FedEx settles with pilots, takes next step with TNT

Will TNT's 777Fs soon be painted purple?
Will TNT’s 777Fs soon be painted purple?

It has been an interesting week for FedEx.

First, the company reached a tentative agreement on an amended collective bargaining agreement with the Air Line Pilots Association (ALPA, the union which represents FedEx’s pilots). This puts an end to four years of negotiations, the last ten months of which have been conducted under mediation by the National Mediation Board.

In a message to pilots, the Chairman of the FedEx ALPA Master Executive Council Chuck Dyer made clear that this was not a final contract: “A Tentative Agreement is just that, it’s tentative,” he said. “We have procedural and legal hoops to jump through over the next week or so, but until that process has been completed, the details of the agreement must be held in confidence by the leadership. Once your MEC reconvenes this coming week, they will be in possession of full contract language and will then decide if this Tentative Agreement will be sent to the membership for a ratification vote.”

FedEx also made its next big move in another area of uncertainty: the takeover of Netherlands-based TNT Express. Of course, there is no uncertainty about this takeover on the part of FedEx or TNT, but, just as the tentative pilot contract needs approval by union members before it can become final, the TNT takeover needs the approval of the European Commission. And while the Commission will probably grant approval early next year, “probably” is not “certainly” – as was clearly demonstrated two years ago when the EC torpedoed a similar takeover bid by UPS.

In the meantime, FedEx continued the acquisition process with formal publication of its cash offer for all TNT shares. You can read a fourteen-page description of the offer on the FedEx website, but here are a few of the more interesting bits.

There is more, much more, and the full document is worth a read. But reading between the lines of the above points leads to a couple of interesting conclusions.

First, it is clear from the last bullet point above, that the TNT name will disappear. Not immediately, but before long.

Not quite as clear is the fate of the Liege air hub. FedEx says it will be maintained as “a significant operation of the group going forward.” But what does “a significant operation” mean? Who knows? It could mean just about anything. FedEx seems unlikely to move its main European hub from its current location at Charles de Gaulle Airport in Paris, and maintaining two significant express hubs just 275 km apart makes little sense.

And finally, regarding the fleet, the offer appears to confirm our earlier speculation that while TNT’s European air operations will be sold (to conform with EU law on airline ownership), the long-haul operations will be taken over by FedEx Express. It would make sense for FedEx to acquire TNT’s three 777Fs, as FedEx already has twenty-six of the type in its fleet and has seventeen more on order with Boeing. TNT Airways also has four 747-400ERFs, two of which it operates for Emirates on an ACMI basis. FedEx has no 747s of any variant, and it is hard to see the company incorporating the four TNT units into its fleet, so these will likely be returned to the lessors as soon as possible.

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