Federal Express 2011 Annual Report Download - page 39

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MANAGEMENT’S DISCUSSION AND ANALYSIS
from any airport in any member state of the European Union will be
covered by the ETS requirements beginning in 2012, and each year we
will be required to submit emission allowances in an amount equal to
the carbon dioxide emissions from such flights. In addition, the U.S.
Congress has, in the past, considered bills that would regulate GHG
emissions, and some form of federal climate change legislation is
possible in the future. Increased regulation regarding GHG emissions,
especially aircraft or diesel engine emissions, could impose substantial
costs on us, especially at FedEx Express. These costs include an
increase in the cost of the fuel and other energy we purchase and
capital costs associated with updating or replacing our aircraft or
vehicles prematurely. Until the timing, scope and extent of such
regulation becomes known, we cannot predict its effect on our cost
structure or our operating results. It is reasonably possible, however,
that it could impose material costs on us. Moreover, even without
such regulation, increased awareness and any adverse publicity in
the global marketplace about the GHGs emitted by companies in the
airline and transportation industries could harm our reputation and
reduce customer demand for our services, especially our air express
services. Finally, given the broad and global scope of our operations
and our susceptibility to global macro–economic trends, we are
particularly vulnerable to the physical risks of climate change that
could affect all of humankind, such as shifts in world ecosystems.
A localized disaster in a key geography could adversely impact
our business. While we operate several integrated networks with
assets distributed throughout the world, there are concentrations of
key assets within our networks that are exposed to localized risks from
natural or manmade disasters such as tornados, floods, earthquakes or
terrorist attacks. The loss of a key location such as our Memphis super
hub or one of our information technology centers could cause a sig-
nificant disruption to our operations and cause us to incur significant
costs to relocate or reestablish these functions. Moreover, resulting
economic dislocations, including supply chain and fuel disruptions,
could adversely impact demand for our services.
We are also subject to other risks and uncertainties that affect
many other businesses, including:
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increasing costs, the volatility of costs and funding requirements and
other legal mandates for employee benefits, especially pension and
healthcare benefits;
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the increasing costs of compliance with federal and state govern-
mental agency mandates and defending against inappropriate or
unjustified enforcement or other actions by such agencies;
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the impact of any international conflicts or terrorist activities on the
United States and global economies in general, the transportation
industry or us in particular, and what effects these events will have
on our costs or the demand for our services;
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any impacts on our businesses resulting from new domestic or inter-
national government laws and regulation;
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changes in foreign currency exchange rates, especially in the euro,
Chinese yuan, Canadian dollar, British pound and Japanese yen,
which can affect our sales levels and foreign currency sales prices;
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market acceptance of our new service and growth initiatives;
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any liability resulting from and the costs of defending against
class–action litigation, such as wage–and–hour, discrimination and
retaliation claims, and any other legal proceedings;
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the outcome of future negotiations to reach new collective bargain-
ing agreements — including with the union that represents the pilots
of FedEx Express (the current pilot contract is scheduled to become
amendable in March 2013 unless the union exercises its option to
shorten the contract, in which case the agreement would be amend-
able in March 2012);
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the impact of technology developments on our operations and on
demand for our services, and our ability to continue to identify and
eliminate unnecessary information technology redundancy and
complexity throughout the organization;
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widespread outbreak of an illness or any other communicable
disease, or any other public health crisis; and
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availability of financing on terms acceptable to us and our ability
to maintain our current credit ratings, especially given the capital
intensity of our operations.
FORWARD–LOOKING STATEMENTS
Certain statements in this report, including (but not limited to) those
contained in “Outlook (including segment outlooks),” “Liquidity,”
“Capital Resources,” “Liquidity Outlook,” “Contractual Cash
Obligations” and “Critical Accounting Estimates,” and the “Retirement
Plans” and “Contingencies” notes to the consolidated financial
statements, are “forward–looking” statements within the meaning
of the Private Securities Litigation Reform Act of 1995 with respect
to our financial condition, results of operations, cash flows, plans,
objectives, future performance and business. Forward–looking
statements include those preceded by, followed by or that include
the words “may,” “could,” “would,” “should,” “believes,” “expects,”
“anticipates,” “plans,” “estimates,” “targets,” “projects,” “intends” or
similar expressions. These forward–looking statements involve risks
and uncertainties. Actual results may differ materially from those con-
templated (expressed or implied) by such forward–looking statements,
because of, among other things, the risk factors identified above and
the other risks and uncertainties you can find in our press releases and
other SEC filings.
As a result of these and other factors, no assurance can be given as
to our future results and achievements. Accordingly, a forward–look-
ing statement is neither a prediction nor a guarantee of future events
or circumstances and those future events or circumstances may not
occur. You should not place undue reliance on the forward–looking
statements, which speak only as of the date of this report. We are
under no obligation, and we expressly disclaim any obligation, to
update or alter any forward–looking statements, whether as a result
of new information, future events or otherwise.