Listen: FedEx restructure and next-gen widebody assembly

In this week’s episode of the “Cargo Facts Connect” podcast, Cargo Facts Editor Jeff Lee and Associate Editors Andrew Crider and Robert Luke discuss the restructure of FedEx , which now plans to retire its remaining MD-11Fs by 2028, switching to an entirely twin-engine fleet. With changes to its aircraft fleet, FedEx also expects to change its routes, downsizing its foothold in Europe. Meanwhile, Airbus has begun the production of the first A350F, manufacturing the first center wingbox of the next-generation widebody freighter. Tune in for a discussion of these topics and more for the week ending April 7, 2023. A transcript is available below. This transcript has been generated by software and is being presented as is. Some transcription errors may remain. Andrew Crider Hello and welcome to this episode of cargo facts connect the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I'm your host Andrew Crider, associate editor of cargo facts. Robert Luke And I'm your co host, Robert Luke, associate editor of cargo Facts. Jeff Lee And I'm Jeff Lee, editor of cargo Facts. Andrew Crider Robert, you were just a moment ago listing all the developments from FedEx. I want to talk about them, there was a major press conference about how the company is restructuring and cutting costs. Tell me a little bit more. Robert Luke Certainly, Andrew, It'll be my pleasure. FedEx is definitely making some lean cuts as they look to get a little bit more efficient in their operational side of the aircraft that they currently hold in their inventory. Part of which is sad to say, because this is one of my favorites, the MD 11 will be retired out of the FedEx fleet in 2028, as they look to reduce additional costs, so it sounds like they're fully committee earlier than expected to the twin engine models and the narrow body and wide body sectors. As evidenced by this decision, FedEx also announced that they're looking to distribute more of their lighter package loads to more of the general partners that they're collaborating with. So that they can have their aircraft focused more on a interestingly enough point to point route structure, as they are starting to transition from the hub and spoke system, which we kind of spoke about maybe a month or two ago, as we were discussing the future outlook of the air cargo industry in the post pandemic phase. So it's starting to align in that direction. And we're starting to see a lot more of that happening as E commerce and express shipping starts to kind of become the trend of demand for the industry. In addition to that, FedEx a also explained that they're looking to streamline their spending fiscally on their fleet from 2.3 billion to 1.5 billion, that's $800 million, that they're scaling back on, in addition to other cost cutting measures that they're implementing for their operational network structure. They also indicated in Europe, they're going to be revamping their clearing houses and looking to utilize a total savings per year over a net segment of at least 700 million. So we're seeing a lot of cost cutting measures that are taking place. But the The interesting part about it is even though the reductions are financially taking hold of the organization, it looks like they're getting more into the investment of the twin engine models in basically like everyone else, bringing more youth into their fleet operational capabilities that are going to allow them to be more fully functional and directly operate on a point to point city structure so that they can start to have that express shipping be more, I would say precise, for lack of a better word. Andrew Crider What are we talking, seven six sevens, a three hundreds, what are we talking about here? Robert Luke Yeah, you're right on the you're right on point with that. And I would say they're definitely based on the last delivery orders and increasing orders that are coming in 767 freighter platform is definitely the primary operator that they're using to replace the nd elevens. And, again, they do have a fleet of triple sevens, I don't know how much more of an investment they'll make into that aircraft type. But the 767 seems to be the the main workhorse that they're developing and investing in right now. Especially as we need to 2027 I do see that that's going to be the the main operating platform, because if you think about it, they could use that essentially to start running all of the Trans Pacific and transatlantic flights along with the triple sevens and obviously keep their a three hundreds within the within the continental US and within the Americas because they have the range of capability to carry the same load as the seven six, we're just on a shorter haul segment. So you know, that would be my guesstimate. I'm not in the executive offices, but based on the data that has been given to us and released publicly. I would say that's the direction that they're headed in. Andrew Crider Fascinating stuff. It only leaves a question. Who will take that that, space that's going to be left behind by them in Europe as far as Europe to America is which is a highly contested zone. But when you think of Europe and twin engines, Jeff, you have news on a European twin engine aircraft, don't you. Jeff Lee Well, before that, I I also wanted to Andrew Crider Why don't you interrupt and say actually now hold on. Let me let me count my marbles. You have your hand raised. You're supposed to jump in and say something. Robert Luke I was gonna say something to that, like, Why do you have your hand up? Jeff? Andrew Crider Why don't you to message me the question would be like, Oh, by the way, I have a question. But granted, you had your hand raised. Jeff, why don't you ask your question, rather than be stepped on? Jeff Lee My question or non question could be a question is, what about FedEx as you were talking about a three hundreds? And I was gonna say there's an interesting comparison here with with UPS, Robert Luke I knew you were gonna go there. Just go ahead. Go ahead. Jeff Lee I mean, that's there's there's several points here, but the first of which is just on the MD 11 point. You know, as we recently reported ups, it's the Mullaly is starting that retirement process for that, that pipe, right. And so pretty soon, you know, in the years to come this, the MD 11, will basically gradually, he gets way out of both of these major operators, leaving Western global in the US, which I'd be interested to see what they want to do with the MD 11 type. And whether they will be picking up any of these frames that are being freed up. But of course, the Western global is expecting to enter the triple seven segment as well. So it's just yeah, it's an interesting question. But going back to UPS, you know, and the three hundreds, it isn't interesting, because FedEx has also parked for me three hundreds, and maybe those are on the way out as well. Whereas the same can definitely not be said of UPS, which just completed the the upgrade, the cockpit upgrade for the you know, the entire fleet that 50 to a three hundreds. And so they clearly spent a bit of money in in this upgrade. And they actually, I mean, it's taken a few years. The first one, basically was was completed in 2021. But I mean, I think, actually, that this was quite a speedy process. They got through all 52 In two or three years. And so yeah, they we know for sure that the 300 is not on the way out at UPS. Not sure about FedEx, but the the e 300. Will, I think because UPS is also retiring, MD elevens. And using seven, six sevens to replace those, to me make maybe indicative where the three hundreds are or what kind of role the three hundreds will will pick on on a will to continue to keep but that's just an interesting point. Andrew Crider Robert, follow up. Robert Luke i Yes. Thank you. You acknowledged my hand raised I'm so grateful to you're attentive to, to my inquiring question here. With that being said, Jeff, I'm going to ask you as the editor of cargo facts. Do you see the MD 11 potentially happening a second life in the secondary markets one because some of the operators operators to operating a 747 200 may see that as a chance to one not only reduce the amount of engines that they have to incur from an operational and fuel burn cost and expense, but something that's a little bit more Martin in the 200. And then to do you see FedEx potentially playing Copycat with UPS. And this is just all speculative. I know we don't have the answers, but it's just inquiring mind that wants to know, because if they see value in a 300 with an upgraded cockpit, how do we know that FedEx won't see the same? Because, you know, two engines is the way that everyone's going right now. That is the latest trend? Jeff Lee Well, yeah, I mean, but given the commitment to reduce spending on aircraft, you know, I don't know where that leaves the three hundreds. But in terms of the MD elevens, maybe getting second life it's really good. hence because there there really aren't that many operators. In fact, Western global leaving aside FedEx and UPS, Western global is basically the the the only operator of the 11th. And I mean, if you're talking about the companies that operate 747 Classics really not sure. Maybe they should be looking at, you know, the newer wide body conversions rather than the MD elevens. Also, the engines on the on these MD elevens. might, you know, they might not last? I don't know how much longer that lasts. But to me, that's not a sensible option to go with. But I don't run an engine. So I don't know. And this also actually leads to the next point, doesn't it? Because Andrew, you asked the question, was FedEx going to do with that, that that gap after the MD elevens leave? And the broader question on that is the just what large wide body replacements for aircraft types like the MD 11. And one of those options, of course, is the A 350. Right. And speaking to a 350 Airbus this week, I said that it just completed the first or started production of the first components for this new widebody freighter how the course of the passenger version of the HP 50 has been in production for a long time now, but this burst small part in what will become the the prototype, the 350 freighter is now being produced at the Airbus Atlantic facility in Nantes and it's interesting because Airbus gave us a bit more detail about the the overall timeline for the production process, the basically the this center Wingbox slab assembly will expect to complete that kind of early 2024. And at the same time, the fuselage sections will also undergo assembly by the end of this year. And if you think about it, it's it's like a car factory it just may be a bit more complex, but all these parts have different assemblies lights, or production sites and everything kind of slowly comes together. And by kind of mid next year, the major milestone of the the marriage between the the main fuselage section and the center wing box sub assembly, those will come together. And then by the others that will happen at the final assembly line in Toulouse. And then everything else of course will also start coming in. Many of these possible will also be flown on Airbus beluga fleet. And then, yeah, those wings, the engines and everything was started coming together. And the current target is for first flight to take place in late 2024. Which actually, if you think about it isn't that far away? So, you know, things are happening happening quickly and we will look forward to seeing the first a350 freighter make its first test flight, Andrew Crider airplane building more complex and car building. Wow, that's a new one. Jeff, breaking news while we spoke to Airbus at Farnborough and then at the time, they were still in the design phase in talking to customers to change features of that aircraft. Do you think that the fact that production has begun signals that they've gotten all the input they need and it's it we're looking at a finalized design? Jeff Lee Yeah, I mean, that's definitely the case. Of course design has to be frozen. You know, well before the the manufacturing even starts though. Yeah, no, I mean, everything is now set in stone and And the the final product will be what Airbus has on the drawing board basically. Andrew Crider That's certainly interesting stuff in would that mean that the only one left to make changes would then be the triple? Seven dash eight F? Jeff Lee Possibly? Yeah, I mean, because all the regional seven conversion programs that really don't really make any changes there, either of those are already underway. So yeah, this large wide body arena, you know, is interesting, and it'll be great to finally see, you know, physically see the 350, the first aid refit the frita, having seen so many renderings of it. And that's the other thing right? Is the Airbus will be unveiling the who won that livery design competition for the first a 350 will happen at the Paris Air Show. So, first prototype will not be in the standard Airbus colors, Andrew Crider something I certainly hope to see. So if you're in the market for designing a revolutionary new technology that could be integrated on a wide body freighter that would change the game between the A 350 and the triple seven, dash eight, right to Boeing at 100. North Riverside, Chicago, Illinois, 60606 United States of America, they I'm sure they would love to hear from you now. That that makes me want to close on something a little bit smaller. And that would be aeronaves TSM. They continue to expand in the CRJ 100 freighter category, which I mean, Jeff, I don't know of a single other operator for that type. Robert, do you Robert Luke offhand? Absolutely not. But I think it's I think it's awesome that, you know, they're seeing a need for that particular freighter type in their segment and that they're showing a dedicated commitment to it. You know, it's definitely an aircraft that's unique in its own characteristics, being a regional carrier converted to a freighter, and it's obviously filling a very, very important role for aeronaves TSM. So kudos to that group and the executive management team for seeing the value in it free to type and keeping it rolling on the conversion program that it's an than it initially started with and hats off to AEI as well for finding a way to continue to or life into that freedom program. Awesome, guys. Jeff Lee There is actually another fellow Mexican operator, tum aerocarga, Andrew Crider I'm looking at it right now in our regional fleet, freighter fleet data set on cargo facts.com. You also have West Atlantic Sweden it is Jeff Lee well it's interesting because those to the West Antarctic used to operate have also been picked up by aeronaves TSM So yeah, that was what I was gonna say is that when it comes to aeroanves TSM basically, it's always like if you have an aircraft that you want to get rid of, the first person you should ask is aeronaves TSM because not everyone is interesting, because they Yeah, they apart from these CRJs that they picked up from West Atlantic they the other main type that they've that they growing now is the 737 Classic, and probably more specifically, the 400. It's just attacking this from multiple angles. It's acquiring feedstock for conversion with AEI it is buying 737 400 SF conversions from other carriers. It's also adding Pemco converted 7374 Hundreds from other people so it really doesn't discriminate. It just really wants more of that 737 classic platform which is interesting to see all these 737 400 Birds going down to Mexico and it's always yeah and when whenever we see an airline retiring, or one frame leaving an airline, the first guest should be aeronaves TSM Andrew Crider I am very curious to see what what it is Is that is attracting them to this greater type? I mean, it has to be a niche for our regional market, certainly. But I mean, the CRJ is a aircraft with its challenges. And it's certainly very unique to the freighter space. And if you have information as to why the CRJ would be desirable, or if you're in the market for CRJ, please let me know. Robert Luke The good thing about it is there are plenty of CRJ models currently in operation right now with a passenger and our freighter so they have plenty of logistical support. So guys continue doing the good work that you do with that with that freighter type. I mean, they do have a long lifespan capability with the amount of aircraft that we're actually produced by bombardier so there'll be okay. Andrew Crider With that, that's going to be all the time we have for today. For more multimedia coverage like this search cargo facts connect on iTunes and Spotify and search cargo facts.com. Thank you very much for tuning in. Join us again next time. Subscribe to Cargo Facts Connect on iTunes or Spotify , or download the episode on Transistor . Don’t miss our two upcoming events that are essential for stakeholders in Asia and Latin America: Cargo Facts Asia , taking place April 17-19 in Singapore, and Cargo Facts LATAM , taking place May 15-17 in Panama City. Register today.

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