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FedEx was founded as Federal Express Corporation in 1971, by 28-year-old Memphis, Tennessee, native Frederick W. Smith. Smith, a former Marine pilot, originally outlined his idea for an overnight delivery service in a term paper he wrote for a Yale University economics class.
He felt that air freight had different requirements than air passenger service and that a company specializing in air freight rather than making it an add-on to passenger service would find a lucrative business niche. Speed was more important than cost, in Smith's view, and access to smaller cities was essential. His strategies included shipping all packages through a single hub and building a private fleet of aircraft. Company-owned planes would free the service from commercial-airline schedules and shipping regulations, while a single hub would permit the tight control that got packages to their destinations overnight. In making his dream a reality, Smith selected Memphis as his hub: it was centrally located and despite inclement weather, its modern airport rarely closed.
Smith supplemented a $4 million inheritance from his father with $91 million in venture capital to get his idea off the ground. In 1973 FedEx began service in 25 cities with a fleet of 14 Dassault Falcon aircraft and 389 employees. The planes, which were relatively small in size, collected packages from airports every night and brought them to Memphis, where they were immediately sorted. They were then flown to airports close to their destination and delivered by FedEx trucks the following morning.
Deregulation of airlines in 1977 meant the company could fly anywhere in the United States anytime, and use larger aircraft like 727s, and later, DC-10s. FedEx bought a fleet of used 727-1OOCs, using its Falcons to expand into small- and medium-sized markets. In 1978, with its prospects looking solid, FedEx went public, selling its first shares on the New York Stock Exchange. The move raised needed capital and gave the company's backers a chance to gain back a portion of their initial investment.
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