Executive Vice President and Chief Financial Officer at FedEx
Thank you, Brie, and good afternoon, everyone. We had a strong fourth quarter with adjusted earnings per share improving 37% year-over-year, revenue increasing 8% and consolidated adjusted operating margin expanding 50 basis points to 9.2%. These results reflect the outcome of the revenue management emphasis Brie described as we aggressively adjust to mitigate continued inflationary cost pressures.
Notable fourth quarter year-over-year expense items included higher shelf insurance costs primarily at Ground as well as a roughly $130 million impact from higher rates for both wages and purchase transportation. Offsetting these headwinds were favorable year-over-year comparisons for variable compensation of approximately $300 million and last year's $100 million contribution to Yale University to support our carbon neutrality goals.
With that overview of consolidated results, I'll turn to the highlights for each of our transportation segments. Ground reported a 4% increase in revenue with operating income down approximately $260 million, resulting in an operating margin of 10%. Self insurance expense increased approximately $200 million, reflecting a higher loss experience as well as an adjustment to the reserve for the projected cost of claims. There are multiple initiatives underway to mitigate the cost of risk, including new vehicle safety technology and driver certification standards in our service provider agreements. The strong 11% yield improvement at Ground was not enough to offset that headwind along with higher cost of wages and purchase transportation.
Looking forward, the continued revenue quality emphasis in conjunction with specific productivity and workforce initiatives will drive improved profitability. Stabilization of the labor market will also support further traction in these areas. And Express adjusted operating income increased by nearly 10% year-over-year with operating margin improving by 20 basis points to 8.2%. This improvement was driven by higher yields, including the favorable net impact of fuel and lower variable compensation which more than offset volume declines. In addition, crew cost per flight hour have been further elevated as operating the network has had to accommodate not only COVID protocols, but also to the routing changes to avoid layovers and locations with stricter COVID regulations as well as conflict airspace.
Freight had an incredible finish to the year with revenue for the fourth quarter increasing 23% and operating profit growing 67%. These outstanding results are a testimony to freights continued focus on revenue quality and profitable share growth as we build on our strengths as the leader in the LTL market.
Turning to FY '23, we are projecting continued momentum with a range of 9% to 19% adjusted earnings per share improvement. We expect margin expansion in all of our transportation segments on an adjusted basis as we execute on key priorities, including enhanced revenue quality beyond inflation, technology driven operational efficiency improvements and increasing utilization of our assets.
As we began fiscal 2023, we are seeing the lower customer demand trends we experienced in the fourth quarter continue into June and expect first quarter volumes will continue to be pressured. In addition, Express continues to experience flight constraints due to crew COVID protocols, as has been highlighted industry wide.
We do expect both Express air network efficiency and year-over-year volume comparisons across all of our transportation segments to strengthen as we go through the fiscal year.
In addition, our outlook includes an approximately $450 million non-cash pension headwind through the lower asset returns realized in fiscal 2022. This is all below the line expense that will be recognized evenly over the year. Our retirement plans operating expense will be relatively flat as lower pension expense will be offset by higher 401(k) expense. And as a reminder, our primary US pension plans were closed to new entrants beginning in 2020 and we introduced a new 401(k) plan with a higher company match in January of 2022. Our projection for the full year effective tax rate is approximately 24% prior to the mark-to-market retirement plan adjustments and costs related to business optimization initiatives.
Turning to capital allocation, our fiscal 2022 adjusted free cash flow of $3.6 billion supported a repurchase of approximately $2.2 billion of our stock and $800 million of dividend payments. In addition, we funded $500 million in voluntary pension contributions and ended the year with a solid $6.9 billion in cash.
As we look to fiscal 2023, we remain focused on driving total shareholder return and thoughtfully allocating capital. First, we will continue to invest in an attractive ROIC initiative. Fiscal 2023 capital expenditures are projected to be roughly the same as the $6.8 billion invested during fiscal '22, which came in lower than our initial $7.2 billion estimate as supply chain considerations extended timelines. Facility investment at Ground will decline as well aircraft expenditures at Express, offsetting that is increasing investment in vehicle replacement, including rollout of our vehicle electrification initiatives as well as additional automation projects. We project fiscal 2023 capex as a percent of revenue to be under 7% compared to 7.2% for fiscal 2022.
Next, we expect to repurchase an additional $1.5 billion of stock in the first half of fiscal 2023. And of course, as we announced last week, we are raising our dividend by over 50%, which increases our adjusted payout ratio to over 20%. These significant shareholder return advances reflect confidence in our continued execution and ability to adapt to the evolving market. And lastly, I'd add we are projecting $800 million of voluntary pension contributions to the US plans.
So we enter fiscal 2023 with a strong foundation for driving improved profitability and returns. We are mindful of the uncertainty across many fronts, including the pace of global economic activity, inflation, energy prices, additional pandemic developments and further geopolitical risks that are actively adjusting to these changing circumstances.
In closing, we are focused on delivering shareholder value by driving profitable revenue growth, expanding margins, lowering our capital intensity and improving returns to shareholders. And we look forward to sharing additional insights about our plans for this year and beyond at our investor meeting next week here in Memphis.
Now, we'll be happy to address your questions.