UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
NOVEMBER 30, 2007 OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM                      TO                     

Commission File Number: 1-7806

FEDERAL EXPRESS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	71-0427007
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3610 Hacks Cross Road
Memphis, Tennessee	38125
(Address of principal executive offices)	(ZIP Code)

(901) 369-3600
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ

The number of shares of common stock outstanding as of December 17, 2007 was 1,000. The Registrant is a wholly owned subsidiary of FedEx Corporation, and there is no market for the Registrant’s common stock.

The Registrant meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by General Instruction H(2).

FEDERAL EXPRESS CORPORATION

INDEX

PART I. FINANCIAL INFORMATION

	PAGE
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets November 30, 2007 and May 31, 2007		3-4
Condensed Consolidated Statements of Income Three and Six Months Ended November 30, 2007 and 2006		5
Condensed Consolidated Statements of Cash Flows Six Months Ended November 30, 2007 and 2006		6
Notes to Condensed Consolidated Financial Statements		7-12
Report of Independent Registered Public Accounting Firm		13
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		14-20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		21
ITEM 4. Controls and Procedures		21
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings		22
ITEM 1A. Risk Factors		22
ITEM 6. Exhibits		22
Signature		23
Exhibit Index		E-1
Exhibit 12.1
Exhibit 15.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

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FEDERAL EXPRESS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)

	November 30,
	2007		May 31,
ASSETS	(Unaudited)		2007
CURRENT ASSETS
Cash and cash equivalents	$	297	$	257
Receivables, less allowances of $60 and $61		1,654		1,429
Spare parts, supplies and fuel, less allowances of $161 and $156		306		269
Deferred income taxes		399		404
Due from other FedEx subsidiaries		312		432
Prepaid expenses and other		120		125
Total current assets		3,088		2,916
PROPERTY AND EQUIPMENT, AT COST		17,584		16,905
Less accumulated depreciation and amortization		9,288		8,988
Net property and equipment		8,296		7,917
OTHER LONG-TERM ASSETS
Due from parent company		4,104		3,832
Goodwill		919		901
Intangibles and other assets		484		466
Total other long-term assets		5,507		5,199
	$	16,891	$	16,032

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FEDERAL EXPRESS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)

	November 30,
	2007		May 31,
LIABILITIES AND OWNER’S EQUITY	(Unaudited)		2007
CURRENT LIABILITIES
Current portion of long-term debt	$	86	$	88
Accrued salaries and employee benefits		709		824
Accounts payable		1,579		1,329
Accrued expenses		895		931
Due to parent company and other FedEx subsidiaries		259		265
Total current liabilities		3,528		3,437
LONG-TERM DEBT, LESS CURRENT PORTION		744		745
OTHER LONG-TERM LIABILITIES
Deferred income taxes		736		705
Pension, postretirement healthcare and other benefit obligations		700		669
Self-insurance accruals		575		569
Deferred lease obligations		578		606
Deferred gains, principally related to aircraft transactions		327		341
Other liabilities		117		55
Total other long-term liabilities		3,033		2,945
COMMITMENTS AND CONTINGENCIES
OWNER’S EQUITY
Common stock, $0.10 par value; 1,000 shares authorized, issued and outstanding		—		—
Additional paid-in capital		479		484
Retained earnings		8,998		8,373
Accumulated other comprehensive income		109		48
Total owner’s equity		9,586		8,905
	$	16,891	$	16,032

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FEDERAL EXPRESS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN MILLIONS)

	Three Months Ended						Six Months Ended
	November 30,						November 30,
	2007			2006			2007			2006
REVENUES	$	5,993		$	5,653		$	11,844		$	11,254
OPERATING EXPENSES:
Salaries and employee benefits		2,012			2,071			4,025			4,028
Purchased transportation		299			269			578			532
Rentals and landing fees		413			390			821			784
Depreciation and amortization		231			205			458			407
Fuel		872			716			1,672			1,514
Maintenance and repairs		375			364			776			761
Intercompany charges, net		534			524			1,048			1,033
Other		741			625			1,441			1,250
		5,477			5,164			10,819			10,309
OPERATING INCOME		516			489			1,025			945
OTHER INCOME (EXPENSE):
Interest, net		44			44			85			80
Other, net		(50	)		(25	)		(98	)		(48	)
		(6	)		19			(13	)		32
INCOME BEFORE INCOME TAXES		510			508			1,012			977
PROVISION FOR INCOME TAXES		204			190			386			370
NET INCOME	$	306		$	318		$	626		$	607

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FEDERAL EXPRESS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS)

	Six Months Ended
	November 30,
	2007			2006
Operating Activities:
Net income	$	626		$	607
Noncash charges:
Depreciation and amortization		458			407
Other, net		56			26
Changes in operating assets and liabilities, net		(17	)		1,186
Net cash provided by operating activities		1,123			2,226
Investing Activities:
Capital expenditures		(812	)		(769	)
Other		4			1
Net cash used in investing activities		(808	)		(768	)
Financing Activities:
Principal payments on debt		(3	)		(23	)
Net payments to parent company		(272	)		(1,456	)
Net cash used in financing activities		(275	)		(1,479	)
Net increase (decrease) in cash and cash equivalents		40			(21	)
Cash and cash equivalents at beginning of period		257			217
Cash and cash equivalents at end of period	$	297		$	196

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FEDERAL EXPRESS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) General

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of Federal Express Corporation (“FedEx Express”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, the instructions to Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2007 (“Annual Report”). Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of November 30, 2007 and the results of our operations for the three- and six-month periods ended November 30, 2007 and 2006 and our cash flows for the six-month periods ended November 30, 2007 and 2006. Operating results for the three- and six-month periods ended November 30, 2007 are not necessarily indicative of the results that may be expected for the year ending May 31, 2008.

We are a wholly owned subsidiary of FedEx Corporation (“FedEx”) engaged in a single line of business and operate in one business segment — the worldwide express transportation and distribution of goods and documents.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2008 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

STOCK-BASED COMPENSATION. FedEx has two types of equity-based compensation: stock options and restricted stock. The key terms of the stock option and restricted stock awards granted under FedEx’s incentive stock plans are set forth in FedEx’s Annual Report.

FedEx uses the Black-Scholes pricing model to calculate the fair value of stock options. The value of restricted stock awards is based on the price of the stock on the grant date. We recognize stock-based compensation on a straight-line basis over the requisite service period of the award in the “Salaries and employee benefits” caption of our condensed consolidated income statement.

Our total share-based compensation expense was $7 million for the three months ended November 30, 2007 and $15 million for the six months ended November 30, 2007. Our total share-based compensation expense was $7 million for the three months ended November 30, 2006 and $14 million for the six months ended November 30, 2006. This amount represents the amount charged to us by FedEx for awards granted to our employees.

NEW ACCOUNTING PRONOUNCEMENTS. New accounting rules and disclosure requirements can significantly impact the comparability of our financial statements. We believe the following new accounting pronouncements are relevant to the readers of our financial statements.

On June 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes.” This interpretation establishes new standards for the financial statement recognition, measurement and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.

-7-

The cumulative effect of adopting FIN 48 was immaterial. Upon adoption, our liability for income taxes under FIN 48 was $59 million, and the balance of accrued interest and penalties was $21 million. The liability recorded includes $49 million associated with positions that if favorably resolved would provide a benefit to our effective tax rate. We classify interest related to income tax liabilities as interest expense, and if applicable, penalties are recognized as a component of income tax expense. These income tax liabilities and accrued interest and penalties are presented as noncurrent liabilities because payment of cash is not anticipated within one year of the balance sheet date. These noncurrent income tax liabilities are recorded in the caption “Other liabilities” in our condensed consolidated balance sheets. As of November 30, 2007, there were no material changes to the adoption date disclosures made above.

We file income tax returns in the U.S. and various foreign jurisdictions. The U.S. Internal Revenue Service is currently examining our returns for the 2004 through 2006 tax years. We are no longer subject to U.S. federal income tax examination for years through 2003 except for specific U.S. federal income tax positions that are in various stages of appeal. No resolution date can be reasonably estimated at this time for these audits and appeals. We are also subject to ongoing audits in state, local and foreign tax jurisdictions throughout the world.

It is difficult to predict the ultimate outcome or the timing of resolution for tax positions under FIN 48. Changes may result from the conclusion of ongoing audits or appeals in state, local, federal and foreign tax jurisdictions, or from the resolution of various proceedings between the U.S. and foreign tax authorities. Our liability for tax positions under FIN 48 includes no matters that are individually material to us. It is reasonably possible that the amount of the benefit with respect to certain of our unrecognized tax positions will increase or decrease within the next 12 months, but an estimate of the range of the reasonably possible outcomes cannot be made. However, we do not expect that the resolution of any of our tax positions under FIN 48 will be material.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. (“SFAS”) 157, “Fair Value Measurements,” which provides a common definition of fair value, establishes a uniform framework for measuring fair value and requires expanded disclosures about fair value measurements. The requirements of SFAS 157 are to be applied prospectively, and we anticipate that the primary impact of the standard to us will be related to the measurement of fair value in our recurring impairment test calculations (such as measurements of our recorded goodwill). We do not presently hold any financial assets or liabilities that would require recognition under SFAS 157 other than investments held by our pension plans. SFAS 157 is effective for us beginning June 1, 2008 (fiscal 2009); however, the FASB has proposed a one-year deferral of the adoption of the standard as it relates to non-financial assets and liabilities. Our evaluation of the impact of this standard is ongoing, and we have not yet determined the impact of the standard on our financial condition or results of operations.

In December 2007, the FASB issued SFAS 141R, “Business Combinations,” and SFAS 160, “Accounting and Reporting Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51.” These new standards significantly change the accounting for and reporting of business combination transactions and noncontrolling interests (previously referred to as minority interests) in consolidated financial statements. Both standards are effective for us beginning June 1, 2009 (fiscal 2010) and are applicable only to transactions occurring after the effective date.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. Our pilots, who represent a small number of our total employees, are employed under a collective bargaining agreement. During the second quarter of 2007, the pilots ratified a new four-year labor contract that included signing bonuses and other upfront compensation of approximately $143 million, as well as pay increases and other benefit enhancements. These costs were partially mitigated by reductions in variable incentive compensation.

-8-

(2) Comprehensive Income

The following table provides a reconciliation of net income reported in our financial statements to comprehensive income for the periods ended November 30 (in millions):

	Three Months Ended
	2007		2006
Net income	$	306	$	318
Other comprehensive income:
Foreign currency translation adjustments, net of deferred taxes of $7 in 2007 and $2 in 2006		44		2
Amortization of unrealized pension actuarial gains/losses, net of deferred taxes of $1 in 2007		—		—
Comprehensive income	$	350	$	320

	Six Months Ended
	2007		2006
Net income	$	626	$	607
Other comprehensive income:
Foreign currency translation adjustments, net of deferred taxes of $8 in 2007 and $1 in 2006		60		3
Amortization of unrealized pension actuarial gains/losses, net of deferred taxes of $1 in 2007		1		—
Comprehensive income	$	687	$	610

(3) Retirement Plans

We sponsor or participate in programs that provide retirement benefits to most of our employees. These programs include defined benefit pension plans, defined contribution plans and postretirement healthcare plans. A majority of our employees are covered by the FedEx Corporation Employees’ Pension Plan (“FedEx Plan”), a defined benefit pension plan sponsored by our parent, FedEx. The FedEx Plan covers certain U.S. employees age 21 and over with at least one year of service and provides benefits primarily based on average earnings and years of service. Defined contribution plans covering a majority of U.S. employees and certain international employees are in place. We also sponsor or participate in nonqualified benefit plans covering certain of our U.S. employee groups and other pension plans covering certain of our international employees. For more information, refer to the financial statements of FedEx included in its Form 10-Q for the quarter ended November 30, 2007.

-9-

Our retirement plans costs for the periods ended November 30 were as follows (in millions):

	Three Months Ended				Six Months Ended
	2007		2006		2007		2006
Pension plans sponsored by FedEx	$	39	$	77	$	79	$	154
Other U.S. domestic and international pension plans		9		7		17		13
U.S. domestic and international defined contribution plans		21		23		42		43
Postretirement healthcare plans		13		12		26		23
	$	82	$	119	$	164	$	233

For the plans currently sponsored by us, the components of the net periodic benefit cost of the pension and postretirement healthcare plans were individually immaterial for all periods presented. No material contributions were made during the first half of 2008 or 2007 to pension plans sponsored by us, and we do not expect to make material contributions in 2008.

(4) Commitments

As of November 30, 2007, our purchase commitments for the remainder of 2008 and annually thereafter under various contracts were as follows (in millions):

			Aircraft-
	Aircraft		Related (1)		Other (2)		Total
2008 (remainder)	$	243	$	82	$	17	$	342
2009		930		143		14		1,087
2010		907		132		12		1,051
2011		665		9		11		685
2012		31		—		9		40
Thereafter		—		—		107		107

(1)	Primarily aircraft modifications.
(2)	Primarily advertising and promotions contracts.

-10-

The amounts reflected in the table above for purchase commitments represent non-cancelable agreements to purchase goods or services. Commitments to purchase aircraft in passenger configuration do not include the attendant costs to modify these aircraft for cargo transport unless we have entered into non-cancelable commitments to modify such aircraft. Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.

Deposits and progress payments of $122 million have been made toward aircraft purchases, options to purchase additional aircraft and other planned aircraft-related transactions. Our primary aircraft purchase commitments include the Boeing 757 (“B757”) and Boeing 777 Freighter (“B777F”) aircraft. In addition, we have committed to modify our DC10 aircraft for two-man cockpit configurations. Future payments related to these activities are included in the table above. Aircraft and aircraft-related contracts are subject to price escalations. The following table is a summary of the number and type of aircraft we are committed to purchase as of November 30, 2007, with the year of expected delivery:

	A300		B757		B777F		MD11		Total
2008 (remainder)		3		6		—		—		9
2009		3		14		—		2		19
2010		—		4		6		—		10
2011		—		5		9		—		14
2012		—		3		—		—		3
Total		6		32		15		2		55

A summary of future minimum lease payments under capital leases at November 30, 2007 is as follows (in millions):

2008 (remainder)	$	91
2009		12
2010		95
2011		6
2012		6
Thereafter		117
		327
Less amount representing interest		36
Present value of net minimum lease payments	$	291

A summary of future minimum lease payments under non-cancelable operating leases with an initial or remaining term in excess of one year at November 30, 2007 is as follows (in millions):

	Aircraft and Related		Facilities and
	Equipment		Other		Total
2008 (remainder)	$	376	$	278	$	654
2009		555		496		1,051
2010		544		413		957
2011		526		344		870
2012		504		292		796
Thereafter		3,430		2,323		5,753
	$	5,935	$	4,146	$	10,081

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While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations.

We make payments under certain leveraged operating leases that are sufficient to pay principal and interest on certain pass-through certificates. The pass-through certificates are not our direct obligations, nor do we guarantee them.

(5) Contingencies

Wage-and-Hour. We are a defendant in a number of lawsuits containing various class-action allegations of wage-and-hour violations. The plaintiffs in these lawsuits allege, among other things, that they were forced to work “off the clock,” were not paid overtime or were not provided work breaks or other benefits. The complaints generally seek unspecified monetary damages, injunctive relief, or both. We have denied any liability and intend to vigorously defend ourselves in these wage-and-hour lawsuits. Given the nature and status of the claims in these lawsuits, we cannot yet determine the amount or a reasonable range of potential loss, if any.

Other. We are subject to other legal proceedings that arise in the ordinary course of our business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not materially adversely affect our financial position, results of operations or cash flows.

(6) Parent/Affiliate Transactions

Affiliate company balances that are currently receivable or payable relate to charges for functions provided by or to FedEx affiliates and are settled on a monthly basis. The noncurrent intercompany balance amounts at November 30, 2007 and May 31, 2007 primarily represent the net activity from participation in FedEx’s consolidated cash management program. These net amounts are reflected as financing activities on the statements of cash flows. In addition, we are allocated interest income on these amounts at market rates.

We maintain an accounts receivable arrangement with FedEx Customer Information Services, Inc. (“FCIS”), a subsidiary of FedEx Corporate Services, Inc. (“FedEx Services”). FedEx Services is a wholly owned subsidiary of FedEx. Under this arrangement, which began in 2007, FCIS records and collects receivables associated with our domestic package delivery functions, while we continue to recognize revenue for the transportation services provided. At November 30, 2007, our net receivables recorded by FCIS totaled approximately $1.3 billion. At May 31, 2007, our net receivables recorded by FCIS totaled approximately $1.3 billion.

The costs of FedEx Services are allocated to us and are included in the expense line item “Intercompany charges” based on metrics such as relative revenues or estimated services provided. We believe these allocations approximate the net cost of providing these functions.

(7) Supplemental Cash Flow Information

	Six Months Ended
	November 30,
	2007		2006
	(In millions)
Cash payments for:
Interest (net of capitalized interest)	$	16	$	24
Income taxes (primarily paid to parent)		340		369

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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder
Federal Express Corporation

We have reviewed the condensed consolidated balance sheet of Federal Express Corporation as of November 30, 2007, and the related condensed consolidated statements of income for the three-month and six-month periods ended November 30, 2007 and 2006 and the condensed consolidated statements of cash flows for the six-month periods ended November 30, 2007 and 2006. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Federal Express Corporation as of May 31, 2007, and the related consolidated statements of income, changes in owner’s equity and comprehensive income, and cash flows for the year then ended not presented herein, and in our report dated July 9, 2007, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2007, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Memphis, Tennessee
December 19, 2007

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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

GENERAL

The following Management’s Discussion and Analysis of Results of Operations and Financial Condition, which describes the principal factors affecting the results of operations and financial condition of Federal Express Corporation (“FedEx Express”), is abbreviated pursuant to General Instruction H(2)(a) of Form 10-Q. This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended May 31, 2007 (“Annual Report”). Our Annual Report includes additional information about our significant accounting policies, practices and the transactions that underlie our financial results. For additional information, including a discussion of outlook, liquidity, capital resources, contractual cash obligations and critical accounting estimates, see the Quarterly Report on Form 10-Q of our parent, FedEx Corporation (“FedEx”), for the quarter ended November 30, 2007.

We are the world’s largest express transportation company. FedEx Corporate Services, Inc. (“FedEx Services”) provides customer-facing sales, marketing and information support to us and our sister company FedEx Ground Package System, Inc. (“FedEx Ground”), as well as retail access for our services to customers through FedEx Kinko’s Office and Print Services, Inc. (“FedEx Kinko’s”).

The operating expenses line item “Intercompany charges” on the financial summary below represents an allocation that primarily includes salaries and benefits, depreciation and other costs for the sales, marketing and information technology support provided to us by FedEx Services. The costs for these activities are allocated based on metrics such as relative revenues or estimated services provided. “Intercompany charges” also include allocated charges from our parent for management fees related to services received for general corporate oversight, including executive officers and certain legal and finance functions.

The key indicators necessary to understand our operating results include:

• the overall customer demand for our various services;

• the volume of shipments transported through our network, as measured by our average daily volume and shipment weight;

• the mix of services purchased by our customers;

• the prices we obtain for our services, as measured by average revenue per package (yield);

• our ability to manage our cost structure for capital expenditures and operating expenses and to match our cost structure to 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.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2008 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

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RESULTS OF OPERATIONS

The following table compares revenues, operating expenses, operating income, net income and operating margin (dollars in millions) for the periods ended November 30:

	Three Months Ended						Percent			Six Months Ended						Percent
	2007			2006			Change			2007			2006			Change
Revenues:
Package:
U.S. overnight box	$	1,615		$	1,634			(1	)	$	3,231		$	3,288			(2	)
U.S. overnight envelope		481			488			(1	)		992			1,000			(1	)
U.S. deferred		730			716			2			1,441			1,421			1
Total U.S. domestic package revenue		2,826			2,838			—			5,664			5,709			(1	)
International Priority (IP)		1,910			1,697			13			3,731			3,362			11
International domestic (1)		174			57		NM				329			109		NM
Total package revenue		4,910			4,592			7			9,724			9,180			6
Freight:
U.S.		604			624			(3	)		1,197			1,231			(3	)
International priority freight		312			271			15			604			520			16
International airfreight		96			106			(9	)		190			209			(9	)
Total freight revenue		1,012			1,001			1			1,991			1,960			2
Other		71			60			18			129			114			13
Total revenues		5,993			5,653			6			11,844			11,254			5
Operating expenses:
Salaries and employee benefits		2,012			2,071			(3	)		4,025			4,028			—
Purchased transportation		299			269			11			578			532			9
Rentals and landing fees		413			390			6			821			784			5
Depreciation and amortization		231			205			13			458			407			13
Fuel		872			716			22			1,672			1,514			10
Maintenance and repairs		375			364			3			776			761			2
Intercompany charges		534			524			2			1,048			1,033			1
Other		741			625			19			1,441			1,250			15
Total operating expenses (2)		5,477			5,164			6			10,819			10,309			5
Operating income	$	516		$	489			6		$	1,025		$	945			8
Operating margin		8.6	%		8.7	%		(10	) bp		8.7	%		8.4	%		30	bp
Other income (expense):
Interest, net		44			44			—			85			80			6
Other, net		(50	)		(25	)	NM				(98	)		(48	)	NM
		(6	)		19		NM				(13	)		32		NM
Income before income taxes		510			508			—			1,012			977			4
Provision for income taxes		204			190			7			386			370			4
Net income	$	306		$	318			(4	)	$	626		$	607			3

(1)	International domestic revenues include our international domestic express operations, primarily in the United Kingdom, Canada, India and China.
(2)	Operating expenses for the three and six months ended November 30, 2006 included a $143 million charge associated with upfront compensation and benefits under the labor contract with our pilots, which was ratified in October 2006.

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The following table compares selected statistics (in thousands, except yield amounts) for the periods ended November 30:

	Three Months Ended				Percent			Six Months Ended				Percent
	2007		2006		Change			2007		2006		Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box		1,163		1,183		(2	)		1,150		1,174		(2	)
U.S. overnight envelope		677		700		(3	)		688		702		(2	)
U.S. deferred		902		895		1			883		875		1
Total U.S. domestic ADV		2,742		2,778		(1	)		2,721		2,751		(1	)
IP		535		502		7			516		484		7
International domestic (1)		310		49	NM				294		46	NM
Total ADV		3,587		3,329		8			3,531		3,281		8
Revenue per package (yield):
U.S. overnight box	$	22.06	$	21.92		1		$	21.94	$	21.87		—
U.S. overnight envelope		11.27		11.06		2			11.26		11.13		1
U.S. deferred		12.84		12.70		1			12.76		12.69		1
U.S. domestic composite		16.36		16.21		1			16.26		16.21		—
IP		56.63		53.71		5			56.52		54.33		4
International domestic (1)		8.90		18.41	NM				8.75		18.37	NM
Composite package yield		21.73		21.90		(1	)		21.52		21.86		(2	)
Freight Statistics
Average daily freight pounds:
U.S.		8,915		9,917		(10	)		8,878		9,642		(8	)
International priority freight		2,279		1,980		15			2,150		1,876		15
International airfreight		1,827		1,946		(6	)		1,789		1,922		(7	)
Total average daily freight pounds		13,021		13,843		(6	)		12,817		13,440		(5	)
Revenue per pound (yield):
U.S.	$	1.08	$	1.00		8		$	1.05	$	1.00		5
International priority freight		2.17		2.18		—			2.19		2.17		1
International airfreight		0.83		0.86		(3	)		0.83		0.85		(2	)
Composite freight yield		1.23		1.15		7			1.21		1.14		6

⁽¹⁾ International domestic statistics include our international domestic express operations, primarily in the United Kingdom, Canada, India and China.

Revenues

Revenues increased 6% in the second quarter of 2008 and 5% in the first half of 2008 due to growth in IP and international domestic revenue, partially offset by decreases in U.S. domestic package and U.S. freight revenues. During the second quarter of 2008, IP revenues grew 13% on volume growth of 7% and yield improvement of 5%. During the first half of 2008, IP revenue grew 11% on volume growth of 7% and yield improvement of 4%. Significant increases in international domestic revenues were driven by business acquisitions in the second half of 2007, primarily in the United Kingdom.

IP volume growth during the second quarter and first half of 2008 was due to increased demand in Asia, resulting from continued expansion of our services in Asian markets, as well as increases in the U.S. outbound and European markets. Increased international domestic volumes were driven by business acquisitions in the second half of 2007. U.S. domestic package and U.S. freight volumes decreased during the second quarter and first half of 2008, as the ongoing weak U.S. economy continued to have an impact on demand for these services.

IP yield increased during the second quarter and first half of 2008 primarily due to favorable exchange rates and increases in international average weight per package, partially offset by decreases in the average rate per pound. International domestic yield decreased during the second quarter and first half of 2008 as a result of the inclusion of lower-yielding services at the companies acquired in the second half of 2007. Composite freight yield increased in both the second quarter and first half of 2008 due to changes in service mix and favorable exchange rates.

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Our fuel surcharges are indexed to the spot price for jet fuel. Using this index, the U.S. domestic and outbound fuel surcharge and the international fuel surcharges ranged as follows for the three- and six-month periods ended November 30:

	Three Months Ended						Six Months Ended
	2007			2006			2007			2006
U.S. Domestic and Outbound Fuel Surcharge:
Low		14.00	%		12.50	%		13.50	%		12.50	%
High		16.50			17.00			16.50			17.00
Weighted-average		15.00			15.35			14.34			15.67
International Fuel Surcharges:
Low		12.50			12.00			12.00			12.00
High		16.50			17.00			16.50			17.00
Weighted-average		14.91			14.33			14.47			14.55

In October 2007, we announced a 6.9% average list price increase effective January 7, 2008 on U.S. domestic and U.S. outbound express package and freight shipments and made various changes to other surcharges, while we lowered our fuel surcharge index by 2%. In November 2006, we announced a 5.5% average list price increase effective January 1, 2007 on U.S. domestic and U.S. outbound shipments and made various changes to other surcharges, while we lowered our fuel surcharge index by 2%.

Operating Income

Operating results for the second quarter and first half of 2008 were negatively impacted by higher net fuel costs and the continued softness in the U.S. economy. Continued investment in domestic express services in China also negatively impacted results in the second quarter and first half of 2008. However, volume growth in IP services, reduced retirement plan costs, the favorable impact of foreign currency exchange rates and lower variable incentive compensation offset the net impact of increased fuel costs on operating income during the second quarter and first half of 2008. Operating income for the second quarter and first half of 2007 included $143 million in expenses associated with our pilot contract, which were partially offset by the benefits from the timing of net fuel impacts and Hurricane Katrina insurance proceeds.

Fuel costs increased in the second quarter and first half of 2008 due to an increase in the average price per gallon of fuel. Our operating income in the second quarter of 2008 reflected a difficult year-over-year comparison, as last year’s second quarter results benefited from the timing lag that exists between when we purchase fuel and when our indexed fuel surcharges automatically adjust. During the second quarter of 2008, we experienced the opposite effect, as fuel prices significantly increased throughout the quarter, while our changes in fuel surcharges lag these increases by approximately six to eight weeks.

Purchased transportation costs increased in the second quarter and first half of 2008 primarily due to the inclusion of our 2007 business acquisitions, the impact of higher fuel costs and IP volume growth, which required a higher utilization of contract pickup and delivery services. These increases were partially offset by the elimination of payments by us for pickup and delivery services provided by our former China joint venture partner, as we acquired this business in the second half of 2007. Depreciation expense increased 13% in the second quarter and first half of 2008 primarily due to aircraft purchases and our 2007 business acquisitions. Other operating expenses increased during the second quarter and first half of 2008 principally due to the inclusion of our 2007 business acquisitions, including the full consolidation of the results of our China joint venture. We previously recorded only our portion of the net results of the China business due to the joint venture structure.

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Income Taxes

Our effective tax rate was 39.9% for the second quarter of 2008 and 38.1% for the first half of 2008, as compared to 37.4% for the second quarter of 2007 and 37.9% for the first half of 2007. We expect the effective tax rate to be 37.5% to 38.0% for the remainder of 2008. The actual rate will depend on a number of factors, including the amount and source of operating income.

NEW ACCOUNTING PRONOUNCEMENTS

New accounting rules and disclosure requirements can significantly impact the comparability of our financial statements. We believe the following new accounting pronouncements are relevant to the readers of our financial statements.

On June 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes.” This interpretation establishes new standards for the financial statement recognition, measurement and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The cumulative effect of adopting FIN 48 was immaterial. For additional information on the impact of adoption of FIN 48, refer to Note 1 to the accompanying unaudited condensed consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. (“SFAS”) 157, “Fair Value Measurements,” which provides a common definition of fair value, establishes a uniform framework for measuring fair value and requires expanded disclosures about fair value measurements. The requirements of SFAS 157 are to be applied prospectively, and we anticipate that the primary impact of the standard to us in future periods will be related to the measurement of fair value in our recurring impairment test calculations (such as measurements of our recorded goodwill). We do not presently hold any financial assets or liabilities that would require recognition under SFAS 157 other than investments held by our pension plans. SFAS 157 is effective for us beginning June 1, 2008 (fiscal 2009); however, the FASB has proposed a one-year deferral of the adoption of the standard as it relates to non-financial assets and liabilities. Our evaluation of the impact of this standard is ongoing, and we have not yet determined the impact of the standard on our financial condition or results of operations.

In December 2007, the FASB issued SFAS 141R, “Business Combinations,” and SFAS 160, “Accounting and Reporting Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51.” These new standards significantly change the accounting for and reporting of business combination transactions and noncontrolling interests (previously referred to as minority interests) in consolidated financial statements. Both standards are effective for us beginning June 1, 2009 (fiscal 2010) and are applicable only to transactions occurring after the effective date.

FORWARD-LOOKING STATEMENTS

Certain statements in this report 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. Forward-looking statements include those preceded by, followed by or that include the words “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:

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

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• 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;

• damage to our reputation or loss of brand equity;

• disruptions to the Internet or our technology infrastructure, including those impacting our computer systems and Web site, which can adversely affect shipment levels;

• the price and availability of jet and diesel fuel;

• 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 market share;

• our ability to manage our cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;

• our ability to effectively operate, integrate, leverage and grow acquired businesses;

• any impacts on our businesses resulting from new domestic or international government regulation, including regulatory actions affecting global aviation rights, increased air cargo and other security requirements, and tax, accounting, labor or environmental rules;

• changes in foreign currency exchange rates, especially in the euro, Chinese yuan, Canadian dollar, British pound and Japanese yen, which can affect our sales levels and foreign currency sales prices;

• any liability resulting from and the costs of defending against class-action litigation, such as wage-and-hour and race discrimination claims, and any other legal proceedings;

• our ability to maintain good relationships with our employees and prevent attempts by labor organizations to organize groups of our employees, which could significantly increase our operating costs;

• a shortage of qualified labor and our ability to mitigate this shortage through recruiting and retention efforts and productivity gains;

• increasing costs and the volatility of costs for employee benefits, especially pension and healthcare benefits;

• significant changes in the volume of shipments transported through our network, customer demand for our various services or the prices we obtain for our services;

• market acceptance of our new service and growth initiatives;

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

• adverse weather conditions or natural disasters, such as earthquakes and hurricanes, which can damage our property, disrupt our operations, increase fuel costs and adversely affect shipment levels;

• widespread outbreak of an illness or any other communicable disease, or any other public health crisis;

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• availability of financing on terms acceptable to us and our ability to maintain our current credit ratings, especially given the capital intensity of our operations and the current volatility of credit markets; and

• other risks and uncertainties you can find in FedEx’s and 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 forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Omitted under the reduced disclosure format permitted by General Instruction H(2)(c) of Form 10-Q.

Item 4. Controls and Procedures

Our management, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of November 30, 2007 (the end of the period covered by this Quarterly Report on Form 10-Q).

During our fiscal quarter ended November 30, 2007, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of all material pending legal proceedings, see Note 5 of the accompanying consolidated financial statements.

In December 2007, we received a grand jury subpoena for the production of documents in connection with an ongoing criminal investigation by the Antitrust Division of the U.S. Department of Justice (“DOJ”) into possible anti-competitive behavior in the international air freight forwarding industry. This investigation is different from the ongoing investigations by the DOJ, the Directorate General for Competition of the European Commission and the Australian Competition and Consumer Commission that were disclosed in our Annual Report. We do not believe that we have engaged in any anti-competitive activities, and we are cooperating with these investigations.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in our Annual Report (under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition”) in response to Part I, Item 1A of Form 10-K.

Item 6. Exhibits

Exhibit
Number	Description of Exhibit
12.1	Computation of Ratio of Earnings to Fixed Charges.
15.1	Letter re: Unaudited Interim Financial Statements.
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FEDERAL EXPRESS CORPORATION
Date: December 21, 2007	/s/ J. RICK BATEMAN
	J. RICK BATEMAN
	VICE PRESIDENT
	WORLDWIDE CONTROLLER
	PRINCIPAL ACCOUNTING OFFICER

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EXHIBIT INDEX

Exhibit
Number	Description of Exhibit
12.1	Computation of Ratio of Earnings to Fixed Charges.
15.1	Letter re: Unaudited Interim Financial Statements.
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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