FedEx Express has embarked on a downsizing of its US domestic air network by retiring 24 planesand is working on further adjustments to match lower volumes.
The company announced it will take 18 A310-200 freighters and six Boeing MD10-10 cargo planesout of service permanently. Most of these 24 planes are currently parked and not in revenueservice. In financial terms, FedEx has recorded a non-cash impairment charge of $134 million in thefourth quarter in respect of the retirements.
The decision to permanently retire these aircraft will better align the U.S. domestic airnetwork capacity of FedEx Express to match current and anticipated shipment volumes, the companyexplained. In the third quarter of 2011-12, its US domestic volumes dropped 4% due to a combinationof market trends and deliberate modal shift to the less expensive Ground delivery service.
FedEx already took five B727-200s out of service in the fourth quarter of fiscal 2012, whichended on May 31, and plans to retire 21 more B727s in the current 2012-13 financial year.
“Along with the decisions to retire these 50 aircraft, we are also developing detailed operatingand cost structure plans to further improve our efficiency,” said David J. Bronczek, FedEx Expresspresident and chief executive officer. “We expect to provide additional information on these plansin the fall.”
Several US-based analysts have recently commented that they expect FedEx to restructure its USdomestic air operations, speed up a shift to more fuel-efficient planes and to reduce jobs in orderto reduce operating costs and thus to achieve better margins in US domestic express.
FedEx stressed that it continues to modernise its aircraft fleet by adding newer aircraft thatare more reliable, fuel efficient and technologically advanced, and retiring older, less-efficientaircraft.
In response to the new fleet plans, FedEx Express is shortening the depreciable lives of 31additional Boeing MD10-10s, 18 additional Airbus A310s, four B727s and one Boeing MD10-30. Thiswill accelerate the retirement of these aircraft to align with the delivery schedule forreplacement Boeing 767-300 and Boeing 757-200 aircraft.
The B767 will provide similar capacity as the MD10s, with improved reliability, an approximate30% increase in fuel efficiency and a minimum of a 20% reduction in unit operating costs, while theB757 is significantly more fuel efficient per pound of payload and has 20% additional payloadcapacity than the B727 it replaces, FedEx pointed out.
FedEx Express’s fleet totalled 688 aircraft as of February 29, 2012, the end of its thirdquarter. This included 17 B777s, 64 MD11s, 71 A300-600s, 53 A310-200/300s, 75 MD10s, 69 Boeing757-200s and 48 Boeing 727-200s.
