), one of the leading package delivery companies has set a new
target of 30% improvement in fuel efficiency of its fleet by
2020. The company raised the fuel efficiency standard by
approximately 50% from the previous 20% target set in 2008 that
it has already accomplished.
We believe the company's efforts will not only translate into
sustainable transportation solutions for its customers but will
also improve the company's cost structure in the long run.
Previously in 2012, the company released its fourth annual
Global Citizenship Report, in which it highlighted its activities
towards achieving a sustainable freight transportation system.
The report highlighted that FedEx targets reducing aircraft
carbon emissions to 30% by 2020 besides 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
The U.S. government 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 remains the
establishment of the National Program in 2009 - an agreement
between the federal government, state regulators and the auto
The national program, also a two-phased program constituted
standards for establishing fuel efficiency improvements in a 30
years span, involving 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 in 23% improvement in new vehicle pollution
standards, representing an average annual improvement of 5% by
Going forward, the phase II (2017-2025) of the National
Program covers standards on 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
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 research data.
Moreover, FedEx is also in an attempt 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' 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.
FedEx, which operates with another big player,
United Parcel Service, Inc.
), has a Zacks Rank #3 (Hold).
Another related stock worth considering in this sector is
Deutsche Post AG
). The company currently retains a Zacks Rank #1, implying a
Strong Buy rating.
BOEING CO (BA): Free Stock Analysis Report
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FEDEX CORP (FDX): Free Stock Analysis Report
UTD PARCEL SRVC (UPS): Free Stock Analysis
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