Despite near-term air cargo bump, FedEx rejigs aircraft deliveries

[caption id="attachment_412727" align="alignright" width="460"] FedEx had forty-six 767-300Fs on order with Boeing at the end of May. (Photo: FedEx)[/caption] The COVID-19 pandemic kicked FedEx’s flight operations into high gear during the fourth quarter of its fiscal year 2020, ended May 31. The favorable demand that surfaced following passenger flight cancellations enabled FedEx to make up for lost ground in Q4 with additional flight segments and a surge in charter activity. While capacity cuts and a generally bearish outlook for flight activity led the company to forecast a 7% YoY drop in flight hours for its fiscal year 2020 earlier in the year, FedEx reversed course and ended its fiscal year with flight hours up 2.6%. Despite the boost, the company is not rushing to take delivery of the remaining 767-300F aircraft it has on order with Boeing, choosing instead to “smooth” out deliveries over the next three fiscal years. On June 25, FedEx reached an agreement with Boeing to reschedule 767F deliveries, according to a note in the company’s most recent Stat Book. While the forty-six 767-300Fs FedEx had on order with Boeing as of May 31 were originally all due to be delivered by the end of FedEx’s fiscal year 2023, four 767-300Fs are now postponed until fiscal 2024. Deliveries for fiscal 2021 remain unchanged, with eighteen 767-300Fs expected. Subsequent years will see fewer deliveries, with eleven, thirteen and four units now expected each year between fiscal 2022 and 2024. The company’s previous delivery schedule included sixteen deliveries in fiscal 2022 and eight in fiscal 2023. Additional flying has been made possible by the reactivation and continued use of freighters previously slated for retirement. Six MD-10-10Fs earmarked for retirement by May 31 continued to fly. FedEx now expects to retire the thirteen remaining MD-10-10Fs in its fleet by the end of fiscal 2021. During a call with analysts to discuss the results, FedEx said it established an air capacity coordination center to match capacity with demand. With dedicated freighter capacity, FedEx expects to wrestle market share from freight forwarders unable to secure reliable and competitively priced capacity. In its fourth quarter, FedEx operated more than 100 charters carrying personal protective equipment (PPE), with most flights and segments added on trans-Pacific lanes. The company expects a slow recovery for passenger aviation, which will continue to push trans-Pacific volumes that would have flown on other airlines, to FedEx. As supply chains in Europe begin to recover, FedEx expects demand to pick up on the trans-Atlantic lane as well. “With freighter capacity now accounting for 75% of total air capacity in the trans-Atlantic lane, FedEx capacity remains a premium. Increasing international profitability is a major priority for us and Europe is our biggest opportunity,” said Raj Subramaniam, president and COO, FedEx Corp. Regarding the company’s most significant investment in Europe through its 2016 acquisition of TNT Express, the integration process now faces further delays, blamed on the pandemic. Air network integration, seen as a final component, is now delayed from calendar 2021 until 2022. Returning to the company’s quarterly earnings, FedEx reported a loss of $334 million on total revenue of $17.4 billion. Operating costs rose by $125 million due to the implementation of safety and sanitary precautions to maintain operations during the pandemic. Growth in the business-to-consumer (B2C) segment offset sluggish B2B volumes as consumers shifted spending to online channels during the pandemic. “Several years of retail share gains have been compressed into a few months in the United States, with e-commerce as a percentage of U.S. retail increasing from 16% in calendar year 2019 to 27% in April 2020,” said Brie Carere, executive vice president and chief marketing and communications officer of FedEx. Residential volumes grew to 72% of the company’s deliveries, compared to 56% a year prior. Due to the current volatility in the market, FedEx declined to provide guidance for fiscal 2021 but said it has seen week-over-week growth since its business bottomed out in April. “As we enter fiscal 2021, there are signs of tentative economic recovery under way,” added Carere.

Despite near-term air cargo bump, FedEx rejigs aircraft deliveries

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Aviastar-Tu to add Cainiao-branded 757F

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Related Posts

AEI targets 737-800SF STC approval in 4 other jurisdictions

Texel Air continues ACMI growth with 737-800BCF addition

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Asiana ponders freighter fleet renewal

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CARGO FACTS CONSULTING

CFC: Large widebody freighter choices expand again

CFC: Expect slower international express market growth after 2021

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