to print its own money.
     No surprise the hubris of both of these companies. Both believe that they can do anything they want. Now in the U.S., ground shipping is growing faster than air.
     The real question here is, what will happen as shippers discover an ability to obtain the guarantee, the absolutely positively shipping by FedEx cache, for maybe a third of the cost of high profile FedEx, just by specifying ground when shipping FedEx?
     If shippers get hip and decide that all things considered they can wait a day or two, what happens to the high-yield bread and butter revenue at Fed Ex?
     FedEx, as we said earlier is smart. But after spending all the years conditioning the world that overnight is the thing, some wonder if FedEx will shoot itself through the foot saying that two or three days is OK too?
     We remember Federal Express Zap Mail. Somebody forgot about fax machines. Zap Mail cost $400 million 1980s dollars, we recall.
     FedEx owes its success to its originality and brilliant business acumen.
     The general belief about FedEx amongst most people after 25 plus years in business, is that the company delivers as promised.
     FedEx built an empire by delivering trust that whatever was specified as next-day arrived at 10:30 in the morning.
     Unlike UPS, who shippers agree, usually will say:
     “The shipment is in transit.”
     FedEx always has lots more exact information about shipments.
     What has really happened here therefore is nothing new in the wide world of sports.
     It is the oldest game in air cargo. Invest billions to get into a new business and then to make sure it works, lower rates.
     But since as mentioned, the company built itself upon a solid reputation for reliability, selling overnight and total tracking as part of its service package, it is now offering what the shipper really wants in 2003, peace of mind at a discount.
     FedEx’s success on the ground may not be at the expense of UPS, although everybody will continue to draw comparisons.
     There is enough business to go around, so that both companies should continue to soar.
     But there is a question of shippers getting through the new FedEx shipping rule book as labor at the company gets familiar with five separate product lines with maybe more to be added, all being accepted and handled at one place.
     Whether FedEx employees will take a page from their new best friends and partners at the U.S. Postal Service about service, we can only pray never happens.
     U.S. Postal workers are generally regarded as under motivated and hostile.
     In any event, more than one shipper looking at those bullet proof enclosures in every postal facility after another disgruntled postal worker has gone berserk, has thought that maybe the protection is there for the public.
     An industry type who wishes to have their name withheld tells of an attempt to ship a laptop computer at FedEx using cheaper FedEx Ground.
     “I carried the laptop in, figuring I could get one of those neat laptop containers that they give away for free.
     FedEx Air gives away boxes.
     The FedEx store front shipping center, while offering and accepting FedEx Ground, refused my request to use a FedEx laptop box for a ground shipment.
     ‘A ground shipment can’t go in a FedEx box,’ I was told.
     After much conversation I obtained free of charge the FedEx Air box specifically to ship laptop computers.
     I wrapped the laptop FedEx Air box in brown paper and stuck on a label for cheaper FedEx Ground shipping.
     I rendered the shipment and was afforded the same courtesy and acceptance of tracking information into those flat pointy scanners that beep.”
     The possibilities intriguing.
     Your box with a laptop being shipped to California for six bucks by FedEx Ground offers the same tracking and general service guarantees (albeit a couple days longer travel, plus an extra charge for insurance) goes into one basket while just next to that somebody else’s laptop costs $40 bucks, or $36 dollars more to travel overnight.
     Since most FedEx customers are buying peace of mind of the FedEx system, what customers choose to spend will be interesting to observe as the future unfolds.
     Outside the FedEx shipment centers today, different trucks, all saying FedEx but with the logo in different colors for each service (in addition to “Air” and “Ground’ another service for Internet orders called “FedEx Home” is offered), are fighting for parking space on a busy city street, to pick up their respective FedEx packages.
     Perhaps free boxes at FedEx will have to go the way of meals on passenger flights. Certainly people will take advantage.
     But rather than dwell on that, let’s marvel for a moment at how much money, time and effort FedEx can afford to spend to get to where it wants to be.
     Today, just like when they invented their own idea for air cargo, right after Railway Express Air went out of business, Federal Express is still the best story around.
     By 2009, according to one estimate, the company expects to double its ground delivery capacity from 2.5 million packages a day currently to nearly 5 million daily.

Two Airbus executives, Brian Fleet (right) and Scott Coleman pose for a picture atop what is the first bit of solid matter, which when completed will become part of the world’s newest, biggest, most exciting aircraft the Airbus A380 super jumbo. The first wing is being constructed at the North Wales factory at Broughton, U.K. The panel of aluminum-alloy is 35 meters long and weighs 4,500 kilos and will be the biggest wing ever constructed in the U.K. Part of the first A380, the wings are scheduled to be delivered to Toulouse, France where the entire country is clearing a way from the coast inland to accommodate their passage in 2004.

ADDING UP TO 2003

Ilpo Kuisma (left) knows all about the power-play, first as a professional all-star, ice-hockey player from Finland, and today as newly named vice-president sales at Finnair Cargo. In New York with Tony LaRusso (right) December 12, Mr. Kuisma noted the solid contribution of air cargo to both building world economies and to Finnair.“There is no better way to Northern Europe, the Baltics and CIS and now to the emerging markets in China,” Mr. Kuisma declared. Contact: ilpo.kuisma@finnair.com.

     Tony LaRusso who took over command of Finnair Cargo USA September 1st of this year has experienced his first couple of months on the front line of a business that is yet to return to acceptable levels.
     Although he is the new kid on the block, Tony is anything but new, and certainly after nearly fifteen years at Finnair Cargo he can’t be called a kid.
     But already Tony is looking forward to 2003, The CNS Conference and building new bridges and friends for Finnair.
     It’s worth mentioning, that right now as the Yuletide approaches, the tenacious true-blue carrier with routes from the Arctic Circle to the Southern Cross is solid profitable, the way Finnair usually is, despite upheaval all around in the airline business
     Still Tony has been down the road enough times to acknowledge that things could be better.
     “We are taking nothing for granted. There has not been any marked improvement in the export climate. In fact when you consider that this is peak season the depressed state of the market becomes more apparent.”
     Tony is good to talk to about business. In the first place he studied finance in college, so he couples an analytical mind about numbers with a love for aviation. But more than that he understands how to separate what is real from the hoped for. No green eye-shade accountant here, but a real world pragmatist who is purpose bent on getting the job done.
     “Many carriers are having to offer ad-hoc prices for their air cargo services even at this time of year. Supply is still outpacing demand.
     Finnair Cargo knows that it can do business by delivering on every promise. We do the all the things that make the big job successful.
     “We are proud to announce that Mr. Paul Kasztan has joined our North America cargo team as district sales manager based at JFK, New York. Paul is a perfect fit for us with nearly twenty years experience in sales, service and operations. Paul, Frank McDonnell and I are basically all from the same ilk.
     “We are all excited about our depth of expertise in air cargo and the fact that Finnair Cargo USA is now a three-headed cargo monster.
     “We will be announcing some new programs during 2003 as business solids up a bit. For now we just can’t wait for tomorrow, because we look better every day.”