FedEx (FDX) 8-K FedEx Reports Solid Revenue and Earnings Growth Ground Package Volume Increases 14 Percent

Exhibit 99.1

FOR IMMEDIATE RELEASE

FedEx Reports Solid Revenue and Earnings Growth
Ground Package Volume Increases 14 Percent

MEMPHIS, Tenn., December 20, 2006 ... FedEx Corporation (NYSE: FDX) today reported earnings of $1.64 per diluted share for the second quarter ended November 30, compared to $1.53 per diluted share a year ago. The quarter’s results included costs associated with the new pilot labor contract at FedEx Express. The net effect of this agreement reduced second quarter earnings by approximately $0.25 per diluted share. Excluding these costs, second quarter earnings were $1.89 per diluted share, an increase of 24% from last year’s second quarter.

FedEx Corp. reported the following consolidated results for the second quarter:

• Revenue of $8.93 billion, up 10% from $8.09 billion the previous year

• Operating income of $839 million, up 6% from $790 million a year ago

• Operating margin of 9.4%, down from last year’s 9.8%

• Net income of $511 million, up 8% from $471 million the previous year

Total combined average daily package volume at FedEx Express and FedEx Ground grew 7% year over year for the quarter, led by ground and international express package growth.

“FedEx continues to deliver outstanding financial results, and I am confident about our business going forward,” said Frederick W. Smith, chairman, president and chief executive officer of FedEx Corp. “Package volumes are solid this holiday season, and we see continued global economic growth in 2007.”

The company has announced a net 3.5% average price increase on U.S. domestic and U.S. export express shipments, and a 4.9% average price increase on FedEx Ground services. These changes will be effective January 1, 2007. The company also announced increases to various shipment surcharges.

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Outlook

With the better-than-expected second quarter results and an expected strong fourth quarter, management is tightening its annual earnings guidance range to $6.35 to $6.65 per diluted share. Excluding the net impact of the second quarter costs associated with the new pilot labor contract, the updated guidance is $6.60 to $6.90 per diluted share. For the third quarter, earnings are expected to be $1.20 to $1.35 per diluted share. For the fourth quarter, earnings are expected to be $1.98 to $2.13 per diluted share. The capital spending forecast for fiscal 2007 is $3.1 billion.

“Earnings for our second quarter were better than forecast primarily due to lower than expected fuel prices, slightly stronger than anticipated growth at FedEx Ground and insurance proceeds related to Hurricane Katrina,” said Alan B. Graf, Jr., executive vice president and chief financial officer. “Our earnings guidance for the third quarter recognizes a difficult year-over-year comparison, as last year’s third quarter benefited from the timing lag that exists between when we purchase fuel and when our indexed fuel surcharges automatically adjust. December 2005 fuel surcharges at FedEx Express and FedEx Ground were set during the period fuel prices had spiked following Hurricane Katrina. We remain optimistic that we will continue to improve full-year margins and returns during a period of moderate economic growth.”

FedEx Express Segment

For the second quarter, the FedEx Express segment reported:

• Revenue of $5.69 billion, up 6% from last year’s $5.37 billion

• Operating income of $502 million, up 5% from $476 million a year ago

• Operating margin of 8.8%, down from 8.9% the previous year

Operating margin was negatively affected by costs associated with the new pilot labor contract. The new contract includes signing bonuses and other upfront compensation of approximately $143 million, as well as pay increases and other benefit enhancements, which were partially mitigated by reductions in variable incentive compensation. These costs more than offset the benefit from revenue growth, declining fuel prices and revenue management actions.

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FedEx International Priority (IP) revenue grew 12% for the quarter, as IP revenue per package grew 6%, primarily due to favorable exchange rates, a higher rate per pound and an increase in package weight. IP average daily package volume grew 6%. U.S. domestic revenue per package increased 3%, driven by a higher rate per pound, while package volume declined 1%.

FedEx Express continues to grow and strengthen its international network. The company recently acquired ANC Holdings Ltd., a United Kingdom domestic express transportation company, and entered into an agreement to acquire Prakash Air Freight Pvt. Ltd., its Indian express service provider. These strategic investments will expand the company’s offering to customers and deliver additional value to shareowners.

FedEx Ground Segment

For the second quarter, the FedEx Ground segment reported:

• Revenue of $1.52 billion, up 16% from last year’s $1.31 billion

• Operating income of $191 million, up 17% from $163 million a year ago

• Operating margin of 12.6%, up from 12.5% the previous year

FedEx Ground average daily package volume grew 14% year over year in the second quarter due to increased commercial business and the continued growth in the FedEx Home Delivery service. Yield improved 2% primarily due to a higher rate per pound, higher fuel surcharges and increased extra service revenues.

Operating margin was higher due to revenue growth, improved operating results at FedEx SmartPost and lower fuel costs, which more than offset increased network expansion and legal costs.

FedEx Freight Segment

For the second quarter, the FedEx Freight segment reported:

• Revenue of $1.23 billion, up 31% from last year’s $932 million

• Operating income of $138 million, up 2% from $135 million a year ago

• Operating margin of 11.3%, down from 14.5% the previous year

On September 3, FedEx completed the purchase of Watkins Motor Lines. The operations of Watkins Motor Lines are being rebranded as FedEx National LTL. Operating margin declined during the quarter, as the impact of FedEx National LTL, including integration costs, more than offset the benefit from a property sale gain.

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Less-than-truckload (LTL) shipments increased 28% year over year primarily due to the FedEx National LTL acquisition and demand for FedEx Freight’s regional and interregional services. Average daily LTL shipments at FedEx Freight, excluding FedEx National LTL, continued to grow in the second quarter, although growth moderated each month during the quarter. LTL yield improved 11% year over year reflecting higher yields from longer-haul FedEx National LTL shipments and higher rates.

FedEx Kinko’s Segment

For the second quarter, the FedEx Kinko’s segment reported:

• Revenue of $519 million, down 2% from last year’s $528 million

• Operating income of $8 million, down 50% from $16 million a year ago

• Operating margin of 1.5%, down from 3.0% the previous year

FedEx Kinko’s revenues decreased year over year primarily due to lower copy product revenues attributed to decreased demand. The operating margin decline was primarily due to the base revenue decline, network expansion costs, employee development and training costs, and sales workforce reorganization expenses.

FedEx Kinko’s continues a company-wide effort to refocus resources on core business priorities, including a multi-year network expansion using a lower-cost model. The company opened 86 centers in the first half of the fiscal year with plans for a total of approximately 200 new locations by the end of FY07.

Corporate Overview

FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $34 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world’s most admired and trusted employers, FedEx inspires its more than 275,000 employees and contractors to remain “absolutely, positively” focused on safety, the highest ethical and professional standards and the needs of their customers and communities. For more information, visit fedex.com.

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Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and second quarter FY2007 Statistical Book. These materials, as well as a Webcast of the earnings release conference call to be held at 8:30 a.m. EST on December 20, are available on the company’s Web site at www.fedex.com/us/investorrelations. A replay of the conference call Webcast will be posted on our Web site following the call.

Certain statements in this press release may be considered forward-looking statements, such as statements relating to management’s views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, new U.S. domestic or international government regulation, the impact from any terrorist activities or international conflicts, our ability to effectively operate, integrate and leverage the FedEx Kinko’s and FedEx National LTL businesses, the impact of changes in fuel prices and currency exchange rates, our ability to match capacity to shifting volume levels and other factors which can be found in FedEx Corp.’s and its subsidiaries’ press releases and filings with the SEC.

Media Contact: Howard Clabo 901-818-7463
Investor Contact: Mickey Foster 901-818-7519
Home Page: fedex.com

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES

The company believes that meaningful analysis of our financial performance requires an understanding of the factors underlying that performance and our judgments about the likelihood that particular factors will repeat. Excluding the net impact of the costs associated with the new pilot labor contract from this quarter’s results and this year’s guidance will allow more accurate comparisons to prior periods of our operating performance in fiscal 2007. As required by SEC rules, the tables below present a reconciliation of our presented non-GAAP measures to the most directly comparable GAAP measures.

				Q2 FY07 EPS vs.
	Q2 FY07 Diluted			Q2 FY06 EPS
	Earnings Per Share			(% Change)
Non-GAAP measure	$	1.89			24	%
Impact of new pilot contract, net of variable compensation and income taxes		(0.25	)
GAAP measure	$	1.64			7	%

	FY07 Diluted EPS Guidance
Earnings guidance excluding net effect of new pilot contract (non-GAAP)		$6.60 -- $6.90
Impact of new pilot contract, net of variable compensation and income taxes		(0.25) -- (0.25)
Earnings guidance (GAAP)		$6.35 -- $6.65

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FEDEX CORP. FINANCIAL HIGHLIGHTS

Second Quarter Fiscal 2007
(In millions, except earnings per share and FTEs)
(Unaudited)

	Three Months Ended									Six Months Ended
	November 30									November 30
	2006			2005			%			2006			2005			%
Revenue:
FedEx Express segment	$	5,693		$	5,370			6	%	$	11,333		$	10,492			8	%
FedEx Ground segment		1,520			1,307			16	%		2,937			2,526			16	%
FedEx Freight segment		1,225			932			31	%		2,238			1,824			23	%
FedEx Kinko’s segment		519			528			(2	%)		1,023			1,045			(2	%)
Other & eliminations		(31	)		(47	)	NM				(60	)		(90	)	NM
Total Revenue		8,926			8,090			10	%		17,471			15,797			11	%
Operating Expenses:
Salaries and employee benefits		3,526			3,081			14	%		6,811			6,143			11	%
Purchased transportation		996			812			23	%		1,892			1,583			20	%
Rentals and landing fees		584			584			—			1,154			1,249			(8	%)
Depreciation and amortization		430			386			11	%		829			756			10	%
Fuel		860			891			(3	%)		1,801			1,619			11	%
Maintenance and repairs		492			445			11	%		1,007			913			10	%
Other		1,199			1,101			9	%		2,354			2,160			9	%
Total Operating Expenses		8,087			7,300			11	%		15,848			14,423			10	%
Operating Income:
FedEx Express segment		502			476			5	%		969			761			27	%
FedEx Ground segment		191			163			17	%		348			311			12	%
FedEx Freight segment		138			135			2	%		288			270			7	%
FedEx Kinko’s segment		8			16			(50	%)		18			32			(44	%)
Other & eliminations		—			—		NM				—			—		NM
Total Operating Income		839			790			6	%		1,623			1,374			18	%
Other Income (Expense):
Interest, net		(17	)		(30	)		(43	%)		(26	)		(54	)		(52	%)
Other, net		1			—		NM				(4	)		(11	)		(64	%)
Total Other Income (Expense)		(16	)		(30	)		(47	%)		(30	)		(65	)		(54	%)
Pretax Income		823			760			8	%		1,593			1,309			22	%
Provision for Income Taxes		312			289			8	%		607			499			22	%
Net Income	$	511		$	471			8	%	$	986		$	810			22	%
Diluted Earnings Per Share	$	1.64		$	1.53			7	%	$	3.17		$	2.63			21	%
Weighted Average Common and Common Equivalent Shares		311			308			1	%		311			308			1	%
Capital Expenditures	$	760		$	655			16	%	$	1,459		$	1,326			10	%
Average Full-Time Equivalents (000s)		239			222			8	%		232			220			5	%

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FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS

Second Quarter Fiscal 2007
(In millions)

	Nov. 30, 2006
	(Unaudited)		May 31, 2006
ASSETS
Current Assets:
Cash and cash equivalents	$	1,855	$	1,937
Other current assets		4,988		4,527
Total Current Assets		6,843		6,464
Net Property and Equipment		11,988		10,770
Other Long-Term Assets		5,882		5,456
	$	24,713	$	22,690
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current Liabilities:
Current portion of long-term debt	$	1,168	$	850
Other current liabilities		4,806		4,623
Total Current Liabilities		5,974		5,473
Long-Term Debt, Less Current Portion		2,047		1,592
Other Long-Term Liabilities		4,134		4,114
Total Common Stockholders’ Investment		12,558		11,511
	$	24,713	$	22,690

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FEDEX CORP. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS

Second Quarter Fiscal 2007
(In millions)
(Unaudited)

	Six Months Ended
	November 30
	2006			2005
Operating Activities:
Net income	$	986		$	810
Noncash charges:
Depreciation and amortization		829			754
Other, net		65			200
Changes in operating assets and liabilities, net		(532	)		(629	)
Net cash provided by operating activities		1,348			1,135
Investing Activities:
Capital expenditures		(1,459	)		(1,326	)
Business acquisition		(784	)		—
Proceeds from asset dispositions and other		32			37
Net cash used in investing activities		(2,211	)		(1,289	)
Financing Activities:
Proceeds from debt issuances		999			—
Dividends paid		(55	)		(48	)
Other, net		(163	)		(51	)
Net cash provided by (used in) financing activities		781			(99	)
Net decrease in cash and cash equivalents		(82	)		(253	)
Cash and cash equivalents at beginning of period		1,937			1,039
Cash and cash equivalents at end of period	$	1,855		$	786

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FEDEX EXPRESS SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Second Quarter Fiscal 2007
(Dollars in millions)
(Unaudited)

	Three Months Ended									Six Months Ended
	November 30									November 30
	2006			2005			%			2006			2005			%
FINANCIAL HIGHLIGHTS
Revenue	$	5,693		$	5,370			6	%	$	11,333		$	10,492			8	%
Operating Expenses:
Salaries and employee benefits		2,116			1,959			8	%		4,118			3,930			5	%
Purchased transportation		269			236			14	%		532			477			12	%
Rentals and landing fees		392			409			(4	%)		790			892			(11	%)
Depreciation and amortization		208			203			2	%		413			396			4	%
Fuel		716			760			(6	%)		1,514			1,388			9	%
Maintenance and repairs		365			339			8	%		763			700			9	%
Intercompany charges		526			383			37	%		1,036			741			40	%
Other		599			605			(1	%)		1,198			1,207			(1	%)
Total Operating Expenses		5,191			4,894			6	%		10,364			9,731			7	%
Operating Income	$	502		$	476			5	%	$	969		$	761			27	%
Operating Margin		8.8	%		8.9	%					8.6	%		7.3	%
OPERATING STATISTICS
Operating Weekdays		63			63			—			128			128			—
AVG DAILY VOLUME / POUNDS
Average Daily Package Volume (000s):
U.S. Overnight Box		1,183			1,211			(2	%)		1,174			1,195			(2	%)
U.S. Overnight Envelope		700			702			(0	%)		702			707			(1	%)
U.S. Deferred		895			886			1	%		875			891			(2	%)
Total U.S. Domestic Package		2,778			2,799			(1	%)		2,751			2,793			(2	%)
International Priority		507			480			6	%		488			462			6	%
Total Average Daily Packages		3,285			3,279			0	%		3,239			3,255			(0	%)
Average Daily Freight Pounds (000s):
U.S.		9,917			9,544			4	%		9,642			9,209			5	%
International		1,946			2,283			(15	%)		1,922			2,159			(11	%)
Total Avg Daily Freight Pounds		11,863			11,827			0	%		11,564			11,368			2	%
YIELD
Revenue Per Package:
U.S. Overnight Box	$	21.92		$	21.03			4	%	$	21.87		$	20.69			6	%
U.S. Overnight Envelope		11.06			10.86			2	%		11.13			10.71			4	%
U.S. Deferred		12.70			12.56			1	%		12.69			12.16			4	%
Total U.S. Domestic Package		16.21			15.80			3	%		16.21			15.44			5	%
International Priority		61.68			58.14			6	%		62.12			57.36			8	%
Composite Package Yield	$	23.22		$	21.99			6	%	$	23.13		$	21.39			8	%
Revenue Per Freight Pound:
U.S.	$	1.00		$	0.94			6	%	$	1.00		$	0.91			10	%
International		0.86			0.81			6	%		0.85			0.80			6	%
Composite Freight Yield	$	0.98		$	0.91			8	%	$	0.97		$	0.89			9	%
Average Full-Time Equivalents (000s)		121			124			(2	%)		121			125			(3	%)

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FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Second Quarter Fiscal 2007
(Dollars in millions)
(Unaudited)

	Three Months Ended									Six Months Ended
	November 30									November 30
	2006			2005			%			2006			2005			%
FINANCIAL HIGHLIGHTS
Revenue	$	1,520		$	1,307			16	%	$	2,937		$	2,526			16	%
Operating Expenses:
Salaries and employee benefits		256			230			11	%		497			451			10	%
Purchased transportation		592			506			17	%		1,145			972			18	%
Rentals		44			36			22	%		80			67			19	%
Depreciation and amortization		65			53			23	%		126			103			22	%
Fuel		28			27			4	%		59			45			31	%
Maintenance and repairs		32			28			14	%		63			57			11	%
Intercompany charges		147			129			14	%		283			249			14	%
Other		165			135			22	%		336			271			24	%
Total Operating Expenses		1,329			1,144			16	%		2,589			2,215			17	%
Operating Income	$	191		$	163			17	%	$	348		$	311			12	%
								��
Operating Margin		12.6	%		12.5	%					11.8	%		12.3	%
OPERATING STATISTICS
Operating Weekdays		63			63			—			128			128			—
Average Daily Package Volume1 (000s)		3,242			2,843			14	%		3,082			2,712			14	%
Yield (Revenue Per Package)1	$	7.04		$	6.90			2	%	$	7.08		$	6.91			2	%

1 — Package statistics exclude FedEx SmartPost.

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FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Second Quarter Fiscal 2007
(Dollars in millions)
(Unaudited)

	Three Months Ended									Six Months Ended
	November 30									November 30
	2006			2005			%			2006			2005			%
FINANCIAL HIGHLIGHTS
Revenue	$	1,225		$	932			31	%	$	2,238		$	1,824			23	%
Operating Expenses:
Salaries and employee benefits		592			442			34	%		1,076			881			22	%
Purchased transportation		140			81			73	%		223			153			46	%
Rentals and landing fees		30			25			20	%		53			49			8	%
Depreciation and amortization		52			29			79	%		83			59			41	%
Fuel		116			104			12	%		228			186			23	%
Maintenance and repairs		45			30			50	%		77			58			33	%
Intercompany charges		16			9			78	%		30			18			67	%
Other		96			77			25	%		180			150			20	%
Total Operating Expenses		1,087			797			36	%		1,950			1,554			25	%
Operating Income	$	138		$	135			2	%	$	288		$	270			7	%
Operating Margin		11.3	%		14.5	%					12.9	%		14.8	%
OPERATING STATISTICS
LTL Operating Weekdays		61			62			(2	%)		126			127			(1	%)
LTL Shipments Per Day (000s)		87			68			28	%		78			67			16	%
Weight Per LTL Shipment (lbs)		1,127			1,161			(3	%)		1,128			1,147			(2	%)
LTL Revenue/CWT	$	18.73		$	16.80			11	%	$	18.35		$	16.68			10	%

The results of operations for FedEx National LTL are included in our consolidated results from the date of acquisition on September 3, 2006.

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FEDEX KINKO’S SEGMENT FINANCIAL HIGHLIGHTS

Second Quarter Fiscal 2007
(Dollars in millions)
(Unaudited)

	Three Months Ended									Six Months Ended
	November 30									November 30
	2006			2005			%			2006			2005			%
FINANCIAL HIGHLIGHTS
Revenue	$	519		$	528			(2	%)	$	1,023		$	1,045			(2	%)
Operating Expenses:
Salaries and employee benefits		198			190			4	%		389			376			3	%
Rentals		96			99			(3	%)		190			201			(5	%)
Depreciation and amortization		35			37			(5	%)		69			73			(5	%)
Maintenance and repairs		17			19			(11	%)		32			37			(14	%)
Intercompany charges		16			6		NM				27			10		NM
Other operating expenses:
Supplies, including paper and toner		67			70			(4	%)		133			137			(3	%)
Other		82			91			(10	%)		165			179			(8	%)
Total Operating Expenses		511			512			(0	%)		1,005			1,013			(1	%)
Operating Income	$	8		$	16			(50	%)	$	18		$	32			(44	%)
Operating Margin		1.5	%		3.0	%					1.8	%		3.1	%

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