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Furloughs Hit FedEx Freight

FedEx Freight said it is furloughing workers as it brings its business in line with changes in the operating environment for parcel carriers. 

“In response to current business conditions impacting volumes, FedEx Freight is enacting a temporary furlough in some U.S. markets to align our workforce with operational requirements,” the company said in a statement provided to Sourcing Journal Monday. 

The company is reportedly set to begin the furloughs next month at the FedEx Corp. business unit, which handles less-than-truckload shipments, or those smaller than a full truckload. 

The company said some employees will be offered options to permanently transfer to other FedEx-served markets with greater demand. Health benefits and “other financial incentives” will be offered to furloughed Freight employees, according to the company. 

FedEx said it “anticipates that many employees will volunteer to participate in the program.” 

“The company will continue to evaluate the environment and bring back furloughed employees as business circumstances allow,” FedEx said.

The company declined to specify the number of employees it aims to furlough. 

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The Freight business, which had revenue of $2.7 billion in the company’s fiscal first quarter ended Aug. 31, is the smallest of the three transportation segments. FedEx also counts FedEx Express, the unit handling expressing shipments, and FedEx Ground, which handles small-package ground deliveries, in its portfolio.

The Freight business had the strongest performance of the three divisions in the quarter, based on operating profit, which totaled $651 million. That’s up from $390 million in the year-ago period. The business had revenue of $2.7 billion, up nearly 21 percent from a year earlier. 

“Freight delivered another strong quarter with operating income increasing over 67 percent as the Freight team continues to execute,” executive vice president and chief financial officer Mike Lenz said in September during the company’s quarterly earnings call. 

The parcel industry overall has seen lower volumes moving in line with the macroenvironment and declining consumer demand. 

“To address the changed environment, we’re focused on what’s within our control and moving with urgency to take costs out of the network,” Lenz told analysts. 

The Freight furloughs come as FedEx looks for areas where it can trim its costs, an effort it revealed earlier this year that’s expected to bring anywhere from $2.2 billion to $2.7 billion in current fiscal year savings. The company hopes to squeeze out some $4 billion in costs by 2025. 

The near-term efforts include a pullback on the number of flights for FedEx Express, temporarily parking planes and stopping some Sunday operations in the company’s Ground unit

FedEx Corp. president and CEO Raj Subramaniam said in September, at the time of the company’s first quarter report, the business is “moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial and capacity levers to adjust to the impacts of reduced demand.”  

FedEx Corp. reported adjusted companywide revenue of $23.2 billion in its fiscal first quarter ended Aug. 31. That was up from $22 billion in the year-ago period. Adjusted net income totaled $905 million, down from $1.2 billion a year earlier.