Mickey Foster – Head, 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

Art Hatfield – Morgan Keegan Donald Broughton – Avondale Partners Peter Jacobs – Wells Fargo David Ross – Stifel Nicolaus Gary Chase – Lehman Brothers John Langenfeld – Robert W. Baird Tom Wadewitz – JP Morgan Ken Hoexter – Merrill Lynch Justin Yagerman – Wachovia Capital Markets William Greene – Morgan Stanley John Barnes – BB&T Capital Markets David Campbell – Thompson, Davis & Company Edward Wolfe – Wolfe Research

Welcome to the FedEx Corporation first quarter earnings conference call. (Operator Instructions) At this time I will turn the call over to Mickey Foster.

The earnings release and the 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 would like 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.

Thank you for joining our conference call highlighting FedEx’s financial performance during the first quarter of fiscal year ’09. As everyone now knows global economic conditions are challenging. FedEx is taking strong proactive actions to manage through this difficult cycle, however. We’re committed to implementing strategies that will improve profits by reducing expenses, enhancing the customer experience, gaining market share and ensuring the long term success of our company. As I recently shared with FedEx team members and share owners around the world, I’m confident we will weather the current storms successfully and emerge even stronger, just as we did in 1979, 1990, 1991, after the dot com meltdown of 2000 and after 9/11. FedEx has all the ingredients for profitable long term financial performance. We have a strong and sound business strategy. We have precise planning. We have outstanding execution and most important of all we have a great team committed to making every customer experience outstanding. We’re especially reminded of our team member’s dedication to serving our customers and those in need during the recent storms that struck the Southeastern United States. In close cooperation with the American Red Cross, a total of 80,000 family packs and food kits were sorted, packed by volunteers and loaded aboard two donated FedEx aircraft for special delivery. Eight skids of aid were airlifted to Memphis and trucked to Baton Rouge and Hattiesburg following Hurricane Gustav. I want to thank the team for this any many other outstanding efforts in response to the recent hurricanes. As FedEx faces today’s especially tough economic challenges we’ll continue to hold the line on costs across all segments. This includes lowering variable incentive compensation, controlling discretionary spending and limiting staff. We intend to continue to increase productivity through innovation and re-engineering. As one direct result for example, jet fuel consumption is down more than 5% for the quarter. We aim to continue to lower overhead costs and achieve greater efficiencies through more collaborative management. During the first fiscal quarter we were able to lower our capital spending forecast for fiscal 2009 by $400 million from about $3 billion to $2.6 billion. Should the economic downturn become more pronounced we stand ready to take additional actions to control costs. I want to emphasize, however, that we will not compromise our outstanding service levels or customer experience or take actions that will negatively impact our long term future. We, in this regard, will not sacrifice opportunities to make investments with high returns such as the substantially more fuel efficient Boeing 757 which are now entering our fleet and the Boeing 777 long range aircraft that we will begin to get next year. The 757 provides 25% more capacity per flight while improving fuel efficiency by 36% compared to the aircraft it replaces. Similarly the 777 trader provides greater payload, range capacity while using 18% less fuel than current long range aircraft in the FedEx International fleet. We’ll continue to invest in long term strategic projects that expand and improve our global network to better serve our customers. In this regard, since January FedEx Freight has cut transit times in more than 2,800 service lanes in the United States, extending its leadership in the next and second day LTL freight market. Also in calendar 2008 FedEx Ground has improved transit times by one or more days between more than 41,000 zip code payers. FedEx Ground provided the fastest ground service to more businesses in the United States. In October, FedEx Express will launch FedEx Express Nacional a domestic next business day service across Mexico, one of the fastest growing markets in the Express industry and a key part of FedEx International grown and profitability. This is the first FedEx domestic service in Latin America and follows recent domestic offering in China, India, and the United Kingdom. Earlier this month FedEx Express launched a new Airbus A310 flight to Vietnam to meet that countries increasing demand for reliable time definite express services. In addition, FedEx Express upgraded our next business day delivery service from Europe to major US East Coast cities. Customers who had two business day services now can reach more than 3,500 zip codes on the East Coast overnight from virtually anywhere in Western Europe. FedEx offers the broadest coverage for next day business service from Europe to the Eastern United States now. In short, we believe we have the people, the plan and the resolve that will put FedEx in an excellent position to take full advantage of global economic conditions as they improve. Now Alan Graf our Chief Financial Officer will make some comments.

Earlier this morning we reported earnings of $1.23 per share for the first quarter ended August 31, as we pre-announced last week compared to $1.58 per share a year ago. Our overall revenues increased 8% to $9.97 billion led by higher fuel surcharges, 4% higher FedEx Ground average daily volumes and 4% higher FedEx Freight average daily shipment. For the first quarter our results were negatively impacted by the continued weak US economy which is of course being affected by ongoing high fuel prices, a significant contraction in consumer spending and a very tough pricing environment. Looking at our segments and starting with Express, FedEx Express segment revenues increased 9% in the first quarter primarily due to yield increases driven by increases in fuel surcharges. These yield increases were partially offset by decreased volumes in US Domestic package and Freight services as the weak US economy and persistently higher fuel prices and the related impact on our fuel surcharges have reduced demand for these services and pressured based yields. The price per gallon of jet fuel in the first quarter fiscal ’09 increased 77% versus last years first quarter average. US Domestic Express yields increased 13% although base yields excluding the fuel surcharge increased less than 1%. Package volumes declined 5%. International Priority revenues increased 12% with yields up 14%. Fuel surcharge and exchange rate benefits provided 13 of the 14 percentage point increase in yield. International Priority volumes were flat due to a softening in all major regions of the global economy, most notably Asia/Pacific and US outbound. Cost containment activities combined with lower variable incentive compensation partially mitigated a negative impact of these factors on our operating results. Key cost containment activities during the quarter included reductions in flight and labor hours, reductions in fuel consumption and maintenance costs, freezes in hiring for most open positions. In addition, we continue to exercise stringent control over discretionary spending such as travel, entertainment and professional fees. FedEx Express will increase shipping rates by an average of 6.9% for US and US Export Services effective January 5, 2009. The rate increase will partially offset by adjusting the fuel price at which the fuel surcharge begins, reducing the fuel surcharge by two percentage points. Now turning to Ground, FedEx Ground segment revenues increased 9% during the first quarter due to yield and volume growth partially offset by one fewer operating day. Average daily volumes at FedEx Ground increased 4% due to the continued growth of our FedEx home delivery service and increased commercial business resulting with market share gains. FedEx Ground segment operating income was modestly higher as revenue growth and other operating expenses offset higher fuel prices in a competitive pricing environment. At Ground, fuel costs increased 118% primarily due to a significant increase in the average price per gallon of diesel fuel. Rent expense increased 19% due to higher spending on facilities associated with our continuing multi-year capacity expansion plan. Purchased transportation costs increased 13% as the result of higher rates paid to our independent contractors and increased fuel supplement costs. Ground continues to improve its already high service level and speed up significant numbers of lanes we continue to invest in the customer experience. Look at our Freight segment, FedEx Freight segment revenues increased 10% during the first quarter due to higher less than truckload yields and shipment growth again partially offset by one fewer operating day. Less than truckload yield increased 5% due to higher fuel surcharges despite the 25% rate reduction implemented in July 2007 and a very tough pricing environment base yields declined. Fuel costs at Freight increased 58% due to an increase in the average price per gallon of diesel fuel. During the first quarter average daily less than truckload shipments increased 4% resulting from market share gains despite the weak US economy and again a competitive pricing environment. FedEx Freight segment operating income and operating margin decreased due to the fuel surcharge rate reduction implemented in July 2007 and as I mentioned earlier higher purchased transportation costs. Now let’s discuss guidance for a moment, we expect our results throughout the remainder of fiscal 2009 to continue to be constrained as we expect no improvement in the US economy in the near term and a continued slow down in the global economy. We expect earnings to be $1.40 to $1.60 per diluted share in the second quarter compared to $1.54 a year ago. For the full year we are reaffirming our earnings estimate of $4.75 to $5.25 per diluted share which reflects weaker global macro economic conditions. Home price declines, lower construction starts, deteriorating credit market conditions and the lingering impact of Hurricane Ike will restrain the US economy and the rising US dollar until at least very recently may negatively impact exports. This guidance incorporates oil prices of approximately $95 per barrel and the related impact on fuel surcharges which of course are reducing demand for our services and adversely affecting base rates across the companies transportation segments. We will continue to have cost management initiatives in place across all segments including controlling discretionary spending and severely restricting staffing. CapEx has been reduced to $2.6 billion as Fred mentioned and we will continue to balance deferring capital while continuing to invest strategically in growing service lines, expanding our global networks and broadening our service offerings to position us for strong growth and better economic times. We will not compromise our outstanding service levels or take actions that negatively impact the customer experience in exchange for short term expense and capital reductions. Our balance sheet remains strong, we have plenty of liquidity and we will be cash flow positive for fiscal ’09. Now let me open the call to questions.

(Operator Instructions) Your first question comes from Art Hatfield – Morgan Keegan. Art Hatfield – Morgan Keegan: When we think about the global economic situation and I hear what you’re saying regarding guidance, are you guys saying that you’re seeing the US being more stable and then you’re seeing the rest of the world slow down as maybe a lag to where the US is now. If so, what kind of time lag have you seen in that slow down with the rest of the world? What would be your expectations if you even have any with regard to growth as the US comes out how far the rest of the world would lag behind the US?

About a year ago this time as I recall I gave an interview to the Financial Times and the focus of the interview was has the world disconnected from the US economy. At the time there was a theory out there that the growth in Euro land and Asia centered around China was no longer directly related to the United States to the extent that it had been. My response to that question was that that was nonsense that the rest of the world would definitely follow the United States if our economy went south. Of course I take no pride in the fact that the forecast I gave was correct. The world has slowed down particularly in Europe. Asia is still growing because of the emerging China economy, the Entra Asia market in particular. Of course we’re very happy that this December we opened up our major new Asia/Pacific hub in Guangzhou which we’re going to show all of you that can come to the Investor and Lenders Meeting. China still continues to grow but at a lower rate. The world is in the midst of a slow down which was led by the United States. We obviously have gone into a new realm on all these credit problems but people sometimes forget there’s the industrial economy and there’s the simple economy or the financial sector. The two while they’re higher related in many ways they also beat to a different drummer in many respects as well.

We actually have taken our GDP forecast on a quarter over quarter basis downward in the third calendar quarter of ’08 and the fourth calendar ’08 and are now looking at a GDP forecast for calendar ’09 of $1.9. We expect to see a similar economic forecast through calendar ’09. Certainly continued below trend economic activity as it relates to GDP here in the US and its difficult at this point to really see how the international economies are going to respond to that. As Alan mentioned we’re not expecting any increase in global economic activity in the near term we actually see more pressure there and certainly more of the same here in the US. Art Hatfield – Morgan Keegan: Is there anything outside of FedEx that you’re optimistic about?

I think the Redskins are going to do great this year.

Your next question comes from Donald Broughton – Avondale Partners. Donald Broughton – Avondale Partners: If you could lay out for me maybe your top three, top five, cost saving project and help us walk through how much they’re affecting margin and what the nominal dollar savings are and explain to us how you’re managing those so that you don’t inhibit your future growth prospects when the cycle does turn back in your favor.

I’m probably not the most popular guy inside FedEx Corporation these days but I can tell you that we have a great team of cost managers. All of our team mates have been educated on the situation where we are, high fuel prices. I noticed that oil is back over $100 this morning, weakening economic environment and we need to stay very focused on our service levels but also we need to stay very focused on our costs. We’ve got a lot of levers that we pulled; I think we’ve talked to you several times about our incentive compensation programs which have been very significantly curtailed. We are not replacing any staff at all unless it’s an operational or sales necessity. We are managing our hours and our flat hours down significantly, Fred mentioned 5% less fuel consumption year over year at Express. It’s completely across the board. I’m very proud of what we’ve been able to do. I think we’re doing very well in a very bad environment. We will continue to do that but there is no one thing, it is everything that we’re doing.

Your next question comes from Peter Jacobs – Wells Fargo. Peter Jacobs – Wells Fargo: Could you break out the International priority business growth in Asia? I’m trying to understand the dynamics globally when I look at the zero growth that you saw in that business but what particularly what were you seeing in Asia. Related to that could you talk about the competitive environment that you’re seeing in Asia and China now and how you put that in context with the growth rates that you’re seeing there.

In the Asia market of course the electronic business has been soft. I think that’s no surprise to anyone. I should put a little color around the fact that on the flat volume growth and obviously the yield growth that was mentioned before 12% we had one less operating day around the world. In China, because of how the days fell we had two less operating days. That coupled with the fact that we had two less days on top of that because of Typhoons there. That’s slowed down some of the growth there. The good news is on our Domestic Chinese front the volumes have been growing very nicely there along with the rest of the Domestic International businesses around the world. You have to put a little bit of that into context of what’s happening and the way the days have fallen this quarter for China. Don’t forget that the Olympics, the Para Olympics are going on now, of course. The Olympics at the end of the first quarter also slowed some of the shipping and some of the volume down.

The competitive situation in China really resembles the competitive situation on a global basis. Our two primary competitors UPS and DHL are very active as we are but we have a very differentiated value proposition with the number of flights in and out of China and the continued expansion of our Domestic service. We feel quite good about where we sit and the value proposition that we offer in the market but it is a competitive market. Peter Jacobs – Wells Fargo: If you had a normalized for the last days both from the Typhoon and the one or two less operating days if you had notionally adjust that what do you think your International Priority volume growth might have been? Are we talking still low single digits or do you think it could have been plus 5%?

There’s no question that we would have had volume growth higher than what we have shown. Probably low single digits would be correct. We had IP mix in there as well. We had some shifting of our volume to IPFS which you probably have seen grew 14%. Not unlike the United States people have mode shifted a little bit as well.

Your next question comes from David Ross – Stifel Nicolaus. David Ross – Stifel Nicolaus: A question on the Freight side, if you could talk a little bit about volume trends for the quarter. The other LTLs were saying that June was particularly and July was pretty good but that August fell off significantly. If you could talk about what you’re seeing on that side and how September has been to date.

Actually our volume if you look at our shipment growth June and August were very similar. July was unusually strong. To come out with 4% volume growth in a declining LTL market we’re pretty pleased with those volumes. September began to echo August but now with the softness due to the Hurricanes and the shut downs in Texas and Ohio it’s hard to get a good read on it at the moment. David Ross – Stifel Nicolaus: The shipment growth is very good, most of the other LTLs are also reporting increased average weight per shipment as maybe some truckload overflow freight has gone into their networks plus customers are downsizing multiple shipments into fewer shipments with larger weights. Are you seeing significant increase in average shipment size or is there other things like the haul is impacting your mix?

We don’t really divert our assets to truckload usage. We’re actually growing on our LTL market which is what the fleet is for. You won’t find the truckload mix inside of our company the way you do at some of the others. That 1% weight per shipment increase that we showed is a real increase in shipment size.

Your next question comes from Gary Chase – Lehman Brothers. Gary Chase – Lehman Brothers: I’m wondering if you could elaborate a little bit on you’ve been talking a bit about IP growth it was flat in the quarter. As you look forward and you think about the guidance should we be thinking that the thought process around volume there is similar, flattish results through the remainder of the year, do you think it will be down or back into positive territory looking forward?

I think Dave alluded to it a little bit. We’re frankly expecting very similar IP results on a year over year basis the next couple of quarters which is flat to perhaps down a bit. We will see some International Express Freight and International Priority Freight service and our distribution services probably take some of that as people down gauge a bit. We’ll be very close to flat or maybe down a bit but we still believe that because we have such an outstanding service that we won’t see anything like what we’ve seen in the Domestic Express. Gary Chase – Lehman Brothers: Historically you’ve talked to the growth in International and the incremental margins there it’s been one of the big stories behind the Express margin gains looking backward. How should we think about that in an environment where we’re flattish, how are you managing that? If it does turn a little bit negative should we think the incremental margin is just as powerful to the down side or can you mitigate it.

We can mitigate that, that’s in our outlook for the year. If it’s the next couple of quarters I’m talking about that’s a short term phenomenon. Over the long run it’s still the driver of our value proposition. We have by far the best networks out there and we’re going to continue to invest in them and expand them. We just put in the East Coast special which Dave can talk about a little bit which has been very high demand for. While we may see a little bit because of the economy here in the next couple quarters, in the long run it’s still going to be the driving factor for our value proposition.

We’re actually adding capacity where we think we have some incremental opportunities, the European late night sort back into the East Coast. We’re reviewing other opportunities there as well. Vietnam, Mexico, Canada we’re adding flights, upgrading flights into Canada as well. One of the things that Alan pointed out that I mentioned earlier is some of our traffic you would see in our IP volume growth has just shifted to our International economy and our IPFS service. We’re growing very healthy in both of those areas there. As soon as the economy turns a little bit around we’re expecting a nice bounce back there.

Your next question comes from John Langenfeld – Robert W. Baird. John Langenfeld – Robert W. Baird: On the fuel side are there any parts of the company where fuel is actually a negative outside of the demand, I’m thinking more on the expense side given how fast fuel surcharges come down or was it pretty much a positive across the board year over year?

The biggest factor is of course Express where we’re about 295 million gallons a quarter of jet fuel. It dwarfs fuel everywhere else. That was a positive year over year for us in the first quarter because of the decline towards the end of the first quarter. It will also be a positive assuming as I said fuel barrel prices stay the same here in the second quarter. In the long run it all evens out and so positive in the first and second quarter and then we’ll see about the second half. John Langenfeld – Robert W. Baird: On the pricing side, can you comment how that looks in the Domestic Express side and how you would compare that to maybe previous cycles?

If you look at the second calendar quarter year over year change in the average revenue per package for our primary competitor excluding the fuel surcharge you actually see a decline of approximately 5% to 6% in the Express segment and a slight increase of less than 1.5% on the Ground segment. This compares to FedEx fiscal Q1 year over year increase in average revenue per package again excluding the fuel surcharge of almost 1% in the Express segment and over 2% on the Ground segment. Even with the difference in timing it would appear that they’re taking a more aggressive pricing stance than FedEx. However, we continue to take volume and revenue market share in the Express and Ground segments and are confident that our revenue management strategy is working and certainly yielding the proper balance between volume and revenue growth so we’ll continue along that path.

Your next question comes from Tom Wadewitz – JP Morgan. Tom Wadewitz – JP Morgan: I wanted to ask you one question on the guidance then I have a follow up on margin side. I think the second quarter guidance looks a little better than what the street was expecting and you’re keeping the full year range do you think that the second quarter just maybe looks a little better due to the fuel benefit or do you think that there’s maybe some conservatism in your full year number and perhaps just related to lack of visibility on volumes.

Obviously I’ve missed three quarterly ranges in a row so my previous track record has been destroyed by the volatility of fuel and the economic environment changes which are happening so rapidly. I have less and less confidence over the very short term about these ranges. I’m still very positive about where I know we’re going to be in the long run. What we’re saying in the guidance is that we’re doing a little bit better in the first and second quarter because of the decline in fuel but we see a continuing weakening global economy. The fact is that we’ll probably see a little bit weaker overall revenue now than we did three months ago so that’s why we kept the year the same. We’ll see again when we talk again in three months about where everything is going because it’s very difficult to judge. We talk to a lot of our customers, they tell us what their plans are, and we feel pretty comfortable about the second quarter after that it’s a little hazy for us. Tom Wadewitz – JP Morgan: On the Ground margin the deterioration in the Ground margin was pretty moderate compared to pressure on the Ground margins it was a lot more significant the last few quarters. Is this a one time thing where you had less legal costs in the quarter or are the cost measures in Ground sustainable and we’d probably see a little better Ground performance the next couple quarter than we had seen the prior couple quarters?

Alan made a mention earlier that fuel certainly impacted us and frankly in a direct sense our surcharges did not cover our costs but its deminimus compared to Express. Having said that, purchased trans was a key driver for us and really when you look at purchased transportation between the volume increases, the rate we pay and the increased fuel associated with that purchased trans which is a function of growth is really the big highlight in the numbers. Associated with that are some of the costs associated with the expansion of our multi-work area or the rate we’re paying contractors which is now up to roughly 60% our multi-work area contracts. In terms of cost controls and other cost aspects we feel very confident and to your point about legal, the first quarter of last year had some unusual and significant legal expenses that we accrued and that did not occur in this quarter as we’re managing those costs as well. I’m fairly confident going forward on the cost containment it comes again back to this whole economic environment that we’re dealing with and the growth opportunities that may or may not exist.

Your next question comes from Ken Hoexter – Merrill Lynch. Ken Hoexter – Merrill Lynch: Can I get a clarification, you keep mentioning that if fuel stays where it is, what number did you use throw into those estimates, but my question really is on the Domestic International saw phenomenal strength, can you comment on is that just acquisition related or are you really seeing that level of growth in China and other places?

We factored in there for the second quarter a $95 per barrel price. It’s anybody’s guess where it’s going to be. Bouncing around again today as it always does. As far as our International Domestic business, yes they’re growing. China is improving a lot, it’s not as fast as we would like and the yields aren’t quite as good as we would like but it’s certainly improving although albeit a little slower rate. In FedEx UK our service levels are unbelievable, that team is doing a great job that was a great acquisition, we’re excited about that. That’s a very strong point for us. Ken Hoexter – Merrill Lynch: On price, do you find yourself in this environment using core price, it sounded like you said before if you ‘x’ out all the fuel pure pricing maybe in some of those categories would have been up 1%. Is there any area where you find you’re getting more aggressive on price? I remember that you used to say that we’d look to use it on IP we’ve gotten margin where we want we’re willing to use price more aggressively to get the volumes. In the down turn have you felt yourself moving toward that level yet?

As you look at International Priority the yields were up substantially and some of that was fuel surcharge but an awful lot of that was also exchange rate and base rates. That’s a terrific story. It’s a little tougher in the US on Ground and Domestic Express.

We certainly have a very disciplined revenue management process which involves input from the finance organization as well as the operating companies. Certainly when there’s an opportunity to benefit the companies bottom line we will take a more aggressive stance on individual opportunities as we’ve talked about in the past. We just have to look at those on case by case basis and again look at where it will benefit FedEx Corporation.

Your next question comes from Justin Yagerman – Wachovia Capital Markets. Justin Yagerman – Wachovia Capital Markets: I wanted to ask a question on the launch of FedEx Nacional in Mexico I thought that that was an interesting timing. Are you guys seeing more near sourcing opportunities that’s driving that decision to enter the Mexico market, are customers leading you there because manufacturing has gotten a little bit cheaper there with the transport costs of bringing things in from further away? Can you talk a little bit about that initiative and why the timing is now in that market?

You’re correct. We’re seeing a lot of companies asking us to consolidate their domestic shipping along with their cross border shipping. Juárez, Mexico into El Paso, Texas has been a spectacularly successful for us along with other border crossing from Mexico into the United States. There’s a very nice opportunity for us to continue to grow very much like Canada, in fact its growing faster than Canada at the moment. We would have probably gotten into this market a little bit earlier if we could have. The timing is just that this all worked out for us right now. We’re very optimistic for the Mexican market, bundling our opportunities there into the United States and Canada. Justin Yagerman – Wachovia Capital Markets: I’m curious as the rationale behind lowering the fuel surcharge on FedEx Express when looking at the rate increase was obviously hefty. I’d be curious to get a sense of what you guys think retention will be like on that rate increase and how much of your customer base it’s applied to. Also, given the volatility we’ve seen in fuel why you would take away some of the fuel surcharge recovery there; it’s something I was a little curious about in this environment.

The January 2009 Express rate increase announced today is consistent with our January 2008 rate increase and like last years partially offset by the 2% reduction in the fuel surcharge. When the fuel surcharge was put in place obviously average barrel prices were substantially lower than they are today so we think it’s important to over time reset that fuel surcharge more consistent with average barrel prices that we’re seeing in today’s environment. This is a trend that we have been following the last several years and anticipate continuing to do so in the future. Regarding what percentage of the business is actually affected by the rate increase. Over 75% of the Express revenue base will see the increase in the January timeframe with other customers being impacted throughout the year based upon contract anniversary dates and we have a very high retention rate for our rate increases at Express and Ground somewhere in the neighborhood of 70%.

Your next question comes from William Greene – Morgan Stanley. William Greene – Morgan Stanley: Can I ask you to just follow up a little bit on the pricing comment you just made, why are we being challenged on base rates now given what fuel has done if you have such high retention on big list rate increases?

You’re going to have to repeat the question I’m not sure I understood what you were… William Greene – Morgan Stanley: You just said that you have a strong history of pushing through these rate increases and a retention of roughly 70% and yet the base rate increases that have been referenced in the press release today are much lower and Alan talked about yield increases of more like 1% ‘x’ fuel surcharge. I’m not clear why you’re feeling pressure on base rates but you’ve got such high retention list rate increases?

You’ve got to look hard at our mix. When we talk about a 5% decline look hard at box and you’ll see some of that. We’re giving you overall yield numbers not individual ones. That’s part of it. Secondarily, Mike’s talking about historically, he’s not talking about the current environment that we’re in.

I think Alan’s points are right, the customer mix is an important issue when you’re seeing economic conditions like they are today you see a down trade from overnight to deferred, deferred to Ground and all of that has a big impact on the rate environment and the volume mix as well. All those factors come into play but we’ve been able to retain a high degree of the rate increase in the past. We’re comfortable with the amount of the rate increase that we’ve announced again partially offset by a 2% reduction in the fuel surcharge. William Greene – Morgan Stanley: If I look at the Express business and we think about how it evolves during an economic cycle do you think of it as leading or lagging? If we think about this down turn given what you’ve done on Ground and how much you’ve improved the service there is it possible that the rebound in Express would be more muted going forward?

It’s very difficult to project what the rebound is going to be. I clearly believe that some customers will see that Ground is a viable alternative for their supply chains going forward. It’s quite possible that we will not see the rebound that we’ve seen in years past. Our value proposition in the Domestic Express and Global Express market is outstanding and where customers need that type of service we feel comfortable we’ll see the positive impact when the economic situation improves. A lot of the volume impact has been related to a decline in documents in the financial markets and things of that nature so you really have to take that mix issue into consideration when looking at the business.

Your next question comes from John Barnes – BB&T Capital Markets. John Barnes – BB&T Capital Markets: I know you’ve cut your CapEx budget but as far as spending priority are you reallocating CapEx from Express to Ground or what projects are getting the highest priority?

Clearly as we said earlier International expansion at Express is getting very high priority as is the continued growth at Ground and Freight. We are growing those businesses and it’s a significant amount of packages and a significant amount of weight which requires holes and terminals and back doors and everything else. We’re putting it at the highest priority and the highest ROIs for the projects that we can see giving us the nearest term benefit. Having said that, about half our CapEx in fiscal ’09 is aircraft at Express as we mentioned many times the 757 and 777 and Fred had that in his opening comments are very important pieces of equipment for us going forward. We’re not going to back off of those any. We’re at $2.6 which is about 10% lower than last year even though volumes are not that much lower I think we’re doing very good of managing our CapEx. As I said, we’ll be cash flow positive this year. John Barnes – BB&T Capital Markets: On those planes, the 777s are you replacing existing fleet with those is there the risk if global demand keeps falling off could you get too much capacity in some of your International lanes in the short term or are you pulling older planes out as those come on?

The 777s will be International; they are not replacing any planes. International continues to grow. We’re confident that we’ll need all of those planes and looking to Boeing for more in the future. If there’s any airplanes that we’re looking at shorter term would be here in the United States that we would be parking, for example.

Your next question comes from David Campbell – Thompson, Davis & Company. David Campbell – Thompson, Davis & Company: Related to China I see where their imports were down in August from July do you think that represents the big slow down there in that country. What do you expect; don’t you think that can be pulled back up in September, October?

We think it’s the Olympics primarily. There were a lot of controls put in place, customs and at borders and so forth. We think the majority of it was the Olympics.

Having said that I will tell you that our big strong powerful electronics customers are not shipping as much with us this year as last year nor do we expect them to during the second quarter. That’s simply a fact of life about the US economy right now. That’s also having an impact on APAC.

Your last question comes from Edward Wolfe – Wolfe Research. Edward Wolfe – Wolfe Research: It feels like there’s been a move consistently from air to ground because of oil prices and the weak economy. To come out with a 6.9% Express increase now at this time when you’ve been talking about pricing being difficult probably I’m guessing will send more people to the Ground. Is that the intention longer term?

It’s very important as has been said at least twice today to look at the cohorts in the Express business. The biggest decline in the Express business percentage wise is in the documents and packet sector. That sector of course is heavily tied in to housing, financial services, mortgage and increasingly over time just as we’re doing ourselves with our terrific FedEx print online a lot of it is being diverted into electronic transmission media. On the bottom side the deferred Express business is down more than the Overnight box business. My guess is that after many years in this business when you look at the speed up that we’ve done in FedEx Ground and the great service that they’re doing there that probably has an effect there. The interesting thing to me is despite all of the travail and the economic down turn the Overnight Express Box business is doing pretty good. I think the markets are simply adjusting to the logical need. As you know, because we’ve talked about it many times our goal has been over the last 15 years to take our capacity in the Express sector and use it more and more for the inland movement of International packages and that is occurring. We haven’t bought a pound of air lift for Domestic Express business in many, many years. The Express business is continuing to increase. There again you’ve got to be careful about looking at just the overall category because the fastest growing segment in the Intercontinental business is the International Priority Freight segment. It’s the door to door retail freight business. The door to door package business is relatively flat but the door to door freight business is growing at double digits. Within these traffic cohorts there are some fairly significant trends there that lead us to believe that the businesses are a bit stronger than just the gross numbers would say. I hated to be going to that level of detail but you really have to, to answer your question.

As you know this is the fourth straight year that we have taken 2% out of the fuel surcharge and put it into the base rates so I think it’s a mischaracterization to say that it’s a 6.9% net rate increase, it is not. As we have done in years past the 6.9% increase is partially offset by the 2% reduction in the fuel surcharge so while it is not a straight 4.9% rate increase because the impact on individual customers may vary it is not a 6.9% increase to customers again because that is offset by a 2% net reduction in the fuel surcharge. This level of rate increase is certainly consistent with what we’ve done in years past and we feel comfortable with the impact it will have in the marketplace. Our desire is to put a customer’s traffic in the network that best serves them, that is what we are here to do. We sell solutions to customers. It’s doesn’t matter to us if it’s Express, if it’s Ground, if it’s International, if it’s Freight. Our desire is to put the traffic in the network that’s going to provide the best value to the customer to create long term value in the relationship. Edward Wolfe – Wolfe Research: If International Freight is suddenly growing faster than International Packages at some point does that lead you to change your thought process maybe in combining Ground and Air at some point to deliver that through the Ground network? Separately, the 4.9% net that’s a good point we’re talking 4.9% not 6.9%. That’s similar to last year and Alan said earlier you’re getting less than 1% net of fuel right now so it’s hard to push that through, people are taking other options and slowing down the freight it feels like. It feels like in this economy that maybe that push is more towards Ground do you think that I’m right thinking that way or not?

It’s very difficult to make that statement simply because the individual needs of specific customers differ greatly. In some cases you are absolutely correct that we can meet the needs of a customers supply chain by pushing more business in to the Ground we would do that no matter what the rate increase is. As you know, we’ve made substantial improvements in speeding up the network in Ground where now 80% of the packages are delivered in three days or less. Clearly there’s more opportunity to take Domestic Express volume and put it into the Ground network to meet those customers. Having said that, we’re pleased with the impact that has on FedEx’s bottom line and the ability to manage that mix to meet the needs of FedEx and its shareholders. I wouldn’t get too hung up on the magnitude of the rate increase whether its 400 basis points higher than it should be or not that’s a matter of opinion. It’s consistent with that we’ve done in the past and we’re very comfortable with our position.

On the broader question about the International trade business this is really the fruits of many years of labor here at FedEx. We have over the past decade been building out the Intercontinental Express network so as Alan mentioned a few moments ago it is by far the biggest. That’s quite frankly why we can mitigate costs on the down side if we need to. We have so many flights, so many sections that we have greater scale and the ability to fine tune that. Taking a section out on the weekend or taking a section out on the Friday or whatever the case may be, making another stop on the weekend and so forth. We have a lot of flexibility to right size the intercontinental network that we didn’t a few years ago. What we’ve also done is to build out our product portfolio so that we have door to door Express Freight service IPFS, International Priority Distribution Service, where you have an aggregate shipment that crosses the border, it’s cleared as one shipment then it explodes into smaller shipments either Freight or Packages. Over the last couple of years we have vigorously rolled out the International Economy Freight service IEFS and International Economy Distribution Service IED. Those products have been growing very rapidly because as the price of fuel has gone up, I made this comment before on these is the price of fuel has gone up it’s actually playing into our hands because these major consolidations by Air depending on the value per pound or the urgency of the piece of the shipment in some cases are going back into the water. The door to door Express Freight shipments are more and more going in our network and that’s why it’s growing so strong. It’s a double digit growth rate during the quarter. Those shipments obviously are built around our Air system and around the airports and so forth. There are significant differences in the type of equipment; the times of pick up and delivery, the routes and on and on down the line between the Express Freight business and the FedEx Freight organization under Doug Duncan. At the moment we think that we’re correctly organized.

That concludes today’s question and answer session.

Thank you for your participation on our first quarter earnings release conference call. Please feel free to call anyone on the Investor Relations team if you have additional questions.