FedEx is continuing to scale back its air capacity and also modernise its aircraft fleet by taking 15 older planes out of service faster than originally planned, resulting in a $246 million charge that will impact on Q4 results.
The company announced yesterday that it has permanently retired 15 aircraft and 21 related engines as it continues to rationalise capacity and modernise its aircraft fleet to more effectively serve customers. In detail, the retirements cover seven MD11s, three A300s, four A310-300s and one MD10-10.
FedEx, which is due to announce 2014/15 fourth quarter and full year results (up to May 2015) on June 17, disclosed that the impact of retiring these aircraft, engines and related parts resulted in a non-cash impairment charge of $246 million recorded in May 2015. This will impact on Q4 results. The company did not indicate what level of air capacity reduction would result from these aircraft retirements.
In addition, FedEx said that it has adjusted the retirement schedule of an additional 23 airframes and 57 engines. A further $30 million in cash charges associated with these actions was recognised in May 2015.
FedEx is in the midst of a long-term aircraft fleet modernisation programme, with fuel-efficient Boeing 777, 767 and 757 freighters being introduced to replace older planes such as A310s, MD11s and MD10s, which have heavy fuel consumption as well as higher operating costs. As of Feb. 28, 2015, FedEx Express’s fleet totalled 673 aircraft, including 383 jet aircraft.
