In air cargo capital, no fear over shipping rules

MEMPHIS, Tenn. – As the busiest shipping season of the year begins, the specter of tighter security measures on air shipping after last month's international mail-bomb scare might have sent a shiver through FedEx's hometown.

It might have, if Memphians hadn't spent decades watching the company's planes fly into and out of what has grown into the world's busiest cargo airport, and seeing its delivery trucks heading out in all directions, and generally spotting its name all over this Mississippi River city.

"Everywhere you look, FedEx is into everything here," basketball fan Matt Hine said as he stood in the bustling lobby of the $250 million FedExForum, built six years ago to lure the Vancouver Grizzlies in a move that gave Memphis a status-affirming pro sports franchise.

The Memphis economy relies on FedEx for 30,000 jobs and the billions of dollars of business FedEx creates at Memphis International Airport. FedEx shipped 98 percent of cargo put aboard an airplane in 2007 at the airport, which had a $28.6 billion impact on the area that year, according to a 2009 study commissioned by the airport.

The Memphis identity relies on FedEx and a handful of other major companies, notably International Paper, AutoZone Inc. and The ServiceMaster Co., to lend enough prestige to push interest in the city beyond the cliche — blues, barbecue and Elvis. Those firms fuel confidence in residents and feelings of grandeur in politicians and other civic boosters in a place that has big-city aspirations and big-city problems but still evokes a small-town Southern feel, more New Orleans than Atlanta.

Hine, 38, works in printing, making note pads and menus for the hospitality industry, and he praised FedEx Corp. for its speedy deliveries overseas. As a Memphian, he's also keenly aware of the economic impact the company has on Memphis, and like many others here, he has confidence in FedEx's ability to deal with adversity.

"Them having to fire anyone, that's never concerned me," he said. "It's because of FedEx that Memphis has grown like it has."

So it raised eyebrows here when intelligence officials last month narrowly thwarted a mail-bomb plot blamed on al-Qaida, stopping two explosive packages carrying printer cartridges shipped from Yemen through UPS and FedEx before they could blow up airplanes. Company employees in Yemen were not required to X-ray the printer cartridges the explosives were hidden inside. Instead, they looked at the printers and sent them off, U.S. officials said.

The episode led the Obama administration to announce new cargo rules banning freight out of Yemen and Somalia. It also restricted the shipment of printer and toner cartridges weighing more than a pound on all passenger flights and some cargo flights. Overall cargo security rules were unchanged.

Congress is expected to look at whether more drastic changes are needed to improve air cargo security. U.S. Rep. Steve Cohen, D-Memphis, said he plans to speak with FedEx officials and said the security issue would "unquestionably" be discussed in the House.

All of that raises the question of whether shipping companies such as FedEx may have to cut costs or even jobs to pay for scanning technology. FedEx spokesman Maury Lane said the company is providing no cost estimates for any security measures it may have to implement.

Academics and financial analysts who closely track FedEx say the likelihood that it will have to cut U.S. jobs is quite small, mainly because FedEx will likely pass the costs along to its consumers through rate increases.

American customers could see two other changes. First, sending and receiving packages overseas could get more expensive. Second, it may take a while longer to get that framed picture of your cousins who live in Japan.

"Now, maybe instead of guaranteeing 10 a.m. delivery, it might become like the cable company: 'We'll be there from 10 a.m. to 2 p.m.,'" said Kevin W. Sterling, an analyst with BB&T Capital Markets.

FedEx has a history of dealing with adversity, having weathered the financial fallout from the Sept. 11 attacks to retain its status as the world's second-largest package delivery company, after Atlanta-based UPS Inc.

And it has a history of helping Memphis survive tough times as well. For years, FedEx has lent a hand to Youth Villages, which provides residential treatment, an adoption program and foster care services for children in need.

Volunteers from FedEx have helped kids in the program celebrate birthdays and learn career preparation, and have helped spruce up cottages where children receive residential treatment, said Richard Shaw, chief development officer for Youth Villages.

"Speaking as someone who lives near the airport, I say a prayer when I hear those jets taking off every night," Shaw said. "A good friend of mine once said that Memphis would be like Shreveport had it not been for FedEx ... Most Memphians say thank God for FedEx."