The small package air freight industry in the United States: A review of the federal express experience

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The growth in air freight traffic in the United States can be attributed to the increasing demand for fast and reliable delivery of small and time-sensitive packages. A solution to the problem appears to be an all-cargo airline that can directly operate its own vehicles in a more coordinated fashion and can achieve the economy-of-scale by consolidating traffic. An example can be found in Federal Express—a small package airlines—which provides direct, single source door-to-door service through its own fleet of aircrafts and pickup/delivery trucks. Traffic is bundled up from thin density markets via a concentrated operation in Memphis. These two features in conjunction allow services to be rendered economically to small medium-size cities. The relative youth and entrepreneurship of the airline means that ideas and management techniques are often configured from afresh and executed with diligence. The airline, long qualified as an air taxi, has operated with a large degree of freedom outside the confines of regulatory controls. As the company expands and as a set of national air cargo regulations are evolving, some of the advantage enjoyed by the company may be negated. The future success of the “Federal Express Model” is an interesting case study for both practitioners and researchers in the air freight industry.