Mickey Foster – Vice President, Investor Relations 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 Dave Bronczek - President and CEO of FedEx Express Dave Rebholz - President and CEO of FedEx Ground Doug Duncan, President and CEO of FedEx Freight

Ed Wolfe – Wolfe Research David Ross – Stifel Nicolaus Donald Broughton – Avondale Partners John Langenfeld – Robert W. Baird Peter Jacobs – Ragen Mackenzie Tom Wadewitz – JP Morgan Robert Nichols – Manning & Napier Art Hatfield – Morgan Keegan Justin Yagerman – Wachovia Adam Longson – Morgan Stanley Gary Chase – Barclays Capital Helane Becker – Jesup & Lamont

(Operator Instructions) Welcome to the FedEx Corporation Second Quarter Earnings Conference Call. At this time I will turn the call over to Mickey Foster.

Welcome to the FedEx Corporation Second Quarter Earnings Conference Call. I’m Mickey Foster, Vice President of Investor Relations at FedEx Corporation. The earnings release and 25 page stat book are on our website at FedEx.com. This call is being broadcast from our website and the replay and Podcast 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. 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 our press releases and filings with the SEC. To the extent we disclose any non-GAAP financial measures on this call, please refer to the investor relations portion of our website at FedEx.com for a reconciliation of such measures to the 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. Now our Chairman, Fred Smith, will share his views on the quarter followed by Alan Graf. After Alan, we will have questions and answers.

We appreciate your joining today’s conference call to discuss FedEx Quarter Two FY09 earnings. FedEx financial performance is increasingly being challenged by some of the worst business conditions in the history of our company. We’ve been managing costs and taking full advantage of market opportunities and our service levels are record at highs. We expect, however, that economic conditions will remain very difficult through calendar 2009 and today we are announcing additional actions that we believe are necessary to offset weak demand, to protect our business and help minimize the loss of jobs. We believe these steps are necessary and will required shared sacrifice from the top down and across the FedEx workforce. I’m very confident in our team as it has done many times in the past will do whatever it takes to keep FedEx competitive. I firmly believe we will emerge as a stronger, more vibrant company when the economy improves as I’m sure it will. During the first half of fiscal year ’09 FedEx managed to produce solid financial results primarily due to three factors: A steep decline in fuel prices Gaining additional volume as a result of DHL’s pull out from US domestic market Outstanding customer service delivered by our team members who everyday live our purple promise stated simply, “I will make every FedEx experience outstanding” As we near the conclusion of our busiest time of the year I’d like to take this opportunity to extend my utmost appreciation to our team members around the world for their dedication in going literally and figuratively that extra mile to deliver the holidays to our customers. Earlier this year in anticipation of continued economic weakening, FedEx began a program of cost management activities to minimize job loss and position our company for long term growth. We grounded certain aircraft and reduced flight and labor hours, fuel consumption and maintenance costs. We reconfigured route structures for greater efficiency and productivity. We instituted a hire freeze on all hiring expect for mission critical positions. We cut discretionary spending and because we believe there should be a strong relationship between pay and corporate performance we eliminated all bonus and variable incentive compensation payouts representing hundreds of millions of dollars in FY09. As we all know, the global economic downturn continues and we are in some degree uncharted territory as uncertainty in the marketplace continues. We cannot predict exactly how it will unfold. The actions that we’re unveiling today are aimed at minimizing loss of jobs in the company and better positioning FedEx for long term and future growth. These measures are expected to reduce costs by an additional $200 million in the remainder of FY09 which ends May 31, and by about $600 million in FY10. Overall our cost reduction efforts should total more than $1 billion in the current fiscal year. The actions that we’re announcing today include permanent reductions in compensation from the top down beginning January 1, 2009. In this regard, my salary will be reduced by 20%. Our other senior executive officers by 7.5% to 10% depending on position and all other officers and United States salaried exempt personnel will take a 5% reduction. We will eliminate merit based salary increases in calendar 2009 for US salaried exempt personnel and we will suspend our 401(k) company matching contributions for a minimum of one year effective February 1, 2009. We will find ways to reduce costs for all the goods and services we buy across the company. We will make purchasing a more strategic activity. We are streamlining and simplifying internal processes within FedEx Services particularly and focus on our Information Technology functions especially. We aim to reduce duplication, overhead and non-essential costs. We’ve reduced capital spending plans for this fiscal year from $3 billion at the start of the year to currently estimate at $2.4 billion for FY09. I’d like to be clear, however, we will not do anything to compromise our outstanding service levels in return for short term gain. In fact, we’re redoubling our efforts to improve on even our high service levels that we’re able to provide our customers today. We’ll continue to balance the need to control spending with the opportunity to make investments with high returns. For example, yesterday, December 17, the first FedEx Express test flight arrived at our new Asia/Pacific hub in Guangzhou, China which will officially open now on February 6. It will be the largest FedEx facility of its kind outside the United States overtaking our large facility even in Paris in Europe and it represents a US $150 million capital investment. It will be the heart of our APAC operations with are integral to our long term growth strategy. Tested time and again FedEx has proved its strength, resilience and ability to successfully adapt. In the FedEx culture we see adversity often as an opportunity to strengthen our competitive advantage. I am highly confident in our business model and our team member’s ability to focus, be strong and give it their best during these challenging times. I can tell you we remain very thankful for their commitment, passion, loyalty and most of all understanding. As we move forward I am optimistic we will gain market share even in declining markets and add new customers in light of DHL’s decision to pull out from US domestic market. We will continue to position FedEx to take full advantage of market conditions when the economy rebounds and it will rebound at some point I’m quite sure of it. We’ll continue to provide the highest levels of service to our customers, service levels that they have come to expect when the FedEx brand is on the service. Let me remind all of you that procrastinate that there is still time for those last minute shoppers to have their gifts delivered in time for the holidays. In fact, you may ship as late as Tuesday, December 23, for FedEx Express delivery before Christmas. Before I turn it over to Alan Graf let me digress to say that one of the reasons that we are so confident in our future and in our current situation is because of the hard work put in by Alan and his team and the CFOs at our operating companies over many years to build an extremely strong balance sheet and great liquidity. With that financial strength we enter these challenging times with great confidence. I would now like to turn the floor over to Alan.

I’ll try to give you a little bit of color on what we saw in the second quarter which was frankly different than what we had expected when we had previously had our first quarter discussion with you; and then give you what little we can say about the second half in terms of our revenue expectations and talk a little bit about our cash flows for the rest of the year. As you know, global economic conditions deteriorated further in the second quarter of fiscal 2009 and continue to negatively impact our revenue and earnings growth rates. We experienced continued softening in demand for our services particularly our FedEx Express and FedEx Freight Services due to declines in industrial production and consumer spending. Shipping volumes for our Transportation segments declined year over year in the second quarter and remain below prior year levels as we began our historical peak shipping season. Let me give you a little bit of a trend analysis by segment to give you an idea of just how weak the second quarter was. In the first fiscal quarter of 2009 US Domestic Express volumes declined 5% year over year. In the second quarter that number slipped to 8% of the decline year over year. In terms of International Priority at Express we were about flat in the first quarter of fiscal 2009 versus 2008 and that slipped to a decline of 7% in the second fiscal quarter of 2009 versus the previous year. While we had been growing at FedEx Ground in our first fiscal quarter, 4% year over year, we saw a 1% decline in the second quarter year over year. The same story at Freight where our less than truckload shipments had been growing at 4% our first fiscal quarter but declined by 2% in our second fiscal quarter year over year, an accelerating negative volume trend throughout the quarter. In terms of yield we did see weight decreases that were negatively impacting our Domestic Express and IP yields and of course IP yields were further negatively impacted by exchange rates which during the quarter, as a result of the strengthening dollar. Ground yields however were positively impacted by rate increases in extra services performed very well. During the second quarter rapidly declining fuel costs and the timing lag between such declines and adjustments to our fuel surcharges provided substantial offsetting benefits to the decrease in volumes particularly at FedEx Express. The average price of jet fuel during the second quarter of fiscal 2009 was 26% lower than the average during the first quarter of fiscal 2009, while the fuel surcharge only decreased quarter over quarter by a nominal amount. That substantial benefit to our earnings in the second quarter will not continue in the second half. As Fred mentioned in response to weak business conditions we took actions in the first half of fiscal 2009 to lower our cost structure such as eliminating variable compensation payments, implementing a strict hiring freeze, making significant volume related reductions in labor hours and line haul expenses, reducing personnel and facilities at FedEx Freight and FedEx Office. In addition, we have exercised stringent control over discretionary spending. We have rationalized our networks by adjusting routes and equipment types, temporarily idling equipment, consolidating facilities and deferring facility expansions to match current demand levels. Fred detailed the additional actions to further reduce costs that we will be taking in the third quarter. Turning to the outlook, we frankly expect the difficult global economic environment will worsen in the second half of fiscal 2009. We obviously have reduced our earnings forecast accordingly. Weak economic conditions in the US have spread to Europe and Asia and ongoing weak global economic factors are expected to further reduce demand for all of our transportation services in the second half of fiscal 2009. We don’t believe we have reached the bottom of industrial production or consumer spending on a quarter over quarter basis at this point. With the exception of volumes at SmartPost shipping volumes in our third quarter which includes our historical peak shipping season for our package business are expected to be particularly weak and well below prior year levels. While we expect to benefit in the long term from the exit of DHL from the US Domestic market we cannot predict the extent of such additional volumes under present economic conditions. We do not anticipate year over year GDP growth to turn positive until the fourth calendar quarter 2009 at the earliest. We have provided a wide range earnings estimate for the second half of FY09. We have extremely limited visibility as we forecast base volume erosion from weak economic conditions in Express and Ground package traffic offset by increases in that traffic from customers switching to FedEx from DHL and the elasticity at Express of significant lower fuel surcharges. This lack of visibility to revenue combined with the fact that any additional cost reduction we may take beyond those we announced today would only impact the fourth quarter and beyond precludes us from providing a meaningful third quarter forecast. For the remainder of fiscal 2009 we will continue to balance the need to control spending with the opportunity to make investments with high returns such as in substantially fuel efficient Boeing 757 and Boeing 777 Freighters, although we have pushed back our 777 delivery schedule. We will continue to invest in critical long term strategic projects focused on expanding our global networks and broadening our service offerings to position us for stronger growth when economic conditions improve. Lastly, let me point out that our cash flow from operations remains strong and we expect to end the year with a $1.5 billion of cash on the balance sheet even after retiring a $500 million debt maturity in April. With that we will be happy to take your questions.

(Operator Instructions) Your first question comes from Ed Wolfe – Wolfe Research Ed Wolfe – Wolfe Research: Can you talk a little bit about the impact of DHL in terms of which products are you mostly seeing the volumes? You noted in the release and talked about SmartPost, where else are you seeing more versus less of the DHL volumes? Over time what do you see as the pricing potential if you could talk about that from DHL?

Clearly DHL decision in the United States has presented a unique opportunity and one that we began planning for many months ago. Early in the stages we saw actually a higher level of ground volume coming on, it seemed to be the first to activate then that balanced itself out and actually skus now are a little bit more towards Express. SmartPost has also benefited significantly as the result of DHL’s decision. It’s very difficult to predict how this will settle out because our average yield per transaction is much higher than what DHL was carrying the traffic at. It will take some time for us to see how this volume settles in the various modes. I don’t think we’ll have clear visibility to that until after the holidays. We’ll just have to wait and see how the mix of traffic settles out in the various networks because I think that can be skewed to some degree by the holiday and the Christmas season. Ed Wolfe – Wolfe Research: In the results it seems like your Ground results when you take out fuel feel much better than your Express results. Is that driven by seeing the Ground earlier at DHL or is that just the nature that there are more fixed costs in Express than Ground?

It’s definitely some of both but mostly the later. As I said, when we talked to you at the end of our first quarter we weren’t expecting the decline accelerations that we saw and the numbers that I mentioned to you on the trends. With the size of the fixed cost network that we have at Express chasing that decline in revenue down with cost reductions takes us longer. We will get there and as I’ve said we’ve done quite a few things already and we have more levers if we need to pull them. At the same time we don’t want our service levels to do anything but improve which we think is one of the keys for our longer term success. We’re behind at Express in terms of getting our cost structure in line with the amount of revenue that we’re seeing but we will catch back up.

Let me respond to your pricing question because I failed to address that. Clearly we see some opportunity here; we’re going to take a very disciplined approach to pursuing this opportunity. It would be very easy to be caught up in volume attainment and market share gains, that’s not the approach that we’re taking. We’re taking advantage of the opportunity and going to make sure that it benefits FedEx Corporation.

Your next question comes from David Ross – Stifel Nicolaus David Ross – Stifel Nicolaus: Can you first talk about with fuel being so low these days if you’re rethinking potentially hedging?

No, all we have to do is look at the wreckage of the last year of all the airlines who did and that’s an easy one to answer. David Ross – Stifel Nicolaus: On the Freight segment if you could talk a little bit of the difference between the national LTL piece and the regional LTL piece and how they fared during the quarter.

Both grew market share although the market share gains at the national side are stronger than the ones at the regional side. I think we did very well in the marketplace. The problem is the whole market is chasing declining volumes which is really showing up on the yield side which is where the biggest problems are.

Your next question comes from Donald Broughton – Avondale Partners Donald Broughton – Avondale Partners: We saw the worst decline in margins in Freight. Is that a function of continuing to try and grow out the infrastructure on the national basis is it more a fixed cost basis than the other businesses, what exactly would you attribute that to?

I think its more the industrial economy got hit early. The trucking industry, the freight industry was pressured starting back late ’06 with the housing decline in growth and then as we began to sell fewer cars in this country. The industrial side has put the freight business under pressure for a number of years. We’ve mitigated that because we’ve been growing market share across those years but now you lop the decline in the consumer economy on top of that. I think the trucking market was weak to begin with and now we’re going into this global recession. I think the yield side of it is really hurting. When you look at our unit cost we’ve kept those roughly in line with the volumes that we’ve seen. The yield is the side of the house that is causing all of the problems. Donald Broughton – Avondale Partners: On the fuel line I certainly know that you got pinched by a larger number than this in recent quarters as fuel was going straight up in the year and your face but my back of the envelope math says there was an after tax $200 million benefit from the falling price of fuel. Is that close or do I need to find a new envelope?

The language that I gave you was very carefully crafted. I will read it again because I wrote it down. Adjustments to our fuel surcharges provided substantial offsetting benefits to the decrease in volumes. I would say that’s not going to continue with where we are. I will say jet fuel has not declined as much as oil prices have at this point. There could be a little bit more decline in the price of jet fuel going forward. As far as what’s going to happen with oil prices we believe with the weakness in the economy they’re going to stay at these levels at least during our third quarter. We won’t see that benefit in the third and fourth quarters as we enjoyed in the second quarter.

Your next question comes from John Langenfeld – Robert W. Baird John Langenfeld – Robert W. Baird: Thanks for laying out the progression quarter to quarter. If we look at those numbers is it safe to assume that you left the quarter at a meaningfully lower rate? For instance, since International Priority down 7% for the quarter can you give us any sense for what it was in the last month of the quarter?

This is one of the things that’s reducing our visibility a bit in that most of our traffic in the various cohorts and modes saw sequential year over year worsening during the second quarter with the exception of SmartPost which has grown straight through the roof because its such a terrific service, oddly enough Domestic Express. The reason Domestic Express did not have a sequential decline during the quarter is that you have to go back to the previous year and we had a very strong September and fuel prices were still very low and did not start to increase until late September/October timeframe so we had a very tough comp in the month of September year over year, that’s part of it. Secondarily the rumors about DHL and then the announcement by DHL didn’t stimulate volume in September as it did in October and November for Domestic Express particularly November. That didn’t have a sequential decline. As I said in my opening remarks, in December and going in to the second half we just see a lot of weakness. John Langenfeld – Robert W. Baird: On the International side I know that area is more fixed cost structure than maybe the Domestic Express side but can you talk about some of the cost initiatives you have there to vary it with the volume contraction?

Obviously the drop off in the second quarter for International was very large for us. Our very big network across the globe we’re able to scale it down through line haul reductions without affecting our customer service whether it’s in intra Asia, across the Pacific, across the Atlantic or here in the United States when we’re delivering International packages. We’ve dropped our jet fuel consumption for example by 7%. These are significant numbers for us.

Your next question comes from Peter Jacobs – Ragen Mackenzie Peter Jacobs – Ragen Mackenzie: Could you start by giving a little bit more color around the decline in volumes in the International Priority business, regions that you might have seen the most pronounced declines? Also, could you talk about if there is any fuel surcharge mechanisms there as well that are similar to what you have in the States?

Primarily Asia/Pacific and US International export back to Asia are the two areas that have the most significant declines. Europe, quite frankly did well for us. The surcharge applies around the world for us at FedEx Express. Peter Jacobs – Ragen Mackenzie: The yields declined quite a bit in International Priority while they held up in the Domestic and I understand the yields holding up if I understand that right in the Domestic business was a lot due to the timing of the fuel surcharges then you got some benefits there perhaps. The International yields were down pretty good could you help me understand that a little bit.

They’re not down as much…

International yields improved on an absolute basis year over year but that was largely fuel surcharge. The same is true in US Package there was an absolute increase year over year and that was largely fuel surcharge. Our weaknesses were in rates.

One other component obviously we have much more Domestic International that has a little bit lower overall yield than the intercontinental.

Your next question comes from Tom Wadewitz – JP Morgan Tom Wadewitz – JP Morgan: I know there’s not a lot of visibility and you’ve given the wide range reflects that but can you give us any kind of broad sense of at the high end and the low end what your volume expectations might be if you talk about Domestic Express volumes or IP volumes just how bad and how good things could be at the two end of the range in any broad terms?

The range that I’ve given is a low and a high forecast, it’s not a best and a worst. Best and worst would reply certainty that we’re going to hit inside that range and I’m not by any means saying there is certainty that we’re going to hit within that range. Tell me how many packages went through the Wilmington hub at DHL last night and I can give you a better idea of how much of that we’re going to get in the second half as they go out of business in January, that’s number one. Number two, tell me how weak or strong industrial production is going to be in the first calendar quarter of ’09 and that would help. The range is our best guesses of what could be an economy that quits declining so rapidly and more traffic from DHL versus one that continues to decline and we don’t see as much from DHL. Tom Wadewitz – JP Morgan: There is I think some concern that as you’ve got the new Congress and the new administration coming in that there would be some of the union friendly legislation would come to the forefront. Obviously you as a very large transport company that’s non-union expect for the pilots would potentially have an increase in unionization risk if some of that legislation gets traction. Can you give a sense of how you view that risk and some of the things that you do that even if that passed that would prevent the risk of unionization in Express or LTL?

Tell me first what legislation that you’re specifically referring to. Tom Wadewitz – JP Morgan: There would be two things that I would think of so presumably the employee free choice would be something that would be brought up again. Then the provision that was put in the prior FA reauthorization about taking Express out of railway labor would be something else potentially that could come up in 2009.

Let me give a broad brush answer and then ask Christine Richards our General Counsel who also manages our Federal affairs unit under the able leadership of Gina Adams in DC to comment. Regarding card check I think the opposition to card check is so broad and so deep an American industry that all we can do is to say we do not think that is good public policy. In particular I think the mandatory arbitration provision would be very ill advised particularly at this time where you take the management of a business out of the hands of management and labor who understand the business and put it in the hands of an arbitrator who may or may not understand the business. We strongly oppose it but we are just one of many people in that regard. Under the Railway Labor Act we’ve said repeatedly that it is extremely bad public policy. FedEx Express has been a Railway Labor Act carrier since inception; it was one of the key elements in the formation of the company, the integrated air, ground network. That issue was challenged in court, the ruling in the 9th Circuit Court in California was very clear in the court saying that FedEx Express is exactly the kind of integrated transportation system that Congress intended. We would hope that that provision would not see the light of day or at the very least if they want to examine the Railway Labor Act they ought to do it in the cold light of day have a bill and have hearings on it and deal with the public policy issues which were developed over 138 years. This is a very long standing issue and why the labor act was put in place and it is certainly not anti-labor because 70% of the people under the Railway Labor Act are represented. We would strongly oppose that. The final thing I’d say before asking Chris to comment, the main thing about FedEx is the fact that we have always had our priorities right and we understand the most important folks in this organization are not the people you’re talking to, they’re the people you deal with everyday out there picking up and delivering our shipments and delivering that purple promise. We’ve tried to do right by our folks to be fair and forthright with them and I hope the actions that we’re taking today demonstrate that as well. We believe that our current focus is correct and obviously the unions have the right to try to organize our folks and it’s their right to decide on that if that’s what they want. We think that our formula for success has been pretty good over the past 35 years. I’ll ask Christine to talk specifically about any legislative issues because she knows them better than I do.

I think what we anticipate is a broader dialogue particularly with respect to the employee free choice act amongst all of the constituencies that would be impacted by that act as it is considered in the context of the economic times that we’re facing in the US and globally. Any major change or disruption that would potentially negatively impact the ability of employers to move forward with offering jobs and growing their businesses poses a pretty broad risk to the country’s economy at this point in time. We expect the dialogue on that bill to be extremely broad and as Fred said there will be many voices in business who will be pointing out the weaknesses of the bill. As you watch the hearings with the automotive manufacturers you hear a lot of criticism of decisions that management made in the years running up the current situation. Fred is right, mandatory arbitration provision in the employee free choice act would take away from management the ability to make the right decisions and to offer employment packages that ensure the long term stability of companies. An arbitrator who has no vested interest expect as the arbitrator in the matter would be making decisions that could impact the benefits to be received by the employees and more importantly the value to the company and to the shareholders of the enterprise as a long term going concern. That part of the bill is particularly troubling to us. On the Railway Labor Act changes we expect to see the kind of initiatives we have we were fully supportive of having a dialogue and hearings on that matter so that people can better understand why that bill, why that statute is in place to permit entities that run national and international networks to continue to operate those networks without interference by disruption in one particular locale. We hope we can have a situation where we have that dialogue and we look forward to working with people on both sides of the aisle as Congress convenes after the first of the year to move the country forward.

Your next question comes from Robert Nichols – Manning & Napier Robert Nichols – Manning & Napier: I’m curious what some of the similarities and differences are between what we’re experiencing today versus the early 90’s or back in the early 80’s or 70’s and what you’re doing that is the same and what’s different? What challenges you might be experiencing in that particular downturn?

I think its been commented upon by many, many people this is obviously the most significant economic challenge that the United States has had certainly in the period of time that I’ve been in business. Simply put it’s a massive de-leveraging. I personally believe that the root cause of this is the fact that the United States in particular has had policies, particularly tax policies in place, which incented the growth in the financial sector at the expense of the industrial sector. The best indication I can give to you that is that in the economic problems in the early 80’s, 25 years or so ago financial activities represented about 15% of the reported profits of US industry. By 2007, it may have been 2006, about 25 years on the financial sector was generating 32% of all profits. The deductibility of interest which incents people to leverage up was probably the ultimate example being the private equity sector while equity is taxed very significantly and capital is taxed very significantly means that the companies that employ the blue collar workforce can invest to the extent that they need to invest. One of the things that we’ve advocated very strongly in addition to lowering the overall corporate tax rate is to expense capital and that is a policy that President Elect Obama and his team could put in place that has no downside because if you can incent business to invest all you’re doing is to defer the tax and what you do from the industrial sector is you mitigate the risk of making those investments. I’ve asked scores of CEOs over the last few weeks if such a policy was put in place would in fact they bring forward productivity enhancing or technology based investments that they are deferring just like we are. I said in my comments we’ve reduced our capital from $3 billion to $2.4 billion. If we could make capital investments and get the money back in the year they were made it makes our workforce more productive and about $0.70 on the dollar accrues to the blue collar workforce. Why am I going into this rather long explanation? Its because unless and until the tax policies of the United States move more towards encouraging industrial activity and away from leveraging either personal or corporate we’re going to have a massive de-leveraging that of course is underway at the moment. How long that takes leads to the uncertainty that both Alan and I mentioned. It is taking place, people are deferring the purchase of automobiles, housing is not being purchased those are the two biggest consumer purchasing decision that people make. It’s going to have to run its course and I don’t think that a stimulus package that simply encourages people to consume or get the check in the mail like the stimulus package last summer may have the intended affect. People may well use that money to continue the de-leveraging process. Stimulation on the industrial front I think has much more potential and again it’s like the sleeves off your vest because if people don’t invest the government loses nothing. Corporate taxes are only about 15% of the revenues the government gets and if we make increased capital investment and get to write it off in the year that its made again its simply a deferral because then the Federal Treasury is a partner in our capital investment from that point forward as long as that investment is made. The only way to make blue collar folks wealthier is an investment in productivity enhancing equipment, the training and the infrastructure that goes to support them. I think that things will definitely turn around. I think the country and the economy will be on much more solid footing when it comes out and of course it’s clear that all of the central bankers have learned the lessons of the Great Depression in that they’re providing great liquidity and great stimulation out there. I just hope the policy makers will remember that it is the industrial sector that provide those high value added jobs and put more focus there and appropriate tax laws.

Your next question comes from Art Hatfield – Morgan Keegan Art Hatfield – Morgan Keegan: Back to your earlier comments about cost chasing down revenue, if volumes were to stabilize how far behind are you on that the Express unit?

Not that far. That’s part of the reason the range is so high that if it would stabilize then I think the actions that we’ve taken, or the actions that we would need to take. That will start to catch up. If they continue to deteriorate there’s the likelihood we’ll have to take additional cost actions to chase that. There an underlying amount of economic activity that’s continuing and that requires transportation and so it’s just a question of when that stabilizes is when I could give you a better answer. To put a little color on what’s different this time, this company is so much bigger with so many different operating models and subsidiaries we’re in the retail business at Office. We didn’t have an LTL business the last time we had a severe downturn. We have a wonderful operating model at Ground and Ground while it may not be on a growth plan at the moment it certainly could be, even in this economic environment because the value that’s being provided there is so great. Lastly, we have a wonderful management team and operations out there, they don’t need me to tell them what to do, and they’re already doing it and telling me what they’re doing. That’s one of the great advantages of having long tenured senior management here is they know exactly how to get the costs out and they’re doing it on their own. I’m not just pleased with our cost performance; we just got caught with a faster decline in traffic than we had been planning. Art Hatfield – Morgan Keegan: Its fair to say then the comments that Fred made with regard to service that if things turn and some day they will you don’t get caught in a situation where you’re chasing to get people added where need to be so that service doesn’t suffer.

Absolutely, we think when it turns back up its going to be pretty dang rapid because there’s no inventory out there, supply chains and very shortened right now. When the demand goes up we’ll be in a position to perform extremely well. Obviously we lost one of our competitors in the business and I think our service superiority had a lot to do with that.

Your next question comes from Justin Yagerman – Wachovia Justin Yagerman – Wachovia: At Freight are there any LTL customers that are coming to you guys right now making contingency plans for large carrier bankruptcies? Are you picking up market share from weaker capitalized players as customers are scared about financial health of some of their carriers out there right now?

We’ve been taking market share for quite some time and continue to do so in both our regional network and our national network. Obviously in the national network we are new to the long haul party with an improved value proposition we just had better service than everybody else. We’d been growing market share on that value proposition. I would tell you recently we’ve had an awful lot of customers come to us concerned about the future especially in the long haul sector. I think we picked up quite a bit of market share because people are nervous about what’s going on in the market. I think that’s also occurring in the regional market which is why we continue to grow market share there as well. I think both things are working in our favor. As you know, the LTL business is a pretty fragmented business, we have lots of competitors and I think its highly likely that capacity will come out of this industry because as I said before this industry has been under pressure for two years now. If that happens I think we’re well positioned to help customers out and between the service that we provided and the brand of FedEx I think we’ve positioned ourselves to be the first call made when somebody gets concerned about supply chain disruptions. Justin Yagerman – Wachovia: Can you give us what the oil estimate is that’s in for crude as a price per barrel that’s in your current guidance? Along those lines you guys have been on the forefront of giving discounts on fuel surcharges in a few of your divisions is there any thought given the lower fuel environment that we’re in currently and the challenging yield environment that we’re in currently to potentially taking back some of those discounts and being more market rate in terms of where you are on fuel surcharges competitively.

I did mention in my opening comments one of the things that we’re looking at is the elasticity if there is any at Domestic Express for these rapidly declining fuel surcharges which right now are going to be at most 2% in February. I noticed oil is trading at $38 and change at the moment. We have a higher number than that in our outlook but it’s not enough to make a material difference at the moment. As far as pricing goes, believe me, its very complex, it’s very fungible and since it’s so hard I’m going to let Mike answer it.

Let me state on the front end that our sales team has done a wonderful job in managing the fuel surcharge and I’m very proud of their efforts in that regard. They’ve been very disciplined in their approach and we have an extremely high attainment rate of the fuel surcharge. Having said that, there are some instances in dealing with some customers where it’s in FedEx’s benefit to discount the base rate versus the fuel surcharge and vice versa so we look at every one of those to ensure what is in the best interest of FedEx Corporation long term. Our attainment rate of the fuel surcharge is quite high so we’ve done a very good job in that regard.

Your next question comes from Adam Longson – Morgan Stanley Adam Longson – Morgan Stanley: Can you give us a sense of where capacity utilization sits now in the Domestic air network and how much you could really rationalize out of that without affecting service?

We’re pulling down capacity in the United States; we’re rationalizing our capacity to our volumes here in the United States. Of course have an ability to quickly move the network back up if we needed to. We’re watching it carefully; we’re adjusting our costs with our revenue. Of course the wild card in it is when International pops back up into our US networks again. We’re managing it very carefully.

We’ve got plenty of room over Christmas if you need to buy those last second gifts. Adam Longson – Morgan Stanley: As strange as this sounds are there any assets out there that are now much cheaper to acquire that you once decided against maybe acquiring for price reasons?

Let me reiterate what I said before Alan took over, we have a very strong balance sheet and when times are bad they’re always great opportunities that come up. As I mentioned we look at this to some degree as a huge opportunity. I can’t think of anything right off the top of my head that I’d be willing to talk to you about. We have the balance sheet to do whatever were to arise. You’re question did bring something into mind that I don’t think that people have quite appreciated about FedEx and hopefully it’s being demonstrated now. Over many, many years we have built a system which can flex both ways. Part of the way we’ve done that is to have a huge part of our compensation certainly at the management level to be variable in nature. We clearly have personally experienced that to the benefit of the corporation and I said in my remarks that’s as it should be. Our personnel systems out in the field going back to Art Hatfield’s comments in all of our operating companies allow us to flex up and down. Sometimes not quite as fast as we would like on the down side but we certainly can flex up on the up side with no risk to service. As I said in my remarks and Alan mentioned in his that’s something that we would not put at risk. We’re running at the highest service levels we ever have and intend to improve them even further. The other thing is we’ve managed our asset structure and our network design which allows us to flex things. In our air fleet, for instance, we buy some new airplanes, we buy some used airplanes. We plan to have airplanes that are in the fleet that are fully depreciated or nearly fully depreciated so that we can flex them and that’s what Dave is doing in his operation right now. We can go one way or another we have lost of cost labor still to come if need them as Alan mentioned but its because we built them in over a long period of time. Hopefully people are recognizing that now. I’m very proud of the way we’ve built up that capability and again worked so hard to build a strong balance sheet which makes these troubling times to be sure, as was mentioned a moment ago an opportunity as well.

Your next question comes from Gary Chase – Barclays Capital Gary Chase – Barclays Capital: I wondering if you could maybe give us a sense is there any way to size what kind of volume were you expecting when you sized the network for this quarter? You noted the deceleration month over month and obviously we can see the numbers quarter over quarter. What level were you prepared for and how much did volume disappoint you factually in the fiscal second quarter?

I don’t know if it was disappointing. We’re in the same boat as everyone else with the weakening economy. As we’ve said, we are taking market share even in the declining market across the board. We’ve got some great stories. I think the Ground numbers are terrific; SmartPost is growing unbelievably and is an unbelievable service. In that regard I don’t know that we’re disappointed. What we’re doing is comparing as all great companies do to come out on the other side stronger and better and more nimble competitor than we were going in. While we temporarily parked a few more airplanes and deferred some CapEx and reduced hours and all those kinds of things it’s more of that than we otherwise would have. We’ll have to see how we come out in the first couple of weeks of January as DHL completely shuts down their operation and whether some of the stimulus things in Washington start to take hold with 0% funds rate and all that to see where we are. As I said, we did hit our range that we gave you at the end of the first quarter but it was because we had a large benefit from fuel that offset the decline that we saw in our revenue. Gary Chase – Barclays Capital: Given a new volume reality you’ve announced the new round of cost reductions so you’re saying that you’re taking additional action because volumes have changed. Is it safe to say that when you were first looking and planning your network for the fiscal second quarter you were anticipating a volume level that was more consistent with what you had in the fiscal first?

We were anticipating we were going to have some year over year declines at Express but not to the extent that we had. As Fred mentioned we are able to flex down we just can’t catch up in the immediate quarter and very near term. An important point that Fred made is that some of these actions that we’re taking here on the compensation front across the board are to preserve jobs and keep our service levels high so that we have those well trained people in place and when this turns we’re in a better position than everybody else. Gary Chase – Barclays Capital: Can I ask you to quickly clarify you say $200 million in savings this year, $600 million next in 2010. Is the $600 million incremental to the $200 million, in other words is it an $800 million run rate is it $600 million?

The $600 million would be more of annualized number the $200 million is basically the impact to the second half. The $600 million is an incremental to the well over $1 billion that we’ve already reduced. On the downside we have other levers we can pull. On the upside I think we’re really well positioned if we get one.

Your next question comes from Helane Becker – Jesup & Lamont Helane Becker – Jesup & Lamont: Your pension contribution can you address how the changes you’re making and the cost reductions and the changes in the market will affect contributions for fiscal ’09 calendar year?

We have, as you know, on May 31 measurement date on the balance sheet. We’ll just have to see what market conditions are at that point in terms of what the discount rate for our liabilities would be, what the market value of assets will be and any other changes that we may or may not make to the plan. That will then determine what our contributions and expense are in fiscal ’10. We made almost $0.5 billion of contributions this year and anticipate no further contributions to the plan. Remind everybody that we are a very young company and the demand on our pension plan on a monthly basis from a cash flow standpoint is basically immaterial to the size of the plan. It’s strongly funded from that standpoint. Helane Becker – Jesup & Lamont: Are there any non-cash charges you would have to take or that you’ll talk about in the second quarter 10-Q as a result of the reductions you’re making, the $1 billion?

We are having no impairment or non-cash charges in the second quarter.

That does conclude our Q&A session for today. I’ll turn the call back over to you Mr. Foster.

Thank you very much for your participation on the FedEx second quarter earnings conference call. Please feel free to call anyone in the Investor Relations team if you have additional questions.

That does conclude today’s conference thank you for your participation and have a wonderful day you may now disconnect.