By FedEx executives anticipate that the company will retain a significant portion of the shipping business obtained from rival United Parcel Service (UPS) during UPS’s labor negotiations. Additionally, they believe FedEx could keep thousands of package deliveries following Yellow’s bankruptcy filing, according to analysts at BofA.
During an investor lunch, the executives expressed their expectations. FedEx gained approximately 400,000 packages per day out of the 1.2 million lost by UPS. In contrast, UPS has commented that it expects to win back most of its business and is willing to pay customer penalties.
Moreover, executives at FedEx expect to retain approximately 5,000 shipments per day in extra less-than-truckload freight, which consists of smaller shipments that occupy only a portion of a trailer. This expectation arises after Yellow filed for Chapter 11 bankruptcy in August.
FedEx’s Response to UPS and Teamsters Union Agreement
Facing soft shipping demand, FedEx is taking measures to cut costs and streamline operations. This includes reducing flights, eliminating executive roles, closing offices, and implementing price increases. However, it is worth noting that employees at FedEx might end up receiving more benefits as a result of the UPS-Teamsters deal. BofA analysts have pointed out that FedEx expects labor rates to increase after the implementation of the UPS labor contract and has already factored this in its annual wage growth expectations.
UPS has estimated that costs associated with the Teamsters agreement will rise by 3.3% over the five-year lifespan of the contract. The company, however, remains flexible in implementing technology to drive productivity within its facilities.
J.B. Hunt Transport Services Inc., a trucking company, has acknowledged the ongoing freight “recession” following the decline of the pandemic-induced package-delivery boom. Although the company’s president, Shelley Simpson, noted that they are not yet completely out of this situation, there are positive indications of progress in the industry.
FedEx and UPS Stock Drops
Shares of FedEx and UPS experienced a decline in value on Wednesday. FedEx saw a decrease of 2.3%, while UPS fell by 1.4%. These drops signify a challenging day for both shipping giants.
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