On June 20th, FedEx released its latest financial results, revealing “ongoing demand weakness.” The freight mover reported that the performance witnessed in its most recent fiscal quarter was due to both demand weakness and cost inflation. Part of the company’s plan to deal with this is to reduce its costs and park a portion of its fleet.
Freight boom settles down
The pandemic highlighted the importance of robust and reliable supply chains. This resulted in numerous entities getting into or boosting their presence in the air cargo market. For example, Air Canada retired its passenger Boeing 767-300ERs and converted some of them into freighters. The airline also ordered new freighters directly from Boeing.
As recently as February 2022, FedEx had been mulling a large freighter order with Boeing or Airbus. Of course, the shift in the market may have put a hold on this potentially major deal.
Photo: FedEx
Indeed, as supply chains are slowly restored and passenger aircraft fill the skies again, air cargo capacity in the bellies of those jets is back. Indeed, a May 2023 report by IATA notes that the uptick in belly capacity has resulted in a 2.3% decline in freighter capacity. Additionally, after two-and-a-half years of continuous preighter operations, activity in this category ceased in March.
FedEx parking or retiring 29 aircraft over the next year
FedEx is experiencing this shift in market demand firsthand. In its recent quarterly report, the firm stated:
“FedEx Express continues to implement volume-related and structural cost-reduction actions, including further reductions in flight hours and the early retirement of certain aircraft and related assets, to mitigate the negative effect of ongoing demand weakness.”
According to FreightWaves, FedEx will reduce its operating costs by removing 29 aircraft from its fleet over the next year. This will see aircraft either permanently retired or temporarily stored. This move goes hand in hand with the operator’s recent reduction in global flight hours.
Providing more detail about this plan, FedEx CEO Raj Subramaniam stated that 20 aircraft would be parked over the next year, while an additional nine MD-11 freighters will be permanently retired. This build’s on the company’s recent aircraft retirement actions, which have already seen the retirement of the following 18 aircraft over the past year:
- 12x MD-11s
- 4x Boeing 757-200s
- 2x Airbus A300-600s
Presently, FedEx has 46 MD-11s, but these will be phased out by around 2027 or 2028.
Despite numerous older freighters being grounded or retired, the FedEx mainline fleet will still see some growth. This is due to existing orders placed with Boeing in 2018. FedEx will continue to take delivery of new, factory-built 767 and 777 freighters with ch-aviation.com, noting that the company is expecting 23 more 777Fs and six more 767Fs.
What do you think of this ongoing trend in the air cargo market? When do you think things will stabilize? Share your thoughts by leaving a comment!
Sources: FreightWaves, IATA, ch-aviation.com
