One of the largest package delivery companies,
) has reportedly added 1,900 fuel efficient vehicles to its
fleet. We believe the company's focus on increasing such vehicles
remains concurrent with its target of making its fleet 30% more
fuel efficient by 2020.
The company raised the fuel efficiency standard by
approximately 50% from the 20% target set in 2008. We believe the
company's efforts will not only translate into sustainable
transportation solutions for its customers, but will also improve
In 2012, the company released its fourth annual Global
Citizenship Report, in which it highlighted its efforts to
achieve a sustainable freight transportation system. The report
highlighted that FedEx targets reducing aircraft carbon emissions
to 30% by 2020 apart from meeting at least 30% of its jet fuel
requirements through alternative fuels by 2030. We believe that
the growing environmental awareness among corporate houses like
FedEx stems from the stringent actions taken by the regulatory
authorities to restrain environmental pollution.
The U.S. federal and state governments as well as regulatory
bodies like the U.S. Department of Transportation (DOT) and
National Highway Traffic Safety Administration (NHTSA), as well
as the U.S. Environmental Protection Agency (EPA) have taken
several measures to curb global warming.
One of these key measures is the establishment of the National
Program in 2009 - an agreement between the federal government,
state regulators, and the auto industry. This is a two-phased
program to set standards for establishing fuel efficiency
improvements in 30 years, including the first-ever global warming
pollution standards for light-duty vehicles.
The key highlights of the first phase (2012-2016) are setting the
global warming pollution standards of 250 grams per mile, on
average, for model year 2016 vehicles. In addition, NHTSA
requires fuel efficiency standards of an average of 34.1 miles
per gallon in a new vehicle. Cumulatively, these measures are
expected to translate into 23% improvement in new vehicle
pollution standards, representing an average annual improvement
of 5% by 2016.
The phase two (2017-2025) of the National Program covers the
standards for light vehicles, finalized by the EPA and DOT in Aug
2012. These standards require reduction in green house gas
emission by cars and light trucks to 163 grams per mile in 2025
that would lead to fuel efficiency of 54.5 miles per gallon.
Consequently, we believe that FedEx's goal of improved fuel
efficiency is a significant step toward exercising these
standards. This will not only result in a cleaner environment but
also lower average consumer expenses on fuel, accounting for $140
billion in 2030 as per market reports.
Moreover, FedEx is also trying to improve its performance level
by concentrating on network realignment to match the current
demand level. In Jun 2012, the company announced plans to
purchase 19 more
) 767 aircraft. FedEx expects the delivery of these aircraft from
2015 through 2019.
These new aircraft are expected to benefit cost structure by
replacing the old fleet of MD-10 and A31-200 as well as by
exchanging equipment like spare parts, tooling and flight
simulators with the existing FedEx's Boeing 757 Fleet.
Additionally, FedEx delayed the delivery of 11 777-freight
aircraft that were scheduled to be delivered between 2013 and
2018. We believe the delayed deliveries would help in better
utilization of the MD-11 fleet on international flights and lower
overall cost and investment.
BOEING CO (BA): Free Stock Analysis Report
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FedEx, which operates with another players such as
United Parcel Service, Inc.
Expeditors International of Washington Inc.
), has a Zacks Rank #3 (Hold).