WORLD TARIFF LTD

Business Services > Import and Export Services

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.

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.

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