FedEx axes 22 757 freighters as express profits remain under pressure
26 / 06 / 2024
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FedEx revealed in its fiscal fourth-quarter results that it has retired 22 of its Boeing 757 freighters as it looks to better match capacity to market demand.
The move sees the express giant reduce its 757F fleet to 92 aircraft as of May 31, compared with 115 at the same time last year. Seven engines related to the aircraft were also retired.
In addition, the company has also retired nine MD-11Fs over the last fiscal year as previously announced.
While 31 of its larger freighters have been retired over the past year, it has also taken delivery of 10 Boeing 767 freighters and four Boeing 777 freighters.
The company’s total trunk aircraft fleet now stands at 389 compared with 407 last year.
“This reflects our strategy to continue to right-size our air network capacity with demand and unlock additional operating efficiencies,” explained chief financial officer John Dietrich.
Source: FedEx
The retirement of the 757 aircraft resulted in an impairment charge of $157m.
The move comes as fourth-quarter operating profits at the express business slipped by 53.2% year on year to $201m while revenues were flat at $10.4bn.
The company said there had been a move by customers to less expensive services and more capacity in the market.
Chief customer officer Brie Carere explained: “At FedEx Express, revenue in the fourth quarter was flat, with package yield up 2%, while positive yield growth was pressured by a tapering of international export demand surcharges and an increasing mix of deferred services.
“International yields were also pressured by an increased capacity in the global air cargo market.”
The overall FedEx business – including its ground and freight segments – saw fourth quarter revenues for the three months ending May 31 increase by 0.8% year on year to $22.1bn, while operating income improved by 4% to $1.6bn and net income was down 4.5% to $1.5bn.
For the full year, revenues were down 2.8% to $87.7bn, operating income improved 13.2% to $5.6bn and net income improved 9% to $4.33bn.
The operating margin improvement comes as the company has been implementing its DRIVE cost-saving initiative that aims to generate annual savings of $4bn.
Most recently, the express giant said it would let go between 1,700 and 2,000 members of its back-office team in Europe – around 3-4% of its 52,000 employees on the continent.
Last year, FedEx said it planned to reorganise its air network to better suit the demands of various shipment types as part of efforts to cut costs.
Earlier this year, UPS secured a contract to become the primary air cargo carrier for the US Postal Service (USPS), marking the end of rival FedEx’s 20-year run in that role.
