MEMPHIS, Tenn.--Dec. 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.

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 ayear 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.

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.

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

www.fedex.com.

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.