How does FEDEX UPS make money

[ThisistheDream]

I am curious how much revenue does UPS or FEDEX make on a flight from lets say LAX to SDF or MEM in a 767 or A300 fully loaded with boxes VS. a DAL 767 fully loaded with passengers flight from LAX to ATL? I am assuming that FEDEX UPS is making 10 times the revenue on the cost of shipping boxes vs. the cost to ship passengers? How much more does it cost to ship a 6ft long by 2 ft wide, 200 pound box (the ave. person dimensions) on FEDEX UPS from LAX to ATL vs. buying one passenger ticket on DAL from LAX to ATL. the cargo carriers have an awesome pension, awesome pay and benefits and are spending a ton a fuel like the rest so is it just making more money shipping a 200 pound box vs. one passenger that makes then so much money or are we missing something else???? you can say they dont need any flight attendants (saves money) but they have the truck drivers, ground sorters etc. so they must have the same amount of employees roughly. So does it just come down to making more shipping 200 pounds of boxes vs. one passenger or is there some kind SWA equation they are using that also helps them make the millions???

 

[SWA GUY]

Here's the short answer, or question rather:

What can you stuff more of into an airplane, boxes or people?

 

[Whale Rider]

Here's the short answer, or question rather:

What can you stuff more of into an airplane, boxes or people?

Good one SWA GUY! I have a buddy in the MD-11 over there, he says Fedex makes $7 million every MD-11 load brought over from China. Don't know which way he sliced the calculations, but which ever way you cut it, thats alot of bread.

 

[fdxdisco]

Thisisthe dream
Here's a longer answer. I'm sure some guys will have more accurate figures.

I'm on the 11 and this is the way it was explained to me. 200K of international freight at $35 to $42 a lb is 7.0 to 8.4 mil a plane load. That was the going rate a couple of years ago, or so I was told. 400 pax at $2k a pop from the asia is only 800k. Was also told once that the 4-747 freighters that NWA once owned provided over 40% of there gross revenue.

Fedex Express (thats the air wing of FEDEX) makes most of its money from three sources: international, Hazardous material, and P1 (that's priority 1, ie letters that have to be there overnight). If you could see the sorting facility we have just for letter envelopes you know why this makes so much money. Think of hundreds of 50 gallon bags stuffed with letter size envelopes at $13 a pop.

Haz is a whole other subject. My favorite is when they load the infectious substance on top of the explosives. Like any airline (not just freighters) the Hax that scares you is not the stuff that's declared and shipped correctly, but the stuff that isn't declared. That's what caused our DC-10 hull loss a few years ago.

We also lost an MD-11 over the Pacific because of undeclared Haz. A really good actor got to spend 4 years on a deserted island because of it. No wait, that was a movie, never mind.

It's early and I've got a class to teach tomorrow.

Later
Disco

 

[TonyC]

It's early and I've got a class to teach tomorrow.

I don' wanna heer no whinin', ya heer?

 

[capt. megadeth]

The other day I went to overnight an approx. 1-3 lb book Chicago to Dallas.
Cost $36

 

[Goose17]

don't forget

Airline employees from other carriers get the SAME discount we FedEx employees get. Show your airline ID and you get a nice savings while shipping.

Goose17

 

[CA1900]

I use that discount a lot, and I greatly appreciate it. (So when people whine that they can't get reciprocation when a FedEx guy jumpseats, they just need to broaden their horizons.)

I also discovered a couple of weeks ago that, now that FedEx owns Kinko's, you can use your discount there instead of hunting down the sometimes-inconvenient FedEx Service Center. That's saving me a TON of driving!

 

[AlbieF15]

...before we get too exicited...

Airline pax drive themselves to the airport and "self load". We have to have a whole team of people and equipment to load, move, then distribute and deliver the cargo. The airline's job is done when the passenger steps on the airport curb--our company's job is still far from over at that point.

Stock report has reported margins from 7-15% historically. 7% of all that revenue is good, but we do have costs the pax carriers do not. All that aside...glad to be on the growing, secure side of this crazy business.

 

[ThisistheDream]

It seems the basic answer is that you can make millions more shipping boxes and letters rather than people, so with that in mind why dont the airlines increase some cargo operations or even start a small cargo operation like NWA does with?

 

[captain caveman]

Airline pax drive themselves to the airport and "self load". We have to have a whole team of people and equipment to load, move, then distribute and deliver the cargo. The airline's job is done when the passenger steps on the airport curb--our company's job is still far from over at that point.

True, except that most passengers check a bag. The bag needs to be processsed, moved, damaged, loaded, unloaded, sorted for connecting flights, lost, found and claimed. More than likely the revenue that the airline receives for the passenger and bag is far less than an express shipper would get for just transporting the bag.

 

[JohnQ]

I also discovered a couple of weeks ago that, now that FedEx owns Kinko's, you can use your discount there instead of hunting down the sometimes-inconvenient FedEx Service Center. That's saving me a TON of driving!

Are you sure? I certainly hope that you arecorrect. Recently, however, as I drove 30 minutes to the nearest Service Center, the rep there told me that you still cannot use Kinko's for the airline discount. In fact she told me that even FedEx employees cannot use Kinko's for the discount, but must use a Service Center office.

I hope that she was wrong.

 

[Goose17]

Kinkos discount

I have used it many times. There are some growing pains with the new aquisition, but you should get a discount if they are accepting packages for shipment there.

Goose17

 

[iflyhigh]

What everyone seems to forget, is that the legacy carriers were once all cargo operations. (Of course before consolidation.) Flying passengers was second. The passenger was extra money. They sat on top of the cargo and did not complain when it took a little longer.

Its amazing to hear CEO of legacy carriers say their is no money in freight, when that was where they initially earned their money back in the 1930's.

iflyhigh

 

[Wingsweep]

I'm no business man, but...

I'm not a business man, but I can use a calculator. One advantage cargo has over pax is this: You can raise the price of shipping a letter or box by, say, 10% and most people won't balk. On a $15 letter or $30 box, the delta would be in the range of $1.50 to $3. Raising the price on a $400-1000 plane ticket by 10% is another bucket of worms. I'm not saying this is the whole story; for example, small changes obviously effect volume shippers much more than individuals. However, the advantage of dense shipping is not that hard to understand. Later dude...

 

[F18-FDX]

It seems the basic answer is that you can make millions more shipping boxes and letters rather than people, so with that in mind why dont the airlines increase some cargo operations or even start a small cargo operation like NWA does with?

It is hard to just "start a small cargo operation". As has been discussed before on this forum it is extremely difficult to start a small operation and be competitive. Serious customers aren't interested unless you are 1-reliable and 2-have a have a large enough network to get the package where they want it (not always a large city). A recent Wall Street Journal article about DHL (an already well-established company) trying to break into the domestic market stated that they would have to pump another $3-5 Billion (yes, with a "B") into the market to be competitive with FedEx. Not too many Toms, Dicks or Airlines out there with that kind of cash to start a small operation.

Very hard to "cherry pick" in cargo.

 

[JohnQ]

Recently, however, as I drove 30 minutes to the nearest Service Center, the rep there told me that you still cannot use Kinko's for the airline discount. In fact she told me that even FedEx employees cannot use Kinko's for the discount, but must use a Service Center office.

I hope that she was wrong.

FYI, I am correcting myself. I just mailed a package at Kinko's, and evidently the word has finally gotten out. Now I just have to drive 5 minutes versus 30! However, one thing to keep in mind: for time critical FedEx express shipments, the employee discount is fantastic. However, if shipping time does not matter, it is cheaper to ship via Ground (without any discount) than Express with the discount.

 

[say again]

People will pay more to ship packages than they will for themselves!!!

It's almost more expensive taking a cab to the airport than the actual plane ticket. Sad, very sad.

 

[psysicx]

Less competition.

 

[IHaveAPension]

Here's a psysicx type question... Does FedEx fly people?