The news
FedEx will expand Network 2.0 to Los Angeles, Charlotte and Oklahoma City after the holiday peak. The overhaul combines Ground and Express parcel operations, allowing the two networks to share stations, vehicles and delivery routes.
FedEx enters peak with nearly 65% of eligible volume running through the model, meeting the target it set before the holiday season.
About 630 FedEx stations now run on Network 2.0.
FedEx has already converted Dallas, San Francisco, Phoenix and Washington, DC.
The details
FedEx hit its pre-peak conversion goal and will pause the rollout until early 2027, as it has in the past two years. The share of eligible volume on Network 2.0 has nearly tripled since December, when it stood at 24%.
“As we have done in the past two years, we will pause implementation until early 2027,” said Raj Subramaniam, FedEx’s CEO, in June.
The share rose to 35% in March, 45% in June and nearly 65% in October.
FedEx completed its Canada rollout last year.
The company expects Network 2.0 and related initiatives to generate about $1 billion in savings by the end of this year and $2 billion by the end of 2027.
Dallas, one of the first major markets to complete the transition, shows how the operating model changes. Ground and Express parcels now share buildings and delivery vehicles.
“One truck in one neighborhood instead of three trucks,” said Johnne Moore, FedEx’s district managing director for East Texas.
At the Mesquite, Texas, station, contracted service providers now deliver some time-definite shipments previously handed by FedEx-employed couriers.
FedEx said a converted market typically takes three to six months to regain its efficiency.
The consolidation also means fewer stations and changes for workers. FedEx plans to close more than 475 stations by the end of 2027, about 30% of its footprint. It has closed more than 260 so far.
Four facilities in Moore's East Texas district have closed, with staff relocating or taking severance.
FedEx's restructuring costs last quarter went mostly toward severance, incentive payments to contracted service providers and professional services.
At the same time, FedEx is paying more for the trucks that move freight between its buildings. It expects about $130 million in extra linehaul costs this quarter.
Interim CFO Claude Russ attributed higher rates to "the broader tightening in the labor market for truck drivers from recent regulatory changes."
CEO Raj Subramaniam said the network overhaul “is leading to tighter capacity utilization across our surface network.”
Worth noting
FedEx’s service performance improved during last year’s peak, the first holiday season with meaningful volume running through Network 2.0. ShipMatrix put FedEx’s on-time delivery rate at 95.3% in December 2025, up from 91.8% a year earlier. This will be the first peak with most eligible volume on the new model.
What peers are doing
UPS is closing buildings as it reshapes operations. The company said in January it planned to cut up to 30,000 operational jobs in 2026 and close 22 facilities with Teamsters-represented workers.
What’s next
FedEx plans to resume conversions in early 2027 and complete Network 2.0 that year. It is targeting $2 billion in savings from the overhaul and related initiatives by year-end 2027.
(Photo: Matthew LeJune / Unsplash)
