ALPA watching out for us?!

[TonyC]

Tony--I meant impose wage cuts via the bankruptcy code (although it's not as easy now). The point was that no one is safe and you never know where the next curve ball will come from.

Well, in that case, I exercise the right to change my answer. Fred filing bankruptcy to avoid pay raises sounded more absurd than the scenario I thought you were describing, so I gave you the benefit of the doubt.


Nothing says that economics won't change 5 years hence, but I believe there's not a Bankruptcy judge in the world that wouldn't laugh Mr. Smith out of the court room and fine him for wasting his time were he to consider that course today. Record profits and growth quarter after quarter, year after year, and no end in sight to the point they can no longer hide all the profits in the ground units leads me to believe that pleading poverty just ain't gonna happen this time around.

Granted, the airline industry has weathered events that nobody could have seen coming, and there might very well be such events in our future still. However, I must note that FedEx and UPS weathered those unforeseen events quite well. There's a fair chance that such will be the case in the future.


Don't confuse my confidence with complacency or ignorance. I'm putting away money as if I won't have this job next year. I'm preparing to be unemployed. I would bet on being disabled before being furloughted, but who knows. Of course, I think there's a lot of guys that should have been doing that a few years ago, too, but that's another story. Bygones be ... One of the reasons I favored FedEx in the first place was economic stability. The only mistake I made was underestimating how important that factor would become. Lucky for me the error was in my favor. But if I were a betting man today, I'd still bet on the future of a cargo carrier over any pax carrier.


Just my opinions, mind you...






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[RichardFitzwell]

Tony,

Although FedEx is currently more protected than the PAX carriers it is not immune from other threats. When your current contract was being voted on, Fred threatened to move freight using PAX carriers, contract carriers and trucks. Everyone knew that was an empty threat. It just wasn't possible due to logistics.

Since then FedEx has beefed up their ground transportation sector considerably. This, if pressed by a pilot strike, will allow a large transfer of cargo via ground and other airlines. Do you really think the only reason FDX has been expanding FedEx Ground is to compete with UPS and DHL? I was happy to see FPA go as I thought ALPA would protect FedEx from this transfer. At the time, ALPA had more control over PAX haulers. FPA had no support from ALPA. FPA is long gone and ALPA is fighting to stay alive.

In the first twenty-five years FedEx built their reputation on overnight shipments. Clearly trucks can't match airplanes when it comes to the timely transfer of cargo but, in today's environment, trucks can make up much of their new business model. Overnight shippments may be moved using management pilots, pilots willing to cross a line, contract operators and hundreds of passenger airlines. Even overseas shipments could be flown using foreign carriers. FedEx, like every other major, could start buying B737's and operate them under a different name, transferring domestic routes slowly over time.

In addition, cabatoge is a real threat for freight ops. IMO, we will see foreign carriers flying freight point to point within the U.S. before we see them flying passengers.

Those are simply two obvious threats that come to mind. I'm sure your happy faced Fred Smith has many more ideas to cut operating costs. Maybe (hopefully) none of my concerns are valid and FedEx and UPS will be immune from what the passenger haulers have gone through. But to think it absolutely, positively can't happen to you is foolish.

 

[TonyC]

Tony,

Although FedEx is currently more protected than the PAX carriers it is not immune from other threats. When your current contract was being voted on, Fred threatened to move freight using PAX carriers, contract carriers and trucks. Everyone knew that was an empty threat. It just wasn't possible due to logistics.

Since then FedEx has beefed up their ground transportation sector considerably. This, if pressed by a pilot strike, will allow a large transfer of cargo via ground and other airlines. Do you really think the only reason FDX has been expanding FedEx Ground is to compete with UPS and DHL? ...

In the first twenty-five years FedEx built their reputation on overnight shipments. Clearly trucks can't match airplanes when it comes to the timely transfer of cargo but, in today's environment, trucks can make up much of their new business model. Overnight shippments may be moved using management pilots, pilots willing to cross a line, contract operators and hundreds of passenger airlines. Even overseas shipments could be flown using foreign carriers. FedEx, like every other major, could start buying B737's and operate them under a different name, transferring domestic routes slowly over time.

I don't recall ever being so foolish as to say "never" about anything. But I am smart enough to realize that if Fred could operate his express business without pilots, he'd be doing it today. If you believe that he can protect the product that made FedEx what it is today, the absolutely, positively guaranteed by 10:30 tomorrow service, using anything other than his own airline with dedicated pilots and airplanes, you're sorely confused. The moment that the customer can no longer rely on that service, FedEx becomes an overpriced UPS, and I've seen first hand what customers do when their carrier stops carrying. Brand loyalty lasts about a half a nanosecond.

Management pilots can't do it. A handful of scabs won't do it. A fleet of trucks stretched bumper-to-bumper from coast to coast won't do it. (Not until they invent that 600 mph truck, that is.) Belly freight on passenger airplanes won't do it. All of those together won't do it. The key factor that set Federal Express apart from the rest in the beginning, the element that was lauded in early television and print ads, the fact that FedEx is better because it has its own airline with its own airplanes and pilots on its own schedule, is the same factor that demands the day in and day out reliable airline flown by FedEx pilots. If there were another way, we'd be doing it already.


Nice try, though. You might have convinced a few people the last time around.




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[RichardFitzwell]

What last time around?

I agree with a lot of what you've said but my point is Fred won't stop trying to cut costs and make money. Its not like he hasn't tried before. FedEx even went as far as to design their own, ugly cargo airplane. Do you remember that pig? It was some single engine, twin prop pile of dung that never made it off the ground. It failed like Zap Mail but he spent a lot of time and money trying to make it work.

I believe we will see another carrier flying FedEx cargo exclusively under FDX holdings within the next several years. FedEx has shifted from being a single overnight shipper to being a very diverse operation made up of many smaller divisions. Today, FedEx makes piles of money from many separate divisions such as FedEx Express, Freight, Ground, Custom Critical, Kinkos, etc. Other than Express, these divisions are on the ground shipment side only. What prevents Custom Critical from starting an airline using 73's and pilots not currently on the FedEx seniority list. Nothing really.

What we've covered is only in house FedEx. DHL is ramping up up become a major competitor with a massive presence overseas. Like I said earlier, cabatoge will also be a major player with some sort of Open Sky's Agreement. I see some tough battles ahead for the cargo companies which ALPA doesn't have the means or willingness to fight.

 

[RichardFitzwell]

If you believe that he can protect the product that made FedEx what it is today, the absolutely, positively guaranteed by 10:30 tomorrow service, using anything other than his own airline with dedicated pilots and airplanes, you're sorely confused. The moment that the customer can no longer rely on that service, FedEx becomes an overpriced UPS, and I've seen first hand what customers do when their carrier stops carrying. Brand loyalty lasts about a half a nanosecond.

I think this statement blatantly reflects your overconfidence. Years ago many passenger airline pilots and ALPA thought the same as you are today. "I fly for (insert airline here). My passengers expect the top notch service MY airline provides and no other pilot or airline can duplicate this service. No other airline will ever be able to fly MY passengers as I can." That sounds crazy in today's world, doesn't it? We have learned this is not the case and feeder service goes up for bid to be flown by the lowest bidder. That hasn't happened much on your side yet but it is a real possibility and ALPA has no defense. Remember the term "Whipsaw." It may be term you become familiar with in your future, but then again, I'm sorely confused.

 

[TonyC]

I tell ya what. Go price an overnight letter from Point A to Point B using FedEx and then price the same service using UPS. Then explain to me why a customer would use FedEx.


When you've completed that exercise, explain to me how that package will make it from Shreveport to Knoxville without a FedEx airplane.


Once we understand those details, we'll have a better appreciation for the big picture.




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[RichardFitzwell]

I tell ya what. Go price an overnight letter from Point A to Point B using FedEx and then price the same service using UPS. Then explain to me why a customer would use FedEx.


When you've completed that exercise, explain to me how that package will make it from Shreveport to Knoxville without a FedEx airplane.


Once we understand those details, we'll have a better appreciation for the big picture.


.

Sure Tony. I'll do that. Like I said before, I think you may be setting yourself up for a major let down. Good luck.

 

[TonyC]

Sure Tony. I'll do that. Like I said before, I think you may be setting yourself up for a major let down. Good luck.

I appreciate your well wishing. I think you may be fooling yourself into thinking an expertise on passenger economics directly translates into expertise on express cargo operations.


FedEx customers pay more for FedEx service, each and every day. The single element that sets us apart from our competitors is the confidence that we will deliver on time reliably. The moment that confidence is breached, we become nothing more than an overpriced UPS.


How do we build that confidence, and how do we maintain it? Well, Fred knows exactly how. It was built, and it is maintained, with a network of airplanes flown and controlled by his airline using his pilots. I won't try to educate you about the entire form of the system, but the SHV - TYS scenario explains some important facets. When a customer sends her overnight letter from SHV to TYS, it doesn't immediately leave SHV on a journey east. It sits in SHV until all the packages are ready to leave SHV that evening. Furthermore, it doesn't arrive in TYS just in time to meet the 10:30 delivery deadline, it arrives with all the other TYS destined packages early in the morning. Accounting for travel from station to ramp, and ramp to station, the package has about 6 hours to be sorted and transported.

Now, if you'd like to consult a map program such as MapQuest or Map.google.com to calculate the distance between the two, feel free. Trust me, though, a truck won't make the trip in 6 hours. Consult the schedules of airliners if you like, but I'm going to bet you won't find scheduled service that leaves SHV after 9PM and arrives in TYS before 6AM. Let's see, what were those other options? Oh, yeah. Contractors. Yes, Fred could contract airplanes to replace the FedEx airplanes. There's an entire fleet of ACMI lift just standing by to cover all the airlift that FedEx performs every night - - NOT. Contract pilots? Sure. We'll get that system up and running in about two months, as long as we can find pilots to do the IOE. Scabs? Yepp. Guess how many DC-10's or 727s will move with 500 scab Captains? Zero. Management pilots? Good point. They'll keep 3 or 4 MD-11's moving each night. Think you'll see an MD-11 in SHV or TYS? Not a chance.

I don't blame you for being so naive about how the system works. Most FedEx pilots don't even appreciate the details or implications of the system form, so why should you? So, don't be so quick to toss your "overconfident" label around in a conversation where you're not the expert. Being quite familiar with how the system works, having worked the system from package pickup through package delivery, having dealt first-hand with customers whose first choice of carrier was on strike, I believe I have a better appreciation of the nature of the situation than you. I am quite confident that FedEx Express exists today and will only continue to exist as the result of the FedEx pilots, along with other key players. Remove one of the key players, and the system will fail. I am confident that Fred would be doing it today without pilots if he could. He can't, and he won't. The threats were idle then, and they're just as idle today.








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[RichardFitzwell]

O.K. Tony. Let me see if I understand how FedEx works - Box is dropped at station A by customer, sits 'til plane leaves to fly to sort, box is sorted and put on airplane going to destination city, box arrives at destination city with enough time to be delivered via ground shipper to customer by 10:30. Believe me I understand that very difficult concept as I was a part of it for over six years.

I'm simply stating my opinion. From your demeanor I really don't expect you to agree with anything I've said. Your whole arguement is based on the fact that customers care who moves their cargo. You think if anyone else flew that box confidence would be lost. What about Mountain Air or Wiggins? It has already started and customers don't know (or care).

I think you have the leverage today to negotiate a decent contract but you can also win the battle and lose the war. Fred (or his successor) will not continue to be at the mercy of the pilots. He has been building up back-ups on the ground shipment side for years so if one area fails, the other can pick up the slack. IMO, this same concept will continue to Express. Internal competition along with increasing foreign and domestic operators will continue to put pressure on your stronghold. You come across as being irreplaceable. That's naive.

Please explain to me how FedEx works again. It really helped me. You can have the last word.

 

[Traderd]

How do we build that confidence, and how do we maintain it? Well, Fred knows exactly how. It was built, and it is maintained, with a network of airplanes flown and controlled by his airline using his pilots.
Let's see, what were those other options? Oh, yeah. Contractors. Yes, Fred could contract airplanes to replace the FedEx airplanes. There's an entire fleet of ACMI lift just standing by to cover all the airlift that FedEx performs every night - - NOT. Contract pilots? Sure. We'll get that system up and running in about two months, as long as we can find pilots to do the IOE. Scabs? Yepp. Guess how many DC-10's or 727s will move with 500 scab Captains? Zero. Management pilots? Good point. They'll keep 3 or 4 MD-11's moving each night. Think you'll see an MD-11 in SHV or TYS? Not a chance.

I am confident that Fred would be doing it today without pilots if he could. He can't, and he won't. The threats were idle then, and they're just as idle today.

Tony,

I follow and trade both UPS and FDX actively.

Based on the scenario you present, it looks like the entity actually in control of "his airline....pilots" is not FDX corporate. It appears that your union can demand and receive whatever level of compensation and QOL standard they desire with FDX having no option except to capitulate or fold. You seem to have dismissed every other option at FDX's disposal.

Is that a fair assessment of current situation concernong pilot labor at FDX for now?

Thanks

 

[FreightNazi]

I believe we will see another carrier flying FedEx cargo exclusively under FDX holdings within the next several years.

Would it be called FedEx Express Express?

 

[PurpleInMEM]

Za fazzerland vill rule once again...

Just FYI...

Standard letter, using company packaging, via courier pickup from Miami to Seattle with Overnight, priority-morning delivery results in the following:

UPS -- $59.34

FDX -- $55.28

and our good friends at Deutsche Post, DHL -- $25.33

 

[TonyC]

He has been building up back-ups on the ground shipment side for years so if one area fails, the other can pick up the slack.

Tell us about the back-ups that will get that letter from SHV to TYS, or for that matter, from New York to Los Angeles, or Miami to Portland - - either Portland.




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[TonyC]

It appears that your union can demand and receive whatever level of compensation and QOL standard they desire with FDX having no option except to capitulate or fold. You seem to have dismissed every other option at FDX's disposal.

I never said we can demand whatever we want. We do, however, have a good deal of leverage to negotiate what we are worth.

As I asked RichardFitzwell, can you describe for us the option that will allow FedEx to guarantee service by 10:30 tomorrow across the country?


A scheme that allows FedEx to return to a 70% service level in 2 weeks is unacceptable. By that time, customers will have already shifted their business to DHL and UPS. Permanently. I've seen it happen. Once the absolutely, positively overnight guarantee goes away, that confidence and image are gone forever. Like virginity, you can't get it back.




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[Traderd]

I never said we can demand whatever we want. We do, however, have a good deal of leverage to negotiate what we are worth.

As I asked RichardFitzwell, can you describe for us the option that will allow FedEx to guarantee service by 10:30 tomorrow across the country?


A scheme that allows FedEx to return to a 70% service level in 2 weeks is unacceptable. By that time, customers will have already shifted their business to DHL and UPS. Permanently. I've seen it happen. Once the absolutely, positively overnight guarantee goes away, that confidence and image are gone forever. Like virginity, you can't get it back.




.

I did not mean to insinuate that you had said that you could demand whatever you want. However, you have clearly articulated the case that there are no operational options available to FDX in the case of a pilot strike. At least none that would allow for the continuation of the business model as it is currently constructed.

It looks like there is a lot of leverage on your part.

Thanks

 

[TonyC]

... you have clearly articulated the case that there are no operational options available to FDX in the case of a pilot strike. At least none that would allow for the continuation of the business model as it is currently constructed.

It looks like there is a lot of leverage on your part.

I highlighted the key phrase. Clearly, FedEx could change its business model, and clearly they have threatened us that they will. It is my contention that were an alternate business model preferable to the Absolutely, Postively model currently in place, the model that made FedEx what it is today, we would have converted to that model long ago. As it is, we go to great lengths - - back-up crews, back-up airplanes, back-up plans - - to protect the image, the virginity. I believe we will continue to go to those great lengths.



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[RichardFitzwell]

Tell us about the back-ups that will get that letter from SHV to TYS, or for that matter, from New York to Los Angeles, or Miami to Portland - - either Portland.




.

Like I said, you have the leverage TODAY. The transfer won't happen immediately, but it will happen. Over time FedEx will grow less dependent on Express air domestic and more on ground. Do you know what the fastest growing domestic transportation company is in history? It's FedEx Ground via RPS and Caliber Systems.

FedEx is parking the smaller 727's it uses to feed smaller cities and adding widebodies to larger cities. Ground can move it to within a couple hundred miles to and from the larger airport and still meet the 10:30 deadline. It's even easier for ground going west bound with the time difference.

The domestic air side of FedEx has lost money for the past seven straight quarters. I'm sure you already knew that. How has FedEx been so profitable? They are starting to rely more heavily on international shipments (like many domestic PAX haulers) and ground shipments. More money can be made internationally than can be made domestically. It's very possible for FDX to fly cargo international using pilots not on the current FedEx seniority list. You've already seen it around peak.

The bottom line is customers want that confidence you speak of but they want it at discounted prices. Competition will allow this to happen. FedEx will have to lower expenses to compete. That's where you come in.

 

[fr8doggie]

The domestic air side of FedEx has lost money for the past seven straight quarters. I'm sure you already knew that. How has FedEx been so profitable? They are starting to rely more heavily on international shipments (like many domestic PAX haulers) and ground shipments. More money can be made internationally than can be made domestically. It's very possible for FDX to fly cargo international using pilots not on the current FedEx seniority list. You've already seen it around peak.

/

From where do you get this information? This is from our most recent quaterly financial statement:

The following refers to the FedEx Express unit only

• Revenue of $5.12 billion, up 11% from last year's $4.62 billion
• Operating income of $285 million, down 8% from $310 million a year ago
• Operating margin of 5.6%, down from 6.7% the previous year

FedEx International Priority (IP) revenue grew 13% for the quarter, as IP revenue per package grew 7%, primarily due to higher fuel surcharges and package weights, as well as favorable exchange rates. IP average daily package volume grew 6%. U.S. domestic express package revenue increased 8%, as U.S. domestic average daily package volume grew 4%. U.S. domestic revenue per package increased 3%, driven by higher fuel surcharges.
On September 7, FedEx announced the first overnight express link between India and China as part of its new eastbound around-the-world flight, which connects Europe, India, China and Japan with the FedEx Express U.S. hub in Memphis. Start-up costs for this flight, together with costs associated with the westbound around-the-world flight that began in March, negatively affected operating income in the first quarter. The complementary eastbound and westbound around-the-world routes have been launched to meet supply and demand needs in both direction.

Those'll be flown by FDX planes and FDX crews. FDX does not like to use non-FDX assets as they are unreliable. Yes- we use them at peak because it does not make sense to run the manning/fleet based on the heavy requirements of a couple of months.

 

[fr8doggie]

Duplicate entries

 

[RichardFitzwell]

From where do you get this information?

Air Cargo News
January 2003

"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.

EDIT: This article is from 2003. I thought it was more recent. Sorry for the confusion. It does show us that the FedEx domestic product has suffered in the past couple years.