FEDERAL EXPRESS CORP, 10-K, 1994-08-05

FEDERAL EXPRESS CORP
10-K, 1994-08-05
AIR COURIER SERVICES

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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(MARK ONE)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE FISCAL YEAR ENDED MAY 31, 1994 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 (I.R.S. Employer
incorporation or organization) Identification No.)

2005 CORPORATE AVENUE, MEMPHIS, TENNESSEE 38132
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 369-3600

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- ------------------------------------------
Common Stock, Par Value New York Stock Exchange
$.10 per share

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

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 /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /

As of July 29, 1994, 55,906,097 shares of the Registrant's Common Stock
were outstanding and the aggregate market value of the voting stock held by
non-affiliates of the Registrant (based on the closing price of such stock on
the New York Stock Exchange) was approximately $3,346,046,518.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Stockholders for the fiscal year ended May
31, 1994 are incorporated by reference into Parts II and IV.

Portions of the Proxy Statement for the Annual Meeting of Stockholders on
September 26, 1994 are incorporated by reference into Part III.

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TABLE OF CONTENTS

PAGE
----
PART I

ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 4. Submission of Matters to a Vote of Security Holders. . . . . . 12

Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . 12

PART II

ITEM 5. Market for the Registrant's Common Stock and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . 15
ITEM 7. Management's Discussion and Analysis . . . . . . . . . . . . . 15
ITEM 8. Financial Statements and Supplementary Data. . . . . . . . . . 15
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . 15

PART III

ITEM 10. Directors and Executive Officers of the Registrant . . . . . . 15
ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . 15
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 15
ITEM 13. Certain Relationships and Related Transactions . . . . . . . . 16

PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 16

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

FINANCIAL STATEMENT SCHEDULES INDEX

Report of Independent Public Accountants on Financial Statement Schedules S-1
SCHEDULE II Amounts Receivable from Related Parties . . . . . . . . . S-2
SCHEDULE V Property and Equipment. . . . . . . . . . . . . . . . . . S-3
SCHEDULE VI Accumulated Depreciation and Amortization . . . . . . . . S-4
SCHEDULE VIII Valuation and Qualifying Accounts . . . . . . . . . . . . S-5
SCHEDULE IX Short-Term Borrowings . . . . . . . . . . . . . . . . . . S-6
SCHEDULE X Supplementary Income Statement Information. . . . . . . . S-7

EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1

<PAGE>

PART I

ITEM 1. BUSINESS

INTRODUCTION AND RECENT DEVELOPMENTS

Federal Express Corporation (the "Company") was incorporated in Delaware on
June 24, 1971 and began operations in 1972. The Company offers a wide range of
express services for the time-definite transportation of documents, packages and
freight throughout the world using an extensive fleet of aircraft and vehicles
and leading-edge information technologies.

During fiscal year 1994, the Company continued to improve its global
network of aviation, ground and information links between the major trading
centers of the Americas, Europe and Asia. The Company added new Airbus A300
aircraft, for example, and unveiled new services and innovative technologies
aimed at enhancing service and improving customer satisfaction. The Company
also updated its corporate identity by adopting "FedEx" as its new brand name.

DOMESTIC SERVICES

The Company offers three domestic overnight delivery services: FedEx
Priority Overnight Service, FedEx Standard Overnight Service and FedEx Overnight
Freight Service. Overnight document and package service extends to virtually
the entire United States population and overnight freight service covers all
major and most medium-size metropolitan areas. Packages and documents are
either picked up from shippers by Company couriers or are dropped off by
shippers at Company facilities, including city stations, Business Service
Centers, Mini-Centers or Drop Boxes strategically located throughout the
country.

FedEx Priority Overnight Service, scheduled for delivery in most
communities no later than 10:30 a.m. local time the following business day, is
designed for packages weighing up to 150 pounds with a maximum combined length
and girth of 165 inches and a maximum length of 119 inches. Also available are
Saturday delivery service and Saturday pick-up for delivery the following
Monday. FedEx Standard Overnight Service is similar to, though more economical
than, Priority Overnight Service with delivery scheduled no later than
3:00 p.m. local time the following business day in most communities.
Company-provided packaging (FedEx Letter envelope, FedEx Pak, FedEx Large,
Medium and Small Boxes, FedEx Tube and FedEx Diagnostic Specimen Envelope) is
provided as part of these overnight services. FedEx Overnight Freight Service
is scheduled for delivery by noon or 4:30 p.m. the following business day,
depending on the recipient's location, and is designed for individual shipments
weighing 151 to 750 pounds. Shipments exceeding 750 pounds will be accepted if
advance approval is obtained.

Two domestic second-day services are available for less urgent shipments:
FedEx Economy Two-Day Service and FedEx Two-Day Freight Service. Economy
Two-Day Service is designed for packages weighing up to 150 pounds, 165 inches
in combined length and girth and a maximum length of 119 inches. Economy
Two-Day Service shipments are scheduled for delivery in most communities no
later than 4:30 p.m. the second business day following pick-up. Two-Day Freight
Service is a time-definite domestic freight service for individual shipments
weighing 151 to 1500 pounds. Shipments exceeding 1500 pounds will be accepted
if advance approval is obtained. Shipments are scheduled for delivery no later
than 4:30 p.m. the second business day in all major and most medium-size
metropolitan areas.

Domestic overnight and second-day services are primarily used by customers
for shipment of time-sensitive documents and goods, high-value machines and
machine parts, computer parts, software and consumer items from manufacturers,
distributors and retailers and to retailers, manufacturers and consumers.
Company employees handle virtually every shipment from origin to destination.

<PAGE>

The Company's Collect On Delivery (C.O.D.) service provides the fastest
payment return in the express industry. C.O.D. payments are returned to
shippers within one or two business days compared to competitors' services which
can take as long as 45 days. Like the Company's other domestic services, C.O.D.
service offers money-back guarantees on timely delivery and on the Company's
ability to track and locate any package in its system.

INTERNATIONAL SERVICES

The Company offers five international document and package delivery
services and two international freight services.

International Priority ("IP") Service is a time-definite service for
documents and packages weighing up to 150 pounds. Customs clearance is included
as part of this service. The broker selection option for IP Service permits
customers to designate their own customs broker for clearance. Pick-up and
delivery are provided from any point in the Company's domestic and international
network around the world. Delivery is generally scheduled within one to three
business days depending on the destination of the shipment and commodity
limitations imposed by authorities in the destination country. Size, weight and
commodity limitations vary according to destination.

International Priority Freight Service is an expansion of IP Service and is
a time-definite service for international shipments exceeding 150 pounds or 250
inches in length and girth combined. Customs clearance is included as part of
this service and customers are permitted to designate their own customs broker
for clearance. Pick-up and delivery are provided from many points in the
Company's domestic and international network around the world. Delivery is
generally scheduled within one to three business days depending on the
destination of the shipment and commodity limitations imposed by authorities in
the destination country. Size, weight and commodity limitations vary according
to destination.

International Priority Plus is an overnight service for packages (up to 70
pounds) and documents shipped from New York City to Amsterdam, Brussels,
Frankfurt (documents only), Geneva, London, Madrid (documents only), Milan
(documents only), Paris, Rio De Janeiro, Rome, Sao Paulo (documents only) and
Zurich and from Washington, D.C. to London and Paris. IP Plus shipments must
be picked up or dropped off by 3:00 p.m. for delivery the next business day.
EXPRESSfreighter routing, discussed below, allows overnight service from major
locations in Europe and Asia to be scheduled for 10:30 a.m. delivery on the
next business day to most United States destinations and to major business
centers in Canada, Mexico and the Caribbean.

More economical than IP Service, International Priority Distribution
Service is a time-definite service for bulk shipments destined to several
different recipients in one country. Once the bulk shipment arrives in the
destination country, the individual packages are separated and delivered to the
recipients. Weight and size restrictions are the same as for IP Service, with
transit time one or two days longer.

FedEx International MailService provides for the pick-up, transportation
and sorting of nondutiable, printed material and certain low-value, dutiable
items which are tendered for delivery to postal services throughout the world.
Generally, material sent by International MailService for premium service is
delivered to recipients within three to six days, while receipt of material sent
by International MailService for standard service takes four to ten days.

FedEx International Express Freight Service, a freight service for
shipments of nearly any weight, size or shape, is available between major
markets in North America, Asia, Australia, Europe and South America. This
service, providing scheduled delivery from one to three business days depending
on destination, is designed for shippers desiring time-definite, committed
delivery with the option of customs clearance provided by the Company. Commodity
limitations vary according to destination.

FedEx International Airport-to-Airport Cargo Service is an international
airfreight service designed for freight forwarders and agents who do not require
a time-definite, committed delivery. Space-available service is offered to and
from virtually any airport around the world for airfreight shipments of nearly
any weight, size or

<PAGE>

shape, with arrival at the destination airport from two to four days after
tender of the shipment. If the Company's aircraft do not serve the destination
airport, another carrier's services are used pursuant to an "interline"
agreement or other arrangement with such carrier. Commodity limitations vary
according to destination.

CHARTER SERVICES AND CRAF PARTICIPATION

The Company offers commercial and military charter services which
supplement the utilization of aircraft capacity when not needed in the Company's
scheduled operations. In addition to providing these charter services the
Company participates in the Civil Reserve Air Fleet ("CRAF") program. Under
this program, the Department of Defense may requisition for military use certain
of the Company's wide-bodied aircraft in the event of a declared need, including
a national emergency. The Company is compensated for the operation of any
aircraft requisitioned under the CRAF program at standard contract rates
established each year in the normal course of awarding contracts. Through its
participation in the CRAF program, the Company is entitled to bid on peacetime
military cargo charter business. The Company, together with a consortium of
other carriers, currently contracts with the U.S. Government for charter
flights. The Company, while continuing to participate in the CRAF program and
continuing to bid on military charters with respect to the carriage of cargo,
discontinued military passenger flights at the end of September 1992.

During fiscal 1994, revenues from charter operations accounted for
approximately 1.3% of the Company's total revenues and approximately 1.4% and
2.5% of total revenues during fiscal 1993 and 1992, respectively. Charter
results for the first quarter of 1992 were positively affected by elevated
charter activity related to Operation Desert Storm.

FEDEX LOGISTICS SERVICES

FedEx Logistics Services ("FLS") is a division of the Company which offers
a full range of global and regional logistics solutions, including
transportation and logistics management as well as other innovative services.
FLS also offers an extensive array of services for catalogers and direct
marketers, including customized promotional strategies, telemarketing training,
operational support and international mailing services. FLS has offices in
Memphis and other key U.S. sites, the United Kingdom, Belgium, the Netherlands,
Singapore and Hong Kong to serve its more than 2,000 clients.

PRICING

The Company periodically publishes list prices in its Service Guides for
the majority of its services. In general, domestic shipping rates are based on
the service selected, weight, size, any ancillary service charge and whether or
not the shipment is picked up by a Company courier or dropped off by the
customer at a Company location. International rates are based on the type of
service provided and vary with size, weight and destination. The Company offers
its customers volume discounts based on actual or potential average daily
revenue produced. Discounts are determined by reference to several local and
national revenue bands developed by the Company. In general, the more revenue a
particular customer produces, the greater the discount. Of the more than two
million current customers of the Company, a significant portion participates in
its discount program.

<PAGE>

SERVICE REVENUES

The following table shows the amount of revenues generated for each class
of service offered for the fiscal years ending May 31 (amounts in thousands):

1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Priority Overnight Services $3,707,974 $3,433,106 $3,342,956
Standard Overnight Services 1,166,808 1,013,076 841,439
Economy Two-Day Service 1,091,511 968,780 786,837
Domestic Freight Services 113,939 87,365 74,284
International Priority Services 1,317,856 1,116,589 1,039,337
International Freight Services 504,738 570,154 699,939
Charter 113,446 112,416 188,165
FedEx Logistics Services and Other* 463,184 506,557 577,103
---------- ---------- -----------
Total $8,479,456 $7,808,043 $7,550,060
---------- ---------- -----------
---------- ---------- -----------

<FN>
*Includes revenues generated by the specialized services summarized above
under "FedEx Logistics Services" and does not include express and freight
service revenue generated by FLS clients. In addition, includes revenues from
non-U.S. intra-country operations (a portion of the U.K. and all continental
Europe intra-country operations were discontinued on May 4, 1992), Warren
Transport, Inc. (sold September 1993), aircraft noise-reduction kit sales and
fees paid by customers for additional casualty coverage and C.O.D. Service.
</TABLE>

SEASONALITY OF BUSINESS

The Company's express package business and international airfreight
business are both seasonal in nature. Historically, the domestic package
business experiences an increase in late November and December. International
business, particularly in the Asia to U.S. markets, peaks in October and
November due to domestic holiday sales. The latter part of the Company's third
fiscal quarter and late summer, being post-winter holiday and summer vacation
seasons, have historically exhibited lower volumes relative to other periods.

OPERATIONS

The Company's global transportation and distribution services are provided
through an extensive international network consisting of numerous aviation and
ground transportation operating rights and authorities, 462 aircraft,
approximately 30,900 vehicles, sorting facilities, city stations, Business
Service Centers, Mini-Centers, Drop Boxes and sophisticated package tracking,
billing and communications systems.

The Company's primary domestic sorting facility, the SuperHub located in
Memphis, serves as the center of the Company's multiple hub-and-spokes domestic
system. A second national hub is located in Indianapolis. In addition to these
national hubs, the Company operates regional hubs in Newark and Oakland and
major metropolitan sorting facilities in Los Angeles and Chicago. A facility in
Anchorage serves as a sorting facility for express package and freight traffic
moving to and from Asia, Europe and North America. Major sorting and freight
handling facilities are located at Narita Airport in Japan, Charles de Gaulle
Airport in Paris and Stansted Airport outside London. The Company trucks some
shipments point-to-point, utilizing national, regional and metropolitan sorting
facilities.

In January 1991, the Company implemented EXPRESSfreighter flights which
provide faster international service through direct flights between major
markets in Asia, Europe and North America. For example, EXPRESSfreighter
flights from Hong Kong, Osaka, Singapore, Taipei and Tokyo to the Company's
facility in Anchorage and from there to the SuperHub in Memphis allow for next
business day delivery by 10:30 a.m. in the United States and to major business
centers in Canada, Mexico and the Caribbean. Cargo on those EXPRESSfreighter
flights bound for Europe is flown for next-day delivery to sixteen European
cities. Westbound

<PAGE>

from Europe, EXPRESSfreighter service is available from Amsterdam, Antwerp,
Basel, Brussels, Frankfurt, London, Luxembourg, Milan, Paris and Zurich for
10:30 a.m. next-day delivery in most of North America.

Throughout its worldwide network, the Company operates city stations and
employs a staff of customer service agents, cargo handlers and couriers who pick
up and deliver shipments in the station's service area. In some cities, the
Company operates Business Service Centers which are staffed, store-front
facilities located in high-traffic, high-density areas. Manned or unmanned
Mini-Centers and unmanned Drop Boxes provide customers the opportunity to drop
off packages at locations in office buildings, shopping centers and corporate or
industrial parks. In 1994, the Company formed alliances with certain retailers
to extend this customer convenience network to new drop-off sites in such
retailers' locations. In international regions where low package traffic makes
our direct presence less economical, Global Service Participants have been
selected to complete deliveries.

The Company has an advanced package tracking and billing system, COSMOS,
that utilizes hand-held electronic scanning equipment and computer terminals.
This system provides proof of delivery information, an electronically reproduced
airbill for the customer and information regarding the location of a package
within the Company's system. For international shipments, the Company has
developed ExpressClear, a worldwide electronic customs clearance system, which
speeds up customs clearance by allowing customs agents in destination countries
to review information about shipments before they arrive. The Company has 16
computerized telephone customer service centers in the United States which
handle thousands of customer calls daily. In general, the Company's
international locations handle customer calls locally.

The Company provides many of its customers POWERSHIP 2, an automated
computer system, which provides package tracking, produces shipping labels,
calculates shipping charges, invoices the customer daily and produces customized
reports. For customers that ship 100 or more packages a day, the Company offers
POWERSHIP Plus software, which performs the same functions as POWERSHIP 2 but
can be integrated with the customer's own computer systems for customer service,
accounting, inventory control and financial analysis purposes. POWERSHIP
PassPort is an automated shipping system which is automatically updated with the
Company's system information, such as routing codes and rates. POWERSHIP 3
enables customers who ship as few as three packages per day to enjoy the
advantage of automated shipping. In 1994, the Company began offering FEDEX
Tracking Software, free of charge, that can be used on a customer's own
personal computer.

FUEL SUPPLIES AND COSTS

The Company's aviation fuel is purchased from various suppliers under
contracts which vary in length from three to twenty-one months and which provide
for specific amounts of fuel to be delivered. Approximately 60% of the fuel
represented by these contracts is prepriced, i.e., preset or "price not to
exceed." The remainder is purchased at market price which may fluctuate daily.
The Company believes that, barring a substantial disruption in supplies of crude
oil, these agreements will ensure the availability of an adequate supply of fuel
for the Company's needs for the immediate future, as well as provide fuel-cost
stability for the term of the contracts. However, a substantial reduction of oil
supplies from oil producing regions or refining capacity, or other events
causing a substantial reduction in the supply of aviation fuel, could have a
significant adverse effect on the Company.

The Company has also entered into contracts which are designed to limit its
exposure to fluctuations in jet fuel prices. The contracts extend through May
1995. These agreements are based on a notional sum of 10 million gallons per
month, which is approximately 20 to 25% of the Company's monthly consumption of
jet fuel. As of the date of this Report, the Company had neither received nor
made any payments related to these contracts.

<PAGE>

The following table sets forth the Company's costs for aviation fuel and
its percentage of total operating expense for the previous five fiscal years:

<TABLE>
<CAPTION>
Total Cost Percentage of Total
Fiscal Year (in thousands) Operating Expense
----------- -------------- -------------------
<S> <C> <C>
1994 $374,561 4.7%
1993 $403,597 5.4%
1992 $414,481 5.5%
1991 $554,637 7.5%
1990 $431,601 6.5%
</TABLE>

Approximately 40% of the Company's requirement for vehicle fuel is
purchased in bulk under fixed-price agreements. The remainder of the Company's
requirement is satisfied by retail purchases, discounted from 1% to 3%. The
percentage of total operating expense for vehicle fuel purchases for each of the
last five fiscal years has not exceeded 1.5%.

COMPETITION

The overnight express market is highly competitive and sensitive to both
price and service. Competitors in this market include passenger airlines
offering package express services, regional express delivery concerns,
airfreight forwarders and other express package concerns, principally United
Parcel Service and Airborne Express.

The international express package and freight markets are also highly
competitive. Ability to compete effectively internationally depends principally
upon price, frequency and capacity of scheduled service, extent of geographic
coverage and reliability. The Company currently holds certificates of authority
to serve more foreign countries than any other United States all-cargo carrier
and its extensive, scheduled international route system allows it to offer
single-carrier service to many points not offered by its principal all-cargo
competitors. This international route system, combined with an integrated air
and ground network, enables the Company to offer international customers more
extensive single-carrier service to a greater number of domestic points than can
be provided currently by competitors. However, many of the Company's competitors
in the international market are government owned, controlled, or subsidized
carriers which may have greater resources, lower costs, less profit sensitivity
and more favorable operating conditions than the Company. The Company's
principal competitors in the international freight market are foreign national
air carriers, United States passenger airlines and all-cargo airlines and other
express package companies including United Parcel Service and DHL.

REGULATION

AIR

Under the Federal Aviation Act of 1958, as amended, both the Department of
Transportation ("DOT") and the Federal Aviation Administration ("FAA") exercise
regulatory authority over the Company. The DOT's authority relates primarily to
economic aspects of air transportation. The DOT's jurisdiction extends to
aviation route authority, pricing oversight and to other of the Company's
business practices, including interlocking relations, competitive practices and
cooperative agreements. The Company holds an all-cargo certificate and air
carrier certificate to carry cargo and mail. The Company's international
authority permits it to carry cargo and mail from several points in its domestic
route system to numerous points throughout the world. The DOT regulates
international routes, fares, rates and practices and is authorized to
investigate and take action against discriminatory treatment of United States
air carriers abroad. The right of a United States carrier to serve foreign
points is subject to the DOT's approval and generally requires a bilateral
agreement between the United States and the foreign government. The carrier must
then be granted the permission of such foreign government to provide specific
flights and services. The FAA's regulatory authority relates primarily to safety
aspects of air transportation, including aircraft standards and maintenance,
personnel and ground facilities. The Company holds an operating

<PAGE>

certificate granted by the FAA pursuant to Part 121 of the Federal Aviation
Regulations. This certificate is of unlimited duration and remains in effect so
long as the Company maintains its standards of safety and meets the operational
requirements of the regulations.

GROUND

Much of the ground transportation performed by the Company is integral to
its air transportation services and is exempt from regulation by the Interstate
Commerce Commission ("ICC") under the Motor Carrier Act of 1980. The Company is
required to register as an exempt ICC operator in each of the states in which it
operates. In addition, the Bureau of Motor Carrier Safety of the Federal Highway
Administration of the DOT regulates the safety aspects of the Company's motor
vehicle operations. The Company also holds nationwide motor carrier common and
contract carrier authorities issued by the ICC which authorizes the express
carriage of general commodities between points in the United States. In addition
to federal regulation of ground transportation, certain states have local
regulations which restrict the use of ground transportation. The Company has
attempted through legislative and judicial avenues to eliminate these
intrastate transportation regulations. Though some success has been achieved,
significant regulatory barriers still exist that prevent the maximum use of the
Company's ground transportation network.

COMMUNICATION

Because of the extensive use of radio and other communication facilities in
its aircraft and ground transportation operations, the Company is subject to the
Federal Communications Commission Act of 1934, as amended. Additionally, the
Federal Communications Commission regulates and licenses the Company's
activities pertaining to satellite communications.

ENVIRONMENTAL

Pursuant to the Federal Aviation Act, the FAA with the assistance of the
Environmental Protection Agency is authorized to establish standards governing
aircraft noise. The Company's present aircraft fleet is in compliance with
current noise standards contained in Part 36, Part 91 and Part 161 of the
Federal Aviation Regulations. The Company's aircraft are also subject to, and
are in compliance with, the regulations limiting the level of engine smoke
emissions. In addition to federal regulation of aircraft noise, certain
airport operators have local noise regulations which limit aircraft operations
by type of aircraft and time of day. These regulations have had a restrictive
effect on the Company's aircraft operations in some of the localities where they
apply but do not have a material effect on any of the Company's significant
markets. Congress' passage of the Airport Noise and Capacity Act of 1990
established a National Noise Policy which enabled the Company to plan for noise
reduction and better respond to local noise constraints.

Under the Clean Air Act Amendments of 1990, many states will be required to
implement alternative fuel programs for fleet vehicles operating in certain
nonattainment areas. As states begin to implement their clean fuel fleet
programs, the Company anticipates acquiring new delivery vehicles or modifying
its existing delivery vehicles in order to comply with the regulations.
Additionally, facility modifications may be required to accommodate the use of
alternative fuels at the Company stations and ramps. The Company believes these
new alternative fuel programs will impose additional expenditures on the
Company; however, the magnitude of the impact has not yet been determined nor
has the Company decided what steps to take in response to any new regulations
enacted.

Two other aspects of the Clean Air Act Amendments are also expected to have
an impact on the Company. The Amendments require the Company to develop an
emissions inventory for its facilities which emit prescribed levels of
pollutants. In addition, the Amendments mandate that the Company explore
alternatives to reduce the number of vehicles transporting its employees to and
from work at certain facilities during certain time periods. The Company is in
the process of developing the emissions inventory in anticipation of an October
1995 deadline and is also studying ways to comply with the trip reduction
mandates of the Amendments. Though

<PAGE>

additional expenditures will be required to accomplish these tasks, the
anticipated impact is not expected to be material.

The states, in response to the requirements contained in the Clean Water
Act, are implementing programs related to the capture and treatment of aircraft
deicing fluids and the capture and treatment of aircraft and vehicle wash water
discharge. During periods of cold weather flying, the Company is required to
deice its aircraft by applying fluids which dissolve and inhibit the formation
of ice on the body and wings of the aircraft. These fluids may be applied to the
aircraft while it is on the runway or in the ramp area next to the terminal. In
either case, various states and airport authorities have begun to regulate the
discharge and disposal of such fluids. In some cases, the airport authorities
are splitting the cost of containment systems among all of the airlines using
the airport authorities' deicing facilities. In other cases, each individual
carrier is required to pay the cost of its own deicing facilities and the
cost of the disposal of its own discharge. Capture and disposal of vehicle wash
discharge is also required by the Clean Water Act. In this case, the Company is
exploring ways to reduce the amount of contaminants contained in the discharge
as well as treat the discharge itself to comply with state and local pollution
control requirements.

For both aircraft deicing and vehicle washing, the Company cannot
accurately predict the precise amount of future costs associated with
compliance with the Clean Water Act given the developing nature of the
regulations, the variety of local responses to the requirements and the multiple
solutions being considered by the Company to the requirements. Increased
expenditures will be necessary to comply in the short and long term, but the
Company does not expect these expenditures to be material.

EMPLOYEES

At June 30, 1994, the Company employed approximately 66,000 permanent
full-time and 35,000 permanent part-time employees, of which approximately 22%
are employed in Memphis. Employees of the Company's international branches and
subsidiaries in the aggregate comprise approximately 12% of all employees. The
Company believes its relationship with its employees is excellent.

Following the Company's flight crewmembers' decision to form a collective
bargaining unit, the Company and the Air Line Pilots Association ("ALPA") began
negotiations on certain interim issues on August 26, 1993 in preparation for a
comprehensive collective bargaining agreement. In March 1994, the Company
and ALPA entered into two agreements, one creating a dispute resolution system
for certain disciplinary matters, the other permitting ALPA crewmembers to be
excused from flying to perform ALPA related duties in exchange for ALPA's
agreement to reimburse the Company for the loss of those crewmembers.
Negotiations toward a comprehensive collective bargaining agreement began in
May 1994 and are continuing.

Attempts by other labor organizations to organize certain other groups of
employees have been initiated. Although the Company cannot predict the outcome
of these labor activities or their effect on the Company or its employees, if
any, the Company is vigorously opposing these organization attempts.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS

For information concerning financial results for domestic and international
operations for the three years ended May 31, 1994, 1993 and 1992, refer to Note
10 of Notes to Consolidated Financial Statements contained in the Company's 1994
Annual Report to Stockholders, which Note is incorporated herein by reference.

ITEM 2. PROPERTIES

The Company's principal owned or leased properties include its aircraft,
vehicles, national, regional and metropolitan sorting facilities, administration
buildings, city stations, Service Centers, Mini-Centers, Drop Boxes and data
processing and telecommunications equipment.

<PAGE>

AIRCRAFT AND VEHICLES

The Company's operating jet fleet at July 31, 1994 consisted of Airbus
A300-600, A310-200, McDonnell Douglas MD-11, DC-10-10, DC-10-30 and Boeing
B727-100, B727-200 and B747-200 aircraft. The A300s and A310s are two-engine,
wide bodied aircraft which have a longer range and more capacity than B727s. The
MD- 11s are three-engine, wide-bodied aircraft which have a longer range and
larger capacity than DC-10s. The DC- 10s are three-engine, wide-bodied aircraft
which have been specially modified to meet the Company's cargo requirements. The
B747s are four-engine, wide-bodied aircraft. The B727s are three-engine aircraft
configured for cargo service. At July 31, 1994, the Company also owned 32 Fokker
F-27 and 216 Cessna 208 turbo-prop aircraft which, in general, are leased to
unaffiliated operators to support Company operations in remote areas. An
inventory of spare engines and parts is maintained for each aircraft type.

The Company's fleet at July 31, 1994 consisted of the following aircraft:

<TABLE>
<CAPTION>
Approximate
Revenue Payload
Description Number (Pounds per Aircraft)
- ----------- ------ ---------------------
<S> <C> <C>
Boeing B747-200 6* 250,000
McDonnell Douglas MD-11 13* 198,500
McDonnell Douglas DC-10-30 20* 172,000
Airbus A300-600 4* 117,700
McDonnell Douglas DC-10-10 11* 105,000
Airbus A310-200 1* 74,200
Boeing B727-200 90* 59,500
Boeing B727-100 69* 46,000
Fokker F-27-500 24 14,000
Fokker F-27-600 8 12,500
Cessna 208B 206 3,460
Cessna 208A 10 2,960
---
Total 462
---
---
<FN>
___________________________
*Four A300, one A310, 13 MD-11, two DC-10-10, 15 DC-10-30, six B747-200, five
B727-100 and 13 B727-200 aircraft are subject to operating leases.

</TABLE>

In addition, the Company "wet leases" approximately 30 smaller
piston-engine and turbo-prop aircraft which feed packages to and from airports
served by the Company's larger jet aircraft. The wet lease agreements call for
the owner-lessor to provide flight crews, insurance and maintenance, as well as
fuel and other supplies required to operate the aircraft. The Company's wet
lease agreements are for terms not exceeding one year and are generally
cancelable upon 30 to 60 days notice.

At July 31, 1994, the Company operated approximately 30,900 ground
transport vehicles, including pick-up and delivery vans, larger trucks called
container transport vehicles and over-the-road tractors and trailers.

AIRCRAFT PURCHASE COMMITMENTS

Under various contracts, the Company is committed to purchase 21 Airbus
A300 and 25 Cessna 208B aircraft to be delivered through 1999. The Company also
has options to purchase up to 46 additional A300 aircraft for delivery beginning
in 1997.

<PAGE>

SORTING AND HANDLING FACILITIES

At June 30, 1994, the Company was operating the following sorting and
handling facilities:

<TABLE>
<CAPTION>
SORTING LEASE
SQUARE CAPACITY EXPIRATION
LOCATION ACRES FEET (per hour)* LESSOR YEAR
- -------- ----- ------ ----------- ------ ----------
<S> <C> <C> <C> <C> <C>
NATIONAL

Memphis, Tennessee 510 1,828,000 491,000 Memphis-Shelby County 2014
Airport Authority

Indianapolis, Indiana 170 645,000 153,000 Indianapolis Airport 2016
Authority

REGIONAL

Newark, New Jersey 60 374,000 85,000 Port Authority of New 2010
York and New Jersey

Oakland, California 36 191,000 50,000 City of Oakland 2011

METROPOLITAN

Los Angeles, California 25 130,000 53,000 City of Los Angeles 2009

Chicago, Illinois 35 286,000 45,000 City of Chicago 2018

Anchorage, Alaska** 42 208,000 16,000 Alaska Department of 1998
Transportation and Public
Facilities
<FN>

________________________
* Documents and packages
** Handles international express package and freight shipments to and from
Asia, Europe and North America.
</TABLE>

The Company's facilities at the Memphis International Airport also consist
of aircraft hangars, flight training and fuel facilities, administrative offices
and warehouse space. The Company leases these facilities from the Memphis-Shelby
County Airport Authority under several leases. The leases cover land, the
administrative and sorting buildings, other facilities, hangars and ramps and
certain related equipment. The Company has the option to purchase certain
equipment (but not buildings or improvements to real estate) leased under such
leases at the end of the lease term for a nominal sum. The leases obligate the
Company to maintain and insure the leased property and to pay all related taxes,
assessments and other charges. The leases are subordinate to, and the Company's
rights thereunder could be affected by, any future lease or agreement between
the Authority and the United States Government.

In addition to the facilities noted above, the Company has major
international sorting and freight handling facilities located at Narita Airport
in Japan, Charles de Gaulle Airport in Paris, France and Stansted Airport
outside London, England. The Company is also developing a transloading facility
in Subic Bay, The Philippines which is expected to become operational in 1995.

ADMINISTRATIVE AND OTHER PROPERTIES AND FACILITIES

The Company has facilities housing administrative and technical operations
on approximately 200 acres adjacent to the Memphis International Airport. Of
the seven buildings located on this site, four are subject to long-

<PAGE>

term leases and the other three are owned by the Company. The Company also
leases 64 facilities in the Memphis area for its corporate headquarters,
warehouse facilities and administrative offices.

The Company owns 14 and leases 762 facilities for city station operations
in the United States. In addition, 161 city stations are owned or leased
throughout the Company's international network. The majority of the leases are
for terms of five to ten years. The Company believes that suitable alternative
facilities are available in each locale on satisfactory terms, if necessary. As
of June 30, 1994, the Company leased space for 406 Service Centers in the United
States and had placed approximately 29,676 Drop Boxes. The Company also owns
stand- alone Mini-Centers located on leaseholds in parking lots adjacent to
office buildings, shopping centers and office parks of which 285 were operating
at June 30, 1994. Internationally, the Company leases space for 31 Business
Service Centers and has approximately 733 Drop Boxes.

The Company leases central processing units and most of the disk drives,
printers and terminals used for data processing. Owned equipment consists
primarily of Digitally Assisted Dispatch Systems ("DADS") terminals used in
communications between dispatchers and couriers, computerized routing, tracing
and billing equipment used by customers and mobile radios used in the Company's
vehicles. The Company also leases space on C-Band and Ku-Band satellite
transponders for use in its telecommunications network.

ITEM 3. LEGAL PROCEEDINGS

The Company has reached a tentative settlement of the shareholder
class-action lawsuit filed in 1990 against it, Frederick W. Smith, Chairman and
Chief Executive Officer, and James L. Barksdale, the Company's former Executive
Vice President and Chief Operating Officer. The settlement, which still must be
approved by the United States District Court for the Western District of
Tennessee, is for an immaterial amount (the Company's portion of which has been
recorded in the 1994 financial statements). The Company's insurance carrier will
pay a majority of the settlement amount.

The Company currently believes that the Court will approve or disapprove
the settlement agreement before the end of its current fiscal year. Prior to the
Court's decision, the purchasers of the Company's Common Stock affected by the
settlement agreement must be notified of the terms of the settlement and a
hearing must be held in the District Court.

The Internal Revenue Service ("IRS") issued an Examination Report on
October 31, 1991 asserting the Company underpaid federal excise taxes for the
calendar quarters ended December 31, 1983 through March 31, 1987. The
Examination Report contains a primary position and a mutually exclusive
alternative position asserting the Company underpaid federal excise taxes by
$54,000,000 and $26,000,000, respectively. Disagreeing with essentially all of
the proposed adjustments contained in the Examination Report, the Company filed
a Protest on March 16, 1992 which set forth the Company's defenses to both IRS
positions and a claim for refund of overpaid federal excise taxes of
$23,500,000. On March 19, 1993, the IRS issued another Examination Report to the
Company asserting the Company underpaid federal excise taxes by $105,000,000 for
the calendar quarters ended June 30, 1987 through March 31, 1991. On June 17,
1993, the Company filed a Protest contesting the March 19 Examination Report
which set forth the Company's defenses to the IRS position and a claim for
refund of overpaid federal excise taxes of $46,500,000. Interest would be
payable on the amount of any refunds by the IRS to the Company or underpaid
federal excise taxes payable by the Company to the IRS at statutorily determined
rates. The interest rates payable by the Company for underpaid taxes are higher
than the rates payable by the IRS on refund amounts.

The Company plans to vigorously pursue its Protests administratively with
the IRS Appeals Division. If it is unsuccessful with the IRS Appeals Division,
the Company intends to pursue its position in court. Pending resolution of this
matter, the IRS can be expected to take positions similar to those taken in
their Examination Reports for periods after March 31, 1991.

<PAGE>

on the Company's financial condition or results of operations. No amounts have
been reserved for this contingency.

In November 1987, The Flying Tiger Line Inc. ("Flying Tigers"), a company
acquired by the Company in 1989, received a notice from the United States
Environmental Protection Agency ("EPA") identifying Flying Tigers as a
potentially responsible party ("PRP") in connection with a "Superfund" site
located in Monterey Park, California. The site is a 190-acre landfill which
operated from 1948 through 1984. In June 1985, the EPA began a remedial
investigation of the site to identify the extent of soil, air and water
contamination. The EPA estimates that approximately .1% of the waste disposed at
the site is attributable to Flying Tigers. Flying Tigers participated in a
partial settlement relating to remedial actions for management of leaching
contamination and site control. Partial consent decrees were entered in the
United States District Court for the Central District of California in 1989 and
1992, which provided, in part, for payments of $109,000 and $230,000,
respectively, by Flying Tigers and Federal Express to the partial-settlement
escrow account. However, the Company does not expect all outstanding issues to
be resolved for several years. Due to several variables which are beyond the
Company's control, it is impossible to accurately estimate the Company's
potential share of the remaining costs, but based on Flying Tigers' relatively
insignificant contribution of waste to the site, the Company believes that its
remaining liability will not be material. However, if negotiations with the EPA
are not successful, it could decide to issue a unilateral remedial order which
could name one or more PRP as responsible for the entire liability. Any PRP
named in such an order would, however, be expected to seek contribution from the
unnamed PRPs.

The Company is subject to other legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the aggregate
liability (if any) with respect to these other actions will not materially
adversely affect the financial position or results of operations of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended May 31, 1994.

EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding executive officers of the Company is as follows
(included herein pursuant to General Instruction G(3) of Form 10-K):

Officer, Year First
Elected as Officer Age Positions with Company
- -------------------- --- ----------------------
<S> <C> <C>
Frederick W. Smith 49 Chairman, President and Chief Executive
1971 Officer since April 1983; Chief Executive
Officer since April 1977; Chairman since
February 1975; and President from June 1971
to February 1975. Founder of the Company.

William J. Razzouk 46 Executive Vice President - Worldwide Customer
1983 Operations since June 1993; Senior Vice
President - Sales and Customer Service from
October 1991 to June 1993; Senior Vice
President - Sales and Customer Information
from September 1990 to October 1991; Vice
President - U.S. Sales from 1988 to
September 1990; Vice President - Field Sales
from 1986 to 1988; and Vice President -
Electronic Product Sales from August 1983 to
1986.

David J. Bronczek 40 Senior Vice President - Europe, Africa and
1987 Mediterranean since March 1993; Vice
President - Canadian Operations from March
1987 to March 1993; and several sales and
operations managerial positions from 1976 to
1987.

<PAGE>

T. Michael Glenn 38 Senior Vice President - Worldwide Marketing,
1985 Customer Service and Corporate Communications
since June 1994; Senior Vice President -
Marketing and Corporate Communications from
December 1993 to June 1994; Senior Vice
President - Worldwide Marketing, Catalog
Services and Corporate Communications from
June 1993 to December 1993, Senior Vice
President - Catalog and Remail Services from
September 1992 to June 1993; Vice President -
Marketing from August 1985 to September 1992,
various management positions in sales and
marketing and senior sales specialist from
1981 to 1985.

Alan B. Graf, Jr. 40 Senior Vice President and Chief Financial
1987 Officer since November 1991; Vice President
and Treasurer from July 1987 to November
1991; and various management positions in
finance and a senior financial analyst from
1980 to 1987.

Dennis H. Jones 42 Senior Vice President and Chief Information
1986 Officer since November 1991; Vice President -
Customer Automation and Invoicing from
December 1986 to November 1991; and various
management positions in finance and a
financial analyst from 1975 to 1986.

Kenneth R. Masterson 50 Senior Vice President and General
1980 Counsel since February 1981; Secretary since
September 1993; and Vice President - Legal
from January 1980 to February 1981.

Joseph C. McCarty, III 49 Senior Vice President - Asia, Pacific and
1983 Middle East since October 1991; Vice
President - International Legal from March
1987 to October 1991; Vice President -
Properties & Facilities from November 1984 to
March 1987; and Vice President - Legal from
February 1983 to November 1984.

James A. McKinney 49 Senior Vice President, President FedEx
1989 Logistics Services since December 1993; Vice
President - Business Logistics Services -
North America from October 1992 to December
1993; Vice President - Information Systems
from July 1992 to October 1992; Vice
President - Operations - FEDEX Aeronautics
Corporation from January 1992 to July 1992;
Vice President - Flight Operations from
June 1989 to January 1992; and various
managerial positions from 1984 to 1989.

Kenneth R. Newell 56 Senior Vice President - Retail Service
1983 Operations since June 1993; Senior Vice
President - Europe, Mediterranean and Africa
Operations from October 1991 to June 1993;
Vice President - United Kingdom/Ireland from
1990 to October 1991; Vice President -
Domestic Ground Operations, Central Region;
Vice President - Business Service Centers; &
Service Systems; Vice President - Business
Service Operations & Sales from September
1983 to 1987; and various managerial
positions from 1975 to 1983.

James A. Perkins 50 Senior Vice President and Chief Personnel
1979 Officer since June 1979 and various personnel
managerial positions from 1974 to 1979.

David F. Rebholz 41 Senior Vice President - Sales and Customer
1988 Services since June 1993; Vice President of
the Central Region for the Americas and
Caribbean from October 1991 to June 1993;
Vice President of Customer Service from
December 1988 to October 1991; and Regional
Sales Director-Western Region and various
operating management positions from 1976 to
1988.

<PAGE>

Jeffrey R. Rodek 40 Senior Vice President - Americas and
1986 Caribbean since July 1991; Senior Vice
President - Central Support Services from
December 1989 to July 1991; President of The
Flying Tiger Line Inc. from June 1989 to
August 1989; Vice President - Financial
Planning and Control from January 1986 to
December 1989; and various management
positions in finance and an operations
research analyst from 1978 to 1986.

Tracy G. Schmidt 37 Senior Vice President - Air Ground Terminal
1990 and Transportation since July 1994; Vice
President - Corporate Financial Planning from
January 1990 to July 1994; and various
management positions in financial planning
and reporting from 1980 to 1990.

Mary Alice Taylor 44 Senior Vice President - Central Support
1985 Services since September 1991; Regional Vice
President - Ground Operations - Southern
Region from May 1988 to September 1991; Vice
President - Logistics and Publishing Services
from November 1985 to May 1988. Various
management positions in Finance and
management information consultant from 1980
to 1985.

Theodore L. Weise 50 Senior Vice President - Air Operations since
1978 July 1991; Senior Vice President - United
States and Canada from June 1990 to July
1991; Senior Vice President - Domestic Ground
Operations from 1987 to June 1990; Senior
Vice President - Central Support Services
from 1985 to 1987; Senior Vice President/
General Manager - Business Service Centers
from 1983 to 1985; Senior Vice President -
Operations Planning from 1979 to 1983; Vice
President - Operations Resource and Corporate
Planning from 1978 to 1979; Vice President
Special Projects and Advanced Planning from
April 1977 to 1978; and Director of Special
Projects from 1972 to 1977.
</TABLE>
14

<PAGE>

GRAHAM R. SMITH 46 Vice President and Controller since September
1988 1990; Vice President-International Finance from
December 1988 to September 1990; and various management
positions in finance from 1977 to 1988.

Officers are elected by, and serve at the discretion of, the Board of
Directors. There is no arrangement or understanding between any officer and any
person, other than a director or executive officer of the Company acting in his
or her official capacity, pursuant to which any officer was selected. There are
no family relationships between any executive officer and any other executive
officer or director of the Company. There has been no event involving any
executive officer under any bankruptcy act, criminal proceeding, judgment or
injunction during the past five years.

PART II

Information for Items 5 through 8 of this Report appears in the Company's
1994 Annual Report to Stockholders as indicated in the following table and is
incorporated herein by reference.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS

Information regarding market information, stockholders and dividends is
contained in the Corporate Information Section of the 1994 Annual Report to
Stockholders, on page 56 under the headings, "Stock Listing," "Stockholders" and
"Market Information" and is incorporated herein by reference.

No cash dividends have been declared.

PAGE(S) IN ANNUAL
REPORT TO STOCKHOLDERS
----------------------
ITEM 6. SELECTED FINANCIAL DATA

Selected Consolidated Financial Data.................. 52 - 53

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............. 26 - 32

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Statements of Operations............ 33
Consolidated Balance Sheets...................... 34 - 35
Consolidated Statements of Cash Flows............ 36
Consolidated Statements of Changes in
Common Stockholders' Investment................. 37
Notes to Consolidated Financial Statements....... 38 - 50

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........... Not Applicable

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding members of the Company's Board of Directors is
presented in Sections "Voting Securities and Principal Holders Thereof -
Security Ownership of Management and Certain Beneficial Owners," "Election of
Directors," "Meetings and Committees," "Transactions with Management and Others"
and

<PAGE>

"Compensation of Directors" on pages 1 through 5 and 11 through 12 of the
Definitive Proxy Statement for the Company's 1994 Annual Meeting of Stockholders
which will be held September 26, 1994 and is incorporated herein by reference.
Information regarding executive officers of the Company is included above in
Part I of this Form 10-K under the caption "Executive Officers of the
Registrant" pursuant to Instruction 3 to Item 401(b) of Regulation S-K and
General Instruction G(3) of Form 10-K. Information required by Item 405 of
Regulation S-K is presented in "Section 16 Filings" on page 12 of the
Definitive Proxy Statement and is incorporated herein by reference.

Information for Items 11 through 13 of this Report appears in the
Definitive Proxy Statement for the Company's 1994 Annual Meeting of Stockholders
to be held on September 26, 1994 and, as indicated in the following table, is
incorporated herein by reference.

PAGE IN PROXY
STATEMENT
-------------
ITEM 11. EXECUTIVE COMPENSATION

Compensation Information........................... 6 - 11

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

Voting Securities and Principal Holders Thereof...... 1 - 3

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others.............. 11

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. FINANCIAL STATEMENTS

The consolidated financial statements of the Company, together with the
report thereon of Arthur Andersen & Co., dated June 29, 1994, are presented on
pages 33 through 51 of the Company's 1994 Annual Report to Stockholders and are
incorporated herein by reference. With the exception of the aforementioned
information and the information incorporated by reference in Items 5, 6, 7 and 8
hereof, the Company's 1994 Annual Report to Stockholders is not to be deemed as
filed as part of this Report.

2. FINANCIAL STATEMENT SCHEDULES
PAGE NUMBER IN
FORM 10-K
--------------

Report of Independent Public Accountants on Financial
Statement Schedules.................................... S-1

Schedule II - Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees Other
than Related Parties................................... S-2

Schedule V - Property and Equipment.............................. S-3

Schedule VI - Accumulated Depreciation and Amortization of
Property and Equipment................................. S-4

Schedule VIII - Valuation and Qualifying Accounts................ S-5

Schedule IX - Short-Term Borrowings.............................. S-6

<PAGE>

Schedule X - Supplementary Income Statement Information.......... S-7

All other financial statement schedules have been omitted because they are not
applicable or the required information is included in the consolidated financial
statements, or the notes thereto, contained in the Company's 1994 Annual Report
to Stockholders and incorporated herein by reference.

3. EXHIBITS

The documents attached hereto as Exhibits 3.1, 3.2, 4.1 through 4.25, 10-1
through 10.71, 11.1, 12.1, 13.1, 21.1, 23.1 and 24.1 are being filed in
connection with and incorporated by reference herein.

The Exhibit Index on pages E-1 through E-9 is hereby incorporated herein
by reference.

(b) REPORTS ON FORM 8-K

During the last quarter of the period covered by this Report on Form 10-K,
the Registrant filed two Current Reports on Form 8-K.

The first Current Report was dated March 11, 1994 and contained
Registrant's press release dated March 11, 1994.

The second Current Report was dated March 16, 1994 and contained documents
relating to Registrant's 1994 Pass Through Certificates, Series A310-A1, A310-A2
and A310-A3.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.

FEDERAL EXPRESS CORPORATION
(Registrant)

BY: /s/ GRAHAM R. SMITH
-----------------------------------
Graham R. Smith
Vice President and Controller
(Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.

SIGNATURE CAPACITY DATE
--------- -------- ----

/s/ FREDERICK W. SMITH * Chairman, President
- -------------------------- and Chief Executive Officer
Frederick W. Smith (Principal Executive Officer)

/s/ WILLIAM J. RAZZOUK * Executive Vice President
- -------------------------- Worldwide Customer
William J. Razzouk Operations

/s/ ALAN B. GRAF, JR.* Senior Vice President and
- -------------------------- Chief Financial Officer
Alan B. Graf, Jr. (Principal Financial Officer)

/s/ GRAHAM R. SMITH Vice President and Controller
- --------------------------- (Principal Accounting Officer) August 5, 1994
Graham R. Smith

/s/ ROBERT H. ALLEN * Director
- ---------------------------
Robert H. Allen

/s/ HOWARD H. BAKER, JR. * Director
- ---------------------------
Howard H. Baker, Jr.

/s/ ANTHONY J.A. BRYAN * Director
- ---------------------------
Anthony J.A. Bryan

/s/ ROBERT L. COX * Director
- ---------------------------
Robert L. Cox

/s/ RALPH D. DENUNZIO * Director
- ---------------------------
Ralph D. DeNunzio

<PAGE>

SIGNATURE CAPACITY DATE
--------- -------- ----

/s/ JUDITH L. ESTRIN * Director
- ---------------------------
Judith L. Estrin

/s/ PHILIP GREER * Director
- ---------------------------
Philip Greer

/s/ J. R. HYDE, III * Director
- ---------------------------
J. R. Hyde, III

/s/ CHARLES T. MANATT * Director
- ---------------------------
Charles T. Manatt

/s/ JACKSON W. SMART, JR. * Director
- ---------------------------
Jackson W. Smart, Jr.

/s/ JOSHUA I. SMITH * Director
- ---------------------------
Joshua I. Smith

/s/ PETER S. WILLMOTT * Director
- ---------------------------
Peter S. Willmott

*By:/s/ GRAHAM R. SMITH August 5, 1994
------------------------
Graham R. Smith
Attorney-in-Fact

<PAGE>

S-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES

To Federal Express Corporation:

We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Federal Express Corporation's 1994
Annual Report to Stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated June 29, 1994. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
financial statement schedules on pages S-2 through S-7 are the responsibility of
the Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. The financial statement schedules have been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

/s/ ARTHUR ANDERSEN & CO.
---------------------------------
ARTHUR ANDERSEN & CO.

Memphis, Tennessee,
June 29, 1994.

<PAGE>

S-2
SCHEDULE II

FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992

<TABLE>
<CAPTION>
BALANCE AT END
DEDUCTIONS OF YEAR
------------------- ------------------

BALANCE AT AMOUNTS
NAME OF BEGINNING AMOUNTS WRITTEN NOT
DEBTOR(A) OF YEAR ADDITIONS COLLECTED OFF CURRENT CURRENT
--------- ---------- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1994
- ----
Thomas R. Oliver(B) $1,775,817 - $1,775,817 - - -
William J. Razzouk - $ 350,007 350,007 - - -
Theodore L. Weise 619,031 - - - - $ 619,031
Ronald D. Wickens 242,790 - 223,103 - - 19,687

1993
- ----
Larry W. McMahan $ 101,690 - $ 101,690 - - -
Thomas R. Oliver(B) 400,997 $1,374,820 - - - $1,775,817
William J. Razzouk - 199,803 199,803 - - -
Theodore L. Weise 619,031 - - - - 619,031
Ronald D. Wickens 242,790 - - - - 242,790

1992
- ----
David C. Anderson(C) $ 482,802 - $ 482,802 - - -
A. Doyle Cloud 70,874 - 70,874 - - -
John M. Dauernheim 122,203 - 122,203 - - -
Larry W. McMahan 101,690 - - - - $ 101,690
Thomas R. Oliver 400,997 - - - - 400,997
Ron J. Ponder(C) 636,832 - 636,832 - - -
William J. Razzouk - $ 160,138 160,138 - - -
Michael A. Staunton 113,218 - 113,218 - - -
Theodore L. Weise 619,031 - - - - 619,031
Ronald D. Wickens 242,790 - - - - 242,790

<FN>
(A) Consists of loans to certain key employees for the purchase of Common Stock
under the Company's stock incentive plans. Loans are non-interest bearing
and are due on demand or when the individual leaves the employment of the
Company.

(B) Mr. Oliver, the Company's former Executive Vice President-Worldwide
Customer Operations, resigned from the Company effective July 31, 1993.

(C) Mr. Anderson, the Company's former Chief Financial Officer, and Mr. Ponder,
the Company's former Senior Vice President and Chief Information Officer,
resigned from the Company during 1992.
</TABLE>

<PAGE>

S-3
SCHEDULE V
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992
(In thousands)

BALANCE AT BALANCE
BEGINNING ADDITIONS AT END
DESCRIPTION OF YEAR AT COST RETIREMENTS OTHER (E) OF YEAR
- ----------- ---------- --------- ----------- --------- -------

1994
- ----
<S> <C> <C> <C> <C> <C>
Flight equipment . . . . . . . . . . . . $2,843,253 $ 582,477(A) $(597,422)(D) $ (287) $2,828,021
Package handling and ground
support equipment . . . . . . . . . . . 1,413,793 221,859(B) (49,387) (2,837) 1,583,428
Computer and electronic equipment. . . . 947,913 181,417(C) (160,903) (1,521) 966,906
Other property and equipment . . . . . . 1,501,250 103,622 (90,815) (2,187) 1,511,870
---------- ------------ --------- ------------ ----------

$6,706,209 $ 1,089,375 $(898,527) $ (6,832) $6,890,225
---------- ------------ ---------- -------- ----------
---------- ------------ --------- -------- ----------
1993
- ----
Flight equipment . . . . . . . . . . . . $2,540,350 $ 571,639(A) $(268,343)(D) $ (393) $2,843,253
Package handling and ground
support equipment . . . . . . . . . . . 1,352,659 79,104 (69) (17,901) 1,413,793
Computer and electronic equipment. . . . 851,686 126,465(C) (32,951) 2,713 947,913
Other property and equipment . . . . . . 1,433,212 89,779 (22,838) 1,097 1,501,250
---------- ---------- --------- --------------- ----------

$6,177,907 $ 866,987 $(324,201) $(14,484) $6,706,209
---------- ---------- --------- -------- ----------
---------- ---------- --------- -------- ----------
1992
- ----
Flight equipment . . . . . . . . . . . . $2,394,326 $ 538,544(A) $(392,966)(D) $ 446 $2,540,350
Package handling and ground
support equipment. . . . . . . . . . . . 1,296,706 53,440 (30,048) 32,561 1,352,659
Computer and electronic equipment. . . . 756,638 110,993(C) (16,987) 1,042 851,686
Other property and equipment . . . . . . 1,447,501 67,793 (85,060) 2,978 1,433,212
---------- ---------- --------- -------- ----------

$5,895,171 $ 770,770 $(525,061) $ 37,027 $6,177,907
---------- ---------- --------- -------- ----------
---------- ---------- --------- -------- ----------

<FN>
(A) Additions to flight equipment primarily relate to the purchase of
aircraft and related equipment as follows: five MD-11 and three B727-
200 in 1994; 19 B727-200 and four MD-11 in 1993; and two B727-100, nine
B727-200, three MD-11, six F-27 and 24 Cessna 208B in 1992.

(B) Additions to package handling and ground support equipment in 1994
primarily relate to the acquisition of pick-up and delivery vehicles,
container transport vehicles and expansion of the Company's national and
regional sorting and package handling facilities.

(C) Additions to computer and electronic equipment relate primarily to
computer mainframe expansion and upgrades and expansions of the Company's
customer automation systems (POWERSHIP) and, with respect to 1993 and
1992, the Company's advance package tracking and billing systems
(COSMOS).

(D) Retirements of flight equipment primarily relate to sale-leasebacks of
six MD-11 aircraft in 1994; three MD-11 aircraft in 1993; and five
B727-100, two DC-10-10 and three MD-11 aircraft in 1992.

(E) Includes foreign currency translation adjustments and reclassifications.
</TABLE>

<PAGE>

S-4
SCHEDULE VI

FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992
(In thousands)

<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES RETIREMENTS OTHER (B) OF YEAR
- ----------- ---------- ---------- ----------- --------- -------

1994
- ----
<S> <C> <C> <C> <C> <C>
Flight equipment . . . . . . . . . . . . $1,097,985 $234,086 $ (68,609)(A) $ (94) $ 1,263,368
Package handling and ground
support equipment . . . . . . . . . . . 851,739 135,408 (48,998) (1,923) 936,226
Computer and electronic equipment. . . . 677,567 120,736 (158,963) (925) 638,415
Other property and equipment . . . . . . 602,650 92,432 (90,634) (1,325) 603,123
---------- -------- --------- -------- -----------
$3,229,941 $582,662 $(367,204) $ (4,267) $ 3,441,132
---------- -------- --------- -------- -----------
---------- -------- --------- -------- -----------

1993
- ----

Flight equipment . . . . . . . . . . . . $ 899,993 $221,088 $ (22,890) $ (206) $ 1,097,985
Package handling and ground
support equipment . . . . . . . . . . . 746,730 124,120 - (19,111) 851,739
Computer and electronic equipment. . . . 601,582 111,299 (32,854) (2,460) 677,567
Other property and equipment . . . . . . 518,305 105,302 (16,147) (4,810) 602,650
---------- -------- ---------- -------- -----------

$2,766,610 $561,809 $ (71,891) $(26,587) $ 3,229,941
---------- -------- ---------- -------- -----------
---------- -------- ---------- -------- -----------

1992
- ----

Flight equipment . . . . . . . . . . . . $ 741,256 $204,262 $ (45,820)(A) $ 295 $ 899,993
Package handling and ground
support equipment . . . . . . . . . . . 594,896 133,171 (11,953) 30,616 746,730
Computer and electronic equipment. . . . 503,853 104,970 (7,241) - 601,582
Other property and equipment . . . . . . 431,140 114,410 (26,995) (250) 518,305
---------- -------- ---------- -------- -----------
$2,271,145 $556,813 $ (92,009) $ 30,661 $ 2,766,610
---------- -------- ---------- -------- -----------
---------- -------- ---------- -------- -----------
<FN>
(A) Retirements of flight equipment relate primarily to sale-leasebacks of
aircraft.

(B) Includes foreign currency translation adjustments and reclassifications.
</TABLE>

<PAGE>

S-5
SCHEDULE VIII

FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992
(In thousands)

ADDITIONS
---------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS(A) YEAR
- ----------- ---------- ---------- ---------- ------------- ----------

Allowance for
Doubtful Accounts
-----------------
<S> <C> <C> <C> <C> <C>
1994 . . . . . . . . . . . $31,308 $45,763 - $43,138 $33,933
------- ------- --------- ------- -------
------- ------- --------- ------- -------

1993 . . . . . . . . . . . $32,074 $33,552 - $34,318 $31,308
------- ------- --------- ------- -------
------- ------- --------- ------- -------

1992 . . . . . . . . . . . $37,694 $31,670 $ 4,596 $41,886 $32,074
------- ------- --------- ------- -------
------- ------- --------- ------- -------

<FN>

(A) Accounts written off net of recoveries.

</TABLE>

<PAGE>

S-6
SCHEDULE IX

FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992
(In thousands, except percentages)

MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
BALANCE AVERAGE OUTSTANDING OUTSTANDING INTEREST
CATEGORY OF AGGREGATE AT END INTEREST DURING DURING RATE DURING
SHORT-TERM BORROWINGS OF YEAR RATE THE YEAR THE YEAR THE YEAR(C)
- --------------------- ------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1994 (A)
- ----

Commercial paper . . . . . . . . - - $ 95,000 $ 1,781 3.8%
Revolving credit agreement . . . - - 45,000 1,082 6.0%

1993 (A)
- ----
Commercial paper . . . . . . . . - - $202,328 $ 43,058 4.2%
Revolving credit agreement . . . - - 125,000 13,075 6.2%

1992 (B)
- ----
Commercial paper . . . . . . . . $120,413 4.7% $277,771 $185,455 5.9%
Revolving credit agreements. . . 75,000 6.5% 530,000 245,413 6.6%

<FN>

(A) The Company has a revolving credit agreement with domestic and foreign
banks at May 31, 1994, which was also in place at May 31, 1993.
International borrowings with foreign banks are denominated in U.S.
dollars. During 1993 there were certain international borrowings with
foreign banks denominated in currencies other than U.S. dollars. Those
borrowings were translated based on the foreign currency rates of exchange
in effect for the period. The average amount outstanding during the year
was computed by dividing the sum of daily outstanding principal balances by
365 for commercial paper and revolving credit borrowings.

(B) The Company had revolving credit agreements with domestic and foreign
banks. International borrowings with foreign banks denominated in
currencies other than U.S. dollars were translated based on the foreign
currency rates of exchange in effect for the period. The average amount
outstanding during the year was computed by dividing the sum of daily
outstanding principal balances by 365 for commercial paper and domestic
revolving credit borrowings and by dividing the sum of the month-end
outstanding principal balances by 13 for international revolving credit
borrowings.

(C) The weighted average interest rate was computed by dividing actual interest
expense by average short-term borrowings outstanding during the year. The
weighted average interest rates for domestic and international borrowings
under revolving credit agreements were both approximately 6% for 1993, and
6% and 11%, respectively, for 1992. There were no international borrowings
under the revolving credit agreement in 1994.

</TABLE>

<PAGE>

S-7
SCHEDULE X

FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED MAY 31, 1994, 1993 AND 1992
(In thousands)

1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs (A). . . $554,301 $527,856 $530,566

Advertising. . . . . . . . . . . 122,002 109,323 123,592

<FN>

(A) The above amounts include salaries and employee benefits and other expenses
associated with the Company's internal maintenance and repair functions for
aircraft and vehicle fleets, facilities and sort equipment.

</TABLE>

<PAGE>

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

3.1 Restated Certificate of Incorporation of Registrant (Filed as
Exhibit 3.1 to Registrant's 1993 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

3.2 By-laws of Registrant (Filed as Exhibit 3.2 to Registrant's 1993
Annual Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)

4.1 Indenture dated as of April 1, 1987 between Registrant and
NationsBank of Tennessee, National Association ("NationsBank"), as
Trustee, relating to Registrant's 10% Senior Notes due April 15,
1999. (Filed as Exhibit 10.36 to Registrant's 1988 Annual Report on
Form 10-K, Commission File No. 1-7806, and incorporated herein by
reference.)

4.2 Supplemental Indenture No. 2 dated as of April 18, 1989 between
Registrant and NationsBank, relating to Registrant's 10% Senior
Notes due April 15, 1999. (Filed as Exhibit 4(a) to Registrant's
Current Report on Form 8-K dated April 25, 1989, Commission File
No. 1-7806, and incorporated herein by reference.)

4.3 Supplemental Indenture No. 3 dated as of April 21, 1989 between
Registrant and NationsBank and form of note relating to
Registrant's 10% Senior Notes due April 15, 1999. (Filed as
Exhibit 4(b) to Registrant's Current Report on Form 8-K dated April
25, 1989, Commission File No. 1-7806, and incorporated herein by
reference.)

4.4 Indenture dated as of May 15, 1989 between Registrant and
NationsBank, relating to Registrant's 9-3/4% Senior Notes due May
15, 1996. (Filed as an exhibit to Registrant's Registration
Statement No. 33-28796 on Form S-3 and incorporated herein by
reference.)

4.5 Supplemental Indenture No. 1 dated as of May 22, 1989 between
Registrant and NationsBank and form of note relating to
Registrant's 9-3/4% Senior Notes due May 15, 1996. (Filed as
Exhibit 4 to Registrant's Current Report on Form 8-K dated May 24,
1989, Commission File No. 1-7806, and incorporated herein by
reference.)

4.6 Supplemental Indenture No. 2 dated as of August 11, 1989 between
Registrant and NationsBank, relating to Registrant's 9 5/8% Sinking
Fund Debentures due October 15, 2019. (Filed as Exhibit 4.2 to
Registrant's Registration Statement No. 33-30415 on Form S-3 and
incorporated herein by reference.)

4.7 Supplemental Indenture No. 3 dated as of October 15, 1989 between
Registrant and NationsBank, relating to Registrant's 9 5/8% Sinking
Fund Debentures due October 15, 2019. (Filed as Exhibit 4.2 to
Registrant's Current Report on Form 8-K dated October 16, 1989,
Commission File No. 1-7806, and incorporated herein by reference.)

4.8 Supplemental Indenture No. 4 dated as of November 15, 1989 between
Registrant and NationsBank, relating to Registrant's 9.20% Senior
Notes due November 15, 1994. (Filed as Exhibit 4.1 to Registrant's
Current Report on Form 8-K dated November 13, 1989, Commission File
No. 1-7806, and incorporated herein by reference.)

4.9 Form of 9.20% Senior Note due November 15, 1994. (Filed as Exhibit
4.2 to Registrant's Current Report on Form 8-K dated November 13,
1989, Commission File No. 1-7806, and incorporated herein by
reference.)

E-1

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

4.10 Supplemental Indenture No. 5 dated as of August 15, 1990 between
Registrant and NationsBank, relating to Registrant's Medium-Term
Notes, Series A, the last of which is due November 20, 1995. (Filed
as Exhibit 4(c) to Registrant's Current Report on Form 8-K dated
August 28, 1990, Commission File No. 1-7806, and incorporated
herein by reference.)

4.11 Form of Fixed Rate Medium-Term Note, Series A, the last of which is
due November 20, 1995. (Filed as Exhibit 4(a) to Registrant's
Current Report on Form 8-K dated August 28, 1990, Commission File
No. 1-7806, and incorporated herein by reference.)

4.12 Form of Floating Rate Medium-Term Note, Series A, the last of which
is due November 20, 1995. (Filed as Exhibit 4(b) to Registrant's
Current Report on Form 8-K dated August 28, 1990, Commission File
No. 1-7806, and incorporated herein by reference.)

4.13 Indenture dated May 15, 1989 including Supplemental Indentures Nos.
1 through 5 dated as described above, between Registrant and
NationsBank, relating to Registrant's Medium-Term Notes, Series B,
the last of which is due August 15, 2006, Registrant's 9 7/8% Notes
due April 1, 2002, Registrant's 9.65% Notes due June 15, 2012 and
Registrant's 6 1/4% Notes due April 15, 1998. (Filed as described
above.)

4.14 Form of Fixed Rate Medium-Term Note, Series B, the last of which is
due August 15, 2006. (Filed as Exhibit 4.4 to Registrant's
Registration Statement No. 33-40018 on Form S-3 and incorporated
herein by reference.)

4.15 Form of Floating Rate Medium-Term Note, Series B, the last of which
is due August 15, 2006. (Filed as Exhibit 4.5 to Registrant's
Registration Statement No. 33-40018 on Form S-3 and incorporated
herein by reference.)

4.16 Form of 9 7/8% Note due April 1, 2002. (Filed as Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated March 23, 1992,
Commission File No. 1-7806, and incorporated herein by reference.)

4.17 Form of 9.65% Note due June 15, 2012. (Filed as Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated June 18, 1992,
Commission File No. 1-7806, and incorporated herein by reference.)

4.18 Form of 6 1/4% Note due April 15, 1998. (Filed as Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated April 21, 1993,
Commission File No. 1-7806, and incorporated herein by reference.)

4.19 Pass Through Trust Agreement dated as of February 1, 1993 between
Registrant and NationsBank of South Carolina, National Association,
as Pass Through Trustee, relating to Registrant's 1993 Pass Through
Certificates, Series A1 and A2, Series B1 and B2 and Series C1 and
C2. (Filed as Exhibit 4.19 to Registrant's 1993 Annual Report on
Form 10-K, Commission File No. 1-7806, and incorporated herein by
reference.)

4.20 Form of 1993 Pass Through Certificates, Series A1 and A2. (Filed as
Exhibit 4(a)(2) to Registrant's Current Report on Form 8-K dated
February 4, 1993, Commission File No. 1-7806, and incorporated
herein by reference.)

4.21 Form of 1993 Pass Through Certificates, Series B1 and B2. (Filed as
Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated
September 23, 1993, Commission File No. 1-7806, and incorporated
herein by reference.)

E-2

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

4.22 Form of 1993 Pass Through Certificates, Series C1 and C2. (Filed as
Exhibit 4.a.2 to Registrant's Current Report on Form 8-K dated
December 2, 1993, Commission File No. 1-7806, and incorporated
herein by reference.)

4.23 Pass Through Trust Agreement dated as of March 1, 1994 between
Registrant and NationsBank of South Carolina, National Association,
as Pass Through Trustee, relating to Registrant's 1994 Pass Through
Certificates, Series A310-A1, A310-A2 and A310-A3. (Filed as
Exhibit 4.a.1 to Registrant's Current Report on Form 8-K dated
March 16, 1994, Commission File No. 1-7806, and incorporated herein
by reference.)

4.24 Form of 1994 Pass Through Certificates, Series A310-A1, A310-A2 and
A310-A3. (Filed as Exhibit 4.a.2 to Registrant's Current Report on
Form 8-K dated March 16, 1994, Commission File No. 1-7806, and
incorporated herein by reference.)

4.25 Loan Agreement dated July 15, 1992, between Registrant and
Kreditanstalt Fur Wiederaufbau relating to the financing of
predelivery payments on Airbus A300 aircraft. Confidential
treatment has been granted for confidential commercial and
financial information pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934. (Filed as Exhibit 4.2 to Registrant's 1993
Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.1 Indenture between the Memphis Shelby County Airport Authority (the
"Authority") and NationsBank, as Trustee, dated as of August 1,
1979. (Refiled as Exhibit 10.1 to Registrant's 1990 Annual Report
on Form 10-K, Commission File No. 1-7806, and incorporated herein
by reference.)

10.2 Second Supplemental Indenture dated as of May 1, 1982 between
NationsBank and the Authority relating to 8.30% Special Facilities
Revenue Bonds, Series 1982B due September 1, 2012. (Refiled as
Exhibit 10.2 to Registrant's 1993 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

10.3 Third Supplemental Indenture dated as of November 1, 1982 between
the Authority and NationsBank. (Refiled as Exhibit 10.3 to
Registrant's 1993 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)

10.4 Fourth Supplemental Indenture dated as of December 1, 1984 between
the Authority and NationsBank, relating to 7 7/8% Special
Facilities Revenue Bonds, Series 1984 due September 1, 2009. (Filed
as Exhibit 10.18 to Registrant's 1985 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

10.5 Fifth Supplemental Indenture dated as of July 1, 1992 between the
Authority and NationsBank, relating to 6 3/4% Special Facilities
Revenue Bonds, Refunding Series 1992 due July 1, 2012. (Filed as
Exhibit 10.5 to Registrant's 1992 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

10.6 Guaranty dated as of August 1, 1979 between Registrant and
NationsBank. (Refiled as Exhibit 10.5 to Registrant's 1990 Annual
Report on Form 10-K, Commission File No. 1-7806, and incorporated
herein by reference.)

10.7 Reaffirmation of Guaranty dated as of May 1, 1982 between
NationsBank and Registrant relating to Special Facilities Revenue
Bonds, Series 1982B. (Refiled as Exhibit 10.7 to Registrant's 1993
Annual Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)

E-3

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

10.8 Reaffirmation of Guaranty dated as of December 1, 1984 between
NationsBank and Registrant relating to Special Facilities Revenue
Bonds, Series 1984. (Refiled as Exhibit 10.10 to Registrant's 1993
Annual Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)

10.9 Reaffirmation of Guaranty dated as of July 30, 1992 between
NationsBank and Registrant relating to Special Facilities Revenue
Bonds, Refunding Series 1992. (Filed as Exhibit 10.11 to
Registrant's 1992 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)

10.10 Consolidated and Restated Lease Agreement dated as of August 1,
1979 between the Authority and Registrant. (Refiled as Exhibit
10.11 to Registrant's 1990 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)

10.11 First Supplemental Lease Agreement dated as of April 1, 1981
between Registrant and the Authority. (Filed as Exhibit 10.13 to
Registrant's 1992 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)

10.12 Second Supplemental Lease Agreement dated as of May 1, 1982 between
the Authority and Registrant. (Refiled as Exhibit 10.14 to
Registrant's 1993 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)

10.13 Third Supplemental Lease Agreement dated November 1, 1982 between
the Authority and Registrant. (Filed as Exhibit 28.22 to
Registrant's 1993 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)

10.14 Fourth Supplemental Lease Agreement dated July 1, 1983 between the
Authority and Registrant. (Filed as Exhibit 28.23 to Registrant's
1993 Second Quarter Report on Form 10-Q, Commission File No. 1-
7806, and incorporated herein by reference.)

10.15 Fifth Supplemental Lease Agreement dated February 1, 1984 between
the Authority and Registrant. (Filed as Exhibit 28.24 to
Registrant's 1993 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)

10.16 Sixth Supplemental Lease Agreement dated April 1, 1984 between the
Authority and Registrant. (Filed as Exhibit 28.25 to Registrant's
1993 Second Quarter Report on Form 10-Q, Commission File No. 1-
7806, and incorporated herein by reference.)

10.17 Seventh Supplemental Lease Agreement dated June 1, 1984 between the
Authority and the Registrant. (Filed as Exhibit 28.26 to
Registrant's 1993 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)

10.18 Eighth Supplemental Lease Agreement dated July 1, 1988 between the
Authority and Registrant. (Filed as Exhibit 28.27 to Registrant's
1993 Second Quarter Report on Form 10-Q, Commission File No. 1-
7806, and incorporated herein by reference.)

10.19 Ninth Supplemental Lease Agreement dated July 12, 1989 between the
Authority and Registrant. (Filed as Exhibit 28.28 to Registrant's
1993 Second Quarter Report on Form 10-Q, Commission File No. 1-
7806, and incorporated herein by reference.)

E-4

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

10.20 Tenth Supplemental Lease Agreement dated October 1, 1991 between
the Authority and Registrant. (Filed as Exhibit 28.29 to
Registrant's 1993 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)

10.21 Twelfth Supplemental Lease Agreement dated July 1, 1993 between the
Authority and Registrant. (Filed as Exhibit 10.23 to Registrant's
1993 Annual Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)

10.22 Special Facility Lease Agreement between the Authority and
Registrant dated as of August 1, 1979. (Refiled as Exhibit 10.15 to
Registrant's 1990 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)

10.23 First Special Facility Supplemental Lease Agreement dated as of May
1, 1982 between the Authority and Registrant. (Filed as Exhibit
10.25 to Registrant's 1993 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)

10.24 Second Special Facility Supplemental Lease Agreement dated as of
November 1, 1982 between the Authority and Registrant. (Filed as
Exhibit 10.26 to Registrant's 1993 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

10.25 Third Special Facility Supplemental Lease Agreement dated as of
December 1, 1984 between the Authority and Registrant. (Filed as
Exhibit 10.14 to Registrant's 1985 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

10.26 Fourth Special Facility Supplemental Lease Agreement dated as of
July 1, 1992 between the Authority and Registrant. (Filed as
Exhibit 10.20 to Registrant's 1992 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

10.27 Special Facility Lease Agreement between the Authority and
Registrant dated as of July 1, 1993. (Filed as Exhibit 10.29 to
Registrant's 1993 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)

10.28 Special Facility Ground Lease Agreement between the Authority and
Registrant dated as of July 1, 1993. (Filed as Exhibit 10.30 to
Registrant's 1993 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)

10.29 Indenture between the Authority and NationsBank, as Trustee, dated
as of July 1, 1993 relating to 6.20% Special Facility Revenue
Bonds, Series 1993, due July 1, 2014. (Filed as Exhibit 10.31 to
Registrant's 1993 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)

10.30 Guaranty dated as of July 1, 1993 between Registrant and
NationsBank, relating to 6.20% Special Facility Revenue Bonds,
Series 1993. (Filed as Exhibit 10.32 to Registrant's 1993 Annual
Report on Form 10-K, Commission File No. 1-7806, and incorporated
herein by reference.)

10.31 Ground Lease dated as of February 27, 1979 between the City of Los
Angeles and The Flying Tiger Line Inc. ("FTL") covering acreage at
the Los Angeles International Airport. (Filed as Exhibit 28.1 to
Registrant's 1993 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)

E-5

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

10.32 First Amendment dated September 18, 1979, to Ground Lease, dated
February 27, 1979, between the City of Los Angeles and FTL covering
acreage at the Los Angeles International Airport. (Filed as Exhibit
28.2 to Registrant's 1993 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by reference.)

10.33 Second Amendment dated March 9, 1983 to Ground Lease, dated
February 27, 1979, between the City of Los Angeles and FTL covering
acreage at the Los Angeles International Airport. (Filed as Exhibit
28.3 to Registrant's 1993 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by reference.)

10.34 Interim Exchange Agreement dated as of September 11, 1990 between
the City of Los Angeles and Registrant relating to the Los Angeles
International Airport. (Filed as Exhibit 28.4 to Registrant's 1993
Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.35 Lease Agreement dated as of May 7, 1985 between the City of Oakland
and Registrant. (Filed as Exhibit 28.5 to Registrant's 1993 Second
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.36 Affirmative Action Agreement dated as of May 14, 1985, to Lease
Agreement dated May 7, 1985, between the City of Oakland and
Registrant. (Filed as Exhibit 28.6 to Registrant's 1993 Second
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.37 First Supplemental Agreement dated August 5, 1986, to Lease
Agreement dated May 7, 1985, between the City of Oakland and
Registrant. (Filed as Exhibit 28.7 to Registrant's 1993 Second
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.38 Second Supplemental Agreement dated February 17, 1987 to Lease
Agreement dated May 7, 1985, between the City of Oakland and
Registrant. (Filed as Exhibit 28.8 to Registrant's 1993 Second
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.39 Third Supplemental Agreement dated February 1989 to Lease Agreement
dated May 7, 1985, between the City of Oakland and Registrant.
(Filed as Exhibit 28.9 to Registrant's 1993 Second Quarter Report
on Form 10-Q, Commission File No. 1-7806, and incorporated herein
by reference.)

10.40 Lease and First Right of Refusal Agreement dated July 22, 1988
between the State of Alaska, Department of Transportation and
Public Facilities and Registrant. (Filed as Exhibit 28.10 to
Registrant's 1993 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)

10.41 Development Agreement dated July 22, 1988 to Lease and First Right
of Refusal Agreement, dated July 22, 1988, between the State of
Alaska, Department of Transportation and Public Facilities and
Registrant. (Filed as Exhibit 28.11 to Registrant's 1993 Second
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.42 Supplement No. 1 dated May 19, 1989 to Development Agreement
between the State of Alaska, Department of Transportation and
Public Facilities and Registrant. (Filed as Exhibit 28.12 to
Registrant's 1993 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)

E-6

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

10.43 Supplement No. 1 dated July 19, 1989 to Lease and First Right of
Refusal Agreement, dated July 22, 1988, between the State of
Alaska, Department of Transportation and Public Facilities and
Registrant. (Filed as Exhibit 28.13 to Registrant's 1993 Second
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.44 Right-of-Way Agreement dated September 19, 1989 to Lease and First
Right of Refusal Agreement, dated July 22, 1988, between the State
of Alaska, Department of Transportation and Public Facilities and
Registrant. (Filed as Exhibit 28.14 to Registrant's 1993 Second
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.45 Supplement No. 2 dated April 23, 1991 to Lease and First Right of
Refusal Agreement dated July 22, 1988, between the State of Alaska,
Department of Transportation and Public Facilities and the
Registrant. (Filed as Exhibit 28.15 to Registrant's 1993 Second
Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.46 Lease Agreement dated October 1, 1983 between The Port Authority of
New York and New Jersey and Registrant. (Filed as Exhibit 28.16 to
Registrant's 1993 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)

10.47 Supplement No. 1, dated October 1, 1983 to Lease Agreement dated
October 1, 1983 between The Port Authority of New York and New
Jersey and Registrant. (Filed as Exhibit 28.17 to Registrant's 1993
Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.48 Supplement No. 2 dated September 1, 1985 to Lease Agreement dated
October 1, 1983 between the Port Authority of New York and New
Jersey and Registrant. (Filed as Exhibit 28.18 to Registrant's 1993
Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.49 Supplement No. 3 dated June 1, 1992 to Lease Agreement dated
October 1, 1983 between The Port Authority of New York and New
Jersey and Registrant. (Filed as Exhibit 28.19 to Registrant's 1993
Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.50 Amended and Restated Airport Use Agreement and Terminal Facilities
Lease dated as of January 1, 1985 between the City of Chicago and
FTL. (Filed as Exhibit 28.20 to Registrant's 1993 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and incorporated
herein by reference.)

10.51 Cargo Building Site Lease dated September 23, 1987 between the City
of Chicago and FTL. (Filed as Exhibit 28.21 to Registrant's 1993
Second Quarter Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)

10.52 Amended and Restated Land Lease Agreement dated August 1993 between
Registrant and the Indianapolis Airport Authority.

10.53 Indenture between the City of Indianapolis and Indiana and National
Bank of Detroit, as Trustee, dated as of September 1, 1993 relating
to the City of Indianapolis Airport Facility Revenue Refunding
Bonds, Series 1994, due April 1, 2017. (Filed as Exhibit 10.1 to
Registrant's 1994 First Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)

E-7

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

10.54 Loan Agreement between the City of Indianapolis and Registrant.
(Filed as Exhibit 10.2 to Registrant's 1994 First Quarter Report on
Form 10-Q, Commission File No. 1-7806, and incorporated herein by
reference.)

10.55 Form of Promissory Note to the City of Indianapolis. (Filed as
Exhibit 10.3 to Registrant's 1994 First Quarter Report on Form 10-
Q, Commission File No. 1-7806, and incorporated herein by
reference.)

10.56 1980 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1980 Stock Incentive Plan, as amended. (Filed as
Exhibit 10.59 to Registrant's 1993 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

10.57 1983 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1983 Stock Incentive Plan, as amended. (Filed as an
exhibit to Registrant's Registration Statement No. 2-95720 on Form
S-8 and incorporated herein by reference.)

10.58 1984 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1984 Stock Incentive Plan, as amended. (Filed as an
exhibit to Registrant's Registration Statement No. 2-95720 on Form
S-8 and incorporated herein by reference.)

10.59 1987 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1987 Stock Incentive Plan, as amended. (Filed as an
exhibit to Registrant's Registration Statement No. 33-20138 on Form
S-8 and incorporated herein by reference.)
10.60 1989 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1989 Stock Incentive Plan, as amended. (Filed as
Exhibit 10.26 to Registrant's 1990 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

10.61 1993 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1993 Stock Incentive Plan. (1993 Stock Incentive Plan
was filed as Exhibit A to Registrant's 1993 Definitive Proxy
Statement, Commission File No. 1-7806, and incorporated herein by
reference.)

10.62 Amendment to Registrant's 1980, 1983, 1984, 1987 and 1989 Stock
Incentive Plans. (Filed as Exhibit 10.27 to Registrant's 1990
Annual Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)

10.63 Amendment to Registrant's 1983, 1984, 1987, 1989 and 1993 Stock
Incentive Plans.

10.64 1986 Restricted Stock Plan and Form of Restricted Stock Agreement
pursuant to 1986 Restricted Stock Plan. (Filed as Exhibit 10.28 to
Registrant's 1990 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)

10.65 Registrant's Retirement Parity Pension Plan. (Filed as Exhibit
10.67 to Registrant's 1993 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)

10.66 Management Performance Bonus Plan. (Description of the performance
bonus plan contained in the Definitive Proxy Statement for
Registrant's 1994 Annual Meeting of Stockholders, under the heading
"Report on Executive Compensation of the Compensation Committee of
the Board of Directors" is incorporated herein by reference.)

E-8

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

10.67 Registrant's Retirement Plan for Outside Directors. (Filed as
Exhibit 10.30 to Registrant's 1990 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by reference.)

10.68 Long-term Performance Bonus Plan. (Description of the long-term
performance bonus plan contained in the Definitive Proxy Statement
for Registrant's 1994 Annual Meeting of Stockholders, under the
heading "Report on Executive Compensation of the Compensation
Committee of the Board of Directors" is incorporated herein by
reference.)

10.69 Credit Agreement dated May 7, 1993 among Registrant and The First
National Bank of Chicago; Bank of America National Trust and
Savings Association; The Chase Manhattan Bank, N.A.; Citibank,
N.A.; Morgan Guaranty Trust Company of New York with Morgan Bank
(Delaware); NationsBank of Georgia; The Bank of New York; The Bank
of Tokyo Trust Company; CIBC, Inc.; Commerzbank A.G., Atlanta
Agency; Credit Suisse; Societe Generale Bank, Southwest Agency;
Kredietbank N.V., Grand Cayman Branch; The Long-Term Credit Bank of
Japan, LTD.; Mellon Bank, N.A.; National Westminister Bank PLC;
Union Bank of Switzerland New York Branch and The Toronto-Dominion
Bank. (Filed as Exhibit 10.70 to Registrant's 1993 Annual Report on
Form 10-K, Commission File No. 1-7806, and incorporated herein by
reference.)

10.70 Amendment dated as of December 1, 1993 to Credit Agreement dated
May 7, 1993 among the Registrant and the parties listed in Exhibit
10.69 above.

10.71 Purchase Agreement between AVSA and Registrant for purchase of
Airbus A300 aircraft. Confidential treatment has been granted for
confidential commercial and financial information, pursuant to Rule
24b-2 under the Securities Exchange Act of 1934. (Filed as Exhibit
10.36 to Registrant's 1991 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)

11.1 Statement re Computation of Earnings Per Share.

12.1 Statement re Computation of Earnings to Fixed Charges.

13.1 Registrant's Annual Report to Stockholders for the fiscal year
ended May 31, 1994.

21.1 Subsidiaries of Registrant.

23.1 Consent of Independent Public Accountants.

24.1 Powers of Attorney.

E-9

<PAGE>

AMENDED AND RESTATED
LAND LEASE AGREEMENT

FEDERAL EXPRESS CORPORATION

AUGUST 1993

<PAGE>

INDEX
TO
AMENDED AND RESTATED LAND LEASE AGREEMENT

ARTICLE I - LEASED PREMISES.............................................2
A. DESCRIPTION OF LEASED PREMISES..............................2
B. EXPANSION AREA - OPTION.....................................2
C. EXPANSION AREA - LEASED.....................................3

ARTICLE II - OBJECTIVES AND PURPOSES OF LEASE...........................3
A. USE OF LEASED PREMISES......................................3
B. PROHIBITED USES.............................................4

ARTICLE III - LESSEE'S CONSTRUCTION REQUIREMENTS........................5
A. REQUIREMENT FOR IMPROVEMENTS ON LEASED
PREMISES....................................................5
B. CONSTRUCTION DATES..........................................5
C. APPROVAL OF PLANS...........................................5
D. EXTENSION OF UTILITIES OR SPECIAL
FACILITIES..................................................6
E. CONSTRUCTION OF ADDITIONAL FACILITIES.......................6
F. ALTERATIONS OR MODIFICATIONS TO PREMISES....................7
G. LIEN INDEMNIFICATION........................................7
H. COST OF CONSTRUCTION, ALTERATIONS AND
STRUCTURAL REPAIRS..........................................7
I. AS-BUILT DRAWINGS...........................................8
J. MORTGAGE OF LEASEHOLD INTEREST..............................8
K. OWNERSHIP OF IMPROVEMENTS...................................9

ARTICLE IV - TERM......................................................10
A. PRIMARY....................................................10
B. RENEWAL....................................................10
C. HOLDING OVER...............................................10

ARTICLE V - RENTALS, FEES AND RECORDS..................................11
A. LEASED PREMISES............................................11
B. RENTAL ADJUSTMENTS.........................................11
C. EXPANSION AREA.............................................12
D. FIELD USE CHARGES..........................................12
E. TIME AND PLACE OF PAYMENTS.................................12
F. DELINQUENT RENTALS.........................................13

ARTICLE VI - OBLIGATIONS OF LESSEE.....................................13
A. NET LEASE..................................................13
B. MAINTENANCE AND OPERATION..................................13
C. UTILITIES..................................................15
D. TRASH, GARBAGE, ETC........................................16
E. SIGNS......................................................16
F. NONDISCRIMINATION..........................................16
G. AFFIRMATIVE ACTION.........................................17

<PAGE>

H. OBSERVANCE OF STATUTES, ETC................................18
I. HAZARD LIGHTS..............................................18

ARTICLE VII - OBLIGATIONS OF AUTHORITY.................................19

A. OPERATION AS PUBLIC AIRPORT................................19
B. INGRESS AND EGRESS.........................................19
C. CONSTRUCTION BY AUTHORITY..................................20
D. MAINTENANCE AND OPERATIONS.................................20

ARTICLE VIII - AUTHORITY'S RESERVATIONS................................20
A. IMPROVEMENT, RELOCATION OR REMOVAL OF
STRUCTURES.................................................20
B. INSPECTION OF LEASED PREMISES..............................21
C. SUBORDINATION TO U.S. GOVERNMENT...........................21
D. WAR OR NATIONAL EMERGENCY..................................21

ARTICLE IX - INDEMNITY AND INSURANCE...................................22
A. INDEMNIFICATION............................................22
B. LIABILITY INSURANCE........................................23
C. FIRE AND EXTENDED COVERAGE INSURANCE.......................23
D. APPLICATION OF INSURANCE PROCEEDS..........................24
E. PERFORMANCE BONDS..........................................24

ARTICLE X - TERMINATION OF LEASE BY LESSEE.............................26
A. TERMINATION................................................26
B. TERMINATION BY LESSEE......................................26

ARTICLE XI - TERMINATION OF LEASE BY AUTHORITY.........................27
A. TERMINATION BY AUTHORITY...................................27
B. WAIVER OF STATUTORY NOTICE TO QUIT.........................28
C. POSSESSION BY AUTHORITY....................................28
D. SUSPENSION OF LEASE........................................29
E. DESTRUCTION OF PREMISES - TERMINATION......................29

ARTICLE XII - RIGHTS UPON TERMINATION..................................30
A. FIXED IMPROVEMENTS.........................................30
B. TEMPORARY BUILDINGS........................................30
C. PERSONAL PROPERTY..........................................30

ARTICLE XIII - ASSIGNMENT AND SUBLETTING...............................31
A. SUCCESSORS AND ASSIGNMENT..................................31
B. SUBLETTING.................................................32

ARTICLE XIV - QUIET ENJOYMENT..........................................32

ARTICLE XV - GENERAL PROVISIONS........................................32
A. NON-INTERFERENCE WITH OPERATION OF AIRPORT.................32
B. AUTHORITY's CONSENT........................................33
C. TAXES......................................................33
D. LICENSE FEES AND PERMITS...................................33
E. PARAGRAPH HEADINGS.........................................34
F. INTERPRETATIONS............................................34
G. NOTICES....................................................34
H. FORCE MAJEURE..............................................34

<PAGE>

I. NON WAIVER OF RIGHT TO PROCEED IN
CONDEMNATION...............................................35
J. EFFECTIVE DATE.............................................35

SIGNATURE PAGE.............................................36

<PAGE>

AMENDED AND RESTATED
LAND LEASE AGREEMENT
FEDERAL EXPRESS CORPORATION

THIS AMENDED AND RESTATED LAND LEASE AGREEMENT with Federal Express
Corporation made and entered into this _____ day of _____________, 1993, by and
between the Indianapolis Airport Authority, a municipal corporation, existing
under and by virtue of the laws of the State of Indiana, (hereinafter called
"AUTHORITY"), and Federal Express Corporation, a Delaware corporation with its
principal offices in Memphis, Tennessee, and authorized to do business in the
State of Indiana, (hereinafter called "LESSEE"),

W I T N E S S E T H:

WHEREAS, AUTHORITY owns and operates the Indianapolis International
Airport, (hereinafter called "Airport"), located in Marion County, Indiana; and

WHEREAS, LESSEE is a corporation primarily engaged in the business of
providing nationwide door-to-door transportation of time sensitive cargo; and

WHEREAS, AUTHORITY has right, title and interest in and to the real
property on the Airport, together with the facilities, easements, rights,
licenses, and privileges hereinafter granted, and AUTHORITY has full power and
authority to enter into this Lease in respect thereof; and

WHEREAS, LESSEE desires to lease certain property and to construct a
distribution and sort facility and related offices and buildings thereon upon
the terms and conditions hereinafter stated;

NOW, THEREFORE in consideration of the mutual covenants and considerations
herein contained, AUTHORITY lets and demises to LESSEE and LESSEE takes from
AUTHORITY the following described Leased Premises, and all described rights
incident thereto, subject to the following:

ARTICLE I - LEASED PREMISES

<PAGE>

A. DESCRIPTION OF LEASED PREMISES

The term "Leased Premises", as used in this Lease, shall include real
estate located at Indianapolis International Airport in Marion County,
Indiana, as described on the attached Exhibit "A", dated April 27,
1993, and any improvements, including the right of ingress thereto and
egress therefrom.

B. EXPANSION AREA - OPTION

LESSEE is granted an option to lease an expansion area of real
property lying contiguous to and southwest of the Leased Premises
which is more particularly identified on the attached Exhibit "A"
dated April 27, 1993. LESSEE may elect to exercise said option to
lease for part or all of said expansion area during the term hereof by
giving AUTHORITY written notice of such intention and by paying the
additional rent therefore, starting ninety (90) days thereafter, as
provided in Article V, C. Exercise of the option as a part of the
expansion area shall not terminate the option as to the remainder of
the expansion area. At any time prior to the exercise of such option,
AUTHORITY may give LESSEE written notice of its intent to lease, use,
or otherwise dispose of said expansion area or part thereof specifying
therein the nature of use for which the premises are intended. Upon
receipt of such written notice, LESSEE shall have ninety (90) days to
notify AUTHORITY if it intends to exercise its option to lease the
premises specified in AUTHORITY's notice and to begin paying the
appropriate additional rental therefore. In the event such election
is not made within said ninety (90) day period, the option of LESSEE
to lease the specified premises shall terminate, provided, however, if
the transaction contemplated in AUTHORITY's notice to LESSEE is not
consummated within one (1) year of

<PAGE>

AUTHORITY's notice to LESSEE, the option to lease the specified area
reverts back to LESSEE. In addition to the notice of election,
LESSEE shall also tender the additional rent as provided in Article V.

C. EXPANSION AREA - LEASED

Any portion of the expansion area with respect to which LESSEE's
option is exercised shall become a part of the Leased Premises, shall
be subject to the terms of this Lease and shall not serve to extend
the lease term.

ARTICLE II - OBJECTIVES AND PURPOSES OF LEASE

A. USE OF LEASED PREMISES

LESSEE shall use the Leased Premises for the operation of its business
of transportation of cargo and for other purposes reasonably
incidental thereto, subject to the following:

(1) All parking of automobiles and trucks operated by officers,
employees and business invitees of LESSEE incidental to its
operation, except for those vehicles in the process of loading or
unloading and servicing aircraft, shall be confined to the
parking lot provided by LESSEE on the Leased Premises.

(2) LESSEE agrees that aircraft and ramp equipment stored on the ramp
will be parked in accordance with a plan approved by AUTHORITY.

(3) Fueling, servicing and minor repairs, as defined in AUTHORITY's
rules and regulations, of aircraft and ramp equipment operated by
or for the LESSEE in connection with its operations shall be
performed in accordance with AUTHORITY's rules and regulations.
LESSEE and its subcontractors shall not perform major maintenance
of aircraft on the ramp.

<PAGE>

(4) LESSEE covenants that LESSEE shall not use or permit the Leased
Premises to be used for any other purpose without the prior
written consent of AUTHORITY.

B. PROHIBITED USES

LESSEE shall not permit the loading, unloading or storage of any
hazardous animate or inanimate materials or objects in violation of
any applicable law or regulation. LESSEE shall not store or transport
Class-A Explosives as defined in 49 CFR Part 107.3. LESSEE's handling
of any hazardous material shall be in accordance with 49 CFR, parts
100-199, dated December 31, 1976, or as same may be amended. In no
event shall LESSEE handle any materials which would adversely affect
the insurance coverage of the Leased Premises required of LESSEE
herein.

ARTICLE III - LESSEE'S CONSTRUCTION REQUIREMENTS

A. REQUIREMENT FOR IMPROVEMENTS ON LEASED PREMISES

Except as provided in Article VII, C, LESSEE shall, at its sole
expense, construct on the Leased Premises, as provided in Paragraphs D
and H of this Article, such buildings, structures, roadways, utility
lines, additions, and improvements as LESSEE may desire in furtherance
of the purposes set forth in Article II, and shall install therein and
thereon such equipment and facilities as LESSEE may deem necessary or
desirable, provided, however, that no building, structure, roadway,
utility lines, addition, or improvement of any nature shall be made or
installed by LESSEE without the prior written consent of the AUTHORITY
as herein provided.

B. CONSTRUCTION DATES

Construction of the improvement shall begin not later than July 1,
1985, and shall be completed no later than December 31, 1987. In the
event

<PAGE>

LESSEE shall fail to begin construction by July 1, 1985, and pursue
diligently the completion thereof, AUTHORITY shall have the right to
terminate this Lease pursuant to the provisions of Article XI herein,
and LESSEE shall reimburse AUTHORITY for any costs and expenses for
the design, engineering and construction of the aircraft apron and
related site improvements actually incurred by AUTHORITY up to date of
termination.

C. APPROVAL OF PLANS

LESSEE covenants and agrees that prior to the preparation of detailed
construction plans, specifications and architectural renderings of any
such building, structure, roadway, addition or improvement, it shall
first submit plans showing the general site plan, design and character
of improvements and their locations, including drainage and roadways,
to AUTHORITY's Executive Director for approval. LESSEE's plans shall
meet AUTHORITY's design standards for the type of development
proposed. LESSEE covenants and agrees that prior to the installation
or construction of any such building, roadway, structure, addition or
improvement on the Leased Premises, it shall first submit to the
AUTHORITY for approval, final detailed construction plans and
specifications and architectural renderings prepared by registered
architects and engineers, and that all construction will be in
accordance with such plans and specifications and AUTHORITY's Building
and Land Use Provisions as outlined in Exhibit "B", attached hereto.

D. EXTENSION OF UTILITIES OR SPECIAL FACILITIES

LESSEE shall construct at its expense all necessary utility lines
within the Leased Premises required for LESSEE to connect to the line
of existing service as shown on Exhibit "C". LESSEE shall construct
within

<PAGE>

the Leased Premises, at its expense, the connecting roadways to the
existing roadway system as shown on Exhibit "C".

E. CONSTRUCTION OF ADDITIONAL FACILITIES

LESSEE has the right to construct additional buildings, facilities and
necessary site improvements on the Leased Premises. Prior to such
construction, LESSEE agrees to submit to AUTHORITY for approval, final
plans, specifications and architectural renderings prepared by
registered architects and engineers, and comply with all other
requirements of Paragraph C of this Article.

F. ALTERATIONS OR MODIFICATIONS TO PREMISES

LESSEE shall not construct, install, remove and/or modify any of the
buildings or premises leased hereunder without prior written approval
of the AUTHORITY. LESSEE shall submit for approval by AUTHORITY, its
plans and specifications for any proposed project as well as complying
with such other conditions considered by AUTHORITY to be necessary.

G. LIEN INDEMNIFICATION

In the event any person or corporation shall attempt to assert a
Mechanic's Lien against the Leased Premises, LESSEE shall hold
AUTHORITY harmless from such claim, including the cost of defense.

H. COST OF CONSTRUCTION, ALTERATIONS AND STRUCTURAL REPAIRS

Within thirty (30) days of completion of the construction,
alterations, or structural repairs, LESSEE shall present to AUTHORITY
for examination and approval a sworn statement of the "Construction,
Alteration and/or Structural Repair Costs".

"Construction, Alteration and/or Structural Repair Costs" for the
purpose of this Article, are hereby defined as all money paid by
LESSEE for actual demolition, construction, alteration, or structural
repair,

<PAGE>

including architectural and engineering costs plus pertinent fees in
connection therewith.

The cost of the required initial improvements constructed and
equipment installed, in accordance with Paragraph A of this Article,
shall be not less than $24,000,000.00 and shall be substantiated by
LESSEE as provided hereinabove.

In the event that LESSEE makes further improvements, alterations,
or structural repairs on the Leased Premises, the use thereof shall be
enjoyed by LESSEE during the term hereof without the payment of
additional rental therefore, but such additions, alterations,
improvements, or structural repairs shall become the property of
AUTHORITY upon the completion of the construction.

I. AS-BUILT DRAWINGS

Within thirty (30) days following completion of any additions,
alterations or improvements, LESSEE shall present to AUTHORITY a
complete set of reproducible (mylar) "record" drawings including, but
not limited to, specifications and shop drawings. In addition and
upon request of the AUTHORITY, this information shall be submitted on
a computer diskette using the AutoCAD format.

J. MORTGAGE OF LEASEHOLD INTEREST

LESSEE shall have the right to place a First Mortgage Lien upon its
leasehold interest in an amount not to exceed eighty percent (80%) of
the cost of capital improvements thereon, the terms and conditions of
such mortgage loan shall be subject to the approval of AUTHORITY.
Lender's duties and rights are as follows:

1. The Lender shall have the right, in case of default, to assume
the rights and obligations of LESSEE herein, with the further
right to

<PAGE>

assign the LESSEE's interest to a third party, subject to
approval of AUTHORITY. Lender's obligations under this Lease, as
substituted LESSEE, shall cease upon assignment to a third party
and approval by AUTHORITY.

2. As a condition precedent to the exercise of the right granted to
Lender by this Paragraph, Lender shall notify AUTHORITY of all
action taken by it in the event payments on such loans shall
become delinquent. Lender shall also notify AUTHORITY in writing
of any change in the identity or address of the Lender.

3. All notices required by Article XI to be given by AUTHORITY to
LESSEE shall also be given to Lender at the same time and in the
same manner. Upon receipt of such notice, Lender shall have the
same rights as LESSEE to correct any default.

K. OWNERSHIP OF IMPROVEMENTS

Upon completion of construction, any building, fixture, structure,
addition or improvement, excluding personal property as defined in
Article XII, C, on the Leased Premises shall immediately become the
property of AUTHORITY, as owner, subject only to the right of LESSEE
to use during the term of this Lease and shall remain the property of
AUTHORITY thereafter with the sole right, title and interest thereto.

ARTICLE IV - TERM

A. PRIMARY
The term of this lease is a minimum of thirty (30) years, commencing
the first day of the month following the date the improvements to be
made by LESSEE, as more particularly described in Article III, are
completed and ready for occupancy, or January 1, 1987, whichever shall
be the first to

<PAGE>

occur, unless extended by written agreement of the parties with
respect to any delay in completion and occupancy caused by AUTHORITY.

B. RENEWAL

LESSEE shall have an option to extend this Lease for one (1)
additional term of ten (10) years upon the rental terms outlined in
Article V, C, by mailing or delivering to AUTHORITY written notice of
such intention not later than ninety (90) days prior to the date of
expiration of the primary term.

C. HOLDING OVER

In the event LESSEE shall continue to occupy the Leased Premises
beyond the Lease term or any extension thereof without AUTHORITY's
written renewal thereof, such holding over shall not constitute a
renewal or extension of this Lease, but shall create a tenancy from
month to month which may be terminated at any time by AUTHORITY or
LESSEE by giving thirty (30) days written notice to the other party.

LESSEE further agrees that upon the expiration of the term of
this Lease or sooner cancellation thereof, the Leased Premises will be
delivered to AUTHORITY in good condition, reasonable wear and tear and
matters covered by insurance excepted. Reasonable wear and tear shall
be determined at the sole discretion of AUTHORITY upon inspection of
the Leased Premises from time to time.

ARTICLE V - RENTALS, FEES AND RECORDS

During the term hereof, LESSEE shall pay to AUTHORITY rentals for the
Leased Premises according to the following schedule:

A. LEASED PREMISES
September 1, 1992 thru October 31, 1993

LEASED PREMISES
Ground Rent 4,356,000 sq.ft. @ $.152 =

<PAGE>

ANNUAL RENT $662,112.00

LEASED EXPANSION AREA
Ground Rent 487,436.4 sq.ft. @ $.05 =
ANNUAL RENT 24,371.82
-----------
TOTAL ANNUAL RENT $686,483.82
MONTHLY RENT $57,206.00

November 1, 1993 thru December 31, 1996

LEASED PREMISES
Ground Rent 4,356,000 sq. ft. @ $.152 =
ANNUAL RENT $662,112.00

LEASED EXPANSION AREA
Ground Rent 2,139,667.2 sq.ft. @ $.05 =
ANNUAL RENT $106,983.36
-----------
TOTAL ANNUAL RENT $769,095.36
MONTHLY RENT $64,091.28

B. RENTAL ADJUSTMENTS
1. Next ten (10) years (1/1/97 - 12/31/2006)

LEASED PREMISES
Ground Rent 4,356,000 sq.ft. @ $1.66 =
ANNUAL RENT $723,096.00

LEASED EXPANSION AREA
Ground Rent 2,139,667.2 sq.ft. @ $.07 =
ANNUAL RENT $149,776.70
-----------
TOTAL ANNUAL RENT $872,872.70
MONTHLY RENT $72,739.39

2. Next ten (10) years (1/1/2007 - 12/31/2016)

LEASED PREMISES
Ground Rent 4,356,000 sq.ft. @ $.196 =
ANNUAL RENT $853,776.00

LEASED EXPANSION AREA
Ground Rent 2,139,556,2 sq.ft. @ $.10 =
ANNUAL RENT $213,966.72
-------------
TOTAL ANNUAL RENT $1,067,742.70
MONTHLY RENT $88,978.56

3. Renewal term (if exercised by LESSEE - January 1, 2017 through
December 31, 2026) ground rental rate will be subject to
negotiation, but shall not exceed $.20 per square foot per year
for 4,356,000 square feet of leased area and the 2,139,667.2 sq.
ft. of expansion area now leased.

C. EXPANSION AREA

<PAGE>

1. Through December 31, 1996 @ $.05 (ground rent rate) per square
foot per year.

2. 1/1/97 - 12/31/2006 @ $.07 (ground rent rate) per square foot per
year.

3. 1/1/2007 - 12/31/2016 @ $.10 (ground rent rate) per square foot
per year.

4. Renewal Term (if exercised by LESSEE - January 1, 2017 through
December 31, 2026) ground rent rte will be subject to
negotiation, but shall not exceed $.20 per square foot per year.

D. FIELD USE CHARGES

Fees and charges for the use of the landing area and facilities
necessary thereto, shall be calculated and paid in accordance with the
Airline Operating Agreement between the parties dated September 25,
1985.

E. TIME AND PLACE OF PAYMENTS

The foregoing fixed rentals shall be payable in equal monthly
installments in advance on or before the first business day of each
calendar month of the term at the office of:

Executive Director
Indianapolis Airport Authority
Indianapolis International Airport
Box 100, 2500 S. High School Road
Indianapolis, IN 46241

F. DELINQUENT RENTALS

There shall be added to all sums due AUTHORITY and unpaid, as may be
established by AUTHORITY, an interest charge of one and one-half
percent (1 1/2%) of the principal sum for each full calendar month of
delinquency computed as simple interest. No interest shall be charged
upon that portion of any debt which, in good faith, is in dispute. No
interest shall be charged upon any account until payment is thirty
(30) days overdue, but such interest when assessed thereafter, shall
be

<PAGE>

computed from the due date. The interest rate, established by
Ordinance by the Airport Authority Board, may change from time to
time.

ARTICLE VI - OBLIGATIONS OF LESSEE

A. NET LEASE

The use and occupancy of the Leased Premises by LESSEE will be without
cost or expense to AUTHORITY. It shall be the sole responsibility of
LESSEE to maintain, repair and operate the entirety of the Leased
Premises and any improvements and facilities constructed thereon
including aircraft apron constructed by AUTHORITY, at LESSEE's sole
cost and expense.

B. MAINTENANCE AND OPERATION

LESSEE shall maintain the Leased Premises at all times in a safe, neat
and attractive condition, and shall not permit the accumulation of any
trash, paper, or debris on the Airport premises. LESSEE shall repair
all damages to the Leased Premises caused by its employees, patrons,
or its operation thereon; shall maintain and repair all equipment
thereon, including any buildings and improvements, and shall repaint
the buildings as necessary.

LESSEE shall be responsible for and perform all maintenance,
including but not limited to:

1. Janitorial services, providing janitorial supplies, window
washing, rubbish, and trash removal.

2. Supply and replacement of light bulbs in and on all buildings,
obstruction lights and replacement of all glass in the building,
including plate glass.

3. Cleaning of stoppages in plumbing fixtures, drain lines and
septic system to the first manhole outside the Leased premises.

4. Replacement of floor covering.

<PAGE>

5. Maintenance of all building and overhead doors and door operating
systems including weather stripping and glass replacement.

6. Building interior and exterior maintenance, including painting,
repairing and replacement.

7. Repair or replacement of equipment and utilities to include
electrical, mechanical and plumbing in all buildings, including
but not limited to air conditioning and heating equipment. All
repairs to electrical and mechanical equipment are to be made by
licensed personnel. Other repairs are to be made by craftsmen
skilled in work done and performing such work regularly as a
trade.

8. LESSEE shall keep the concrete apron clean and free of oil and
other accumulated deposits.

9. LESSEE shall be responsible for all snow removal on the Leased
Premises and shall do so in a manner which does not interfere
with AUTHORITY's Airport operations or damage to property.

10. LESSEE shall perform all maintenance on LESSEE-constructed
structures, pavements, and equipment; and utilities to the point
where connected to the main source of supply or the first manhole
outside of the Leased Premises, or to the utility corridor.

11. LESSEE shall advise AUTHORITY and obtain AUTHORITY's consent in
writing before making changes involving structural changes to
building or premises, modifications or additions to plumbing,
electrical or other utilities. To prevent the voiding of roof
bond(s) and to maintain correct records by AUTHORITY, any
penetration of the roof shall be considered a structural change.

12. LESSEE is responsible for maintaining electric loads within the
designed capacity of the system. Prior to any change desired by
LESSEE in the electrical loading which would exceed such
capacity, written consent shall be obtained from the Executive
Director.

13. LESSEE shall maintain and relamp all lights in and on the
buildings and on the ramp.

14. LESSEE shall provide and maintain hand fire extinguishers for the
interior of all buildings, shop parking and storage areas in
accordance with applicable safety codes.

15. LESSEE shall maintain and replace all landscaping and grounds as
originally approved and installed, and will not allow the removal
of trees without permission of AUTHORITY.

AUTHORITY, at its discretion, shall be the sole judge of the
quality of maintenance; and LESSEE, upon written notice by AUTHORITY to
LESSEE, shall be required to perform whatever maintenance AUTHORITY

<PAGE>

deems necessary. If said maintenance is not undertaken by LESSEE within
thirty (30) days after receipt of written notice, AUTHORITY shall have the
right to enter upon the Leased Premises and perform the necessary
maintenance, the cost of which shall be borne by LESSEE.

No waste shall be committed or damage done to the property of
AUTHORITY.

C. UTILITIES

LESSEE shall assume and pay for all costs or charges for utilities
services furnished to LESSEE during the term hereof; provided,
however, that LESSEE shall have the right to connect to any and all
storm and sanitary sewers and water and utility outlets at its own
cost and expense; and LESSEE shall pay for any and all service charges
incurred therefore.

D. TRASH, GARBAGE, ETC.

LESSEE shall pick up, and provide for, an complete and proper
arrangement for the adequate sanitary handling and disposal, away from
the Airport, of all trash, garbage, and other refuse caused as a
result of the operation of its business. LESSEE shall provide and use
suitable covered metal receptacles for all such garbage, trash, and
other refuse.

Piling of boxes, cartons, barrels, pallets, debris, or similar
items in an unattractive or unsafe manner, on or about the Leased
Premises, shall not be permitted.

E. SIGNS

LESSEE shall not erect, maintain, or display upon the outside of any
improvements on the Leased Premises any billboards or advertising
signs; provided, however, that LESSEE may maintain on the outside of
said

<PAGE>

buildings, its own name(s) and services on signs, the size, location
and design of which shall be subject to prior written approval by
AUTHORITY.

F. NONDISCRIMINATION

LESSEE, for itself, its personal representatives, successors in
interest, and assigns, as part of the consideration hereof, does
hereby covenant and agree, (1) that no person on the grounds of race,
color, or national origin shall be excluded from participation in,
denied the benefits of, or be otherwise subjected to discrimination in
the use of the Leased Premises; (2) that in the construction of any
improvements on, over, or under such land and the furnishing of
services thereof, no person on the grounds of race, color or national
origin shall be excluded from participation in, denied the benefits
of, or otherwise be subjected to discrimination; (3) that LESSEE shall
use the Leased Premises in compliance with all other requirements
imposed by or pursuant to Title 49, Code of Federal Regulations,
Department of Transportation, Subtitle A, Office of the Secretary,
Part 21, Nondiscrimination in Federally-assisted programs of the
Department of Transportation, Effectuation of Title VI of the Civil
Rights Act of 1964, and as said Regulations may be amended, to the
extent that said requirements are applicable, as a matter of law, to
LESSEE.

With respect to the Leased Premises, LESSEE agrees to furnish
services on a fair, equal and not unjustly discriminatory basis to all
users thereof, and to charge fair, reasonable and not unjustly
discriminatory prices for each unit or service; provided, that the
LESSEE may be allowed to make reasonable and nondiscriminatory
discounts, rebates, or other similar types of price reductions to
volume purchasers.

<PAGE>

G. AFFIRMATIVE ACTION

With respect to the Leased premises, the LESSEE assures that it will
undertake an affirmative action program as required by 14 CFR part
152, Subpart E, to insure that no person shall, on the grounds of
race, creed, color, national origin or sex be excluded from
participating in any employment activities covered in 14 CFR Part 152,
Subpart E; that no person shall be excluded on these grounds from
participating in or receiving the services or benefits of any program
or activity covered by that Subpart; and that it will require that its
covered suborganizations provide assurance to the LESSEE that they
similarly will undertake affirmative action programs, and that they
will require assurances from their suborganizations, as required by 14
CFR Part 152, Subpart E, to the same effect, to the extent that said
requirements are applicable, as a matter of law, to LESSEE.

H. OBSERVANCE OF STATUTES, ETC.

The granting of this Lease and its acceptance by LESSEE is conditioned
upon the right to use the Airport facilities in common with others
authorized to do so, provided, however, that LESSEE shall observe and
comply with any and all requirements of the constituted public
authorities and with all Federal, State and Local statutes,
ordinances, regulations and standards applicable to LESSEE for its use
of the Leased Premises, including but not limited to, rules and
regulations promulgated from time to time by the Executive Director
for the administration of the Airport.

I. HAZARD LIGHTS

LESSEE shall, at its expense, provide and maintain hazard lights on
any structure erected by LESSEE on the Leased Premises, if required by

<PAGE>

AUTHORITY of Federal Aviation Administration regulations. Any hazard
lights so required shall comply with the specifications and standards
established for such installations by the FAA.

ARTICLE VII - OBLIGATIONS OF AUTHORITY

A. OPERATION AS PUBLIC AIRPORT

AUTHORITY covenants and agrees that at all times it will develop,
operate and maintain, 24 hours a day, 365 days a year, except as
limited by law or operational requirements of AUTHORITY, the Airport
facilities as a public airport consistent with the Airport Master
Plan, which is incorporated herein by reference, and pursuant to the
Sponsor's Assurances given by AUTHORITY to the United States
Government under the Federal Airport Act.

B. INGRESS AND EGRESS

Upon paying the rental hereunder and performing the covenants of this
Lease, LESSEE shall have the right of ingress to and egress from the
Leased Premises for the LESSEE, its officers, employees, agents,
servants, customers, vendors, suppliers, patrons, and invitees over
the roadway provided by AUTHORITY serving the Leased Premises.
AUTHORITY's roadway shall be used jointly with other tenants on the
Airport, and LESSEE shall not interfere with the rights and privileges
of other persons or firms using said facilities and shall be subject
to such weight and type use restrictions as AUTHORITY deems necessary.

C. CONSTRUCTION BY AUTHORITY

AUTHORITY provided a sort building site prepared to subgrade level,
including utilities and road access to the Leased Premises, and major
drainage and retention basin. In addition, AUTHORITY constructed two
(2) connecting taxiways to the existing Runway 31, now renumbered 32,

<PAGE>

two (2) temporary connecting taxiways to the existing Runway 22L, now
renumbered 23L, and approximately fifty (50) acres of aircraft apron
extending to within 25 feet of the sort buildings constructed by
LESSEE. The aircraft apron was designed to accommodate Boeing 727-100
aircraft. A layout of AUTHORITY's construction obligations referred
to in this Paragraph is included in page 3 of Exhibit "A" attached
hereto.

D. MAINTENANCE AND OPERATIONS

AUTHORITY shall be responsible for snow removal from the runways,
taxiways and public use areas of the Airport, but not the Leased
Premises.

ARTICLE VIII - AUTHORITY'S RESERVATIONS

A. IMPROVEMENT, RELOCATION OR REMOVAL OF STRUCTURES

AUTHORITY, at its sole discretion, reserves the right to further
develop or improve the aircraft operating area and other portions of
the Airport, including the right to remove or relocate any structure
on the Airport, as it sees fit, and to take any action it considers
necessary to protect the aerial approaches of the Airport against
obstructions, together with the right to prevent LESSEE from erecting
or permitting to be erected, any building or other structure on the
Airport which, in the opinion of AUTHORITY would limit the usefulness
of the airport or constitute a hazard to aircraft.

In the event AUTHORITY requires the Leased Premises for
expansion, improvements, or the development of the Airport, or
protection of the aerial approaches to the Airport, AUTHORITY reserves
the right, on six (6) months notice, to relocate or replace LESSEE's
improvements in substantially similar form at another generally
comparable location on the Airport.

<PAGE>

B. INSPECTION OF LEASED PREMISES

AUTHORITY, through its duly authorized agent, shall have at any
reasonable time, the full and unrestricted right to enter the Leased
Premises for the purpose of periodic inspection for fire protection,
maintenance and to investigate compliance with the terms of this
Lease.

C. SUBORDINATION TO U.S. GOVERNMENT

This Lease shall be subordinate to the provisions of any existing or
future agreement(s) between AUTHORITY and the United States, relative
to the operation and maintenance of the Airport, the terms and
execution of which have been or may be required as a condition
precedent to the expenditure or reimbursement to AUTHORITY for Federal
funds for the development of the Airport.

D. WAR OR NATIONAL EMERGENCY

During the time of war or national emergency, AUTHORITY shall have the
right to lease the Airport or any part thereof to the United States
Government for military use, and if any such lease is executed, the
provisions of this Lease insofar as they are inconsistent with the
Lease to the Government shall be subpended, and in that event, a just
and proportionate part of the rent hereunder shall be abated.

ARTICLE IX - INDEMNITY AND INSURANCE

A. INDEMNIFICATION

LESSEE agrees to fully indemnify, and save forever harmless the
AUTHORITY from and against all claims and actions and all reasonable
expenses incidental to the investigation and defenses thereof, based
on or arising out of claims for damages or injuries to third persons,
including wrongful death, and arising out of LESSEE's use or occupancy
of the Leased Premises; provided, however, that AUTHORITY shall give
to

<PAGE>

LESSEE prompt and reasonable notice of any such claims or actions, and
LESSEE shall have the right to investigate, compromise and defend the
same; and provided further that LESSEE shall not be liable for any
claims, actions, injury, damage or loss occasioned by any negligence
or intentional acts of authority, its agents or employees. LESSEE
shall indemnify and save and hold AUTHORITY harmless from and against
any claim by carriers serving LESSEE, provided, however, LESSEE shall
not be liable for any claims, actions, injury, damage or loss
occasioned by any negligence or intentional acts of AUTHORITY, its
agents or employees.

B. LIABILITY INSURANCE

LESSEE shall, at its expense, procure and keep in force at all times
during the term of this Lease from a financially sound and reputable
company acceptable to AUTHORITY, public liability insurance, insuring
LESSEE and AUTHORITY for personal injury and property damage, and such
other insurance necessary to protect AUTHORITY from such claims and
actions aforesaid. Without limiting its liability, LESSEE agrees to
carry and keep in force insurance with single limit liability for
personal injury or death and property damage in a sum not less than
Twenty Million Dollars ($20,000,000.00) with said policy designating
AUTHORITY as an additional insured. LESSEE shall maintain aircraft
liability insurance with limits not less than Twenty Million Dollars
($20,000,000.00). LESSEE shall furnish AUTHORITY with a certificate
of insurance as evidence of such coverage. Said insurance shall not
be cancelled or materially modified except upon ten (10) days advance
written notice to AUTHORITY. Coverage is to be written on the
broadest liability form which is customarily available at reasonable
cost for LESSEE's use of and operations at Indianapolis International
Airport.

<PAGE>

C. FIRE AND EXTENDED COVERAGE INSURANCE

LESSEE shall, at its expense, procure and keep in force at all times
during the term of this Lease with a company suitable to AUTHORITY,
insurance on the improvements on the Leased Premises against loss and
damage by fire, aircraft and extended coverage perils. Such policy
shall be in an amount of not less than eighty percent (80%) of the
replacement cost of the improvements with satisfactory evidence of
such coverage furnished AUTHORITY.

D. APPLICATION OF INSURANCE PROCEEDS

If the fixed improvements placed upon the Leased Premises shall be
totally destroyed or extensively damaged and LESSEE shall elect not to
restore the same to their previous condition, the proceeds of
insurance payable by reason of such loss shall be apportioned between
AUTHORITY and LESSEE, with AUTHORITY receiving the same proportion of
such proceeds as the then expired portion of the Lease term bears to
the full Lease term, including the renewal term, and LESSEE receiving
the balance. The Lease shall then be cancelled. If the damage
results from an insurable cause and the LESSEE shall elect to restore
the same with reasonable promptness, it shall be entitled to receive
and apply the entire proceeds of any insurance covering such loss to
said restoration, in which event this Lease shall continue in full
force and effect.

E. PERFORMANCE BONDS

LESSEE shall deliver to AUTHORITY a surety bond in the amount of
$100,000.00, within thirty (30) days after the execution date first
above mentioned. Said bond shall be conditioned on the faithful
performance of all terms, conditions, and covenants of this Lease,
shall

<PAGE>

be renewable annually, and shall be kept in full force and effect for
the complete term of this Lease, except as hereinafter provided.

At LESSEE's option, a total amount equal to three (3) months
fixed rental may be deposited with AUTHORITY in lieu of said
performance bond within thirty (30) days after the execution date
first above mentioned.

In lieu of said surety bond or rental deposit, LESSEE may deposit
with AUTHORITY's Controller, within thirty (30) days after the
execution date first above mentioned, a letter of credit, bonds of the
United States of America, or such other securities or bank certificate
of deposit, acceptable to AUTHORITY, in the name of AUTHORITY or
assigned to AUTHORITY in the amount of $90,000.00 as security for
faithful performance by LESSEE as hereinabove provided and LESSEE may
have the right to reserve to itself payable on said U.S. Bonds or such
other securities.

AUTHORITY agrees to return any security posted by LESSEE under
this Paragraph at such time as LESSEE has occupied the building,
operated its business and paid rent for a continuous period of one (1)
year, all as required by this Lease.

Any time that LESSEE undertakes construction of any facilities,
LESSEE shall, at its own cost and expense, cause to be made, executed,
and delivered to AUTHORITY separate bonds, as follows:

1. Prior to the date of commencement of construction, a contract
surety bond in a sum equal to the full amount of the construction
contract awarded. Said bond shall be drawn in a form and from
such company as approved by AUTHORITY; shall guarantee the
faithful performance of necessary construction and completion of
improvements in accordance with approved final plans and detailed

<PAGE>

specifications; and shall guarantee AUTHORITY against any losses
and liability, damages, expenses claims and judgments caused by
or resulting from any failure of LESSEE to perform completely,
the work described herein provided.

2. Prior to the date of commencement of construction, a payment bond
with LESSEE's contractor or contractors as principal, in a sum
equal to the full amount of the construction contract awarded.
Said bond shall guarantee payment of all wages for labor and
services engaged and of all bills for materials, supplies and
equipment used in the performance of said construction contract.

ARTICLE X - TERMINATION OF LEASE BY LESSEE

A. TERMINATION

This Lease shall terminate at the end of the primary term and any
renewal term, if exercised, and LESSEE shall have no further right to
interest in any of the leasehold improvements hereby demised, except
as provided in Article IV, C.

B. TERMINATION BY LESSEE

LESSEE, in addition to all other rights at law or in equity, may
terminate this Lease and terminate its obligations hereunder at any
time that LESSEE is not in default in the payment of rentals to
AUTHORITY by giving AUTHORITY sixty (60) days advance written notice
to be served as hereinafter provided, and by surrender of the Leased
Premises, upon or after the happening of any one of the following
events:

1. The issuance by any court of competent jurisdiction of an
injunction or order, or the enactment of any law, ordinance, or
regulation or other act of a governmental body that in any way
prevents or restrains the use of the Airport, so as to
substantially affect LESSEE's use of the Airport.

<PAGE>

2. The default by AUTHORITY in the performance of any covenant or
agreement herein required to be performed by AUTHORITY, and the
failure of AUTHORITY to undertake and be continuing to remedy
such default for a period of sixty (60) days after receipt from
LESSEE of written notice to remedy the same; provided, however,
that no notice of termination, as above provided, shall be of any
force or effect if AUTHORITY shall have remedied the default
prior to receipt of LESSEE's notice of termination.

3. The assumption by the United States Government or any authorized
agency thereof of the operation, control, or use of the Airport
and facilities, or any substantial part or parts thereof, in a
manner as substantially to restrict LESSEE for a period of at
least ninety (90) days from full use of its Leased Premises, and
in that event, a just and proportionate part of the rent
hereunder shall be abated.

ARTICLE XI - TERMINATION OF LEASE BY AUTHORITY

A. TERMINATION BY AUTHORITY

AUTHORITY, in addition to all other rights at law or in equity, may
declare this Lease terminated in its entirety, subject to and in the
manner provided in Paragraph B, upon or after the happening of any one
or more of the following events, and may exercise all rights of entry
and re-entry upon the Leased Premises:

1. The failure to pay all installments of rent then due (with
interest) within thirty (30) days after receipt by LESSEE of
written notice to pay such rent.

2. The filing by LESSEE of a voluntary petition in bankruptcy or the
making of any assignment of all or any part of LESSEE's assets
for benefit of creditors.

3. The adjudication of LESSEE as a bankrupt pursuant to any
involuntary bankruptcy proceedings.

4. The taking by a court of competent jurisdiction of LESSEE or its
assets pursuant to proceedings brought under the provisions of
any federal reorganization act.

5. The appointment of a receiver or a trustee of LESSEE's assets by
a court of competent jurisdiction and the failure of LESSEE to
dismiss the same within ninety (90) days or a voluntary agreement
with LESSEE's creditors.

6. The breach by LESSEE of any of the covenants or agreements herein
contained, and the failure of LESSEE to take appropriate action
to

<PAGE>

remedy such breach within thirty (30) days after receipt by
LESSEE of written notice from AUTHORITY.

7. The abandonment of the Leased Premises.

8. The failure to commence the replacement of any improvements which
have been destroyed by fire, explosion, wind, etc. within six (6)
months from the date of such destruction.

B. WAIVER OF STATUTORY NOTICE TO QUIT

In the event AUTHORITY exercises its option to cancel this Lease upon
the happening of any or all of the events set forth in this Article, a
notice of cancellation shall be sufficient to cancel this Lease; and,
upon such cancellation, LESSEE hereby agrees that it will forthwith
surrender up possession of the Leased Premises to AUTHORITY. In this
connection, LESSEE hereby expressly waives the receipt of any
statutory notice to quit or notice of termination which would
otherwise be given by AUTHORITY.

C. POSSESSION BY AUTHORITY

In any of the aforesaid events, AUTHORITY may take immediate
possession of the Leased Premises and remove LESSEE's effects,
forcibly if necessary, without being deemed guilty of trespassing.
Upon said default, all rights of LESSEE shall be forfeited, provided,
however, AUTHORITY shall have and reserve all of its available
remedies at law as a result of said breach of this Lease.

Failure of AUTHORITY to declare this Lease terminated upon
default of LESSEE for any of the reasons set out shall not operate to
bar, destroy, or waive the right of AUTHORITY to cancel this Lease by
reason of any subsequent violation of the terms hereof.

D. SUSPENSION OF LEASE

During the time of war or national emergency, AUTHORITY shall have the
right to lease the landing area or any part thereof to the United
States

<PAGE>

Government for military use. If any such lease is executed, any
provisions of this instrument which are inconsistent with the
provisions of the lease to the Government shall be suspended, provided
that the term of this Lease shall be extended by the amount of the
period of suspension.

E. DESTRUCTION OF PREMISES - TERMINATION

In the event of damages to or destruction or loss of the building or
buildings by an insured or insurable risk, LESSEE shall promptly
repair, restore and rebuild said building or buildings as nearly as
possible to the condition they were in immediately prior to such
damage or destruction, except as provided in Article IX, D.

If the building or buildings shall be damaged in such manner as
to render them unusable in whole or in part, and LESSEE elects to
rebuild, the rental provided to be paid under the terms of this Lease
shall be abated or reduced proportionately during the period from the
date of such damage or destruction until the work of repairing,
restoring or reconstructing said building or buildings is completed.

ARTICLE XII - RIGHTS UPON TERMINATION

A. FIXED IMPROVEMENTS

It is the intent of this Agreement that the real estate, leasehold
improvements, except trade and business fixtures, and alterations
thereto shall be and remain the property of AUTHORITY during the
entire term of this Lease and thereafter.

B. TEMPORARY BUILDINGS

At the termination of this Lease, LESSEE shall have the right within
thirty (30) days thereafter, to remove all temporary buildings,
furniture, fixtures, machinery, equipment and signs installed on the

<PAGE>

premises leased hereunder, but shall repair at its own expense, all
damage to the Leased Premises caused by such removal. All other
improvements erected or installed on the Leased Premises shall, on
such termination, remain on the Leased Premises.

C. PERSONAL PROPERTY

Upon termination of this Lease, LESSEE shall remove all personal
property, including trade and business fixtures from the Leased
Premises within thirty (30) days after said termination, subject,
however, to a lien in favor of AUTHORITY for unpaid rents or fees, and
repair any damage to the Leased Premises caused by such removal. If
LESSEE fails to remove said personal property, said property may
thereafter be removed by AUTHORITY at LESSEE's expense.

ARTICLE XIII - ASSIGNMENT AND SUBLETTING

A. SUCCESSORS AND ASSIGNMENT

Except as otherwise provided herein, LESSEE shall not assign this
Lease or any part thereof in any manner whatsoever or assign any of
the privileges recited herein without the prior written consent of
AUTHORITY, provided, however, in the event of such assignment, LESSEE
remain liable to AUTHORITY for the remainder of the term of the Lease
to pay to AUTHORITY any portion of the rental and fees provided for
herein upon failure of the assignee to pay the same when due. Said
assignees shall not assign the Lease except with the prior written
approval of the AUTHORITY and the LESSEE herein, and any assignment by
the LESSEE shall contain a clause to this effect.

LESSEE may assign this Lease or any part hereof to Federal
Express Corporation or any direct or indirect wholly owned subsidiary
of Federal Express Corporation, without the prior written approval of
AUTHORITY,

<PAGE>

but no such assignment shall be effective until notice thereof is
received by AUTHORITY and provided however, LESSEE shall remain liable
to AUTHORITY for the remainder of the term of the Lease to pay to
AUTHORITY any portion of the rental and fees provided for herein upon
failure of the assignee to pay the same when due.

B. SUBLETTING

Except as otherwise provided herein, LESSEE shall not sublease or
permit any part of the Leased Premises to be occupied by others
without the prior written consent of AUTHORITY.

LESSEE may sublet any portion of the Leased Premises to Federal
Express Corporation, or any direct or indirect wholly owned subsidiary
of Federal Express Corporation without the prior written approval of
AUTHORITY, but no such sublease shall be effective until notice
thereof is received by AUTHORITY and provided however, LESSEE shall
remain liable to AUTHORITY for the remainder of the term of the Lease
to pay to AUTHORITY any portion of the rental and fees provided for
herein upon failure of the sublessee to pay the same when due.

ARTICLE XIV - QUIET ENJOYMENT

AUTHORITY covenants that LESSEE, upon payment of the rentals reserved
herein and the performance of each and every one of the covenants, agreements,
and conditions on the part of LESSEE to be observed and performed, shall and
may, peaceably and quietly, have, hold and enjoy the Leased Premises for the
term aforesaid, free from molestation, eviction or disturbance.

ARTICLE XV - GENERAL PROVISIONS

A. NON-INTERFERENCE WITH OPERATION OF AIRPORT

LESSEE, by accepting this Lease, expressly agrees for itself, its
successors and assigns that it will not make use of the Leased
Premises

<PAGE>

in any manner which might interfere with the landing and taking off of
aircraft at the Airport or otherwise constitute a hazard. In the
event the aforesaid covenant is breached, the AUTHORITY reserves the
right to enter upon the Leased Premises and cause the abatement of
such interference at the expense of the LESSEE.

AUTHORITY shall maintain and keep in repair the Airport landing
areas and taxiways, and shall have the right to direct and control all
activities of the LESSEE in this regard.

B. AUTHORITY'S CONSENT

Whenever any provision of this Lease requires the approval, consent or
exercise of discretion of AUTHORITY, such action shall not be
unreasonably withheld or unreasonably exercised.

C. TAXES

LESSEE shall pay any leasehold interest tax assessed and all property
taxes which may be assessed against equipment, merchandise, or other
personal property belonging to LESSEE located on the Leased Premises,
or other permitted portions of the Airport. In the event any real
estate taxes are assessed against the Leased Premises during the term
of this Lease, such taxes shall be paid AUTHORITY.

D. LICENSE FEES AND PERMITS

LESSEE shall obtain and pay for all licenses, permits, fees or other
authorization or charges as required under Federal, State or local
laws and regulations insofar as they are necessary to comply with the
requirements of this Lease and the privileges extended hereunder.

E. PARAGRAPH HEADINGS

<PAGE>

The paragraph headings contained herein are for convenience in
reference and are not intended to define or limit the scope or any
provision of the Lease.

F. INTERPRETATIONS

This Lease shall be interpreted in accordance with the laws of the
State of Indiana.

G. NOTICES

Whenever any notice or payment is required by this Lease to be made,
given or transmitted to the parties hereto, such notice or payment
shall be enclosed in an envelope with sufficient postage attached to
insure delivery and deposited in the United States Mail, addressed to:

AUTHORITY.......... Executive Director
Indianapolis Airport Authority
Indianapolis International Airport
Box 100, 2500 S. High School Road
Indianapolis, IN 46241

and notices, consents and approvals to LESSEE addressed to:

LESSEE............ Federal Express Corporation
2005 Corporate Avenue
Memphis, TN 38132

H. FORCE MAJEURE

Neither AUTHORITY nor LESSEE shall be deemed to be in breach of this
Lease by reason of failure to perform any of its obligations hereunder
if, while, or to the extent such failure is due to strikes, boycotts,
labor disputes, embargoes, shortages of materials, acts of God, acts
of the public enemy, acts of superior governmental authority, weather
conditions, floods, riots, rebellion, sabotage or any other
circumstances for which it is not responsible, and which are not
within its control. This provision shall not apply to failures by
LESSEE to pay rents, fees, or other charges, or to make any other
money payments

<PAGE>

when required by this Lease, but may apply to extend the time at which
rent, and other such money payments, begin to accrue. This provision
shall not prevent either party from exercising its respective rights
of termination under Article X, B, 1 and 3; Article XI, A, 1-5 and 7;
and other provision for termination not related to force majeure.

I. NON WAIVER OF RIGHT TO PROCEED IN CONDEMNATION

Notwithstanding any provision of this Lease to the contrary, such as,
but not limited to Article VIII, C and D; Article X, B, 1 and 3; and
Article XI, D, LESSEE and AUTHORITY agree that LESSEE does not intend
to, and has not, waived any right which may accrue to it for damages
and compensation arising out of or relating to any taking, by
condemnation or other act of an authorized entity, of any right,
title, or interest of LESSEE in the Leased Premises and the
improvements and equipment relating thereto.

J. EFFECTIVE DATE

This Amended and Restated Land Lease Agreement amends and restates the
Land Lease Agreement dated March 28, 1984, between Purolator Courier
Corporation and AUTHORITY, which Agreement was assigned to Federal
Express Corporation on November 12, 1987. The parties agree that the
effective date of the Amended and Restated Land Lease Agreement is
March 28, 1984, and that in accordance with Article IV, A, of this
Lease, the commencement date of the primary term is January 1, 1987.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the date first above mentioned at Indianapolis, Indiana.

INDIANAPOLIS AIRPORT AUTHORITY

By /s/ Michael W. Wells
_____________________________________

<PAGE>

Michael W. Wells, President

By /s/ Gordon St. Angelo
_____________________________________
Gordon St. Angelo, Vice President

By /s/ Betty J. Johnson
_____________________________________
Betty J. Johnson, Secretary

By /s/ Lawrence A. O'Connor, Jr.
_____________________________________
Lawrence A. O'Connor, Jr., Member

By /s/ Murvin S. Enders
_____________________________________
Murvin S. Enders, Member
AUTHORITY

FEDERAL EXPRESS CORPORATION

By /s/ Gilbert Mook
__________________________

Title Vice President - Properties
_______________________

ATTEST:

By /s/ Sybille S. Noble
__________________________

Title Assistant Secretary
_______________________
LESSEE

Attachments: Exhibit A: Leased Premises and Expansion Area
Exhibit B: Building & Land Use Provisions
Exhibit C: Roads and Utilities Provided by AUTHORITY

<PAGE>

STATE OF INDIANA )
) SS:
COUNTY OF MARION )

Personally appeared before me Michael W. Wells, President, Gordon St.
Angelo, Vice President, Betty J. Johnson, Secretary, Lawrence A. O'Connor, Jr.,
Member, and Murvin S. Enders, Member, respectively, of the Indianapolis Airport
Authority, a municipal corporation, who acknowledged that the execution of the
foregoing Amended and Restated Land Lease Agreement, for and on behalf of said
municipal corporation, was their free, and duly authorized act and deed this
20th day of August, 1993.

/s/ Robert A. Duncan
_________________________________
Notary Public

Robert A. Duncan
_________________________________
(printed)

My Commission Expires: Resident in Hendricks County
Indiana
10/22/96

<PAGE>

STATE OF TENNESSEE )
) SS
COUNTY OF SHELBY )

Personally appeared before me Gilbert Mook, and Sybille S. Noble,
as the Vice - President - Real Estate and Assistant Secretary, respectively,
of Federal Express Corporation, a Delaware corporation, who acknowledged that
the execution of the foregoing Amended and Restated Land Lease Agreement, for
and on behalf of said corporation, was their free, and duly authorized act and
deed this 19 day of August, 1993.

/s/ Kimble H. Scott
_________________________________
Notary Public

Kimble H. Scott
_________________________________
(printed)

My Commission Expires: Resident in Shelby County
Indiana
July 25, 1995

This instrument was prepared by ROBERT A. DUNCAN, GENERAL COUNSEL
Indianapolis Airport Authority

<PAGE>

FEDERAL EXPRESS LEASED AREA
149.12 ACRES

A part of Section 26 and the Southeast corner of Section 23, Township 15 North,
Range 2 East, Marion County Indiana, described as follows:

Commencing at Indianapolis Airport Authority Monument 25-0 which marks the
southeast corner of the northeast quarter of the above captioned Section 26;
thence north no degrees 10 minutes 9 seconds West (assumed bearing) with the
west line of said Northeast Quarter, 384.43 feet to the POINT OF BEGINNING of
the parcel herein described; thence, continuing with the east line of Northeast
Quarter, North no degrees 10 minutes 9 seconds West 902.48 feet; thence North 45
degrees 2 minutes 25 seconds West 1968.37 feet; thence South 44 degrees 57
minutes 35 seconds West 2311.92 feet; thence South 64 degrees 58 minutes 59
seconds West 364.41 feet; thence South 44 degrees 57 minutes 35 seconds West
748.55 feet; thence South 45 degrees no minutes 32 seconds East 1334.12 feet to
a point on a curve; thence along a curve, having a radius of 1986.86 feet, a
central angle of 18 degrees 34 minutes 11 seconds, a chord bearing North 73
degrees 6 minutes 23 seconds East 641.13 feet, an arc distance of 643.95 feet;
thence North 82 degrees 23 minutes 4 seconds East 492.59 feet; thence North 7
degrees 34 minutes 51 seconds West 503.14 feet; thence North 83 degrees 26
minutes 58 seconds East 1921.98 feet to the Point of Beginning and containing
149.12 acres, more or less.

EXHIBIT "A"
PAGE 1 OF 3
DESCRIPTION OF LEASED PREMISES (including Leased Expansion Area)
APRIL 27, 1993

<PAGE>

Page 2 contains a diaphragm of the roads and utilities provided by the
Authority.

<PAGE>

Page 3 contains a diaphragm of the leased premises.

<PAGE>

3-1-77

LAND LEASE GENERAL BUILDING AND USE PROVISIONS
FOR ALL AIRPORTS OWNED BY THE
INDIANAPOLIS AIRPORT AUTHORITY

This document outlines the Indianapolis Airport Authority's restrictions
and conditions associated with airport land use. Full compliance will be
expected except in those cases where the provisions are not applicable. Any
deviations from the regulations outlined herein must be approved by the
Executive Director. AUTHORITY reserves the right to make periodic inspections
to insure compliance with these Provisions and to initiate appropriate
corrective measures.

CLAUSE I
PURPOSE OF CONDITIONS AND RESTRICTIONS

1. All improvements constructed on airport property are subject to conditions,
restrictions and reservations for the following purposes:

(a) To establish aesthetic values designed to complement and benefit
all Airport Authority facilities;

(b) To develop all airports with a park-like character which will
insure their being a continuing asset to the Indianapolis Metropolitan
area and to the State of Indiana;

(d) To insure proper, desirable use and appropriate development and
improvement of each site within each airport;

(e) To protect lessees and/or tenants of buildings against improper
and undesirable use of surrounding building sites which will
depreciate the value of their properties;

(f) To guard against the erection of structures built of improper or
unsuitable materials;

(g) To encourage the erection of attractive improvements with
appropriate locations on building sites thereof;

(h) To insure and maintain proper setbacks from streets, highways,
runways, taxiways and aprons, and adequate open spaces between
structures which will insure a park-like character;

(i) In general, to provide for a high type and quality of improvement
of said property;

(j) To insure the safety and security of the airport operation and
the operation of airport tenants;

<PAGE>

CLAUSE II
LOT AND BUILDING CONSTRUCTION REQUIREMENTS

(See CLAUSE V, pages 18 thru 25,
SPECIAL CONSTRUCTION (T-HANGARS)

1. No building or other structure shall be erected, permitted or
placed upon any part of said real estate which shall have any part thereof
including, but not limited to, any windows, eaves, steps, chimneys, or other
projections nearer than 80 feet from the nearest boundary line or right-of-way
line of any street or streets, or which is nearer than 50 feet from any boundary
line of said real estate which does not border a street. No fence, sign, hedge,
or mass planting shall be constructed or permitted to exist in the front setback
area established herein except upon securing, in advance, the written consent of
AUTHORITY.

2. The area between the front of any building and the street shall
be restricted to planting and landscaping only and shall not be used for parking
or driveway. A grass strip at least 25 feet wide shall be maintained on both
sides and at the rear of every plot.

3. One combination entrance and exit drive shall be permitted for
each lease area.

4. No excavations or excavating work shall be permitted on any part
of said real estate except excavations for the purpose of constructing buildings
and physical improvements on such real estate immediately prior to and during
the construction of such buildings and tangible improvements. No soil, sand
gravel, minerals, aggregate or earth materials shall be removed from said real
estate except as part of such excavations made for the purpose of constructing
buildings and tangible improvements on said real estate.

5. Elevations and grade lines shall be marked on drawings to
indicate depths necessary for work.

6. Bottom of all foundation excavations shall be made to exact grade
as called for on drawings; and spaces deeper than those shown shall be filled
with concrete, with no backfill of earth permitted in such spaces.

7. Excavation shall be made outside of walls to allow for
inspection, placing and removal of forms. All trenches must be left open until
all work has been inspected and approved by Lessee's representative.

8. Pier and ball-type or spread footings unless approved otherwise,
shall be drilled true to size and depth called for on drawings. All loose earth
must be removed from bottom of footing excavation and excavation must be kept
clean until concrete is placed.

<PAGE>

9. Existing piping, conduits, etc., if encountered in excavating
unless called for to be removed, shall be temporarily supported and maintained
until permanent support has been restored or AUTHORITY has otherwise disposed of
them. When required to be removed, they shall be cut off and capped outside the
excavation by Contractor at his expense.

10. Bilge pumps, suction and discharge lines, well points, etc., must
be provided, if necessary, to keep all excavation free from standing water.

11. No backfill will be permitted until foundations or other work in
excavation has been inspected and approved by Lessee's representative.

12. Sufficient time must be allowed after notice is given that work
is ready for inspection in order for Lessee to make all
necessary examinations and tests.

13. No backfill will be permitted against retaining walls until they
have attained sufficient strength to support same.

14. Material frozen in lumps or material softer than adjoining soil
shall not be used. All fillings must be tamped in 6 to 10 inch layers, with
special care taken in tamping fillings under floors, etc., to prevent
settlement. These fillings should be puddled with water where necessary, using
very little water for puddling and none at all for sandy, clay soil. All
filling must be compacted to 90% of standard Proctor density. The preferred
method would be to use a sand or gravel fill in these areas.

15. All utility trenches must be tamped outside and inside buildings
as above specified to prevent settlement, with compaction to 95% of standard
Proctor density under pavings and 90% under lawn and planting areas.

16. Should additional material be required for backfilling in excess
of that obtained from excavation, it shall be provided and shall be suitable,
clean approved material. Again the preferred method is to utilize sand or
gravel to avoid settling.

17. All fills under floors, if required, must be made with subsoil up
to within 4 inches of elevation of bottom of slab, with compaction the same as
called for hereinbefore under "BACKFILLING." The top 4 inches under all floor
slabs shall be of approved sand. The top 2 inches under sidewalks shall be of
approved sand. A good grade of course, clean river sand will be acceptable.

18. All fills and all grading must conform to contours as shown on
the plot plan. If approved earth is not available on site to do the grading,
this material must be provided and hauled in.

19. Where planting areas are designated, elevations should be lowered
4 inches, to accommodate topsoil or sod.

<PAGE>

20. Stockpiled topsoil must be spread over planting areas to a depth
of 4 inches as directed, with areas hand-raked to elevations called for on the
drawings. Additional approved topsoil must be provided to obtain full depth
coverage if stockpiled topsoil is not of sufficient quantity.

21. Fills shall be constructed at locations and to lines and grades
indicated on the drawings and as directed by Lessee. The completed fill shall
correspond to the shape of the typical sections shown on the drawings or shall
meet the requirements of the particular case. All fill material shall be
reasonably free from roots or other organic material, trash, frozen material,
and from all stones having a maximum dimension greater than 6 inches. Stones
larger than 3 inches, maximum dimension, shall not be permitted in the upper 6
inches of fill or embankment. The material shall be placed in successive
horizontal layers not exceeding 6 inches in thickness after compaction.
Contractors shall add moisture to or dry by aeration each layer as may be
necessary to meet the requirements of this specification for compaction.

22. Subgrade preparation under any proposed apron pavement area shall
be in accordance with Item P-152 of the F.A.A. Standards for specifying
construction of Airport, October 24, 1974, with latest revisions.

23. Uniformly smooth grading of all finished base areas shall be
accomplished. The finished surface shall be reasonably smooth, compacted and
free from irregular surface changes. The degree of finish shall be that
ordinarily obtainable from either blade-grader or planer operations. The
finished surface shall be not more than 0.15 foot above or below the established
grade or approved cross section. The surface of base for pavement shall not
vary more than 0.05 foot from the established grade and approved cross section.

24. Finished subgrade base shall not be disturbed by traffic or other
operations and shall be maintained in satisfactory condition until operations to
place finish courses are commenced. If base becomes softened by rain or frost
action, or any other cause to the extent that it does not have specified density
and moisture content at time of placement of subsequent courses, the base shall
be recompacted to not less than 95% of the specified density either by
additional passes of a sheepsfoot and/or pneumatic roller or other approved
roller, or by scarifying and rerolling. Recompacted base shall be finished as
called for hereinbefore.

25. All dirt, loose materials and miscellaneous articles which are
not a part of the finished leased area shall be removed from the existing and
proposed airport boundaries. The site of such disposal shall be approved by the
Executive Director.

26. All buildings, both principal and appurtenant that are
constructed on the property, shall conform to the standards specified at the
time of such construction by the latest edition of the National Building Code
and National Fine Code.

<PAGE>

27. All buildings shall be non-combustible and constructed of
approved masonry or metal materials with a quality of finish in keeping with the
overall attractiveness of each airport.

28. The following protection shall remain in force during all phases
of construction work:

(a) Provide protection to adjoining property, including buildings,
walks, roads, trees, fences and shrubs.

(b) Provide, erect and maintain all fences, planking, shoring,
lights, warning signs and guards as necessary for protection of people
and property. Remove protection devices only when authorized to do so
by the Executive Director.

29. Existing utility lines, as shown on drawings or as are made known
to Contractor prior to excavation and that are to be retained, as well as
utility lines constructed during excavation operation, shall be protected from
damage during all excavation, trenching and grading operations. Existing
utility lines should be located and cleared by hand-digging 3 feet either side
of the line. If damaged, shall be repaired by Contractor at his expense.
Contractor shall be responsible for verification of all utility locations and
shall repair all damages to the satisfaction of AUTHORITY.

30. Construction, alteration, or addition of or to any building or
structure on any lot shall meet the architectural design standards provided in
these specifications. Prior to said construction, alternation, or addition,
lessee must submit two sets of plans and specifications for such building to
AUTHORITY, its successors or assigns. A written approval of such plans and plot
plans by AUTHORITY shall be required.

31. In addition to the right reserved above to approved plans and
specifications for the construction or alterations of any building, AUTHORITY
also reserves the right to approve plans and specifications for the
construction, installation or alteration of all signs, loading docks, parking
facilities, fencing, storage building or facilities, and landscape planting on
each Airport. Such plans and specifications must first be submitted to and have
the written approval of AUTHORITY, its successors or assigns.

32. No approval for building or structure improvements shall be made
until a plan for site improvements has been submitted and approved in writing by
AUTHORITY. Said plans shall indicate and include:

(a) Preliminary site plan showing building orientation, entrances,
parking, a water management plan that meets the requirements of Marion
County Ordinance No. 62-1978, and other pertinent data. Lessee should
not proceed with the other requirements listed below until this plan
has been approved by AUTHORITY.

<PAGE>

(b) A complete set of plans and specifications certified by an
architect or engineer registered in the State of Indiana shall be
submitted in duplicate to AUTHORITY. Said documents shall include:

(1) A site plan showing location and design of building,
structures, signs, gas lines, water lines, electrical lines,
sanitary sewers, storm drainage, driveways, driveway intersection
with streets, exterior material storage areas, parking areas,
loading area and sidewalks. Drainage and sediment control plans
shall be in accordance with specifications adopted by the City of
Indianapolis Board of Public Works, on April 14, 1981, by
Resolution No. 2400-1800.

(2) Elevations, typical wall sections, pavement sections and
details, finish and color designations, lighting and signing on
the structure. No roof top heating, air-conditioning, or large
fan units will be acceptable unless approved in writing by the
Executive Director.

(3) A plan showing the landscape treatment, type, nature, and
arrangement of plantings, fences, walls, outdoor lighting and
similar features.

(4) A plan showing that the number of parking spaces for
employees and visitors and standing areas for the loading and
unloading of service vehicles is sufficient to accommodate the
expected use of the lot and improvements. All parking areas
shall include perimeter plantings of trees and shrubs to minimize
the open paved effect of the parking area.

(5) A description of proposed operations on said real estate and
an estimate of the maximum number of employees contemplated.

(6) Any other pertinent information requested by AUTHORITY, and
any information which will show compliance with each and all of
these restrictions.

33. The following pavement sections shall serve as minimum for all
paving:

(a) Parking lots, drives, roads, aircraft taxiways (under 12,500
pounds aircraft), and areas of this category as a minimum shall
consist of:

(1) 2" Hot Asphaltic Concrete Surface Type "B,"
(2) 2" Hot Asphaltic Concrete Binder,
(3) 6" Hot Asphaltic Concrete Base

<PAGE>

(1) 2" Hot Asphaltic Concrete Surface Type "B,"
(2) 3" Hot Asphaltic Concrete Base,
(3) 8" Crushed Limestone Base with Prime Coat
(will be approved only if proper subgrade
drainage is installed).

(b) All other paving shall consist of Portland Cement that complies
with the "Standard Specifications for Portland Cement," ASTM
Designation C-150 (latest revision), Concrete Aggregates that conform
to the "Standard Specifications for Concrete Aggregates," ASTM
Designation C-33 (latest revision), Metal Reinforcement that conforms
to latest ASTM Specification No. A 615, and water. Any pavement areas
which are planned to receive transport aircraft or transport vehicles
shall be designed and constructed in compliance with the Federal
Aviation Administration's Standard for specifying construction of
airports, October 24, 1974, with latest revisions. All other design
criteria (for each project) shall be developed and specified by
AUTHORITY.

CLAUSE III
UTILITIES

1. No septic tank, outside toiler, or individual water well may be
constructed, placed or used on any lands leased on any Airport if public
utilities are available. No installation for the disposal of sanitary sewage
shall be constructed or operated unless the installation shall meet all the
requirements of appropriate city, county and/or State regulations.

2. Discharge from any sump pump, footing drains, roof drains, or any
storm water coming on any lot shall not be allowed to flow into any sanitary
sewerage facility.

3. AUTHORITY shall not approve plans and specifications for
construction of any structure on any lot on which all or part of an open storm
drainage ditch or swale is situated unless such plans and specifications shall
provide for the installation of such culverts or for the taking of such other
steps as may be specified by AUTHORITY as will insure that such ditch or swale
will remain free and unobstructed. It shall be the obligation of every lessee
of an airport lot on which any part of such ditch or swale is situated to keep
such part of such ditch or swale continuously unobstructed and in good repair.
All surface drainage must be designed in accordance with State and local
regulations. Lessee must secure drainage permit if required.

4. All utilities including, but not limited to water, gas,
electricity, telephone, and sewer shall be installed underground within the
leased area by and at the expense of lessee.

<PAGE>

5. Coordination of the installation of the required utilities with
the appropriate company and AUTHORITY shall be the responsibility of lessee.

6. Lessee shall provide and pay for connections of storm sewer to
facilities provided at lease line by AUTHORITY.

CLAUSE IV
OTHER REQUIREMENTS

1. Open storage and/or refuse collection areas and/or open work or
activity areas including vehicular parking and loading and unloading activities
shall be screened to a minimum height of 6 feet by evergreen plantings, masonry
wall, redwood or equal fencing, or a combination thereof.

2. In the interest of safety and the free movement of commercial and
private vehicles in and through the airport, employee, customer, owner, or
tenant parking will not be permitted on private or public dedicated streets
within the airport confines. It will be the responsibility of lessees, their
successors or assigns to provide adequate parking facilities for customers,
employees, and public carriers within the boundaries of the property leased to
accommodate the daily or seasonal peak requirement. Parking, loading, service,
or other outdoor work areas must be paved with asphalt or concrete, as
determined by AUTHORITY.

3. The operation of all ground equipment, mobile or stationary,
required for construction, repair or any other purpose within the limits of the
airfield shall be governed as follows:

(a) All equipment and materials when not in use or about to be
installed shall be left in spaces approved for this purpose by the
Executive Director. All equipment on the field, when in use or not in
use, shall be properly marked with yellow, or orange and white
checkered flags of a size not less than 2 feet square during the day
and with amber electric flasher lights at night. No equipment shall
be parked within 750 feet of the centerline of any runway or within
250 feet of the centerline of any taxi way, unless specifically
authorized by the Executive Director. Equipment parked on the
airfield area shall be kept to an absolute minimum and restricted to
equipment actually used in progress the work under progress.

(b) Nothing shall be placed on the airfield without the permission of
the Executive Director.

(c) Parking areas for contractor equipment, supplies, materials and
employee vehicles will be as established by the Executive Director or
as indicated on the plans.

(d) Neither equipment nor personnel shall use any runway, taxiway or
apron for the purpose of hauling materials or

<PAGE>

access to the work unless approved by the Executive Director.
Authorized equipment operating on any hard surfaces is limited to that
equipment with pneumatic tires. Prior to use of any hard surface,
permission shall be obtained from the Executive Director. All drivers
shall be instructed to be alert for aircraft and to follow routes
designated for vehicular traffic. All vehicles will be clearly marked
to identify owner. No privately owned vehicle will be operated on
runway or taxiways.

(e) Prior to initiation of operations which will require the crossing
of any hard surface used by aircraft, the contractor shall assure
himself that a signalman, with visual or radio contact with the air
traffic control tower, is on duty at the site of the crossing to
regulate traffic. Moving aircraft have priority over all other
traffic on the field. Only equipment equipped with pneumatic tires
shall be allowed to cross paved areas. It shall be the responsibility
of the contractor to keep paved surfaces free of any material at all
times that might drop from moving vehicles while crossing paved areas.

(f) Contractor shall conform to the requirements of the Executive
Director as to the placement, type and service of special barricades,
obstruction and hazard marking and lighting devices used to identify
danger areas to aircraft;

(g) Hauling across clear zones of any runway will not be permitted
unless authorized by the Executive Director.

(h) Contractor must agree to permit only his bona fide employees and
those of his subcontractors access and use of the airfield during
actual hours of work.

4. Planting and landscaping shall be in accord with an AUTHORITY
approved plan. All land areas not covered by building or paving must be
improved with a locally acceptable ground cover such as Kentucky-Blue grass, or
equal, except for plots planted with shrubbery, flowers, or trees.

5. Lessee of any tract on the airport must at all times keep the
premises, buildings, improvements, and appurtenances in a safe, clean, wholesome
condition and comply in all respects with the government health and police
requirements. Lessee will provide a place for the collection of rubbish that is
screened from view and will remove at his own expense such rubbish of any
character whatsoever which may accumulate on said property. Grass shall be kept
cut on all leased lots, and AUTHORITY shall keep unleased areas in a clean,
mowed, orderly manner. In the event any lessee fails to keep grass and weeds
cut on the leased premises, AUTHORITY may have the grass and weeds cut and
charge such expense to lessee.

<PAGE>

6. The building and above-grade structures, including parking areas
placed on a lot, shall not exceed seventy-five percent (75%) of the leased area.

7. Every tank for the storage of fuel on the airport shall be buried
below the surface of the ground. This installation must receive prior written
approval of the Executive Director. The installation of all underground fueling
facilities and fuel pipe lines must have a cathodic protection system. All
fueling systems must have adequate provisions to contain possible spill or leak.
A spill prevention and control plan must be prepared and approved by the
Executive Director and conform to all local city-state regulations and the
National Fire Protection Code.

8. No free-standing antennae or transmission towers will be
permitted on the airport without prior written approval of the Executive
Director.

9. No animals shall be kept on any leased tract on the airport.

10. All proposed improvements shall conform to all National, State
and Local codes and specifications, and in Marion County shall follow the
Commercial Zoning Ordinance (80-A0-1), printed September, 1982.

11. The lessee shall require lessee's contractors doing work on
airport to have the following insurance coverage:

CONTRACTOR'S LIABILITY INSURANCE

A. Lessee shall demand that each Contractor shall take out and
maintain insurance of such types and in such amounts as are necessary to cover
his responsibilities and liabilities on all projects, and shall require all his
subcontractors to carry similar insurance.

(1) The Owner will accept, in lieu of all subcontractors
carrying similar insurance, an "Owner's and Contractor's Protective Liability
Policy" paid for by the Contractor and written in the name of the Owner for the
amounts specified hereinafter including all the special coverages. Said policy
must protect the Owner for all claims for bodily injury and/or property damage
arising out of operations for the named insured by said Contractor, or any
subcontractor of said Contractor.

B. No Contractor shall commence work under this contract until he
has obtained all insurance required under this Section and such insurance has
been approved by the Owner, nor shall any Contractor allow any subcontractor to
commence work on his subcontract until the same insurance has been obtained by
the subcontractor and approved by the Owner. Each and every Contractor and
Subcontractor shall maintain all insurance required under paragraphs (1) and (2)
of this Section for not less than one year after completion of this contract.

<PAGE>

C. Each Contractor shall file with the Owner and Architect a
Certificate of Insurance. Any certificate submitted and found to be altered or
incomplete will be returned as unsatisfactory.

D. If requested by the Owner, Contractor shall furnish the Owner
with true copies of each policy required of him or his subcontractors. Said
policies will not be canceled or materially altered, except after fifteen (15)
days advance written notice to the Owner and Architect, mailed to the addresses
indicated herein.

E. Insurance under this Section, as a minimum, shall include the
following coverages:

(1) Workmen's Compensation and Employer's Liability Insurance:

Workman's Compensation and Occupational Disease Insurance of
statutory limits as provided by the state in which this contract
is performed and Employers; Liability Insurance at a limit of not
less than $100,000.00 for all damages arising from each accident
or occupational disease.

(2) Comprehensive General Liability Insurance covering:

(a) Operations -- Premises Liability:

including, but not limited to, Bodily Injury, including
death at any time resulting therefrom, to any person or
Property Damage resulting from execution of the work
provided for in this contract, or due to or arising in any
manner from any act or omission or negligence of the
Contractor and any subcontractor, their respective employees
or agents.

(b) Elevator Liability:

including, but not limited to, Bodily Injury, including
death at any time resulting therefrom, to any person or
Property Damage resulting from operation or use of any
elevator or hoist, if either or both are operated or used in
connection with execution of this contract.

including, but not limited to, Bodily Injury, including
death at any time resulting therefrom, to any person or
Property Damage arising from acts or omissions of any
subcontractor, their employees or agents.

(d) Products:

<PAGE>

including, but not limited to, Bodily Injury, including
death at any time resulting therefrom to any person or
Property Damage because of goods, products, materials or
equipment used or installed under this contract.

(e) Completed Operations Liability:

or because of completed operations, which may become evident
within one year after acceptance of the building including
damage to the building or its contents.

(f) Contractual Liability:

Each and every policy for liability insurance, carried by
each contractor and subcontractor, as required by this
Section shall specifically include Contractual Liability
coverage with respect to Section F of this Division.

(g) Special Requirements:

The insurance required under Paragraph (2) of this Section
shall specifically include the following special hazards:

Property Damage caused by conditions otherwise subject to
exclusions "x,c,u," Explosion, Collapse or Underground
Damage.

Broad Form Property Damage endorsement, which has reference
to property in the "care, custody, or control" of the
insured.

"Occurrence" Bodily Injury coverage in lieu of "caused by
accident."

"Occurrence" Property Damage coverage in lieu of "caused by
accident."

(h) Limits of Liability:

The insurance under Paragraph (2) of this Section shall be
written in the following limits of liability, as a minimum:

For Contracts Less than $250,000.00:

BODILY INJURY:
--------------
$500,000.00 each person
$500,000.00 each occurrence
$500,000.00 aggregate Products

<PAGE>

PROPERTY DAMAGE:
----------------
$100,000.00 each occurrence
$300,000.00 aggregate Operations
$300,000.00 aggregate Products
$500,000.00 aggregate Contractual

For Contracts $250,000.00 or greater:

BODILY INJURY
-------------
$1,000,000.00 each person
$1,000,000.00 each occurrence
$1,000,000.00 aggregate Products

PROPERTY DAMAGE
---------------
$250,000.00 each occurrence
$500,000.00 aggregate Operations
$500,000.00 aggregate Protective
$500,000.00 aggregate Products
$500,000.00 aggregate Contractual

(3) Comprehensive Automobile Liability covering:

(a) All owned, hired, or non-owned vehicles
including the loading or unloading thereof.

(b) Special Requirements:

The insurance required under paragraph (3)
of this section shall specifically include
the following special hazards:

"Occurrence" Bodily Injury in lieu of "caused
by accident."

"Occurrence" Property Damage in lieu of
"caused by accident."

(c) The insurance under Paragraph (3) of this
Section shall be written in the following
limits of liability as a minimum:

FOR CONTRACTS LESS THAN $250,000.00:
------------------------------------
Automobile Bodily Injury
Each Person $500,000.00
Each Occurrence $500,000.00
Automobile Property Damage
Each Occurrence $100,000.00

FOR CONTRACTS $250,000.00 OR GREATER:
-------------------------------------
Automobile Bodily Injury
Each Person $500,000.00
Each Occurrence $1,000,000.00
Automobile Property Damage

<PAGE>

Each Occurrence $250,000.00

F. Hold Harmless Agreement:

(1) The Contractor shall indemnify and hold harmless the Owner
and the Architect and their agents and employees from and
against all claims, damages, losses and expenses including
attorney's fees arising out of or resulting from the
performance of the work, provided that any such claim,
damage, loss or expense (a) is attributable to bodily
injury, sickness, disease or death, or to injury to or
destruction of tangible property (other than the work
itself) including the loss of use resulting therefrom and
(b) is caused in whole or part by any negligent act or
omission of the Contractor, any subcontractor, anyone
directly or indirectly employed by any of them or anyone for
whose acts any of them may be liable, regardless of whether
or not it is caused in part by a party indemnified
hereunder.

(2) In any and all claims against the Owner or the Architect or
any of their agents or employees by any employee of the
Contractor, Subcontractor, anyone directly or indirectly
employed by any of them or anyone for whose acts of them may
be liable, the indemnification obligation under this Hold
Harmless Agreement shall not be limited in any way by any
limitation on the amount payable by or for the Contractor or
any Subcontractor under workmen's compensation acts,
disability benefit acts or other employee benefit acts.

(3) The obligations of the Contractor under this Hold Harmless
Agreement shall not extend to any claim, damage, loss or
expense arising out of professional services performed by
the Architect, his agents, or employees, including (a) the
preparation of maps, plans, opinions, reports, surveys,
designs or specifications, and (b) supervisory, inspection
or engineering services.

12. The lessee's contractors shall:

(a) Use only those roads as designated by the Executive
Director for transportation of equipment and hauling of
materials.

(b) Be responsible for cleanup of areas outside the leased area
that may be damaged or disturbed.

<PAGE>

CLAUSE V
SPECIAL CONSTRUCTION
T-HANGARS

1. This specification covers material for fabrication and erection
of the T-Hangars which shall be constructed to be weathertight, structurally
sound and in compliance with the required loading conditions. Such compliance
shall be subject to approval of the AUTHORITY. This specification also provides
for such foundations as are required for the T-Hangars. All materials shall be
new, unused and free of defects and imperfections.

2. Pavement dimension for T-Hangar taxiways and approaches should
conform to the master plan for the airport. The approaches should extend inside
the T-Hangar building to provide a hardstand for the aircraft to be parked.
Pavement inside and outside the T-Hangar building shall conform to the minimum
pavement thicknesses established by Clause II of this document.

3. All items of work under this section shall be furnished,
constructed and installed in strict conformance with the applicable latest
edition of the following:

(a) American Institute of Steel Construction Specifications for the
Design, Fabrication and Erection of Structural Steel for Building and
the Code of Standard Practice.

(b) American Society for Testing Materials Standard Specification for
Buildings (Serial Designation A-36).

(d) Any pertinent federal, state or local codes or ordinances.

4. Any incidental items of work required by any of the above
mentioned authorities and not specifically shown or mentioned shall be furnished
under this specification without additional cost.

5. The drawings and specifications, when in direct conflict with any
of the above regulations, will govern and supersede the regulations unless such
drawings and specifications are not equal to the regulations.

6. Buildings shall be constructed of steel and metal, containing all
items required for complete installations, including but not limited to the
following:

(a) Steel post and beam or structural wall framework, columns,
trusses, beams, girts, purlins, and necessary bracing and connecting
members.

(b) Metal wall, partition and roof panels.

<PAGE>

7. Building shall contain either manually or electrically operated
bi-fold or other approved type hangar doors. One door will be required for each
airplane pocket. Each electrically operated door shall be controlled by a push
button station located on the inside of wall near door. Each hangar shall have
an access door (minimum 2'-0" x 6'-4") complete with hardware including cylinder
lock. Locks shall be furnished masterkeyed in one set with each lock keyed
differently. Door cover panels shall be compatible in design and color with
building wall panels. Design loading of door shall be same as loading of
building. Flex door closures shall be furnished equal to Federal Specifications
HH-P-151e, Type II; bulb type in form at door sill and diaphragm type at door
head.

8. The contractor shall furnish and install footings as required.

9. Electrical contractor shall furnish and install electrical wiring
and lighting for the T-Hangars except for wiring required for door operators.
Electrical contractor shall terminate wiring in an outlet box at the top and
near center of each hanger door. Metal building contractor shall install and
connect motors and push button control switches including all connecting wiring,
and disconnect switches for same. All electrical wiring and control wiring
shall be installed in conduit.

10. A minimum of 26-gauge steel will be required for all cover
panels.

(a) Roof panels shall be one piece from ridge or eave, with one piece
ridge panels to match corrugations of roof panel. Panels shall be of
gauge required to meet design loading requirements and shall be of
galvanized steel meeting or exceeding the following: A.S.T.M.
Galvanized Specification A93 (latest issue) and Federal Specifica-
tion QQ-S-775a, Type I, Class d. Deflection shall be limited to 1/240
of the span.

(b) Wall panels shall be one piece from eave to ground. Panels shall
be of gauge required to meet design loading requirements and shall be
of galvanized steel meeting or exceeding the following: A.S.T.M.
Galvanized Specification A93 (latest issue) and Federal Specification
QQ-S-775a, Type I, Class d. Deflection shall be limited to 1/180 of
the span.

(c) Partition panels if constructed shall be of one piece from roof
to ground and shall be roll formed galvanized steel meeting same
specifications for wall panels including wind loading.

11. The following types of fasteners shall be required:

<PAGE>

(a) Structural to structural - Hex head machine bolts, except beam to
column connections and splices shall be high strength bolts, A.S.T.M.
A-325 or A-490.

(b) Panel to structural and panel to panel - Cadmium plated or
stainless steel with steel and neoprene washers. Self-threading
screws will be acceptable.

12. Approved type Butyl equal to PECORA BC-158 Sealant shall be
applied at side and end laps of roof panels, at top and bottom (continuous) of
eave closures, and elsewhere as required to make buildings weathertight.

13. Trim and closures shall be of cold formed galvanized steel with
corrugation closure at eaves.

14. Purlins and girts shall be of cold formed, galvanized high
strength steel of gauge required to meet design loading requirements.

15. Structural steel shall be standard stock sections, free from
flaws, cracks or injurious seams, rolled from new billets and conforming to
requirements of A.I.S.C. and A.S.T.M. for steel buildings.

16. Design basis shall be "Steel Construction Manual" of American
Institute of Steel Construction, current edition; and/or American Iron and Steel
Institute's "Light Gauge Steel Design Specification" dated 1960, and American
Welding Society Code for Welding in Building Construction, dated 1963.

A.S.T.M. Standards as amended to date:

A-325 and A-490 for Quenched and Tempered Steel Bolts,
A-307 for Steel Machine Bolts and Nuts,
ASA B-149 for Determining Tensile Stress Area of
Threaded Ends of Rods.

17. Structural description will be as follows:

(a) ROOF: Roof purlins shall be light gauge "Z" purlins. Continuous
design will not be acceptable. Deflection shall be limited to 1/240
of their span. Maximum spacing of roof purlins shall be 6 feet.
Horizontal and vertical bracing of trusses shall be in accordance with
good engineering practices as required by design loads and erection
requirements.

(b) WALLS AND PARTITIONS: Girts shall be spaced as required by the
panels. The limit of deflection shall be 1/240 of their span. They
may be of hot rolled or cold-formed sections. They shall not be
considered to be continuous over columns. Columns shall be spaced as
required and limited by drawings. They shall be hot-rolled sections.
Maximum allowable deflections shall be 1/180 of their span.

<PAGE>

(c) BRACING: Standard as required by design. No moment shall be
taken into the foundation. Horizontal forces at the base of the
column shall be resisted by tie rods furnished and installed by the
Metal Building Contractor.

18. DESIGN LOADS: All loads shall be applied as per the National
Building Code:

(a) Live Loads: Roof: 20 p.s.f.

(b) Wind Load: 25 p.s.f. on the vertical
projection.

30 p.s.f. uplift on the roof structure, including roof deck, purlins,
trusses, or rigid frames, structural walls, beams and columns.

(c) All building components shall be capable of resisting the most
severe conditions produced by any combination of the above-mentioned
loads applied in conjunction with dead loads. When wind loads are
applied in conjunction with dead and live loads an overstress of
33-1/3% will be allowed.

19. PAINTING STRUCTURAL STEEL: All structural steel components,
not galvanized, shall be shop cleaned thoroughly to remove all loose mill scale,
rust, dirt, oil and other foreign substance and given one shop coat of a first
class rust inhibitive primer on all surfaces concealed, in contact, and exposed.
Scarred or damaged places must be touched up after erection. Asphaltum paint
will not be accepted. Field painting of interior structural steel other than
touch-up work will not be required. Exterior structural steel shall be painted
with two (2) coats of oil base paint.

20. PAINTING GALVANIZED STEEL: Painting will not be required on
any galvanized metal other than that specified under alternate.

21. SHOP DRAWINGS shall be submitted before construction. Drawings
shall clearly indicate scope of work, type of footings, anchor bolt setting
plan, and erection drawings and necessary information for proper assembly of the
structure. With shop drawings, builders shall submit complete data showing
structure, including doors to be compatible with the required loads.

(a) All drawings and data shall bear the seal of a registered
professional engineer and shall be subject to approval by the
AUTHORITY.

(b) Data for the metal building shall be arranged in an orderly
manner beginning with a statement of the loads and continuing through
the roof and wall panel components, purlins and girts, frame, walls,
columns and bracing.

<PAGE>

(c) Reference to standard tabular data and details developed by the
building manufacturer shall be clearly explained and adequately
marked.

(d) Tables of section properties of all building components shall be
furnished with the data unless they are included in the A.I.S.C.
Manual of Steel Construction.

22. Erection shall be performed by a qualified erector using proper
tools and equipment. All components and parts shall be located as shown on
erection drawings supplied by the manufacturer.

23. There shall be no field welding, burning, or other field
fabrication of any primary structural members, unless otherwise specified on
manufacturer's drawings.

24. Hollow metal doors and frames for office spaces at ends of hangar
shall be furnished with the T-hangars. Doors shall be furnished glazed with
7/32" thick glass and complete with the following hardware or equal:
FOR EACH DOOR:

1-1/2 Pr. Butts STANLEY FBBK 179p 4-1/2 X 4-1/2 NRP
1 Closer CORBIN 70-6 X SBL
1 Bracket CORBIN 016-1/2=456 X SBL
l Lock CORBIN 700-7551 x WBX x US26D
l Stop CORBIN 360-12 x US26D
1 Threshold VON DUPRIN AL-355
Weatherstripping ZERO Series 18L.

NOTE: Furnish cylinders masterkeyed to cylinders furnished with
locks on access doors in bi-fold hangar doors.

<PAGE>

EXHIBIT 10.61

<PAGE>

FEDERAL EXPRESS CORPORATION
1993 STOCK INCENTIVE PLAN

1. Purpose of Plan

The purpose of the Federal Express Corporation 1993 Stock Incentive Plan
(the "Plan") is to aid Federal Express Corporation (the "Company") and its
subsidiaries in securing and retaining key employees and directors of
outstanding ability and to provide additional motivation to such employees and
directors to exert their best efforts on behalf of the Company and its
subsidiaries. The Company expects that it will benefit from the added interest
which such employees and directors will have in the welfare of the Company as a
result of their ownership or increased ownership of the Company's Common Stock.

2. Stock Subject to the Plan

The total number of shares of Common Stock of the Company that may be
optioned under the Plan is 1,500,000 shares, which may consist, in whole or in
part, of unissued shares or treasury shares. Any shares optioned hereunder that
are canceled or cease to be subject to the option may again be optioned under
the Plan.

3. Administration

The Compensation Committee of the Board of Directors (the "Committee")
shall administer the Plan. Except as otherwise provided herein with respect to
the participation in the automatic grant of options to directors, no member of
the Committee shall be eligible to participate in the Plan while serving on the
Committee nor shall he or she have been at any time within one year prior to his
or her appointment eligible for selection as a person to whom shares might have
been optioned pursuant to the Plan or to whom stock options, stock appreciation
rights, or stock of the Company or any of its affiliates may have been granted
pursuant to any other plan of the Company or its affiliates. The Committee
shall have the authority, consistent with the Plan, to determine the provisions
of the options to be granted, to interpret the Plan and the options granted
under the Plan, to adopt, amend and rescind rules and regulations for the
administration of the Plan and generally to administer the Plan and to make all
determinations in connection therewith which may be necessary or advisable, and
all such actions of the Committee shall be binding upon all participants.
Committee decisions and selections shall be made by a majority of its members
present at the meeting at which a quorum is present, and shall be final. Any
decision or selection reduced to writing and signed by all of the members of the
Committee shall be as fully effective as if it had been made at a meeting duly
held.

4. Eligibility

Key employees, including officers, of the Company and its subsidiaries (but
excluding members of the Committee except as provided in paragraph 7), who are
from time to time responsible for the management, growth and protection of the
business of the Company and its subsidiaries are eligible to be granted options
under the Plan. The employees who shall receive options under the Plan shall be
selected from time to time by the Committee in its sole discretion, from among
those eligible, and the Committee shall determine, in its sole discretion, the
number of shares to be covered by the option or options granted to each such
employee selected.

5. Limitations

No option may be granted under the Plan after June 1, 2003, but options
theretofore granted may extend beyond that date.

<PAGE>

6. Terms and Conditions of Stock Options

All options granted under this Plan shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith as the Committee
shall determine.

(a) The option price per share for options granted to employees shall
be determined by the Committee, but shall not be less than 100% of the fair
market value at the time the option is granted. The fair market value
shall, for all purposes of the Plan, be the mean between the high and low
prices at which shares of such stock are traded on the New York Stock
Exchange on the day on which the option is granted. In the event that the
method for determining the fair market value of the shares provided for in
this paragraph (a) shall not be practicable, then the fair market value per
share shall be determined by such other reasonable method as the Committee
shall, in its discretion, select and apply at the time of grant of the
option concerned.

(b) Each option shall be exercisable during and over such period
ending not later than ten years from the date it was granted, as may be
determined by the Committee and stated in the option.

(c) No option shall be exercisable during the year ending on the
first anniversary date of the granting of the option, except as provided in
paragraphs 6(e), 6(f), 6(g) and 13 of the Plan.

(d) Each option may be exercised by giving written notice to the
Company specifying the number of shares to be purchased and accompanied by
payment in full (including applicable taxes, if any) in cash therefor. No
option shall be exercised for less than the lesser of 50 shares or the full
number of shares for which the option is then exercisable. No optionee
shall have any rights to dividends or other rights of a stockholder with
respect to shares subject to his or her option until he or she has given
written notice of exercise of his or her option, paid in full for such
shares and, if requested, given the representation described in paragraph
10 of the Plan.

(e) If an optionee's employment by the Company or a subsidiary or if
a director's directorship terminates by reason of such person's retirement,
the optionee's option may thereafter be exercised to the extent to which it
was exercisable at the time of retirement but may not be exercised after
the expiration of the period of twelve months from the date of such
termination of employment or directorship or of the stated period of the
option, whichever period is the shorter; provided, however, that if the
optionee dies within twelve months after such termination of employment or
directorship, any unexercised option, to the extent to which it was
exercisable at the time of the optionee's death, may thereafter be
exercised by the legal representative of the estate or by the legatee of
the option under a last will for a period of twelve months from the date of
the optionee's death or the expiration of the stated period of the option,
whichever period is shorter.

(f) If an optionee's employment by the Company or a subsidiary or if
a director's directorship terminates by reason of permanent disability, the
optionee's option may thereafter be exercised in full but may not be
exercised after the expiration of the period of twelve months from the date
of such termination of employment or directorship or of the stated period
of the option, whichever period is the shorter; provided, however, that if
the optionee dies within a period of twelve months after such termination
of employment or directorship, any unexercised option, to the extent to
which it was exercisable at the time of the optionee's death, may
thereafter be exercised by the legal representative of the estate or by the
legatee of the option under a last will for a period of twelve months from
the date of the optionee's death or the expiration of the stated period of
the option, whichever period is the shorter.

<PAGE>

(g) If an optionee's employment by the Company or a subsidiary or if
a director's directorship terminates by reason of the optionee's death, the
optionee's option may thereafter be immediately exercised in full by the
legal representative of the estate or by the legatee of the option under a
last will, and for a period of twelve months from the date of the
optionee's death or the expiration of the stated period of the option,
whichever period is the shorter.

(h) If an optionee's employment or if a director's directorship
terminates for any reason other than death, retirement or permanent
disability, the optionee's option shall thereupon terminate.

(i) The option by its terms shall be personal and shall not be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution. During the lifetime of an optionee, the option
shall be exercisable only by the optionee, or by a duly appointed legal
representative.

7. Automatic Grant of Options to Directors

Notwithstanding any other provision of the Plan, the grant of options
hereunder to directors who are not also employees of the Company shall be
subject to the following terms and conditions.

(a) Immediately following each of the five consecutive Annual
Meetings of the Stockholders of the Company beginning with the 1994 Annual
Meeting, each director of the Company who is then incumbent and is not also
an employee of the Company shall be granted a non-incentive stock option to
purchase 1,000 shares of the Common Stock of the Company.

(b) If, during the period beginning with the 1994 Annual Meeting and
ending with the 1998 Annual Meeting, a person who is not also an employee
of the Company is elected or appointed a director other than at an Annual
Meeting, such person shall thereupon be granted a non-incentive stock
option to purchase 1,000 shares of the Common Stock of the Company.

(c) Each option granted to directors under this paragraph 7 shall be
exercisable at an exercise price equal to 100% of the fair market value of
the price of the Common Stock on the date of the grant, as determined in
accordance with the second sentence of paragraph 6(a) hereof.

(d) Each option granted to directors under this paragraph 7 shall be
exercisable on and after the first anniversary of the date of grant.

(e) Unless otherwise provided in the Plan, all provisions with
respect to the terms of non-incentive stock options hereunder shall be
applicable to stock options granted to directors.

(f) The automatic grants described in this paragraph 7 shall
constitute the only grants under the Plan permitted to be made to directors
who are not also employees of the Company.

8. Designation of Certain Options as Incentive Stock Options

Options or portions of options granted to employees hereunder may, in the
discretion of the Committee, be designated as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). In addition to the terms and conditions contained in paragraph 6
hereof, options designated as incentive stock options shall also be subject to
the condition that the aggregate fair market value (determined at the time the
options are granted) of the Company's Common Stock with respect to which
incentive stock options are exercisable for the first time by any individual
employee during any calendar year (under this Plan and all other similar plans
of the Company and its subsidiaries) shall not exceed $100,000.

<PAGE>

9. Loans to Optionees

The Company may make interest-free demand loans to holders of options which
are not designated or qualified hereunder or by the Code as "incentive stock
options" for the purpose of exercising such options and/or for the purpose of
enabling optionees to pay any tax liability associated with the exercise of any
such option. Such loans shall be fully secured by shares of Common Stock of the
Company and shall in any event be repayable upon the termination of the
optionee's employment or directorship with the Company for any reason. The
Committee shall establish written procedures concerning the application for and
making of such loans.

10. Investment Representation

Upon any distribution of shares of Common Stock of the Company pursuant to
any provision of this Plan, the distributee may be required to represent in
writing that he or she is acquiring such shares for his or her own account for
investment and not with a view to, or for sale in connection with, the
distribution of any part thereof. The certificates for such shares may include
any legend which the Company deems appropriate to reflect any restrictions on
transfers.

11. Transfer, Leave of Absence, Etc.

For the purpose of the Plan: (a) a transfer of an employee from the
Company to a subsidiary, or vice versa, or from one subsidiary to another, and
(b) a leave of absence, duly authorized in writing by the Company, shall not be
deemed a termination of employment.

12. Rights of Employees and Others

(a) No person shall have any rights or claims under the Plan except
in accordance with the provisions of the Plan.

(b) Nothing contained in the Plan shall be deemed to give any
employee the right to be retained in the service of the Company or its
subsidiaries.

13. Changes in Capital or Control

If the outstanding Common Stock of the Company subject to the Plan shall at
any time be changed or exchanged by declaration of a stock dividend, stock
split, combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number and kind of shares subject to this Plan and the option prices shall be
approximately and equitably adjusted so as to maintain the option price thereof.
Notwithstanding any other provision of the Plan, upon the occurrence of a Change
in Control, as hereinafter defined, each holder of an unexpired option under the
Plan shall have the right to exercise such option in whole or in part without
regard to the date that such option would be first exercisable, except that no
option may be exercised less than six months from the date of grant, and such
right shall continue, with respect to any such holder whose employment with the
Company or subsidiary or whose directorship on the Board of Directors terminates
following a Change in Control, for a period ending on the earlier of the date of
expiration of such option or the date which is twelve months after such
termination of employment or directorship.

For purposes of the Plan, a "Change in Control" of the Company shall be
deemed to have occurred if:

(a) any person, as such term is used in Sections 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended, becomes a
beneficial owner (within the meaning of Rule 13d-3 under such Act) of 20%
or more of the Company's outstanding Common Stock;

<PAGE>

(b) there occurs within any period of two consecutive years any
change in the directors of the Company such that the members of the
Company's Board of Directors prior to such change do not constitute a
majority of the directors after giving effect to all changes during such
two-year period unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors
at the beginning of the period; or

(c) the Company is merged, consolidated or reorganized into or with,
or sells all or substantially all of its assets to, another corporation or
other entity, and immediately after such transaction less than 80% of the
voting power of the then-outstanding securities of such corporation or
other entity immediately after such transaction is held in the aggregate by
holders of the Company's Common Stock immediately before such transaction.

In addition, if the Company enters into an agreement or series of agreements or
the Board of Directors of the Company adopts a resolution which results in the
occurrence of any of the foregoing events, and the employment or directorship of
a holder of an option under the Plan is terminated after the entering into of
such agreement or series of agreements or the adoption of such resolution, then,
upon the occurrence of any of the events described above, a Change in Control
shall be deemed to have retroactively occurred on the date of entering into of
the earliest of such agreements or the adoption of such resolution.

14. Use of Proceeds

Proceeds from the sale of shares pursuant to options granted under this
Plan shall constitute general funds of the Company.

15. Amendments

The Board of Directors may discontinue the Plan and the Committee may amend
the Plan from time to time, but no amendment, alteration or discontinuation
shall be made which, without the approval of the stockholders, would:

(a) Except as provided in paragraph 13 of the Plan, increase the total
number of shares reserved for the purposes of the Plan;

(b) Decrease the option price of an option to less than 100% of the fair
market value on the date of the granting of the option;

(d) Amend or modify paragraph 7 of the Plan.8

Neither shall any amendment, alteration or discontinuation impair the rights of
any holder of an option theretofore granted without the optionee's consent;
provided, however, that if the Committee after consulting with management of the
Company determines that application of an accounting standard in compliance with
any statement issued by the Financial Accounting Standards Board concerning the
treatment of employee stock options would have a significant adverse effect on
the Company's financial statements because of the fact that options granted
before the issuance of such statement are then outstanding, then the Committee
in its absolute discretion may cancel and revoke all outstanding options to
which such adverse effect is attributed and the holders of such options shall
have no further rights in respect thereof. Such cancellation and revocation
shall be effective upon written notice by the Committee to the holders of such
options.

<PAGE>

STOCK OPTION AGREEMENT
PURSUANT TO
FEDERAL EXPRESS CORPORATION
1993 STOCK INCENTIVE PLAN

A STOCK OPTION for a total of ________ shares of Common Stock, par value
$.10 per share, of Federal Express Corporation, a Delaware corporation (the
"Company"), is hereby granted to _____________________ (the "Optionee"), at the
price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the Company's 1993 Stock Incentive Plan (the
"Plan"), which is incorporated herein by reference.

1. OPTION PRICE. The option price is $________ for each share, being one
hundred percent (100%) of the fair market value, as determined by the Committee,
of the Common Stock on the date of grant of this Option.

2. EXERCISE OF OPTION. This Option shall be exercisable in accordance
with provisions of Section 6 of the Plan as follows:

(i) SCHEDULE OF RIGHTS TO EXERCISE. Twenty percent (20%) after one
year from the date of grant; forty percent (40%) after two years; sixty percent
(60%) after three years; eighty percent (80%) after four years; and one hundred
percent (100%) after five years.

(ii) METHOD OF EXERCISE. This Option shall be exercisable by a
written notice which shall:

(a) state the election to exercise the Option, the number of shares
in respect of which it is being exercised, the person in whose name the
stock certificate or certificates for such shares of Common Stock is to be
registered and the address and Social Security Number of such person (or if
more than one, the names, addresses and Social Security Numbers of such
persons);

(b) contain such representations and agreements as to the holder's
investment intent with respect to such shares of Common Stock as may be
satisfactory to the Company's counsel;

(c) be signed by the person or persons entitled to exercise the
Option and, if the Option is being exercised by any person or persons other
than the Optionee, be accompanied by proof, satisfactory to counsel for the
Company, of the right of such person or persons to exercise the Option; and

(d) be in writing and delivered in person or by first class or
interdepartmental mail to the President of the Company or his designee.

Payment of the purchase price of any shares with respect to which the Option is
being exercised shall be by certified or bank cashier's check.

(iii) RESTRICTIONS ON EXERCISE. This Option may not be exercised if
the issuance of the shares upon such exercise would constitute a violation of
any applicable federal or state securities or other law or regulation. As a
condition to the exercise of this Option, the Company may require the person
exercising this Option to make any representation and warranty to the Company as
may be required by any applicable law or regulation.

3. DESIGNATION OF CERTAIN OPTION SHARES AS INCENTIVE STOCK OPTIONS. The
maximum number of option shares granted hereunder are (as permitted by Section 7
of the Plan) hereby designated incentive stock options, as that term is defined
in Section 422(b) of the Internal Revenue Code (the "ISO Shares").

<PAGE>

Pursuant to the exercise schedule as provided in Section 2(i) of this Agreement,
the number of ISO Shares and non-qualified option shares ("NQO Shares")
exercisable on and after the anniversaries described in such Section 2(i) shall
be as set forth in the table below; provided, however, that if pursuant to any
provision of the Plan or amendment to this Agreement any of the option shares
hereby granted become exercisable sooner than as provided in Section 2(i)
hereof, then the number of option shares that may be ISO Shares shall,
notwithstanding the table below, be limited to the quotient obtained by with
respect to any calendar year during which they are first exercisable shall,
notwithstanding the table below, be limited to the quotient obtained by dividing
$100,000 by the option price set forth in Section 1 hereof.

Anniversary of
Grant Date ISO Shares NQO Shares
-------------- ---------- ----------

(i) NOTICE TO COMPANY OF DISPOSITION OF ISO SHARES. Optionee agrees
that, in the event the Optionee disposes of any of the ISO Shares within one
year after the date of exercise of the option to purchase same, the Optionee
will promptly notify the Company of such disposition. Such notice shall be in
writing and shall specify (i) the number of ISO Shares so disposed of, (ii) the
price paid for such shares by the Optionee upon the exercise of the option, and
(iii) the price or other consideration received for such shares. All
certificates for Common Stock issued upon the exercise of an option to purchase
ISO Shares shall bear such legend or other distinctive impression, as determined
by the Committee, as will notify the transfer agent of such stock to advise the
Company of the disposition of ISO Shares within one year after the issuance
thereof.

4. TRANSFERABILITY OF OPTION. This Option may not be transferred in any
manner otherwise than by will or the laws of descent or distribution and may be
exercised during the lifetime of the Optionee only by the Optionee. The terms
of this Option shall be binding upon the heirs, personal representatives and
successors of the Optionee.

5. TERM OF OPTION. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, as set forth below, and may be
exercised during such term only in accordance with the Plan and the terms of
this Option.

6. OPTIONEE ACKNOWLEDGMENT. Optionee acknowledges receipt of a copy of
the Plan, which is annexed hereto, and represents that such Optionee is familiar
with the terms and provisions thereof, and hereby accepts this Option subject to
all the terms and provisions thereof. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Committee
upon any questions arising under the Plan or this Option.

Date of Grant: ___________________.

FEDERAL EXPRESS CORPORATION

By:________________________
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER

___________________________
OPTIONEE

<PAGE>

EXHIBIT 10.63

<PAGE>

AMENDMENT TO FEDERAL EXPRESS CORPORATION
1983, 1984, 1987, 1989 AND 1993 STOCK INCENTIVE PLANS

Paragraph 12 of the Company's 1983, 1984 and 1987 Stock
Incentive Plans, as amended, are amended by adding the following
phrase to the first sentence of each such paragraph after the
words "first exercisable" and before the words "and such right"
in the sixth line of each such paragraph:

, except that no option may be exercised
less than six months from the date of
grant,

Paragraph 13 of the Company's 1989 Stock Incentive Plan, as
amended, is amended by adding the following phrase to the first
sentence of such paragraph after the words "first exercisable"
and before the words "and such right" in the sixth line of such
paragraph:

, except that no option may be exercised
less than six months from the date of
grant,

Paragraph 15 of the Company's 1989 and 1993 Stock Incentive
Plans, as amended, are amended by adding to each such paragraph
the following sentence after subparagraph (d) of such paragraph:

Notwithstanding subparagraph (d) above,
paragraph 7 shall not be amended more than
once every six months, other than to comply
with changes in the tax laws.

Adopted by the Compensation Committee of the Board of Directors
of the Company on July 18, 1994.

<PAGE>

FIRST AMENDMENT TO
FEDERAL EXPRESS CORPORATION
CREDIT AGREEMENT

This First Amendment (this "Amendment") is entered into as of December 1,
1993 by and among FEDERAL EXPRESS CORPORATION (the "Borrower"), the Lenders
party to the Agreement (as hereinafter defined), and THE FIRST NATIONAL BANK OF
CHICAGO as agent (in such capacity the "Agent"). The parties hereto agree as
follows:

WHEREAS, the Borrower, the Lenders, and the Agent are parties to that
certain Credit Agreement dated as of May 7, 1993 (the "Agreement"); and

WHEREAS, the Borrower has requested certain amendments of the Agreement and
the Lenders and the Agent have agreed to the requested amendments upon the
conditions set forth in this Amendment;

NOW, THEREFORE, the parties hereto hereby agree as follows:

1. DEFINED TERMS. Capitalized terms used and not otherwise defined in
this Amendment shall have the meanings attributed to them in the Agreement.

2. AMENDMENT OF AGREEMENT. The Agreement is hereby amended as follows:

(a) The following definition is inserted in Article I (Definitions)
in the appropriate alphabetical position:

"'Dealer' means a Lender, First Tennessee Bank, N.A., Union
Planters National Bank of Memphis or any other national or state bank
or trust company or dealer or broker of government securities having
either (A) capital, surplus and undivided profits or (B) total equity
of at least $250,000,000, or any affiliate thereof authorized to deal
in the commercial products described in clauses (i), (ii), and (iii)
of Section 6.17(e)."

(b) Section 6.1(ii) is deleted in its entirety and the following is
inserted in lieu thereof:

"(ii) Within 45 calendar days after the end of each of the
first three quarters of each fiscal year of the
Borrower, for itself and the Consolidated Subsidiaries,
consolidated unaudited balance sheets as at the close
of each such period and consolidated profit and loss
and reconciliation of surplus statements and a
statement of cash flows for the period from the
beginning of such fiscal year to the end of such
quarter, all certified as complete and accurate and
prepared in accordance with GAAP by its Financial
Officer, Treasurer or Controller.

"(e) For a period not in excess of one year, (i) marketable
direct obligations of the United States of America, or an
instrumentality or agency thereof, or (ii) instruments fully
supported by marketable direct obligations of the United States
of America, or an instrumentality or agency thereof, or (iii)
open market commercial paper maturing within one year after
acquisition of such commercial paper, which is rated A1 or better
by S&P or P1 or better by Moody's; in each case, purchased by the
Borrower or a Consolidated Subsidiary and actually

Page 1

<PAGE>

delivered to or held by a Dealer for the account of the Borrower
or a Consolidated Subsidiary under a repurchase agreement with
the Dealer from which such obligations or commercial paper was
purchased obligating such Dealer to repurchase such obligations
or commercial paper within fourteen calendar days after the date
of such repurchase agreement,"

3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby confirms,
reaffirms and restates the representations and warranties set forth in Article V
of the Agreement as of the Effective Date (as defined in Section 4 of this
Amendment) as though such representations and warranties were fully set forth
herein. A Default under and as defined in the Agreement as amended by this
Amendment shall be deemed to have occurred if any representation or warranty
made pursuant to the preceding sentence shall be materially false on the date as
of which it was made.

4. EFFECTIVE DATE. This Amendment shall become effective as of the date
first written above (the "Effective Date") upon receipt by the Agent of
counterparts of this Amendment duly executed by the Borrower, the Agent and the
Required Lenders.

5. RATIFICATION. Except as amended hereby, the Agreement shall remain in
full force and effect and is hereby ratified, approved, and confirmed in all
respects. Upon the effectiveness of this Amendment, all references in the
Agreement to "this Agreement" (and all indirect references such as "hereby,"
"herein," "hereof" and "hereunder") shall be deemed to be references to the
Agreement as amended by this Amendment.

6. COUNTERPARTS. This Amendment may be executed in separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument.

7. ENTIRE AGREEMENT. This Agreement, the Agreement as amended hereby,
and the other Loan Documents embody the entire agreement and understanding among
the Borrower, the Agent and the Lenders and supersede any and all prior
agreements and understandings among the Borrower, the Agent and the Lenders
relating to the subject matter thereof.

8. GOVERNING LAW. This Amendment and the rights and obligations of the
parties hereto shall be construed in accordance with and governed by the laws of
the State of Illinois (without giving effect to any conflicts of law provisions
contained therein).

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed as of the date first written above.

FEDERAL EXPRESS CORPORATION

By /s/ Charles M. Buchas, Jr.
-------------------------------------
Charles M. Buchas, Jr.
Vice President and Treasurer

THE FIRST NATIONAL BANK OF CHICAGO
individually and as Agent

By /s/ William S. Lear
-------------------------------------
William S. Lear
Senior Vice President

Page 2

<PAGE>

BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION

By
-------------------------------------
Name
-----------------------------------
Title
----------------------------------

BANK OF HAWAII

By
-------------------------------------
Name
-----------------------------------
Title
----------------------------------

Page 3

<PAGE>

EXHIBIT 11.1

FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE

Net income (loss) applicable to common and common equivalent shares and the
weighted average number of shares used in the calculation of earnings (loss) per
share for the years ended May 31 were as follows (in thousands, except earnings
per share amounts):

YEAR ENDED MAY 31
----------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Income (loss) before cumulative effect
of change in accounting principle . . . . . . . . . . . $204,370 $ 109,809 $(113,782)

Cumulative effect of change in accounting for
postretirement benefits, net of tax benefit . . . . . . - (55,943) -
-------- --------- ---------

Net income (loss) applicable to common and
common equivalent shares. . . . . . . . . . . . . . . . $204,370 $ 53,866 $(113,782)
-------- --------- ---------
-------- --------- ---------

Average shares of common stock outstanding . . . . . . . 55,333 54,370 53,770

Common Equivalent Shares:
Assumed exercise of outstanding
dilutive options . . . . . . . . . . . . . . . . . . . 2,867 2,213 1,831

Less shares repurchased from proceeds of
assumed exercise of options. . . . . . . . . . . . . . (2,188) (1,864) (1,640)
-------- --------- ---------

Average common and common equivalent shares . . . . . . 56,012 54,719 53,961
-------- --------- ---------
-------- --------- ---------

Earnings (loss) per share:
Before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . $ 3.65 $ 2.01 $ (2.11)

Cumulative effect of change in accounting for
postretirement benefits. . . . . . . . . . . . . . . . - (1.03) -
-------- --------- ---------

Net earnings (loss) per share. . . . . . . . . . . . . . $ 3.65 $ .98 $ (2.11)
-------- --------- ---------
-------- --------- ---------
</TABLE>

- - The computation of the number of shares repurchased from the proceeds of
the assumed exercise of outstanding dilutive options is based upon the
average market price of the Company's Common Stock during the periods.
Common equivalent shares are excluded in periods in which their assumed
exercise would have an anti-dilutive effect.

- - Fully diluted earnings per share are substantially the same as earnings per
share for the years ended May 31, 1994, 1993 and 1992.

<PAGE>

EXHIBIT 12.1

FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)

Year Ended May 31,
--------------------------------------------------------------------------
1990 1991 1992 1993 1994
------------- ------------ ------------ ------------- ------------
(In thousands, except ratios)
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before
income taxes . . . . . . . . . . . $218,423 $ 40,942 $(146,828) $203,576 $378,462
Add back: Interest expense, net of
capitalized interest . . . 199,237 196,982 176,321 168,762 152,170
Amortization of debt
issuance costs . . . . . . 2,989 1,634 2,570 4,906 2,860
Portion of rent expense
representative of
interest factor. . . . . . 248,830 292,840 299,012 262,724 285,261
-------- -------- -------- -------- --------

Earnings as adjusted. . . . . . . . . . $669,479 $532,398 $ 331,075 $639,968 $818,753
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------

Fixed Charges:
Interest expense, net of
capitalized interest . . . . . . . $199,237 $196,982 $176,321 $168,762 $152,170
Capitalized interest. . . . . . . . . . 16,986 35,442 26,603 31,256 29,738
Amortization of debt issuance
costs. . . . . . . . . . . . . . . 2,989 1,634 2,570 4,906 2,860
Portion of rent expense
representative of
interest factor. . . . . . . . . . 248,830 292,840 299,012 262,724 285,261
-------- -------- -------- -------- --------

$468,042 $526,898 $504,506 $467,648 $470,029
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

Ratio of Earnings to Fixed Charges. . . 1.4 1.0 (A) 1.4 1.7
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

<FN>

(A) Earnings were inadequate to cover fixed charges by $173.4 million for the year ended May 31, 1992.

</TABLE>

<PAGE>

Financial Highlights Federal Express Corporation and Subsidiaries

Years ended May 31
- -------------------------------------------------------------------------------------------------------------------
In thousands, except per share amounts and Other Operating Data 1994 1993 % Change
<S> <C> <C> <C>
OPERATING RESULTS
Revenues $8,479,456 $7,808,043 + 9
Operating income 530,632 377,173 + 41
Income before income taxes 378,462 203,576 + 86
Income before cumulative effect of
change in accounting principle 204,370 109,809 + 86
Net income 204,370 53,866 +279

Earnings per share:
Before cumulative effect of change
in accounting principle 3.65 2.01 + 82
Earnings per share $ 3.65 $ .98 +272
Average shares outstanding 56,012 54,719 + 2

FINANCIAL POSITION

Property and equipment, net $3,449,093 $3,476,268 - 1
Total assets 5,992,498 5,793,064 + 3
Long-term debt 1,632,202 1,882,279 - 13
Common stockholders' investment 1,924,705 1,671,381 + 15

OTHER OPERATING DATA*

Express package:
Average daily package volume 1,925,105 1,710,561 + 13
Average pounds per package 6.0 5.8 + 3
Average revenue per pound $ 2.48 $ 2.60 - 5
Average revenue per package $ 14.95 $ 15.17 - 2

Airfreight:
Average daily pounds 1,844,270 2,050,033 - 10
Average revenue per pound $ 1.06 $ 1.09 - 3

Operating weekdays 257 255

Aircraft fleet 458 461

Vehicle fleet 30,900 28,100

Average number of employees (based on a
standard full-time workweek) 88,502 84,104
- -------------------------------------------------------------------------------------------------------------------

<FN>

* Beginning in 1994, U.S. domestic express airfreight is reported as package volume in express package operating data
rather than as pounds in airfreight operating data. Data for 1993 has been restated to conform to this presentation.

</TABLE>

<PAGE>

Financial Section

26 MANAGEMENT'S DISCUSSION AND ANALYSIS

33 CONSOLIDATED STATEMENTS OF OPERATIONS

34 CONSOLIDATED BALANCE SHEETS

36 CONSOLIDATED STATEMENTS OF CASH FLOWS

37 CONSOLIDATED STATEMENTS OF CHANGES IN
COMMON STOCKHOLDERS' INVESTMENT

38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

51 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

52 SELECTED CONSOLIDATED FINANCIAL DATA

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

In 1994, the Company recorded the highest annual net income and earnings per
share in its history. These results, which are significantly better than the
prior three years, are largely due to improvements in the Company's
international operations. During 1991 to 1993, management introduced key
initiatives which reduced the size and scope of the Company's international
operations. These initiatives, along with growth in the Company's
intercontinental express business, have produced consistently lower
international losses since 1992.

The Company's U.S. domestic operations, in comparison, have been pressured
by increased competition and unfavorable economic conditions. These factors
combined with declines in average revenue per package (yield), which has
declined faster than the cost per package, have reduced U.S. domestic operating
profits and margins since 1991.

Consolidated net income for 1994 was $204 million ($3.65 per share)
compared with net income of $54 million ($.98 per share) in 1993 and a net loss
of $114 million ($2.11 per share) in 1992. The following factors affecting
comparability should be considered when reviewing these results.

In 1993, the Company adopted Statement of Financial Accounting Standards
No. 106, "Accounting for Postretirement Benefits Other Than Pensions." The
adoption of this standard resulted in a cumulative after-tax charge of $56
million ($1.03 per share) and increased 1993 operating expense by $15 million
($.16 per share after tax).

Earnings for 1992 included pre-tax charges of $254 million ($3.12 per share
after tax) related to a restructuring of operations in Europe and the United
Kingdom. This restructuring eliminated certain intra-European and intra-country
services that were incompatible with the Company's express business and
substantially reduced the costs associated with serving certain European
markets.

A comparison of consolidated results, excluding the effects of the
cumulative charge related to the 1993 adoption of SFAS No. 106 and the
restructuring charge in 1992, is presented below:

Years ended May 31
- ------------------------------------------------------------------
In millions, except per share data 1994 1993 1992
<S> <C> <C> <C>
Revenues $8,479 $7,808 $7,550
Operating income 531 377 277
Pre-tax income 378 204 107
Net income 204 110 55
Earnings per share $ 3.65 $ 2.01 $ 1.01

</TABLE>

Revenue growth for 1992 to 1994 is primarily the result of increased U.S.
domestic revenues associated with double-digit express package volume growth and
year-over-year increases in the Company's intercontinental express business
partially offset by declining international airfreight revenues.

<PAGE>

Federal Express Corporation and Subsidiaries

Total operating expenses increased 7.0% in 1994 compared with 1993 and
declined 1.3% in 1993 compared with 1992. The table below shows a comparison of
operating expenses for 1992 to 1994:

Years ended May 31
- ------------------------------------------------------------------------------------------
Dollars in millions 1994 1993 1992 1993 to 1994 1992 to 1993
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits $4,105 $3,808 $3,637 + 7.8% + 4.7%
Rentals and landing fees 703 658 672 + 6.8 - 2.1
Depreciation and amortization 599 580 577 + 3.3 + 0.5
Fuel 473 495 509 - 4.4 - 2.8
Maintenance and repairs 465 405 404 + 14.8 + 0.2
Restructuring charge -- (13) 254 -- --
Other 1,604 1,498 1,474 + 7.1 + 1.6
--------------------------
$7,949 $7,431 $7,527 + 7.0 - 1.3
--------------------------
--------------------------
</TABLE>

Salaries and employee benefits for 1992 to 1994 have increased primarily
due to increased employee headcount associated with growing U.S. domestic
volumes. Improved productivity, however, has resulted in lower salaries and
benefits on a per package basis. A portion of the 7.8% increase in 1994 is
attributable to provisions under the Company's performance-based incentive
compensation plans which are related to overall profitability. The 4.7% increase
in 1993, in addition to increased employee headcount, was due to postretirement
health care provisions under SFAS No. 106, rising workers' compensation claims
and health care costs.

In 1994, the Company experienced significant decreases in its workers'
compensation expense and only modest increases in its group health care expense.
These results are primarily attributable to favorable claims experience in both
the group health care and workers' compensation plans and actions by management
to establish managed health care and safety programs.

The 6.8% increase in rentals and landing fees in 1994 is primarily due to
rentals for additional leased MD-11 aircraft. Rentals and landing fees decreased
in 1993 because of lower landing fees and a reduced need for leased aircraft
associated with restructured operations in Europe. It is expected that rent
expense will increase in 1995 because of Airbus A300 and A310 aircraft leases.

Fuel expense for 1992 to 1994 has declined primarily because of lower
average aircraft fuel prices (6.9% and 1.0% declines in 1994 and 1993,
respectively) and reduced aircraft fuel consumption (1.4% and 1.0% declines in
1994 and 1993, respectively) attributable to the utilization of more
fuel-efficient aircraft. In prior years, fuel expense has been greatly impacted
by widely fluctuating per-gallon costs of aircraft fuel. Management takes steps
to mitigate significant price fluctuations by entering into fuel price
agreements for some of the Company's fuel. These agreements confine the fuel
price per gallon within a close range of the current market price. Under the
Omnibus Budget Reconciliation Act of 1993, a 4.3 cents per gallon increase in
the excise tax on aviation fuel will become effective beginning in October 1995.
For 1994 consumption levels, this increase in excise tax would have increased
the Company's annual aircraft fuel expense by approximately $24 million.

Maintenance and repairs expense increased 14.8% in 1994 primarily because
of DC-10 and MD-11 engine maintenance. Scheduled aircraft maintenance generally
follows a predictable pattern over the life of the aircraft. Year-over-year
variations in maintenance and repairs expense occur because of a combination of
factors: timing of aircraft deliveries, condition of the aircraft at delivery,
utilization, and specifics of an aircraft's maintenance program. Certain
combinations of these factors can condense scheduled maintenance into cyclical
peaks. In 1994, such a cyclical peak related to DC-10 engines resulted in
greater maintenance and repairs expense. Also in 1994, maintenance and repairs
expense increased because of the expansion of the MD-11 fleet

<PAGE>

from eight to thirteen aircraft and the beginning of scheduled maintenance
related to the initial MD-11 aircraft acquired. Maintenance and repairs expense,
in addition to scheduled maintenance, is impacted by periodic maintenance
directives issued by regulatory agencies. The Company is currently evaluating
the impact of regulatory maintenance directives as they relate to B727 and MD-11
aircraft engines. It is anticipated that the requirements of these maintenance
directives along with the continued expansion and maturation of the Company's
fleet will result in increased maintenance and repairs expense in 1995 and
beyond.

OTHER INCOME AND EXPENSE AND INCOME TAXES
Net interest expense declined $19 million in 1994. This decline is primarily due
to lower debt levels and reduced interest rates on borrowings. A decline of $3
million in 1993 is principally the result of lower interest rates on borrowings.

The increase in Other, net for 1993 was primarily due to a write-off of
deferred financing costs and the call premium from a refunding of approximately
$96 million of Memphis-Shelby County Airport Authority Special Facilities
Revenue Bonds and a write-off of deferred financing costs related to an early
redemption of $100 million of 10 5/8% Senior Notes.

The Company's effective tax rate for 1994 was 46.0% compared with rates of
46.1% and 48.9% for 1993 and 1992, respectively, excluding the effect of the
restructuring charge for 1992. In each year, the effective tax rate exceeded the
statutory U.S. federal tax rate primarily because of state income taxes and the
impact of foreign operations.

U.S. DOMESTIC SERVICES
Operating results and selected express package statistics for U.S. domestic
services were as follows:

Years ended May 31
- -------------------------------------------------------------------------------
Dollars in millions, except yields 1994 1993 1992
<S> <C> <C> <C>
Revenues $6,200 $5,668 $5,195
Operating income 560 559 636
Operating margin 9.0% 9.9% 12.2%
Express package statistics:
Average daily packages (000's) 1,792 1,596 1,364
Revenue per package $13.20 $13.52 $14.56
Package mix:
Priority Overnight 49% 51% 55%
Economy Two-Day 26% 24% 21%
Standard Overnight 25% 25% 24%
Operating weekdays 257 255 254

</TABLE>

The Company's U.S. domestic results for 1992 to 1994 have been influenced
by a market in which customers have demanded high quality express delivery
services at lower prices. Furthermore, in the U.S. domestic express market,
customers can select from a number of express delivery providers. These two
factors have combined to create a very price-sensitive U.S. domestic express
market.

<PAGE>

Federal Express Corporation and Subsidiaries

Management's response to these economic and competitive conditions was to
increase the level of discounting and to offer new, lower-priced deferred
services. These actions resulted in lower revenues per package and faster growth
in lower-priced, deferred services compared with premium-priced priority
services. At the same time, productivity measures continued to reduce cost per
package. These actions have resulted in consistently greater volumes and
revenues but lower operating profits because declines in yield have exceeded
declines in cost per package. This trend is expected to continue in 1995.

Revenues increased 9% in 1994 and 1993 while operating expenses, though
declining on a per package basis, increased 10% and 12% over these same periods.
Operating income remained essentially flat in 1994 and fell 12% in 1993. In
1994, the Company's operations were affected by severe weather during the winter
months in the eastern United States, an earthquake in Southern California and
less than anticipated package volumes from holiday operations during the last
week of December. Furthermore, the Company's B747 aircraft were transferred from
international to U.S. domestic operations beginning in March 1993 in conjunction
with flight schedule adjustments and aircraft capacity reduction on certain
international routes. The B747 aircraft are not as efficient on U.S. domestic
routes as B727 or DC-10 aircraft. Despite the additional costs associated with
the above, the Company was able to continue to reduce the decline in U.S.
domestic operating margins.

The Company is working to improve its current level of U.S. domestic
profitability by seeking further means to lower costs, managing the decline in
yield, and cultivating close working relationships with its customers.

To lower average transaction costs, the Company will replace certain of its
older aircraft with Airbus A300 and A310 aircraft. Despite higher ownership
costs, these aircraft are expected to produce immediate benefits with relatively
lower fuel, maintenance and crew costs. The most significant benefit of using
these aircraft will ultimately be realized on routes where more than one B727
aircraft can be replaced with a single A300 or A310 aircraft and where
incremental volume can be absorbed without additional aircraft.

The Company is also reducing handling expenses through automation of its
major processes that support package pick-up, delivery, sorting and
transportation operations. As part of the process of reducing costs by
optimizing the Company's air and ground distribution system, management has
attempted through legislative and judicial avenues to eliminate intrastate
transportation regulations which, in certain jurisdictions, restrict the use of
ground transportation. Though some success has been achieved, significant
regulatory barriers still exist that prevent the maximum use of the Company's
lower-cost ground transportation network.

On a year-over-year basis beginning in the second half of 1993, the Company
has been able to slow the rate of yield declines for its higher-yielding
priority services. This is attributable to programs intended to moderate the
level of discounting, to promote heavier weights per package and to attract
lower-volume but higher-yielding customers. It is expected that yield will
continue to fall primarily due to faster growth in deferred services compared
with priority services and selective discounting.

Management recognizes the importance of enhancing effective working
relationships with its customers, especially in the highly competitive market in
which the Company operates. Accordingly, plans are under way to increase the
number of convenience locations, implement direct aircraft service to new
locations, develop alliances with retail businesses and increase the placement
of customer automation devices. In addition, the Company plans to intensify its
sales and marketing efforts by increasing its advertising expenditures, adding
sales personnel, and targeting selected customer groups for special marketing
promotions.

<PAGE>

Management's Discussion and Analysis

INTERNATIONAL SERVICES
Operating results and selected express and airfreight statistics for
international operations, excluding a restructuring charge of $254 million in
1992, were as follows:

Years ended May 31
- --------------------------------------------------------------------------------
Dollars in millions, except yields 1994 1993 1992
<S> <C> <C> <C>
Revenues:
International Priority Services (IP) $1,318 $1,117 $1,039
International EXPRESSfreight (IXF)
and Airport-to-Airport (ATA)
airfreight services 505 570 700
Charter 113 112 188
International FedEx Logistics
Services and other 344 341 428
------------------------------
2,280 2,140 2,355
Operating loss $ (29) $ (182) $ (359)
Operating margin (1.3)% (8.5)% (15.2)%
Express and airfreight statistics:
Average daily IP packages (000's) 133 115 108
Revenue per package $38.60 $38.18 $37.54
Average daily airfreight pounds (000's) 1,844 2,050 2,258
Revenue per pound $ 1.06 $ 1.09 $ 1.22
Operating weekdays 257 255 254

</TABLE>

During 1991 to 1994, the Company took actions which have dramatically
reduced losses from international operations during the last two years. In 1991,
the EXPRESSfreighter system was introduced which gave the Company competitive
advantages for its premium international express package service (IP) from key
Asian and European countries. In 1992, the Company restructured its European
operations by discontinuing certain intra-region and intra-country services in
Europe and the United Kingdom. In 1993, the Company adjusted its flight
schedules to reduce flight hours, reduced its aircraft capacity on certain
international routes through equipment changes and eliminated certain airfreight
terminal operations. In 1994, these actions along with year-over-year growth in
IP revenue, volumes and yields have combined to substantially reduce
international losses and, in the second and fourth quarters, produce operating
profits.

The international operating loss, excluding a restructuring charge in 1992,
declined 84% and 49% in 1994 and 1993, respectively. Revenues increased 7% in
1994 compared with 1993 and decreased 9% in 1993 compared with 1992 while
operating expenses, excluding the restructuring charge, declined 1% and 14% in
1994 and 1993, respectively.

IP revenues increased 18% and 8% in 1994 and 1993, respectively, while
volumes increased 16% and 6% for these same periods. Excluding certain
intra-European services that were discontinued in 1992, IP revenue and volume
growth in 1993 would have been approximately 17% and 15%, respectively. IP
yields increased 1% and 2% in 1994 and 1993, respectively. Competitive service
advantages, increased penetration of global businesses and aggressive sales and
marketing promotions are largely responsible for IP revenue and volume growth.
Yields, especially in the Far East, were bolstered by an increasing proportion
of packages to documents and selected pricing actions.

<PAGE>

Federal Express Corporation and Subsidiaries

Airfreight revenues (ATA and IXF) decreased 11% and 19% in 1994 and 1993,
respectively. These decreases reflect declines in volumes (10% and 9% in 1994
and 1993, respectively) and declines in yields (3% and 11%, respectively).

The Company's ATA service operates in a very competitive and
price-sensitive market with a large number of participants offering relatively
similar services. Consequently, ATA prices, in large part, are determined by
market conditions. The Company's IXF service is an alternative to ATA which
features space confirmation and time-definite delivery for its higher price. The
space-confirmed aspect of IXF creates advantages particularly during seasons of
peak volume and for customers who ship to or from U.S. locations without direct
international air service. During 1994, IXF prices were lowered relative to ATA.
As a result, there was greater growth in IXF than ATA which resulted in a larger
percentage of IXF revenue to total airfreight revenue than in 1993. This change
in airfreight mix had the effect of stabilizing airfreight yields which helped
improve the Company's overall international results.

Charter revenues remained flat in 1994 and decreased 40% in 1993. The
decrease in 1993 is the result of the Company discontinuing its passenger
charter service with the U.S. Military Airlift Command and a comparatively
higher level of military charters during 1992's first quarter related to
Operation Desert Storm.

Sustained improvement in the Company's international operations is
dependent on continued growth in IP, the Company's ability to manage incremental
costs associated with that growth and system efficiencies. To promote IP growth,
aggressive sales and marketing efforts will target time-sensitive industries to
capture new business. Also, as economic conditions improve in certain global
markets, the Company's distribution network will be positioned to benefit from
increased volumes associated with the respective recoveries. To contain costs,
management will monitor customer demand patterns and make changes to its
distribution network to make optimum use of company resources. Furthermore,
through technological advances that aid in the sorting, routing and delivery of
packages, the Company has the ability to add incremental volume without adding a
corresponding amount of incremental cost.
- -------------------------------------------------------------------------------

FINANCIAL CONDITION

CAPITAL EXPENDITURES AND RESOURCES
The Company's operations are capital intensive, characterized by significant
investments in aircraft, package handling facilities, sort equipment, vehicles,
and computer and telecommunication equipment. The amount and timing of capital
additions are dependent on various factors including volume growth, new or
enhanced services, geographical expansion of services, competition and
availability of satisfactory financing.

Capital expenditures for 1994 totaled $1.1 billion and included five MD-11
aircraft (all of which, together with a sixth aircraft acquired in 1993, were
subsequently sold and leased back), three B727-200 aircraft, deposits on future
Airbus A300 aircraft, vehicle and ground support equipment, and customer
automation and computer equipment. In comparison, prior year expenditures
totaled $1.0 billion and included four MD-11 aircraft, nineteen B727-200
aircraft, deposits on MD-11 and Airbus A300 aircraft, aircraft equipment,
facilities expansion, sort equipment, vehicle fleet additions and computer and
customer automation equipment.

At May 31, 1994, the Company had commitments aggregating approximately $1.6
billion, net of deposits and progress payments of $307 million, for the
acquisition of 23 Airbus A300 aircraft (scheduled for delivery through 1999),
aircraft modifications and related parts and the development and upgrade of
aircraft simulators. An estimated $551 million will be expended in 1995, $420
million in 1996, $242 million in 1997, $298 million in 1998 and $61 million
thereafter, in connection with these commitments. At May 31, 1994, the Company
also had options for up to 46 additional Airbus A300 aircraft for delivery
beginning in 1997. In addition, the Company has other commitments related to
facility and other equipment acquisitions that

<PAGE>

Managements' Discussion and Analysis

approximated $321 million at May 31, 1994, of which an estimated $262 million
will be expended in 1995, $16 million in 1996, $6 million in 1997, $21 million
in 1998 and $16 million thereafter.

The Company has historically financed its capital investments through the
use of lease, debt and equity financing in addition to the use of internally
generated cash from operations. Management's practice in recent years with
respect to funding new aircraft acquisitions has been to finance such aircraft
through long-term lease transactions that qualify as off balance sheet operating
leases under applicable accounting rules. Management has determined that these
operating leases provide economic benefits favorable to ownership with respect
to residual value risk, liquidity and after-tax cash flows. The Company has been
successful in obtaining investment capital, both U.S. domestic and
international, for long-term leases on terms acceptable to it although the
marketplace for such capital can become restricted depending on a variety of
economic factors beyond the control of the Company. Refer to Note 3 of Notes to
Consolidated Financial Statements for additional information concerning the
Company's debt and credit facilities.

Management believes that the capital resources available to the Company,
including backstop financing for the 23 Airbus A300 aircraft the Company is
committed to purchase in 1995 to 1999, $100 million of unsecured notes available
under a shelf registration filed with the Securities and Exchange Commission in
June 1992 and the ability to draw upon the public and private debt markets for
leveraged lease financing, provide the Company with the appropriate flexibility
to gain access to the most efficient market with respect to any particular
aircraft acquisition and afford adequate capital resources for its future
capital needs.

LIQUIDITY AND FINANCIAL POSITION
Cash and cash equivalents totaled $393 million, an increase of $237 million
during 1994 compared with an increase of $77 million in 1993 and a decrease of
$40 million in 1992. Cash provided from operations during 1994 was $767 million
compared with $725 million in 1993 and $521 million in 1992. Cash from
operations was significantly lower in 1992 because of substantially higher
losses in international operations and a settlement of a contractual commitment
with a major customer in connection with a discontinuance of certain services in
the United Kingdom in 1991. The Company currently has available a $1 billion
revolving bank credit facility that is generally used to finance temporary
operating cash requirements and to provide support for the issuance of
commercial paper.

At May 31, 1993, the Company had negative working capital of $10 million.
Management does not view negative working capital as an indication of lack of
liquidity for either short-term or long-term purposes. Due to the highly
capital-intensive nature of its business, the Company generally reinvests
earnings to meet its capital requirements rather than accumulate cash and
short-term investments. Furthermore, receivables are of high quality and turn
over more frequently than the Company's short-term obligations. At May 31, 1994,
the Company had receivables net of allowances of $1,021 million, an increase of
$98 million in 1994. This 11% increase, though slightly more than the 9%
increase in U.S. domestic express revenue in the year, is primarily a result of
the increase in revenue rather than a deterioration in the quality or aging of
the receivables. The Company has readily available sources of funds from its
revolving credit facility and its commercial paper program sufficient to manage
its day-to-day cash requirements.

Effective June 1, 1992, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," which did not have a significant effect on its financial position
or results of operations. At May 31, 1994, the Company had a net cumulative
deferred tax asset of $109 million consisting of $454 million of deferred tax
assets (including $56 million of alternative minimum tax credit carryovers which
have no expiration date) and $345 million of deferred tax liabilities. The
reversals of deferred tax liabilities in future periods will offset similar
amounts of deferred tax assets. Based upon historical levels of taxable income,
the Company believes that it is more likely than not that sufficient levels of
future taxable income will be generated to realize the remaining deferred tax
asset.

<PAGE>

Consolidated Statements of Operations
Federal Express Corporation and Subsidiaries

Years ended May 31
- -----------------------------------------------------------------------------------------------
In thousands, except per share amounts 1994 1993 1992
<S> <C> <C> <C>
REVENUES $8,479,456 $7,808,043 $7,550,060
-----------------------------------------
OPERATING EXPENSES:

Salaries and employee benefits (Notes 8 and 9) 4,104,800 3,807,493 3,637,080
Rentals and landing fees (Note 4) 703,028 658,138 672,341
Depreciation and amortization 599,357 579,896 577,157
Fuel 472,786 495,384 508,386
Maintenance and repairs 464,557 404,639 404,311
Restructuring charge (Note 13) -- (12,500) 254,000
Other 1,604,296 1,497,820 1,473,818
-----------------------------------------
7,948,824 7,430,870 7,527,093
-----------------------------------------
OPERATING INCOME 530,632 377,173 22,967
-----------------------------------------
OTHER INCOME (EXPENSE):

Interest, net (Note 1) (142,392) (160,923) (164,315)
Other, net (9,778) (12,674) (5,480)
-----------------------------------------
(152,170) (173,597) (169,795)
INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 378,462 203,576 (146,828)

PROVISION (CREDIT) FOR INCOME TAXES
(NOTE 7) 174,092 93,767 (33,046)
-----------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 204,370 109,809 (113,782)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX
BENEFIT OF $34,287 (NOTE 9) -- (55,943) --
-----------------------------------------
NET INCOME (LOSS) $ 204,370 $ 53,866 $ (113,782)
-----------------------------------------
-----------------------------------------
EARNINGS (LOSS) PER SHARE (NOTE 6):

Before cumulative effect of change in
accounting principle $ 3.65 $ 2.01 $ (2.11)
Cumulative effect of change in
accounting principle (Note 9) -- (1.03) --
-----------------------------------------
$ 3.65 $ .98 $ (2.11)
-----------------------------------------
-----------------------------------------
AVERAGE SHARES OUTSTANDING (NOTE 6) 56,012 54,719 53,961
-----------------------------------------
-----------------------------------------
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

<PAGE>

Consolidated Balance Sheets

May 31
- ------------------------------------------------------------------------------------
In thousand 1994 1993
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 392,923 $ 155,456
Receivables, less allowance for doubtful accounts
of $33,933 and $31,308 1,020,511 922,727
Spare parts, supplies and fuel 173,993 164,087
Deferred income taxes (Note 7) 113,035 133,875
Prepaid expenses and other 61,234 63,573
-------------------------
Total current assets 1,761,696 1,439,718
-------------------------
PROPERTY AND EQUIPMENT, AT COST (NOTES 1, 3, 4 AND 11):

Flight equipment 2,828,021 2,843,253
Package handling and ground support equipment 1,583,428 1,413,793
Computer and electronic equipment 966,906 947,913
Other 1,511,870 1,501,250
-------------------------
6,890,225 6,706,209
Less accumulated depreciation and amortization 3,441,132 3,229,941
-------------------------
Net property and equipment 3,449,093 3,476,268
-------------------------
OTHER ASSETS:

Goodwill (Note 1) 415,178 432,215
Equipment deposits and other assets (Note 11) 366,531 444,863
-------------------------
Total other assets 781,709 877,078
-------------------------
$5,992,498 $5,793,064
-------------------------
-------------------------
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these balance sheets.

<PAGE>

Federal Express Corporation and Subsidiaries

- --------------------------------------------------------------------------------------
1994 1993
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<S> <C> <C>
CURRENT LIABILITIES:

Current portion of long-term debt (Note 3) $ 198,180 $ 133,797
Accounts payable 518,849 554,111
Accrued expenses (Note 2) 819,399 761,357
-----------------------
Total current liabilities 1,536,428 1,449,265
-----------------------
LONG-TERM DEBT, LESS CURRENT PORTION (NOTE 3) 1,632,202 1,882,279
-----------------------
DEFERRED INCOME TAXES (NOTE 7) 3,563 72,479
-----------------------
OTHER LIABILITIES (NOTE 1) 895,600 717,660
-----------------------

COMMITMENTS AND CONTINGENCIES (NOTES 11 AND 12)

COMMON STOCKHOLDERS' INVESTMENT (NOTE 6):

Common Stock, $.10 par value;
100,000 shares authorized; 55,885 and 54,743 shares issued 5,589 5,474
Additional paid-in capital 759,229 699,385
Retained earnings 1,162,160 969,515
------------------------
1,926,978 1,674,374

Less treasury stock and deferred compensation
stock plans 2,273 2,993
------------------------
Total common stockholders' investment 1,924,705 1,671,381
------------------------
$5,992,498 $5,793,064
------------------------
------------------------

</TABLE>

<PAGE>

Consolidated Statements of Cash Flows
Federal Express Corporation and Subsidiaries

Years ended May 31
- -----------------------------------------------------------------------------------------------------
In thousands 1994 1993 1992
<S> <C> <C> <C>
OPERATING ACTIVITIES

Net income (loss) $ 204,370 $ 53,866 $(113,782)
Adjustments to reconcile income (loss) to net cash
provided by operating activities:

Depreciation and amortization 599,357 579,896 577,157
Provision for uncollectible accounts 45,763 33,552 31,670
Provision (credit) for deferred income taxes
and other 3,810 19,910 (75,219)
(Gain) loss from disposals of property
and equipment (11,897) (5,648) 1,810
Cumulative effect of accounting change -- 55,943 --
Changes in assets and liabilities, net of effects
from purchases and dispositions of businesses:
(Increase) in receivables (173,902) (41,535) (727)
(Increase) decrease in other current assets (7,826) (5,813) 61,749
Increase in accounts payable, accrued
expenses and other liabilities 110,508 13,651 33,620
Other, net (2,905) 21,259 4,543
-----------------------------------
Net cash provided by operating activities 767,278 725,081 520,821
-----------------------------------
INVESTING ACTIVITIES

Purchases of property and equipment, including
deposits on aircraft of $112,138, $177,564
and $212,291 (1,087,708) (1,023,723) (915,878)
Proceeds from disposition of property and equipment:
Sale-leaseback transactions 581,400 216,444 400,433
Reimbursements of A300 deposits 38,794 -- --
Other dispositions 46,148 5,984 12,851
Other, net 27,843 1,992 621
-----------------------------------
Net cash used in investing activities (393,523) (799,303) (501,973)
-----------------------------------
FINANCING ACTIVITIES

Proceeds from debt issuances 10,777 878,499 437,709
Principal payments on debt (198,243) (737,334) (507,283)
Proceeds from stock issuances 53,759 24,512 19,272
Other, net (2,581) (14,176) (8,061)
-----------------------------------
Net cash provided by (used in) financing activities (136,288) 151,501 (58,363)
-----------------------------------
Net increase (decrease) in cash and cash equivalents 237,467 77,279 (39,515)
Cash and cash equivalents at beginning of period 155,456 78,177 117,692
-----------------------------------
Cash and cash equivalents at end of period $ 392,923 $ 155,456 $ 78,177
-----------------------------------
-----------------------------------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION

Cash paid for:
Interest (net of capitalized interest) $ 158,149 $ 162,648 $ 178,943
Income taxes 167,209 188,943 89,729
Non-cash investing and financing activities:

</TABLE>

In November 1992, approximately $73,000,000 of secured debt related to a portion
of the purchase price of one MD-11 aircraft acquired by the Company was assumed
by a third party in a sale-leaseback of the aircraft.

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

<PAGE>

Consolidated Statements of Changes in
Common Stockholders' Investment
Federal Express Corporation and Subsidiaries

- ----------------------------------------------------------------------------------------------------
In thousands, except common shares Common Additional Retained Treasury Deferred
Stock Paid-in Earnings Stock Compensation
Capital
<S> <C> <C> <C> <C> <C>
BALANCE AT MAY 31, 1991 $5,363 $652,045 $1,015,205 $ (14) $(3,979)

Purchase of treasury stock -- -- -- (3,099) --
Forfeiture of restricted stock -- -- -- (1,292) --
Issuance of common and treasury stock
under employee incentive plans
(554,269 shares) 47 20,682 (287) 4,373 (2,792)
Amortization of deferred compensation -- -- -- -- 1,833
Foreign currency translation adjustment -- -- 5,419 -- --
Net loss -- -- (113,782) -- --
-----------------------------------------------------------
BALANCE AT MAY 31, 1992 5,410 672,727 906,555 (32) (4,938)

Purchase of treasury stock -- -- -- (472) --
Forfeiture of restricted stock -- -- -- (63) --
Issuance of common and treasury stock
under employee incentive plans
(655,938 shares) 64 26,658 (85) 531 (393)
Amortization of deferred compensation -- -- -- -- 2,374
Foreign currency translation adjustment -- -- 9,179 -- --
Net income -- -- 53,866 -- --
-----------------------------------------------------------
BALANCE AT MAY 31, 1993 5,474 699,385 969,515 (36) (2,957)

Purchase of treasury stock -- -- -- (185) --
Forfeiture of restricted stock -- -- -- (1,224) --
Issuance of common and treasury stock
under employee incentive plans
(1,153,248 shares) 115 59,844 -- 670 (8)
Amortization of deferred compensation -- -- -- -- 1,467
Foreign currency translation adjustment -- -- (11,725) -- --
Net income -- -- 204,370 -- --
-----------------------------------------------------------
BALANCE AT MAY 31, 1994 $5,589 $759,229 $1,162,160 $ (775) $(1,498)
-----------------------------------------------------------
-----------------------------------------------------------

</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

<PAGE>

Notes to Consolidated Financial Statements

- --------------------------------------------------------------------------------
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Federal Express Corporation and its wholly-owned subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated.

PROPERTY AND EQUIPMENT. Expenditures for major additions, improvements, flight
equipment modifications, and certain overhaul costs are capitalized. Maintenance
and repairs are charged to expense as incurred, except for B747 airframe and
engine overhaul maintenance which is accrued and charged to expense on the basis
of hours flown. The cost and accumulated depreciation of property and equipment
disposed of are removed from the related accounts and any gain or loss reflected
in the results of operations.

For financial reporting purposes, depreciation and amortization of property
and equipment is provided on a straight-line basis over the asset's service life
or related lease term as follows:

<TABLE>

<S> <C>
Flight equipment 7 to 20 years
Package handling and ground support equipment 5 to 30 years
Computer and electronic equipment 3 to 10 years
Other 2 to 30 years

</TABLE>

Aircraft airframes and engines are assigned residual values ranging from
10% to 20% of asset cost. All other property and equipment have no assigned
residual values.

For income tax purposes, depreciation is generally computed using
accelerated methods.

DEFERRED GAINS. Gains on the sale and leaseback of aircraft and other property
and equipment are deferred and amortized over the life of the lease as a
reduction of rent expense. Included in Other Liabilities at May 31, 1994 and
1993, were deferred gains of $230,234,000 and $186,087,000, respectively.

DEFERRED LEASE OBLIGATIONS. While certain of the Company's aircraft and facility
leases contain fluctuating or escalating payments, the related rent expense is
recorded on a straight-line basis over the lease term. Included in Other
Liabilities at May 31, 1994 and 1993, was $185,508,000 and $148,231,000,
respectively, representing the cumulative difference between rent expense and
rent payments.

SELF-INSURANCE RESERVES. The Company is self-insured up to certain levels for
workers' compensation, employee health care and vehicle liabilities. Reserves
are based on the actuarialy estimated cost of claims. Included in Other
Liabilities at May 31, 1994 and 1993, was $270,000,000 and $198,000,000,
respectively, representing self-insurance reserves for the Company's workers'
compensation and vehicle liabilities.

CAPITALIZED INTEREST. Interest on funds used to finance the acquisition and
modification of aircraft and construction of certain facilities up to the date
the asset is placed in service is capitalized and included in the cost of the
asset. Capitalized interest was $29,738,000, $31,256,000, and $26,603,000, for
1994, 1993 and 1992, respectively.

CASH EQUIVALENTS. Cash equivalents are cash in excess of current operating
requirements invested in short-term, interest-bearing instruments with
maturities of three months or less at the date of purchase and are stated at
cost, which approximates market value. Interest income was $9,778,000 in 1994,
$7,839,000 in 1993, and $12,006,000 in 1992.

SPARE PARTS, SUPPLIES AND FUEL. Spare parts, supplies and fuel are stated
principally at standard cost (approximates actual cost on a first-in, first-out
basis) which is not in excess of current replacement cost.

<PAGE>

Federal Express Corporation and Subsidiaries

GOODWILL. Goodwill is the excess of purchase price over the fair value of net
assets of businesses acquired. It is amortized on a straight-line basis over
periods ranging up to 40 years. Accumulated amortization was $87,202,000 and
$71,313,000 at May 31, 1994 and 1993, respectively.

FOREIGN CURRENCY TRANSLATION. The Company conducts a significant amount of its
business and has a number of operating facilities in countries outside the
United States. Translation gains and losses of foreign operations that use local
currencies as the functional currency are accumulated and reported as a separate
component of common stockholders' investment. Transaction gains and losses that
arise from exchange rate fluctuations on the transactions denominated in a
currency other than the local functional currency are included in the results of
operations.

INCOME TAXES. Deferred income taxes are provided for the tax effect of temporary
differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements. The Company uses the liability method to
account for income taxes, which requires deferred taxes to be recorded at the
statutory rate expected to be in effect when the taxes are paid.

REVENUE RECOGNITION. Revenue is generally recognized upon delivery of shipments.
For shipments in transit, revenue is recorded based on the percentage of service
completed.

EARNINGS PER SHARE. Earnings per share is computed based on the weighted average
number of common and common equivalent shares outstanding during the year.
Common equivalent shares are the number of shares of common stock that would be
issued upon the exercise of all dilutive outstanding stock options, less the
assumed repurchase of treasury shares. Earnings per share assuming full dilution
is substantially the same as earnings per share as stated and, accordingly, is
not shown separately.

RECLASSIFICATIONS. Certain amounts for 1993 and 1992 have been reclassified to
conform to the 1994 presentation.

- --------------------------------------------------------------------------------
NOTE 2: ACCRUED EXPENSES

May 31
- --------------------------------------------------------------------------------
In thousands 1994 1993
<S> <C> <C>
Compensated absences $180,105 $163,553
Insurance 156,906 169,176
Taxes other than income taxes 130,801 114,460
Employee benefits 86,352 91,651
Salaries 82,563 64,716
Aircraft overhaul 50,933 59,507
Interest 32,374 38,353
Other 99,365 59,941
-----------------------
$819,399 $761,357
-----------------------
-----------------------

</TABLE>

<PAGE>

Notes to Consolidated Financial Statements

- --------------------------------------------------------------------------------
NOTE 3: LONG-TERM DEBT

May 31
- --------------------------------------------------------------------------------
In thousands 1994 1993
<S> <C> <C>

Unsecured notes payable, interest rates of 6.25% to 10.57%,
due through 2013 $1,384,942 $1,493,700
-------------------------
Unsecured sinking fund debentures, interest rate of 9.63%,
due through 2020 98,254 98,185
-------------------------
Capital lease obligations, Memphis-Shelby County Airport Authority
Special Facilities Revenue Bonds, due through 2013, interest
rates of 6.75% to 8.30% 210,100 245,070
Less bond reserve funds 11,096 23,330
-------------------------
199,004 221,740
-------------------------
Other debt, effective rates of 4.28% to 11.25% 148,182 202,451
-------------------------
1,830,382 2,016,076
Less current portion 198,180 133,797
-------------------------
$1,632,202 $1,882,279
-------------------------
-------------------------

</TABLE>

The Company has a revolving credit agreement with domestic and foreign
banks that provides for a commitment of $1,000,000,000 through May 31, 1996, all
of which was available at May 31, 1994. Interest rates on borrowings under this
agreement are generally determined by maturities selected and prevailing market
conditions. The agreement contains certain covenants and restrictions, none of
which is expected to significantly affect operations or the ability to pay
dividends. As of May 31, 1994, approximately $454,000,000 was available for the
payment of dividends. Commercial paper borrowings are backed by unused
commitments under the revolving credit agreement and reduce the amount available
under the agreement. Borrowings under this credit agreement and commercial paper
borrowings are classified as long-term based on the Company's ability and intent
to refinance such borrowings.

The Special Facilities Revenue Bonds were issued by the Memphis-Shelby
County Airport Authority ("MSCAA") to finance the acquisition and construction
of various facilities and equipment at the Memphis International Airport. Lease
agreements with the MSCAA covering the facilities and equipment financed with
the bond proceeds obligate the Company to pay rentals equal to principal and
interest due on the bonds.

In August 1993, an agreement was executed to issue $45,000,000 of City of
Indianapolis Airport Facility Revenue Refunding Bonds in September 1994. The
refunding bonds will be used to retire 11.25% Indianapolis Special Facilities
Revenue Bonds, Series 1984 which were originally issued in November 1984 to
finance the acquisition, construction and equipping of an express package
sorting hub at the Indianapolis International Airport for a third party. In
1988, the Company acquired the hub facility from the third party and assumed
liability for the lease obligation and the guarantee position related to the
bonds. The refunding bonds have a maturity date of April 1, 2017 and a coupon
rate of 6.85%, which will be adjusted in the event of any changes to the
Company's credit rating on its long-term debt prior to the date of issuance.

The Company filed a registration statement in August 1993 with the
Securities and Exchange Commission for the issuance of up to $233,600,000 of
equipment trust certificates and pass through certificates. During October and
December 1993, $152,320,000 and $236,000,000, respectively, of pass through
certificates were issued under a September 1992 and the August 1993 registration
statements to refinance the

<PAGE>

Federal Express Corporation and Subsidiaries

debt portion of leveraged leases related to five MD-11 aircraft. The pass
through certificates are not direct obligations of, or guaranteed by, the
Company but amounts payable by the Company under the five leveraged leases are
sufficient to pay the principal and interest on the certificates.

In December 1993, the Company filed a registration statement with the
Securities and Exchange Commission for the issuance of up to $400,000,000 of
pass through certificates. In March 1994, $377,112,000 of pass through
certificates were issued under this registration statement to finance the debt
portion of leveraged leases related to 13 Airbus A310 aircraft to be acquired
under operating leases and to pay certain expenses. Future payments related to
lease commitments for these aircraft are included in the summary of future
minimum lease payments in Note 4.

In 1993, the Company entered into a $140,000,000 foreign bank facility to
provide term loans for predelivery payments on seven Airbus A300 aircraft, two
of which were delivered during the fourth quarter of 1994 and five of which are
to be delivered in 1995. Principal and interest on borrowings is payable upon
delivery of the aircraft. As of May 31, 1994, the Company had $100,000,000
outstanding under this facility at a net interest rate of 4.28%.

Scheduled annual principal maturities of long-term debt for the five years
subsequent to May 31, 1994, are as follows: $198,180,000 in 1995; $253,700,000
in 1996; $24,400,000 in 1997; $124,700,000 in 1998 and $255,700,000 in 1999.

At May 31, 1994, the Company's long-term debt, exclusive of capital leases,
had a carrying value of approximately $1,630,000,000 and a fair value of
approximately $1,740,000,000. The estimated fair value was determined based on
quoted market prices or on the current rates offered for debt with similar terms
and maturities.

- --------------------------------------------------------------------------------
NOTE 4: LEASE COMMITMENTS

The Company utilizes certain aircraft, land, facilities and equipment under
capital and operating leases which expire at various dates through 2024. In
addition, supplemental aircraft are leased under agreements which generally
provide for cancellation upon 60 days' notice.

Property and equipment recorded under capital leases at May 31 was as
follows:

- --------------------------------------------------------------------------------
In thousands 1994 1993
<S> <C> <C>
Package handling and ground support equipment $372,194 $372,724
Facilities 133,435 133,435
Computer and electronic equipment and other 7,152 29,535
-----------------------
512,781 535,694
Less accumulated amortization 330,155 340,741
-----------------------
$182,626 $194,953
-----------------------
-----------------------

</TABLE>

Rent expense under operating leases for the years ended May 31 was as
follows:

- --------------------------------------------------------------------------------
In thousands 1994 1993 1992
<S> <C> <C> <C>
Minimum rentals $621,174 $563,646 $570,377
Contingent rentals 21,540 35,353 40,043
--------------------------------------
$642,714 $598,999 $610,420
--------------------------------------
--------------------------------------

</TABLE>

Contingent rentals are based on mileage under supplemental aircraft leases.

<PAGE>

Notes to Consolidated Financial Statements

A summary of future minimum lease payments under capital leases and
non-cancelable operating leases (principally aircraft and facilities) with an
initial or remaining term in excess of one year at May 31, 1994 follows:

- --------------------------------------------------------------------------------
In thousands Capital Operating
Leases Leases
<S> <C> <C>
1995 $ 15,561 $ 540,139
1996 15,561 562,776
1997 15,561 521,918
1998 15,561 471,839
1999 15,561 454,345
Thereafter 387,206 5,060,735
-----------------------
$465,011 $7,611,752
-----------------------
-----------------------

</TABLE>

At May 31, 1994, the present value of future minimum lease payments for
capital lease obligations was $199,004,000.

- --------------------------------------------------------------------------------
NOTE 5: PREFERRED STOCK

The Certificate of Incorporation authorizes the Board of Directors, at its
discretion, to issue up to 4,000,000 shares of Series Preferred Stock. The stock
is issuable in series which may vary as to certain rights and preferences and
has no par value. As of May 31, 1994, none of these shares had been issued.

<PAGE>

Federal Express Corporation and Subsidiaries

- --------------------------------------------------------------------------------
NOTE 6: COMMON STOCKHOLDERS' INVESTMENT

Under the provisions of the Company's stock incentive plans, options may be
granted to certain key employees (and, under the 1989 and 1993 plans, to
directors who are not employees of the Company) to purchase common stock of the
Company at a price not less than its fair market value at the date of grant. The
following summarizes information for the past three years with respect to those
plans:

- --------------------------------------------------------------------------------
Number of Shares Option Price
Under Option Per Share
<S> <C> <C>
Outstanding at May 31, 1991 3,856,930 $23.59-$70.19

Granted 526,500 34.50- 53.63
Exercised (467,469) 23.59- 47.00
Canceled (262,158) 34.31- 62.00
-------------------------
Outstanding at May 31, 1992 3,653,803 23.59- 70.19

Granted 260,750 36.88- 56.25
Exercised (643,563) 23.59- 56.63
Canceled (123,947) 34.31- 70.19
-------------------------
Outstanding at May 31, 1993 3,147,043 30.56- 70.19

Granted 982,750 54.31- 70.81
Exercised (1,142,249) 30.56- 70.19
Canceled (111,758) 34.31- 62.94
-------------------------
Outstanding at May 31, 1994 2,875,786 $30.56-$70.81
-------------------------
Exercisable at May 31, 1994 1,181,289 $30.56-$70.19
-------------------------

</TABLE>

At May 31, 1994, there were 796,446 shares available for future grants
under the above plans.

Under the terms of the Company's 1986 Restricted Stock Plan, shares of the
Company's common stock are granted to key employees. Restrictions on the shares
expire over a period of two to five years from their date of grant. Compensation
expense related to this plan is recorded as a reduction of common stockholders'
investment and is being amortized as restrictions on such shares expire. The
shares granted under this plan were 11,000 in 1994, 12,500 in 1993, and 120,500
in 1992. During 1994, 1993 and 1992, 18,438, 1,500 and 33,750 shares,
respectively, were forfeited. At May 31, 1994, there were 10,938 shares
available for future grants under this plan.

At May 31, 1994, there were 3,683,170 shares of common stock reserved for
issuance under the above-mentioned incentive plans.

In 1988, the Board of Directors authorized the purchase of up to 5,300,000
shares of the Company's common stock on the open market. As of May 31, 1994, a
total of 2,765,243 shares at an average cost of $41.68 per share had been
purchased and substantially all reissued under the above-mentioned plans.

<PAGE>

Notes to Consolidated Financial Statements

- --------------------------------------------------------------------------------

NOTE 7: INCOME TAXES

The components of the provision (credit) for federal and other income taxes for
the years ended May 31 were as follows:

- --------------------------------------------------------------------------------
In thousands 1994 1993 1992
<S> <C> <C> <C>
Current provision:
Federal $131,724 $64,130 $ 10,886
Foreign 16,387 9,318 17,512
State 26,862 3,170 7,471
----------------------------
174,973 76,618 35,869
----------------------------
Deferred provision (credit):
Federal 2,263 6,899 (63,754)
Foreign 2,524 -- --
State (5,668) 10,250 (5,161)
----------------------------
(881) 17,149 (68,915)
----------------------------
$174,092 $93,767 $(33,046)
----------------------------
----------------------------
</TABLE>

The Company's operations included the following activity with respect to
entities operating in foreign locations for the years ended May 31:

- ------------------------------------------------------------------------
In thousands 1994 1993 1992
<S> <C> <C> <C>
Entities with pre-tax income $ 127,000 $ 67,000 $ 76,000
Entities with pre-tax losses (210,000) (247,000) (538,000)
---------------------------------
$ (83,000) $(180,000) $(462,000)
---------------------------------
---------------------------------
</TABLE>

Income (losses) from entities which are structured as foreign subsidiaries
are not included in the U.S. consolidated income tax return. Approximately
$14,000,000 of net foreign subsidiary income was not taxable for federal income
tax purposes in 1994. In 1993 and 1992, approximately $7,000,000 and
$27,000,000, respectively, of net foreign subsidiary losses were not deductible
for federal income tax purposes. Income taxes have been provided for foreign
operations based upon the various tax laws and tax rates of the countries in
which the Company's operations are conducted. There is no direct relationship
between the Company's foreign income tax provision and foreign pre-tax book
income due to the different methods of taxation used by countries throughout the
world.

A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate for the years ended May 31 follows:

- --------------------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
Statutory U.S. income tax rate 35.0% 34.0% (34.0)%
Increase resulting from:
Goodwill amortization 1.3 2.5 5.9
Foreign operations 3.5 1.3 0.4
State income taxes, net of federal benefit 3.6 4.4 1.0
Other, net 2.6 3.9 4.2
--------------------
46.0% 46.1% (22.5)%
--------------------
--------------------
</TABLE>

<PAGE>

The Omnibus Budget Reconciliation Act of 1993 increased the statutory U.S.
income tax rate from 34% to 35% retroactive to January 1, 1993. The adverse
impact of the increase in the statutory rate was offset in 1994 by a
corresponding revaluation of the Company's deferred tax assets in accordance
with SFAS No. 109, "Accounting for Income Taxes." The net impact of these
adjustments was immaterial.

The effective tax rate for 1992, excluding the effects of a restructuring
charge, was 48.9%.

At May 31, 1994, the Company had alternative minimum tax credit carryovers
of approximately $56,000,000, which have no expiration date.

The significant components of deferred tax assets and liabilities for the
years ended May 31 were as follows:

- --------------------------------------------------------------------------------
In thousands 1994 1993
-----------------------------------------------
Deferred Deferred Tax Deferred Deferred Tax
Tax Assets Liabilities Tax Assets Liabilities
<S> <C> <C> <C> <C>
Depreciation $ -- $285,524 $ -- $289,466
Deferred gains on sales of assets 45,969 -- 24,305 --
Alternative minimum tax credits 55,844 -- 82,777 --
Employee benefits 66,875 -- 87,307 --
Self-insurance reserves 148,426 -- 122,032 --
Other 137,205 59,323 120,829 86,388
---------------------------------------------
$454,319 $344,847 $437,250 $375,854
---------------------------------------------
---------------------------------------------
</TABLE>

Effective June 1, 1992, the Company adopted SFAS No. 109. This statement
superseded SFAS No. 96, "Accounting for Income Taxes," which was adopted by the
Company as of June 1, 1989. The adoption of SFAS No. 109 did not change the
Company's method of accounting for income taxes. The standard was adopted on a
prospective basis, and amounts presented for prior years were not restated. The
adoption of SFAS No. 109 did not have a significant impact on the Company's
financial position or results of operations.

The following table sets forth the tax effect of items included in the
federal deferred tax provision (credit) for the year ended May 31, 1992:

- --------------------------------------------------------------------------------
In thousands
<S> <C>
Depreciation $ 11,282
Gains on sales of assets (18,678)
Alternative minimum tax (29,675)
European/UK restructuring charges (12,496)
Employee benefits (743)
Self-insurance reserves (35,276)
Other 21,832
--------
$(63,754)
--------
--------
</TABLE>

- --------------------------------------------------------------------------------
NOTE 8: PENSION AND PROFIT SHARING PLANS

The Company sponsors pension plans covering substantially all employees.
The largest plan, the Federal Express plan, covers U.S. domestic employees
age 21 and over, with at least one year of service and provides benefits
based on final average earnings and years of service. Plan funding is
actuarially determined, subject to certain tax law limitations.

<PAGE>

Notes to Consolidated Financial Statements

International defined benefit plans provide benefits primarily based on
final earnings and years of service and are funded in accordance with local laws
and income tax regulations.

The following table sets forth the funded status of the plans as of May 31:

- ----------------------------------------------------------------------------------------------------------------------
In thousands 1994 1993
<S> <C> <C>
Actuarial present value of the projected benefit obligation for service
rendered to date $1,800,187 $1,676,608
Less plan assets at fair value 1,733,446 1,591,507
------------------------
Projected benefit obligation in excess of plan assets 66,741 85,101
Unrecognized net gains from past experience different from
that assumed and effects of changes in assumptions 21,555 44,435
Prior service cost not yet recognized in net periodic cost (31,581) (28,022)
Unrecognized transition amount (797) (5,468)
------------------------
Pension liability $ 55,918 $ 96,046
------------------------
------------------------
Accumulated benefit obligation $1,106,076 $1,046,694
------------------------
------------------------
Vested benefit obligation $ 998,024 $ 950,785
------------------------
------------------------

</TABLE>

Net pension costs for the years ended May 31 included the following
components:

- ----------------------------------------------------------------------------------------------------------------------
In thousands 1994 1993 1992
<S> <C> <C> <C>
Service cost--benefits earned during the period $176,861 $ 161,100 $154,024
Interest cost on projected benefit obligation 127,959 117,086 105,274
Actual return on plan assets (82,019) (160,977) (92,841)
Net amortization and deferral (64,727) 36,055 590
------------------------------------
Net periodic pension cost $158,074 $ 153,264 $167,047
------------------------------------
------------------------------------
</TABLE>

The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.1% and 6.0%, respectively, in 1994 and 8.0%
and 6.0%, respectively, in both 1993 and 1992. The expected long-term rate of
return on assets was 9.5% in 1994, 1993 and 1992. Plan assets consist primarily
of marketable equity securities and fixed income instruments.

The Company also has a profit sharing plan, which covers substantially all
U.S. domestic employees age 21 and over, with at least one year of service with
the Company as of the contribution date, as defined. The plan provides for
discretionary contributions by the Company which are determined annually by the
Board of Directors. Profit sharing expense was $36,800,000 in 1994, $21,900,000
in 1993 and $8,400,000 in 1992.

- --------------------------------------------------------------------------------
NOTE 9: POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS

The Company offers medical and dental coverage to all eligible U.S. domestic
retirees and their eligible dependents. Vision coverage is provided for retirees
only. Substantially all of the Company's U.S. domestic employees become eligible
for these benefits at age 55 and older, if they have permanent, continuous
service with the Company of at least 10 years after attainment of age 45 if
hired prior to January 1, 1988, or at least 20 years after attainment of age 35,
if hired on or after January 1, 1988. Life insurance benefits are provided only
to retirees of the former Tiger International, Inc. who retired prior to
acquisition.

<PAGE>

Federal Express Corporation and Subsidiares

Effective June 1, 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions." This standard
requires that the expected cost of providing postretirement benefits be charged
to expense during the years employees render service. Prior to the adoption of
SFAS No. 106, the Company charged retiree benefits to expense when paid. These
amounts were not significant. The cumulative effect of adopting this standard
was $90,230,000 before taxes ($55,943,000 after tax benefit, or $1.03 per
share).

The following table sets forth the status of the plan as of May 31:

- --------------------------------------------------------------------------------
In thousands 1994 1993
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 34,581 $ 31,854
Fully eligible active employees 25,698 18,952
Other active employees, not fully eligible 66,472 66,114
-----------------------
126,751 116,920
Unrecognized net loss (958) (11,513)
-----------------------
Accrued postretirement benefit cost $125,793 $105,407
-----------------------

</TABLE>

Net postretirement benefit expense for the years ended May 31 was as
follows:

- --------------------------------------------------------------------------------
In thousands 1994 1993
<S> <C> <C>
Service cost $12,392 $ 9,161
Interest cost 10,174 8,434
Transition obligation -- 90,230
----------------------
$22,566 $107,825
----------------------

</TABLE>

Future medical benefit costs were estimated to increase at an annual rate
of 11.5% during 1995, decreasing to an annual growth rate of 6.0% in 2006 and
thereafter. Future dental benefit costs were estimated to increase at an annual
rate of 9.0% during 1995, decreasing to an annual growth rate of 6.0% in 2007
and thereafter. The Company's cost is capped at 150% of 1993 employer cost and,
therefore, will not be subject to medical and dental trends after the capped
cost is attained, projected to be in 1997. Primarily because of the cap on the
Company's cost, a 1% increase in these annual trend rates would not have a
significant impact on the accumulated postretirement benefit obligation at May
31, 1994 or 1994 benefit expense. The weighted average discount rates used in
estimating the accumulated postretirement obligation were 7.7% and 8.0% at May
31, 1994 and 1993, respectively. The Company pays claims as incurred.

In 1994, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which requires recognition of a liability for the
estimated cost of benefits provided to former or inactive employees after active
employment but before retirement. The adoption of SFAS No. 112 did not have a
significant impact on the Company's financial position or results of operations.

<PAGE>

Notes to Consolidated Financial Statements

- --------------------------------------------------------------------------------
NOTE 10: BUSINESS SEGMENT INFORMATION

The Company is in a single line of business--the worldwide transportation and
distribution of goods and documents. For reporting purposes, operations are
classified into two services, U.S. domestic and international. International
services are defined as shipments which either originate in or are destined to
locations outside the U.S. A summary of selected financial information for U.S.
domestic and international operations for the years ended May 31, 1994, 1993 and
1992, follows:

- --------------------------------------------------------------------------------
In thousands U.S. Total
Domestic International Worldwide
<S> <C> <C> <C>
Revenues:
1994 $6,199,940 $2,279,516 $8,479,456
1993 5,667,964 2,140,079 7,808,043
1992 5,194,684 2,355,376 7,550,060
Operating Income (Loss):
1994 $ 559,629 $ (28,997) $ 530,632
1993 559,140 (181,967) 377,173
1992 635,872 (612,905)(1) 22,967
Identifiable Assets:
1994 $4,883,644 $1,108,854 $5,992,498
1993 4,432,578 1,360,486 5,793,064
1992 3,941,022 1,522,164 5,463,186

<FN>

(1) Includes charges related to restructuring European operations in 1992.

</TABLE>

Identifiable assets used jointly in U.S. domestic and international
operations (principally aircraft) have been allocated based on estimated usage.
International revenues related to services originating in the U.S. totaled
$1,019,500,000, $928,200,000 and $914,800,000 for the years ended May 31, 1994,
1993 and 1992, respectively.

- --------------------------------------------------------------------------------
NOTE 11: COMMITMENTS AND CONTINGENCIES

The Company's annual purchase commitments under various contracts as of May 31,
1994 are as follows:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------

In thousands Aircraft Aircraft-Related(1) Other(2) Total
<S> <C> <C> <C> <C>
1995 $466,000 $85,000 $262,400 $813,400
1996 409,700 10,300 15,700 435,700
1997 241,800 -- 5,600 247,400
1998 298,300 -- 21,300 319,600
1999 61,300 -- 15,600 76,900

<FN>

(1) Primarily aircraft modifications, rotables, and development and upgrade of
aircraft simulators.
(2) Primarily facilities, vehicles, computers and other equipment.

</TABLE>

The Company is committed to purchase 23 Airbus A300 and 25 Cessna 208B
aircraft to be delivered through 1999. At May 31, 1994, deposits and progress
payments of $306,600,000 had been made toward these purchases. At May 31, 1994,
the Company had options to purchase up to 46 additional Airbus A300 aircraft for
delivery beginning in 1997.

<PAGE>

Federal Express Corporation and Subsidiaries

The Company has entered into contracts which are designed to limit the
Company's exposure to fluctuations in jet fuel prices. The contracts extend
through May 1995. The agreements are based on a notional sum of 10 million
gallons per month, which is approximately 20 to 25% of the Company's monthly
consumption of jet fuel. As of May 31, 1994, the Company had neither received
nor made any payments related to these contracts. Based on current market
prices, the fair value of these contracts at May 31, 1994, was approximately
$800,000.

- --------------------------------------------------------------------------------
NOTE 12: LEGAL PROCEEDINGS

The Company has reached a tentative settlement to the shareholder class-action
lawsuit filed in 1990 against it, Frederick W. Smith, Chairman and Chief
Executive Officer, and James L. Barksdale, the Company's former Executive Vice
President and Chief Operating Officer. The settlement, which still must be
approved by the United States District Court for the Western District of
Tennessee, is for an immaterial amount (the Company's portion of which has been
recorded in the 1994 financial statements). The Company's insurance carrier will
pay a majority of the settlement amount.

The Company currently believes that the Court will approve or disapprove
the settlement agreement before the end of its current fiscal year. Prior to the
Court's decision, the purchasers of the Company's common stock affected by the
settlement agreement must be notified of the terms of the settlement and a
hearing must be held in the District Court.

The Internal Revenue Service ("IRS") issued an Examination Report on
October 31, 1991 asserting the Company underpaid federal excise taxes for the
calendar quarters ended December 31, 1983 through March 31, 1987. The
Examination Report contains a primary position and a mutually exclusive
alternative position asserting the Company underpaid federal excise taxes by
$54,000,000 and $26,000,000, respectively. Disagreeing with essentially all of
the proposed adjustments contained in the Examination Report, the Company filed
a Protest on March 16, 1992, which set forth the Company's defenses to both IRS
positions and a claim for refund of overpaid federal excise taxes of
$23,500,000. On March 19, 1993, the IRS issued another Examination Report to the
Company asserting the Company underpaid federal excise taxes by $105,000,000 for
the calendar quarters ended June 30, 1987 through March 31, 1991. On June 17,
1993, the Company filed a Protest contesting the March 19 Examination Report
which set forth the Company's defenses to the IRS position and a claim for
refund of overpaid federal excise taxes of $46,500,000. Interest would be
payable on the amount of any refunds by the IRS to the Company or underpaid
federal excise taxes payable by the Company to the IRS at statutorily determined
rates. The interest rates payable by the Company for underpaid taxes are higher
than the rates payable by the IRS on refund amounts.

Given the inherent uncertainties in the excise tax matter referred to
above, management is currently unable to predict with certainty the outcome of
this matter or the ultimate effect, if any, its resolution would have on the
Company's financial condition or results of operations. No amount has been
reserved for this contingency.

The Company is subject to other legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the aggregate
liability, if any, with respect to these other actions will not materially
adversely affect the financial position or results of operations of the Company.

<PAGE>

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
NOTE 13: RESTRUCTURING

In May 1992, the Company substantially reduced the scope of its European and
United Kingdom operations by discontinuing its intra-region and certain
intra-country services and recorded a restructuring charge of $254,000,000. The
primary components of the charge were to cover severance costs, facility
closures, equipment dispositions and expected future operating losses of the
discontinued services through May 4, 1992. The restructuring charge reduced
earnings per share by $3.12 in 1992.

In August 1992, the Company reduced its restructuring reserve by
$12,500,000 due to favorable settlements of certain estimated liabilities
associated with the restructuring. This adjustment increased net income by
$8,200,000 ($.15 per share).

- --------------------------------------------------------------------------------
NOTE 14: SUMMARY OF QUARTERLY OPERATING RESULTS (Unaudited)
- --------------------------------------------------------------------------------

In thousands, except per share amounts First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1994
Revenues $ 2,015,725 $ 2,121,525 $ 2,077,414 $ 2,264,792
Operating income 101,907 149,718 85,317 193,690
Income before income taxes 60,835 110,539 57,717 149,371
Net income 32,851 59,691 31,167 80,661
Earnings per share $ .60 $ 1.07 $ .55 $ 1.43
Average shares outstanding 55,186 55,850 56,445 56,569
1993
Revenues $ 1,864,936 $ 1,964,674 $ 1,939,781 $ 2,038,652
Operating income 69,724 112,655 58,321 136,473
Income before income taxes 20,216 70,519 16,875 95,966
Income before cumulative effect
of change in accounting principle 10,148 35,401 8,488 55,772
Net income (loss) (45,795) 35,401 8,488 55,772
Earnings (loss) per share:
Before cumulative effect of change
in accounting principle .19 .65 .15 1.01
Cumulative effect of change in
accounting principle (1.03) -- -- --
Net earnings (loss) per share $ (.84) $ .65 $ .15 $ 1.01
Average shares outstanding 54,277 54,292 55,117 55,189

</TABLE>

<PAGE>

Report of Independent Public Accountants

To the Stockholders of Federal Express Corporation:

We have audited the accompanying consolidated balance sheets of Federal Express
Corporation (a Delaware corporation) and subsidiaries as of May 31, 1994 and
1993, and the related consolidated statements of operations, common
stockholders' investment and cash flows for each of the three years in the
period ended May 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Federal Express Corporation and
subsidiaries as of May 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended May 31,
1994, in conformity with generally accepted accounting principles.

As discussed in Notes 7 and 9 of the Consolidated Financial Statements,
effective June 1, 1992, the Company changed its methods of accounting for income
taxes and postretirement benefits other than pensions.

Memphis, Tennessee, Arthur Andersen & Co.
June 29, 1994.

<PAGE>

Selected Consolidated Financial Data

Years ended May 31
- ---------------------------------------------------------------------------------------------------------
In thousands, except per share data and Other Operating Data 1994 1993 1992
<S> <C> <C> <C>
OPERATING RESULTS
Revenues $8,479,456 $7,808,043 $7,550,060
Operating income 530,632 377,173 22,967
Income (loss) before income taxes 378,462 203,576 (146,828)
Income (loss) from continuing operations 204,370 109,809 (113,782)
Net income (loss) $ 204,370 $ 53,866 $ (113,782)
PER SHARE DATA
Earnings (loss) per share:
Continuing operations $ 3.65 $ 2.01 $ (2.11)
Discontinued operations -- -- --
Cumulative effects of changes in accounting principles -- (1.03) --
----------------------------------------
Net earnings (loss) per share $ 3.65 $ .98 $ (2.11)
Average shares outstanding 56,012 54,719 53,961
Cash dividends -- -- --
FINANCIAL POSITION
Property and equipment, net $3,449,093 $3,476,268 $3,411,297
Total assets 5,992,498 5,793,064 5,463,186
Long-term debt 1,632,202 1,882,279 1,797,844
Common stockholders' investment 1,924,705 1,671,381 1,579,722
OTHER OPERATING DATA*
Express package:
Average daily package volume 1,925,105 1,710,561 1,472,642
Average pounds per package 6.0 5.8 5.7
Average revenue per pound $ 2.48 $ 2.60 $ 2.87
Average revenue per package $ 14.95 $ 15.17 $ 16.25
Airfreight:
Average daily pounds 1,844,270 2,050,033 2,258,303
Average revenue per pound $ 1.06 $ 1.09 $ 1.22
Operating weekdays 257 255 254
Aircraft fleet:
Airbus A300-600 2 -- --
Boeing 747-100 -- -- 4
Boeing 747-200 6 8 9
McDonnell Douglas MD-11 13 8 4
McDonnell Douglas DC-10-10 11 11 11
McDonnell Douglas DC-10-30 19 19 17
McDonnell Douglas DC-8 -- -- --
Boeing 727-100 69 80 85
Boeing 727-200 90 87 66
Cessna 208A 10 10 10
Cessna 208B 206 206 206
Fokker F-27 32 32 32
Vehicle fleet 30,900 28,100 30,400
Average number of employees (based on a
standard full-time workweek) 88,502 84,104 84,162

<FN>

* Beginning in 1994, U.S. domestic express airfreight is reported as package
volume in express package operating data rather than as pounds in airfreight
operating data. Data for 1990, when the U.S. domestic airfreight services were
initially offered, through 1993 has been restated to conform to this
presentation.

</TABLE>

<PAGE>

Federal Express Corporation and Subsidiaries

- -----------------------------------------------------------------------------------------
1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C>
$7,688,296 $7,015,069 $5,166,967 $3,882,817 $3,178,308 $2,573,229 $2,015,920
252,126 387,355 414,787 379,452 364,743 344,021 258,617
40,942 218,423 298,332 302,328 311,885 305,085 212,272
5,898 115,764 166,451 187,716 166,952 192,671 138,740
$ 5,898 $ 115,764 $ 184,551 $ 187,716 $ (65,571) $ 131,839 $ 76,077

$ .11 $ 2.18 $ 3.18 $ 3.56 $ 3.21 $ 3.86 $ 2.94
-- -- -- -- (4.48) (1.22) (1.33)
-- -- .35 -- -- -- --
- -----------------------------------------------------------------------------------------
$ .11 $ 2.18 $ 3.53 $ 3.56 $ (1.27) $ 2.64 $ 1.61
53,350 53,161 52,272 52,670 51,905 49,840 46,970
-- -- -- -- -- -- --

$3,624,026 $3,566,321 $3,431,814 $2,231,875 $1,861,432 $1,551,845 $1,346,023
5,672,461 5,675,073 5,293,422 3,008,549 2,499,511 2,276,362 1,899,506
1,826,781 2,148,142 2,138,940 838,730 744,914 561,716 607,508
1,668,620 1,649,187 1,493,524 1,330,679 1,078,920 1,091,714 812,267

1,310,890 1,234,174 1,059,882 877,543 704,392 550,306 406,049
5.6 5.4 5.4 5.3 5.1 5.3 5.6
$ 3.07 $ 3.10 $ 3.04 $ 3.10 $ 3.33 $ 3.40 $ 3.45
$ 17.19 $ 16.61 $ 16.28 $ 16.32 $ 16.97 $ 17.92 $ 19.19

2,650,204 3,148,290 4,019,353 -- -- -- --
$ 1.20 $ 1.13 $ 1.06 -- -- -- --
255 255 255 257 254 254 255

-- -- -- -- -- -- --
8 9 8 -- -- -- --
10 10 13 -- -- -- --
1 -- -- -- -- -- --
11 10 8 8 8 6 6
16 16 16 13 11 9 5
-- 6 6 -- -- -- --
92 89 80 47 39 35 35
57 41 26 21 21 18 18
10 37 38 38 39 34 9
183 147 109 71 27 -- --
26 19 7 5 -- -- --
32,800 31,000 28,900 21,000 18,700 14,500 12,300

81,711 75,102 58,136 48,556 41,047 31,582 26,495

</TABLE>

<PAGE>

Federal Express Corporation and Subsidiaries

Board of Directors

Robert H. Allen (2)
Private Investor and Managing Partner
Challenge Investment Partners

Howard H. Baker, Jr. (1)
Partner
Baker, Worthington, Crossley & Stansberry
LAW FIRM

Anthony J. A. Bryan (1)
Chairman, Executive Committee
Hospital Corporation International
OWNS, MANAGES AND BUILDS HOSPITALS AND HEALTH-RELATED FACILITIES IN VARIOUS
COUNTRIES AROUND THE WORLD

Robert L. Cox (1)
Partner
Waring Cox
LAW FIRM

Ralph D. DeNunzio (2)
President
Harbor Point Associates, Inc.
PRIVATE INVESTMENT AND CONSULTING FIRM

Judith L. Estrin
Chief Executive Officer and President
Network Computing Devices, Inc.
DISPLAY STATIONS FOR NETWORK COMPUTING ENVIRONMENTS

Philip Greer (1*)
General Partner
Weiss, Peck & Greer Investments
DIVERSIFIED INVESTMENT MANAGEMENT AND SECURITIES FIRM

J.R. Hyde, III (2)
Chairman and Chief Executive Officer
AutoZone, Inc.
AUTO PARTS RETAIL CHAIN

Charles T. Manatt (1)
Senior Partner
Manatt, Phelps & Phillips
LAW FIRM

Jackson W. Smart, Jr. (2*)
Chairman and Chief Executive Officer
MSP Communications, Inc.
RADIO BROADCASTING COMPANY

Frederick W. Smith
Chairman, President and
Chief Executive Officer
Federal Express Corporation

Dr. Joshua I. Smith (2)
Chairman, President and
Chief Executive Officer
The MAXIMA Corporation
INFORMATION AND DATA PROCESSING FIRM

Peter S. Willmott (1)
Chairman and Chief Executive Officer
Willmott Services, Inc.
RETAIL AND CONSULTING FIRM

(1) Audit Committee
(2) Compensation Committee
(*) Committee Chairman

<PAGE>

Federal Express Corporation and Subsidiaries

Senior Officers

Frederick W. Smith
Chairman, President and
Chief Executive Officer

William J. Razzouk
Executive Vice President
Worldwide Customer Operations

David J. Bronczek
Senior Vice President
Europe, Africa and Mediterranean

T. Michael Glenn
Senior Vice President
Worldwide Marketing, Customer Service
and Corporate Communications

Alan B. Graf, Jr.
Senior Vice President and
Chief Financial Officer

Dennis H. Jones
Senior Vice President and
Chief Information Officer

Kenneth R. Masterson
Senior Vice President,
General Counsel and Secretary

Joseph C. McCarty, III
Senior Vice President
Asia, Pacific and Middle East

James A. McKinney
Senior Vice President
President, FedEx Logistics Services

Kenneth R. Newell
Senior Vice President
Retail Service Operations

James A. Perkins
Senior Vice President and
Chief Personnel Officer

David F. Rebholz
Senior Vice President
Global Sales and Trade Services

Jeffrey R. Rodek
Senior Vice President
Americas and Caribbean

Tracy G. Schmidt
Senior Vice President
Air Ground Terminal and Transportation

Mary Alice Taylor
Senior Vice President
Central Support Services

Theodore L. Weise
Senior Vice President
Air Operations

Graham R. Smith
Vice President, Controller and
Chief Accounting Officer

<PAGE>

Corporate Information

FORM 10-K: A copy of the Company's Annual Report on Form 10-K (excluding
exhibits), filed with the Securities and Exchange Commission, is available free
of charge. You will be mailed a copy upon request to Thomas L. Holland, Investor
Relations Department, Federal Express Corporation, Box 727, Dept. 1854, Memphis,
Tennessee 38194, (901) 395-3478.

STOCK LISTING: The Company's common stock is listed on The New York Stock
Exchange under the ticker symbol FDX.

STOCKHOLDERS: At July 14, 1994, there were 7,843 stockholders of record.

MARKET INFORMATION: Following are high and low closing prices, by quarter, for
Federal Express Corporation common stock in fiscal 1994 and 1993. No cash
dividends have been declared.

- ----------------------------------------------------------------------------
Closing Prices of Common Stock First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
FY 1994
High $60.25 $71.50 $77.50 $77.25
Low 44.63 55.25 68.25 64.88
------------------------------------------
FY 1993
High $46.75 $50.00 $60.75 $58.50
Low 37.63 35.13 49.25 48.00
------------------------------------------

</TABLE>

ANNUAL MEETING: The annual meeting of stockholders will be held at The Peabody
Hotel, 149 Union Avenue, Memphis, Tennessee, on Monday, September 26, 1994, at
10:00 a.m., CDT.

REGISTRAR AND TRANSFER AGENT: First Chicago Trust Company of New York,
Shareholder Services, P.O. Box 2500, Jersey City, NJ 07303-2500, (800)
446-2617/Michael Phalen (312) 407-4885.

CORPORATE HEADQUARTERS: 2005 Corporate Avenue, Memphis, Tennessee 38132, (901)
369-3600.

INQUIRIES: For financial information, contact Thomas L. Holland, Manager of
Investor Relations, Federal Express Corporation, Box 727, Dept. 1854, Memphis,
Tennessee 38194, (901) 395-3478. For general information, contact Shirlee M.
Finley, Manager of Media Relations, Federal Express Corporation, Box 727, Dept.
1850, Memphis, Tennessee 38194, (901) 395-3463.

AUDITORS: Arthur Andersen & Co., Memphis, Tennessee.

<PAGE>

EXHIBIT 21.1

<PAGE>

FEDERAL EXPRESS CORPORATION

<TABLE>
<CAPTION>
Jurisdiction Status
<S> <C> <C>
I. Federal Express Aviation Services, Incorporated Delaware Active

A. Federal Express Aviation Services International, Delaware Active
Ltd.

1. Federal Express Aviation Services United Kingdom Active
International, Ltd.

II. Federal Express Canada Ltd. Canada Active

III. Federal Express International, Inc. Delaware Active

A. Dencom Investments Limited Northern Ireland Inactive

1. Dencom Freight Holdings Limited (54%) Northern Ireland Inactive

a. Federal Express (N.I.) Limited Northern Ireland Inactive

b. Fedex (Ireland) Limited Ireland Inactive

c. F.E.D.S. (Ireland) Limited Ireland Inactive

B. Federal Express (Australia) PTY Ltd. Australia Active

C. Federal Express (Deutschland) Holdings Gmbh Germany (FRG) Liquidation

1. Federal Express (Deutschland) Gmbh Germany (FRG) Liquidation

2. Federal Express (Deutschland) Logistik Germany (FRG) Active
Management Gmbh

a. Continentale Tankfahrt und Germany (FRG) Inactive
Lagerungsgesellschaft

b. Federal Express (Deutschland) Germany (FRG) Inactive
Transport Gmbh

D. Federal Express Europe, Inc. Delaware Active

1. Federal Express Europe, Inc. & Co., Belgium Active
V.O.F. S.N.C. (99%)

2. Federal Express Europe, Inc. (Svenska) A.B. Sweden Liquidation

3. Federal Express European Services, Inc. Delaware Active

<PAGE>

Jurisdiction Status

4. Federal Express (Schweiz) A.G. Switzerland Liquidation

5. PIK Holdings Limted United Kingdom Active
(8.28%)

E. Federal Express Europlex, Inc. Delaware Active

F. Federal Express Holdings, B.V. Netherlands Liquidation

1. Federal Express (Nederland) B.V. Netherlands Liquidation

G. Federal Express Holdings, S.A. Delaware Active

1. Aeroenvios S.A. de C.V. Mexico Active

2. Federal Express (Antigua) Limited Antigua Active

3. Federal Express (Antilles Francaises) S.A.R.L. French West Indies Active

4. Federal Express (Bahamas) Limited (40%) Bahamas Active

5. Federal Express (Barbados) Limited Barbados Active

6. Federal Express (Bermuda) Limited Bermuda Active
(40%)

7. Federal Express Cayman, Limited (60%) Cayman Islands Active

8. Federal Express (Dominicana) S.A. Dominican Republic Active

a. Inversiones Sagitario, S.A. Dominican Republic Active

b. Inversiones Piscis, S.A. Dominican Republic Active

c. Inversiones Geminis, S.A. Dominican Republic Active

9. Federal Express (Grenada) Limited Grenada Active

10. Federal Express (Haiti) S.A. Haiti Inactive

11. Federal Express (Jamaica) Ltd. Jamaica Active

12. Federal Express (St. Kitts) Ltd. St. Kitts and Nevis Active

13. Federal Express (St. Lucia) Limited St. Lucia Active

<PAGE>

Jurisdiction Status

14. Federal Express (St. Maarten) N.V. Netherland Antilles Active

a. Federal Express (Aruba) N.V. Netherland Antilles Active

15. Federal Express (Turks & Caicos) Limited Turks & Caicos Active

16. Federal Express Virgin Islands, Inc. U.S. Virgin Active
Islands

17. Federal Express Entregas Rapidas, Ltd. Brazil Inactive
(99.9988%.)

H. Federal Express (Hong Kong) Limited Hong Kong Active

I. Federal Express International (France) SNC France Active
(95%)

J. Federal Express Italy Inc. Delaware Inactive

1. Federal Express Italia SpA Italy Liquidation

K. Federal Express (Japan) K.K. Japan Active

L. Federal Express Limited England and Wales Liquidation

1. Federal Express Finance P.L.C. England and Wales Active

2. Federal Express International Limited England and Wales Inactive

3. Federal Express Parcel Services Limited England and Wales Inactive

4. Federal Express (U.K.) Limited United Kingdom Active

a. Federal Express (U.K.) Pension United Kingdom Active
Trustees Ltd.

5. Winchmore Developments Ltd. England and Wales Inactive

a. Concorde Advertising Limited England and Wales Inactive

M. Federal Express Luxembourg, Inc. Delaware Active

N. Federal Express Pacific, Inc. Delaware Active

1. Federal Express Services (Malaysia) Sdn. Malaysia Active
Bhd. (51%.)

2. Udara Express Courier Services Sdn. Bhd. Malaysia Active
(47%)

<PAGE>

Jurisdiction Status

O. Federal Express (Singapore) PTE, LTD. Singapore Active

P. Federal Express (U. K.) Limited Delaware Inactive

Q. Fedex (N. I.) Limited Northern Ireland Inactive

IV. Federal Express Leasing Corporation Delaware Active

V. Federal Express Logistics, Inc. Delaware Inactive

VI. Federal Express Redevelopment Corporation Missouri Inactive

VII. FEDEX Aeronautics Corporation Delaware Active

VIII. Fedex Air Charter Corporation Delaware Inactive

IX. Fedex Customs Brokerage Corporation Delaware Inactive

X. Fedex Foreign Sales Corporation Virgin Islands Active

XI. Fedex International Transmission Corporation Delaware Active

XII. Fedex Mexicana S.A. de C.V. Mexico Active

XIII. Fedex Partners, Inc. Delaware Active

XIV. Flying Tiger Air Services, Inc. Delaware Inactive

XV. Skyvoyager Air, Inc. Delaware Inactive

XVI. SWAP, Inc. Delawre Inactive

XVII. Tiger Intermodal, Inc. Delaware Inactive

XIII. Tiger International Insurance Ltd. Cayman Islands Active

XIX. Tiger Leasing Group, Inc. Delaware Liquidation

A. Pegasus, Inc. Delaware Inactive

B. TigerAir, Inc. Delaware Inactive

1. NAL-ONE, Ltd. Delaware Inactive

2. Permez Holdings, B.V.

C. Tiger Equipment and Services, Ltd. Delaware Inactive

D. Tiger Leasing Deutschland Gmbh Germany Liquidation

<PAGE>

Jurisdiction Status

E. Tiger Leasing, Ltd. Delaware Inactive

F. Tiger Leasing, S.A. Belgium Liquidation

XX. Tiger Trading Company Delaware Inactive
</TABLE>

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
by reference in Federal Express Corporation's previously filed Form S-8
registration statement Nos. 2-74000, 2-95720, 33-20138 and 33-38041 and Form S-3
registration statement Nos. 33-47176, 33-50013 and 33-51623 of our reports dated
June 29, 1994, included (or incorporated by reference) in Federal Express
Corporation's Form 10-K for the year ended May 31, 1994.

/s/ ARTHUR ANDERSEN & CO.
-----------------------------------
ARTHUR ANDERSEN & CO.

Memphis, Tennessee,
August 2, 1994.

<PAGE>

EXHIBIT 24.1

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith,
and each of them, with full power of substitution and resubstitution, his true
and lawful attorneys-in-fact and agents, with full power and authority to
execute in the name and on behalf of the undersigned as such Director, the
Corporation's Annual Report on Form 10-K with respect to the Corporation's
fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes may lawfully do or cause to be
done by virtue of these presents.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of June,
1994.

/s/ ROBERT H. ALLEN
----------------------------------------
Robert H. Allen

STATE OF TEXAS )
) SS.
)
COUNTY OF HARRIS )

I, Earlene L. Barbeau, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Robert H. Allen, personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/ EARLENE L. BARBEAU
----------------------------------------
Notary Public

EARLENE L. BARBEAU
Notary Public, State of Texas
My Commission Expires
March 8, 1997
- ----------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of June,
1994.

/s/ HOWARD H. BAKER, JR.
----------------------------------------
Howard H. Baker, Jr.

STATE OF TENNESSEE )
) SS.
)
COUNTY OF SCOTT )

I, Kathy D. West, a Notary Public in and for said County, in the aforesaid
State, DO HEREBY CERTIFY that Howard H. Baker, Jr., personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered the
said instrument as his free and voluntary act, for the uses and purposes therein
set forth.

/s/ KATHY D. WEST
----------------------------------------
Notary Public

My Commission Expires:

12-26-94
- ----------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of June,
1994.

/s/ ANTHONY J.A. BRYAN
----------------------------------------
Anthony J. A. Bryan

STATE OF RHODE ISLAND )
) SS.
)
COUNTY OF WASHINGTON )

I, Jennifer E. Adams, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Anthony J. A. Bryan, personally known to
me to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/JENNIFER E. ADAMS
----------------------------------------
Notary Public

My Commission Expires:

6/18/95
- ----------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of June, 1994.

/s/ ROBERT L. COX
----------------------------------------
Robert L. Cox

STATE OF TENNESSEE )
) SS.
)
COUNTY OF SHELBY )

I, Lillian W. Powers, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Robert L. Cox, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/ LILLIAN W. POWERS
----------------------------------------
Notary Public

My Commission Expires:
My Commission Expires
4-29-97
- ------------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of June, 1994.

/s/ RALPH D. DENUNZIO
----------------------------------------
Ralph D. DeNunzio

STATE OF NEW YORK )
) SS.
)
COUNTY OF NEW YORK )

I, Barbara MacCarthy, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Ralph D. DeNunzio, personally known to
me to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/ BARBARA MACCARTHY
----------------------------------------
Notary Public

My Commission Expires: BARBARA MAC CARTHY
NOTARY PUBLIC, State of New York
___________________________ No. 31-7645700
Qualified in New York County
Commission Expires June 30, 1996

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned, a Director of FEDERAL EXPRESS CORPORATION (the
"Corporation"), a Delaware corporation, does hereby constitute and appoint
Frederick W. Smith, William J. Razzouk, Alan B. Graf, Jr. and Graham R. Smith,
and each of them, with full power of substitution and resubstitution, her true
and lawful attorneys-in-fact and agents, with full power and authority to
execute in the name and on behalf of the undersigned as such Director, the
Corporation's Annual Report on Form 10-K with respect to the Corporation's
fiscal year ended May 31, 1994, and any and all amendments thereto; and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes may lawfully do or cause to be
done by virtue of these presents.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of June,
1994.

/s/ JUDITH L. ESTRIN
----------------------------------------
Judith L. Estrin

STATE OF CALIFORNIA )
) SS.
)
COUNTY OF SANTA CLARA )

I, Lisa M. Cinfio, a Notary Public in and for said County, in the aforesaid
State, DO HEREBY CERTIFY that Judith L. Estrin, personally known to me to be the
same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that she signed and delivered the
said instrument as her free and voluntary act, for the uses and purposes therein
set forth.

/s/LISA M. CINFIO
----------------------------------------
Notary Public
LISA M. CINFIO
Comm. #981937
Notary Public - California
SANTA CLARA COUNTY
My Comm. Expires DEC 27, 1996

My Commission Expires:

December 27, 1996
- -------------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of June, 1994.

/s/ PHILIP GREER
----------------------------------------
Philip Greer

STATE OF NEW YORK )
) SS.
)
COUNTY OF NEW YORK )

I, Kathleen M. Rode, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Philip Greer, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/ KATHLEEN M. RODE
----------------------------------------
Notary Public

My Commission Expires: KATHLEEN M. RODE
Notary Public, State of New York
5/31/96 No. 43-4819454
- ------------------------ Qualified in Richmond County
Commission Expires 5/31/96
-------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of June,
1994.

/s/ J. R. HYDE, III
----------------------------------------
J. R. Hyde, III

STATE OF TENNESSEE )
) SS.
)
COUNTY OF SHELBY )

I, Tina M. McDaniel, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that J. R. Hyde, III, personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/ TINA M. MCDANIEL
----------------------------------------
Notary Public

My Commission Expires:
My Commission Expires Sept. 01, 1997
_______________________________________

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of July,
1994.

/s/ CHARLES T. MANATT
----------------------------------------
Charles T. Manatt

STATE OF CALIFORNIA )
) SS.
)
COUNTY LOS ANGELES )

I, Peter MacDonald, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Charles T. Manatt, personally known to
me to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

July 12, 1994 /s/ PETER MACDONALD
----------------------------------------
Notary Public

My Commission Expires: PETER MAC DONALD
Comm. #886048
9-4-94 Notary Public - California
- ------------------------ LOS ANGELES COUNTY
My Comm. Expires SEP. 4, 1994
4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of June,
1994.

/s/ JACKSON W. SMART, JR.
----------------------------------------
Jackson W. Smart, Jr.

STATE OF ILLINOIS )
) SS.
)
COUNTY OF COOK )

I, Esparanza Acosta, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Jackson W. Smart, Jr., personally known
to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person, and acknowledged that he
signed and delivered the said instrument as his free and voluntary act, for the
uses and purposes therein set forth.

/s/ ESPERANZA ACOSTA
----------------------------------------
Notary Public

OFFICIAL SEAL
My Commission Expires: ESPERANZA ACOSTA
NOTARY PUBLIC, STATE OF ILLINOIS
2-8-97 MY COMMISSION EXPIRES 2-8-97
- ------------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of June,
1994.

/s/ JOSHUA I. SMITH
----------------------------------------
Joshua I. Smith

STATE OF MARYLAND )
) SS.
)
COUNTY OF PRINCE GEORGE'S )

I, Robyn Proctor Armstrong, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Joshua I. Smith, personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/ ROBYN PROCTOR ARMSTRONG
----------------------------------------
Notary Public

My Commission Expires:
ROBYN PROCTOR ARMSTRONG
NOTARY PUBLIC STATE OF MARYLAND
My Commission Expires Feberuary 16, 1998
- --------------------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of June, 1994.

/s/ PETER S. WILLMOTT
----------------------------------------
Peter S. Willmott

STATE OF ILLINOIS)
) SS.
)
COUNTY OF COOK )

I, Joan L. Noble, a Notary Public in and for said County, in the aforesaid
State, DO HEREBY CERTIFY that Peter S. Willmott, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered the
said instrument as his free and voluntary act, for the uses and purposes therein
set forth.

/s/ JOAN L. NOBLE
----------------------------------------
Notary Public

My Commission Expires:

3/5/95
- ------------------------
"OFFICIAL SEAL"
Joan L. Noble
Notary Public, State of Illinois
My Commission Expires 03/05/95

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned, the Chief Financial Officer of FEDERAL EXPRESS
CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute
and appoint Frederick W. Smith, William J. Razzouk and Graham R. Smith, and each
of them, with full power of substitution and resubstitution, his true and lawful
attorneys-in-fact and agents, with full power and authority to execute in the
name and on behalf of the undersigned as such officer, the Corporation's Annual
Report on Form 10-K with respect to the Corporation's fiscal year ended May 31,
1994, and any and all amendments thereto; and hereby ratifies and confirms all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue of these
presents.

IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of June, 1994.

/s/ ALAN B. GRAF, JR.
----------------------------------------
Alan B. Graf, Jr.

STATE OF TENNESSEE )
) SS.
)
COUNTY OF SHELBY )

I, Edna M. Kennon, a Notary Public in and for said County, in the aforesaid
State, DO HEREBY CERTIFY that Alan B. Graf, Jr., personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered the
said instrument as his free and voluntary act, for the uses and purposes therein
set forth.

/s/ EDNA M. KENNON
----------------------------------------
Notary Public

My Commission Expires:

My Commission Expires October 24, 1994
- ----------------------------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned, the Executive Vice President, Worldwide Customer
Operations, of FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware
corporation, does hereby constitute and appoint Frederick W. Smith, Alan B.
Graf, Jr. and Graham R. Smith, and each of them, with full power of substitution
and resubstitution, his true and lawful attorneys-in-fact and agents, with full
power and authority to execute in the name and on behalf of the undersigned as
such officer, the Corporation's Annual Report on Form 10-K with respect to the
Corporation's fiscal year ended May 31, 1994, and any and all amendments
thereto; and hereby ratifies and confirms all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes may lawfully
do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of June, 1994.

/s/ WILLIAM J. RAZZOUK
----------------------------------------
William J. Razzouk

STATE OF TENNESSEE )
) SS.
)
COUNTY OF SHELBY )

I, Sharon A. Smith, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that William J. Razzouk, personally known to
me to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/ SHARON A. SMITH
----------------------------------------
Notary Public

My Commission Expires:

3-16-97
- ------------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned, the principal executive officer and a director of
FEDERAL EXPRESS CORPORATION (the "Corporation"), a Delaware corporation, does
hereby constitute and appoint William J. Razzouk, Alan B. Graf, Jr. and Graham
R. Smith, and each of them, with full power of substitution and resubstitution,
his true and lawful attorneys-in-fact and agents, with full power and authority
to execute in the name and on behalf of the undersigned as such officer and
director, the Corporation's Annual Report on Form 10-K with respect to the
Corporation's fiscal year ended May 31, 1994, and any and all amendments
thereto; and hereby ratifies and confirms all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes may lawfully
do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of June, 1994.

/s/ FREDERICK W. SMITH
----------------------------------------
Frederick W. Smith

STATE OF TENNESSEE )
) SS.
)
COUNTY OF SHELBY )

I, June Y. Fitzgerald, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Frederick W. Smith, personally known to
me to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/ JUNE Y. FITZGERALD
----------------------------------------
Notary Public

My Commission Expires:

My Commission Expires Mar. 28, 1995
- --------------------------------------

4543.MEM2

<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned, the principal accounting officer of FEDERAL EXPRESS
CORPORATION (the "Corporation"), a Delaware corporation, does hereby constitute
and appoint Frederick W. Smith, William J. Razzouk and Alan B. Graf, Jr., and
each of them, with full power of substitution and resubstitution, his true and
lawful attorneys-in-fact and agents, with full power and authority to execute in
the name and on behalf of the undersigned as such officer, the Corporation's
Annual Report on Form 10-K with respect to the Corporation's fiscal year ended
May 31, 1994, and any and all amendments thereto; and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, or their or
his substitute or substitutes may lawfully do or cause to be done by virtue of
these presents.

IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of June, 1994.

/s/ GRAHAM R. SMITH
----------------------------------------
Graham R. Smith

STATE OF TENNESSEE )
) SS.
)
COUNTY OF SHELBY )

I, Delores M. Wolfmeyer, a Notary Public in and for said County, in the
aforesaid State, DO HEREBY CERTIFY that Graham R. Smith, personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, for the uses and
purposes therein set forth.

/s/ DELORES M. WOLFMEYER
----------------------------------------
Notary Public

My Commission Expires:

MY COMMISSION EXPIRES DEC. 1, 1996
- -----------------------------------

4543.MEM2