Burgess COMMENTARY

Peter Burgess

FedEx Retires More Jets as Cargo Markets Stagnate

Part of the FedEx Express fleet awaits dispatch at the company’s Memphis hub. (Photo: FedEx)

Continued weakness in cargo markets and stubbornly high fuel prices have convinced FedEx to retire 18 Airbus A310-200s and 26 related engines permanently, along with six Boeing MD-10-10s and 17 associated engines, the company announced last Monday. The Memphis, Tennessee-based cargo giant noted that it has already grounded most of the airplanes and recorded a $134 million charge during its fourth quarter to reflect the retirements.

“The decision to permanently retire these aircraft will better align the U.S. domestic air network capacity of FedEx Express [with] current and anticipated shipment volumes,” said FedEx in a statement.

The retirements come after the company already decommissioned five Boeing 727-200s in its fourth fiscal quarter this year and announced plans to retire 21 more of the aging trijets in Fiscal Year 2013.

“Along with the decisions to retire these 50 aircraft, we are also developing detailed operating and cost structure plans to further improve our efficiency,” said FedEx Express president and CEO David Bronczek. “We expect to provide additional information on these plans in the fall.”

Meanwhile, FedEx Express continues to take delivery of Boeing 757-200s and 777Fs and awaits delivery of its first 767-300Fs in 2014. Those airplanes would replenish capacity it expects to lose from accelerated retirements over the next 12 years of 31 more MD-10s, 18 additional A310s, four 727s and a single MD-10-30.

Although a report issued by the International Air Transport Association on May 30 cited signs that the cargo market might have hit bottom, Middle Eastern airlines accounted for roughly 80 percent of the slight traffic improvement air freight carriers registered this past April compared with November 2011. Asia-Pacific, European and North American air freight carriers have continued to show weakness, it said, notwithstanding “various distortions” that led to what it called somewhat misleading year-over-year April contraction of 4.2 percent. In fact, North America registered an 8.2-percent year-over-year decline in April freight traffic—the highest of all regions measured.