Connecting People and Possibilities: The History of FedEx
Today, FedEx is consistently recognized as one of the most admired brands in the world and one of the best places to work. But like many innovative companies, we started out as an idea championed by a determined person.
In 1965, Yale University undergraduate Frederick W. Smith wrote a term paper that invented an industry and changed what’s possible. In the paper, he laid out the logistical challenges facing pioneering firms in the information technology industry. Most airfreight shippers relied on passenger route systems, but those didn’t make economic sense for urgent shipments, Smith wrote.
He proposed a system specifically designed to accommodate time-sensitive shipments such as medicine, computer parts, and electronics. Smith’s professor apparently didn’t see the revolutionary implications of his thesis, and the paper received just an average grade.
In August 1971, following a stint in the military, Smith bought controlling interest in Arkansas Aviation Sales, located in Little Rock, Arkansas. While operating his new firm, he saw firsthand how difficult it was to get packages and other airfreight delivered within one to two days. With his term paper in mind, Smith set out to find a better way. Thus the idea for Federal Express was born: A company that has revolutionized global business practices and that now defines speed and reliability.
Smith named the company Federal Express because he believed the patriotic meaning associated with the word “federal” suggested an interest in nationwide economic activity. He also hoped the name would resonate with the Federal Reserve Bank, a potential customer. Although the bank denied his proposal, Smith kept the name because he thought it was memorable and would help attract public attention.
Company headquarters later moved to Memphis, Tennessee. Memphis was chosen because of its central location within the U.S. and because Memphis International Airport was rarely closed due to bad weather. The airport was also willing to make the necessary improvements for the operation and additional hangar space was readily available.
14 planes, 186 packages
Federal Express officially began operations on April 17, 1973, with 389 team members. That night, 14 small aircraft took off from Memphis and delivered 186 packages to 25 U.S. cities from Rochester, New York, to Miami, Florida. Though the company did not show a profit until July 1975, it soon became the premier carrier of high-priority goods in the marketplace and set the standard for the express shipping industry it established.
In the mid-1970s, Federal Express was a leader in lobbying for air cargo deregulation, which was legislated in 1977. These changes were important, because they allowed the company to use larger aircraft (Boeing 727s and McDonnell-Douglas DC-10s) and spurred its rapid growth. Today FedEx Express has the world’s largest all-cargo air fleet, including Boeing 777s, 767s, 757s, and MD-11s and Airbus A-300s and A-310s.
By the 1980s, Federal Express was well established. Its growth rate was compounding at about 40 percent annually, and competitors were trying to catch up. In fiscal year 1983, it reported $1 billion in revenues, making American business history as the first company to reach that financial hallmark inside 10 years of startup without mergers or acquisitions.
Following the first of several international acquisitions, intercontinental operations began in 1984 with service to Europe and Asia. The following year, Federal Express marked its first regular scheduled flight to Europe. In 1988, the company initiated direct-scheduled cargo service to Japan.
In another major move, Federal Express acquired Tiger International Inc. in February 1989. When it integrated the Flying Tigers network on August 7, 1989, Federal Express became the world’s largest full-service, all-cargo airline. The acquisition included routes to 21 countries, a fleet of Boeing 747s and 727s, facilities throughout the world, and Tigers’ expertise in international airfreight.
The company made another significant transition in 1994, adopting the name “FedEx” as its official brand. One year later, it was authorized to serve China through an acquisition from Evergreen International Airlines. Under this authority, it became the sole U.S.-based, all-cargo carrier with aviation rights to the world’s most populous nation. Its global reach has continued to expand into what is now an unsurpassed network, delivering to customers in more than 220 countries and territories.
A portfolio of solutions
With an eye on the future, Federal Express built on its express delivery service to create a more diversified corporation of different but related businesses. Originally called FDX Corp., FedEx Corp. was formed in January 1998 when it acquired Caliber System Inc.
Through this and future purchases, the initial Caliber subsidiaries included:
- RPS, a small-package ground service
- Roberts Express, an expedited, exclusive-use shipping provider
- Viking Freight, a regional LTL freight carrier serving the Western U.S.
- Caribbean Transportation Services, a provider of airfreight forwarding between the U.S., Puerto Rico, the Dominican Republic, and Caribbean islands
- Caliber Logistics and Caliber Technology, providers of integrated logistics and technology solutions.
In January 2000, FedEx unleashed the power of its global brand. In a move to further integrate the company’s portfolio of services, FDX Corp. was renamed FedEx Corp. In addition:
- Federal Express became FedEx Express
- RPS became FedEx Ground
- Roberts Express became FedEx Custom Critical
- Caliber Logistics and Caliber Technology were combined to create FedEx Global Logistics
- American Freightways and Viking Freight became FedEx Freight in February 2001, when FedEx finalized the acquisition of American Freightways, a leading LTL freight carrier serving 40 states in the eastern two-thirds of the U.S.
To centralize sales, marketing, customer service, and information technology support for FedEx Express and FedEx Ground, the corporation formed a new subsidiary named FedEx Corporate Services, Inc. (a/k/a FedEx Services), which began operations in June 2000. The move started the process of transforming its technology and delivery services into a portfolio of shipping and business solutions.
In the next three years, FedEx expanded access to U.S. customers and bolstered its e-commerce solutions with additional acquisitions:
- In February 2004, FedEx acquired privately held Kinko’s Inc., and rebranded it as FedEx Kinko’s (then rebranded it again as FedEx Office in 2008). The acquisition expanded retail access for FedEx® shipping services to all 1,200 Kinko’s stores in operation at that time, enhanced FedEx document management services, and broadened business reach to customers of all sizes. For Kinko’s, the move added the resources and expertise needed to continue expansion of its corporate document outsourcing business and international operations.
- In September 2004, FedEx acquired Parcel Direct, a leading parcel consolidator that it later rebranded as FedEx SmartPost. The acquisition complemented a FedEx alliance with the U.S. Postal Service, providing customers in the e-commerce and catalog segments with a proven, cost-effective solution for low-weight, less time-sensitive residential shipments.
FedEx expands global footprint
With 95 percent of world consumers living outside U.S. borders, FedEx has worked to make international shipping as easy as possible for customers who want to connect with opportunity in global markets.
In February 2000, FedEx acquired TowerGroup International, a leader in international logistics and trade information technology. TowerGroup became the foundation of a new subsidiary, FedEx Trade Networks, which in turn acquired WorldTariff®, a premier customs duty and tax information company, one month later.
FedEx Trade Networks is now one of North America’s largest-volume customs entry filers and a leader in international ocean and air freight forwarding and trade facilitation.
With the value of global trade now at more than $18 trillion, FedEx has continued transforming its business to better align with projected worldwide population and economic growth. One key to that has been the acquisition of numerous transportation companies that allow us to directly serve specific markets and provide better service to our customers.
- 2006 United Kingdom: FedEx acquired ANC Holdings Ltd, a U.K. domestic express transportation company, and rebranded it as FedEx UK.
- 2007 China: FedEx acquired Tianjin Datian W. Group Co. Ltd.’s 50 percent share of the joint venture between FedEx and DTW International Priority Express, along with DTW Group’s domestic express network in China. FedEx then launched a domestic express service for the Chinese market.
- 2007 Hungary: FedEx Express acquires Flying-Cargo Hungary Kft.
- 2011 India: FedEx Express acquires Prakash Air Freight Pvt. Ltd. (PAFEX) and AFL Pvt. Ltd./Unifreight India Pvt. Ltd.
- 2011 Mexico: FedEx Express acquires Servicios Nacionales Mupa, S.A. de C.V. (MultiPack).
- 2012 Poland: FedEx Corporation acquires courier company Courier Opek Sp.z o.o. (Opek).
- 2012 France: FedEx Corporation acquires express transportation company TATEX.
- 2012 Brazil: FedEx Corporation acquires transportation and logistics provider Rapidão Cometa.
As the world we live in continues to change, so does FedEx. With that in mind, you can be sure the spirit of FedEx innovation is hard at work delivering a brighter, better future for the world.