FedEx Q2 net income $1.04 billion
The challenging labor market affected the availability and cost of labor resulting in network inefficiencies, higher purchased transportation costs, and higher wage rates, which increased costs by an estimated $470 million year over year, primarily at FedEx Ground.
The quarter’s results also benefited from continued strategic management actions to improve revenue quality and favorable net fuel.
Net income includes a pre tax, noncash MTM net loss of $260 million ($195 million, net of tax, or $0.73 per diluted share) related to the termination of a TNT Express European pension plan and a curtailment charge related to the U.S. FedEx Freight pension plan.
Last year’s net income included a pre tax, noncash loss of $52 million ($41 million, net of tax, or $0.15 per diluted share) associated with amending a TNT Express European pension plan to harmonize retirement benefits. Last year’s net income also included a tax benefit of $191 million ($0.71 per diluted share) primarily related to favorable guidance issued by the Internal Revenue Service during the quarter.
FedEx Express operating income increased, driven by higher yields and FedEx International Priority volume growth, which more than offset the negative effects of continued staffing challenges and COVID 19 related air network inefficiencies. The prior year’s results included a pre tax benefit of $70 million from a reduction in aviation excise taxes provided by the Coronavirus Aid, Relief, and Economic Security Act, which expired on December 31, 2020.
FedEx Ground operating results declined primarily due to increased purchased transportation costs, higher wage rates, and network inefficiencies due to staffing shortages, which negatively affected year over year results by an estimated $285 million. Operating results were also negatively affected by higher expansion related costs. These costs were partially offset by higher revenue per package, driven by service mix and pricing initiatives.
FedEx Freight second quarter operating income increased 33%, with an operating margin of 14.7%, driven by a continued focus on revenue quality and profitable growth. Revenue per shipment increased 14% and average daily shipments grew 3% during the quarter. ■