Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
FedEx Corp. said late yesterday it has reduced its estimates for its fiscal first-quarter earnings due to persistent weakness in its global airfreight business that was more pronounced than the Memphis-based company had expected.
FedEx, whose fiscal first quarter ended Aug. 31, said it expects to report earnings of between $1.37 and $1.43 per "diluted" share, compared with earlier estimates of somewhere between $1.45 and $1.60 per diluted share. In the same period a year ago, earnings came in at $1.46 per diluted share.
Fully "diluted" shares are defined as the total number of shares that would be outstanding if all possible sources of conversion, such as convertible bonds and stock options, were exercised and became common shares.
If the projections are accurate, it would represent the company's first year-over-year earnings decline since 2009.
In a statement, FedEx said that "weakness in the global economy constrained revenue growth" at its FedEx Express air and international unit "more than expected" from its earlier estimates.
The company said it has not tallied up all of its results from the quarter and will make more numbers available Sept. 18, when it officially releases its fiscal first-quarter results.
FedEx Express, the company's largest division by revenue, has been affected for years by a secular decline in domestic air traffic as many U.S. businesses have shifted to regional distribution networks supported by lower-cost ground transportation. In recent months, however, its international business has suffered as a slowing global economy has reduced global airfreight demand, especially out of the Asia-Pacific region.
The unit has also been hit by rising jet fuel prices, which climbed, on average, 8 percent from June to July and nearly 9 percent from July to August, after dropping 10 percent from May to June. The company imposes jet fuel surcharges to recoup those higher costs, but the surcharges have a lag effect that won't benefit FedEx until its fiscal second quarter.
The company would not specify whether the weakness that triggered the revised forecast was due to domestic U.S. weakness, international sluggishness, or a combination of the two. David G. Ross, analyst at Stifel, Nicolaus & Co., said in a research note that the distinction is irrelevant because air shipments feed through the same global network.
"The company had been banking, in our view, on international packages traveling in the domestic network ... to offset secular declines in domestic traffic, and it hasn't happened," Ross said.
WEAK GLOBAL DEMAND
Benjamin Hartford, transport analyst at investment firm Robert W. Baird & Co., said the FedEx announcement didn't come as much of a surprise given increasing evidence of a "very weak" international airfreight environment in July and sluggish domestic air demand that was below the normal seasonality.
In recent months, sources ranging from Hong Kong airline Cathay Pacific, Hong Kong Air Cargo Terminals Ltd.—through which a large volume of Asian air export traffic flows—and the trade group International Air Transport Association (IATA) have all reported weakening traffic trends.
IATA, which represents most of the world's airlines, said Asia-Pacific carriers reported in July a 7.6-percent drop in cargo traffic compared with the same period a year ago, the steepest year-over-year decline in any region canvassed by the group. Carriers serving the region cut cargo capacity by 4.3 percent during that time, but it wasn't enough to counteract the shortfall, IATA said. Asia-Pacific carriers have experienced virtually no growth in freight traffic since the fourth quarter of 2011, IATA said.
Worldwide freight demand in July was down 3.2 percent from the year-earlier period, IATA said.
Air volumes out of Asia are expected to experience a temporary lift once Apple Inc. begins shipping its new iPhone 5 product. In addition, demand should pick up due to seasonal factors as the marketplace heads toward the fourth-quarter peak season. But once the technology bump abates, demand is expected to fall back into a muted state, suggesting an unmemorable peak period.
FedEx is holding a two-day meeting Oct. 9 and 10 in Memphis, in which it will unveil long-awaited plans to restructure its FedEx Express division.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.