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Fred Smith Has Lift-Off: The Beginnings of Federal Express

Article Overview: “By the early '70s when I'd gotten out of the service it was very clear that this new society was coming in earnest,” recalls Smith. “And so, at that point I said, ‘What the hell, let's try to put it together.’” After leaving the U.S. Marine Corps, Smith purchased a controlling interest in Ark Aviation Sales, a company that focused on aircraft maintenance. This was the first step towards realizing his goal of what would soon become Federal Express.

Fred Smith Has Lift-Off: The Beginnings of Federal Express

“By the early '70s when I'd gotten out of the service it was very clear that this new society was coming in earnest,” recalls Smith. “And so, at that point I said, ‘What the hell, let's try to put it together.’” After leaving the U.S. Marine Corps, Smith purchased a controlling interest in Ark Aviation Sales, a company that focused on aircraft maintenance. This was the first step towards realizing his goal of what would soon become Federal Express.

Smith reoriented Ark Aviation Sales, turning its focus towards trading used jets. On June 18, 1971, Smith officially created Federal Express using $4 million in inheritance and $91 million in venture capital. “The solution was, in my mind, to have an integrated air and ground system, which had never been done,” says Smith. “And to operate not on a linear basis, where you try to take things from one point to another, but operate in a systemic manner.”

Smith compared his business idea to that of a bank clearing house, whereby one bank clearing house would be located in the middle of all the banks and representatives would all be sent to the central location to exchange materials. “That had been done in transportation before: the Indian post office, the French post office,” says Smith. “American Airlines had tried a system like that shortly after World War II. But the demand side and supply side had really not met at an appropriate level of maturation.”

Federal Express was Smith’s response to what he saw as a pressing – and growing – need. Smith’s hunch about the changing trends in society was correct. Just two years after the company was first formed, it was already offering service to over 25 cities and was experiencing tremendous growth.
“And that's how FedEx came to be,” says Smith. “And then from that point forward, the requirements for this type of system were so profound and so big, really for the next 25 years to this date we've simply been running just to keep up with the requirements. And that's what led to the hundreds of planes and the thousands of trucks.”

Today, Federal Express employs some 275,000 workers and earns over $32 billion in revenue. It was the first overnight express delivery company in the world, and continues to be the largest in the U.S. Indeed, few businesses today would be where they are now were it not for the idea that Smith first penned in his Yale University essay and worked tirelessly to put into practice.

Smith remains active in the running of the company as its Chairman, President and CEO, but is modest about the success he has achieved thus far. “I wish it was something that I could say I was so smart,” he says. “It was just like Pogo the Possum said, ‘If you want to be a great leader, find a big parade and run in front of it.’ And that's what we've been doing for the last quarter century.”

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Article Tags: aircraft maintenance, american airlines, aviation sales, business idea, central location, clearing house, controlling interest, federal express, fedex, fred smith, hunch, indian post office, inheritance, jets, liftoff, maturation, offering service, u s marine corps, venture capital, world war ii



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