Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from David Ross – Stifel Nicolaus
David Ross – Stifel Nicolaus
On the Express business how flexible is the Express network given the downturn I know you tried to reduce it and it’s not immediately flexible on the downside. How long does it take to right size it, how much further do you think you have to go still?
Alan Graf
What we’re showing by the cost reductions we had already taken and the ones that we’re about to take, we have a lot more flexibility and variability in our cost structure then most people give us credit for. That’s why the one time charges that we anticipate in the fourth quarter are so small compared to the ongoing expense reductions that we’re going to see in FY10. Most notably will be what we’re going to do at Express and with that I’m going to turn it over to Dave Bronczek.
Dave Bronczek
We have a lot of flexibility to your earlier comment. The $1 billion that Fred and Alan referenced before in cost reductions obviously the lion’s share of that cost reduction effort will be at Express. That’s all around the world, that’s Asia, Europe, here in the United States. We have a lot of levers to pull, we have a lot of initiatives underway and we’re moving forward on all of those initiatives.
David Ross – Stifel Nicolaus
On the DHL business you said that you got a lot of DHL traffic at higher yields. My understanding is that a lot of that might have gone into the Ground network as well. Could you explain how you see the DHL business being split up between what you got on the Express side and on the Ground side?
Mike Glenn
We were able to leverage our vast network and broader range of services which included FedEx Express, FedEx Ground and FedEx SmartPost to work with DHL customers to ensure that we put the traffic in the right network to meet their needs. Obviously given the economic situation, some of the traffic and the pricing that was in the marketplace some of the traffic moved out of the Express network and their system and moved into other networks then ours.
Having said that, we exceeded our fair share in every segment which includes Domestic Express, US Export, Ground and we also added quite a bit of volume to our SmartPost as well. We were especially proud of the effort of our sales and marketing team to deliver this volume at higher yields then DHL was carrying the traffic for.
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