Memphis-based FedEx Corp. said its earnings for the second quarter of its fiscal 2002 year, which ended on November 30, reached $0.81 per diluted share, which includes $116 million or $0.24 per share in compensation from the Air Transportation Safety and System Stabilization Act.

FedEx also said its second quarter revenue rose 5% to $5.14 billion, compared to $4.9 billion in the same quarter of fiscal 2001. Operating income rose 26% to $433 million and net income also rose 26% to $245 million, said FedEx.

"Earnings exceeded our previous forecast primarily due to a state tax settlement at FedEx Express, lower net fuel expense, improved productivity at FedEx Ground and more pounds than anticipated from the U.S. Postal Service transportation agreement," said Alan B. Graf, Jr., executive vp & CFO.

"Compared to last year's second quarter, earnings improved due to lower variable compensation, reduced fuel expense, incremental revenue from the U.S. Postal Service, and higher revenue and solid expense management at FedEx Ground. FedEx Ground volume growth rates improved in October and November, finishing the quarter up 11% from the previous year," he added.

However, Graf said that FedEx will face a challenging third quarter, as the lingering economic effects from the September 11 attacks are expected to continue as government assistance ends. He said the company expects higher maintenance costs, reduced fuel surcharge revenue and continued package volume levels 5% below last year at FedEx Express.