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 Art Hatfield – Morgan Keegan William Greene – Morgan Stanley David Roth – Stifel Nicolaus Gary Chase – Lehman Brothers John Langenfeld – Robert W. Baird & Co. Ken Hoexter – Merrill Lynch Tom Wadewitz – JP Morgan Analyst for Edward Wolfe – Bear Stearns Donald Broughton – Avondale Partners David Campbell – Thomas, Davis & Company Jason Seidle – Credit Suisse First Boston

Good day everyone and welcome to the FedEx Corporation third quarter earnings conference call. Today’s conference is being recorded. At this time I’d like to turn the conference over to Mr. Mickey Foster, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to the FedEx Corporation third quarter earnings conference call. The earnings release and 25 page stat book are on our website atwww.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 Q&A 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 in New York so please save Thursday, October 2, 2008 on your calendar. We will have more details about the meeting for you the next few months. I want to remind all listeners that FedEx Corporation desires to take advantage of the Safe Harbor provisions of the Private 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 release and filings with the SEC. To the extent we’ve disclosed any non-GAAP financial measures on this call, please refer to the investor relations portion of our website at www.FedEx.com for a reconciliation for such measures for 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, Vice President Market Development and Corporate Communications, Chris Richards, Executive Vice President, General Counsel and Secretary, Rob Carter, Executive Vice President FedEx Information Services & CIO, Dave Bronczek, President and CEO of FedEx Express, Dave Rebholz, President & 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 Q&A. Frederick W. Smith: Good morning everyone and thank you for joining our earnings conference call for the third quarter of fiscal year 2008. Like many companies FedEx is facing a challenging economic environment that includes persistently high oil prices, sluggish US growth and significant concerns in the credit markets. The FedEx diversified portfolio of transportation solutions and our wide global footprint however give us flexibility to adapt to shifting economic conditions. We believe in fact, there are significant opportunities to add new customers who appreciate the global FedEx value proposition. Moral among our team members is strong and our service levels are very high. We are concerned by the steep relentless rise in oil prices and we see little justification based on near term supply and demand conditions to support these prices. There’s no doubt speculative trading has driven prices higher overriding market principles and adversely affecting consumer and corporate spending. Our chief economist [Gene Wang] calculates that increase in retail gasoline costs since mid October has resulted in consumers now paying over $1 billion more per week for gasoline for example than they would have at last October’s prices. At FedEx we believe persistently higher fuel prices and the related effects of our fuel surcharges are reducing demand on a macroeconomic basis and leading some customers to shift to less expensive services. But fortunately, we have a broad portfolio and are able to offer our customers those types of alternatives. As many of you know we’ve been very active over the last couple of years in trying to get the congress and the administration to come up with a more forward thinking energy policy and we were gratified with the first step taken last December with the bill that was passed which hopefully will have some effects in the months and years to come in addressing this problem. Now, at FedEx in particular we will continue to invest in more fuel efficient aircraft, vehicles and facilities and we’ll accelerate the retirement of equipment when we can achieve a good ROI for doing so. As we survey the current economic landscape we expect limited earnings growth in FY09 given the current outlook for macroeconomic conditions and fuel prices. There is clearly stress in the housing and financial sectors and they create a drag on the overall US economy as well as the fuel prices. In calendar year 2008 we expect US GDP to grow more slowly than in 2007. Our United States revenue growth rates will continue to be restrained across all segments for the remainder of 2008 because of this slower demand for US domestic express package services and the slow LTL freight market in general although, we are doing very well there as Doug Duncan will talk about later. We continue to take revenue share in the US express domestic package market for example. We expect the international economy will continue to expand overall albeit at a lower rate and this will be fueled by the emerging markets. During the third quarter our average daily package volume grew 5% year-over-year overall boosted by continued strong increase in FedEx international priority shipments, international domestic express shipments and FedEx ground shipments. Now, the wild card going forward remains the price of fuel. We are in uncharted territory when oil consistently sells for more than $100 a barrel. Risks remain in elevated oil prices, credit concerns and a softening labor market. Despite these short term issues we remain optimistic about long term growth prospects as cyclical swings give way to more historic stable macroeconomic trends and the US and world economies adjust to these very high fuel prices as they undoubtedly will. I, for instance, have lived through this now for the fourth time in 73, in 79, in 1990 and now in this fuel run up. I would point out however that based on my rough calculations this is probably the largest transfer of wealth in the history of the world $2.5 trillion dollars from the OECD oil importing countries to the oil producing countries since the price of fuel began to run up in 2002. Thanks to our strategic investments in key markets over the years we are confident FedEx is well positioned to take advantage of long term economic growth trends and to deliver better results in the long return. One example of the strategic investment now paying off for FedEx is our FedEx National LTL, based on the acquisition we made over a year ago. We reengineered that network and it now provides a high level of service that quite frankly has never been seen in that industry segment. As we manage our cost enterprise wide we will look closely at ways to realign our expenses with revenues. We will continue to limit discretionary spending, reduce and delay capital expenditures and hold the line on adding staff. We will continue to invest in long term strategic projects like the 777 and 757 programs that we believe will benefit our share owners and our customers. Another example of that long term orientation is our significant expansion into the Chinese domestic market which began on May 28th last year. I’d like to share with you several accolades we received since we last spoke. Earlier this month and for the seventh consecutive year Fortune Magazine named FedEx to its top 10 list of America’s most admired companies and the world’s most admired companies. In January FedEx was recognized as among the 100 best companies to work for, a distinction that has been awarded to FedEx in 10 of the last 11 years. In addition, we were also named a top 50 employer by Equal Opportunity Magazine, Info World’s top 100 technology innovators and the number one and most admired company for human resources by Human Resource Executive Magazine. Now, such recognition is gratifying but it’s important from a business perspective as well because this trust and respect that the public has for FedEx helps us recruit and train the very best people, to gain new customers and to expand more easily in communities around the world. In April we marked 35 years of continuing operations and it’s gratifying to realize that we built such a world class reputation in a relative short period of time. From the earliest days of this company we made a comment to put a lot of emphasis on our folks and in turn our teammates would work each day to make every FedEx experience outstanding. That’s the FedEx purple promise. As we move forward in these challenging times, we’re committed to keeping a sharp eye on our cost and capital expenditures across all segments. We will continue to maintain and in fact, improve our very high levels of service to our customers. We intend to leverage our unmatched portfolio of services to market and sell the right service and the right network at the right price. We intend to roll out productive, innovative information technology applications and to take good care of our people. Now, let me turn the microphone over to Alan Graf, our chief financial officer. Alan B. Graf, Jr. : Good morning everyone. Today we reported earnings of $1.26 per share for the third quarter ended February 29th compared to $1.35 per share a year ago in the face of a very challenging economic environment as Fred discussed. I should point out that last year’s earnings per share included an $0.08 tax rate benefit so excluding that we were essentially flat year-over-year. Revenue growth up 10% for the third quarter 2008 was primarily attributable to continued growth in international services at FedEx Express, growth at FedEx Ground and increase in FedEx Express US domestic package yields. Higher fuel surcharges continue to be the key driver of increased yields in our transportation segments. Operating income was flat due to the continued impact of substantially higher fuel prices and the weak US economy which pressured volume and yield growth at FedEx Express and FedEx Freight. For the company fuel expense increased 42% in this third quarter versus the prior year. Additionally, higher expense associated with advertising and promotion and strategic technology initiatives as well as expansion in service improvement initiatives at FedEx Kinkos and expansion of our domestic express services in China also had a negative impact on our results. While FedEx Kinkos continues to be a significant source of profitable revenue for the FedEx Express and Ground divisions, its core and print business continues to be a drag. Lower variable incentive compensation combined with cost of containment activities partially mitigated the negative impact of these factors. Now, let’s take a look at our segments and we’ll start with Express. FedEx Express revenues increased 11% in the third quarter primarily due to increases in fuel surcharges, the impact of favorable exchange rates and international priority volume growth of 6%. US domestic package volumes decreased 2% during the third quarter of 2008 as the ongoing weak US economy continued to negatively impact demand for these services. US domestic yield increases up 6% were primarily due to higher fuel surcharges and general rate increases partially offset by lower package weights. IP yield increased 10% due to favorable exchange rates, higher fuel surcharges and increases in package weights partially offset by decreases in the average rate per pound. FedEx Express operating results were negatively impacted by the continued softness in the US economy, increased intercompany charges and continued investments in our domestic express service in China. Net fuel costs versus last year’s third quarter, one additional operating day and favorable exchange rates partially mitigate the impact of these factors on our operating results versus last year. Turning to Ground, revenues increased 13% during the third quarter of 2008 due to continued volume and yield growth. Average daily volume at FedEx Ground increased 7% and the continued growth of our FedEx Home Delivery service was outstanding where volume grew 15% versus last year. Operating income and margins were lower due to increased intercompany charges from the FedEx services segment and costs to enhance and defend the independent contractor model partially offset by the benefit from one additional operating day. Fuel cost increased 96% during the third quarter of 2008 and purchase transportation costs increased as a result of higher rates paid to our independent contractors and their higher fuel costs. Intercompany charges increased during the third quarter again, primarily due to increased net operating cost at FedEx Kinkos associated with reduced copy and print revenues, store expansion and service improvement activities. Let’s take a look at our freight segment. Revenues increased 5% during the third quarter due to higher less than truckload yields. Although average daily LTL shipments decreased 3% as demand for these services continues to be restrained by the weak US economy, we are growing market share in both regional and national sectors. FedEx Freight segment operating income and operating margin decreased primarily due to the net impact of higher fuel costs, the fuel surcharge rate reduction and fewer long haul LTL shipments. Now, let’s look at our guidance. As Fred mentioned, we expect our revenue growth rates to continue to be restrained across all segments for the remainder of 2008. For example at Express, our fuel surcharges are indexed to the spot price of jet fuel and for the month of April the fuel surcharge will be 20%. Based on current prices with the exception of the last two days, that could increase in May and we are in areas of very high elasticity. FedEx expects to earn between $1.60 and $1.80 per share in the fourth quarter of 2008 compared to $1.96 a year ago. Last year’s fourth quarter results did include a $0.06 per share benefit with a settlement with Airbus related to the A380 order cancellation. I must say that I don’t have as much confidence in this range as I normally do due to oil price volatility. The volatility in oil prices has been so high that it could cause us to miss this range on either side depending on how fuel prices react for the rest of 2008. This outlook assumes no additional increases to the current fuel price environment and no further weakening in the economy. Looking ahead to our fiscal 2009 and based on the current economic environment, we’re expecting a continuation of fourth quarter trend which would result in limited earnings growth next year. We are in the middle of our fiscal 2009 business planning process now so I cannot give you any clearer pictures on the future than that until we meet again in June. We expect capital expenditures in 2008 of approximately $3 billion, very similar to what we spent in 2007. Much of the anticipated increase is on spending to support long term volume growth including expanded or additional facilities and aircraft. We also plan to continue to invest in our technology capabilities to include productivity and service levels. Because of the substantial lead time associated with the manufacture and modification of aircraft we must plan our aircraft orders and modifications well in advance of the expected delivery of the aircraft. While we also pursue market opportunities to purchase aircraft when they become available, we must make commitments regarding our airlift requirements years before the aircraft are actually needed. We are scrutinizing all capital expenses initiatives to realign with current business volumes. FedEx Kinkos did open 252 centers this fiscal year-to-date as part of its plan to open 300 new centers this year. Given the weak economic outlook Kinkos will significantly slow its rate of expansion in fiscal 2009 to about 70 new locations. To answer a question that I anticipate being asked with both goodwill and recorded intangible assets at FedEx Kinkos the recoverability of these amounts is dependent on execution of key initiatives related to revenue growth, location expansion and improved profitability. We will perform our annual impairment testing of these assets in the fourth quarter of 2008. We will continue to invest in our long term strategic projects focused on expanding our global networks and broadening our service offering to position us for future growth once the economy begins a recovery process. However, if the economy downturn continues or becomes more pronounced we will take additional actions to control costs and capital expenditures. With that operator, the team is now ready to answer questions.

(Operator Instructions) We’ll go first to John Barnes, BB&T Capital Markets. John Barnes – BB&T Capital Markets: Alan, could you talk a little about when you’re talking about making these changes to the cap ex budget, specifically where are you talking about pulling in? Is it aircraft? I know you talked about Kinkos and slowing the growth there but is there any more specifics you can provide there? Alan B. Graf, Jr. : We’ll, let me talk about aircraft first. With fuel prices where they are and who knows where they’re going to go the fact of the matter is I wish we could get our 757s even faster and retire our fuel inefficient 727s much more quickly. While that would require more cap ex in the near term, those are very high ROI projects that will have significant long term benefits to us. The utilization is more or less 50% more efficient per unit carried for the 757. So, that’s a significant reduction in fuel costs right there on our cost per package. We look at where we thought we would be on our capital plans as late into the calendar in 2007, we’re seeing significant reductions in the demand for our services from what we thought they would be and therefore when you look at dock doors for example at freight, or expansions of the domestic express capabilities they are not going to be needed as soon as we need them so we’re looking to push those out to better align our cap ex with our long term growth opportunities and try and time those better. So, we’ll have a lot of very interesting decisions to make over the next couple of months and we’ll have more to say about that in June. John Barnes – BB&T Capital Markets: Okay so if I hear you right, no real change to the equipment spending but a little bit of a pull back on more infrastructure spending? Alan B. Graf, Jr. : Right. We’ll try to better match our capabilities with what we think the market demands are going to be. John Barnes – BB&T Capital Markets: Right. Then, my follow up question would be on the acquisition front, obviously the last couple of years you guys have been pretty inquisitive, Watkins and the like, what are you seeing right now? Does the current economic backdrop give you pause there and would you just rather hunker down an integrate what you have and kind of complete the rebranding before getting back there? Or, does this kind of environment create unique buying opportunities, better valuations? And, would you still have an appetite for acquisitions even with the current backdrop? Alan B. Graf, Jr. : Well, I think we’re going to continue to be aggressive over the long term in expanding our service capabilities and filling the gaps that our customers tell us that we have in some of our service offerings and it will be very opportunistic. But, we have a very sharp pencil in terms of payback and ROI on those investments and there’s nothing that we have to do today. We think we’re very well positioned and we think we have these networks as tight as we can get them from a cost and capability standpoint versus what we see as current demand and we’ll continue to balance those things. It’s just going to depend on how things proceed and what happens in the environment. But we will remain aggressive and we will remain opportunistic.

We’ll go next to Art Hatfield with Morgan Keegan. Art Hatfield – Morgan Keegan: Alan, historically you guys have always talked about keying off of industrial production growth with regards to your outlook. That fell off in February, is that something that you’re really keen on with regards to how you’re speaking about 2009 at this preliminary point? T. Michael Glenn : As Fred said, we do expect GDP growth to be lower in calendar year 2008 than in 2007 with the news on industrial production being negative in February just coming out in the last couple of days. I think it’s a big premature to determine what’s the long term impact of that. Our volumes in the quarter were relatively stable although below where we would like to see them so we didn’t see any immediate impact of that throughout the quarter and specifically in the month of February but, it’s premature to see what kind of long term impact that would be. We are planning for lower GDP growth in calendar 2008 than 2007. Art Hatfield – Morgan Keegan: Can you give us at this point in time kind of where that falls out from your perspective? T. Michael Glenn : GDP numbers? Art Hatfield – Morgan Keegan: Yeah. T. Michael Glenn : Well, I think it would be kind of a wild card to through that out there. It’s going to be at least a couple of three tenths of a point, 300 basis points less though, I would say.

We’ll go next to William Greene with Morgan Stanley. William Greene – Morgan Stanley: Alan, I’m wondering if you can tell us how much the China investment hurt Express’ margins in the quarter? Alan B. Graf, Jr. : Well, I can tell you that they were a drag. We’re not going to start breaking out individual countries and individual services profitability but we still have a tremendous amount of long term confidence in what we’re doing in China. And of course, our overall – I was speaking about the domestic business in China, of course we have a very lucrative business to and from China that we’ve had for quite some time. So, we’re in great position overall in China. But, we are building a domestic express network and we are having a little bit slower of a revenue growth than we had original thought, again that’s economically driven. But, we have a great service over there and it will be less of a drag going forward. William Greene – Morgan Stanley: Mike, you mentioned that you’re not so confident on the economy here but you heard UPS’ comments last week. Can you compare your volumes here in March versus what they were suggesting that it’s down sort of the last six weeks? T. Michael Glenn : Well, let me just say again, our volume is coming out of December. Our peak season have been relatively stable and from that perspective we’re pleased with that. Although again, they’re below where we would like to see them due to the overall weakness in the economy. But, they’ve been relatively stable on a month-to-month basis. Alan B. Graf, Jr. : He’s talking about Express. Obviously, we’re continuing to grow at ground and as I mentioned our Home Delivery service which is just outstanding is having terrific growth at 15% right now. William Greene – Morgan Stanley: Okay. Just one last question, on the multi route versus single route drivers, do you have a sense for your thinking for when you’ll think about whether that should be applied outside of California, sort of all throughout the network? Christine P. Richards : We’ve been looking at options with respect to our independent contractor model and ways to improve it and to continue to provide outstanding service to our customers for years. We’ll be continuing to do that. We’ve been very pleased with the results of our California transition and have achieved overwhelming acceptance from the single route contractors in their move to multi route contractors or in accepting positions with multi route contractors.

We’ll go next to David Roth with Stifel Nicolaus. David Roth – Stifel Nicolaus: I wanted to ask about the FedEx Ground margins for a second. From your 98 to 2000 they were around 8 to 10% per year then they got hurt in the recession 2001 but, in 2002 to 2007 they were 11% to 14% and I thought we were looking at a new trend but now they’re back below 10%. So, with the enhanced independent contractor expense in place do you expect longer term for them to trend somewhere in between those two growth ranges? Or, where do you expect the Ground margins to be going forward? David F. Rebholz : If you look at the current year we have certainly made investments but there are a number of factors both nominal one-time costs associated with this ongoing transition but there’s also the economic implications of productivity on the core numbers. When you get into piece per stops and the economics associated with Home Delivery. We have every confidence that with our continued growth over the next two to three timeline horizon that our margins will improve as the function of productivity. There are many beneficial offsets that come with growth. We’ve had a convergence of a slowing in our historical rate while we are very proud of the 13 to 14% in Home and in our smart post volumes as well. The fact of the matter is that, that continued growth rate will allow us to offset many of the cost factors that we’re experiencing right now. David Roth – Stifel Nicolaus: Okay. And then you mentioned smart post, with the change in the postal rates announced recently and more importantly the way they compete on the package size, how does that impact, if at all, your smart post operations? David F. Rebholz : In two factors, we think there is both an economic upside but more importantly, an opportunity to expand the growth of our account base.

We’ll go next to Gary Chase, Lehman Brothers. Gary Chase – Lehman Brothers: Two questions on IP, the first is just about the volume outlook there. Obviously, the numbers have stayed pretty strong in terms of volume. You noted, I think it was Alan or Mike that noted domestic China wasn’t performing as well as you at least initially thought it was. Are there any signs that we should expect the IP volume growth rates to start to decline here? David J. Bronczek : No, actually the volumes continue to be strong as you pointed out, 6% this quarter. Overall revenue, as Alan pointed out are up to 18.5% which I should point out is the highest growth rate IP has had since 05. So, we’re optimistic, things on the international intercontinental front continue to do exceedingly well around every region of the world. Frederick W. Smith: It’s probably pretty logical that the elasticity of a very high fuel surcharge is not as high with an international priority package as it is with a domestic express because the alternatives are significantly slower for high value goods as opposed to the alternatives in the United States, I think that’s one. Secondarily, the weak dollar has had a very simulated impact on exports from the US which is part of what’s saving the economy right now and also helping drive our results. Gary Chase – Lehman Brothers: Actually, that was the follow up I wanted to ask. Can you just give us a sense of the magnitude? You noted part of the yield improvement in IP is tied to currency. What sort of an organic yield growth net of currency? Frederick W. Smith: Well, currency was approximately half of the yield increase in IP and so that obviously had a pretty simulative impact but again, the US outbound volume is significantly stronger than the domestic express volume for the reasons that I mentioned and we expect that to continue at least in the next couple of quarters.

We’ll go next to John Langenfeld with Baird. John Langenfeld – Robert W. Baird & Co.: Can you talk – if you look at the ground margin contraction, is the majority of that related to the conversion and legal expenses? And, when should that start to taper off? Alan B. Graf, Jr. : Let me just say that the answer to that question is no. There were a lot of significant impacts. I took the extra time to talk about the services charge backs which had a bigger impact on Ground on a margin basis than they did at Express. So, as we improve Kinkos profitability and better tightly manage our services expenses that drag will start to disappear and hopefully become a positive. In fact, as we go out the next 12 to 18 months, some of the one-time costs associated with what we’re doing to enhance the model will go away and then the more permanent things that we’re doing, we will get paid back in the longer run with a significantly improved productivity and we’re very confident about that. Also, fuel had an impact on it this quarter as well. So, it was just a lot of things and the majority was not the contract enhancements. John Langenfeld – Robert W. Baird & Co.: Thanks for the color. And my follow up question, if I look at domestic express, maybe if you could just bring us back in history a little bit in the early 2000, I guess fiscal 02 we saw mid to upper single digit declines in volume and if I recall, I think a lot of that was due to kind of the initial mode shift to Ground. But, how much of that would be a realistic scenario if things got bad here? Meaning, if you look back at fiscal 02, how much of that do you think was just the initial mode shift versus the economy? Frederick W. Smith: Well, it’s difficult to say exactly because you don’t have full visibility in the customer decisions whether mode shift is caused by higher prices on fuel and fuel surcharges or the value proposition itself. Let me remind you that one of the things that we’ve been able to do is make tremendous investments in the Ground value proposition where now over 80% of those items are delivered in three days or less. Just less than 10 years ago we called that an express transaction. So, the portfolio that we’ve built and the value proposition that we’ve built at FedEx Ground gives customers tremendous choice in determining what’s in their best interest. Having said that, when you have fuel surcharges on express as high as 20%, clearly customers are going to rethink the best way for them to take advantages of the broad portfolio that we have. We do expect that if the fuel surcharges increase and get in the 20% range that more customers will rethink these decisions and either slow those down to afternoon, next afternoon delivery, two day delivery or perhaps moving it into the Ground or LTL network. But, it’s difficult to say exactly what percentage was driven by economic factors and what was driven by enhanced value proposition.

We’ll go next to Ken Hoexter with Merrill Lynch. Ken Hoexter – Merrill Lynch: Just a follow up on that if I may, the inelasticity I guess, we thought we’d see it when fuel hit $50 and then we thought we’d see it when fuel hit $70. Just wondering, are you actually seeing customers now start to pull back? And then to follow up on John’s question, do you think you see that upper single digit volume decline even with the IP down as you noted to these levels? Or, do you think it takes a much slower economic impact to get to those upper single digit declines? Frederick W. Smith: Well, let me remind you the upper single digit decline was John’s number not our number. What you’re saying whether we get to that now or not. Can you repeat the question? Ken Hoexter – Merrill Lynch: Just to start off was on the fuel, we thought we’d see some of this inelasticity when fuel hit $50 ten $70, those were the big numbers at the time. I’m just wondering what caused you to see that large of a swing right now? Or, are you seeing it because of fuel hitting $100? Frederick W. Smith: Well, clearly there’s more discussion in the market about the fuel surcharge. Having said that, one of the things that FedEx led was the implementation of a dynamic fuel surcharge for Express and Ground services which is now common in the markets where we compete. So, customers have full visibility in advance of what’s going to happen to the fuel surcharge and that helps in that regard for them to plan accordingly. Our job is to make sure that we assist customers in getting the traffic into the right network that’s going to meet their service requirements so there’s elasticity to higher fuel, there’s no question about that. And, we will feel the impact of that and have felt the impact of that on our domestic express services and we’ll feel the impact of that going forward. But, the good news for FedEx is we have alternatives to move that into the Ground network or slower mode of Express transportation or into the LTL network. Alan B. Graf, Jr. : Also historically, if you go back to 2001 and 2002, that was different kind of shock and the Ground capabilities were nowhere near what they are today. I mean we’ve speed of tens of thousands of lanes, we have perfect information, much better custodial control, Home Delivery service, all those additional really fantastic alternatives for Express that were not there in 2001 and 2002. So, we’re expecting to see a little more impact of this going forward if prices stay where they are and the economy stays where it is which is basically no growth. Ken Hoexter – Merrill Lynch: Alan, when you talk about 09 being relatively flat at this point based on – and I know you said there’s a huge swing factor based on fuel, can you tell us what is in that target as far as kind of whether it’s a volume or margin kind of impact on a year-over-year basis? Alan B. Graf, Jr. : What I’m telling you is that we have in our previously announced and continually discussed financial objectives we try to grow earnings per share at least 10% a year and try and target a 10 to 15% range. What I’m saying is that’s not possible with fuel at these prices and no economic growth because as good as we are going to be, as well as we’re going to manage the company, we just aren’t going to be able to do that. Now, if those things would change, and I think they will, maybe not in fiscal 09 but beyond, we are extremely well positioned. I mean, we are again running as lean as we have ever run with the highest productivity levels so we’re in the middle of a plan right now and obviously the crystal ball for everybody is very cloudy here. Frederick W. Smith: Let me mention one other thing here which is very important and that is that inventory levels, now the inventory stocking out there is at all time low levels. So, people with visibility they have supply chains these days, invented I might add by FedEx some years ago, are able to adjust to changing macroeconomic conditions. So, if you have some bit from these actions of the Fed and fuel prices go down and so forth, there’s a good news scenario out there too. But, the wild card, as I said in my opening remarks, is fuel. I’d also like to put some color on a couple of these comments here and I know most of the folks on the call are focused on what the next quarter is, or the next six months or so forth but, we’ve been saying this for years, the Express business in the United States, we have not looked at that as a growth business for over a decade. 2000, you’re talking about the meltdown of the dot coms, you’re talking about the real beginning of a lot of migration of the overnight envelop business and the more electronic modes. So, our capacity in FedEx Express, sorting capacity, vehicle capacity, aviation capacity even in the United States has been directed towards the movement of international traffic to and from the hubs and then on into the international system. Now, that’s a very good thing for us because most of the costs in express are transaction driven, they’re not yield or size driven. So, as those IP packages come through the formally domestic capacity at a $50, $60, $70 per unit level and displace a domestic unit which is migrated into our much faster Ground system, that is a very good thing for us. And, both Express and Ground absent the fuel price would see benefits in terms of margin and profitability. It’s just that simple. Also, in the international business and I think I ended the last call we had on this, what’s been going on for a long time and is going to continue for a long time is as the Internet continues to hook up millions of people who can now sell and source their goods with a common language, low cost medium of exchange with systems like our trade tools that make it very easy to cross borders, the traditional movement of goods by air is evolving into more of a small shipment door-to-door paradigm rather than into a consolidation type mode. It is that long term secular trend that continues to have IP growing even when you’ve got fuel prices of this level. Now, will that be 10%? Or 15%? Or 16%? I don’t know but I can tell you that those trends are very powerful. So, I always say this, you’ve got to look at the Express network as a global system and we’ve tried to the extent we can by putting this really outstanding Ground system in place to accommodate what the customers want and to use that capacity for international. I don’t know whether to this day whether that strategy has been as well understood as it should be.

We’ll go next to Tom Wadewitz, JP Morgan. Tom Wadewitz – JP Morgan: I wanted to ask you about the cost control, you said obviously things are a little weak and the outlook is challenging so it sound like you would ratchet up your focus on cost in maybe fourth quarter and into fiscal 09. Can you give us any sense of the magnitude of the opportunities? And then I guess within in the current quarter you mentioned the incentive comp was down and I wondered if you could give any sense of the magnitude of that impact? Was that $10 million? $50 million? Just kind of a ballpark numbers so we can think about it. Alan B. Graf, Jr. : Well, I don’t think it does us any good to go into specific magnitudes on those things, I don’t think it adds a lot of value. We have shock absorbers built in to our compensation plans. This company is a very much paper performance organization and we do well when the company does well and we don’t do so well when we’re in times like this. So, that shock absorber is working and we’ve reduced our annual incentive and long term incentive accruals accordingly. Having said that, the opportunities in a very big company like this to have immediate, quick impact are fairly high. We have a lot of smart people around there that all have a lot of really great ideas and all of them have ROIs. What we’re going to have to do is on a [inaudible] basis pick the ones with the best ROIs and put the rest of them off until we can find a better time to do them. All of which I think will add long term value to the company. So, we’ll have some tough decisions to make here but we’re going to make them. Tom Wadewitz – JP Morgan: So, let me come at it at a little bit of a different angle, if you have volumes in Express down 2%, something like that and let’s say fuel prices are at a high level but stabilize, can Express margins be flat because you do some good things on costs to offset the volume weakness? Or, is there so much leverage to volumes that it’s just tough to keep the margin flat with expense focus? Alan B. Graf, Jr. : All I can tell you is we just had a flat quarter year-over-year in that exact environment you just said. So, we’re doing it. Frederick W. Smith: I’d point out again what I said before, margins at Express even with flat to declining domestic express volume can increase and will increase absent the fuel run up because we’re trading the same expense base for a $60 door-to-door IP shipment for a $15 or $20 domestic business. So, again I’m not sure I’m getting across to you. You just asked the question, will margins go down because of domestic Express volumes going down and the point is as long as IP grows and domestic volumes stay flat and decline a little bit, that’s not a bad thing, that’s a good thing because it means we don’t have to increase our expenses and our margin goes up. What’s eating the margin up is obviously the cost of fuel. Does that clarify it a little bit for you?

We’ll go next to Edward Wolfe with Bear Stearns. Analyst for Edward Wolfe – Bear Stearns: A quick question on the Ground and Home Delivery contractor model, can you tell us the percentage of single work area drivers versus say multi work drivers and maybe how that looked a year ago or five years ago? Christine P. Richards : I can give you some sense that more than 50% of our routes are currently handled by multi area contractors. That has been growing steadily over the last few years. In California, we have stated our goal and plan by May 31st is to have 100% of the operation be with multi work area contractors so that has obviously contributed significantly to the growth this year. Analyst for Edward Wolfe – Bear Stearns: Right. But 50% of the routes, what percentage of the driver count? Christine P. Richards : It’s more helpful if you think about this really in terms of the route. The productivity benefits from a multi work approach are significant and it’s easier to understand if you look at it from a route point of view than the drivers. Analyst for Edward Wolfe – Bear Stearns: Okay. But no sense as to the average number of routes carried by your typical MWA? Christine P. Richards : We have multi work area drivers who have very large operations and we have some that are just a few routes so it varies widely.

We’ll go next to Donald Broughton with Avondale Partners. Donald Broughton – Avondale Partners: Once again we’ve had a quarterly conference call and Doug Duncan despite contributing 12% of the revenue hasn’t had a question so it’s his turn. I was looking at the release, you’ve got 3% negative volume and the stat books says 2.1% negative volume obviously a pretty tough comp last year. Can you give us some granularity, some color, whatever you want to call it on what was the growth pattern in regional versus national? Douglas G. Duncan : Well, we’re not going to break them out because we run these two networks together and they do share some resources. But, I can tell you this, all of the negative growth rates were in the month of December. January and February were positive growth rates for both the regional network and the national network. So, we really think with all the things that we’ve done we’ve got our legs under us now and have some good growth momentum going in both networks now. Donald Broughton – Avondale Partners: But Doug can you tell us at least did regional grow faster or shrink lower than national? Or, was it the other way around? Douglas G. Duncan : Obviously, we had more upside at the national network. We’re a small player in a big long haul sector and we’ve got a service product that isn’t even close to being touched by any competitors in that marketplace. So, our growth rates are and should continue to be much faster in that national network for several years to come. Donald Broughton – Avondale Partners: So, it’s possible that segment actually had positive year-over-year volume comps for the quarter? Douglas G. Duncan : Well, we’re not going to break it out but I’m telling you that we turned positive. All the negative was in December. January and February were positive and February was the most positive of all. So, we’re on a good growth curve here and we’re seeing those same trends going into March.

We’ll go next to David Campbell, Thomas Davis & Company. David Campbell – Thomas, Davis & Company: I wondered if you could help explain why Federal Express and other companies are reporting increases in domestic airfreight tonnage while at the same time reporting like in your case a decrease in small package business? Frederick W. Smith: I can’t say that we’ve quantified this but as you know, there have been for the domestic airfreight business there have been a number of secular developments. First, the domestic airline industry has moved almost completely away from any wide body equipment in the domestic market except a few transcontinental routes so there really isn’t any capacity in the underbellies to move things in the domestic air market in that mode anymore. Number two, there have been some withdrawals of people who were in the door-to-door airfreight sector. Then third, the FedEx both domestic door-to-door express freight and particularly our intercontinental door-to-door express freight are fantastic products, they’re able to deliver levels of service and reliability that customers have never seen. So, for that market which isn’t all that big a market, we have a very superior value proposition and then when you put it across our entire portfolio with our FedEx freight products, regional freight, national LTL and custom critical we’re able to have a freight portfolio that for the people that need expedited freight, we’ve got the answer for them. So, that’s why it’s growing. David Campbell – Thomas, Davis & Company: It’s a very good trend, it’s just surprising in such a supposedly weak economic environment. But, I’m very pleased to see it. In the fuel surcharge catch up in fiscal 09 assuming again, we don’t know but if fuel prices were to level out, wouldn’t that fuel surcharge catch up create earnings growth in 09? Alan B. Graf, Jr. : Well, you have to look at each quarter and dissect it year-over-year. And, it if levels out which that’s the one thing I can promise you it will not do in fiscal 09 which will be stable and therein lies the issue why Fred said it was the wildcard for us going forward.

We’ll go next to William Greene, Morgan Stanley. William Greene – Morgan Stanley: Just one quick follow up, Mike can you talk about the trends in B-to-B versus B-to-C? My assumption is your B-to-C package trends look positive and your B-to-B are probably down? But, I don’t know if that is in fact correct. Alan B. Graf, Jr. : Well obviously in the quarter December has a strong B-to-C period because of the holiday shipping season but in our Ground business in particular we’ve seen strong B-to-C growth and it’s been less distinguishable in the Express segment. William Greene – Morgan Stanley: The difference between the two you mean? Alan B. Graf, Jr. : Correct.

We’ll go next to Jason Seidl, Credit Suisse. Jason Seidle – Credit Suisse First Boston: A question for Doug, Doug can you talk about the differences in pricing in the LTL product between the regional and the national product? Douglas G. Duncan : Well clearly in our regional market this is a mature business and we’re trying to protect our market share in slow economic times. We have a premium service and a premium price value proposition that still 88% of those shipments are delivered next day or second day so that’s one value proposition so they yields have been pretty stable there. On the national side we’ve been pretty aggressive in trying to grow that business after getting past all the integration issues and that’s a little more competitive than the regional market but nothing I would call irrational at this point. Jason Seidle – Credit Suisse First Boston: Okay. Next question, looking at the international priority business still strong [inaudible] I know comments would be that we anticipate this still to grow because of the emerging markets but if the US does flow into a sort of full fledge recessionary period what could we see the international growth rate dip to even with the emerging markets growing? David J. Bronczek : We continue to grow in every region around the world including our US international outbound. We had excellent growth and foresee it being the case going forward. Latin America for example, Mexico into the United States, the trans border market, Canada as well. Europe and Asia continue to grow so we foresee the future for international to be positive in growing across the world. Frederick W. Smith: At the risk of being a broken record mention again that what is happening in the intercontinental market is the traditional airfreight business because of the increasing ease of use and reliability of the network a lot of that market is devolving into door-to-door express rather than into consolidations. And in fact, my guess is as the price of fuel goes up what it really makes shippers do when they examine their supply chain is to decide whether it needs to go door-to-door express or it needs to go on the water. It’s that big middle ground where people have been consolidating and holding small freight shipments which goes to David Campbell’s point, it’s not just packages it’s light freight too, it’s skidded light freight. That’s now going door-to-door through express network and that’s why we think that the business has excellent long term prospects. Now, as the macroeconomic issues flop around clearly, it affects that. But, there are long term secular trends going on in this business that we’ve been following for over 15 years now.

Having no further questions I’d like to turn the conference over to Mickey Foster for any additional or closing comments.

Thank you very much for your participation on our third quarter earnings conference call. Please feel free to call anyone on the IR team if you have any additional questions. Thanks again.

This does conclude today’s conference. Thank you for your participation. You may now disconnect.