Mickey Foster – Vice President Investor Relations Frederick W. Smith – Chairman, President & Chief Executive Officer Alan B. Graf, Jr. – Chief Financial Officer & Executive Vice President T. Michael Glenn – Executive Vice President Marketing Development Christine P. Richards – Executive Vice President, General Counsel & Secretary Robert B. Carter – Executive Vice President FedEx Information Services David J. Bronczek – President & Chief Executive Officer of FedEx Express David F. Rebholz – President & Chief Executive Officer of FedEx Ground Douglas G. Duncan – President & Chief Executive Officer of FedEx Freight

John Barnes - BB&T Capital Markets William Greene - Morgan Stanley David Roth - Stifel Nicolaus & Company, Inc. Donald Broughton - Avondale Partners LLC Ed Wolf - Wolf Research Jon Langenfeld - Robert W. Baird & Co., Inc. Thomas Wadewitz - J.P. Morgan Gary Chase - Lehman Brothers Arthur Hatfield - Morgan, Keegan & Company, Inc. David Campbell - Thompson, Davis, & Co. Robin Byde - HSBC Global Research Mary Jane Credeur - Bloomberg News

Welcome to the FedEx Corporation fourth quarter earnings conference call. (Operator Instructions) At this time I'll turn the call over to Mr. Mickey Foster.

Good morning and welcome to the FedEx Corporation fourth quarter earnings conference call. I'm Mickey Foster, Vice President of Investor Relations at FedEx Corporation. The earnings release and the 26-page stat book is on our web site at fedex.com. This call is being broadcast from our web site and the replay and the pod cast download will be available for approximately one year. Joining us on the call today are members of the media. During our question and answer session callers will be limited to one question and a follow up so we can accommodate all those who would like to participate. We are planning an investor meeting in October at the Hilton in New York so please save the afternoon of Thursday, October 2, 2008 on your calendar. Fred Smith and our top management team will be on hand to give you updates on our business. I want to remind all listeners that FedEx Corporation desires to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act. Certain statements in this conference call may be considered forward-looking statements within the meaning of the Act. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors please refer to the press release and filings with the SEC. In our earnings release we include certain non-GAAP financial measures which we may discuss on this call. Please refer to the release available on our web site for further discussion of these measures and a reconciliation of them to the most directly comparable GAAP measures. To the extent we discuss any other non-GAAP financial measures on this call, please refer to the investor relations portion of our web site at fedex.com for reconciliation of such measures to most directly comparable GAAP measures. Joining us on the call today are Fred Smith, Chairman, President and CEO, Alan Graf, Executive Vice President and CFO, Mike Glenn, Executive Vice President - Market Development and Corporate Communications, Chris Richards, Executive Vice President, General Counsel and Secretary, Rob Carter, Executive Vice President - FedEx Information Services and CIO, David Bronczek, President and CEO of FedEx Express, David Rebholz, President and CEO of FedEx Ground, and Doug Duncan, President and CEO of FedEx Freight. And now our Chairman, Fred Smith, will share his views on the quarter followed by Alan Graf. After Alan, we will have some Q&A. Frederick W. Smith: Thank you for joining our earnings conference call for the fourth quarter of fiscal year 2008. Earlier this past quarter on April 17 FedEx commemorated an historic date, our 35th anniversary of commencing operation. I would like to take a minute to say thank you to the hundreds of thousands of current and former team members around the world to whom we owe the success of our company. Together we faced many challenges and celebrated many more successes. Because of our outstanding team we look forward with confidence and hope to the future. Now, of course, financial results in FY08 were pressured by serious economic difficulties. Record high fuel prices and the weak US economy, particularly in housing and automotive and financial services, dampened volume growth and substantially affected our bottom line. As Yogi Berra, the famous Yankee catcher, reportedly once said, "It's déjà vu all over again" for FedEx. This is the fourth oil crisis FedEx has weathered. The first was in 1973 when the Arab oil embargo almost killed a nation's FedEx in the cradle. 1979 and 1990 and 91 we saw run ups in prices due to restricted oil supplies and now over the last couple of years we have seen oil prices double, particularly in the last 12 months, because of increased demand from emerging markets, particularly China and India. We remain positive, however, about prospects for long-term global economic growth and believe FedEx will be well positioned for profitable growth when economic conditions improve. In 2008 growth in shipments at FedEx Ground, FedEx International Priority, and International Domestic Express helped mitigate some of the negative effects from the US economy. Increased demand in Asia, US outbound and Europe drove IP volume growth during 2008 proving the value of this strategic investments we made over the years. The economic headwinds of FY08 are now continuing into our FY09 which began on June 1. We will continue to reduce expenses across all segments in FY09. In today's release for example we announced that FedEx Freight will close its office in San Jose, California to streamline its operations. At the newly re-branded FedEx office, the Company's senior management team has been reduced and restructured to better support execution of the Company's strategy and to control costs. We also reduced capital commitments in that sector by slowing the rate of expansion of our retail network. When we talked to you a year ago at this time, we forecast our FY08 capital expenditure budget of about $3.5 billion. Through cost saving measures we were able to cut capital expenditures from that budget by 17% to about $2.9 billion for the fiscal year just ended. In addition on the expense side, variable incentive compensation was lower by $221 million in FY08. We are closely managing our capital spending and expenses based on current and anticipated volume and revenue levels. We will defer or limit capital additions where necessary. Now while the current oil crisis is different from the past due to the increased demand from the emerging markets, as I mentioned, it's also very different because automotive and battery technologies on the horizon will permit electric power to displace a great deal of oil demand in the coming years. Plug-in hybrid electric vehicles, nuclear power and clean coal are also part of the equation. FedEx has been and is continuously seeking energy saving alternatives in our operations that cut costs and lessen our environmental impact. We are upgrading our FedEx Express air fleet by replacing Euro-body aircraft with Boeing 757 that reduce fuel consumption up to 36% while providing 20% more capacity. FedEx Express will also acquire Boeing 777 aircraft that provide greater payload capacity and use 18% less planes than our current long-range international fleet. FedEx over a number of years will be working with the Eaton Corporation and the Environmental Defense Fund to put the first practical hybrid electric pick-up and delivery vehicles into operation and we recently reached a major milestone with these vehicles, having driven them more than 2 million miles in revenue service. You can expect to see additional hybrids joining our fleet in the years to come. Now we plan to continue to execute the business strategy that has made FedEx one of the most admired companies in the world and a great place to work and has added significant value for our customers and shareholders. It's my opinion that great companies always improve their competitive positions in economic downturns and we intend to do just that. FY08 and FY09 we believe will be anomalies due to the extraordinary difficulties in the financial, housing and automotive sectors and the rapid run up in fuel prices. We believe, however, there are clearly major significant competitive opportunities available to us in part precisely because of these economic conditions. The expense and cap ex reduction initiatives I mentioned in the various strategic programs like our fuel efficient equipment and facilities investments will hopefully set the stage in FY10 to resume the upward projectory of our financial performance that we saw when we achieved record earnings in fiscal year 07. We're proud that once again in FY08 Fortune magazine ranked FedEx among the top 10 companies most admired in the United States and in the world. For the tenth time in the last 11 years, Fortune named FedEx as one of the 100 best companies to work for. Last quarter the respected University of Michigan's American Customer Satisfaction Index rated FedEx number one in customer satisfaction in our industry and first among all companies listed. Consistent with these achievements we will continue in this fiscal year FY09 to improve the customer experience, improving quality across the board in all of our operations, in order to keep our famous Purple Promise. We will make every FedEx experience outstanding. Let me close my remarks by again thanking every member of the FedEx team who continues to do a superb job in an extremely challenging economic environment. We continue to recognize that more than any other element our front line folks are what really sets FedEx apart and our key to our continuing success. Before I turn it over to Alan, let me just state again our strong belief that we have a number of levers that we can pull regardless of the economic circumstances which we face. I personally believe that significant demand destruction in the oil market will mitigate some of the recent run up in oil prices but regardless of whether oil prices go up and down, we have a very strong balance sheet and cash flows and as I said a moment ago, many short-term and long-term levers that we can pull to reach our goal of coming out of these years of difficult economic times, FY08 and 09, and get back on the proper trajectory in FY10 that we demonstrated in FY07. As I mentioned a moment ago, the one thing that we will not do is to mitigate or put at risk the customer service reputation that FedEx has so justly earned over the years. And now to put more meat on the bones of that chicken, let me turn it over to our Chief Financial Officer, Alan Graf. Alan B. Graf, Jr.: As Fred mentioned, some very strong headwinds from a weak economy and extremely high fuel prices pressured volumes and yields across our entire portfolio. As a result our ongoing earnings declined $0.45 per share excluding the asset impairment charges at the FedEx office this year and the Airbus settlement last year. All-in-all, given the headwinds, I think we had a pretty good quarter. I should note that the fuel surcharge elasticity had its most dampening affect on domestic express volumes and yields and that we expect this difficult economic environment to persist in FY09. Taking a look at the segments in the fourth quarter and starting with Express, international volumes, exchange rate benefits, and net fuel price were all positive contributors to operating income in the quarter versus last year. However, they were not enough to offset base package yield rate declines, domestic volume declines and the impact of one less operating day. As a result, operating income at Express declined $187 million from last year's fourth quarter. At Ground we're very pleased with volumes increasing 6% and yields up 4%. We'll clearly continue to take market share. However, cost growth outpace3d revenue growth as field surcharge revenue at Ground did not cover the fuel cost increase and expenses associated with continued expansion and enhancing and defending the independent contractor model rose. Additionally, operating income at Ground was hampered by one less operating day in the quarter. Freight. The good news there is our shipment volumes rose 3% in a very tough and declining market as we continue to take market share there as well. Net fuel expense, higher purchase transportation costs, and in this case, two fewer operating days caused operating income to decline. Although we don't report it separately at FedEx Office, net operating costs increased from the fourth quarter versus last year which resulted in higher charge-backs to the Express and Ground segments which are included in their reported numbers. Looking at the balance sheet, as Fred mentioned, remains very healthy. We have positive cash flow in fiscal 08, paid down over $600 million in debt, cash balances remain relatively flat at $1.5 billion, and notably our pension plans are fully funded. Looking ahead to 09 we do expect conditions to remain extremely challenging and we anticipate in both the first quarter guidance and the yearly target the current economic weakness will continue and the current level of field costs will not mitigate. We will continue with cost vigilance and have numerous projects underway throughout the Company to further lower overhead and improve productivity while at the same time we will continue to improve our service and enhance our customer experience. I would like to emphasize again that our first quarter guidance of $0.80 to $1.00 and our annual target of $4.75 to $5.25 assume that economic conditions do not worsen and that current fuel cost levels persist. We will manage the cash flow positive and will be scrubbing our cap ex numbers throughout the year. Although we currently expect to spend about the same on cap ex in fiscal 09 as did in 08 largely due to 777 progress payments and the acquisition of 757s for conversion, we can significantly lower that number if conditions worsen and we need to do so. With that, let's open the floor for questions.

(Operator Instructions) Our first question comes from John Barnes - BB&T Capital Markets. John Barnes - BB&T Capital Markets: Alan, on your last comment concerning your capital expenditures and fleet replacement and that type of thing, given what you currently see in the marketplace, can you just talk a little bit more in detail in terms of what magnitude of cap ex pullback you would consider if the current economic trends were to persist for the balance of this year or maybe into 09? Alan B. Graf, Jr.: Sure John. This Company has over the last several years developed a very strong cash flow, we're going to have very strong cash flow in 09, our EBITDA's going to be very positive, as you know we have a significant amount of depreciation in our income statement. If we needed to we could reduce our cap ex to below our depreciation levels, but having said that we certainly would like to get 757s and 777s into our fleet as rapidly as possible because of their energy efficiency that Fred mentioned. So that will be a balancing act as we go through the year. Personally I'd like not to restrict those because those will be very good [inaudible] assets in our Company for the long haul. John Barnes - BB&T Capital Markets: I would imagine, just given the long-term nature of an asset like that, you're not looking at it in the vacuum mode of the next 18 months but is there anything from a cap ex perspective that you see where you would be much more aggressive over say the next 18 to 24 months? Is it terminal expansions put on hold? Is it additional fleet additions to the Ground network or something like that? I know some of those costs are diminimus in comparison to an aircraft addition but can you move the needle on cap ex enough with those type of pullbacks? Alan B. Graf, Jr.: Well we have been doing that but we intend to grow our businesses and we expect international, freight and ground to all have growth in 09 and that requires vehicles and doors and sorting equipment and computer technology, etc. So it will depend on if I'm correct about those growth assumptions which are in our guidance and target.

Our next call is from William Greene - Morgan Stanley. William Greene - Morgan Stanley: I know you think that 2008/2009 in terms of the fuel prices were a bit of an anomaly but do you think that if we stay at this, because we're assuming that fuel prices now don't change, will there be a permanent shift in how your customers use you? In other words, will we have a permanent shift down in the volumes at Express that would cause you to need to rethink the size of that network? Alan B. Graf, Jr.: Let me give you the market perspective. This is my - we've been saying this for some time, as you know, we have been talking as it relates to the US portion of the Express market that we did not see any material growth and have been saying that for the last three years, understanding that consumers were going to become more efficient in their supply chains as they get more information and more visibility and, quite frankly, we've made enhancements to our Ground network and our Freight network to add features such as real time tracking, time definitely delivering money-back guarantee. So this is not a surprise to use. Obviously if fuel prices stay at their current levels we do anticipate lower demands in the domestic part. Having said that, we run a global network and we're seeing strong growth in the international sector albeit a bit dampened currently but we still like our prospects internationally and believe that the Express business offers a lot of opportunities for growth on a global basis. William Greene - Morgan Stanley: So you don't think that, if we stay at these fuel prices, you'll see any permanent shift in the domestic market? Alan B. Graf, Jr.: I'll let Dave Bronczek speak to the network structure but obviously we'll respond to the levels of traffic by reconfiguring networks as required to be the most efficient possible to handle the traffic levels we have. David J. Bronczek: William, in fact we looked at our network and of course we've been talking about this for years, we always try to right size our US network to our US domestic guidance. However, we've actually seen a dramatic increase in our US system if you will because of the global nature of our Company at Express that Mike just mentioned so all of our additions that we've had, wherever they've been in the United States, have been because of our international products flowing through the United States and out of the United States. That's a very important point that Mike pointed out. Fred. Frederick W. Smith: At the risk of being a broken record that I've said this over the past several years, FedEx Express has not bought a unit of capacity for the domestic express business in years and years and years. The network in the United States has been expanded basically to move inland international traffic and at the same time, of course, we've had this marvelous growth in our Ground and Express networks. And increasingly in the years to come in the international market we believe that the movement of goods by air will be in smaller lots and door-to-door express movements rather than in the large consolidations that marked the industry structure several years ago. And we've built a network of regional hubs - we opened one in Greensboro in 2009 - and what those regional operations allow us to increasingly do is to drive-fly across the oceans and then drive on the other side. So we have both international priority and international economy. We have not been adding capacity for the domestic express market for many years and this is not a new thing for us and the 757 is such an important piece of equipment because it operates with unit costs that are basically as good as the bigger plane so it gives us a tremendous amount of flexibility to route to the regional hubs or to downsize to the domestic express network. And most of our airplanes are owned so we have tremendous flexibility in configuring the fleet to the optimal size to reflect what the Express network is both the domestic and much more importantly the interior movement of the Express business. And it's critical for the people that follow this company to understand those issues. Alan B. Graf, Jr.: Let me just add one last thing. This is an important piece. Our tremendously powerful international business that we have at FedEx Express is the best in the world; 50% of all of that business comes through the United States either coming in or going out of the United States. 50%.

Our next question comes from David Roth - Stifel Nicolaus & Company, Inc. David Roth - Stifel Nicolaus & Company, Inc.: I have a question on the closure of the FedEx Freight West facility and whether or not there's any change operation in terms of the FedEx Freight network - it used to be FedEx Freight East, FedEx Freight West and then it was re-branded FedEx Freight? With this closure in the San Jose office, is there a change in the network as well? Douglas G. Duncan: Now the operation will remain pretty much as it is. We've been on the same operating platform at FedEx Freight for some time but we had two different operating companies, FedEx Freight East and FedEx Freight West, and as this business has grown and matured this was an opportunity to streamline our management structure and combine general offices so it's predominantly a back-office function where we can streamline and get efficiencies but our operations are really unaffected. We already have combined sales, marketing and pricing ahead of this so from a customer standpoint there's very little impact but from a cost and efficiency standpoint it's a good move for us to streamline. David Roth - Stifel Nicolaus & Company, Inc.: Okay. And then if you could just talk a little bit about FedEx National LTL and the progress that that's making in the marketplace. I know you felt shipping growth in overall freight but can you talk how much national is growing versus the legacy freight operation? Alan B. Graf, Jr.: Well we're delighted with the progress of FedEx National. The value proposition that we put into place with high reliability and putting in a low-cost network to go after specific of the long haul business has taken hold and our growth momentum there is nothing short of thrilling at the moment. So a lot of the growth that you see in these numbers is actually coming from National and we're delighted with our progress. They're really doing a great job.

Our next question comes from Donald Broughton - Avondale Partners LLC. Donald Broughton - Avondale Partners LLC: I'd like to follow through with that. Can you really give us more color on exactly where the market share gains are being made on Freight? Frederick W. Smith: Our numbers would indicate we're gaining market share in both networks - the regional network as well as the national network. When you look at our growth numbers when we reported Q percent on shipments year-over-year and in Q4 we were plus 3%. That's a huge swing and we believe the bulk of that is all market share gains. We've had sequential growth of shipments since December. Every month has been bigger than the month before so our growth momentum is on track at both networks but probably more so at the national network but I think they're both taking market share. Donald Broughton - Avondale Partners LLC: Especially given that you were at 15% last year that's a tough comp to be on top of that in this environment is admirable.

Our next question comes from Ed Wolf - Wolf Research. Ed Wolf - Wolf Research: Can we talk a little bit about the Ground side? Ground operating income is down 26% and the margin at 750 basis points of year-over-year deterioration seems the worst since you've owned this business year-over-year. The fuel impact is great but should be less at Ground. Can you talk to what's really driving what's been a slow decline at Ground at profitability? David F. Rebholz: First of all, let me point out it's not directly related to your comment but I think it's important. I'm extremely proud that FedEx Ground has achieved an all-time record service level both quality and unplanned service in 98.5 and what's important about that is we now deliver more than 56% of our packages in two days or less and 23% of the Ground packages are delivered the next business day. And you're aware of the fact if you follow us closely that part of our investment this past year was to speed up the lanes and recognizing some of the fundamental changes that have already been discussed. So we're very proud of having about a 13% advantage over UPS. Fuel was singularly the largest absolute dollar difference in the quarter and I think it has already been stated by Alan we did have costs related to the contractor initiatives that we've talked about in the past which come in two flavors - the conversion which I'm proud to say we are completed in California and some additional incentives for our multi-work area contractors. Purchase transportation and other cost lines are really where those numbers reside. The net of it, Ed, is we had a record fourth quarter last year at plus 17% and from a comparable basis along with these investments and one-time costs, I think we have performed extremely well inclusive of our improvement in our service offerings. Ed Wolf - Wolf Research: Dave, can you give more sense in terms of the conversion costs? How much costs are still in front of you? How much of this is ongoing and what percent nationally of the drivers are now single contractors versus multi-route franchisees? David F. Rebholz: Well, Ed, first of all the bulk of the costs from this conversion are in our numbers with the exception of the trailing [MWAs] in the fourth quarter so there will be a slight amount moving into the first quarter but the bulk of the numbers are baked into our base right now. We've had a substantial improvement in multi-work area contractors. Today if you look at the multiple work areas, they roughly are about 3,500 of our contractors, 3,600, are in control of about 10,000 of the service areas. Single work areas are about 7,600 for the organization and, of course, they are one-for-one even though they periodically employ their own employees for peak times, etc. We've had a substantial improvement in the MWAs with the last 500 additions all being 100% MWAs and as I mentioned out of the 489 single area work contractors in California, 410 of them have converted to multiple work area performance. So we have the vast majority of our contractors that have converted and our ongoing growth is in the multi-work area. Our long-term goal is to continue to reinforce that part of the model.

Our next question comes from Jon Langenfeld - Robert W. Baird & Co., Inc. Jon Langenfeld - Robert W. Baird & Co., Inc.: Can you talk a little bit about the domestic express side, specifically the overnight box volume trends which appear to be relatively stable with what you've been seeing over the last two years versus the overnight envelope which has shown an accelerated decline? It seems like that's a little bit counter to the last couple cycles you've been through. Alan B. Graf, Jr.: Jon, the overall Express market in the first calendar quarter of the year actually declined about 3.5% which is obviously well below GDP. A lot of that was driven by the envelope sector so we have seen a mixed change to some degree in the sector. The box has been a bit more stable but has been at a lower level and is more consistent with the overall market performance. Jon Langenfeld - Robert W. Baird & Co., Inc.: Any reason you can think for that diversion? Alan B. Graf, Jr.: I think clearly every time that you see a downturn in the economy the box traffic is affected by that with consumers looking for lower cost alternatives to move the traffic and will trade off service to some degree for price and I think that's what we're seeing.

Our next question comes from Thomas Wadewitz - J.P. Morgan. Thomas Wadewitz - J.P. Morgan: I wanted to ask about what you're seeing looking into fiscal 09. I think you implied within the guidance to be a pretty material decline in Express margins, and I wanted to see if you could comment on whether that's largely a volume weakness issue or if there's a significant cost inflation issue that's hurting the margin side? Alan B. Graf, Jr.: No, it's quite the contrary. We're working very hard on our costs. We have a significant amount of cost reductions and productivity improvements filed in the Express SP&L for fiscal 09. It's just a reflection of the unbelievably high elasticity at these fuel surcharge levels that are pressuring the volumes and the yields significantly on the domestic express market. Thomas Wadewitz - J.P. Morgan: So if you take incentive comp down 220 year-over-year in fiscal 08, is there a meaningful further reduction in that or can you maybe mention some other line items where you see opportunity for cost reduction? Alan B. Graf, Jr.: Certainly. Again let me emphasize that we are still growing our international, ground and freight traffic but a lot of the levers that we have at our hand are certainly the annual long-term incentive comp, reduction in flight hours and hours worked, we can reduce light haul and delivery pick-up routes by reworking the system, and of course we have on our overhead side we have been and are using attrition there. So I think all of those are working. We have a lot of cost reductions filed in the target that I gave you for the year. All look very achievable while at the same time unlike some of our markets not sacrificing service but improving it and enhancing the customer experience. David J. Bronczek: I think Alan's exactly right. We have looked at all of our cost initiatives and we've been doing them for several months now - many months, we have fuel burns with our flight crew that have been very significant savings for us and will be going forward, domestic flying as Alan mentioned, labor costs, productivity increases, really across the board we're very pleased with where we're coming out on our expense side for FY09.

Our next question comes from Gary Chase - Lehman Brothers. Gary Chase - Lehman Brothers: Could I just piggy-back on that? I mean, as you look into fiscal 09 it would seem from the comments you just made that you're expecting the volume weakness in Express to pick up a little bit. Are you seeing that already or is that something you anticipate as these fuel prices make their way into the market over the next couple of months? Alan B. Graf, Jr.: First of all, and I'll let Mike finish up, we just saw it in this quarter and as I mentioned it's continuing now in the summer. We're going to have a 32.5% surcharge in July and that's going to create a lot of mode shift. We didn't have that a year ago. Fuel prices are up 80% on a jet fuel basis versus last summer and last year we had a terrific first quarter at Express. That can't repeat. As Fred says we can't levitate. All we can do is manage through this. T. Michael Glenn: I was just going to add that the domestic Express volumes were actually fairly consistent through the quarter. Obviously we had some seasonal affect as you move into the summer so we will expect to see that but we're about where we thought we would be at this point although there is certainly some pressure on volumes as fuel prices continue to go up. Gary Chase - Lehman Brothers: So this is the kind of volume reduction that you're expecting next year that's in the guidance? Somewhere in the down three or four range. It's not materially different than that? Alan B. Graf, Jr.: As I mentioned the Express market in the US declined 3.6% in the first quarter and that's consistent, we expect that to continue until we see some relief in the economic activity and the rising fuel prices.

Our next question comes from Arthur Hatfield - Morgan, Keegan & Company, Inc. Arthur Hatfield - Morgan, Keegan & Company, Inc.: First question, was there a point with regards to the fuel surcharge level where you really started to see the elasticity in demand kick in? Alan B. Graf, Jr.: Art, it's difficult to say exactly where that occurs because you have a combination of factors here. You have a slowing economy and you have rising fuel prices so it's very difficult to dissect that and say what's causing the activity. You see mode shift when the economy weakens and we've seen that many many times in the past and obviously was at the fuel surcharge increases that puts pressure on our customers to be more efficient in their supply chain decisions as well. So it's clearly more difficult to point that out but we've been as high as 20% in the past with I would say impact but not necessarily as material and once we crossed over that threshold and started heading towards 30% I think our customers obviously want to take a second look. Arthur Hatfield - Morgan, Keegan & Company, Inc.: Just a follow up, Alan, you had talked about really watching cap ex going forward and maybe slowing things down or additions or plant expenditures if things slow down further. Is there the possibility and would it really make a meaningful expense difference if things slowed down further if you were to accelerate some of your aircraft retirement plans? Alan B. Graf, Jr.: Well we always scrub our capital and where a year ago we were planning to have a lot more growth today than we're having, obviously we've had to reduce those plans to match that reality of the marketplace. One of the trade-offs that we have right now is we have 727, 200s out there that if we could get rid of them today, I would do that despite the capital expense because on a per unit basis, 757 is 47% more fuel efficient. We just can't get them acquired and moded as rapidly as we would like so in our plan we have a very rapid acquisition and mod program for the 757. I think that we would be very wise to continue that but we also need to remain cash flow positive so we will manage what comes in front of us and as I said, we are very well positioned to do so. We've got a very strong balance sheet; we've got staying power. You're seeing a lot of trucks parked; you're seeing freighters come out of passenger airline fleets; you're seeing a reduction of passenger flying which reduces belly space. So there's some opportunity there, too. David J. Bronczek: Alan's right. We have the first 757 coming into revenue service for us in September and we're looking at every possible way to get more 757s in faster. Obviously all of that would be good news. The 777 comes in in the second half of FY10. At the end of the first half, I'm sorry. Frederick W. Smith: It should be noted though as I mentioned before we own the vast majority of our airplanes so if we need to structurally take capacity out of the express system, that's relatively easy for us to do by simply accelerating the retirement of some of the airplanes regardless of the replacement lift. That's what I was talking about with the many levers that we have to run, have to pull. And the reason that we believe we can come out of FY09 and get back on our trajectory is it's always difficult when you're on these earnings calls and talking about some numbers on a piece of paper, I mean the FedEx networks are enormously big. They're millions and millions and millions of discreet transactions every day and thousands of air segments and surface movements and so forth. So to re-engineer and reconfigure those networks without doing damage to our service levels and our customer reputation is something that takes some time. And I would remind everyone as we went into the first quarter last year it was a gangbuster quarter and as late as the second quarter of last fiscal year we were looking towards another record financial performance. It's only when the continued run up in fuel prices, and as Alan mentioned they doubled over the past year, that the real impact started being felt in the late fall and early part of the year. So we'll get these networks right and we're very confident that we'll come out on the other side of this thing stronger and better and more market share and so forth.

Our next question comes from David Campbell - Thompson, Davis, & Co. David Campbell - Thompson, Davis, & Co.: You didn't mention any possible benefits from the decision of DHL to terminate its domestic flying and also to transfer that to UPS and a ground area to substantially reduce their ground services. Is that included in your estimates for 09? Any benefit from that? Alan B. Graf, Jr.: David, we've seen a lot of uncertainty on the part of customers and potential customers as it relates to the decisions of our two primary competitors here in the US. We've received a number of phone calls and are responding appropriately to that. These customers have an interest in what FedEx's value proposition can do for them and we're aggressively talking to them just as quickly as we possibly can. We do some potential benefit from that, some of which has been assumed but not all. David Campbell - Thompson, Davis, & Co.: On the international business, how are US export packages and freight increasing faster than the rest of the business? David J. Bronczek: Yes, that's correct. The Asia, Europe and US export business has been very solid and leading the way of course in all of our revenue growths. Our IP was up 16%, 6% on volume, and those three parts of the world led the way. So you are correct. Frederick W. Smith: What's going to happen in the international marketplace, and you can read it in the trade press everywhere, is the traditional airport-to-airport freighter services are being reduced and coming down. In fact one of the major carriers in the Middle East has said that they're going to take their orders, I think it was for 16 freighters, and convert them into passengers. One of the big combination carriers in Asia that operates a big all-cargo system said they're going to be taking on a tremendous amount of capacity. As I mentioned a moment ago and I've mentioned on this call many times, what's happening is the mode shift in the international area makes what happens in the domestic express business pale in comparison. There's a tremendous movement of the lower value added traffic off of the traditional freighter airplanes onto the water, onto the sea. We pick that traffic up in FedEx Ground and FedEx Freight as it comes into the United States and we manage a fair amount of our FedEx Trade Networks unit. That's one of the reasons we bought Watkins and converted it into FedEx National. It is perfectly suited to move items that are coming in on the water into the interior points of the United States in the absolutely most efficient manner. So these long-term segular trends play to our strengths. It's exactly the way we're configured. And I just came back from Europe last week and again went to a couple of our locations and you can see this taking place right in front of your eyes.

Our next question comes from Robin Byde - HSBC Global Research. Robin Byde - HSBC Global Research: Actually just a pull up on the international market. Are you seeing, thinking it's going to slow down mode shift or are you compressioned in any specific markets national or regional? Alan B. Graf, Jr.: The answer to that question is no. We're seeing increases in all of our markets internationally, especially in Asia, Europe and the United States export. Robin Byde - HSBC Global Research: Can you be more specific about particular countries perhaps? Alan B. Graf, Jr.: Well we don't break them down by country but Asia Pacific, all the European countries in our EMEA region of the world and our US export actually almost everywhere in the world including Mexico's been very strong for us. So country by country I can't specifically tell you that. We obviously know that but it's around the world growth in all those sectors.

Our next question comes from Mary Jane Credeur - Bloomberg News. Mary Jane Credeur - Bloomberg News: Has there been any discussion or consideration of going in and proactively cutting jobs or trying to park more aircraft in addition to just trimming the capital expenditure budget going into fiscal 09? Alan B. Graf, Jr.: I think I mentioned earlier about all the levers that we're pulling, reducing flight hours, hours worked, attrition, redesigning routes. All those have been ongoing and continue to be ongoing. Mary Jane Credeur - Bloomberg News: Are you going to actually park planes or proactively reduce headcount? Alan B. Graf, Jr.: Right now we are rotating parking airplanes on a temporary basis.

Our next question comes from William Greene - Morgan Stanley. William Greene - Morgan Stanley: Alan, you mentioned earlier on there were some base rate declines. I was just hoping you could expand upon it. Are you saying that customers are actually demanding and getting rate decreases? Is that what you meant? Alan B. Graf, Jr.: Obviously customers are out there trying to reduce their costs any way they can. They're doing that through a number of different levers that they're pulling. Again, looking at the actual services that they're using and talking with us about moving some traffic from Express to Ground, some traffic from Ground to Freight, and so on and so forth, we are renegotiating some agreements at this point in exchange for longer term agreements. So if that's a benefit to FedEx, we'll certainly consider those things. William Greene - Morgan Stanley: I think you're talking to the IRS this quarter. I don't know if it was in June or May, but can you give us an update on how those talks have gone? Christine P. Richards: We've started those conversations. At this point in time there's a good chance they'll continue on into the first quarter. We're still at the audit level and depending upon the outcome at that level, we will then see how we go forward. Alan B. Graf, Jr.: I've got one follow up to the last question. Also, when we see an economic weakness we see decline in our weights per package which also impacts base yield.

Our next question comes from Ed Wolf - Wolf Research. Ed Wolf - Wolf Research: Alan, have you broken out or at least given us some range of what the fuel drag was in the quarter and how much of that, assuming fuel stays flat for a year, do you think you could recover? Alan B. Graf, Jr.: Surprisingly it was not material in the quarter because of the anomalies of last year. I think I mentioned that Express it was actually net fuel as we measured on a static basis which is simply the surcharge versus the increase in cost was a slight benefit in the quarter. But overall just the absolute size of the surcharge and the elasticity, the pressure on the yields and the volumes is much more important right now than the surcharge versus the additional cost of fuel.

That does conclude today's question and answer session. At this time I'll turn the conference back to management for any additional remarks. Alan B. Graf, Jr.: Thank you for your participation in the FedEx Corporation fourth quarter earnings release conference call. Please feel free to call any one on the IR team if you have any additional questions. Thank you very much for your time.