GENERAL



The following Management's Discussion and Analysis of Results of Operations and
Financial Condition ("MD&A") describes the principal factors affecting the
results of operations, liquidity, capital resources, contractual cash
obligations and critical accounting estimates of FedEx Corporation ("FedEx").
This discussion should be read in conjunction with the accompanying quarterly
unaudited condensed consolidated financial statements and our Annual Report on
Form 10-K for the year ended May 31, 2020 ("Annual Report"). Our Annual Report
includes additional information about our significant accounting policies,
practices and the transactions that underlie our financial results, as well as a
detailed discussion of the most significant risks and uncertainties associated
with our financial condition and operating results.

We provide a broad portfolio of transportation, e-commerce and business services
through companies competing collectively, operating collaboratively and
innovating digitally, under the respected FedEx brand. Our primary operating
companies are Federal Express Corporation ("FedEx Express"), the world's largest
express transportation company; FedEx Ground Package System, Inc. ("FedEx
Ground"), a leading North American provider of small-package ground delivery
services; and FedEx Freight Corporation ("FedEx Freight"), a leading North
American provider of less-than-truckload ("LTL") freight transportation
services. These companies represent our major service lines and, along with
FedEx Corporate Services, Inc. ("FedEx Services"), constitute our reportable
segments.

Our FedEx Services segment provides sales, marketing, information technology,
communications, customer service, technical support, billing and collection
services, and certain back-office functions that support our operating segments.
See the "Reportable Segments" section of this MD&A for further discussion.
Additional information on our businesses can be found in our Annual Report.

The key indicators necessary to understand our operating results include:

• the overall customer demand for our various services based on macroeconomic

factors and the global economy;

• the volumes of transportation services provided through our networks,

primarily measured by our average daily volume and shipment weight and size;

• the mix of services purchased by our customers;

• the prices we obtain for our services, primarily measured by yield (revenue

per package or pound or revenue per shipment or hundredweight for LTL freight

shipments);

• our ability to manage our cost structure (capital expenditures and operating

expenses) to match shifting volume levels; and

• the timing and amount of fluctuations in fuel prices and our ability to

recover incremental fuel costs through our fuel surcharges.




Many of our operating expenses are directly impacted by revenue and volume
levels, and we expect these operating expenses to fluctuate on a year-over-year
basis consistent with changes in revenue and volumes. Therefore, the discussion
of operating expense captions focuses on the key drivers and trends impacting
expenses other than those factors strictly related to changes in revenue and
volumes. The line item "Other operating expense" includes costs associated with
outside service contracts (such as facility services and cargo handling,
temporary labor and security), insurance, professional fees and uniforms.

Except as otherwise specified, references to years indicate our fiscal year
ending May 31, 2021 or ended May 31 of the year referenced and comparisons are
to the corresponding period of the prior year. References to our transportation
segments include, collectively, the FedEx Express segment, the FedEx Ground
segment and the FedEx Freight segment.

                                     - 21 -

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RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

The following tables compare summary operating results and changes in revenue
and operating income (loss) (dollars in millions, except per share amounts) for
the periods ended February 28, 2021 and February 29, 2020:

                                      Three Months Ended         Percent           Nine Months Ended         Percent
                                       2021          2020        Change            2021          2020        Change
Revenue                             $   21,510     $ 17,487            23        $  61,394     $ 51,859            18
Operating income (loss):
FedEx Express segment                      463          137           238            2,073          658           215
FedEx Ground segment                       702          355            98            2,088        1,341            56
FedEx Freight segment                      119          113             5              645          448            44

Corporate, other and eliminations (279 ) (194 ) (44 )


          (746 )       (505 )         (48 )
Consolidated operating income            1,005          411           145            4,060        1,942           109
Operating margin:
FedEx Express segment                      4.3 %        1.5 %         280   bp         6.7 %        2.4 %         430   bp
FedEx Ground segment                       8.8 %        6.1 %         270   bp         9.3 %        8.2 %         110   bp
FedEx Freight segment                      6.5 %        6.5 %           -   bp        11.5 %        8.2 %         330   bp
Consolidated operating margin              4.7 %        2.4 %         230   bp         6.6 %        3.7 %         290   bp
Consolidated net income             $      892     $    315           183        $   3,363     $  1,620           108
Diluted earnings per share          $     3.30     $   1.20           175        $   12.55     $   6.17           103





                                                 Change in Revenue                Change in Operating Income (Loss)
                                           Three Months       Nine Months      Three Months             Nine Months
                                              Ended              Ended             Ended                   Ended
FedEx Express segment                     $        1,864     $       3,850     $         326         $            1,415
FedEx Ground segment                               2,135             6,025               347                        747
FedEx Freight segment                                 98               111                 6                        197
FedEx Services segment                                 2                 9                 -                          -
Corporate, other and eliminations                    (76 )            (460 )             (85 )                     (241 )
                                          $        4,023     $       9,535     $         594         $            2,118


Overview

Residential delivery volume growth, reflecting increased e-commerce demand
accelerated by the coronavirus ("COVID-19") pandemic, as well as yield
improvement related to pricing initiatives, continued in the third quarter,
driving strong growth in our revenue and operating income during the third
quarter and nine months of 2021. We continued to incur increased operating
expenses to support unprecedented levels of demand for our services in the
COVID-19 pandemic environment. Our business is labor and capital intensive in
nature, which has required us to incur higher costs to operate our networks
during the pandemic, including increased wage rates and costs associated with
additional personnel in place to support our operations and to meet regulatory
requirements. Higher costs associated with operating our seven-day network at
FedEx Ground and operating our air network to support higher demand in key
international supply chains impacted by constrained commercial air capacity were
also incurred in the third quarter and nine months of 2021. In addition, we
incurred increased operating expenses related to personal protective equipment
and medical/safety supplies, as well as additional security and cleaning
services, in order to protect our team members and customers during the COVID-19
pandemic, of approximately $60 million in the third quarter and $210 million in
the nine months of 2021.

Our consolidated operating income improved during both the third quarter and
nine months of 2021 due to residential volume growth at FedEx Ground,
international export and U.S. domestic package volume growth at FedEx Express
and pricing initiatives across all of our transportation segments. Higher
variable incentive compensation expense negatively impacted year-over-year third
quarter comparisons by approximately $485 million and nine-month comparisons by
approximately $895 million, which includes approximately $125 million in special
bonuses paid in January 2021 to our front-line operational team members at FedEx
Express. Severe winter weather also negatively impacted year-over-year third
quarter and nine-month operating income comparisons by an estimated $350
million, primarily affecting revenue. Additionally, higher purchased
transportation expenses at FedEx Ground were incurred in both the third quarter
and nine months of 2021.

                                     - 22 -

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During the second quarter of 2020, we recorded asset impairment charges of $66
million ($50 million, net of tax, or $0.19 per diluted share) associated with
the decision to permanently retire certain aircraft and related engines at FedEx
Express. See Note 1 of the accompanying unaudited condensed consolidated
financial statements for additional information.

We incurred integration expenses totaling $49 million ($39 million, net of tax,
or $0.14 per diluted share) in the third quarter and $146 million ($113 million,
net of tax, or $0.42 per diluted share) in the nine months of 2021, a $23
million decrease from the third quarter and a $61 million decrease from the nine
months of 2020. The integration expenses are predominantly incremental costs
directly associated with the integration of TNT Express, including professional
and legal fees, salaries and employee benefits, travel and advertising expenses.
Internal salaries and employee benefits are included only to the extent the
individuals are assigned full-time to integration activities. These costs were
incurred at FedEx Express and FedEx Corporate. The identification of these costs
as integration-related expenditures is subject to our disclosure controls and
procedures. The integration expenses do not include costs associated with our
business realignment activities. See the "Business Realignment Costs" section of
this MD&A for further information.

Consolidated net income in the nine months of 2021 includes a pre-tax, noncash
mark-to-market ("MTM") net loss of $52 million ($41 million, net of tax, or
$0.15 per diluted share) associated with freezing our TNT Express Netherlands
Pension Plan. See the "Retirement Plan MTM Adjustment" section of this MD&A and
Note 7 of the accompanying unaudited condensed consolidated financial statements
for additional information.

The comparison of net income between 2021 and 2020 is affected by a tax benefit
of $299 million ($1.12 per diluted share) recognized during the nine months of
2021, of which we recognized $108 million during the third quarter of 2021 from
a tax rate increase in the Netherlands applied to deferred tax balances and
associated with voluntary contributions to our tax-qualified U.S. domestic
pension plans ("U.S. Pension Plans") and a benefit of $191 million during the
second quarter of 2021 primarily attributable to guidance issued by the Internal
Revenue Service ("IRS"). We also recognized a tax benefit of $133 million ($0.51
per diluted share) during the nine months of 2020 from the reduction of a
valuation allowance. See the "Income Taxes" section of this MD&A for further
information.

                                     - 23 -

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The following graphs for FedEx Express, FedEx Ground and FedEx Freight show selected volume trends (in thousands) over the five most recent quarters:


                               [[Image Removed]]

(1) International domestic average daily package volume relates to our

international intra-country operations. International export average daily

package volume relates to our international priority and economy services.

(2) International average daily freight pounds relate to our international


       priority, economy and airfreight services.


                                     - 24 -

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The following graphs for FedEx Express, FedEx Ground and FedEx Freight show selected yield trends over the five most recent quarters:


                               [[Image Removed]]

(1) International export revenue per package relates to our international

priority and economy services. International domestic revenue per package

relates to our international intra-country operations.

(2) International revenue per pound relates to our international priority,


       economy and airfreight services.


                                     - 25 -

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Revenue

Revenue increased 23% in the third quarter and 18% in the nine months of 2021
primarily due to volume growth in residential delivery services at FedEx Ground
and U.S. domestic package volume growth at FedEx Express, both reflecting
increased e-commerce demand accelerated by the COVID-19 pandemic. International
export package volume growth at FedEx Express and pricing initiatives across all
of our transportation segments also contributed to the increase in revenue
during the third quarter and nine months of 2021. These positive factors were
partially offset by lower fuel surcharges at all of our transportation segments
and severe winter weather during the third quarter and nine months of 2021, as
well as one fewer operating weekday at all of our transportation segments in the
third quarter of 2021.

At FedEx Ground, revenue increased 37% in both the third quarter and nine months
of 2021 primarily due to residential delivery volume growth. Revenue at FedEx
Express increased 21% in the third quarter and 14% in the nine months of 2021
due to international export and U.S. domestic package volume growth.
International export volume increased in the third quarter and nine months of
2021 driven by strong demand for international priority shipments due to air
freight capacity constraints. FedEx Freight revenue increased 6% in the third
quarter of 2021 primarily due to higher revenue per shipment and increased
average daily shipments. Revenue at FedEx Freight increased 2% in the nine
months of 2021 primarily due to higher revenue per shipment, partially offset by
decreased average daily shipments.

Operating Expenses



The following tables compare operating expenses expressed as dollar amounts (in
millions) and as a percent of revenue for the periods ended February 28, 2021
and February 29, 2020:

                                   Three Months Ended         Percent          Nine Months Ended         Percent
                                    2021          2020        Change           2021          2020        Change
Operating expenses:
Salaries and employee benefits   $    8,010     $  6,382            26       $  22,305     $ 18,704            19
Purchased transportation              5,660        4,558            24          16,044       12,914            24
Rentals and landing fees              1,131          964            17           3,073        2,808             9
Depreciation and amortization           956          908             5           2,818        2,688             5
Fuel                                    756          879           (14 )         1,946        2,639           (26 )
Maintenance and repairs                 822          684            20           2,443        2,226            10
Business realignment costs               10            -            NM              10            -            NM
Asset impairment charges                  -            -             -               -           66            NM
Other                                 3,160        2,701            17           8,695        7,872            10
Total operating expenses             20,505       17,076            20          57,334       49,917            15
Operating income                 $    1,005     $    411           145       $   4,060     $  1,942           109




                                                   Percent of Revenue
                                    Three Months Ended             Nine Months Ended
                                   2021             2020          2021            2020
Operating expenses:
Salaries and employee benefits        37.2    %      36.5   %        36.3    %     36.1   %
Purchased transportation              26.3           26.1            26.1          24.9
Rentals and landing fees               5.3            5.5             5.0           5.4
Depreciation and amortization          4.4            5.2             4.6           5.2
Fuel                                   3.5            5.0             3.2           5.1
Maintenance and repairs                3.8            3.9             4.0           4.3
Business realignment costs             0.1              -               -             -
Asset impairment charges                 -              -               -           0.1
Other                                 14.7           15.4            14.2          15.2
Total operating expenses              95.3           97.6            93.4          96.3
Operating margin                       4.7    %       2.4   %         6.6    %      3.7   %


                                     - 26 -

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Volume growth, as discussed in the "Revenue" section of this MD&A, contributed
to a 26% increase in salaries and employee benefits expense in the third quarter
and a 19% increase in the nine months of 2021, as well as an increase in
purchased transportation costs of 24% in both the third quarter and nine months
of 2021. Higher variable incentive compensation expense and merit increases also
contributed to an increase in salaries and employee benefits in both the third
quarter and nine months of 2021. In addition, purchased transportation costs
were also higher in both the third quarter and nine months of 2021 primarily due
to increased residential product mix at FedEx Ground.

Fuel

The following graph for our transportation segments shows our average cost of vehicle and jet fuel per gallon for the five most recent quarters:


                               [[Image Removed]]

Fuel expense decreased 14% in the third quarter and 26% in the nine months of
2021 due to lower fuel prices. Fuel prices represent only one component of the
factors we consider meaningful in understanding the impact of fuel on our
business. Consideration must also be given to the fuel surcharge revenue we
collect. Accordingly, we believe discussion of the net impact of fuel on our
results, which is a comparison of the year-over-year change in these two
factors, is important to understand the impact of fuel on our business. In order
to provide information about the impact of fuel surcharges on the trend in
revenue and yield growth, we have included the comparative weighted-average fuel
surcharge percentages in effect for the third quarters of 2021 and 2020 in the
accompanying discussion of each of our transportation segments.

Because of the factors described above, our operating results may be affected
should the market price of fuel suddenly change by a significant amount or
change by amounts that do not result in an adjustment in our fuel surcharges,
which can significantly affect our earnings either positively or negatively in
the short-term. The net impact of fuel on operating income described below and
for each segment below excludes the impact from table changes.

The net impact of fuel had a slightly negative impact to operating income in the third quarter and nine months of 2021 as lower fuel surcharges outpaced decreased fuel prices.


                                     - 27 -

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Business Realignment Costs



In January 2021, FedEx Express announced a workforce reduction plan in Europe as
it nears the completion of the network integration of TNT Express. The plan will
impact between 5,500 and 6,300 employees in Europe across operational teams and
back-office functions. The execution of the plan is subject to a works council
consultation process that will occur over an 18-month period in accordance with
local country processes and regulations.

We incurred costs of $10 million ($8 million, net of tax, or $0.03 per diluted
share) during the third quarter of 2021 associated with our business realignment
activities. These costs are related to certain employee severance arrangements.
We expect the pre-tax cost of our business realignment activities to range from
$300 million to $575 million. These charges are expected to be incurred through
fiscal 2023 and will be classified as business realignment costs. We expect
savings from our business realignment activities to be between $275 million and
$350 million on an annualized basis beginning in fiscal 2024. The actual amount
and timing of business realignment costs and related cost savings resulting from
the workforce reduction plan are dependent on local country consultation
processes and regulations and negotiated social plans and may differ from our
current expectations and estimates.

Asset Impairment Charges



During the second quarter of 2020, we made the decision to permanently retire
from service 10 Airbus A310-300 aircraft and 12 related engines at FedEx Express
to align with the needs of the U.S. domestic network and modernize its aircraft
fleet. As a consequence of this decision, noncash impairment charges of $66
million ($50 million, net of tax, or $0.19 per diluted share) were recorded in
the FedEx Express segment in the second quarter of 2020.

Retirement Plan MTM Adjustment



We incurred a pre-tax, noncash MTM net loss of $52 million ($41 million, net of
tax, or $0.15 per diluted share) in the second quarter of 2021 related to
amendments to the TNT Express Netherlands Pension Plan. Benefits for
approximately 2,100 employees were frozen effective December 31, 2020. On
January 1, 2021, these employees began earning pension benefits under a
separate, multi-employer pension plan. See Note 7 of the accompanying unaudited
condensed consolidated financial statements for additional information.

Income Taxes



Our effective tax rate was 15.0% for the third quarter and 17.2% for the nine
months of 2021, compared to 25.0% for the third quarter and 18.5% for the nine
months of 2020. The tax rate for the third quarter of 2021 includes benefits of
$108 million from a tax rate increase in the Netherlands applied to our deferred
tax balances and associated with voluntary contributions to our U.S. Pension
Plans. The tax rate for the nine months of 2021 also includes a benefit of $191
million from an increase in our 2020 tax loss primarily attributable to an
Application for Change in Accounting Method discussed below and other
accelerated deductions claimed on the 2020 tax return. The tax rate for the nine
months of 2020 included a $133 million benefit from a valuation allowance
reduction.

We filed an application with the IRS in 2020 requesting approval to change our
accounting method for depreciation to allow retroactive application of tax
regulations issued during 2020 on certain assets placed in service during 2018
and 2019. During the second quarter of 2021, the IRS issued guidance granting
automatic approval to change the method of accounting for these assets resulting
in an income tax benefit of $130 million for the second quarter.

We are subject to taxation in the United States and various U.S. state, local
and foreign jurisdictions. We are currently under examination by the IRS for the
2016 and 2017 tax years. It is reasonably possible that certain income tax
return proceedings will be completed during the next twelve months and could
result in a change in our balance of unrecognized tax benefits. The impact of
any changes is not expected to be material to our consolidated financial
statements.

During the second quarter of 2021, we filed suit in U.S. District Court for the
Western District of Tennessee challenging the validity of a tax regulation
related to the one-time transition tax on unrepatriated foreign earnings, which
was enacted as part of the Tax Cuts and Jobs Act ("TCJA"). Our lawsuit seeks to
have the court declare this regulation invalid and order the refund of
overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the
denial of foreign tax credits under the regulation. We have recorded a
cumulative benefit of $233 million through 2019 attributable to our
interpretation of the TCJA and the Internal Revenue Code. We continue to pursue
this lawsuit; however, if we are ultimately unsuccessful in defending our
position, we may be required to reverse the benefit previously recorded.

                                     - 28 -

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Business Acquisitions



On December 23, 2020, we acquired ShopRunner, Inc. ("ShopRunner"), an e-commerce
platform that directly connects brands and merchants with online shoppers, for
$225 million in cash from operations. The majority of the purchase price was
allocated to goodwill and intangibles. The financial results of ShopRunner are
included in "Corporate, other and eliminations" from the date of acquisition and
were not material to our results of operations.

Outlook



We anticipate continued increased demand for our e-commerce services at FedEx
Ground and FedEx Express, international export volume growth at FedEx Express
and pricing initiatives across all of our transportation segments to drive
improved revenue and operating income in the fourth quarter of 2021. In
addition, higher yields and volume are anticipated to drive revenue and
operating income growth at the FedEx Freight segment in the fourth quarter of
2021.

We expect higher variable incentive compensation accruals, higher labor costs,
increased maintenance costs and increased supply and other costs related to the
COVID-19 pandemic to be incurred in the fourth quarter of 2021. Going forward,
we may incur costs associated with debt reduction and refinancing transactions,
which may be material. See the "Liquidity Outlook" section of this MD&A for more
information. In addition, we will record $100 million of expense in the fourth
quarter of 2021 related to our recently announced pledge to Yale University to
advance carbon sequestration solutions.

Governmental, business and individuals' actions in response to the COVID-19
pandemic are expected to continue to impact the demand for commercial air
travel, thereby reducing available air freight capacity. As a result of these
ongoing capacity constraints, we expect continued strong demand for
international priority shipments in the fourth quarter of 2021 to necessitate
increased usage of our assets to support demand in key international supply
chains. We will continue managing network capacity, flexing our network and
making adjustments as needed to align with volumes and operating conditions.

We have expanded FedEx Ground seven-day residential delivery coverage to
virtually all of the U.S. population and will continue to optimize our network
capacity to meet evolving customer needs. During the fourth quarter of 2021, we
will continue to focus on last-mile residential delivery optimization, including
by directing certain U.S. day-definite residential FedEx Express shipments into
the FedEx Ground network to increase efficiency and lower our cost-to-serve. We
also are focused on improving revenue quality and lowering costs through
advanced technology aimed at improving productivity and safety.

We are continuing to execute our TNT Express integration plans and are scheduled
to complete the integration of the FedEx Express and TNT Express linehaul and
pickup-and-delivery operations and begin offering an enhanced portfolio of
international services in 2021. We will leverage the capabilities that TNT
Express adds to our portfolio, which are expected to improve our European
revenue and profitability, which continue to underperform our expectations for
that market. We expect to complete the final phase of international air network
interoperability in early calendar 2022.

We expect to incur approximately $55 million of integration expenses in the fourth quarter of 2021 in the form of professional fees, outside service contracts, salaries and wages and other operating expenses. We expect the aggregate integration program expenses to be $1.7 billion through the completion of the physical network integration of TNT Express into FedEx Express in 2022.



As we approach the completion of the physical network integration of TNT Express
in 2022, we are evaluating opportunities and pursuing initiatives in addition to
the integration to continue to transform and optimize the FedEx Express
international business, particularly in Europe. These actions are focused on
reducing the complexity and fragmentation of our international business,
improving efficiency to meet changing customer expectations and business
dynamics, lowering costs, increasing profitability and improving service levels.
We expect to incur additional costs, over multiple years, which may be material,
including transformation costs and capital investments related to these actions.
As part of this strategy, in January 2021 we announced a workforce reduction
plan in Europe. We expect the pre-tax cost of the severance benefits to be
provided under the plan to range from $300 million to $575 million in cash
expenditures through fiscal 2023. See the "Business Realignment Costs" section
of this MD&A for additional information.

Our expectations for the fourth quarter of 2021 are dependent on key external
factors, including continued recovery in U.S. industrial production and global
trade, no additional COVID-19-related business restrictions and current fuel
price expectations.

Other Outlook Matters. For details on key 2021 capital projects, refer to the "Liquidity Outlook" section of this MD&A.

See "Forward-Looking Statements" and Part II, Item 1A "Risk Factors" for a discussion of these and other potential risks and uncertainties that could materially affect our future performance.


                                     - 29 -

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RECENT ACCOUNTING GUIDANCE

See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting guidance.

REPORTABLE SEGMENTS

FedEx Express, FedEx Ground and FedEx Freight represent our major service lines and, along with FedEx Services, constitute our reportable segments. Our reportable segments include the following businesses:





FedEx Express Segment    FedEx Express (express transportation, small-package
                         ground delivery and freight transportation)
                         FedEx Custom Critical, Inc. ("FedEx Custom Critical")
                         (time-critical transportation)
                         FedEx Cross Border Holdings, Inc. ("FedEx Cross Border")
                         (cross-border e-commerce technology and e-commerce
                         transportation solutions)

FedEx Ground Segment     FedEx Ground (small-package ground delivery)

FedEx Freight Segment    FedEx Freight (LTL freight transportation)

FedEx Services Segment   FedEx Services (sales, marketing, information
                         technology, communications, customer service, technical
                         support, billing and collection services and back-office
                         functions)


FEDEX SERVICES SEGMENT

The operating expense line item "Intercompany charges" on the accompanying unaudited condensed consolidated financial statements of our transportation segments reflects the allocations from the FedEx Services segment to the respective operating segments. The allocations of net operating costs are based on metrics such as relative revenue or estimated services provided.



The FedEx Services segment provides direct and indirect support to our operating
segments, and we allocate all of the net operating costs of the FedEx Services
segment to reflect the full cost of operating our businesses in the results of
those segments. We review and evaluate the performance of our transportation
segments based on operating income (inclusive of FedEx Services segment
allocations). For the FedEx Services segment, performance is evaluated based on
the impact of its total allocated net operating costs on our operating segments.
We believe these allocations approximate the net cost of providing these
functions. Our allocation methodologies are refined periodically, as necessary,
to reflect changes in our businesses.

CORPORATE, OTHER AND ELIMINATIONS



Corporate and other includes corporate headquarters costs for executive officers
and certain legal and finance functions, as well as certain other costs and
credits not attributed to our core business. These costs are not allocated to
the other business segments. Also, the results of the FedEx Logistics, Inc.
("FedEx Logistics") and FedEx Office and Print Services, Inc. ("FedEx Office")
operating segments, as well as the results of ShopRunner beginning December 23,
2020, are included in Corporate and other. FedEx Logistics provides integrated
supply chain management solutions, specialty transportation, customs brokerage
and global ocean and air freight forwarding. FedEx Office provides an array of
document and business services and retail access to our customers for our
package transportation businesses.

In the third quarter and nine months of 2021, the decrease in revenue in
"Corporate, other and eliminations" was due to a significant decline in
non-shipping revenue at FedEx Office resulting from the COVID-19 pandemic. The
transfer of FedEx Custom Critical and FedEx Cross Border into the FedEx Express
segment contributed to the decrease in revenue in the third quarter and nine
months of 2021. These factors were partially offset by higher transportation
yields driven by constrained market capacity resulting from the COVID-19
pandemic in the third quarter and nine months of 2021.

Certain FedEx operating companies provide transportation and related services
for other FedEx companies outside their reportable segment in order to optimize
our resources. For example, during the nine months of 2021, FedEx Freight
provided road and intermodal support for both FedEx Ground and FedEx Express and
FedEx Ground provided delivery support for certain FedEx Express packages as
part of our last-mile optimization efforts. Billings for such services are based
on negotiated rates, which we believe approximate fair value, and are reflected
as revenue of the billing segment. These rates are adjusted from time to time
based on market conditions. Such intersegment revenue and expenses are
eliminated in our consolidated results and are not separately identified in the
following segment information because the amounts are not material.

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FEDEX EXPRESS SEGMENT

FedEx Express offers a wide range of U.S. domestic and international shipping
services for delivery of packages and freight including priority, deferred and
economy services, which provide delivery on a time-definite or day-definite
basis. The following tables compare revenue, operating expenses, operating
income (dollars in millions), operating margin and operating expenses as a
percent of revenue for the periods ended February 28, 2021 and February 29,
2020:

                                   Three Months Ended         Percent           Nine Months Ended         Percent
                                    2021          2020        Change            2021          2020        Change
Revenue:
Package:
U.S. overnight box               $     2,078     $ 1,865            11        $   5,951     $  5,595             6
U.S. overnight envelope                  444         459            (3 )          1,305        1,395            (6 )
U.S. deferred                          1,418       1,127            26            3,718        3,063            21
Total U.S. domestic package
revenue                                3,940       3,451            14           10,974       10,053             9
International priority                 2,596       1,710            52            7,423        5,344            39
International economy                    653         810           (19 )          1,927        2,538           (24 )
Total international export
package revenue                        3,249       2,520            29            9,350        7,882            19
International domestic(1)              1,162       1,075             8            3,456        3,316             4
Total package revenue                  8,351       7,046            19           23,780       21,251            12
Freight:
U.S.                                     860         739            16            2,492        2,132            17
International priority                   775         439            77            2,165        1,376            57
International economy                    383         499           (23 )          1,162        1,556           (25 )
International airfreight                  56          61            (8 )            196          197            (1 )
Total freight revenue                  2,074       1,738            19            6,015        5,261            14
Other(2)                                 363         140           159            1,008          441           129
Total revenue                         10,788       8,924            21           30,803       26,953            14
Operating expenses:
Salaries and employee benefits         4,352       3,520            24           12,016       10,297            17
Purchased transportation               1,460       1,212            20            4,213        3,711            14
Rentals and landing fees                 650         538            21            1,696        1,556             9
Depreciation and amortization            490         478             3            1,449        1,409             3
Fuel                                     647         744           (13 )          1,672        2,241           (25 )
Maintenance and repairs                  549         429            28            1,642        1,460            12
Business realignment costs                10           -            NM               10            -            NM
Asset impairment charges                   -           -             -                -           66            NM
Intercompany charges                     509         500             2            1,456        1,469            (1 )
Other                                  1,658       1,366            21            4,576        4,086            12
Total operating expenses              10,325       8,787            18           28,730       26,295             9
Operating income                 $       463     $   137           238        $   2,073     $    658           215
Operating margin                         4.3 %       1.5 %         280   bp         6.7 %        2.4 %         430   bp

(1) International domestic revenue relates to our international intra-country

operations.

(2) Includes the operations of FedEx Custom Critical and FedEx Cross Border for


       the periods ended February 28, 2021.


                                     - 31 -

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                                                   Percent of Revenue
                                    Three Months Ended             Nine Months Ended
                                   2021             2020          2021            2020
Operating expenses:
Salaries and employee benefits        40.3    %      39.5   %        39.0    %     38.2   %
Purchased transportation              13.5           13.6            13.7          13.8
Rentals and landing fees               6.0            6.0             5.5           5.8
Depreciation and amortization          4.6            5.4             4.7           5.2
Fuel                                   6.0            8.3             5.4           8.3
Maintenance and repairs                5.1            4.8             5.4           5.4
Business realignment costs             0.1              -               -             -
Asset impairment charges                 -              -               -           0.2
Intercompany charges                   4.7            5.6             4.7           5.5
Other                                 15.4           15.3            14.9          15.2
Total operating expenses              95.7           98.5            93.3          97.6
Operating margin                       4.3    %       1.5   %         6.7    %      2.4   %

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended February 28, 2021 and February 29, 2020:



                                        Three Months Ended         Percent        Nine Months Ended         Percent
                                         2021          2020        Change         2021          2020        Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box                         1,529        1,258            22         1,421        1,240            15
U.S. overnight envelope                      508          536            (5 )         501          548            (9 )
U.S. deferred                              1,562        1,215            29         1,367        1,067            28
Total U.S. domestic ADV                    3,599        3,009            20         3,289        2,855            15
International priority                       765          542            41           736          546            35
International economy                        294          293             -           283          300            (6 )
Total international export ADV             1,059          835            27         1,019          846            20
International domestic(1)                  2,353        2,405            (2 )       2,427        2,475            (2 )
Total ADV                                  7,011        6,249            12         6,735        6,176             9
Revenue per package (yield):
U.S. overnight box                    $    21.91     $  23.54            (7 )   $   22.04     $  23.75            (7 )
U.S. overnight envelope                    14.08        13.59             4         13.72        13.39             2
U.S. deferred                              14.65        14.73            (1 )       14.32        15.11            (5 )
U.S. domestic composite                    17.66        18.21            (3 )       17.56        18.53            (5 )
International priority                     54.71        50.07             9         53.08        51.53             3
International economy                      35.87        43.88           (18 )       35.85        44.44           (19 )
International export composite             49.49        47.90             3         48.30        49.01            (1 )
International domestic(1)                   7.96         7.09            12          7.49         7.05             6
Composite package yield               $    19.21     $  17.90             7     $   18.58     $  18.11             3
Freight Statistics
Average daily freight pounds:
U.S.                                       9,943        8,356            19         9,426        8,244            14
International priority                     6,286        4,752            32         6,000        4,924            22
International economy                     12,135       13,806           (12 )      12,435       14,252           (13 )
International airfreight                   1,417        1,422             -         1,534        1,567            (2 )
Total average daily freight pounds        29,781       28,336             5        29,395       28,987             1
Revenue per pound (yield):
U.S.                                  $     1.40     $   1.40             -     $    1.39     $   1.36             2
International priority                      1.99         1.47            35          1.90         1.47            29
International economy                       0.51         0.57           (11 )        0.49         0.57           (14 )
International airfreight                    0.64         0.68            (6 )        0.67         0.66             2
Composite freight yield               $     1.12     $   0.97            15     $    1.08     $   0.96            13



(1) International domestic statistics relate to our international intra-country


       operations.


                                     - 32 -

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FedEx Express Segment Revenue

FedEx Express segment revenue increased 21% in the third quarter and 14% in the
nine months of 2021 due to international export and U.S. domestic package volume
growth, partially offset by lower fuel surcharges. Revenue was also positively
impacted by pricing initiatives resulting from global air freight capacity
constraints in the third quarter and nine months of 2021. These factors were
partially offset by severe winter weather in the third quarter and nine months
of 2021 and one fewer operating weekday in the third quarter of 2021.

International export package average daily volumes increased 27% in the third
quarter and 20% in the nine months of 2021 led by volume growth from
Asia-Pacific and Europe. International export package yields increased 3% in the
third quarter of 2021 primarily due to favorable exchange rates. International
export package yields decreased 1% in the nine months of 2021 primarily due to
lower fuel surcharges, partially offset by favorable exchange rates and pricing
initiatives resulting from global air freight capacity constraints. U.S.
domestic package average daily volumes increased 20% in the third quarter and
15% in the nine months of 2021 driven by growth in deferred service offerings,
reflecting increased e-commerce demand resulting from the COVID-19 pandemic, as
well as growth in overnight box service offerings. U.S. domestic package yields
decreased 3% in the third quarter and 5% in the nine months of 2021 due to lower
package weights and lower fuel surcharges. Average daily freight pounds
increased 5% in the third quarter and 1% in the nine months of 2021 primarily
due to volume growth in international priority and U.S. services. Composite
freight yields increased 15% in the third quarter and 13% in the nine months of
2021 primarily due to improved base yields. Other revenue increased 159% in the
third quarter and 129% in the nine months of 2021 due to the transfer of FedEx
Custom Critical and FedEx Cross Border into the FedEx Express segment.

FedEx Express's U.S. domestic and outbound fuel surcharge and international fuel
surcharge ranged as follows for the periods ended February 28, 2021 and
February 29, 2020:

                                              Three Months Ended            Nine Months Ended
                                              2021           2020           2021          2020
U.S. Domestic and Outbound Fuel
Surcharge:
Low                                              4.61 %         7.25 %         2.73 %        7.21 %
High                                             6.44           8.00           6.44          8.45
Weighted-average                                 5.21           7.38           4.13          7.48
International Export and Freight Fuel
Surcharge:
Low                                              2.96           6.66           0.28          6.66
High                                            19.88          18.09          19.88         18.56
Weighted-average                                13.48          15.23          11.51         15.47
International Domestic Fuel Surcharge:
Low                                              4.25           2.98           2.62          2.98
High                                            20.39          19.18          20.39         19.47
Weighted-average                                 6.28           7.32           6.04          7.36

FedEx Express Segment Operating Income

FedEx Express segment operating income increased substantially in the third
quarter and nine months of 2021 due to international export and U.S. domestic
package volume growth. FedEx Express segment operating results include benefits
of approximately $30 million in the third quarter and $165 million in the nine
months of 2021 from a reduction in aviation excise taxes provided by the
Coronavirus Aid, Relief, and Economic Security Act, which expired on December
31, 2020. These factors were partially offset by higher variable incentive
compensation expense of approximately $340 million in the third quarter and $570
million in the nine months of 2021, which includes approximately $125 million in
special bonuses paid in January 2021 to our front-line operational team members.
In addition, severe winter weather negatively impacted operating income by an
estimated $240 million in the third quarter and nine months of 2021, primarily
affecting revenue. One fewer operating weekday also negatively impacted
operating income in the third quarter of 2021. We continued to incur increased
costs of operating our global network in the COVID-19 pandemic environment in
the third quarter and nine months of 2021, which is partially impacted by
constrained commercial air capacity. Results for the nine months of 2020 were
negatively impacted by $66 million of asset impairment charges associated with
the decision to permanently retire certain aircraft and related engines.

FedEx Express segment results included $41 million of integration expenses in
the third quarter and $121 million of such expenses in the nine months of 2021,
a $21 million decrease from the third quarter and a $47 million decrease from
the nine months of 2020.

                                     - 33 -

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Salaries and employee benefits expense increased 24% in the third quarter and
17% in the nine months of 2021 primarily due to staffing to support volume
growth and higher variable incentive compensation expense. In addition, higher
labor expenses and increased costs associated with network contingencies as a
result of the COVID-19 pandemic contributed to the increase in salaries and
employee benefits expense in both the third quarter and nine months of 2021.
Purchased transportation expense increased 20% in the third quarter and 14% in
the nine months of 2021 primarily due to the transfer of FedEx Custom Critical
and FedEx Cross Border into the FedEx Express segment. Other operating expense
increased 21% in the third quarter and 12% in the nine months of 2021 primarily
due to higher outside service contract expense and bad debt expense.
Additionally, higher operating supplies, partially offset by decreased travel,
both driven by the COVID-19 pandemic, negatively impacted other operating
expense in the nine months of 2021. Maintenance and repairs expense increased
28% in the third quarter and 12% in the nine months of 2021 primarily due to an
increase in flight hours resulting from higher package volumes.

Fuel expense decreased 13% in the third quarter and 25% in the nine months of
2021 due to lower fuel prices, partially offset by higher aircraft and vehicle
usage. The net impact of fuel had a slightly negative impact to operating income
in the third quarter and nine months of 2021 as lower fuel surcharges outpaced
decreased fuel prices. See the "Fuel" section of this MD&A for a description and
additional discussion of the net impact of fuel on our operating results.

                                     - 34 -

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FEDEX GROUND SEGMENT



FedEx Ground service offerings include day-certain delivery to businesses in the
U.S. and Canada and to 100% of U.S. residences. The following tables compare
revenue, operating expenses, operating income (dollars in millions), operating
margin, selected package statistics (in thousands, except yield amounts) and
operating expenses as a percent of revenue for the periods ended February 28,
2021 and February 29, 2020:

                                   Three Months Ended         Percent           Nine Months Ended         Percent
                                    2021          2020        Change            2021          2020        Change
Revenue                          $    7,980     $  5,845            37        $  22,364     $ 16,339            37
Operating expenses:
Salaries and employee benefits        1,652        1,046            58            4,483        2,888            55
Purchased transportation              3,745        2,908            29           10,524        7,772            35
Rentals                                 306          256            20              859          744            15
Depreciation and amortization           214          197             9              623          585             6
Fuel                                      6            4            50               15           11            36
Maintenance and repairs                 125          101            24              356          286            24
Intercompany charges                    480          405            19            1,358        1,174            16
Other                                   750          573            31            2,058        1,538            34
Total operating expenses              7,278        5,490            33           20,276       14,998            35
Operating income                 $      702     $    355            98        $   2,088     $  1,341            56
Operating margin                        8.8 %        6.1 %         270   bp         9.3 %        8.2 %         110   bp
Average daily package volume         13,206       10,536            25           12,347        9,637            28
Revenue per package (yield)      $     9.72     $   8.78            11        $    9.49     $   8.90             7




                                                   Percent of Revenue
                                    Three Months Ended             Nine Months Ended
                                   2021             2020          2021            2020
Operating expenses:
Salaries and employee benefits        20.7    %      17.9   %        20.0    %     17.7   %
Purchased transportation              46.9           49.7            47.1          47.6
Rentals                                3.8            4.4             3.8           4.5
Depreciation and amortization          2.7            3.4             2.8           3.6
Fuel                                   0.1            0.1             0.1           0.1
Maintenance and repairs                1.6            1.7             1.6           1.7
Intercompany charges                   6.0            6.9             6.1           7.2
Other                                  9.4            9.8             9.2           9.4
Total operating expenses              91.2           93.9            90.7          91.8
Operating margin                       8.8    %       6.1   %         9.3    %      8.2   %

FedEx Ground Segment Revenue



FedEx Ground segment revenue increased 37% in both the third quarter and nine
months of 2021 primarily due to residential delivery volume growth reflecting
increased e-commerce demand accelerated by the COVID-19 pandemic. Additionally,
improved yield related to pricing initiatives positively impacted revenue in the
third quarter and nine months of 2021. These factors were partially offset by
severe winter weather in the third quarter and nine months of 2021 and one fewer
operating weekday in the third quarter of 2021.

Average daily volume increased 25% in the third quarter and 28% in the nine
months of 2021 primarily due to continued growth in residential services driven
by e-commerce, as well as growth in commercial services. FedEx Ground yields
increased 11% in the third quarter and 7% in the nine months of 2021 primarily
due to pricing initiatives.

                                     - 35 -

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The FedEx Ground fuel surcharge is based on a rounded average of the national
U.S. on-highway price for a gallon of diesel fuel, as published by the
Department of Energy. The fuel surcharge ranged as follows for the periods ended
February 28, 2021 and February 29, 2020:

                     Three Months Ended          Nine Months Ended
                     2021           2020         2021           2020
Low                     5.75 %        6.50 %        5.50 %       6.50 %
High                    7.00          7.00          7.00         7.25
Weighted-average        6.30          6.91          5.93         6.96

FedEx Ground Segment Operating Income



FedEx Ground segment operating income increased 98% in the third quarter and 56%
in the nine months of 2021 primarily due to residential delivery volume growth
and yield improvement. These factors were partially offset by higher purchased
transportation service provider settlements related to residential product mix,
increased labor expenses and higher self-insurance accruals in the third quarter
and nine months of 2021. In addition, severe winter weather negatively impacted
operating income by an estimated $85 million in the third quarter and nine
months of 2021, primarily affecting revenue.

Purchased transportation expense increased 29% in the third quarter and 35% in
the nine months of 2021 due to higher volume and increased residential product
mix. Salaries and employee benefits expense increased 58% in the third quarter
and 55% in the nine months of 2021 due to additional staffing to support volume
growth, including costs associated with operating our seven-day network, merit
increases and higher variable incentive compensation expense. In addition,
higher labor expenses and increased costs associated with network contingencies
as a result of the COVID-19 pandemic contributed to the increase in salaries and
employee benefits expense in both the third quarter and nine months of 2021.
Other operating expense increased 31% in the third quarter and 34% in the nine
months of 2021 primarily due to higher self-insurance accruals, higher outside
service contract expense and increased volume-related expenses.

The net impact of fuel had a slight benefit to operating income in the third
quarter and nine months of 2021 as decreased fuel prices outpaced lower fuel
surcharges. See the "Fuel" section of this MD&A for a description and additional
discussion of the net impact of fuel on our operating results.

                                     - 36 -

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FEDEX FREIGHT SEGMENT



FedEx Freight LTL service offerings include priority services when speed is
critical and economy services when time can be traded for savings. The following
tables compare revenue, operating expenses, operating income (dollars in
millions), operating margin, selected statistics and operating expenses as a
percent of revenue for the periods ended February 28, 2021 and February 29,
2020:

                                   Three Months Ended         Percent           Nine Months Ended         Percent
                                    2021          2020        Change            2021          2020        Change
Revenue                          $    1,836     $  1,738             6        $   5,598     $  5,487             2
Operating expenses:
Salaries and employee benefits          911          846             8            2,684        2,665             1
Purchased transportation                203          176            15              582          550             6
Rentals                                  57           54             6              172          158             9
Depreciation and amortization           104           92            13              315          283            11
Fuel                                    103          130           (21 )            258          385           (33 )
Maintenance and repairs                  54           59            (8 )            164          192           (15 )
Intercompany charges                    128          133            (4 )            369          389            (5 )
Other                                   157          135            16              409          417            (2 )
Total operating expenses              1,717        1,625             6            4,953        5,039            (2 )
Operating income                 $      119     $    113             5        $     645     $    448            44
Operating margin                        6.5 %        6.5 %           -   bp        11.5 %        8.2 %         330   bp
Average daily shipments (in
thousands):
Priority                               72.6         70.5             3             74.0         75.5            (2 )
Economy                                31.1         29.8             4             31.3         31.8            (2 )
Total average daily shipments         103.7        100.3             3            105.3        107.3            (2 )
Weight per shipment (lbs):
Priority                              1,110        1,137            (2 )          1,104        1,144            (3 )
Economy                                 950        1,000            (5 )            988          980             1
Composite weight per shipment         1,062        1,096            (3 )          1,070        1,096            (2 )
Revenue per shipment:
Priority                         $   275.44     $ 265.17             4        $  266.30     $ 259.61             3
Economy                              315.11       308.65             2           310.39       299.59             4
Composite revenue per shipment   $   287.32     $ 279.40             3        $  279.42     $ 272.09             3
Revenue per hundredweight:
Priority                         $    24.82     $  23.33             6        $   24.12     $  22.69             6
Economy                               33.16        30.85             7            31.40        30.57             3
Composite revenue per
hundredweight                    $    27.06     $  25.49             6        $   26.12     $  24.84             5




                                                   Percent of Revenue
                                    Three Months Ended             Nine Months Ended
                                   2021             2020          2021            2020
Operating expenses:
Salaries and employee benefits        49.6    %      48.7   %        48.0    %     48.6   %
Purchased transportation              11.1           10.1            10.4          10.0
Rentals                                3.1            3.1             3.1           2.9
Depreciation and amortization          5.7            5.3             5.6           5.1
Fuel                                   5.6            7.5             4.6           7.0
Maintenance and repairs                2.9            3.4             2.9           3.5
Intercompany charges                   7.0            7.6             6.6           7.1
Other                                  8.5            7.8             7.3           7.6
Total operating expenses              93.5           93.5            88.5          91.8
Operating margin                       6.5    %       6.5   %        11.5    %      8.2   %


                                     - 37 -

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FedEx Freight Segment Revenue



FedEx Freight segment revenue increased 6% in the third quarter of 2021
primarily due to higher revenue per shipment and increased average daily
shipments, partially offset by lower fuel surcharges and one fewer operating
weekday. FedEx Freight segment revenue increased 2% in the nine months of 2021
primarily due to higher revenue per shipment, partially offset by lower fuel
surcharges and decreased average daily shipments. In addition, severe winter
weather negatively impacted revenue in the third quarter and nine months of
2021.

Revenue per shipment increased 3% in both the third quarter and nine months of
2021 primarily due to higher base rates reflecting our ongoing revenue quality
initiatives, partially offset by lower fuel surcharges and lower weight per
shipment. Average daily shipments increased 3% in the third quarter of 2021 due
to volumes returning to pre-COVID-19 levels. Despite the increased demand in the
third quarter of 2021, demand for our service offerings in the nine months of
2021 was negatively impacted by the COVID-19 pandemic and related supply chain
disruptions, resulting in a 2% decrease in average daily shipments.

The weekly indexed fuel surcharge is based on the average of the U.S. on-highway
prices for a gallon of diesel fuel, as published by the Department of Energy.
The indexed FedEx Freight fuel surcharge ranged as follows for the periods ended
February 28, 2021 and February 29, 2020:

                     Three Months Ended          Nine Months Ended
                      2021          2020          2021         2020
Low                     21.40 %      23.00 %        21.00 %     23.00 %
High                    24.00        24.00          24.00       24.40
Weighted-average        22.50        23.70          21.60       23.80

FedEx Freight Segment Operating Income



FedEx Freight segment operating income increased 5% in the third quarter and 44%
in the nine months of 2021 driven by continued focus on revenue quality
initiatives, aligning our cost structure with current business levels and
improving operational efficiencies. These positive factors more than offset the
negative impact on volumes from the COVID-19 pandemic and weaker economic
conditions for the nine months of 2021. In addition, severe winter weather
negatively impacted operating income by an estimated $25 million in the third
quarter and nine months of 2021, primarily affecting revenue.

Salaries and employee benefits expense increased 8% in the third quarter of 2021
primarily due to higher variable incentive compensation expense, higher volumes
and merit increases. Purchased transportation expense increased 15% in the third
quarter and 6% in the nine months of 2021 primarily due to higher utilization of
third-party purchased transportation and rail providers.

Fuel expense decreased 21% in the third quarter and 33% in the nine months of
2021 primarily due to lower fuel prices. The net impact of fuel had a moderately
negative impact to operating income in the third quarter and nine months of 2021
as lower fuel surcharges outpaced decreased fuel prices. See the "Fuel" section
of this MD&A for a description and additional discussion of the net impact of
fuel on our operating results.

                                     - 38 -

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FINANCIAL CONDITION

LIQUIDITY

Cash and cash equivalents totaled $8.9 billion at February 28, 2021, compared to
$4.9 billion at May 31, 2021. The following table provides a summary of our cash
flows for the nine-month periods ended February 28, 2021 and February 29, 2020
(in millions):

                                                         2021         2020
Operating activities:
Net income                                             $  3,363     $  1,620
Noncash charges and credits                               5,479        4,944
Changes in assets and liabilities                        (1,450 )     (3,286 )
Cash provided by operating activities                     7,392        

3,278


Investing activities:
Capital expenditures                                     (4,202 )     (4,705 )
Business acquisitions, net of cash acquired                (225 )          -
Proceeds from asset dispositions and other                   88           

15


Cash used in investing activities                        (4,339 )     (4,690 )
Financing activities:
Proceeds from short-term borrowings, net                      -          298
Principal payments on debt                                 (105 )     (1,045 )
Proceeds from debt issuances                                970        2,093
Proceeds from stock issuances                               482           38
Dividends paid                                             (513 )       (509 )
Purchase of treasury stock                                    -           (3 )
Other, net                                                  (13 )         (5 )
Cash provided by financing activities                       821          

867


Effect of exchange rate changes on cash                     101           (8 )
Net increase (decrease) in cash and cash equivalents   $  3,975     $   (553 )
Cash and cash equivalents at the end of period         $  8,856     $  1,766


Cash flows from operating activities increased $4.1 billion in the nine months
of 2021 primarily due to higher net income, the timing of variable incentive
compensation payments and lower pension contributions. Capital expenditures
decreased during the nine months of 2021 primarily due to lower spending related
to vehicles across all of our transportation segments. See the "Capital
Resources" section of this MD&A for a discussion of capital expenditures during
2021 and 2020.

During August 2020, FedEx Express issued $970 million of Pass Through
Certificates, Series 2020-1AA (the "Certificates") with a fixed interest rate of
1.875% due in February 2034 utilizing pass through trusts. The Certificates are
secured by 19 Boeing aircraft. The payment obligations of FedEx Express in
respect of the Certificates are fully and unconditionally guaranteed by FedEx.
FedEx Express is using the proceeds from the issuance for general corporate
purposes. See Note 4 of the accompanying consolidated financial statements for
additional information regarding the terms of the Certificates.

                                     - 39 -

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CAPITAL RESOURCES



Our operations are capital intensive, characterized by significant investments
in aircraft, vehicles and trailers, technology, facilities, and package handling
and sort equipment. The amount and timing of capital additions depend on various
factors, including pre-existing contractual commitments, anticipated volume
growth, domestic and international economic conditions, new or enhanced
services, geographical expansion of services, availability of satisfactory
financing and actions of regulatory authorities.

The following table compares capital expenditures by asset category and
reportable segment for the periods ended February 28, 2021 and February 29, 2020
(in millions):

                                                                                                 Percent Change
                                                                                                    2021/2020
                                   Three Months Ended          Nine Months Ended         Three Months        Nine Months
                                    2021          2020          2021         2020           Ended               Ended
Aircraft and related equipment   $      536      $   399     $    1,809     $ 1,527                 34                 18
Package handling and ground
support equipment                       304          228            865         636                 33                 36
Vehicles and trailers                   139          260            280         920                (47 )              (70 )
Information technology                  189          239            560         704                (21 )              (20 )
Facilities and other                    208          313            688         918                (34 )              (25 )
Total capital expenditures       $    1,376      $ 1,439     $    4,202     $ 4,705                 (4 )              (11 )

FedEx Express segment            $      732      $   929     $    2,564     $ 2,941                (21 )              (13 )
FedEx Ground segment                    349          275            940         818                 27                 15
FedEx Freight segment                   130           97            228         414                 34                (45 )
FedEx Services segment                  145          110            392         415                 32                 (6 )
Other                                    20           28             78         117                (29 )              (33 )
Total capital expenditures       $    1,376      $ 1,439     $    4,202     $ 4,705                 (4 )              (11 )


Capital expenditures decreased during the nine months of 2021 primarily due to
lower spending related to vehicles across all of our transportation segments, as
well as lower spending related to facilities at FedEx Express, partially offset
by higher spending related to aircraft at FedEx Express and increased spending
on package handling equipment at FedEx Ground.

GUARANTOR FINANCIAL INFORMATION



We are providing the following information in compliance with Rule 13-01 of
Regulation S-X, "Financial Disclosures about Guarantors and Issuers of
Guaranteed Securities" with respect to our senior unsecured debt securities and
the Certificates. As of February 28, 2021, we had outstanding $22.0 billion of
senior unsecured debt securities and $944 million of Certificates.

Substantially all of the senior unsecured notes were issued by FedEx under a
shelf registration statement and are guaranteed by certain direct and indirect
subsidiaries of FedEx ("Guarantor Subsidiaries"). FedEx owns, directly or
indirectly, 100% of each Guarantor Subsidiary. The guarantees are (1) unsecured
obligations of the respective Guarantor Subsidiary, (2) rank equally with all of
their other unsecured and unsubordinated indebtedness, and (3) are full and
unconditional and joint and several. If we sell, transfer or otherwise dispose
of all of the capital stock or all or substantially all of the assets of a
Guarantor Subsidiary to any person that is not an affiliate of FedEx, the
guarantee of that Guarantor Subsidiary will terminate and holders of debt
securities will no longer have a direct claim against such subsidiary under the
guarantee.

Additionally, FedEx fully and unconditionally guarantees the payment obligations
of FedEx Express in respect of the Certificates. See Note 6 to the financial
statements included in our Annual Report for additional information regarding
the terms of the senior unsecured debt securities and Note 4 of the accompanying
consolidated financial statements for additional information regarding the terms
of the Certificates.

                                     - 40 -

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The following tables present summarized financial information for FedEx (as Parent) and the Guarantor Subsidiaries on a combined basis after transactions and balances within the combined entities have been eliminated.


                       Parent and Guarantor Subsidiaries

The following table presents the summarized balance sheet information as of February 28, 2021 and May 31, 2020 (in millions):





                           February 28,      May 31,
                               2021            2020
Current Assets            $       14,277     $ 11,014
Intercompany Receivable            4,443        3,985
Total Assets                      87,174       62,089
Current Liabilities                9,393        7,030
Intercompany Payable                   -          519
Total Liabilities                 54,330       49,844

The following table presents the summarized statement of income information for the nine-month period ended February 28, 2021 (in millions):





Revenue                      $ 44,991
Intercompany Charges, net      (2,060 )
Operating Income                2,967
Intercompany Charges, net         107
Income Before Income Taxes      3,187
Net Income                   $  2,692

The following tables present summarized financial information for FedEx (as Parent Guarantor) and FedEx Express (as Subsidiary Issuer) on a combined basis after transactions and balances within the combined entities have been eliminated.


                     Parent Guarantor and Subsidiary Issuer

The following table presents the summarized balance sheet information as of February 28, 2021 and May 31, 2020 (in millions):





                           February 28,      May 31,
                               2021            2020
Current Assets            $        7,213     $  4,444
Intercompany Receivable                -        3,918
Total Assets                      65,473       57,375
Current Liabilities                4,934        3,546
Intercompany Payable               5,193        7,853
Total Liabilities                 46,327       45,140



The following table presents the summarized statement of income information for the nine-month period ended February 28, 2021 (in millions):





Revenue                      $ 17,048
Intercompany Charges, net        (764 )
Operating Income                  833
Intercompany Charges, net         418
Income Before Income Taxes      2,399
Net Income                   $  2,332


                                     - 41 -

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LIQUIDITY OUTLOOK

In response to current business and economic conditions as referenced above in
the "Outlook" section of this MD&A, we have and will continue to actively manage
our cash flow and seek to protect capital for unforeseen challenges from the
ongoing pandemic. With $8.9 billion in cash and $3.5 billion in available
liquidity under our $2.0 billion five-year credit agreement (the "Five-Year
Credit Agreement") and $1.5 billion 364-day credit agreement ("the 364-Day
Credit Agreement" and together with the Five-Year Credit Agreement, the "Credit
Agreements"), we believe that our cash and cash equivalents, cash flow from
operations and available financing sources will be adequate to meet internal and
external liquidity needs, including our capital expenditure expectations
discussed below. As business and economic conditions improve, we will be
evaluating our capital allocation strategy with a priority on strengthening our
balance sheet.

Our cash and cash equivalents balance at February 28, 2021 includes $2.4 billion
of cash in foreign jurisdictions associated with our permanent reinvestment
strategy. We are able to access the majority of this cash without a material tax
cost, as the enactment of the TCJA significantly reduced the cost of
repatriating foreign earnings from a U.S. tax perspective. We do not believe
that the indefinite reinvestment of these funds impairs our ability to meet our
U.S. domestic debt or working capital obligations.

Our capital expenditures are expected to be approximately $5.7 billion in 2021,
a $0.2 billion decrease from 2020. The increase in our expected capital
expenditures from the estimate in our Annual Report is driven by timing of
aircraft spend and acceleration of FedEx Ground capacity investments. Total
capital expenditures will include aircraft modernization at FedEx Express and
strategic investments to improve productivity and safety. We invested $1.8
billion in aircraft and related equipment in the nine months of 2021 and expect
to invest an additional $460 million for aircraft and related equipment during
the fourth quarter of 2021. In addition, we are making investments over multiple
years of approximately $1.5 billion to significantly expand the FedEx Express
Indianapolis hub and approximately $1.5 billion to modernize the FedEx Express
Memphis World Hub. We expect these investments in hubs will provide productivity
gains. We anticipate that our cash flow from operations will be sufficient to
fund our capital expenditures for the remainder of 2021. Historically, we have
been successful in obtaining unsecured financing from both domestic and
international sources, although the marketplace for such investment capital can
become restricted depending on a variety of economic factors.

During the first quarter of 2021, FedEx Express executed a contract amendment
rescheduling Boeing 767-300 Freighter aircraft deliveries as follows: 2021 - 18
aircraft; 2022 - 11 aircraft; 2023 - 13 aircraft; and 2024 - 4 aircraft.

We have a shelf registration statement filed with the Securities and Exchange
Commission ("SEC") that allows us to sell, in one or more future offerings, any
combination of our unsecured debt securities and common stock and allows pass
through trusts formed by FedEx Express to sell, in one or more future offerings,
pass through certificates.

A key aspect of our capital allocation strategy moving forward will be
strengthening our balance sheet and repayment of outstanding debt. Given our
strong cash flows and liquidity position, we are evaluating potential
transactions to reduce and refinance existing debt. The timing of and our
ability to complete any such transactions will depend on a variety of factors,
including economic and market conditions, and we would incur costs related to
these transactions, which may be material.

The Five-Year Credit Agreement expires in March 2026 and includes a $250 million
letter of credit sublimit. The 364-Day Credit Agreement expires in March 2022.
The Credit Agreements are available to finance our operations and other cash
flow needs. See Note 1 and Note 4 of the accompanying unaudited condensed
consolidated financial statements, as well as Part II, Item 5 ("Other
Information"), for a description of the terms and significant covenants of the
Credit Agreements.

During the nine months of 2021, we made voluntary contributions totaling $300
million to our U.S. Pension Plans. We do not expect to make any additional
contributions to our U.S. Pension Plans during the fourth quarter of 2021. Our
U.S. Pension Plans have ample funds to meet expected benefit payments.

Standard & Poor's has assigned us a senior unsecured debt credit rating of BBB,
a commercial paper rating of A-2 and a ratings outlook of "negative." Moody's
Investors Service has assigned us an unsecured debt credit rating of Baa2, a
commercial paper rating of P-2 and a ratings outlook of "negative." If our
credit ratings drop, our interest expense may increase. If our commercial paper
ratings drop below current levels, we may have difficulty utilizing the
commercial paper market. If our senior unsecured debt credit ratings drop below
investment grade, our access to financing may become limited.

CONTRACTUAL CASH OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

There have been no material changes to the contractual commitments described in Part II, Item 7 in our Annual Report.



We do not have any guarantees or other off-balance sheet financing arrangements,
including variable interest entities, which we believe could have a material
impact on our financial condition or liquidity.

                                     - 42 -

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See Note 9 of the accompanying unaudited condensed consolidated financial statements for additional information on our purchase commitments.

OTHER BUSINESS MATTERS

On June 24, 2019, FedEx filed suit in U.S. District Court in the District of Columbia seeking to enjoin the U.S. Department of Commerce (the "DOC") from enforcing prohibitions contained in the Export Administration Regulations against FedEx. On September 11, 2020, the court granted the DOC's motion to dismiss the lawsuit. On November 5, 2020, we appealed this decision.

CRITICAL ACCOUNTING ESTIMATES



The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make significant
judgments and estimates to develop amounts reflected and disclosed in the
financial statements. In many cases, there are alternative policies or
estimation techniques that could be used. We maintain a thorough process to
review the application of our accounting policies and to evaluate the
appropriateness of the many estimates that are required to prepare the financial
statements of a complex, global corporation. However, even under optimal
circumstances, estimates routinely require adjustment based on changing
circumstances and new or better information.

GOODWILL. Goodwill is tested for impairment between annual tests whenever events
or circumstances make it more likely than not that the fair value of a reporting
unit has fallen below its carrying value. We do not believe there has been any
other change of events or circumstances that would indicate that a reevaluation
of the goodwill of our reporting units is required as of February 28, 2021, nor
do we believe the goodwill of our reporting units is at risk of failing
impairment testing. For additional details on goodwill impairment testing, refer
to Note 1 to the financial statements included in our Annual Report.

Information regarding our critical accounting estimates can be found in our Annual Report, including Note 1 to the financial statements therein. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors and with our independent registered public accounting firm.

FORWARD-LOOKING STATEMENTS



Certain statements in this report, including (but not limited to) those
contained in "Business Realignment Costs," "Income Taxes," "Outlook" and
"Liquidity Outlook" and the "General," "Financing Arrangements," "Income Taxes,"
"Retirement Plans," "Commitments" and "Contingencies" notes to our unaudited
condensed consolidated financial statements, are "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to our financial condition, results of operations, cash flows, plans,
objectives, future performance and business and the assumptions underlying such
statements. Forward-looking statements include those preceded by, followed by or
that include the words "will," "may," "could," "would," "should," "believes,"
"expects," "anticipates," "plans," "estimates," "targets," "projects," "intends"
or similar expressions. These forward-looking statements involve risks and
uncertainties. Actual results may differ materially from those contemplated
(expressed or implied) by such forward-looking statements because of, among
other things, potential risks and uncertainties, such as:

• the negative impacts of the COVID-19 pandemic;

• economic conditions in the global markets in which we operate;

• significant changes in the volumes of shipments transported through our

networks, customer demand for our various services or the prices we obtain for


   our services;



• anti-trade measures and additional changes in international trade policies and


   relations;



• a significant data breach or other disruption to our technology


   infrastructure;



• our ability to successfully integrate the businesses and operations of FedEx

Express and TNT Express in the expected time frame and at the expected cost


   and to achieve the expected benefits from the combined businesses;



• our ability to successfully implement our workforce reduction plan in Europe;

• our ability to continue to transform and optimize the FedEx Express


   international business, particularly in Europe;



• our ability to successfully implement our business strategy, effectively

respond to changes in market dynamics and achieve the anticipated benefits and


   associated cost savings of such strategies and actions;


                                     - 43 -

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• damage to our reputation or loss of brand equity;

• our ability to retain and attract employee talent and maintain our company


   culture;



• the impact of the United Kingdom's withdrawal from the European Union and the


   terms of their future trading relationship;



• the price and availability of jet and vehicle fuel;

• our ability to manage our network capacity and cost structure for capital


   expenditures and operating expenses, and match it to shifting and future
   customer volume levels;



• the impact of intense competition on our ability to maintain or increase our

prices (including our fuel surcharges in response to rising fuel costs) or to


   maintain or grow our revenue and market share;



• any impacts on our businesses resulting from evolving or new U.S. domestic or

international government regulations, laws, policies and actions, which could

be unfavorable to our business, including regulatory or other actions

affecting data privacy and sovereignty, global aviation or other

transportation rights, increased air cargo, pilot flight and duty time and

other security or safety requirements, export controls, the use of new

technology and accounting, trade (such as protectionist measures or

restrictions on free trade), foreign exchange intervention in response to

currency volatility, labor (such as joint employment standards, changes to the

Railway Labor Act of 1926, as amended, affecting FedEx Express employees or

increased minimum wage requirements), environmental (such as global climate


   change legislation) or postal rules;



• future changes in tax laws and regulations, interpretations, challenges or


   judicial decisions related to our tax positions;



• our ability to execute and effectively operate, integrate, leverage and grow

acquired businesses such as ShopRunner; to incorporate novel aspects of

acquired businesses into FedEx's operations, including with respect to the

collection and storage of certain personal data of merchants, buyers, and

others; and to continue to support the value we allocate to these acquired

businesses, including their goodwill and other intangible assets; as well as


   additional costs incurred in connection with the integration of acquired
   businesses;



• our ability to maintain good relationships with our employees and avoid

attempts by labor organizations to organize groups of our employees, which

could significantly increase our operating costs and reduce our operational


   flexibility;



• the impact of costs related to lawsuits in which it is alleged that FedEx


   Ground should be treated as an employer of drivers employed by service
   providers engaged by FedEx Ground;



• increased insurance and claims expenses related to vehicle accidents, workers'


   compensation claims and general business liabilities;



• any impact on our business from disruptions or modifications in service by, or

changes in the business or financial soundness of, the U.S. Postal Service,


   which is a significant customer of FedEx;




•  the impact of any international conflicts or terrorist activities on the

United States and global economies in general, the transportation industry or

us in particular, and what effects these events will have on our costs or the


   demand for our services;



• our ability to quickly and effectively restore operations following adverse

weather or a localized disaster or disturbance in a key geography, which have


   become more prevalent in recent years;



• our ability to achieve our goal of carbon-neutral operations by 2040;

• increasing costs, the volatility of costs and funding requirements and other


   legal mandates for employee benefits, especially pension and healthcare
   benefits;



• our ability to successfully mitigate unique technological, operational and


   regulatory risks related to our autonomous delivery strategy;




                                     - 44 -

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• constraints, volatility or disruption in the capital markets and our ability

to obtain financing and maintain our current credit ratings, commercial paper

ratings, senior unsecured debt credit ratings and Credit Agreement financial


   covenants;



• widespread outbreak of an illness or any other communicable disease, or any


   other public health crisis;



• human resource management risks, including changes in our ability to attract

and retain drivers, package and freight handlers, commercial pilots and other


   employees, as well as health and safety issues;



• the increasing costs of compliance with federal, state and foreign

governmental agency mandates (including the Foreign Corrupt Practices Act and


   the U.K. Bribery Act) and defending against inappropriate or unjustified
   enforcement or other actions by such agencies;



• changes in foreign currency exchange rates, especially in the euro, Chinese

yuan, British pound, Canadian dollar, Australian dollar and Mexican peso,


   which can affect our sales levels and foreign currency sales prices;



• any liability resulting from and the costs of defending against class-action,

derivative and other litigation, such as wage-and-hour, joint employment,

securities and discrimination and retaliation claims, and any other legal or

governmental proceedings, including the matters discussed in Note 10 of the


   accompanying unaudited condensed consolidated financial statements;



• the outcome of future negotiations to reach new collective bargaining

agreements - including with the union that represents the pilots of FedEx

Express (the current pilot agreement is scheduled to become amendable in

November 2021) and with the union elected in 2015 to represent drivers at a

FedEx Freight, Inc. facility in the U.S.;



• the impact of technology developments on our operations and on demand for our

services, and our ability to continue to identify and eliminate unnecessary

information-technology redundancy and complexity throughout the organization;

• the alternative interest rates we are able to negotiate with counterparties

pursuant to the relevant provisions of our Credit Agreements following

cessation of the publication of the London Interbank Offered Rate in the event

the euro interbank offered rate also ceases to exist and we make borrowings


   under the agreements; and




•  other risks and uncertainties you can find in our press releases and SEC

filings, including the risk factors identified under the heading "Risk

Factors" in "Management's Discussion and Analysis of Results of Operations and

Financial Condition" in our Annual Report, as updated by our quarterly reports

on Form 10-Q.




As a result of these and other factors, no assurance can be given as to our
future results and achievements. Accordingly, a forward-looking statement is
neither a prediction nor a guarantee of future events or circumstances and those
future events or circumstances may not occur. You should not place undue
reliance on the forward-looking statements, which speak only as of the date of
this report. We are under no obligation, and we expressly disclaim any
obligation, to update or alter any forward-looking statements, whether as a
result of new information, future events or otherwise.

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