The logistics carrier wants to lower the cost of new and operating planes.
FedEx, based in Memphis, has stated plans to reduce structural and incremental expenses by $6 million by concentrating more on overland transportation rather than flying. In contrast to its existing fly-fly-fly strategy, the operator seeks to reorient its business to support a point-to-point service. This will strengthen its hub-and-spoke network and eliminate its current milk run, in which the operator may make multiple stops en route from its starting point to its end terminus.
The main player in transportation and e-commerce will also make an effort to change its business model to emphasize truck deliveries to its key distribution centers in order to reduce the number of activities that require flying. With FedEx planning their retirement by 2028, hastening their elimination from the books, the carriers’ remaining 58 McDonnell Douglas MD-11 are also slated for the chop. Even though the operator owns and operates the majority of its MD-11s, seven of them are still under leases that end between 2023 and 2025. The majority are roughly 30 years old on average.
relying on contractors
According to ch-Aviation, FedEx’s decision will result in the carrier turning to independent contractors and outside service providers, bringing down operator expenses for staff, maintenance, and fuel. Raj Subramaniam, president and chief operating officer of FedEx, stated the following during a quarterly investor call, according to ch-Aviation:
“Reconfiguring our air network is a component of our effort [to save costs]. Many steps are necessary, including the ones being designed right now to gradually phase out our fleet of MD-11Fs. Here, the road splits: will we witness a high-demand environment or a low-demand environment? That flexible fleet was the MD-11F. And now that we’re looking at the demand scenario, we don’t see that strong demand coming through.
a decline in the Pacific
Over the next years, as shipment operations are expected to be consolidated, the operator aims to reduce operations in the Pacific by about 30%. Apart from urgent, high-priority overnight shipments, FedEx also announced that operations within the United States would change to promote ground transportation as its primary and default choice. Subramaniam continued by explaining:
To address our fixed expense structure, we are implementing further measures. This quarter, we cut back on flight hours by 8% and wage and benefit costs by 4%. In addition, we downgauged on several flights, parked nine more aircraft, and made other productivity enhancements.
Richard Smith, CEO of FedEx Express, anticipates that adjustments to the operator’s aircraft operations will result in annual savings of about $250 million. To modernize its fleet, it will continue to buy the 27 B767-300Fs and six B777-200Fs currently on order. With 111 of its 486 aircraft currently in storage, the operator owns 486 aircraft overall. The carrier’s $2.3 billion budget for new aircraft in FY22 will decrease to $1.5 billion in FY25. Smith repeated the action:
