MEMPHIS, Tenn., September 18, 2008 ... FedEx Corp. today reported earnings of $1.23 per diluted share for the first quarter ended August 31, compared to $1.58 per diluted share a year ago.

“Global economic conditions are challenging, but FedEx is taking strong,proactive actions to manage through this difficult cycle,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “We are committed to implementing strategies that will enhance the customer experience, gain market share, reduce expenses, improve profits and ensure the long-term success of the company.”FedE

First Quarter Results

FedEx Corp. reported the following consolidated results for the first quarter:
• Revenue of $9.97 billion, up 8% from $9.20 billion a year ago
• Operating income of $630 million, down 23% from $814 million last year
• Operating margin of 6.3%, down from 8.8% the previous year
• Net income of $384 million, down 22% from last year’s $494 million

Total combined average daily package volume in the FedEx Express and FedEx Ground segments grew 1% year over year for the quarter. Growth in ground, FedEx SmartPost® and international domestic express shipments was substantially offset by a continued decline in U.S. domestic express shipments.

Operating results declined, as strong cost management actions were more than offset by global economic weakness, higher fuel prices and the related negative effects of higher fuel surcharges. One fewer operating day at each of the transportation segments also negatively affected results. While fuel prices decreased from historic highs late in the quarter, the average price of jet fuel was up 77% year over year.

Outlook

FedEx expects earnings to be $1.40 to $1.60 per diluted share in the second quarter compared to $1.54 a year ago. For the full year, the company reaffirms its earnings estimate of $4.75 to $5.25 per diluted share, which reflects weaker global macroeconomic conditions. This guidance incorporates current fuel prices and the related impact on fuel surcharges, which are reducing demand for FedEx services and adversely affecting base rates across the company’s transportation segments. Management has reduced the company’s capital plan to $2.6 billion for fiscal 2009.

2009 Rate Increase

FedEx Express will increase shipping rates by an average of 6.9% for U.S. and U.S. export services, effective January 5, 2009. The rate increase will be partially offset by adjusting the fuel price at which the fuel surcharge begins,reducing the fuel surcharge by two percentage points. Additional changes will be made to other FedEx Express surcharges, details of which can be found at www.fedex.com/us/2009rates. The FedEx Ground rate and surcharge increases for 2009 will be announced later this year.

FedEx Express Segment

For the first quarter, the FedEx Express segment reported:
• Revenue of $6.42 billion, up 9% from $5.89 billion a year ago
• Operating income of $345 million, down 34% from $519 million last year
• Operating margin of 5.4%, down from 8.8% the previous year

Operating results were impacted by global economic weakness, higher fuel prices and the related negative effects of higher fuel surcharges, and one fewer operating day. These factors more than offset the benefits of aggressive cost containment activities, including volume-related reductions in flight hours, labor hours, fuel consumption and maintenance costs and decreases in variable incentive compensation.

FedEx International Priority® (IP) package revenue grew 12% for the quarter,driven by 14% growth in revenue per package primarily due to higher fuel surcharges and favorable exchange rates. IP average daily package volume was flat, while FedEx International Priority Freight® daily pounds grew 14%. U.S. domestic revenue per package increased 13% due to higher fuel surcharges. U.S. domestic package volume declined by 5%.

Earlier this month, FedEx Express announced it has upgraded its nextbusiness- day delivery IP service from Europe to major U.S. East Coast cities. FedEx Express has also announced the introduction of FedEx Express Nacional, a domestic next-business-day service that provides highly reliable,convenient and quality express shipping solutions across Mexico.

FedEx Ground Segment

For the first quarter, the FedEx Ground segment reported:
• Revenue of $1.76 billion, up 9% from last year’s $1.62 billion
• Operating income of $196 million, up 3% from $190 million a year ago
• Operating margin of 11.1%, down from 11.7% the previous year

Average daily ground package volume grew 4% year over year in the first quarter, primarily due to the continued growth of the FedEx Home Delivery® service. Yield improved 6% primarily due to fuel surcharges. FedEx SmartPost revenue increased 14%, while average daily volume grew 9%. Operating income was modestly higher, as revenue growth and lower other operating expenses offset higher fuel prices and a competitive pricing environment. There was one fewer operating day in this year’s first quarter.

FedEx Freight Segment

For the first quarter, the FedEx Freight segment reported:
• Revenue of $1.35 billion, up 10% from last year’s $1.23 billion
• Operating income of $89 million, down 15% from $105 million a year ago
• Operating margin of 6.6%, down from 8.5% the previous year

Less-than-truckload (LTL) average daily shipments increased 4% year over year due to market share gains, despite the weak U.S. economy and a competitive pricing environment. LTL yield improved 5% year over year primarily due to increased fuel surcharges.

Operating results decreased in the quarter due to the weak economy and the competitive pricing environment. There was one fewer operating day in this year’s first quarter.

FedEx Services Segment

FedEx Services segment revenue, which includes the operations of FedEx Office and FedEx Global Supply Chain Services, was down 2% year over year, as declines in copy revenues exceeded revenue generated from FedEx Office locations opened in the last year.

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