FedEx Orders Boeing 777 and ATR Aircraft, Delays MD-11 Retirements

FedEx Corp. has exercised choices to buy eight extra Boeing 777 freighters from Boeing and pushed again retirement of the tri-engine MD-11 fleet in response to rising demand for worldwide nonparcel freight service, the corporate stated in third-quarter outcomes.

On Friday, Toulouse, France-based ATR, a producer of regional plane, introduced that FedEx will purchase 10 further ATR 72-600 turboprop freighter plane, with deliveries scheduled between 2027 and 2029.

FedEx stated in Thursday’s quarterly submitting that it has prolonged the retirement deadline for the total MD-11 fleet from 2028 till 2032. Boeing is anticipated to ship three factory-built 777 freighters in 2026 and 5 in 2027. Chief Monetary Officer John Dietrich stated throughout a convention name with analysts that FedEx additionally not too long ago purchased two used 777 freighters from an undisclosed occasion.

FedEx presently operates 57 Boeing 777 freighters and has two deliveries from its 2018 order scheduled this 12 months.

The choice to amass extra widebody cargo jets and maintain on to the MD-11s is motivated by the necessity to substitute legacy plane with extra trendy ones, the supply of Boeing jets at engaging costs and development projections for worldwide heavy freight, Dietrich stated.

Development in freight demand is basically a perform of FedEx’s latest technique to segregate its Specific air community alongside product traces, dedicating a portion of the fleet to go after premium worldwide air cargo that’s historically consolidated and booked on airways by freight forwarders.

“Given the demand that we’re seeing on the market, notably within the worldwide financial system [segment], we elected to increase the lifetime of these plane,” Dietrich stated of the MD-11s. “These belongings are principally depreciated however have some helpful life left in them and might assist our worthwhile development technique. So if the demand surroundings doesn’t pan out, we even have the flexibility to speed up any retirements on MD-11s.”

FedEx wants further capability after completely eradicating 31 plane from the fleet final 12 months, together with 9 MD-11s and 22 Boeing 757s, Dietrich stated. The airline division has retired 20 MD-11s over the previous three years and presently has 37 of the big freighters in service.

The fleet upsizing represents a change in pondering provided that FedEx had extra plane following the expiration in September of its home air cargo contract with the U.S. Postal Service and that as not too long ago as final 12 months the corporate was downsizing the air fleet in response to a slowdown in parcel demand.

The categorical provider had decreased complete U.S. home flight hours by 24% within the second quarter, primarily because of a 60% discount in daytime flying for the Postal Service. It expects to comprehend massive financial savings, beginning this quarter, by not having to dedicate extra plane and different sources to satisfy service commitments when planes routinely weren’t filled with letters and packages.

“Taking down the daytime community that helps the submit workplace, that actually will increase our flexibility,” President and CEO Raj Subramaniam stated.

FedEx has dedicated to purchase 10 extra ATR 72-600 cargo plane to assist regional feeder routes. (Picture: ATR)

The pivot seems immediately linked to FedEx’s Tricolor technique to streamline the air community and compete extra aggressively for deferred cargo enterprise as a part of an enterprisewide marketing campaign to take away $4 billion in everlasting prices and enhance profitability. Administration has beforehand defined it intends to seize a bigger share of the $80 billion airfreight market, the place it presently has low-single-digit penetration, by reallocating belongings, constructing a devoted gross sales group and investing in digital buyer expertise.

FedEx has spent 20 months constructing to the purpose of tackling the third-party airfreight market at scale.

Beneath the plan, a Purple community of plane and amenities is geared towards worldwide categorical parcel shipments that transfer at evening for next-day supply. These flights settle for fewer massive freight shipments to maximise sorting effectivity.

The Orange community operates off-schedule to hold heavy freight that doesn’t require most velocity and is best suited to a truck-fly-truck supply mannequin than flying all the journey. FedEx says it’s focusing on high-yield freight with related traits to less-than-truckload freight – corresponding to prescription drugs, perishables, electronics and automotive parts – that’s extra worthwhile per pound than bigger shipments of basic items. Flights are scheduled into main and regional sortation facilities throughout the daytime, when employees have extra time to construct dense pallets after which layer on small parcels or poly mailer baggage with e-commerce orders to maximise capability.

The White community is for low-priority shipments booked on business passenger plane by FedEx’s freight forwarding arm.

“Tricolor is driving higher asset utilization. As we enhance plane density and higher leverage our floor community, we now have a broad vary of KPIs that we’re monitoring to measure our progress,” stated Subramaniam. “We’re particularly happy that on a year-over-year foundation, payloads throughout our air community are up 9% with a 5% enchancment in density. It is a key goal of our tricolor working mannequin.”

Administration stated the modifications are already having a optimistic affect, particularly as trucking more and more replaces flights to attach smaller markets with hubs.

The Specific section boosted adjusted working revenue by 17% to $1.4 billion on a 2.7% enhance in income throughout the third quarter, regardless of the adverse affect of shedding the U.S. Postal Service contract. Larger U.S. and worldwide export quantity buoyed outcomes. Worldwide financial system bundle quantity elevated 48% within the third quarter and airfreight common each day kilos elevated 3% for Worldwide Precedence Freight primarily because of continued development in deferred air service and e-commerce.

The acquisition of 777 manufacturing freighters was influenced by the truth that FedEx hasn’t ordered any widebody plane in a number of years and Boeing was providing them at a superb worth as a result of they’re the final ones to be constructed earlier than Boeing closes the 777 manufacturing line in 2027 so it will possibly deal with a brand new freighter mannequin, Dietrich stated. The newer plane are extra gas environment friendly and require much less upkeep than ageing items.

As CEO of Atlas Air earlier than becoming a member of FedEx, Dietrich bought the final 4 747-8 jumbo jet freighters Boeing produced. Atlas Air, the biggest operator of 747 freighter plane on the earth, took supply of the ultimate 747 in January 2023. “That turned out to be the most effective monetary acquisitions for that firm,” Dietrich stated.

“These plane are in very excessive demand, and we didn’t need to allow them to go, for one. However our determination was actually knowledgeable by each our MD-11 retirement plans, in addition to our development projections for the worldwide freight market,” he defined.

Dietrich reiterated that the deal doesn’t depart from FedEx’s plan to comprise capital expenditures, together with a $1 billion goal for plane within the upcoming fiscal 12 months, as a part of the hassle to run a leaner group and enhance shareholder worth.

“We’re planning to remain inside that space of funding not solely in FY 2026, however for the instant years past, and these plane acquisitions are inside that framework,” he stated.

Feeder Fleet Improve

However FedEx isn’t solely centered on massive cargo plane.

The ATR order provides to a earlier FedEx dedication for 30 plane. FedEx has acquired 23 plane up to now and expects the rest of the primary order to be delivered by the tip of 2026, in accordance with its newest fleet replace.

FedEx subleases the ATR fleet to associate carriers that function smaller plane between smaller cities and hub airports to feed its mainline plane. The brand new ATR 72-600s are being acquired to interchange older ATR 72 plane, of which FedEx operates 19.

The ATR 72-600 has a payload of about 10 tons. It may be optimized for bulk transport with 9 vertical nets connected to the ground but in addition has a big cargo door, extensive cross part and loading system to deal with delivery containers, that are appropriate with bigger freighters.

Editor’s Observe: This story first appeared on FreightWaves. 

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