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FedEx and UPS In the Heat of the Pandemic Battle

Major package and cargo carriers FedEx Corp. and UPS are striving to keep vital operations flowing in the midst of the global coronavirus pandemic.

The companies on Tuesday said they are balancing the health and safety of their employees and customers with the need to provide important delivery and logistics support during the crisis.

“The COVID-19 pandemic is having a significant impact around the world,” Frederick W. Smith, FedEx Corp. chairman and CEO, said as the company reported third-quarter financial results. “We continue to deliver for our customers and are ready to support increased demand for our International Express export services due to the significant reductions in intercontinental air capacity.

“While the global economic impact from recent social distancing mandates is uncertain, we remain well positioned to assist our customers as they work to manage their supply chains and inventories,” Smith added. ” We will continue to support efforts to combat the pandemic.”

FedEx’s operating results fell substantially in the three months ended Feb. 29 due to weaker global economic conditions. These included the impact of the coronavirus, higher self-insurance accruals, increased FedEx Ground costs from expanded service offerings, the loss of business from Amazon, a continuing mix shift to lower-yielding services and a more competitive pricing environment.

Net income declined 57 percent in the period to $315 million from $739 million a year earlier, while operating income was down 55 percent to $411 million compared to $911 million in the year-ago quarter.

Revenue in the period increased 3 percent to $17.5 million from $17 million a year earlier. Revenue benefitted from volume growth at FedEx Ground, an additional operating weekday, increased yields at FedEx Freight and the shifting of Cyber Week into December.

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Like many other companies, FedEx is walking back its financial outlook.

“We are suspending our fiscal 2020 earnings forecast for our consolidated and segment results due to the uncertainty caused by the coronavirus pandemic,” Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer, said.

“To mitigate these near-term headwinds and position the company for future earnings growth, we are attacking costs throughout the company by managing capacity, retiring our oldest and least-efficient aircraft, integrating TNT Express, and lowering our residential delivery costs by having FedEx Ground deliver FedEx SmartPost and certain day-definite FedEx Express packages,” he added.

At UPS, chairman and CEO David Abney noted that the World Health Organization and the Center for Decease Control have stated that the likelihood of catching the COVID-19 virus by touching cardboard or other another shipping container is low.

“From the outset, UPS has maintained delivery services except where limited by government restrictions,” Abney said. “We have also worked in partnership with governments around the world to obtain exceptions that allow our shipments to continue in restricted areas.”

UPS is helping with relief related to COVID-19 and will continue to seek opportunities to assist our communities in need, Abney said.

“UPS’s network planning and operations teams are experienced with adapting to changing conditions, and are developing contingency plans to address potential sources of disruption in our air and ground networks,” Abney added. “Our teams are working to continue to serve the supply chain needs of businesses during this time, while keeping our employees and customers safe.”

A Resilience360 special report issued Tuesday noted that a 30-day travel ban on passengers from dozens of European countries issued by the U.S. government is likely to have a significant impact on the movement of trans-Atlantic cargo, most of which is transported in the bellies of passenger planes.

Anyone who has been in these countries in the past 14 days will not be allowed to travel to the U.S., except for U.S. citizens and permanent residents. The travel ban does not apply to cargo carried on passenger or cargo flights between the U.S. and Europe.

The travel ban will affect all 28 transatlantic carriers, which operate around 1,500 flights per week between Europe and the U.S., the Resilience360 report noted. Some of the major airlines operating transatlantic routes such as American Airlines or Lufthansa Group have already started to suspend or drastically reduce services to and from the affected countries.

Some of the cuts are expected to last until May or June, despite the travel ban only being valid until mid-April for now, indicating that a disrupted air cargo market will persist until possibly the end of the second quarter, Resilience360 noted.

The bottom line, the report said, is that flight reduction measures “could lead to a similar increase in air cargo rates. Customers should thus prepare for space limitations and higher freight costs to persist between Europe and the U.S., as well as a select number of Latin and South American countries, at least until May or June.”