A Look Into FedEx
When you see a FedEx truck on the road or a plane in the sky, it’s easy to think of it as “just” another shipping company. But behind that familiar purple-and-orange logo is a story that started with a college term paper and almost collapsed before it ever took off.
Today, FedEx has been in business for more than 50 years. In its 2025 fiscal year, the company generated about $88 billion in annual revenue, moved millions of packages every day across more than 220 countries and territories, and employed more than 500,000 people worldwide.
This global network didn’t appear overnight. It was built through bold ideas, painful setbacks, and risky decisions that easily could have gone the other way. Let’s walk through how FedEx grew from a classroom idea into a powerhouse of global delivery.
What FedEx Looks Like Today
If you walked into FedEx today, you wouldn’t just see boxes and trucks. You’d see a global system quietly moving millions of packages a day for online shops, manufacturers, hospitals, and everyday people who just want a gift to arrive on time.
FedEx has grown from a handful of planes and a single hub into a worldwide network. It serves more than 220 countries and territories and connects local businesses to customers on the other side of the world. Behind every delivery is a mix of aircraft, trucks, warehouses, technology, and people working in sync.
The company now operates through several main business units, including FedEx Express, FedEx Ground, FedEx Freight, and FedEx Office. Each unit focuses on different types of shipments and customers, but they all plug into the same global network.
On the surface, you see a driver at your door. Underneath, there’s a carefully planned system of sorting hubs, flight schedules, truck routes, and tracking tools. That system is the modern version of the original idea Frederick W. Smith wrote about in his Yale term paper—only now it operates on a global scale.
History
The story of FedEx starts in 1965 in a Yale University classroom. A young student named Frederick W. Smith handed in an economics term paper with an unusual idea.
At the time, shipping was slow and fragmented. Smith believed speed mattered more than cost for time-sensitive shipments and that smaller cities were being left behind. His solution was bold: build a network that routed packages through a single central hub and use company-owned aircraft instead of relying on commercial airlines and their schedules.
The professor saw it as an interesting theory, not a practical business. Smith received an average grade. The paper was filed away, and life moved on.
After graduating and serving in the U.S. Marine Corps during the Vietnam War, Smith came home with fresh experience in logistics and supply lines. The old idea from Yale wouldn’t leave him alone. In 1971, at age 27, he decided to turn that term paper into a real company.
He founded Federal Express Corporation, using $4 million from his inheritance and tens of millions more in venture capital. The concept was still the same: one central hub, dedicated aircraft, and a promise of fast, reliable delivery.
Smith first based operations at Little Rock National Airport in Arkansas. On paper, it seemed workable. In reality, the location and support weren’t ideal for what he wanted to build. Within a couple of years, he made a pivotal decision: move Federal Express to Memphis International Airport.
In 1973, the company launched its overnight operations out of Memphis. It was tiny compared to today. Federal Express had 389 employees, 14 small Dassault Falcon jets, and served just 25 U.S. cities. On the very first night of full operation, the company moved only a few hundred packages.
From there, the real test began.
Founders
FedEx has a single founder, Frederick W. Smith. Born in 1944, he showed an early interest in logistics and aviation. By the time he launched Federal Express in 1971, he had already studied economics at Yale and served as a U.S. Marine Corps officer in Vietnam.
Smith wasn’t just the idea person. For decades, he was the driving force behind the company, serving as CEO from the launch of Federal Express until March 2022. After stepping down as CEO, he stayed on as executive chairman, focusing on long-term strategy, innovation, and public policy.
In June 2025, Frederick W. Smith passed away at the age of 80. His long-time colleague Raj Subramaniam now serves as the president and CEO of FedEx. Smith’s vision, however, still shapes the company’s culture and strategy.
Company Setbacks
FedEx might look like a smooth success story from the outside, but the early years were anything but smooth.
The first major setback came from the choice of base. Little Rock National Airport turned out to be a poor long-term fit. The airport and location couldn’t fully support Smith’s hub-and-spoke vision, and the company began losing money quickly. Moving operations to Memphis in 1973 was a high-stakes decision, but it gave Federal Express the room it needed to grow.
Even after the move, the company bled cash. Rising fuel costs and operating expenses pushed FedEx into the red. Between 1973 and 1975, it lost tens of millions of dollars. At one point, the company was nearly out of money and on the brink of shutting down.
This is when one of the most famous stories in FedEx history took place. With just a few thousand dollars left in the bank and a fuel bill due, Smith flew to Las Vegas. He took the company’s last $5,000 to a blackjack table and walked away with $27,000—just enough to keep the planes flying for another week. It wasn’t a long-term solution, but it bought the time needed to secure more funding and restructure.
There were internal pressures, too. Some investors wanted Smith replaced as CEO. It took trusted leaders inside the company, including president Arthur Bass, to argue for keeping him in charge and adjusting the operations instead of scrapping the vision.
In 1984, FedEx faced another costly setback with its ZapMail project. The idea was ahead of its time: use company-owned fax technology to send documents electronically instead of physically delivering them. FedEx invested heavily, but the service suffered technical problems and couldn’t compete with cheaper office fax machines. Within two years, ZapMail was shut down, and the company wrote off hundreds of millions of dollars.
Each of these setbacks could have ended the story. Instead, they became turning points.
Company Successes
FedEx’s first clear breakthrough came from a change in government policy. In 1977, the U.S. air cargo industry was deregulated, and cargo carriers were allowed much more freedom in how they used aircraft and set routes. For FedEx, this meant it could invest in larger planes such as Boeing 727s and DC-10s instead of relying only on small Falcons.
The result was dramatic. With larger planes and a more efficient network, the company turned an $8 million profit in 1977. Just a few years earlier, survival had been in doubt. Now, the model was working.
Federal Express went public in 1978, raising around $258 million from its IPO. That cash fueled rapid expansion across the United States, eventually putting the company in direct competition with the U.S. Postal Service and other major carriers.
To win customers, Federal Express leaned into a bold promise: overnight delivery. Customers could send letters and parcels and expect them to arrive the next day. This “absolutely, positively overnight” positioning helped the company stand out and build trust quickly.
As confidence grew, FedEx began looking beyond the U.S. In the 1980s and 1990s, it built hubs in Europe, acquired international carriers such as Tiger International, and expanded service to dozens of countries around the world. By the 1990s, FedEx had operations in at least 90 countries and had multiplied its profits compared to the early years.
In the late 1990s and early 2000s, the company reorganized under the FedEx brand, forming business units such as FedEx Express, FedEx Ground, FedEx Freight, and FedEx Custom Critical. Later acquisitions, including Kinko’s and TNT Express, strengthened its retail presence and European network.
Business Strategies
What made FedEx different from the start wasn’t just planes and trucks—it was strategy.
Most competitors focused heavily on keeping costs low, often piggybacking on commercial airlines and accepting longer delivery times. FedEx flipped that thinking on its head. It built its brand around speed, reliability, and the ability to reach places others ignored.
The hub-and-spoke model allowed FedEx to collect packages from many cities, fly them to a central hub, and then send them back out to their destinations overnight. By owning its aircraft, FedEx could control its schedule instead of waiting for space on passenger flights.
This gave the company two key advantages:
- Speed: Customers could count on fast, predictable delivery.
- Reach: FedEx could serve smaller markets that weren’t profitable for traditional carriers.
Competitors noticed. In 1981, Emery Airborne Freight began buying aircraft and offering overnight delivery, trying to match FedEx’s model. Even so, FedEx kept a strong edge thanks to its head start, its focus on smaller cities, and its growing network of drop boxes, hubs, and local facilities.
Over time, FedEx has continued to evolve its strategy. It invested in tracking technology so customers can see where their packages are in real time. It expanded into freight, e-commerce, and retail services. And it continues to adjust its network and fleet to handle shifts in global trade and online shopping.
FedEx’s Business Model: How It Makes Money
Under all the planes and packages, FedEx has a simple goal: earn money by moving things quickly, reliably, and at a scale most companies could never build on their own.
The company does this through a few main lines of business that work together:
- FedEx Express: Time-definite air shipments for customers who care more about speed than price. This is the part of the business that grew directly from Smith’s original idea about overnight delivery.
- FedEx Ground: Day-definite deliveries by truck. Ground handles a huge share of e-commerce and business-to-consumer shipments where cost and predictable delivery dates matter.
- FedEx Freight: Less-than-truckload (LTL) shipping for larger, palletized freight. This serves manufacturers, distributors, and companies that need to move heavier shipments without paying for a full truck.
- FedEx Office and other services: Retail locations, printing, packing, logistics support, and specialized solutions that make it easier for customers to plug into the FedEx network.
FedEx makes money by charging for the space, speed, and reliability of its network. The more packages and freight it can move through the same system, the more efficient that system becomes. That’s why the hub-and-spoke model is so important: it allows FedEx to combine shipments from many places, route them through central hubs, and send them back out quickly.
Technology plays a big role in the business model as well. Tracking tools, routing software, and data analysis help FedEx plan better routes, fill its trucks and planes more effectively, and offer customers accurate delivery windows. All of this adds value for customers and supports the premium they are willing to pay for fast, dependable service.
For a small business owner, it’s a useful reminder: the core of your business model is how you turn what you do best into steady, repeatable revenue. FedEx does it with speed, scale, and reliability. Your version may look different, but the principle is the same.
Lessons Learned
FedEx’s story offers a lot of lessons for entrepreneurs, leaders, and anyone thinking about starting a business. Here are a few of the most powerful ones.
1. Don’t be afraid to take smart risks
Launching Federal Express wasn’t a small bet. Smith put in $4 million of his own inheritance and convinced investors to back a model that had never been tried at scale. Later, he even gambled the last company funds on a risky trip to Las Vegas rather than accept failure.
You don’t need to copy that exact move, but you do need to accept that real growth requires risk. When you have a solid business plan and a clear vision, calculated risks are often part of the journey.
2. Persevere when things look bad
FedEx lost money for years. It faced rising fuel costs, skeptical investors, failed projects like ZapMail, and tough competition in both domestic and international markets.
Most companies would have quit long before the profits arrived. FedEx didn’t. The lesson: setbacks aren’t always a sign to stop. Sometimes they’re a sign to adjust, learn, and keep going.
3. Keep innovating, even after you “make it”
FedEx never settled for being just another carrier. It experimented with new services, created overnight letters, added drop boxes, and expanded into freight, retail, and international markets. Later, it adopted advanced tracking, digital tools, and data-driven logistics.
Innovation doesn’t always work—ZapMail is proof of that. But without constant innovation, FedEx would never have become the company it is today. Don’t stop growing and expanding your company. Dream bigger, test ideas, and be willing to learn from what doesn’t work.
4. Find and protect your competitive edge
FedEx built its edge on something simple but powerful: reliable speed. While other companies competed mainly on price, FedEx focused on time—especially for customers who couldn’t afford to wait.
Your edge might be speed, quality, service, specialization, or something else entirely. The key is to understand what your customers value most that your competitors don’t offer, then build your business around it and protect it.
FedEx’s journey shows that a single idea—a faster, smarter way to move packages—can change an entire industry when it’s backed by the right mix of strategy, resilience, and courage.
1971
Frederick Smith launches Federal Express Corporation.
1973
Federal Express moves operations to Memphis International Airport and begins overnight shipping to 25 U.S. cities.
1977
Deregulation of the U.S. air cargo industry allows Federal Express to buy larger aircraft and lower costs.
1978
Federal Express goes public, raising capital to expand across the United States.
1981
Federal Express builds its overnight delivery service into a core part of its brand.
1984
Federal Express launches ZapMail, an electronic document-delivery service, but abandons the program two years later.
1985
Federal Express opens a European hub in Brussels as part of its push into international markets.
1989
Federal Express acquires Tiger International, Inc. (Flying Tiger Line) for roughly $880 million to expand its global network.
1994
Federal Express introduces the “FedEx” brand name.
1998
FedEx forms FDX Corporation and acquires Caliber System, Inc., adding ground and logistics operations.
2000
FDX Corporation is renamed FedEx Corporation.
2000
FedEx structures and rebrands its operations into FedEx Express, FedEx Ground, FedEx Custom Critical, and FedEx Freight.
2004
FedEx acquires Kinko’s, later rebranding it as FedEx Office to add retail print-and-ship locations.
2016
FedEx completes its acquisition of TNT Express, strengthening its European and international network.
2022
Raj Subramaniam becomes president and CEO of FedEx; founder Frederick W. Smith transitions to executive chairman.
2025
Frederick W. Smith, FedEx founder and long-time leader, passes away at age 80; FedEx moves ahead with plans to separate its FedEx Freight division into an independent public company, a transaction expected to be completed in 2026 rather than fully spun off in 2025.